Luceco Plc · LSE:LUCE
Luceco — FY2019 Earnings Presentation
32 slides from Luceco's earnings presentation, April 2020
Slide 1: 2019 Full Year Results
2019 Full Year Results April 2020
Slide 2: Agenda
Agenda Introduction and highlights John Hornby Financial overview Matt Webb Strategy and outlook John Hornby Luceco plc | 2019 Full Year Results Presentation 2
Slide 3: Introduction
Introduction We deliver high quality, innovative electrical products to attractive markets worldwide through sustainable investment in our products, people and channels to market. Luceco plc | 2019 Full Year Results Presentation 3
Slide 4: Highlights
Highlights Financial highlights Strategic highlights SARS‐CoV‐2 (Coronavirus) summary • Final results in line with January 2020 • 2019 was a year of sustained • Worldwide action to safeguard Trading Update progress: employees • Revenue of £172.1m, 5.0% higher than o on a broad front: top‐line, • Chi
Slide 5: Financial Overview
Financial Overview 2019 Full Year Results
Slide 6: Income statement
Income statement Adjusted Adjusted £m FY 2019 FY 2018 Change Change % Revenue 172.1 163.9 8.2 5.0% • Revenue up by 5.0% to £172.1m: Gross profit 62.3 50.6 11.7 23.1% o 3.9% like for like o 2.0% FX benefit Gross margin % 36.2% 30.9% 5.3ppts o (0.9%) impact of US closure in 2018 Overhead costs (44.3)
Slide 7: Revenue bridge
Revenue bridge Revenue bridge (£m) • 3.9% like‐for‐like increase: 2.0% 5.0% o H1 boosted by weak comparatives and the full year effect of 2018 price increases 3.9% (0.9%) o Slowing as expected in H2 due to tougher comparatives and UK macro / political uncertainty o Continued healthy growth from Euro
Slide 8: Revenue by geography
Revenue by geography UK Retail growth % UK Professional growth % • UK Retail ‐ full year growth of 9.4%: 18.4% o Strong growth in H1 against a weak comparative o Slow down in Q4 due to UK General Election and year‐ end inventory management by some customers o No slow down in end consumer demand 2.5%
Slide 9: Gross margin bridge
Gross margin bridge Adjusted Gross Margin bridge (%) • 4.5% like‐for‐like improvement: o 2.0% from selling price updates and sales mix o 2.5% from product cost reductions • 0.2% from USA closure: o Exit from lower margin LED sales • 0.6% from FX: o 1% improvement in hedged RMB rate o 2020: USD and R
Slide 10: Overheads bridge
Overheads bridge Adjusted Overheads bridge (£m) • Cost inflation averaging 2.5% • Increased bonus from improved performance – all main incentive targets hit • LTIP scheme started in 2017. Costs now at full speed after 3 year ramp‐up • Sales resources continually reviewed for effectiveness and redepl
Slide 11: Segmental results
Segmental results Adjusted Adjusted £m FY 2019 FY 2018 Change Change % Wiring Accessories Revenue 70.1 65.8 4.3 6.5% • Segmental operating profit includes allocation of Contribution profit 19.6 11.4 8.2 71.9% fixed central overheads Contribution margin % 28.0% 17.3% 10.7ppts • Segmental contribution
Slide 12: Adjusted free cash flow
Adjusted free cash flow Adjusted Adjusted £m FY 2019 FY 2018 Change Change % Operating profit 18.0 8.5 9.5 111.8% • Two years with operating cash conversion > 100% Depreciation and amortisation 7.9 6.5 1.4 21.5% o Inventory days reduced from 135 to 105 over EBITDA 25.9 15.0 10.9 72.7% that period Ch
Slide 13: Net debt bridge
Net debt bridge Net debt bridge (£m) 66.3 3.1 • Headline net debt reduced from £37.2m to £27.4m 18.6 over 2 years 17.0 2.0 47.7 3.1 • But underlying reduction in debt is far greater due 9.0 to: 12.4 19.2 7.4 32.4 (14.2) 3.9 o Repayment of creditor extension 5.0 o Swapping off‐balance sheet receivabl
Slide 14: Balance sheet
Balance sheet FY FY £m 2019 2018 Change Change % Intangible assets 22.6 23.3 (0.7) (3.0%) • Working capital reduced and cleaned up: Tangible assets 20.0 21.5 (1.5) (7.0%) Non‐current assets 42.6 44.8 (2.2) (4.9%) o Inventory approaching 100 day target Inventory 32.2 32.8 (0.6) (1.8%) o Tight control
Slide 15: Financial model
Financial model Luceco plc | 2019 Full Year Results Presentation 15
Slide 16: Strategy and Outlook
Strategy and Outlook 2019 Full Year Results
Slide 17: Investment Case and Strategic Priorities
Investment Case and Strategic Priorities Luceco plc | 2019 Full Year Results Presentation 17
Slide 18: Product Development
Product Development BG Smart! EV charging Office Electrics Professional LED luminaires 4K/60Hz Thunderbolt3 External displays devices storage USB 3.1 Cloud devices integration Luceco plc | 2019 Full Year Results Presentation 18
Slide 19: Manufacturing transformation
Manufacturing transformation China factory Challenges • High quality but manual production methods • High labour attrition and inflation • Management skilled to grow volume not drive efficiency • Under‐investment in training and development • Insufficient data to fully support tight performance mana
Slide 20: Supply chain transformation
Supply chain transformation UK Distribution Centre Challenges • Out of capacity ‐ lack of pallet spaces, extensive use of offsite storage, facing costly expansion or move • ERP platform lacked warehouse management functionality, leading to sub‐optimal outbound fill rates and cost inefficiency • Dema
Slide 21: IT enhancements
IT enhancements Online tools Warehouse Management and Demand Planning • www.luceco.com relaunch • Bolt‐on of WMS onto Epicor ERP • Development of full service website for account • Upgrade / expanded use of MRP, stock optimisation and customers demand forecasting tool • Development of PIM and relate
Slide 22: SARS-CoV-2 (Coronavirus) - impact
SARS‐CoV‐2 (Coronavirus) ‐ impact Supply impact Demand impact • Nearly all products are sourced from China: • Q1 2020 profit in line with budget o Own factory – 50% of Group revenue, based in • From the start of Q2, lockdown actions have begun Jiaxing (800 km from Wuhan) adversely impact demand: o O
Slide 23: SARS-CoV-2 (Coronavirus) - mitigation
SARS‐CoV‐2 (Coronavirus) ‐ mitigation Cost and cash mitigation Covenant headroom With no revenue Monthly EBITDA loss Monthly cash spend Net debt: Adjusted Adjusted EBITDA : Net Pre‐virus spend 4.7 5.4 EBITDA Finance Expense Mitigating actions: Limit <2.501 >4.002 ‐ Factory reductions (0.8) (0.8) Act
Slide 24: Current trading and outlook
Current trading and outlook Current trading Outlook • Q1: • Outlook very uncertain o Revenue slightly below budget due to virus‐ • Withdrawing current guidance until the situation driven supply chain issues is clearer o Profit in line with budget thanks to solid gross • Recommending the suspension o
Slide 25: Appendix
Appendix 2019 Full Year Results
Slide 26: Appendix – Introduction to Luceco
Appendix – Introduction to Luceco Luceco operates in four product markets: Wiring A traditional wiring accessory Accessories manufacturing brand, serving the professional electrical trade Revenue by product type Environmental and energy Saving LED lighting LED Lighting High performance exterior ligh
Slide 27: Appendix – Introduction to Luceco (cont.)
Appendix – Introduction to Luceco (cont.) The group has developed through business combinations and organic expansion into new products and territories 1941 2003 2008 2011 2013 2014 2015 2016 2017 British General Transition to 12,500m2 Jiaxing facility Luceco brand Luceco LED Sales offices Jiaxing e
Slide 28: Appendix – Introduction to Luceco (cont.)
Appendix – Introduction to Luceco (cont.) The business remains UK focused but with a growing presence in several international markets • Integrated model: wholly‐owned manufacturing and product development facilities in the UK and China • 1,500 employees • Established UK and international sales netw
Slide 29: Appendix – Introduction to Luceco (cont.)
Appendix – Introduction to Luceco (cont.) % The Group serves both retail and trade channels, but with increasing focus on the latter via growth in its Wiring Accessories and LED businesses UK International Consumer Hybrid Wholesale Projects International Germany France Spain MENA Other 100% 100% 90%
Slide 30: Appendix – Introduction to Luceco (cont.)
Appendix – Introduction to Luceco (cont.) Investment case and strategic priorities Luceco plc | 2019 Full Year Results Presentation 30
Slide 31: Appendix – Introduction to Luceco (cont.)
Appendix – Introduction to Luceco (cont.) Page references above are to 2019 Annual Report and Accounts Luceco plc | 2019 Full Year Results Presentation 31
Slide 32: 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