Slide 1: 2020 Interim Results
2020 Interim Results September 2020
Slide 2: Agenda
Agenda Introduction and highlights John Hornby Financial overview Matt Webb Strategy and outlook John Hornby Q&A Luceco plc | 2020 Interim 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 | 2020 Interim Results Presentation 3
Slide 4: Highlights
Highlights Financial highlights COVID-19 • Revenue of £71.6m, 13.4% lower than last year (H1 2019: • Early awareness of COVID due to China presence £82.7m): • Early and comprehensive response o Outperforming the UK market during COVID disruption o Run-rate stabilising at c90% of last year by period
Slide 5: Financial Overview
2020 Interim Results Financial Overview
Slide 6: Income statement
Income statement Adjusted Adjusted Adjusted £m H1 2020 H1 2019 LTM H1 2020 Revenue 71.6 82.7 161.0 • Revenue reduced by 13.4% to £71.6m: Gross profit 27.5 28.9 60.9 o Q1: -11.3% due to COVID supply disruption o Start of Q2: -50% due to COVID lockdown in key Gross margin % 38.4% 35.0% 37.8% markets O
Slide 7: COVID-19 impact on revenue
COVID-19 impact on revenue 2020 LTM revenue by day (£m) 175 H1 2020 • Jan: o Chinese New Year o China lockdown begins • Feb: o China factory closed for 2 weeks, then reopens at much 170 reduced capacity • Mar: o Lack of finished goods in China during the month o Back to normal production capacity by
Slide 8: Revenue by geography
Revenue by geography UK Retail % change UK Professional % change (c50% of revenue) (c30% of revenue) • UK Retail – H1 decline of 11.4%: o Pure-play online +53% Q1 Q2 Q1 Q2 o Hybrid -2% (3.8%) (4.1%) o Grocery -23% (18.6%) o DIY -28% • UK Professional – H1 decline of 23.3%: (44.2%) o Demand driven by
Slide 9: Gross margin bridge – 2018 to 2020
Gross margin bridge – 2018 to 2020 Adjusted Gross Margin bridge (%) • Gross margin comprehensively rebuilt since H1 2018 trough • Progress has helped mitigate COVID impact in 2020 • Mostly arisen from internal actions, not market forces • Targeting further progress in H2 • Selling price update: o In
Slide 10: Lower product costs
Lower product costs Manufactured products Actions taken % of % change H1 2018 Components total cost to H1 2020 • New management team Raw materials 60% (13.0%) • Rigorous tender process for raw materials Production labour 15% (18.0%) • Faster production lines, quicker changeover, better operator rete
Slide 11: Gross margin benchmarking
Gross margin benchmarking Competitor GM% benchmarks % of Group Average Top Segment revenue Performer Performer Competitors used for benchmarking Honeywell, Legrand, Greenbrook, Scolmore, Hamilton Wiring Accessories 44% 42.5% 50% Litestat, ML Accessories LED Lighting: - Project 17% 40% 45% FW Thorpe,
Slide 12: Overheads bridge
Overheads bridge Adjusted Overheads bridge (£m) • COVID overhead reduction plan set in late February, implemented in late March • Temporary lay-offs / furlough now ended • Bonus payments suspended in H1, reintroduced in H2 • Tight control of discretionary expenditure in H1 will be maintained in H2 •
Slide 13: Segmental results
Segmental results Adjusted Adjusted Growth £m H1 2020 H1 2019 % Wiring Accessories Revenue 31.3 34.1 (8.2%) • Segmental operating profit includes allocation of fixed central overheads Contribution profit 10.9 9.9 10.1% Contribution margin % 34.8% 29.0% 5.8ppts • Segmental contribution (before fixed
Slide 14: Adjusted free cash flow
Adjusted free cash flow Adjusted Adjusted Adjusted LTM £m H1 2020 H1 2019 H1 2020 Operating profit 9.0 7.2 19.8 • H1 performance underlies cash flow resilience Depreciation and amortisation 2.8 3.4 7.3 EBITDA 11.8 10.6 27.1 • Operating cash conversion >100%: Change in working capital 1.6 (1.2) 3.8 o
Slide 15: Net debt bridge
Net debt bridge Net debt bridge (£m) 66.3 • £48.0m of free cash generated in 2.5 years in tough (3.5x) conditions 3.1 • Cumulative free cash flow margin 11.8% 18.6 17.0 7.4 47.4 • Leverage risk now removed (2.9x) 3.1 • Significant reductions in off balance sheet funding / 9.0 overhang 12.4 19.2 32.4
Slide 16: New dividend policy
New dividend policy Uses of cash – FY2018 to H1 2020 New policy • New policy: Total free cash flow pre-capex = £58m Dividends o Payout increased from 20-30% to 40-60% of £6.4m 11% Adjusted EPS EBT purchases o Remains progressive £4.1m 7% • Appropriate allocation of consistently strong cash flows now
Slide 17: Balance sheet
Balance sheet H1 H1 FY Change Vs £m 2020 2019 2019 FY 2019 Intangible assets 22.0 23.1 22.6 (0.6) Tangible assets 20.8 22.3 20.0 0.8 • Working capital control remains under tight control Non-current assets 42.8 45.4 42.6 0.2 in challenging conditions Inventory 29.7 34.5 32.2 (2.5) • Net working capi
Slide 18: Strategy and Outlook
2020 Interim Results Strategy and Outlook
Slide 19: Manufacturing Transformation
Key initiatives – expected timelines Timeline Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Office Electrics High Power USB-C sockets BG Smart! dimmer Development New Product Grid Wiring Accessory insourcing 3 Phase range LED cost reduction e.g. Floodlights, Panels, Battens Kingfis
Slide 20: Supply Chain and IT Transformation
Key initiatives – expected timelines (cont.) Timeline Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Equipment investment Transformation Supply Chain Warehouse Management System - UK Warehouse Management System - China Demand Forecasting / MRP System Upgrade UK Next Day Delivery Pro
Slide 21: M&A
M&A Funding capacity (£m) Wiring Accessories targets – UK & Europe 37.5 All Meeting our 24.3 companies criteria Major multinational groups 8 3 (2.5) Regionally focused competitors Balkans 5 2 H2 H1 H2 H1 H2 H1 Benelux 7 0 2017 2018 2018 2019 2019 2020 CEE 8 1 (28.1) (17.7) DACH 22 0 France 5 0 (47.0
Slide 22: Current trading and outlook
Current trading and outlook Current trading Outlook • Expect single-digit like-for-like revenue growth in Q3: Full Year 2020 o Continued recovery in demand from professional / • Expect Adjusted Operating Profit of at least £23.0m wholesale channels provided there is no severely disruptive 2nd wave i
Slide 23: Q&A
LUCECO 2020 Interim Results Q&A
Slide 24: Appendix
2020 Interim Results Appendix
Slide 25: 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 – FY2019 Environmental and energy Saving LED lighting LED Lighting High performance exte
Slide 26: 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 27: 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 28: 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 29: Appendix – Introduction to Luceco (cont.)
Appendix – Introduction to Luceco (cont.) Investment case and strategic priorities Luceco plc | 2020 Interim Results Presentation 29
Slide 30: Appendix – Introduction to Luceco (cont.)
Appendix – Introduction to Luceco (cont.) Page references above are to 2019 Annual Report and Accounts Luceco plc | 2020 Interim Results Presentation 30
Slide 31: Appendix – Adjusted to Reported reconciliation
Appendix – Adjusted to Reported reconciliation Amortisation of acquired H1 2020 Remeasurement to fair value intangibles and related £m Adjusted of hedging portfolio acquisition costs Reported Revenue 71.6 - - 71.6 Gross profit 27.5 - - 27.5 Gross margin % 38.4% 38.4% Overhead costs (18.5) - (0.2) (1
Slide 32: Appendix – Adjusted to Reported reconciliation (cont.)
Appendix – Adjusted to Reported reconciliation (cont.) Amortisation of acquired H1 2019 Remeasurement to fair value intangibles and related £m Adjusted of hedging portfolio acquisition costs Reported Revenue 82.7 - - 82.7 Gross profit 28.9 - - 28.9 Gross margin % 35.0% 35.0% Overhead costs (21.7) -
Slide 33: 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