Slide 1: Realising Our Potential: 2020 Full Year Results
REALISING OUR POTENTIAL 2020 FULL YEAR RESULTS MARCH 2021
Slide 2: Agenda
Agenda Highlights Financial Review Business Review Outlook Q&A John Hornby Matt Webb CEO CFO Luceco plc 2020 Full Year Results Presentation 2
Slide 3: Highlights
Highlights Financial highlights Business highlights • Revenue increased by 2.4% to £176.2m: • Early and comprehensive response to COVID-19: – Ground lost to COVID-19 in H1 more than recovered in H2 – Primary focus on employee wellbeing – Outperformed the UK market – Action taken to reduce costs and
Slide 4: Financial Review
Financial Review Luceco plc 2020 Full Year Results Presentation 4
Slide 5: Income statement
Income statement 2020 2019 Adjusted £m H1 H2 FY H1 H2 FY • Revenue growth of 2.4%: Revenue 71.6 104.6 176.2 82.7 89.4 172.1 – COVID-19 disruption in H1 recovered in H2 Revenue growth % (13.4%) 17.0% 2.4% 10.1% 0.7% 5.0% – Uneven impact by channel Gross profit 27.5 42.7 70.2 28.9 33.4 62.3 – COVID-19
Slide 6: COVID-19 impact on revenue
COVID-19 impact on revenue 2020 LTM revenue by day (£m) • Q1 2020: £m Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 – China factory closed for 2 weeks 190 – Back to normal output by end of Q1 185 • Q2 2020: 180 – Knee-jerk cancellation of orders in April at start of lockdown, then gradual recovery 175 – H
Slide 7: Revenue by channel
Revenue by channel Professional Professional Retail Hybrid • Retail: Wholesale Projects – DIY +9% – Pure play online +26% • DIY chains Chains selling Chains selling to Sale agreed to both professionals direct with – Grocers -30% • Pure play professionals only professionals online retail • Hybrid: an
Slide 8: Manufacturing output
Manufacturing output Sales value of manufacturing output 2020 (£m) • Significant market out-performance Record in Wiring Accessories: output Output £m – Market declined by 6% 2019 average – Sales grew by 16% • Out-performance driven by: – Superior channel access – Business wins – Superior product av
Slide 9: Gross margin %
Gross margin % Income Statement – 2020 versus 2017 FY FY • Gross margin improvement is the foundation Adjusted £m 2020 2017 of improved Group profitability Revenue 176.2 167.6 Revenue CAGR % 1.7% • 2017 vs 2020: Gross profit 70.2 48.4 – Twice the operating profit from similar revenue Gross margin %
Slide 10: Inflation outlook
Inflation outlook USD / RMB (2020: £55m income – hedged) Copper (RMB per tonne) (2020: £16m cost – hedged) 7.2 2020 year average 70 2020 year average 4 year average 4 year average 7.0 65 60 6.8 Thousand 55 6.6 50 6.4 45 6.2 40 6.0 35 Dec Jun Dec Jun Dec Jun Dec Jun Dec Dec Jun Dec Jun Dec Jun Dec Ju
Slide 11: Overheads
Overheads Overheads from H1 2019 to H2 2020 (£m) (0.6) Retained savings 1.0 =£1.7m (2.5) (0.4) 0.8 0.8 (1.0) 1.0 22.6 21.7 21.7 20.7 18.5 H1 2019 H2 2019 Freight Discretionary CJRS H1 2020 End of CJRS Variable Freight Discretionary H2 2020 before CJRS H2 2020 costs costs income income pay costs cost
Slide 12: Adjusted free cash flow
Adjusted free cash flow FY FY Adjusted £m 2020 2019 • Another year of double-digit free cash Operating profit 30.0 18.0 flow margin % Depreciation and amortisation 6.1 7.9 EBITDA 36.1 25.9 • Inevitable increase in year-end working capital: – Strong Q4 revenue growth Change in working capital (3.1) 1
Slide 13: Balance sheet
Balance sheet FY FY Change vs FY £m 2020 2019 2019 • Increase in working capital: Intangible assets 21.5 22.6 (4.9%) – High Q4 sales growth Financial assets held for trading 1.4 - - – Port delays Tangible assets 21.0 20.0 5.0% – Increased delivery time from China Non-current assets 43.9 42.6 3.1% In
Slide 14: Financial goals
Financial goals Previous FY 2020 New Component Metric Targets Results Targets1 Revenue Total revenue growth % 5% - 10% 2.4% 5% - 10% Profit Adjusted Operating Margin % 10 – 15% 17.0% 15% - 20% Cash Adjusted Operating Cash Conversion % >100% 113.7% >100% Adjusted Free Cash Flow Margin % 5% – 10% 12.9
Slide 15: Business Review
Business Review Luceco plc 2020 Full Year Results Presentation 15
Slide 16: Wiring Accessories
Wiring Accessories Adjusted Adjusted Growth £m 2020 2019 % • Strong progress in our most profitable segment Revenue 81.3 70.1 16.0% Contribution profit 29.5 19.6 50.5% • Out-performed the market in all major channels Contribution margin % 36.3% 28.0% 8.3ppts • Strongest progress in the Hybrid channe
Slide 17: LED Lighting
LED Lighting Adjusted Adjusted Growth £m 2020 2019 % • Revenue decline of 8.7% to £49.5m: Revenue 49.5 54.2 (8.7%) – COVID-19 slowed project activity and limited Contribution profit 5.7 5.1 11.8% site access Contribution margin % 11.5% 9.4% 2.1ppts – Market conditions improved in H2 Operating profit
Slide 18: Portable Power
Portable Power Adjusted Adjusted Growth £m 2020 20191 % • Portable Power segment now includes Ross Revenue 45.4 47.8 (5.0%) business. Comparatives restated accordingly Contribution profit 7.5 8.7 (13.8%) Contribution margin % 16.5% 18.2% (1.7ppts) • Revenue declined by 5% to £45.4m: – Strong growth
Slide 19: Manufacturing transformation
Manufacturing transformation Product cost reductions: 2017 to 2020 Automation/Lean % change % of FY 2017 Components of manufactured cost total cost to FY 2020 Raw materials 60% (8%) Production labour 15% (8%) Production overheads 15% (16%) Non-production overheads 10% (14%) Total 100% (9%) Other cos
Slide 20: M&A – Review of Kingfisher Lighting acquisition
M&A – Review of Kingfisher Lighting acquisition Post-acquisition EBIT bridge • Kingfisher Lighting acquired in September 2017 19% (27)% 23% 143% • £10m consideration equal to 7.5x EBITDA 13% 100% 15% • Synergies have added 50% to earnings (post-synergies acquisition multiple of 5.1x): – Cross-sellin
Slide 21: M&A – Strategy update
M&A – Strategy update Funding capacity1 (£m) & earnings impact Priorities & financial criteria 10-15% EPS 71.9 enhancement Priority territories Financial criteria 37.5 24.3 • UK • Revenue £10m - £50m • Europe • EBIT £1m - £5m (2.5) • 6 – 10x EBITDA depending on (17.7) market sector (28.1) (47.0) • E
Slide 22: Environmental, Social & Governance (ESG)
Environmental, Social & Governance (ESG) Contribution to the carbon economy Greenhouse Gas (GHG) emissions and targets Annual CO2 emissions (tonnes) 42,000 Amount 2022 Type (tonnes) Target Scope 1 695 Zero Scope 21 3,902 Zero Scope 3 Unknown Quantify 4,597 Known total 4,597 Luceco GHG emissions Annu
Slide 23: Outlook and Q&A
Outlook and Q&A Luceco plc 2020 Full Year Results Presentation 22
Slide 24: 2021 outlook
2021 outlook • Revenue growth has accelerated in 2021 • Temporary gross margin pressure as inflation to date: passes through the value chain – New business wins • 2021 Adjusted Operating Margin % expected – Continued home improvement spending to be similar to 2020: – Superior channel access and prod
Slide 25: Q&A
Q&A Luceco plc 2020 Full Year Results Presentation 24
Slide 26: Appendix
Appendix Luceco plc 2020 Full Year Results Presentation 25
Slide 27: Company overview
Company overview Activities Competitive advantages Designer and manufacturer of electrical products: • Established brands with leading market positions and loyal professional end users • Wiring Accessories • Clear brand proposition – well designed, high quality, good value for money • LED Lighting •
Slide 28: BG Electrical – Wiring accessories
BG Electrical – Wiring accessories UK market size c.£500 m Established 1941 UK market position / approx market share #2 / 15 % Revenue as % of Group total 1 46 % Revenue 3-year CAGR %2 4% Operating margin1 28 % Product categories Switches and sockets, Circuit protection, Weatherproof, Junction boxes
Slide 29: Nexus – Commercial power and accessories
Nexus – Commercial power and accessories UK market size c.£200 m Established 2021 UK market position / approx market share Recently established Product categories Decorative power & data modules, Cable management, Cables and connectors, Power distribution, Energy & user data management, Ergonomic ac
Slide 30: Luceco – LED lighting
Luceco – LED lighting UK market size c £700 m Established 2013 UK market position / approx market share Top 10 / 4 % Revenue as % of Group total 1,3 28 % Revenue 3-year CAGR %2,3 17 % (6 % organic) Operating margin1,3 6% Product categories Residential interior, Residential exterior, Commercial inter
Slide 31: Kingfisher – LED lighting
Kingfisher – LED lighting UK market size c £100m Established 1988 UK market position / approx market share UK #4 / 15 % Revenue as % of Group total 1,3 28 % Revenue 3-year CAGR %2,3 17 % (6 % organic) Operating margin1,3 6% Product categories Commercial and industrial exterior lighting 1. 2020 2. 20
Slide 32: Masterplug – Portable Power
Masterplug – Portable Power UK market size c £100m Established 1988 UK market position / approx market share UK #1 / 40 % Revenue as % of Group total 1 26 % Revenue 3-year CAGR %2 7% Operating margin1 9% Product categories Extension leads, Cable reels, Adaptors and accessories 1. 2020 2. 2016 to 201
Slide 33: Sales channels
Sales channels Sales channel Description Example customers Retail DIY chains Pure play online retail Grocers Hybrid Chains selling to both professionals and consumers Professional Wholesale Chains selling to professionals only Professional Projects Sale agreed direct Electrical and general contracto
Slide 34: Sales channels continued
Sales channels continued Product segmental sales by sales channel (as % of total) – 2020 Retail Hybrid Professional Wholesale Professional Projects 2% 9% 15% 13% 41% 50% 27% 24% 20% 78% 38% 12% 34% 19% 18% Wiring Accessories LED Lighting Portable power/Other Total Luceco plc 2020 Full Year Results P
Slide 35: Geographic footprint
Geographic footprint • The business remains UK focused however with a growing presence in several international markets Mansfield Kingfisher • Integrated model: wholly-owned manufacturing Lighting London Dublin Head office and product development facilities in the Sales R&D2 Marketing Hamburg Telfor
Slide 36: Geographic footprint continued
Geographic footprint continued Sourcing Distribution to market Selling markets 4% 4% 1% 2% 5% 4% 10% RoW Sold in end market Americas Europe Collected in China APAC 57% 42% UK MENA China – OEM Europe China – UK manufactured 80% 48% 43% Group revenue by Group revenue by Group revenue by product origin
Slide 37: Group history
Group history The group has developed through business combinations and organic expansion into new products and territories Management Luceco LED British buyout of Management Jiaxing projects Jiaxing expanded General wiring BG and buyout backed facility sales team to 52,500m2 Acquisition of accessor
Slide 38: Strategy overview
Strategy overview Investment case Attractive markets Advantaged business model Compelling financial outcomes • Growing faster than GDP • Product development: • Revenue: – Customer-led – 5-10% • Low cyclicality – Agile – Organic supported by bolt-on M&A • High margins – Entrepreneurial • Profit: • De
Slide 39: Strategy overview continued
Strategy overview continued Strategic objectives 1. Increase sales to 2. Increase sales to 3. Enter new professional customers international customers product segments 4. Maximise return on capital from 5. Invest in, and enhance, our 6. Develop our environmental, our existing business and seek advan
Slide 40: Strategy overview continued: capital allocation policy
Strategy overview continued Capital allocation policy 2. CAPEX 1. DIVIDENDS 3-4% of annual revenue 40-60% payout Product development Progressive Manufacturing capacity <3 year payback Conservative leverage 1.0x – 2.0x Adjusted EBITDA Averaging 1.5x 3. M & A Product adjacency 4. BUYBACKS / SPECIAL DI
Slide 41: Recent performance: P&L
Recent performance: P&L Revenue £m OP £m High growth Managed China Average Post-IPO growth manufacturing profitability issues High profitability expansion Low cashflow High cashflow IPO 176.2 172.1 167.6 163.9 30.0 133.7 103.1 18.0 82.3 65.6 14.7 14.5 58.5 53.3 52.4 11.5 44.5 8.5 8.4 5.9 3.2 2.4 2.6
Slide 42: Recent performance: Cash
Recent performance: Cash Net debt bridge: 2017 to 2020 (£m) Reported net debt Factored receivables Creditor extension IFRS 16 66.3 (3.5x) 3.1 18.6 17.0 47.4 (2.9x) 3.1 9.0 12.4 19.2 32.4 (1.3x) 3.9 5.0 22.7 18.3 (0.5x) 37.2 32.2 27.4 8.6 18.3 FY 2017 Underlying FY 2018 Underlying Dividends/EBT FY 20
Slide 43: 2013 to 2020 financials
2013 to 2020 financials 2013 2014 2015 2016 2017 2018 2019 2020 Adjusted metrics £m £m £m £m £m £m £m £m Income Statement Revenue 65.6 82.3 103.1 133.7 167.6 163.9 172.1 176.2 Growth % 25.5% 25.3% 29.7% 25.4% (2.2%) 5.0% 2.4% Gross Profit 18.3 25.1 33.8 40.5 48.4 50.6 62.3 70.2 Gross Margin % 27.9%
Slide 44: 2013 to 2020 financials continued
2013 to 2020 financials continued 2013 2014 2015 2016 2017 2018 2019 2020 Adjusted metrics £m £m £m £m £m £m £m £m Balance Sheet Fixed assets 22.4 24.6 27.5 33.5 47.2 44.8 42.6 43.9 Inventory 14.0 23.8 26.2 35.4 44.2 32.8 32.2 37.2 Trade receivables 10.5 17.1 20.4 26.5 33.4 39.5 42.8 70.1 Trade paya
Slide 45: 2013 to 2020 financials continued
2013 to 2020 financials continued 2013 2014 2015 2016 2017 2018 2019 2020 Adjusted metrics £m £m £m £m £m £m £m £m Cash flow statement Operating Profit 5.9 8.4 11.5 14.5 14.7 8.5 18.0 30.0 Depreciation & amortisation 1.4 1.9 2.6 3.2 4.4 6.5 7.9 6.1 EBITDA 7.3 1 0.3 14.1 17.7 19.1 15.0 25.9 36.1 Work
Slide 46: 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