Luceco Plc · LSE:LUCE
Luceco — H1 2021 Earnings Presentation
46 slides from Luceco's earnings presentation, Sep 7, 2021
Slide 1: Strong progress and well positioned for long-term growth
STRONG PROGRESS AND WELL POSITIONED FOR LONG‑TERM GROWTH 2021 INTERIM RESULTS www.lucecoplc.com SEPTEMBER 2021
Slide 2: Agenda
Agenda Highlights Financial review Business review Outlook Q&A John Matt Hornby Webb CEO CFO Luceco plc 2021 Interim Results Presentation 2
Slide 3: Highlights
Highlights Revenue growth Adj. Operating Profit ROCI +51.1% +113.3% +18.0ppts H1 2021 £108.2m H1 2021 £19.2m H1 2021 42.5% H1 2020 £71.6m H1 2020 £9.0m H1 2020 24.5% H1 2019 £82.7m H1 2019 £7.2m H1 2019 18.3% New business wins Superior channel access Increased product availability +£27.5m +79.9% +50
Slide 4: Financial review
Financial review Luceco plc 2021 Interim Results Presentation 4
Slide 5: Income statement
Income statement H1 H1 Change vs H1 Change vs LTM H1 Adjusted £m 2021 2020 H1 2020 2019 H1 2019 2021 • Revenue of £108.2m: Revenue 108.2 71.6 36.6 82.7 25.5 212.8 – 51.1% higher than a COVID-disrupted Revenue growth % 51.1% 30.8% H1 2020 Gross profit 41.7 27.5 14.2 28.9 12.8 84.4 – 30.8% higher than
Slide 6: Performance vs the market
Performance vs the market 2000 to 2018 2019 to 2021 CAGR %: 2000 to 2018 CAGR %: H1 2019 to H1 2021 1.3% 1.4% 0.6% 13.1% 8.3% 3.8% 4.1% 2.5% 0.2% UK GDP1 UK RMI Luceco UK GDP1 UK RMI Luceco Construction1 Construction UK organic UK acquired Overseas UK organic Overseas 1. ONS data at current prices 1
Slide 7: Performance drivers
Performance drivers New business wins Superior product availability – Manufacturing agility Annual sales value £m COVID recovery & record output Major new business wins since 2019 WA LED PP Total Sales Value of manufacturing output by half year (£m) Retail 9.2 2.5 3.5 15.2 Hybrid 4.7 0.5 0.5 5.7 Pro
Slide 8: Revenue by channel
Revenue by channel Professional Professional • Retail: Retail Hybrid Wholesale Projects – Healthy demand from UK DIY, supported by business wins • DIY chains Chains selling Chains selling Sale agreed – Good progress with major DIY chains in • Pure play to both to professionals direct with Continenta
Slide 9: Inflation impact
Inflation impact USD/RMB Copper (RMB’000 per tonne) (2020: £55m annual income – hedged) (2020: £16m annual cost – hedged) 7.40 ¥80 ¥75 7.20 ¥70 7.00 ¥65 6.80 ¥60 37% increase from 2020 6.2% decrease from 2020 average to 2021 average ¥55 average to 2021 average 6.60 ¥50 6.40 ¥45 ¥40 6.20 ¥35 6.00 ¥30
Slide 10: Profitability bridge
Profitability bridge H1 2020 Selling price/ Manufacturing Volume H1 2021 H1 2021 at actual cost inflation efficiency growth/mix at constant FX at actual £m currency impact gain impact currency impact currency • Significant cost inflation in H1, as Revenue 71.6 1.1 — 40.7 113.4 (5.2) 108.2 expected:
Slide 11: Overheads
Overheads Overheads from H2 2020 to H1 2021 (£m) • Overheads increased by £0.8m from 0.6 0.2 H2 2020 to H1 2021: – £1.0m reduction from CJRS repayment: 1.0 furlough support fully refunded in H2 2020 – £1.0m increase in variable pay: including increased bonus payable for improved (1.0) Group performa
Slide 12: Adjusted free cash flow/net debt reconciliation
Adjusted free cash flow/net debt reconciliation H1 H1 LTM H1 Adjusted £m 2021 2020 2021 • H1 cash conversion lower than recent Operating profit 19.2 9.0 40.2 trends: Depreciation and amortisation 2.9 2.8 6.2 – Additional inventory in transit from EBITDA 22.1 11.8 46.4 China due to shipping delays Ch
Slide 13: Balance sheet
Balance sheet Change Change H1 H1 vs FY vs £m 2021 2020 H1 2020 2020 FY 2020 • Debtor days reduced from 92 to 83 due Intangible assets 20.7 22.0 (1.3) 21.5 (0.8) to quicker collection of letters of credit Tangible assets 23.5 20.8 2.7 21.0 2.5 • Inventory days increased from 107 Financial assets hel
Slide 14: Business review
Business review Luceco plc 2021 Interim Results Presentation 14
Slide 15: Wiring Accessories (50% of revenue)
Wiring Accessories (50% of revenue) H1 H1 Growth vs Growth vs Adjusted £m 2021 2020 2020 % 2019 % • Revenue 57.5% higher than H1 2019: Revenue 53.7 31.3 71.6% 57.5% – New business wins, particularly in Contribution profit 19.6 10.9 79.8% 98.0% Hybrid and Retail channels Contribution margin % 36.5% 3
Slide 16: LED Lighting (25% of revenue)
LED Lighting (25% of revenue) H1 H1 Growth vs Growth vs Adjusted £m 2021 2020 2020 % 2019 % • Revenue 5.1% higher than H1 2019: Revenue 26.9 19.8 35.9% 5.1% – Slow start to 2021 with commercial and Contribution profit 4.5 2.6 73.1% 73.1% institutional LED projects curtailed by Contribution margin %
Slide 17: Portable Power (25% of revenue)
Portable Power (25% of revenue) H1 H1 Growth vs Growth vs Adjusted £m 2021 2020 2020 % 2019 % • Revenue 20.0% higher than H1 2019: Revenue 27.6 20.5 34.6% 20.0% – New business wins with UK DIY Contribution profit 4.0 3.1 29.0% 14.3% multiples and independent chains Contribution margin % 14.5% 15.1%
Slide 18: Investment in fulfilment
Investment in fulfilment • Warehouse Management System implemented in March 2021 • Key benefits: – Faster customer service – order fulfilment time reduced from 3-4 days to 1-2 days so far Investment in WMS in March 2021 of – More accurate order picking £0.6m to improve serviceability and – Increased
Slide 19: Investment in marketing
Investment in marketing Improved social media strategy Improved contractor engagement Investment in contractor training Increased market and product imagery Luceco plc 2021 Interim Results Presentation 19
Slide 20: Investment in manufacturing: example projects
Investment in manufacturing: example projects Project 1: X22 automatic assembly line Project 2: Automatic robot arm for metal stamping Before After KPIs Before After KPIs Investment £250k Investment £200k Productivity 37.7% Productivity 150% gain gain Capacity 40% Capacity 32% increase increase Payb
Slide 21: ESG
ESG Update on 2021 priorities 2021 priorities Status Eliminate or offset Scope 1 & 2 GHG ü Quantify Scope 3 GHG ü Commence participation in CDP ü Launch ESG strategy H2 2021 Commit to science-based targets 2022 EV charging opportunity UK market opportunity New product range • New petrol and diesel v
Slide 22: Outlook and Q&A
Outlook and Q&A Luceco plc 2021 Interim Results Presentation 22
Slide 23: Leading indicators
Leading indicators Q3 revenue to date: Q3 2021 vs Q3 2019 UK housing transactions: Q2 2021 vs Q2 2019 +12% +48% UK planning applications: Q1 2021 v Q1 2020 RIBA Future Trends Workload Index (June 2021) +19% +31 (score > 0 indicates the proportion of architects expecting an increase in workload in th
Slide 24: 2021 outlook
2021 outlook Q3 2021: FY 2021: • Retail and Hybrid demand remains strong, continuing to • July 2021: increased guidance to: out-perform the market – Revenue of at least £220m • Softer Professional Wholesale demand in late July/August, – Adjusted Operating Profit of at least £39m but could be driven
Slide 25: Q&A
Q&A Luceco plc 2021 Interim Results Presentation 25
Slide 26: Appendix
Appendix Luceco plc 2021 Interim Results Presentation 26
Slide 27: Company overview
Company overview Activities Competitive advantages Designer and manufacturer of electrical • Established brands with leading market positions and loyal professional products: 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.£500m Established 1941 UK market position/approx market share #2/15% Revenue as % of Group total 1 50% Revenue 3-year CAGR %2 4% Operating margin1 28% Product categories Switches and sockets, Circuit protection, Weatherproof, Junction boxes, Cable
Slide 29: Nexus – Commercial power and accessories
Nexus – Commercial power and accessories UK market size c.£200m 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 acces
Slide 30: Luceco – LED Lighting
Luceco – LED Lighting UK market size c £700m Established 2013 UK market position/approx market share Top 10/4% Revenue as % of Group total 1,3 25% Revenue 3-year CAGR %2,3 17% (6% organic) Operating margin1,3 9% Product categories Residential interior, Residential exterior, Commercial interior, Comm
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 25% Revenue 3-year CAGR %2,3 17% (6% organic) Operating margin1,3 9% Product categories Commercial and industrial exterior lighting 1. H1 2021 2. 2016 to
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 25% Revenue 3-year CAGR %2 7% Operating margin1 9% Product categories Extension leads, Cable reels, Adaptors and accessories 1. H1 2021 2. 2016 to 2019 (
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) – H1 2021 Retail Hybrid Professional Wholesale Professional Projects 1% 1% 10% 12% 41% 16% 49% 28% 27% 21% 38% 73% 14% 33% 20% 16% Wiring Accessories LED Lighting Portable Power/Other Total Luceco plc 2021 Interim Resu
Slide 35: Geographic footprint
Geographic footprint • The business remains UK focused Mansfield Kingfisher however with a growing presence in Dublin Lighting London Head office several international markets Sales • Integrated model: wholly-owned R&D Marketing Hamburg manufacturing and product Telford EU sales and marketing Produc
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 Management Jiaxing Luceco LED British buyout of buyout facility projects Jiaxing expanded Acquisition General wiring BG and backed by expanded sales team to 52,500m2
Slide 38: Strategy overview
Strategy overview Investment case Attractive markets Advantaged business model Compelling financial outcomes • Growing faster than GDP • Product development: • Revenue: • Low cyclicality – Customer-led – 5-10% • High margins – Agile – Organic supported by bolt-on M&A – Entrepreneurial • Profit: • De
Slide 39: Strategy overview continued
Strategy overview continued Strategic objectives 1 Increase sales to professional customers 2 Increase sales to international customers 3 Enter new product segments 4 Maximise return on capital from our existing 5 Invest in, and enhance, our advantaged 6 Develop our environmental, social and busines
Slide 40: 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 DIVI
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 cash flow High cash flow 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
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 37.2 (0.5x) 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