Likewise Group (LSE:LIKE) — Final Results for the year ended 31 December 2024

0:01 Good morning, ladies and gentlemen. Welcome to the LIKEWISE PLC Investor Presentation. Simply type in your questions at any time and press send. The company may not be in a position to answer every question received during today's meeting. However, the company can review all questions submitted today and we'll publish those responses where it's appropriate to do so. Before we begin, we'd like to submit the following poll and I'm sure the company would be most grateful for your participation. It gives me great pleasure to hand over to CEO, Tony Pruitt. Good morning, Tony. Good morning. Thank you, Mark, and welcome, everybody, and thanks for joining this presentation. Just starting with the first slide, you see a pretty impressive truck and trailer there. We've had three of those delivered over the last three months, March, April and May, helping the capacity of the group, particularly on the night transfers.

0:53 And then over and above that, we have, 32 new trucks coming into LIKEWISE during the course of the year. And including those which we had in the second half of last year, 20 new trucks into Vale. So significant investment to improve the fleet and the delivery service to our customers. So, as you know, I'm sure that, the business is focused on the product development, sales, marketing and distribution floor into independent retailers and flooring contractors. With the additional site that we acquired in January in Plymouth, we now have 12 distribution and logistics centers, and I'll demonstrate during the course of this presentation where we have additional capacity. We now have 87 key suppliers of general flooring products, which includes, of course, carpet, residential vinyl, laminate, luxury vinyl tile, artificial grass, commercial flooring, adhesives and leveling compounds and other flooring accessories.

1:51 And very importantly, 96 executives who are very much focused on our customer needs as are the rest of the employees within the business and 144 delivery vehicles offering that next day service to our customers. We've now increased to five forty five staff, and a huge majority of those, of course, are the management, the sales teams, the internal sales, warehouse staff, delivery drivers, many of which have long standing floor covering experience. And we continue to increase our market presence with displays and sampling going into retailers. And that culminates in having just over 7,000 customers across the business. And whilst we'll report sales revenue of 150,000,000 for 2024, we are heading towards our original target of getting through 200,000,000, and we believe that we can now look forward to exceeding that in future years.

2:49 So in terms of the results for '24, the group's made really strong progress, particularly in the last eight months. But overall, sales revenue for '24, up 7.4%. In LIKEWISE, FLOOR is a very substantial 15.5%. And whilst we are competitive in the marketplace, no question about that, equally, we are not buying market share, and we see a slight improvement in our gross margin, as you can see, up to 30.7%. The underlying EBITDA, which is a measurement used in some of the financial circles, up to GBP 8,800,000. Profit before tax, down slightly, but that reflects the additional investment we've made, particularly in our sales teams during the course of last year and particularly in H1.

3:35 And importantly, a positive cash generation of GBP 7,200,000. So the overall dividend now has been increased to GBP 0.375, with a final dividend of 0.25p being proposed. As I've said, last eight months, particularly, and if we take the four months of '25, increasing by 10.2%. But taking into account one less working day so far this year, the actual like for like increase is a very impressive 11.5%. And what's particularly important is that sales revenue now is consistently exceeding 13,000,000 going on $14,000,000 which is where we see an improved operational gearing and subsequent profitability.

4:23 So in terms of the income statement, we've given you the key numbers. And I think probably one thing to look at is that non underlying. As the group, through its formative years, has been, moving out of old sites, restructuring the business, incurring dilapidation costs and other restructuring costs, dual running costs, and that's why we had to use that non underlying column. But as the business is much more strongly positioned now, I think going forward, the only cost we'd expect to see in there is probably the setup costs in in the Southwest in Plymouth and the additional marketing costs that we do to accelerate our market share and growth. On the balance sheet, I think the the key numbers to pull out there are we now have included in the benefits of the Plymouth site, 23,500,000 of freehold property with just 2,300,000 of debt against that.

5:17 The cash and cash equivalents reducing year on year, but that's wholly to do with the 4,300,000 deferred consideration on the acquisitions of Vale and of Delta. So overall, cash generation is positive. And I think, you know, a very solid balance sheet and gives us the foundations to continue to grow the business. The sales line, as you look at that blue line for 2024, very consistent and solid performance from January through to August. But there, after that, you can see in September, October, November, the business really starting to accelerate with some pretty positive increases with the final quarter being 10.2% up as against the total year, point 4%.

6:03 And then you can see clearly, going into 2025, that acceleration continuing with some strong performances. And actually, the growth has accelerated each month from January, February, March and April, with April being 14.2% up. So a very strong performance. And obviously, it's not all about the sales, of course, but it's that key volume that then creates that operational gearing and the improved profitability we've seen, which gives us confidence in the market forecast for 2025 being a real step change in the overall performance of the business. And I guess this is a pretty impressive slide of our management team. There's a cross section there and a balance of experience, but also, you know, some really good young people taking management positions literally in their twenties, thirties, and forties.

6:57 Plenty of experience being gathered, but, you know, really exciting careers ahead for this team of people. And then touched on our sales team. You know, those, 25 management who are very much product and customer focused, but the 71 external salespeople, you know, literally visiting our customers on a daily basis, positioning new product and point of sale, and they're supported by the 50 internal people with a wealth of experience and, you know, appreciating very much our customer needs. In terms of the point of sale and market presence, a myriad of displays there you can see, whether it be laminate, engineered wood, various derivatives of luxury vinyl tile, residential vinyl, and, of course, various carpet ranges.

7:47 Important strategic moves that we made in the autumn of last year with two key suppliers now, one associated weavers in carpet and Unolin in laminate. And we've had very good relationship with these suppliers for many years, not done business within LIKEWISE for a variety of reasons, but now the timing is right in the autumn to launch product, and we're experiencing, you know, a lot of success even in the formative months on those products. And then just literally last week, we've launched to our sales team a product from Candine. Interestingly, Candine came to us asking us to distribute this product in conjunction with themselves. So we've just launched a Palio product, and, you know, really good feedback from our customers with the number of display stands we're already getting commitment for.

8:37 And then the Lewis Abbott premium carpet products, we launched again in quarter four last year, getting good some good traction on a number of the products, and that's an exciting part of our future in that premium end of the carpet market. And two other key products here on the left hand side from a new partner, GROUP PLC, a laminate product, but also, excitingly, the engineered wood that we've now launched. And again, good traction to begin with on that product. That's a completely new product category for LIKEWISE. And then in Valley, historically, Valley have, relied on sample books and been very successful with it. But we've now put hardware in this particularly in the second half of last year with LET turns, eight base stand and just about to be launched, the laminate stands, to expand the Vale business.

9:31 In terms of the infrastructure, this is a very important slide in how we've put the business together. So we started in 2018 when we acquired what is now LIKEWISE Matting based in Sudbury. But thereafter, as you can see from the dates on that slide, everything else has been achieved since the beginning of twenty one when we moved into the new distribution center in Leeds. We followed that up with Glasgow in the spring of twenty three from small premises just around the corner from that large facility we have now. Newcastle beginning of twenty two. Manchester, moved in the summer of last year, '24. Birmingham was operational in during 2022.

10:16 Sid Cup, the beginning of twenty twenty three, and Newbury, the summer of twenty twenty two. And of course, the acquisition of Vale in January 2022 with their three locations, and then more recently, Plymouth completing our full coverage of The UK. But I emphasize, there's 23,500,000 worth of freehold property there with just 2,300,000 of debt. 50% of our capacity given some of the larger centers that we own. And it just gives us a very firm position on our balance sheet, an opportunity to expand the business for the future. And this is the network that we now have within LIKEWISE FLOWS, with the three main hubs being in Birmingham, Leeds and Glasgow, where carpet, residential vinyl and artificial grass are stopped and then distributed.

11:04 And each of those lines represent overnight movement of trucks, for then unloaded in the early hours of the morning, loaded onto our outgoing delivery trucks, therefore giving our customers a next day delivery service. And similarly, the network within Vale where currently, the main cutting is done in Aerith in Southeast London, but we're just about to start cutting in Derby as well to give us more capacity within the Vale business. And that just really demonstrates the overall network and the geographical coverage that the group has. It's just a simple chart just to show where our capacity is. We've just started the second shift within the Glasgow business literally in April, giving us extra capacity.

11:53 Leeds, with further capacity, and we've literally just ordered a new cutting machine for the Leeds business. That's a large five meter wide carpet and vinyl cutting machine. In Derby, as I've said, we're about to start cutting there, an opportunity to start one shift and follow with a next second shift as volumes require. And then Newport, we're just in the process and hopefully at the later stages of obtaining planning permission to be able to extend that facility. And again, we've ordered the cutting table. We're soon to order the racking, and that would be planned to be operational realistically in quarter two next year. It's just a simple diagram of the Newport extension. You can see on the left hand side, the lighter gray is the existing facility, which is 35,000 square feet, with the top part being the planned extension and with raised loading bay to give much better material handling.

12:49 And that's a 60% increase in capacity within the Newport facility. Then geographical coverage. I think it's fair to say that LIKEWISE is now pretty well covered across the whole of The UK. Plymouth literally became operational earlier this morning, to cover the Southwest and similarly in Valley, extending out, and we'll just cover those areas just in the the Mid and and the South over the coming months. I just thought I'd bring you back to that sales graph because I think it is so important that, again, you can see through '24, you know, good performance, the seasonality quite consistent, a nice growth year on year, but really accelerating through that September, October, November, and then very much carried forward into the early part of this year with a very strong performance in the first four months, which, please, to say is continuing in May as well.

13:50 So just summarizing, I think we've made significant progress since really since 2021. We're moving into the Leeds facility, being the real start of LIKEWISE FLOWS accelerating forward. And I think we're benefiting in the last eight months from all the foundations we've laid over the previous four years. Whilst the sales are accelerating quickly, we have logistics capacity to cope with that. And as I've demonstrated, we have excellent management teams across the country in our various operations. And I think it's fair to say, really significant support from our suppliers and, obviously, our customers are extremely important. And, you know, we believe there are lots of opportunities within The UK flooring industry to continue to grow our business.

14:38 We're not there yet, but we believe that 200,000,000 is well in sight. And certainly, the infrastructure that we have, particularly with the additions of what I've talked about in Glasgow, Derby and Newport, notwithstanding the other operations, we can certainly go through $200,000,000 And I think now the Board is looking to say what do we need to do to invest to get through that $250,000,000 and beyond. Thank you. Tony, that's great. Thank you very much indeed for updating investors this morning. Tony, we've had a number of questions from investors, both ahead of today's meeting and during your presentation. So firstly, thank you to everybody for your engagement today. Let's just start off with the first question. Do you think that joining the main market from AIM would increase exposure to institutional investors?

15:28 And is there any future ambition to do so? There isn't any there's not any plans to do that. I think the benefit on AIM, of course, with IHT, is particularly helpful. And believe that, you know, it's all about in terms of our rating, in terms of improving the profitability, which we're setting to do. And we believe the the objectives before us for this year and the analyst forecasts are deliverable. And I think if we can do that, and obviously, the signs so far are very good, then, you know, our rating will improve subsequently. Great. Thank you. There's a number of questions, both ahead of today's event during the live presentation around what you're gonna do with the free cash flow. Would it be debt reduction, perhaps further share buybacks, dividends, acquisitions? How do you see that shaping out? Okay. Well, we've launched a share buyback this morning, a committee in GBP zero two five million.

16:24 So that will unfold over the coming days, weeks. And we'll just keep that under review for future share buyback. And as we've said, in terms of the investment in Plymouth, where we've acquired the freehold and the fitting out of that, that's done through our own cash resources. Similarly, the plan is with the Newport extension, and that's within our budgeted cash flow to fund that. And at some point, we'll make further step changes, I guess, in how we invest in the business and deploy that cash generation. In terms of acquisitions, we can never say never. My phone rang this morning, not with an acquisition, but somebody talking about m and a and what what we're planning to do. I think, you know, we would consider the right acquisition. If we go back, obviously, we had the original acquisition of of William Arms and created LIKEWISE Matting.

17:22 Heat seam factory flooring was a a step change for us with acquiring that business in Dewsbury in 2019 and then moving, of course, to the Leeds facility in '21. And, of course, Vale was a massive move for us, to establish that. I think it's fair to say, would we pay lots of goodwill to build the group? No. I don't believe we would. I think, if we had opportunities for asset backed acquisitions, we would, of course, consider that or anything else we felt was of a strategic benefit. But our focus is very much on continuing to grow the business and invest in the sales team. We've added 18 new sales execs in the last well, since the beginning of '24, so in the last sixteen months or so. And we continue to consider opportunities to invest in additional people, but not pay huge amounts of goodwill.

18:17 Great. Thank you, Tony. With the addition of supplying Cardene ranges, do you have any other leading flooring brands to be added the portfolio such as perhaps Quick Step or are there any other brands? Well, interestingly, we, the Vitality product, that we launched in the fourth quarter of last year is from Yunlin, who are the manufacturer of Quick Step. So there's not any immediate plans. I think we're doing really well with Vitality, and we'll continue to build on that. There's nothing specific. I think having taken Associated Weavers and Vitality from Yunlin and Kandin, that was three key players that for the variety of reasons we were previously working with that we now are.

19:03 Thank you once again. Obviously, I know you touched on the 200,000,000 of sales target, but how realistic would it be to hit that milestone within the year of 2026, we're being asked? I think a bit early for '26. But I would say over the next few years, we should be hitting that target. That's great. Thank you. Let's take to a question here. Obviously, we've touched on further acquisitions, so let me jump past that one. Given your strong property ownership and low fixed debt, is there scope to unlock value from your property assets to maybe accelerate shareholder returns, do you think? No. We have no plans whatsoever to sell our properties. We would rather add to that rather than sell any.

19:53 Sale and leaseback, no way, no possibility. Got a question from Mark. Mark, thank you for your question. What does the board's view as a key potential threat from l l LFL growth other than, I guess, the macro economy? Well, as I've said, we've in the business. We believe we can grow the business organically, in fact, what the question's pointing at. So absolutely, we keep putting new product into the marketplace, lots of point of sale. We continue pushing our management and sales teams to put more point of sale into retailers, and that's what will fuel our like for like growth.

20:41 Great. Thank you. Question here around, I guess, expansion in the market. Is your growth outlook weighted more towards expansion of market share from existing regions or perhaps a deeper penetration into newer territories, perhaps like Wales or South Wales? Well, South Wales, we're covering both from LIKEWISE Delta and importantly, from Vale. And obviously, the step into the Southwest Of England into Devon and Cornwall is actually really starting today, because we were running two day deliveries from South Wales into the Southwest until today, and now we're running a daily delivery service. So that's stepping up. I think we've pretty much got The UK geographically covered. It's now there are areas, you know, where we should increase our market share, market position.

21:32 Tony, that's great. Thank you very much indeed. There are a few other questions that I know we've kind of covered either in the presentation or perhaps what we can do is I can present those to you post today's meeting. I know you've got a busy schedule of investor presentation. So what I'll do, Tony, if I may, is just come back to you for a couple of closing comments before I redirect investors to give you their feedback. Thank you. So Tony, thank you very much indeed for your time today. If I could please ask investors not to close this session as well. Now automatically redirect investors to provide you with their feedback in order to better understand their views and expectations. Your feedback will only take a couple of moments to submit, but I'm sure it will be greatly valued by the company. On behalf of management team of LIKEWISE GROUP PLC, we'd like to thank you for attending today's presentation and wish you all a good rest of your day. Thank you for joining us this morning.