Luceco Plc · LSE:LUCE
Luceco — FY2018 Earnings Presentation
24 slides from Luceco's earnings presentation, April 2019
Slide 1: Full Year Results Presentation April 2019
FULL YEAR RESULTS PRESENTATION APRIL 2019
Slide 2: Agenda
Agenda Introduction and highlights John Hornby Financial overview Matt Webb Strategy, current trading & outlook John Hornby Questions Luceco plc | Full Year Results Presentation 2018 2
Slide 3: Introduction
Introduction Who we are What we do • Luceco is a manufacturer and • Luceco operates an integrated model, Revenue Established distributor of high quality and which includes wholly-owned £163.9m UK and International innovative LED lighting products, manufacturing and product 2017: £167.6m sales networ
Slide 4: Highlights
Highlights • Profitability rebuilt in H2 after a challenging H1: • Strong financial position: • Continuing strategic shift towards higher margin • Net debt reduced sales • Currency and commodity hedging improved • Pricing amended • Long-term funding secured • Overheads controlled • Working capital e
Slide 5: Financial overview
Financial overview Luceco plc | Full Year Results Presentation 2018 5
Slide 6: Income statement
Income statement Adjusted Adjusted Adjusted Adjusted • (2.2)% revenue decline a product of: • Operating profit declined from £m H1 2018 H2 2018 FY 2018 2017 £14.7m to £8.5m Revenue 75.1 88.8 163.9 167.6 • (4.7)% like-for-like decline • £(9.0)m decline in H1 Growth / (Decline) % (0.3)% (3.8)% (2.2)%
Slide 7: Recent results in context
Recent results in context Adjusted Operating Profit 2009 to 2016 (£m) • Up until 2016: 16 • Continuous, rapid profit growth 14 • Market share gains 12 • Margin expansion 10 8 • 2017 & 2018: 6 4 • UK consumer-facing retail destocking 2 • Adverse and unhedged FX/commodity movements 0 • Invested too qu
Slide 8: Building a simple and sustainable model
Building a simple and sustainable model Examples Past Present / Future Profit focused Broad Growth strategy Customer & product driven Product driven Continued diversification Leading growth Corporate support functions Lagging growth Best in class High leverage for a plc Conservative leverage & clear
Slide 9: Capital structure policy
Capital structure policy DIVIDENDS CAPEX 20-30% payout 3-4% of annual revenue Progressive Product development Manufacturing capacity Conservative leverage 1.0x – 2.0x Adjusted EBITDA Averaging 1.5x M&A BUYBACKS / SPECIAL DIVIDENDS Product adjacency Market share consolidation Clear synergy (e.g. prod
Slide 10: Revenue
Revenue Group revenue bridge (£m) LFL UK Consumer Retail growth % 4.7% LFL decline Q1 Q2 Q3 Q4 5.1% (0.8)% (7.1)% (1.8)% (11.0)% (16.7)% (28.0)% (2.2)% (43.7)% LFL UK Professional growth % 2.4% 18.1% 167.6 163.9 0.3% (4.2)% (5.8)% Q1 Q2 Q3 Q4 LFL Overseas growth % 56.7% 34.5% 24.5% (12.3)% Q1 Q2 Q3
Slide 11: Gross margin
Gross margin Adjusted Gross Margin % by half year • Two successive halves of weak gross margin H1 H2 H1 H2 • Rebuilt by end of 2018: 2017 2017 2018 2018 Adjusted Gross Margin % 31.9% 26.4% 27.3% 33.9% • Sales mix FX: • Pricing changes USD : GBP 1.26 1.32 1.37 1.31 RMB : GBP 8.70 8.79 8.74 8.88 • Imp
Slide 12: Overheads
Overheads Adjusted Overheads by half year (£m) • Significant investment in overheads in 2017 against incorrect profit baseline: £21.6m • Sales and marketing £20.5m 1.0 • Product development / R&D amortisation £18.7m 1.8 +£1.1m 1.7 • Kingfisher Lighting acquisition 1.0 +£1.8m • Full impact in H1 2018
Slide 13: Segmental results
Segmental results 2018 20172 • All segments experienced a difficult H1 2018 H1 H2 FY FY LED Lighting • Portable Power significantly impacted due to highest Revenue 24.2 27.6 51.8 44.8 exposure to retail, currency and copper Growth % 39.1% 0.7% 15.6% Operating Profit1 (1.4) 1.9 0.5 (1.0) • All segmen
Slide 14: Balance sheet
Balance sheet £m 2018 20171 Change • Capex constrained throughout the year Non-current assets Intangible assets 23.3 23.7 (0.4) • Significant reduction in inventory Tangible assets 21.5 23.5 (2.0) 44.8 47.2 (2.4) • Cash proceeds used to normalise supplier payment terms Current assets • Net debt and
Slide 15: Cash flow
Cash flow £m 2018 2017 Change • Strong operating cash generation Adjusted operating profit 8.5 14.7 (6.2) • Facilitated £9.2m reduction in net debt in H2 2018 Adjusted depreciation and 6.5 4.4 2.1 • Refinancing: amortisation Adjusted EBITDA 15.0 19.1 (4.1) At 31 Dec 2017 At 31 Dec 2018 Adjusted chan
Slide 16: Strategy and outlook
Strategy and outlook Luceco plc | Full Year Results Presentation 2018 16
Slide 17: Reflections on strategy
Reflections on strategy Strengths Areas for development High UK market share / UK channel access Continued expansion of UK professional / particularly retail / barrier to entry International Sales execution / greenfield market share Maximising profitable growth / prioritising gains growth opportunit
Slide 18: Distribution Map
Distribution Map Revenue Revenue By Revenue By Revenue By By Channel Product Geography Channel by Product 3% 2% 3% 6% 25 Consumer-facing 9% Distributors % DISTRIBUTION CHANNEL (35%) 32 END USERS % Hybrid (20%) 80 % Contractor Specifier Professional- 40 % facing Distributors (45%) Ross / Other Americ
Slide 19: Assessing attractiveness of product / channel segments
Assessing attractiveness of product / channel segments Market attractiveness Ability to compete Market size Synergy with existing products Market growth Synergy with existing sales channels Profitability of participants Synergy with existing fulfilment capability Barriers to entry Importance of pric
Slide 20: Market attractiveness
Applying to the portfolio Professional - LED Hybrid - WA Hybrid - PP High Professional - WA Market attractiveness Medium Consumer - WA Consumer - PP Consumer - LED Low Low Medium High Ability To Compete Luceco plc | Full Year Results Presentation 2018 20
Slide 21: Current trading & outlook
Current trading & outlook Current trading: • Strong order book • Revenue in line with expectations Outlook: • Important learnings turned to our advantage • Stronger and more profitable than we were 12 months ago: • Operationally and financially • Simpler and more sustainable • More focused • Sound p
Slide 22: Appendices
Appendices Luceco plc | Full Year Results Presentation 2018 22
Slide 23: Income statement – adjusted vs reported
Income statement – adjusted vs reported Adjusted Reported Adjusted Reported • 2018 PBT Adjustments: £m 2018 Adjustments 2018 2017 Adjustments 2017 Revenue 163.9 - 163.9 167.6 - 167.6 • US closure costs - £(2.0)m Growth % (2.2)% - (2.2)% • Restructuring costs - £(0.8)m Gross profit 50.6 (1.0) 49.6 48
Slide 24: Disclaimer
Disclaimer This presentation and information communicated verbally to you may contain certain projections and other forward-looking statements with respect to the financial condition, results of operations, businesses and prospects of Luceco plc. These statements are based on current expectations an