TIDMLUCE
RNS Number : 1977A
Luceco PLC
10 September 2018
10 September 2018
Luceco plc
("Luceco" or the "Group" or the "Company")
"RESULTS IN-LINE WITH EXPECTATIONS WITH A FIRMER BASE FROM WHICH
TO GROW"
Luceco plc, a manufacturer and distributor of high quality and
innovative LED lighting products, wiring accessories and portable
power products, today announces its unaudited results for the six
months ended 30 June 2018 ("H1 2018" or "the period").
Reported results (Unaudited)
Six months Six months Change Change at
to to constant
30 June 30 June FX rate(2)
2018 2017(1)
GBPm GBPm % %
Revenue 75.1 75.3 (0.3%) 3.3%
Gross profit margin 26.0% 31.9% (5.9 ppts) (5.0 ppts)
Operating (loss)/profit (3.1) 9.0 (134.4%) (122.2%)
Operating (loss)/profit
margin (4.1%) 12.0% (16.1 ppts) (14.6 ppts)
Adjusted(4) operating profit - 9.0 -
(Loss)/profit after taxation (4.4) 6.5 (167.7%)
Basic (loss)/earnings per
share (2.7) pence 4.0 pence (167.5%)
Net debt (41.4) (26.1) 58.6%
------------------------------ ----------- ----------- ----------- ------------
Financial highlights
Reported results
-- Revenue was broadly flat at GBP75.1m (H1 2017: GBP75.3m), a
3.3% increase on a constant currency(2) basis
-- Gross margin reduced to 26.0% (H1 2017(1) : 31.9%)
-- Operating loss of GBP3.1m (H1 2017: operating profit of GBP9.0m)
-- Loss after taxation for the period of GBP4.4m (H1 2017: profit after taxation GBP6.5m)
-- Cash flow from operations reduced from GBP10.2m to GBP1.3m
-- Basic and fully diluted loss per share of 2.7 pence (H1 2017: earnings per share 4.0 pence)
-- Net debt of GBP41.4m (H1 2017: GBP26.1m, FY 2017: GBP36.7m)
Alternative performance measures(4)
-- Adjusted(4) gross margin was 27.3% (H1 2017(1) : 31.9%)
-- Adjusted(4) operating profit was GBPnil (H1 2017: GBP9.0m)
-- Adjusted(4) operating profit from ongoing operations(3) (i.e.
excluding pro-forma losses from closed US operations) was GBP1.0m
(2017: GBP9.8m)
-- Adjusted(4) loss after taxation for the period was GBP1.4m
(H1 2017: profit after taxation GBP6.5m)
-- Adjusted(4) basic and fully diluted loss per share of 0.9
pence (H1 2017: earnings per share 4.0 pence)
Notes:
1. Prior year financials have been restated see note 1a in the
Notes to the Condensed Consolidated Financial Statements
2. H1 2018 translated at H1 2017 average exchange rates. These
were 1.26 for GBP: US Dollar and 8.70 for GBP: RMB.
3. Definitions of ongoing and non-ongoing operations can be
found in note 1 in the Notes to the Condensed Consolidated
Financial Statements
4. The definitions of the adjustments made to the statutory
figures can be found in note 1 in the Notes to the Condensed
Consolidated Financial Statements
Operational and strategic highlights
-- Strong growth in strategically important and margin-enhancing
segments such as LED Projects & international markets,
supported by investment in sales resource and product range
-- Progress in LED Projects accelerated by Kingfisher Lighting,
which has traded in-line with management expectations and delivered
expected synergies
-- Overall progress in H1 limited by the slowdown of UK
consumer-facing retail sales due to de-stocking and lacklustre
consumer confidence
-- Gross margins impacted by cost inflation arising in Q4 2017
-- Selling prices successfully updated in response, with full margin benefit expected in H2
-- Product development activities continue apace, focused on
international wiring accessories, LED and smart devices.
-- US operations now ceased, enabling greater focus on more
compelling international growth opportunities
Commenting on the results, Chief Executive Officer, John Hornby
said:
"Whilst the first six months have been challenging, the Group is
entering the second half with an outlook unchanged from the July
2018 Trading Update. The decline in revenue from UK consumer-facing
retail and the adverse impact on gross margins of commodity
inflation and exchange rates has generated a disappointing
financial performance in the first half year. However, we have
already put into place a number of actions that will deliver an
improvement in the Group's financial performance in the second half
of the year with a return to profitability expected.
"Although UK consumer confidence remains fragile the Group has
moved into the third quarter with: a 30% increase in the UK Retail
order book, lower commodity prices, better selling prices and a
more favourable currency position as a result of the hedging
actions taken at the beginning of the year and improving currency
markets. Consequently, the Group is well positioned to deliver
year-on-year adjusted operating profit growth in the second half of
the year.
"The Board and the wider management team are focused and
determined to improve the Group's earnings potential and we remain
confident about Luceco's long-term growth prospects."
Further enquiries:
Luceco plc via MHP Communications
John Hornby, Chief Executive 020 3128 8100
Officer
Matt Webb, Chief Financial
Officer
MHP Communications
Tim Rowntree
James White
Ollie Hoare 020 3128 8100
Business summary
Luceco is a manufacturer and distributor of high quality and
innovative LED lighting products, wiring accessories and portable
power products for a global customer base.
The Group supplies trade distributors, retailers, wholesalers
and project developers with a wide range of products which broadly
fall into the following market recognised brands:
-- Luceco and Kingfisher Lighting: energy efficient LED lighting
products and associated accessories;
-- British General ("BG"): wiring accessories (including
switches, sockets), circuit protection and cable management
products;
-- Masterplug: cable reels, extension leads, surge protection, timers and adaptor products; and
-- Ross: television wall mounts, audio visual accessories and other items.
The Luceco and Kingfisher LED lighting brands continue to
benefit from the disruptive shift away from mature lighting
technologies because of the material advancement in LED technology
in recent years. The brand has continued to successfully leverage
the Group's existing customer base and low-cost Chinese
manufacturing facility. Consequently, it remains well positioned to
build on its impressive organic growth trajectory to date.
In the electrical wiring accessories market, Luceco's BG and
Masterplug brands have continued to reinforce their market leading
positions through further new product development initiatives,
expanding into new product adjacencies and gaining market
share.
Executive Review
Chief Executive Officer's Review
Overview
Revenue for the period was broadly in-line with last year at
GBP75.1m compared to GBP75.3m in H1 2017. Flat revenue masked good
growth in the strategically important areas of LED projects and
international sales.
LED sales increased by GBP6.8m to GBP24.2m and now represent one
third of Group revenue. The Group delivered particularly strong
growth in UK project sales (which command a significant margin
premium), with this type of business now representing just under
half of the Group's total LED revenue. This higher margin growth
increased overall LED gross margins substantially and these profits
allowed the Group to expand its LED project sales team to 31
(including 9 in the Kingfisher team) at the period end (30 June
2017: 17), to support future growth. Progress in this category
includes GBP6.5m of sales from Kingfisher Lighting, acquired in
September 2017 and trading in line with expectations subsequently.
The Group continues to expand its LED business overseas, with
international LED revenue increasing by 43.0%, most notably in
Mexico, the Middle East and Germany. Recent product development now
allows the Group to offer a comprehensive product range,
particularly to professional customers.
The Group continues to enjoy strong growth internationally,
driven in part by the LED sales noted above. This has not only
supported overall Group revenue but also reduced the Group's
reliance on the UK market - a key aspect of management's strategy.
In 2016, overseas revenue represented 14.0% of the Group total. In
H1 2018, it represented 21.2% underlining the extent of the market
share gains achieved. International revenue in H1 2018 was
GBP15.9m, 33.6% higher than H1 2017. This growth was supported by
expansion of the overseas sales team, which at the end of the
period had increased by 17 heads, compared to the 2017 half year
end, to 93, and product development designed to improve the Group's
local offer such as the launch of European-standard wiring
accessories.
Despite this good progress, overall revenue was held back by a
sharp downturn in orders from UK consumer-facing retail customers
and the impact of a weaker dollar on dollar-denominated Freight on
Board ('FOB') sales to large retailers.
Consumer-facing retail represents approximately 25% of Group
revenue, a significantly lower amount than previous years because
of the diversification strategy outlined above. Sales to this
segment declined by 20% year-on-year due to a combination of
destocking in the supply chain after a poor Christmas and
well-publicised lacklustre consumer confidence. The temporary
impact of destocking was reducing by the end of the half year, as
evidenced by a Q3 retail order book over 30% higher than Q2.
The weaker dollar reduced Group revenue by 3.6% and whilst some
of this impact was offset by reduced costs due to weakening of the
Chinese Renminbi against sterling, foreign exchange movements still
left H1 2018 profits GBP1.1m lower than last year in aggregate. In
light of these events, the Group implemented a revised currency
hedging policy and has now hedged approximately 95% of its currency
exposure for the remainder of 2018 and almost two-thirds of 2019's
exposure, both at more favourable exchange rates than H1 2018.
Adjusted gross profit percentage ("gross margin") decreased by
160 basis points ("bps") compared to the 2017 full year and by 460
bps against the comparable period last year. Gross margins were
held back by the currency movements referred to above, increases in
commodity prices, most notably copper, and certain one-off
adjustments at the half year end to add prudence to the value of
the Group's inventory.
A number of changes have been made in the first six months to
improve future gross margin. These include the revised currency
hedging policy explained above and updated selling prices to better
reflect changes to input costs. Copper prices have reduced since
the end of the half year, which if maintained should also benefit
H2 margins. Increased production volumes in the Group's Chinese
factory in the second half of the year, driven by seasonality and
the end of destocking described above, should also improve the
Group's gross margins as factory fixed costs are more efficiently
leveraged.
The Group's adjusted operating profit for the period was GBPnil
compared to GBP9.0m for the same period in 2017. The GBP9.0m
adverse movement in profit is represented by the GBP3.5m decrease
in gross margin, described above, and a GBP5.5m increase in
overheads, which is detailed in the Financial Review.
The Group's reported operating loss of GBP3.1m included GBP3.1m
of alternative performance measurement adjustments as detailed in
Note 1 to the Condensed Consolidated Financial Statements.
Closure of USA operations
The Group has now closed its loss-making US operations in order
to focus its resources on its other more attractive and successful
international markets. In the financial year 2017 the business
reported revenue of GBP4.2m and made an operating loss of GBP1.9m.
One-off closure costs have been provided in the interim financial
statements at GBP2.0m in total to cover inventory write down, an
onerous lease and employee severance. Luceco Inc. employed
approximately nineteen people. The impact of the closure will be
broadly cash neutral.
New product development
Innovation is a core strength of our business and in the past
two years we have invested approximately GBP3.2m in new product
development to strengthen our innovation base, reduce our time to
market and to ensure we are the first to introduce exciting new
products and services. During the six months ended 30 June 2018 we
introduced to market 50 new wiring accessories and portable power
products and 16 LED lighting products.
Outlook
The Group's outlook remains unchanged from the July 2018 Trading
Update. The second half of 2018 is anticipated to be a stronger
period than the first six months with a return to profitability
expected. Although UK consumer confidence remains fragile the Group
has moved into the third quarter with: a 30% increase in the UK
Retail order book, lower commodity prices, better selling prices
and a more favourable currency position as a result of the hedging
actions taken at the beginning of the year and improving currency
markets. Consequently, the Group is well positioned to deliver
year-on-year adjusted operating profit growth in the second half of
the year.
Financial review
Overview
Revenue by geographical location of customer Unaudited Unaudited Growth
30 June 30 June %
2018 2017
GBPm % GBPm %
total revenue total revenue
---------------------------------------------- ---------- --------------- ---------- --------------- -------
UK 59.2 78.8 63.4 84.2 (6.6%)
Europe 5.4 7.2 3.1 4.1 74.2%
Middle East and Africa 4.4 5.9 3.4 4.5 29.4%
Asia Pacific 3.9 5.2 3.5 4.7 11.4%
Americas 2.2 2.9 1.9 2.5 15.8%
Total revenue 75.1 100.0 75.3 100.0 (0.3%)
---------------------------------------------- ---------- --------------- ---------- --------------- -------
Revenue in sterling was broadly flat year-on-year due to a
weaker US Dollar but increased by 3.3% on a constant currency
basis. This includes sales generated by Kingfisher Lighting,
without which Group revenue at constant currency would have
declined by 5.3%.
UK revenues decreased by 6.7% largely as a consequence of the
decline in UK consumer facing retail and the impact of the weaker
US Dollar on FOB sales. Project sales to professional customers
increased substantially. Sales to wholesale distributors were in
line with prior year but at improved margins.
International revenues increased by 33.6% from GBP11.9m to
GBP15.9m and now represent 21.2% of Group revenue. Investment in
the Group's overseas operations is gaining traction with strong
revenue growth in France, Spain, Mexico and Asia.
Adjusted gross margin reduced by 460 basis points to 27.3% from
31.9%, due largely to higher commodity prices and adverse currency
movements. The Group has hedged at more favourable currency rates
for the second half year and 2019.
Adjusted operating costs grew year-on-year by GBP5.5m with the
majority of the additions occurring in the second half of 2017.
This growth included Kingfisher Lighting overheads of GBP1.8m,
depreciation and amortisation of GBP0.6m, investment in global
sales and marketing resources of GBP1.1m, investment in product
development of GBP0.6m, and warehousing and distribution of
GBP1.2m. Headcount recruitment was frozen early in 2018 and
discretionary expenditure curtailed in response to the Group's
performance. Investments in sales and marketing and product
development should yield increasing benefit in the second half
year. Closure of the Group's US operations and headcount reductions
elsewhere in the Group should collectively lower overheads by
GBP0.8m in the rest of the year or GBP2.0m on an annualised basis,
some of which will be reinvested in strengthening the Group's
support functions.
Impact of foreign exchange movements
A summary of the Condensed Consolidated Income Statement on a
constant currency basis is included in the table below. Current
period balances have been translated at the prior year's average
exchange rates and demonstrate the impact of the volatility in
exchange rates during the period.
Reported results (Unaudited) Unaudited Currency impact Unaudited Constant currency Unaudited
30 June constant variance to 30 June
2018(2) currency(3) 30 June 2017 2017(1)
GBPm GBPm % GBPm GBPm % GBPm
Revenue 75.1 (2.7) (3.6%) 77.8 2.5 3.3% 75.3
Cost of sales (55.6) 1.3 (2.3%) (56.9) (5.6) 10.9% (51.3)
Gross profit 19.5 (1.4) (6.7%) 20.9 (3.1) (12.9%) 24.0
Gross margin % 26.0% (90bps) 26.9% (500bps) 31.9%
Operating costs (22.6) 0.3 (1.3%) (22.9) (7.9) (52.7%) (15.0)
----------------------------- --------- ------- --------- ------------ -------- --------- ---------
Operating (loss)/profit (3.1) (1.1) (55.0%) (2.0) (11.0) (122.2%) 9.0
Operating margin % (4.1%) (2.6%) 12.0%
----------------------------- --------- ------- --------- ------------ -------- --------- ---------
1. Prior year financials have been restated see note 1a in the
Notes to the Condensed Consolidated Financial Statements
2. Six months ended 30 June 2018 translated at average exchange
rates for the period. These were 1.37 for GBP: US Dollar and 8.74
for GBP: RMB.
3. Six months ended 30 June 2018 translated at six months ended
30 June 2017 average exchange rates. These were 1.26 for GBP: US
Dollar and 8.70 for GBP: RMB
Sterling exchange rates were stronger, on average, against both
US Dollar and Chinese Renminbi ("RMB") in H1 2018 compared to H1
2017. The average rate for the US Dollar against Sterling increased
by 8% from $1.26 in H1 2017 to $1.37 in H1 2018, resulting in a
reduction in the Sterling value of the Group's US
Dollar-denominated revenue, which accounts for approximately 40% of
Group revenue. The RMB appreciated by 0.5% from RMB 8.70 to RMB
8.74. The Group has expanded its currency hedging programme for H2
2018 and 2019 to better manage currency risks in the future.
Prior year restatement
During the production of the 2017 Annual Report and Financial
Statements a number of errors were identified that impacted the
Group's previously published financial statements. As a result, the
comparative financial information was restated in the 2017
Financial Statements. In these interim financial statements the
comparative financial information has been restated in accordance
with IAS 8 to correct those errors that impacted the first half
year.
The only restatement found to be required to the Group's
Condensed Consolidated Income Statement was the reclassification of
Chinese manufacturing facility costs from Administrative costs to
Cost of Sales which amounted to GBP2.4m. In the Group's Condensed
Consolidated Statement of Financial Position, the opening balances
were restated for the restatements that were made to 31 December
2016 Financial Position, as reported in the 2017 Annual Report and
Financial Statements and detailed in note 1a of the Notes to the
Condensed Consolidated Financial Statements. In addition, Trade
Receivables, that had previously been reported net of rebates, have
been grossed up for the amount of the rebates with a corresponding
increase in Trade and Other Payables, in the six-month period to 30
June 2018 this amounted to GBP7.4m (H1 2017: GBP6.7m; FY 2017:
GBP8.6m). None of these restatements have an impact on profit or
net assets. Further details on the prior year restatements is given
in note 1a of the Notes to the Condensed Consolidated Financial
Statements.
Operating segment review
The methodology for the segmental review was changed during the
period and the comparatives have been restated using the new
methodology. The segmental review has been made by reference to
Adjusted financial metrics, the definitions of these adjustments to
the statutory figures can be found in note 1 in the Notes to the
Condensed Consolidated Financial Statements.
LED Lighting (Luceco and Kingfisher Lighting)
Unaudited Unaudited Growth
30 June 30 June
2018 2017
GBPm GBPm %
------------------------------------ --------- --------- ---------
Revenue 24.2 17.4 39.1%
Adjusted(1) operating (loss)/profit (1.4) - -
Adjusted(1) operating margin % (5.8%) (0.2%) (560 bps)
------------------------------------ --------- --------- ---------
LED Lighting revenue increased by GBP6.8m, of which GBP6.5m was
contributed by Kingfisher Lighting. Organic growth was therefore
GBP0.3m, or 1.7%, held back by the slowdown in UK retail sales.
This masked good progress in the UK LED Project and international
sales, accompanied by a significant improvement in gross margin.
The business expects to improve upon the GBP1.4m adjusted operating
loss recorded in the first half as it generates a return on recent
investments in its sales team and product offering.
Wiring Accessories (British General)
Unaudited Unaudited Growth
30 June 30 June
2018 2017
GBPm GBPm %
------------------------------- --------- --------- ----------
Revenue 31.4 35.1 (10.5%)
Adjusted(1) operating profit 2.0 7.1 (71.8%)
Adjusted(1) operating margin % 6.4% 20.2% (1380 bps)
------------------------------- --------- --------- ----------
The Group increased its Wiring Accessories sales to
international and UK wholesale distribution customers in the
period, with the latter allowing the Group to increase its share of
the UK market. Despite this good progress, overall segmental
revenue declined by 10.5% due to slow UK retail sales and adverse
currency movements as previously described, with the latter also
pressuring gross margins. The segment remained profitable in the
half and results should improve as UK retail demand stabilises and
recent selling price updates deliver fully.
Portable Power (Masterplug)
Unaudited Unaudited Growth
30 June 30 June
2018 2017
GBPm GBPm %
------------------------------------ --------- --------- ----------
Revenue 16.9 19.8 (14.6%)
Adjusted(1) operating (loss)/profit (0.5) 2.2 (122.7%)
Adjusted(1) operating margin % (3.0%) 11.1% (1410 bps)
------------------------------------ --------- --------- ----------
The Portable Power business experienced a challenging first half
due to its relatively high exposure to UK high street retail,
currency movements and copper prices. Much of the decline in UK
consumer-facing retail sales arose from destocking and reduced
sales to a small number of challenged retailers. Copper prices and
a weaker dollar took their toll on first half gross margins but
management have taken the steps necessary to address this, with the
potential for outperformance if current copper prices are
maintained. The Group continues to enjoy clear UK market
leadership. Demand in the UK retail market is likely to remain
subdued for the foreseeable future and the Group's retail customers
are likely to continue to face fierce competition online (a channel
which the Group also serves). Despite these challenges, the Group
is confident it can make healthy returns in what is a relatively
capital efficient part of the business whilst continuing to exploit
attractive growth opportunities overseas.
Ross and other
Unaudited Unaudited Growth
30 June 30 June
2018 2017
GBPm GBPm %
------------------------------- --------- --------- -------
Revenue 2.6 3.0 (13.3%)
Adjusted(1) operating loss (0.1) (0.3) 66.7%
Adjusted(1) operating margin % (3.8%) (10.0%) 620bps
------------------------------- --------- --------- -------
Ross revenues have declined by 13.3% to GBP2.6m, with an
adjusted operating loss of GBP0.1m, largely due to the slowdown in
this sector, increased raw materials costs and limited product
offerings through new product innovations.
Interest costs
Net finance expense at GBP1.0m (H1 2017: GBP0.9m). Higher
finance costs in the period reflected a year-on-year increase in
average net debt largely due to the Kingfisher Lighting acquisition
in September 2017.
Funding and banking covenants
Net debt increased to GBP41.4m (H1 2017: GBP26.1m), a GBP4.7m
increase since the year end due to a combination of normal
seasonality and trading underperformance. Indebtedness levels
benefited from reduced levels of capital and development
expenditure as well as the temporary suspension of the dividend.
The Group expects to deliver an improved trading performance in the
second half year which will contribute to a reduction in the level
of net debt.
During the period the Group successfully negotiated an extension
in the maturity of its GBP20.0m revolving credit facility to 31
March 2020 and the addition of a GBP3m overdraft facility from its
relationship bank, which is currently undrawn. The Group also has a
GBP30m invoice financing facility.
Net debt at GBP41.4m represented 2.54x adjusted last twelve
months Earnings Before Interest Tax Depreciation and Amortisation
("EBITDA"). Refer to note 1 in the Notes to the Condensed
Consolidated Financial Statements for an explanation of "adjusted".
EBITDA reflects certain adjustments required by the Company's loan
agreements, including proforma adjustments for acquisitions and
planned closures. The Group was in compliance with its covenant
requirements throughout the period.
Income tax expense
A tax charge for the six-month period has been included in the
Condensed Consolidated Income Statement at GBP0.3m (H1 2017:
GBP1.6m) and has been calculated using the anticipated effective
tax rate on the taxable profit of the UK business. It is not
expected that any relief will be granted on the losses arising in
the Group's overseas businesses. The anticipated effective tax rate
for the year ended 31 December 2018 was calculated at 33.3% (H1
2017: 19.0%).
Balance sheet
Non-current assets
Non-current assets during the 12-month period increased by
GBP12.8m to GBP47.6m (H1 2017: GBP34.8m):
-- Intangible assets increased by GBP10.1m during this period,
mainly due to the increase in goodwill arising on the acquisition
of Kingfisher Lighting in September 2017 of GBP9.8m; and
-- Property, Plant and Equipment net additions, after disposals
and depreciation were GBP2.8m during the period of which GBP0.3m
(H1 2017: GBP0.4m) arose in the six months since the year end and
includes investments in tooling in the UK and continued investment
in testing equipment to support the Group's manufacturing facility
in China.
Working capital
Net working capital at GBP30.4m (H1 2017: GBP32.9m) has reduced
by GBP1.9m since the year-end position at GBP32.3m as the Group
continues to manage its working capital requirements. Working
capital as a percentage of revenue for the six-month period was 41%
(H1 2017: 35%).
Cash flow
Unaudited Unaudited Audited
Reported Reported Reported
30 June 30 June 31 December
2018 2017 2017
GBPm GBPm GBPm
----------------------------------------------------- --------- --------- -------------
Cash from operations 1.3 10.2 20.3
Tax paid (1.4) (0.4) (3.1)
Financing inflows (excluding dividends paid) 1.9 (2.7) 5.9
Dividends paid - (0.5) (1.8)
Capital expenditure net of disposals (3.1) (3.6) (10.0)
Acquisition of subsidiary - - (9.7)
-------------
Net (decrease)/increase in cash and cash equivalents (1.3) 3.0 1.6
----------------------------------------------------- --------- --------- -------------
Dividend
In consideration of the Group's first half year performance the
Board has decided not to propose an interim dividend. The Board
retains its confidence in the delivery of the Group's strategy and
will revisit the dividend policy in 2019.
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 has applied the going concern
principle in preparing the Condensed Consolidated Financial
Statements.
In early 2018 the Group successfully negotiated an extension in
the maturity of its Revolving Credit Facility to March 2020 and the
addition of a GBP3m overdraft from its relationship bank. In
addition, the Group successfully extended its invoicing financing
facility to Kingfisher Lighting and customers in Hong Kong. The
Group remains and expects to remain in full compliance with its
banking covenants. It also expects to continue to have adequate
funding liquidity to support its growth goals. The Group's
Viability Statement can be found on page 27 of the 2017 Annual
Report and Financial Statements.
Principal risks and uncertainties
The Group is subject to risk factors both internal and external
to its business and has a well-established set of risk management
procedures. The following risks and uncertainties are those that
the Directors believe could have the most significant impact on the
Group's business:
-- disruption to manufacturing operations
-- input costs
-- loss of market share
-- concentration of customers
-- financial impact of international operations
-- regulatory non-compliance
-- pursuit of the acquisition strategy
-- inadequate integration or leverage of acquired business
For further detail of these risks and uncertainties, please
refer to pages 24 to 27 of the Luceco plc 2017 Annual Report and
Financial Statements, which is available on request from the
Group's head office or through the Group website
www.luceco.com/investors
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.
Condensed Consolidated Income Statement
for the period ended 30 June 2018 (Unaudited)
Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited Audited
Adjusted Adjustments(2) Reported Adjusted Adjustments(2) Reported Reported
30 June 30 June 30 June 30 June 31 December
2018 2018 2017(1) 2017(1) 2017
Note GBPm GBPm GBPm GBPm GBPm GBPm GBPm
----------------- ---- --------------- -------------- --------- --------- -------------- --------- -----------
Continuing
operations
Revenue 2 75.1 - 75.1 75.3 - 75.3 167.6
Cost of sales (54.6) (1.0) (55.6) (51.3) - (51.3) (119.2)
----------------- ---- --------------- -------------- --------- --------- -------------- --------- -----------
Gross profit 20.5 (1.0) 19.5 24.0 - 24.0 48.4
----------------- ---- --------------- -------------- --------- --------- -------------- --------- -----------
Distribution
expenses (9.6) - (9.6) (7.7) - (7.7) (12.1)
Administrative
expenses (10.9) (2.1) (13.0) (7.3) - (7.3) (22.1)
----------------- ---- --------------- -------------- --------- --------- -------------- --------- -----------
Operating
(loss)/profit 3 - (3.1) (3.1) 9.0 - 9.0 14.2
----------------- ---- --------------- -------------- --------- --------- -------------- --------- -----------
Finance income - - - - - - 0.1
Finance expense (1.0) - (1.0) (0.9) - (0.9) (2.0)
----------------- ---- --------------- -------------- --------- --------- -------------- --------- -----------
Net financing
expense (1.0) - (1.0) (0.9) - (0.9) (1.9)
----------------- ---- --------------- -------------- --------- --------- -------------- --------- -----------
(Loss)/profit
before
tax (1.0) (3.1) (4.1) 8.1 - 8.1 12.3
Income tax
expense 4 (0.4) 0.1 (0.3) (1.6) - (1.6) (2.3)
----------------- ---- --------------- -------------- --------- --------- -------------- --------- -----------
(Loss)/profit
from
continuing
operations (1.4) (3.0) (4.4) 6.5 - 6.5 10.0
----------------- ---- --------------- -------------- --------- --------- -------------- --------- -----------
(Loss)/Earnings
per
share (pence)
Continuing
operations
Basic 5 (0.9) (1.8) (2.7) 4.0 - 4.0 6.2
Fully Diluted 5 (0.9) (1.8) (2.7) 4.0 - 4.0 6.2
----------------- ---- --------------- -------------- --------- --------- -------------- --------- -----------
Notes:
1. The reported comparatives have been restated to reflect a
prior year adjustment, see note 1a in the Notes to the Condensed
Consolidated Financial Statements
2. The definitions of the adjustments made to the statutory
figures can be found in note 1 in the Notes to the Condensed
Consolidated Financial Statements
The accompanying notes form an integral part of these interim
financial statements.
Condensed Consolidated Statement of Comprehensive Income
for the period ended 30 June 2018 (Unaudited)
Unaudited Unaudited Audited
Reported Reported Reported
30 June 30 June 31 December
2018 2017(1) 2017
GBPm GBPm GBPm
--------------------------------------------------- ------------- --------- ------------
(Loss)/profit for the period (4.4) 6.5 10.0
Other comprehensive income - amounts that may
be reclassified to profit or loss in the future:
Impairment provision on expected credit losses (0.5) - -
Foreign exchange translation differences - foreign
operations 0.1 (1.7) (0.1)
--------------------------------------------------- ------------- --------- ------------
Total comprehensive (expense)/income for the
period (4.8) 4.8 9.9
--------------------------------------------------- ------------- --------- ------------
Note 1: The reported comparatives have been restated to reflect
a prior year adjustment, see note 1a in the Notes to the Condensed
Consolidated Financial Statements
All results are from continuing operations.
The accompanying notes form an integral part of these financial
statements.
Condensed Consolidated Statement of Financial Position
at 30 June 2018 (Unaudited)
Unaudited Unaudited Audited
Reported Reported Reported
30 June 30 June 31 December
2018 2017(1) 2017(1)
Note GBPm GBPm GBPm
------------------------------ ---- --------- --------- ------------
Non-current assets
Property, plant
and equipment 7 23.8 21.0 23.5
Intangible assets 8 23.8 13.7 23.7
Deferred tax asset - 0.1 -
---------------------------------- ---- --------- --------- ------------
47.6 34.8 47.2
------------------------------ ---- --------- --------- ------------
Current assets
Inventories 41.5 36.9 44.2
Trade and other
receivables 33.8 35.9 45.3
Cash and cash
equivalents 4.1 6.4 5.6
---------------------------------- ---- --------- --------- ------------
79.4 79.2 95.1
------------------------------ ---- --------- --------- ------------
Total assets 127.0 114.0 142.3
---------------------------------- ---- --------- --------- ------------
Current liabilities
Interest-bearing
loans and borrowings 9 40.8 20.3 42.3
Trade and other
payables 46.2 44.2 58.2
Other financial
liabilities 0.1 0.3 0.1
---------------------------------- ---- --------- --------- ------------
87.1 64.8 100.6
------------------------------ ---- --------- --------- ------------
Non-current liabilities
Other interest-bearing
loans and borrowings 9 4.0 12.0 -
Other financial
liabilities 0.6 0.1 0.4
Deferred tax liability - - 1.3
---------------------------------- ---- --------- --------- ------------
4.6 12.1 1.7
------------------------------ ---- --------- --------- ------------
Total liabilities 91.7 76.9 102.3
---------------------------------- ---- --------- --------- ------------
Net assets 35.3 37.1 40.0
---------------------------------- ---- --------- --------- ------------
Equity attributable to equity
holders of the parent
Share capital 0.1 0.1 0.1
Share premium 24.8 24.8 24.8
Translation reserve 1.4 (0.3) 1.3
Treasury reserve (1.2) - (1.2)
Retained earnings 10.2 12.5 15.0
---------------------------------- ---- --------- --------- ------------
Total equity 35.3 37.1 40.0
---------------------------------- ---- --------- --------- ------------
Note 1. The reported comparatives have been restated to reflect
a prior year adjustment, see note 1a in the Notes to the Condensed
Consolidated Financial Statements
The accompanying notes form an integral part of these interim
financial statements.
Condensed Consolidated Statement of Changes in Equity
for the period ended 30 June 2018 (Unaudited)
Share Share Translation Retained Treasury Total
capital premium reserve Earnings(1) reserve equity
GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------------------------------------- ------- ------- ----------- ----------- -------- ------
Balance at 1 January 2017 0.1 24.8 1.4 12.0 - 38.3
Prior year restatement (note 1a) - - - (5.5) - (5.5)
-------------------------------------------------------- ------- ------- ----------- ----------- -------- ------
Balance at 1 January 2017 as restated 0.1 24.8 1.4 6.5 - 32.8
Total comprehensive income
Profit for the period - - - 6.5 - 6.5
Currency translation differences - - (1.7) - - (1.7)
-------------------------------------------------------- ------- ------- ----------- ----------- -------- ------
Total comprehensive income
for the period - - (1.7) 6.5 - 4.8
Transactions with owners in their capacity as owners:
Dividends paid - - - (0.5) - (0.5)
Share-based payments charge(1) - - - - - -
Total transactions with owners in their capacity as
owners - - - (0.5) - (0.5)
Balance at 30 June 2017 0.1 24.8 (0.3) 12.5 - 37.1
Balance at 1 January 2018 0.1 24.8 1.3 15.0 (1.2) 40.0
Total comprehensive income
Loss for the period - - - (4.4) - (4.4)
Impairment provision on expected credit losses(2) - - - (0.5) - (0.5)
Currency translation differences - - 0.1 - - 0.1
Total comprehensive income
for the period - - 0.1 (4.9) - (4.8)
Transactions with owners in their capacity as owners:
Share-based payments charge - - - 0.1 - 0.1
-------------------------------------------------------- ------- ------- ----------- ----------- -------- ------
Total transactions with owners in their capacity as
owners - - - 0.1 - 0.1
-------------------------------------------------------- ------- ------- ----------- ----------- -------- ------
Balance at 30 June 2018 0.1 24.8 1.4 10.2 (1.2) 35.3
-------------------------------------------------------- ------- ------- ----------- ----------- -------- ------
Notes:
1. The share-based payment charge in the period ended 30 June 2017 was GBP28,000.
2. Refer to IFRS 9 in note 1 in the Notes to the Condensed
Consolidated Financial Statements.
Condensed Consolidated Cash Flow Statement
for the period ended 30 June 2018 (Unaudited)
Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited Audited
Reported
31 December
2017
Adjusted Adjustments(1) Reported Adjusted Adjustments(1) Reported
30 June
30 June 30 June 30 June 30 June 2017 30 June
2018
2018 2018 2017 2017
-------------------- ---- --------- --------------- --------- --------- --------------- --------- -----------------
Note GBPm GBPm GBPm GBPm GBPm GBPm GBPm
-------------------- ---- --------- --------------- --------- --------- --------------- --------- -----------------
Cash flows from
operating
activities
(Loss)/profit for
the
period (1.4) (3.0) (4.4) 6.5 - 6.5 10.0
Impairment provision
for credit losses (0.5) - (0.5) - - - -
Adjustments for:
Depreciation and
amortisation 2.4 0.3 2.7 1.8 - 1.8 4.4
Financial
derivatives 0.2 - 0.2 - - - (0.7)
Net financial
expense 1.0 - 1.0 0.8 - 0.8 1.9
Taxation 4 0.4 (0.1) 0.3 1.6 - 1.6 2.3
Share-based payments
charge 0.1 - 0.1 - - - 0.3
-------------------- ---- --------- --------------- --------- --------- --------------- --------- -----------------
Operating cash flow
before
movement in working
capital 2.2 (2.8) (0.6) 10.7 - 10.7 18.2
Decrease/(increase)
in
trade and other
receivables 11.5 - 11.5 (6.6) - (6.6) (13.0)
Decrease/(increase)
in
inventories 1.7 1.0 2.7 (1.5) - (1.5) (7.8)
(Decrease)/Increase
in
trade and other
payables (13.3) 1.0 (12.3) 7.6 - 7.6 22.9
Cash from operations 2.1 (0.8) 1.3 10.2 - 10.2 20.3
Income taxes paid (1.4) - (1.4) (0.4) - (0.4) (3.1)
-------------------- ---- --------- --------------- --------- --------- --------------- --------- -----------------
Net cash from
operating
activities 0.7 (0.8) (0.1) 9.8 - 9.8 17.2
-------------------- ---- --------- --------------- --------- --------- --------------- --------- -----------------
Cash flows from
investing
activities
Acquisition of
property,
plant and equipment 7 (1.9) - (1.9) (2.4) - (2.4) (7.2)
Acquisition of
subsidiary 13 - - - - - - (9.7)
Acquisition of other
intangible assets 8 (1.2) - (1.2) (1.2) - (1.2) (3.1)
Disposal of tangible
assets - - - - - - 0.3
Net cash used in
investing
activities (3.1) - (3.1) (3.6) - (3.6) (19.7)
-------------------- ---- --------- --------------- --------- --------- --------------- --------- -----------------
Cash flows from
financing
activities
Proceeds from new
loans 2.5 - 2.5 - - - 8.7
Interest paid (0.8) - (0.8) (0.8) - (0.8) (1.9)
Dividends paid - - - (0.5) - (0.5) (1.8)
Finance lease
liabilities 0.2 - 0.2 (0.1) - (0.1) 0.3
Purchase of treasury
shares - - - - - - (1.2)
Repayment of
borrowings - - - (1.2) - (1.2) -
Repayment of
interest-bearing
loans - - - (0.6) - (0.6) -
Net cash from
financing
activities 1.9 - 1.9 (3.2) - (3.2) 4.1
-------------------- ---- --------- --------------- --------- --------- --------------- --------- -----------------
Net
(decrease)/increase
in cash and cash
equivalents (1.3) 3.0 1.6
Cash and cash
equivalents
at 1 January 5.6 4.1 4.1
Effect of exchange
rate
fluctuations on
cash
held (0.2) (0.7) (0.1)
-------------------- ---- --------- --------------- --------- --------- --------------- --------- -----------------
Cash and cash equivalents at 30
June/31 December 4.1 6.4 5.6
------------------------------------- --------------- --------- --------- --------------- --------- -----------------
Notes
1: The definitions of the adjustments made to the statutory
figures can be found in note 1 in the Notes to the Condensed
Consolidated Financial Statements
Notes to the Condensed Consolidated Financial Statements
for the period ended 30 June 2018 (Unaudited)
1, Basis of preparation
Luceco plc (the 'Company') is a company incorporated and
domiciled in the United Kingdom. These condensed consolidated
interim financial statements ("interim financial statements") for
the period ended 30 June 2018 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 LED lighting products and wiring accessories
to global markets (see note 2).
The annual financial statements of Luceco plc are prepared in
accordance with International Financial Reporting Standards (IFRS)
and IFRS Interpretations Committee (IFRS IC) interpretations as
adopted by the European Union and the Companies Act 2006 applicable
to companies reporting under IFRS. The condensed consolidated
interim financial statements included in this half-yearly financial
report has been prepared in accordance with IAS 34 "Interim
Financial Reporting" as adopted by the European Union.
The accounting policies adopted in the preparation of the
condensed consolidated interim financial information are consistent
with those followed in the preparation of the Group's financial
statements for the year ended 31 December 2017 other than the
impact of the new standards adopted in the period, as described
below.
The condensed consolidated interim financial statements do not
comprise statutory accounts within the meaning of section 434 of
the Companies Act 2006. Statutory accounts for the year ended 31
December 2017 were approved by the Board of Directors and have been
delivered to the Registrar of Companies. The audit report on those
accounts was unqualified, did not draw attention to any matters by
way of emphasis and did not contain any statement under section
498(2) or (3) of the Companies Act 2006.
This condensed consolidated interim financial information has
been reviewed, not audited.
Risks and uncertainties
An outline of the key risks and uncertainties faced by the Group
is described in the 2017 Annual Report and Financial Statements.
Risk is an inherent part of doing business and the Directors
believe that the Group is well placed to manage the key risks it
faces.
Going concern
The condensed consolidated interim financial statements have
been prepared on a going concern basis. The Directors of the
Company are confident, based on current financial projections and
facilities available and after considering sensitivities, that the
Group has sufficient resources for its operational needs and will
remain in compliance with the financial covenants in its bank
facilities for at least then next 12 months.
Standards and interpretations issued
At the date of the approval of these financial statements, the
following standards and interpretations, which have not yet been
applied in these financial statements, were in issue, but not yet
effective:
-- Amendments to IAS 28 "Long-term Interests in Associates and Joint Ventures"
-- IFRIC 23 Uncertainty over Income Tax Treatments
-- Annual improvements to IFRS standards 2015-17 cycle
The Directors are currently analysing the impact that these
standards will have on the Group's financial statements.
Impact on the adoption of new standards, interpretations and
amendments for 2018
IFRS 9 "Financial Instruments" and IFRS 15 "Revenue from
Contracts with Customers" were adopted from 1 January 2018.
IFRS 9 "Financial Instruments"
This standard addresses the classification, measurement and
de-recognition of financial assets and liabilities through the
introduction of an impairment model that requires the recognition
of impairment provisions on expected credit losses rather than
incurred credit losses. For trade and other receivables, the Group
has determined that in the period the expected credit losses
requires an impairment which has resulted in an increase in
provisions of GBP0.5m and has been charged to reserves in the
period in line with the transitional requirements of IFRS 9.
IFRS 15 "Revenue from Contracts with Customers"
This standard provides the requirements for recognising revenues
and costs from contracts with customers. The Group recognises
revenue when it transfers control over a product to its customer.
Where product sales are Freight on Board ("FOB") title passes when
the goods are received by the customer's freight forwarders and
with domestic and non-FOB exports title passes upon receipt by the
customer. Having reviewed customer contracts the Group has
concluded that IFRS 15 does not impact the way it reports revenue
and that there is therefore no material effect on these interim
financial statements.
Critical accounting judgements and estimates
The preparation of these condensed consolidated interim
financial statements requires management to make judgements,
estimates and assumptions that affect the application of accounting
policies and the reported amounts of assets and liabilities, income
and expense. Actual results may differ from these estimates.
The significant judgements made by management in preparing these
interim financial statements and applying the Group's accounting
policies and the key sources of estimation uncertainty were the
same as those applied to the consolidated financial statements for
the year ended 31 December 2017.
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
because of intermittent activities such as a corporate acquisition.
The Group separately reports items Condensed consolidated income
statement which, in the Director's judgement, need to be disclosed
separately by virtue of their nature, size and incidence for users
of the financial statements to obtain a balanced view of the
financial information and the underlying performance of the
business.
In following the guidelines on Alternative Performance Measures
(APMs) issued by the European Securities and Markets Authorities,
the Group has included a Condensed Consolidated Income Statement
and Condensed Consolidated Cash Flow Statement that have both
Statutory and Adjusted performance measures.
The measures used in these interim financial statements are
defined in the table on page 86 of the 2017 Annual Report and
Financial Statements and the principles to identify adjusting items
have been applied on a consistent basis with the exception of
adjusted operating profit. The definition of adjusted operating
profit is expanded to include the closure of business operations
and the amortisation of acquired assets.
The unaudited measures used in this interim results announcement
and adjustments made are summarised in the table below:
30 June Closure Restructuring Amortisation 30 June 31 December
2018 of US business(2) costs(3) of acquired 2017 2017
Adjustments intangibles(4) Adjustments Kingfisher
acquisition
costs(1)
GBPm GBPm GBPm GBPm GBPm GBPm
------------------ ------------- ------------------- -------------- ---------------- ------------- ------------
Cost of sales (1.0) (1.0) - - - -
------------------ ------------- ------------------- -------------- ---------------- ------------- ------------
Gross profit (1.0) (1.0) - - - -
Administrative
expenses (2.1) (1.0) (0.8) (0.3) - (0.5)
------------------ ------------- ------------------- -------------- ---------------- ------------- ------------
Operating profit (3.1) (2.0) (0.8) (0.3) - (0.5)
Loss before tax (3.1) (2.0) (0.8) (0.3) - (0.5)
Income tax credit 0.1 - 0.1 - - -
------------------ ------------- ------------------- -------------- ---------------- ------------- ------------
Loss for the
year (3.0) (2.0) (0.7) (0.3) - (0.5)
------------------ ------------- ------------------- -------------- ---------------- ------------- ------------
Notes:
1. The September 2017 acquisition costs of Kingfisher lighting
included legal and professional fees of GBP0.2m and redundancy and
reorganisation costs of GBP0.3m.
2. Closure of the US business represent GBP0.2m onerous lease
costs, GBP1.0m inventory provision, severance costs, write down and
disposal of assets GBP0.8m
3. One-off restructuring and advisory fees arising from
restructuring of the Finance function.
4. The amortisation charge of intangible assets acquired with Kingfisher Lighting
The Group reports some financial measures net of "non-ongoing
operations". It defines such operations to be those that are either
sold or closed, or where their disposal or closure has been
announced. Such operations do not meet the criteria to be
classified as discontinued operations under IFRS 5 "Non-Current
Assets Held for Sales and Discontinued Operations". In June 2018,
the Group's business in the US was classified as non-ongoing.
Ongoing Operations are therefore defined as continuing operations
excluding non-ongoing operations.
A reconciliation between ongoing and continuing operations is
shown below:
Unaudited Revenue Revenue Adjusted Adjusted
operating operating
profit profit
Six months Six months Six months Six months
to to to to
30 June 30 June 30 June 30 June
2018 2017 2018 2017
GBPm GBPm GBPm GBPm
----------------------- ---------- ---------- ---------- ----------
Ongoing operations 74.0 73.7 1.0 9.8
Non-ongoing operations 1.1 1.6 (1.0) (0.8)
----------------------- ---------- ---------- ---------- ----------
Continuing operations 75.1 75.3 - 9.0
----------------------- ---------- ---------- ---------- ----------
The Group announced on 4 June that it had decided to close its
US business and expects the closure to be completed during Q3 2018
at a cost of GBP2.0m, this sum has been provided in these interim
financial statements.
1a. Prior year restatement
During the production of the 2017 Annual Report and Financial
Statements a number of material errors were identified that
impacted the Group's previously published financial statements. As
a result, the comparative financial information was restated in the
2017 Financial Statements. In these interim financial statements
comparative financial information for the six-month period ended 30
June 2017 has been restated in accordance with IAS 8 to correct
those errors that impacted the first half year. The only
restatement to impact the Condensed Consolidated Income Statement
for the six-month period ended 30 June 2017 is the reclassification
of Chinese manufacturing facility cost of GBP2.4m from
Administrative costs to be included in Cost of Sales. The
restatement to the Condensed Consolidated Income Statement for the
six months ended 30 June 2017 is detailed below:
Condensed Consolidated Income Statement
30 June 2017 restatement
As previously Restatement As restated
reported impact
GBPm GBPm GBPm
-------------- ----------- ------------
Revenue 75.3 - 75.3
Cost of sales (48.9) (2.4) (51.3)
------------------------ -------------- ----------- ------------
Gross profit 26.4 (2.4) 24.0
Gross margin % 35.1% - 31.9%
Distribution expenses (7.7) - (7.7)
Administrative expenses (9.7) 2.4 (7.3)
------------------------ -------------- ----------- ------------
Operating profit 9.0 - 9.0
Net financing expense (0.9) - (0.9)
------------------------ -------------- ----------- ------------
Profit before taxation 8.1 - 8.1
Income tax expense (1.6) - (1.6)
------------------------ -------------- ----------- ------------
Profit for the year 6.5 - 6.5
------------------------ -------------- ----------- ------------
Earnings per share
(pence)
------------------------ --------------
Basic and fully
diluted 4.0p - 4.0p
------------------------ -------------- ----------- ------------
As noted in the 2017 Annual Report and Financial Statements the
balance sheet as at 31 December 2016 was amended to reflect a prior
year restatement. The total net asset and retained earnings
restatement as at 1 January 2017 was a reduction of GBP5.5m and had
the effect of reducing inventory by GBP3.1m and trade payables by
GBP2.4m. The restatements were required to adjust for inter-company
balances that were incompletely reconciled and therefore not
correctly eliminated and to correct the level of overheads that
were included in inventory. In these interim financial statements
the comparative financial information at 30 June 2017 has been
restated and the impact, which reduced opening retained earnings by
GBP5.5m, is reflected in the table below. It should be noted that
as the restatements are the same as those made at 31 December 2016
there is no profit impact in the six-month period ended 30 June
2017.
In addition to the above restatements it has been identified in
the current period that it is necessary to gross up Trade
Receivables and Trade and Other Payables by GBP6.7m in the Balance
Sheet at 30 June 2017 to change the Group's treatment of the rebate
accrual. The Group's policy had been to net the rebate accrual
against Trade Receivables as it would often settle rebates by
crediting a customer's account rather than by a cash payment. As
there is no legal right of set-off then Trade Receivable customer
balances should be shown gross, not net, of rebates. Accordingly
rebates to the value of GBP7.4m have been added back to Trade
Receivables and Trade Payables at 30 June 2018 (30 June 2017:
GBP6.7m; 31 December 2017: GBP8.6m). These adjustments are detailed
in the tables below.
Condensed Consolidated Statement of Financial Position
30 June 2017 restatement
As previously Changes
reported to opening
balance Reclassification
sheet of rebates As restated
GBPm GBPm GBPm GBPm
-------------- ----------- ---------------- -----------
Non-current assets
Property, plant
and equipment 21.0 - - 21.0
Intangible assets 13.7 - - 13.7
Deferred tax asset 0.1 - - 0.1
-------------------------- -------------- ----------- ---------------- -----------
34.8 - - 34.8
-------------------------- -------------- ----------- ---------------- -----------
Current assets
Inventories 40.0 (3.1) - 36.9
Trade and other
receivables 29.2 - 6.7 35.9
Cash and cash equivalents 6.4 - - 6.4
-------------------------- -------------- ----------- ---------------- -----------
75.6 (3.1) 6.7 79.2
-------------------------- -------------- ----------- ---------------- -----------
Total assets 110.4 (3.1) 6.7 114.0
-------------------------- -------------- ----------- ---------------- -----------
Current liabilities
Interest bearing
loans and borrowings (20.3) - - (20.3)
Trade and other
payables (35.1) (2.4) (6.7) (44.2)
Other financial
liabilities (0.3) - - (0.3)
(55.7) (2.4) (6.7) (64.8)
-------------------------- -------------- ----------- ---------------- -----------
Non-current liabilities (12.1) - - (12.1)
-------------------------- -------------- ----------- ---------------- -----------
Total liabilities (67.8) (2.4) (6.7) (76.9)
-------------------------- -------------- ----------- ---------------- -----------
Total net assets 42.6 (5.5) - 37.1
-------------------------- -------------- ----------- ---------------- -----------
31 December 2017 restatement
As previously Reclassification
reported of rebates As restated
GBPm GBPm GBPm
------------- ---------------- -----------
Non-current assets
Property, plant
and equipment 23.5 - 23.5
Intangible assets 23.7 - 23.7
47.2 - 47.2
------------------------ ------------- ---------------- -----------
Current assets
Inventories 44.2 - 44.2
Trade and other
receivables 36.7 8.6 45.3
Cash and cash
equivalents 5.6 - 5.6
------------------------- ------------- ---------------- -----------
86.5 8.6 95.1
------------------------ ------------- ---------------- -----------
Total assets 133.7 8.6 142.3
------------------------- ------------- ---------------- -----------
Current liabilities
Interest bearing
loans and borrowings (42.3) - (42.3)
Trade and other
payables (49.6) (8.6) (58.2)
Other financial
liabilities 0.1 - 0.1
(92.0) (8.6) (100.6)
------------------------ ------------- ---------------- -----------
Non-current liabilities (1.7) - (1.7)
------------------------- ------------- ---------------- -----------
Total liabilities (93.7) (8.6) (102.3)
------------------------- ------------- ---------------- -----------
Total net assets 40.0 - 40.0
------------------------- ------------- ---------------- -----------
There is no impact from the restatements on the total operating,
investing or financing cash flows for the six months ended 30 June
2017.
2. Operating segments
The Group's principal activities are in the manufacturing and
supply of LED lighting, wiring accessories, portable power
equipment and Ross (home entertainment products). For the purposes
of management reporting to the Chief Operating Decision-Maker (the
Board), the Group consists of four operating segments which are the
product categories that the Group manufactures and 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".
Unaudited Unaudited Unaudited
Adjusted(1) Reported Reported
30 June 30 June 30 June
2018 2018 2017(2)
GBPm GBPm GBPm
------------------------ --------------- --------------- ---------
Revenue
Wiring Accessories 31.4 31.4 35.1
Portable Power 16.9 16.9 19.8
LED Lighting 24.2 24.2 17.4
Ross and other 2.6 2.6 3.0
-------------------------- --------------- --------------- ---------
75.1 75.1 75.3
------------------------ --------------- --------------- ---------
Operating (loss)/profit
Wiring Accessories 2.0 1.7 7.1
Portable Power (0.5) (1.7) 2.2
LED Lighting (1.4) (3.0) -
Ross and other (0.1) (0.1) (0.3)
-------------------------- --------------- --------------- ---------
Operating (loss)/profit - (3.1) 9.0
-------------------------- --------------- --------------- ---------
Notes:
1. For details of the 2018 adjustment refer to note 1 in the
Notes to the Condensed Consolidated Financial Statements.
2. Reported and Adjusted figures are the same as there were no
adjustments made to Revenue and Operating profit in the six months
to 30 June 2017.
Revenue by location of
customer
Unaudited Unaudited
Reported Reported
30 June 30 June
2018 2017
GBPm GBPm
UK 59.2 63.4
Europe 5.4 3.1
Middle East and Africa 4.4 3.4
Asia Pacific 3.9 3.5
Americas 2.2 1.9
Total revenue 75.1 75.3
------------------------- --------------- ---------------
3. Expenses recognised in the Condensed Consolidated Income
Statement
Included in the Condensed Consolidated Income Statement are the
following:
Unaudited Unaudited Audited
Reported Reported Reported
30 June 30 June 31 December
2018 2017 2017
GBPm GBPm GBPm
------------------------------------------------ ------------------ --------------- ------------
Research and development costs expensed as
incurred 0.4 0.2 1.3
Operating lease charges:
Plant and machinery - 0.1 0.1
Other assets - 0.5 1.1
Depreciation of property, plant and equipment 1.6 1.4 3.2
Amortisation of acquired intangible assets 0.3 - -
Amortisation of internally developed intangible
assets 0.8 0.4 1.2
------------------------------------------------ ------------------ --------------- ------------
4. Income tax expense
A tax charge for the six-month period has been included in the
Condensed Consolidated Income Statement at GBP0.3m (H1 2017:
GBP1.6m) and has been calculated using the anticipated effective
tax rate on the taxable profit of the UK business, it is not
expected that any relief will be granted on the losses arising in
the Group's overseas businesses. The anticipated effective tax rate
for the year ended 31 December 2018 was calculated at 33.3% (H1
2017: 19.0%).
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.
Unaudited Unaudited Audited
30 June 30 June 31 December
2018 2017 2017
GBPm GBPm GBPm
------------------------------------------ ---------- ---------- -------------
Reported (loss)/earnings for calculating
basic (loss)/earnings per share (4.4) 6.5 10.0
Adjusted for:
Restructuring costs 0.7 - 0.2
Transaction costs - - 0.3
Closure of US business 2.0 - -
Amortisation of acquired intangibles 0.3 - -
------------------------------------------ ---------- ---------- -------------
Adjusted (loss)/earnings for calculating
adjusted basic (loss)/earnings per share (1.4) 6.5 10.5
------------------------------------------ ---------- ---------- -------------
H1 2018 H1 2017 FY 2017
Number Number Number
million million million
------------------------------------------- ------- ------- -------
Weighted average number of ordinary shares
- basic and diluted 160.8 160.8 160.8
------------------------------------------- ------- ------- -------
H1 2018 H1 2017(1) FY 2017
Pence Pence Pence
------------------------------------------- ------- ---------- -------
Basic (loss)/earnings per share (2.7) 4.0 6.2
------------------------------------------- ------- ---------- -------
Diluted (loss)/earnings per share (2.7) 4.0 6.2
------------------------------------------- ------- ---------- -------
Adjusted basic (loss)/earnings per share (0.9) 4.0 6.5
Adjusted diluted (loss)/earnings per share (0.9) 4.0 6.5
------------------------------------------- ------- ---------- -------
There were no dilutive ordinary shares in issue at 30 June
2018.
6. Dividends
Considering the Group's first half year performance the Board
has decided not to propose an interim dividend. The Board retains
its confidence in the delivery of the Group's strategy and will
revisit the dividend policy in 2019.
7. Property, plant and equipment
During the six months ended 30 June 2018, the Group purchased
assets at a cost of GBP1.9m (H1 2017: GBP2.4m, FY 2017: GBP7.2m).
Expenditure relating to plant and equipment and tooling in the UK
amounted to GBP0.9m while GBP1.0m related to the manufacturing
facility in China. Total depreciation for the period was GBP1.6m.
Net Book Value at 30 June 2018 was GBP23.8m (H1 2017: GBP21.0m, FY
2017: GBP23.5m)
The Group has not included any borrowing costs within additions
in H1 2018 (H1 2017: GBPnil, FY 2017: GBPnil). 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. There
were no disposals during the year.
8. Intangible assets and goodwill
The Group has recognised an amortisation charge of GBP0.3m in
the first half year in respect of acquired intangible assets from
Kingfisher Lighting, in the Condensed Consolidated Income Statement
this amount has been included within "adjustments" in calculating
the adjusted operating loss (refer to note 1 in the Notes to the
Condensed Consolidated Financial Statements).
Development expenditure is capitalised and included in
intangible assets when it meets the criteria laid out in IAS 38,
"Intangible Assets". During the six months ended 30 June 2018, the
Group incurred internally generated development costs of GBP1.2m
(H1 2017: GBP1.2m, FY 2017: GBP3.0m) and externally purchased
patents of GBP0.1m (H1 2017: GBP0.1m, FY 2017: GBP0.1m). This
amount excludes capitalised borrowing costs. Net Book Value at 30
June 2018 was GBP23.8m (H1 2017: GBP13.7m, FY 2017: GBP23.7m).
There has been no impairment to goodwill following a review
since the year ended 31 December 2017. Goodwill has been allocated
to cash-generating units and can be referred to in the Group's 2017
Annual Report and Financial Statements.
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 19 in the 2017 Annual Report and Financial Statements.
Unaudited Unaudited Audited
30 June 30 June 31 December
2018 2017 2017
GBPm GBPm GBPm
------------------------ --------- --------- ------------
Non-current liabilities
Chinese mortgage loan 4.0 - -
Bank term loan - 12.0 -
4.0 12.0 -
------------------------ --------- --------- ------------
Current liabilities
Bank term loan - - 20.0
Shareholder loan notes - - 0.3
Secured bank loans 40.8 20.3 22.0
------------------------ --------- --------- ------------
40.8 20.3 42.3
------------------------ --------- --------- ------------
Secured bank loans are secured by a fixed and floating charge
over the assets of the Group. They include funds advanced under
invoice discounting arrangements from HSBC Finance (UK) Limited of
GBP20.8m (six months ended 30 June 2017: GBP20.3m, year ended 31
December 2017: GBP22.0m), a revolving credit facility GBP20.0m and
Industrial and Commercial Bank of China Limited commercial mortgage
of GBP4.0m (six months ended 30 June 2017: GBPnil, year ended 31
December 2017: GBPnil).
10. Exchange rates
The following significant Sterling exchange rates were applied
during the year:
Average rate Reporting date
spot rate
----------------------- ---------------------------
30 June 30 June 30 June 30 June
2018 2017 2018 2017
---- -------------- ------- ----------------- --------
USD 1.37 1.26 1.32 1.22
EUR 1.14 1.15 1.13 1.17
RMB 8.74 8.70 8.74 8.50
---- -------------- ------- ----------------- --------
11. Financial risk management and financial instruments
The Group's activities expose it to a variety of financial risks
that include currency risk, interest rate risk, credit risk and
liquidity risk.
These interim financial statements do not include all financial
risk management information and disclosures required in the annual
financial statements which should therefore be read in conjunction
with the Group's Annual Report and Financial Statements for the
year ended 31 December 2017. There have been no changes to the risk
management policies since the year ended 31 December 2017.
12. Related party transactions
At 1 January 2018 GBP0.3m was owed under shareholder loan notes
to John Hornby, CEO, and remained outstanding at 30 June 2018 (30
June 2017: nil). No interest was either accrued or paid to John
Hornby during the period.
13. Acquisition of subsidiary
On 18 September 2017, the Group acquired the entire issued share
capital of Kingfisher Lighting Limited ("Kingfisher Lighting") from
its retiring founder and other minority shareholders for a total
cash consideration of GBP9.7m on a cash free debt free basis. The
acquisition was funded through an increase to the Group's existing
banking facilities. Kingfisher Lighting is a nationwide UK supplier
of exterior lighting products, including road and street LED
lighting systems and controls, and high mast LED luminaires, as
well as a provider of installation and maintenance services. The
Group incurred acquisition-related costs of GBP0.5m comprising
professional fees GBP0.3m and redundancy and restructuring costs
GBP0.2m.
14. Date of approval of financial information
The interim financial information covers the year 1 January 2018
to 30 June 2018 and were approved by the Board on 7 September 2018.
Further copies of the interim financial information can be accessed
on the Luceco plc investor relations website,
www.luceco.com/investors.
Responsibility Statement
We confirm that to the best of our knowledge:
-- the condensed set of financial statements has been prepared
in accordance with IAS 34 Interim Financial Reporting as adopted by
the EU;
-- the interim management report includes a fair review of the
information required by:
(a) DTR 4.2.7R of the Disclosure Guidance and Transparency
Rules, being an indication of important events that have occurred
during the first six months of the financial year and their impact
on the condensed set of financial statements; and a description of
the principal risks and uncertainties for the remaining six months
of the year; and
(b) DTR 4.2.8R of the Disclosure Guidance and Transparency
Rules, being related party transactions that have taken place in
the first six months of the current financial year and that have
materially affected the financial position or performance of the
entity during that period; and any changes in the related party
transactions described in the last annual report that could do
so.
At the date of this statement, the Directors are those listed in
the Group's 2017 Annual Report and Financial Statements.
Approved by the Board on 7 September 2018 and signed on its
behalf.
John Hornby Matt Webb
Chief Executive Officer Chief Financial Officer
INDEPENDENT REVIEW REPORT TO LUCECO PLC
-- Conclusion
We have been engaged by the company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 30 June 2018 which comprises the Condensed
consolidated income statement, Condensed consolidated statement of
comprehensive income, Condensed consolidated statement of changes
in equity, Condensed consolidated statement of total financial
position, Condensed consolidated statement of cashflows and the
related explanatory notes.
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
June 2018 is not prepared, in all material respects, in accordance
with IAS 34 Interim Financial Reporting as adopted by the EU and
the Disclosure Guidance and Transparency Rules ("the DTR") of the
UK's Financial Conduct Authority ("the UK FCA").
-- Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity issued by the Auditing Practices Board for use in the
UK. A review of interim financial information consists of making
enquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review
procedures. We read the other information contained in the
half-yearly financial report and consider whether it contains any
apparent misstatements or material inconsistencies with the
information in the condensed set of financial statements.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK) and
consequently does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
-- Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the DTR of the UK FCA.
The annual financial statements of the Group are prepared in
accordance with International Financial Reporting Standards as
adopted by the EU. The directors are responsible for preparing the
condensed set of financial statements included in the half-yearly
financial report in accordance with IAS 34 as adopted by the
EU.
Our responsibility
Our responsibility is to express to the company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
The purpose of our review work and to whom we owe our
responsibilities
-- This report is made solely to the company in accordance with
the terms of our engagement to assist the company in meeting the
requirements of the DTR of the UK FCA. Our review has been
undertaken so that we might state to the company those matters we
are required to state to it in this report and for no other
purpose. To the fullest extent permitted by law, we do not accept
or assume responsibility to anyone other than the company for our
review work, for this report, or for the conclusions we have
reached.
Michael Froom
Senior Statutory Auditor
for and on behalf of KPMG LLP
Statutory Auditor
Chartered Accountants
One Snowhill
Snow Hill Queensway
Birmingham
B4 6GH
7 September 2018
Additional information
Financial calendar
2018 Year end 31 December 2018
-------------------------------------------- ----------------
2018 Full year trading update January 2019
-------------------------------------------- ----------------
2018 Full year preliminary results statement April 2019
-------------------------------------------- ----------------
AGM June 2019
-------------------------------------------- ----------------
2019 Half year end 30 June 2019
-------------------------------------------- ----------------
2019 Half year trading update July 2019
2019 Half year interim results statement September 2019
-------------------------------------------- ----------------
Company's registered office
Luceco plc
Building E Stafford Park 1
Stafford Park
Telford
TF3 3BD
www.luceco.com
info@luceco.com
Independent auditor
KPMG LLP
Statutory Auditor
Chartered Accountants
One Snowhill
Snow Hill Queensway
Birmingham
B4 6GH
Financial advisor and broker
Numis Securities
The London Stock Exchange Building
10 Paternoster Square
London
EC4M 7LT
Principal Bankers
HSBC Bank plc
8 Canada Square
London
E14 5HQ
Registrars
Link Asset Services
The Registry
34 Beckenham Road
Beckenham
Kent BR3 4TU
Company Secretarial services
Link Asset Services
65 Gresham Street
London
EC2V 7NQ
Investor relations
MHP Communications
6 Agar Street
London
WC2N 4HN
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR GMGGLLLVGRZG
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September 10, 2018 02:00 ET (06:00 GMT)
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