Likewise Group (LSE:LIKE) — 2023 Full Year Results

0:00 Good morning, and welcome to the LIKEWISE GROUP PLC Full Year Results Investor Presentation. The screen. Simply type in your questions and press send. The company may not be in a position to answer every question it receives during the meeting itself. However, the company can review all questions submitted today and publish responses where it is appropriate to do so. Before we begin, I would like to submit the following poll, And I would now like to hand

0:32 you over to CEO, Tony Brewer. Good morning to you. Many thanks, and thanks everybody for joining this presentation this morning. I believe we can demonstrate another positive year of development in the group. Really good sales growth, and that's continued into 2024. So importantly, the group has put together over the last four years now 11 distribution and logistics centers, and we've created extra capacity to be able to develop the business in the future. Importantly, we have 80 suppliers across our various product categories where we have extremely good long standing relationships. That includes suppliers of carpet, residential vinyl, laminate, luxury vinyl tile, artificial grass, flooring accessories, and commercial flooring.

1:20 And another key feature of the group is the 94 customer focused sales executives that we have with extremely good customer relationship and floor covering knowledge. And through the business that we develop, those are delivered on our fleet of trucks to service our customers on a next day delivery service. The just over 500 staff are extremely important to us. And, many of them, whether that be management, sales representatives, telesales, warehouse staff, delivery drivers, all have long standing floor covering experience. And through our sales teams, we're placing on a daily basis a huge amount of point sale into our customers, independent retailers and foreign contractors, to be able to develop business to our mutual benefit.

2:06 And as we've stated consistently, our short term objective is to meet 10% market share and beyond. That's 200,000,000 sales revenue, which we've created the infrastructure to be able to deliver. So in the year of '23, sales revenue up 12.9%, adjusted EBITDA, under new IFRS rules, up from 6,600,000 to 7,900,000. The underlying pre EBT figure, slightly down year on year, but that again reflects the investment the business has made for the future development. And given the confidence the Board has in the future of the business, increased the final dividend from GBP 0.2 to GBP 0.25, which given the interim payment we made was GBP 0.1, and that gives a total for the year of GBP 0.35, an increase of 75% compared with 2022.

3:07 Important landmarks, during the course of 2024 is that we've completed on time the deferred consideration on both the Vale and the Delta acquisitions. And also, really encouraging, is that the beginning of April, in one single day, we were able to take orders in excess of GBP 1,000,000.

3:27 And we've shown this chart a number of times before, but it just demonstrates the size of the floor covering market in The UK at in excess of £2,000,000,000. And again, reflecting, you know, we have every opportunity to take that 10% market share and above. The management structure and management team is very important to us. Within the the LIKEWISE floor structure, really good people in logistics and IT to be able to support the product development and sales generation through our various businesses. And similarly, at a local level, our operation management are extremely good and experienced. And, again, through the Valley operation, which is kept separate to LIKEWISE, again, extremely strong management and a great team of people.

4:14 And alongside that, we have a financial structure, controlling the overall financials capabilities of the business. And this really reflects the strength and depth of our management team. You see a really good cross section of people, a lot of experience, but also many good young people coming through the business who have learned their trade, understand the IT, logistics, the product, the customer requirements, and gives the business a great deal of strength for the future.

4:47 Within our distribution centers, as we've said, 11 logistics and distribution centers across The UK. With the exception of Sudbury, which we had was the original business in 2018, the other 10 sites are new to the group in the last three and a half years, which, again, reflects the work that's been done in building that infrastructure. So Glasgow opened in the spring of twenty three. Newcastle beginning of twenty two. Leeds early part of twenty one. Manchester, a new development. Literally, the racking is commencing today, and that will be operational on the June 16. Birmingham, whilst we moved into that in '21, it was really operational from the beginning of twenty two. Sudbury, as I mentioned, the original, business in 2018.

5:35 Sid Cup, we moved into beginning of twenty three, and Newbury, middle of twenty two. So alongside the Vale acquisitions, you know, huge amounts of development of the infrastructure over the last three and a half years. And this map really demonstrates how we're covering the country with the combined business of, LIKEWISE and Valley. Probably more clearly is the LIKEWISE infrastructure where, the main processing of carpet, residential vinyl, and artificial grass is in Birmingham, Leeds, and now Glasgow, And then delivered overnight in each of these lines reflect overnight delivery service, enabling us to to supply to customers and deliver to them the following day relevant to their required needs.

6:26 And the valley infrastructure where the cutting of and processing of residential vinyl and carpet is in Erith, delivery into the South And Southeast Of England directly from Erith. And then for Midlands and the North, overnight shipments again to Derby from the delivery to those customers. And this simple slide really shows the capacity that we have in the business where if we look, first of all, at Valley, where everything's getting towards capacity, but we've put a cutting table into Derby to cut up to up to five meter wide carpet, again, allowing Valley to expand its business for the future. And then in Birmingham, we still have capacity, and we're just reorganizing leads to create further capacity there and plenty of capacity for cutting carpet and residential vinyl in Glasgow. So overall, we believe that we've got probably 60% utilized currently, which again reflects the opportunity for the group to go from the run rate currently towards a 150,000,000 annual sales up towards and beyond that 200,000,000.

7:32 Then importantly, the the sales generation through our 94 sales executives, 24 management, and 70 external executives who very much are calling on customers, positioning point of sale, and developing our business on a daily basis. And you can see here the advances in point of sale. Appreciate a huge proportion of floor covering is still sold from, traditional swatches, but we've developed numerous types of display stands, whether that be lecterns, library units, wall stands, laminate and LVT stands. You can see a vast array, which, again, our salespeople are placing into customers on an ongoing basis. And this this shows the sales generation of the group going back to our early beginnings in 2021, developing the business, then the step change with the acquisition of Valley in '22.

8:29 You can see the onward progression. And the early part of this year, sales up 8.7%. And if we look at just the LIKEWISE branded businesses, that's actually an increase of 15.3%. I think you can see there in the graph slight movement between where Easter fell in April last year and March this year, but

8:47 a really positive start to the group in what has to be said of probably quite challenging market conditions. And the geographical presence, you can see there, we're extending the presence of Vale into South Wales and the Southwest, and lots of opportunities increased in the M 5 and M 4 Corridor. And similarly, in the LIKEWISE side of the business, lots of opportunities whilst that map looks fairly well covered. We know in certain sectors, we have a fairly limited market share. And with the 13 additional sales executives we've put into the business in the last six months, just progressively increasing those opportunities in that market share. In terms of the numbers, as I've said, the, profitability flat year on year, but that really reflects the ongoing investment in the business. And I think we see as we step up through the next 50,000,000 of sales, that that will be done at a lower proportionate cost to the first 150,000,000.

9:49 So the opportunity for operational gearing. And the balance sheet there reflects a strong position, £39,000,000 worth of net assets. That deferred consideration, you can see the 4,300,000 has now been discharged, limited debt and well within our banking facilities, and every opportunity of the business continue to develop. So in terms of our environmental responsibilities, we're very conscious of that. And you'll see there that now 92% of our cars were electric or hybrid, continue to renew the fleet with 46 new commercial vehicles in the last two years, continue with processing and recycling our packaging and poles.

10:35 And the important factor is that we are a core fund funding member of Carpet Recycling UK. And it's interesting that manufacture of carpet are focused more and more on the opportunities to both use recycled yarns and also, ultimately, to be able to recycle carpet. And I think another really important feature is our overall employee well-being. Now, we do have a policy wherever possible to promote from within and develop people's careers. And also, given these properties that we've developed over the last three and a half years, gives a much better working environment for our employees.

11:15 So just summing up, the key to the business is about about the people. We have really good teams around the country, very established, experienced management team, and, you know, sales executives with great customer relationship, which is really important to drive the business forward. We keep the business simple. It's about product development, creating that market presence through point of sale and servicing our customers' needs. And to be able to do that, you know, we've developed that logistics infrastructure. We have excess capacity that we can take the business forward over the next two, three, five years with the infrastructure that we have, and that will provide that improving return on sales and on investment. And in line with that, as demonstrated in dividend declared, that we have a progressive dividend policy and, you know, lots of opportunities to continue and surpass our original targets.

12:12 Thank you. Perfect, Tony. Thank you very much indeed for your presentation this morning. Ladies and gentlemen, please do continue to submit your questions using the Q and A tab situated on the top right corner of your screen. While the company take a few moments to review those questions submitted today, I would like to remind you that a recording of this presentation along with a copy of the slides and the published Q and A can be accessed via our investor dashboard. Tony, as you can see, we have received a number of questions throughout today's presentation. And if I may now hand back to you and kindly ask you to read out the questions where appropriate to do so, and I'll pick up from you at the end. Okay. Thank you. So the first question is, can we explain the the share price and does not reach the required level? I think, ultimately, the the share price is largely about market conditions in the stock market, particularly with regard to small companies such as ourselves.

13:05 Our belief is very much to concentrate on developing the business, and that's the key feature for us. And, ultimately, the share price will respond to that. And as we improve

13:16 the profitability, I'm sure our rating will improve. And in line with that, the second question was when will investors see good news in the share price? And I believe that comes back to the key feature that we need to concentrate on the business. Yes. We have obligations to the stock market. We'll be doing presentations over the next couple of days, but it is ultimately about us concentrating as the executive team in the business to develop the business. The next question is, with increased sales in own brand LBT, have you plans to improve the point of sale displays of these products? I feel selling from swatches, folders, small samples is letting down sales in this area. Well, I think our view is there that, in traditional sampling of swatches is very important and drives, you know, huge proportion of sales, particularly in products such as carpet. There's particular questions with regard to LVT.

14:12 But interestingly, we have a number of new LVT initiatives, and one on our premium sand, is currently being placed. So we will be developing that part of the business. But I think as demonstrated on the slide on our various point of sale and market presence, you know, it isn't just about swatches. We have a huge array of different types of point of sale across our product sectors. Please, could you talk about expectations and methods of funding growth? I think within our, banking facilities, we're comfortable that we can take the business forward in the area that we want to and grow the business accordingly. There's no plans for us to place further equity. And as I said, the level of bank debt we have, we're very comfortable with.

15:07 Do you see drivers for the market softness that your competitors are reporting? Our view there is, you know, it probably is a challenging market. The market probably is slightly off the 2,000,000 sorry, 2,000,000,000 that we refer to. But I think our focus is about ourselves and developing our market share, because it's still a huge market to go for. And if we concentrate and keep bringing product into the market competitively priced, then we have every opportunity to continue to grow. Is the business at a point where the benefits of operational gearing could exceed the need for organic investment? Absolutely. I think the as I've demonstrated, the infrastructure is very much in place. I'm not gonna suggest for one moment that we'll stop investing because we will. Those 13 additional sales executives rep represent that. The new Manchester building, which, as I said, literally, the racking is going into commencing today, you know, you know, reflects our desire that we will keep investing in the business.

16:14 But that speed of investment will be at a lower level, which will create that operational gearing and improve profitability. There are a couple of questions about Hedlund's trading update. As you'll appreciate, we prefer just to concentrate on what we're doing and developing our business. I don't really want to comment on on Hedlund's position. Now, as I've said, it probably is a more difficult market, but it's up to us to keep generating the business and taking market share. Next question is, have you experienced a normal seasonal upturn in April and May? As demonstrated from the graph, April, was probably not quite as positive as March given that movement in Easter, but I think it is purely to do with Easter, whereas May has started quite well. You know, we're pretty happy with the evolution of the business.

17:27 Next question is, will there be any investment in overseas operations in the medium to long term? Our focus is is absolutely on The UK and Mainland UK. Again, we see great opportunities, and we really don't want to dilute our executive management to being involved in Continental Europe or other overseas operations. It's all about for us developing that UK business and taking in excess of 10% market share. That's great, Tony. Thank you for addressing those questions for investors today. And of course, the company can review your questions submitted today, and we'll publish those responses on the Investor Meet company platform. But before we direct investors to provide you with their feedback, which I know is particularly important to the company, Tony, could I please ask you for a few closing comments? Okay.

18:16 Thank you. Well, I'd just like to thank everybody for attending the presentation this morning. As we've demonstrated, the business is continuing to grow, positive '23, good evolution into '24, and, you know, we're very positive, but we're very focused on achieving our objectives before us. Fantastic, Tony. Thank you once again for updating investors today. Could I please ask investors not to close this session as you will now be automatically redirected to provide your feedback in order that the board can better understand your views and expectations? This will only take a few moments to complete, and I'm sure will be greatly by the company. On behalf of the management team of LIKEWISE GROUP PLC, we'd like to thank you for attending today's presentation, and good morning to you all.

19:02 Thank you.