Likewise Group (LSE:LIKE) — Half Year Results

0:00 Good morning, and welcome to the LIKEWISE GROUP PLC Half Year Results Investor Presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged and can be submitted at any time using the Q and A tab situated on the right hand corner of your 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 appropriate to do so. Before we begin, I would like to submit the following poll.

0:29 And I would now like to hand you over to CEO, Tony Brewer. Good morning to you. Many thanks, Alex, and thanks, everybody, for joining this presentation, which will update you on the half year to, June 23 and also the overall trading development of the group. So just, starting with a summary really of what we've been doing. So we now have 11 distribution and logistics centers around The UK. If we go back to the beginning of twenty one, all but three of those have now been developed and changed in that we opened the distribution center in Leeds in January 21. More recently, and just around the country, we've, in the last few months, opened a new distribution center to rehash the Scottish business, giving us more capacity for both the Scottish market and shipment back into the Leeds distribution center to enlarge our presence in England.

1:21 At the beginning of last year, we opened the new center in Newcastle, followed that with the development of Birmingham, Newbury in the middle of last year, and Sid Cup in January of this year in conjunction with the Sudbury distribution center as well. Of course, then we acquired the Valley business in January last year, so that's kind of eight new premises that we've developed in the last couple of years. Importantly, we have very good relationship with suppliers across our key product areas of carpet, residential vinyl, luxury vinyl tile, laminate and artificial grass and commercial flooring. And our business is developed by 22 customer faced product and sales management and 60 external sales executives.

2:09 And that's supported by now a 134 delivery trucks providing next day service to our customers. Another key feature is our staff, obviously, where a huge majority of them have long standing experience in the floor covering industry, whether that be in warehouse, transport and logistics, telesales, management, of course, and sales representatives. And our market presence is created through hundreds of thousands of point sale items being positioned in retailers to generate business with their consumer. And we now have over 5,000 active customers who are principally independent flooring retailers and contractors. As we've stated consistently over the last couple of years, our short term objective is to gain over 10% market share, over GBP 200,000,000 sales revenue with a target of a 5% return on sales. And in line with our progress, the board is committed to a progressive dividend policy.

3:08 So in terms of the highlights of the results we've just announced, overall sales revenue up 17.3, and very encouragingly, the LIKEWISE branded business is up 23.3%. Underlying profit, is reduced as expected in the period following the investment we made in the second half of twenty two and into '23 to ultimately grow the business. I think very encouraging is the positive cash generation of 1,700,000, which allows further investment in the business. And on the back of that activity, the board has, announced an interim maiden dividend of 0.1p per share. Another key feature, which I'll expand upon in the presentation, is the increased distribution network where we now have 15,000,000 cubic feet of distribution capacity, of which we believe about 60% is utilized, particularly with regard to cutting and processing. And we'll continue to invest in point of sale to develop the business.

4:12 Those of you who have followed us will know we're a young business starting in 2018 with the acquisition of William Arms matting business followed by Bruce Stark, and then stepping forward with the acquisition of factory flooring in the spring of nineteen to give us access to carpet, residential vinyl, luxury vinyl tile, laminate, artificial grass, and then developing the commercial sector of the business. The business successfully listed on the Aimland Stock Exchange in the autumn of twenty one, and then the important acquisition of Vale in January 22 followed by the acquisition of Delta. And you can see there the sales profile continually increasing of the business. Again, we've shown this slide previously. Market data demonstrates that we've got a market of over £2,000,000,000 with our stated intent to increase our market share to over 10% and have a £200,000,000 business and in excess.

5:10 In terms of the management structure, we've notified this morning that Roy Povey has elected to step down as as chief financial officer. That's wholly Roy's decision for personal reasons, but we believe these are ably underpinned by, Ben, Ian and David in this group finance roles and, the regional finance support that we have. So we're wholly comfortable with that to be able to take the business forward from that projection. And then in terms of our overall, management at the senior level in logistics and IT, products and sales, supported by the regional operational managers. Just keeping the business simple and the growth, it is all about product development, increasing our geographical reach, enlarging our sales teams, and overall, increasing that market presence and market share.

6:04 In terms of the properties around the country, which I touched on, we have four freehold properties in Sudbury, Erith, Derby and Newport amounting to £22,300,000, which strengthens the balance sheet. But we have invested heavily in those properties over the last three years. And you'll see there the Manchester site, which we really need to rehouse as soon as possible. So the overall logistics network, you can see the country is very well covered. At some point, we need to create further logistics presence in the Southwest. But other than that, we have good coverage across the country. And you see there the LIKEWISE logistics network with the two main distribution hubs in Leeds and Birmingham with the logistics network, and centers across the country.

6:56 And that's the the Valley distribution network with the main cutting facility in Erith supported with logistics from Derby and Newport. And we've made further investment in Derby to be able to start cutting carpet residential vinyl there in the first quarter of next year. And this really demonstrates a very simple slide that demonstrates the cutting capacity that we have, which is key to our processing where perhaps in in Leeds, we're probably running at 90% capacity, but we've just put the second shift into Birmingham to create extra capacity there. And that we have, with the new facility in Glasgow, plenty of capacity to grow the business through the next few years. And similarly, as I mentioned, in Derby, we've invested over £1,000,000 there in putting an extension, extra storage capacity and cutting table into that facility.

7:48 And you'll see on the right hand side of the page, the business invested, 6,000,000 in the LIKEWISE businesses in the last couple of years, plus the acquisition of Vale and the further investment in Derby.

8:02 Importantly, as I touched on at the start of the presentation, there's 22 management who are focused on product development and customer facing sales supported by the 60 external sales representatives. It's key for them to continue to develop business with our customer base. And that just demonstrates the kind of market presence with various display stands that we're putting into our customers on an ongoing basis. This up to date sales chart, you see there we had a particularly strong August. And if you cast your eye to the yellow line, you see that seasonality is very similar to what we experienced in '21. And September really follows that trend as we and the order book continues to increase as we approach the traditional busy fourth quarter into October, November and December.

8:57 That really demonstrates the investment in the business in terms of management where we've in the process of appointing two further management to support the business, one in Vale and one in, likewise, developing Wales and, certainly extra sales representatives, particularly in the Southwest Of England and into South Wales. This map very much demonstrates the geographical opportunities that we have. If we take the valley slide on the right hand side, those, white patches, particularly that M 5 and M 4 corridor, which we're in the process of developing business through the established valley infrastructure in Erith Derby and Newport. And then on the LIKEWISE page, again, lots of opportunity to develop our business in the South And Southeast, plus the Southwest Of England and into South Wales.

9:52 Really touched on the the numbers, but this is up to the income statement demonstrates that sales positive sales increase, the expected short term reduction in profitability as we invest in the business, set the business forward.

10:06 And the balance sheet have stated, £39,000,000 worth of assets supported by £22,300,000 worth of property and and limited debt of 2,400,000 against the one Sudbury property.

10:24 And really, shows the sales trajectory that the group is enjoying and developing as we head towards that 200,000,000 sales revenue and beyond. Whilst the company's been growing rapidly, we're also conscious of our obligations and responsibilities environmentally. And you can see there that now 86% of company cars are electric or hybrid. We continually invest in new commercial vehicles, to obviously have the lowest emissions. And ongoing, we're concentrating on recycling, packaging and particularly poles, both from an environmental and a cost perspective. And, last year, we joined the carpet recycling as a core funding member, and then very importantly is our employee well-being.

11:13 And as you can see, we very much have a policy of career development and recruitment from within.

11:21 So just summarizing, very importantly, we've got established and very experienced management and sales team to develop the business. We continue, product development and market presence. As I've demonstrated, we have that logistics infrastructure with excess capacity, and it's all about improving that return on sales now and the investment, and that's supported by a progressive dividend policy. And I think it's fair to say we have many opportunities to surpass the original targets we set for the business. 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 your investor dashboard.

12:18 Tony, can I just make sure you can see that Q and A tab on the right? Yes. I can. Thank you. Perfect. And if I may now hand over to you and kindly ask you to read out the questions, give responses where appropriate to do so, and I will pick up from you at the end. Okay. The first question is what percent of sales are you aiming for from own brand? What is the margin impact as this increases? Well, we have a degree of own brand certainly across products such as luxury vinyl tile, laminate, artificial grass. Carpet is is branded as with vinyl as likewise, but that is sometimes available from some of our competitors. There is a margin improvement as we develop more own brands through the business.

12:59 Next question. How do you feel you're performing compared to others in the sector? I think, undoubtedly, we're taking market share. The increases we've demonstrated, certainly ahead of where the market would be, I guess there would be a general view that the market's probably declined, slightly in the period, and as we've grown the business, taking market share.

13:23 Okay. The £200,000,000 target mentioned, it's a balance of organic and acquisition growth needed to get there. I think we would see it now as principally organic growth. We would look at opportunities for acquisitions, but I think the distribution infrastructure that we've developed over the last two to three years allows us that capacity to get through that 200,000,000 initial target and beyond. The next question is would you consider acquiring smaller competitors? We would certainly consider that, but as I've just stated, our focus really is on organic growth. Next question is, what strategy do use to gain market share and from which competitors do you gain share? Well, the strategy, as I touched on, is all about slick product development, getting product to market quickly, competitively priced with, the latest and up to date point of sale.

14:22 In terms of competitors, I think we see it as the market generally. There are lots of opportunities. We still have relatively small market share, and there are opportunities to to continue to grow. Perfect, Tony. I believe you have addressed all the questions from investors today. I have. Thank And of and of course, the company can review all questions submitted today, and we will publish those responses on the Investor Meet company platform. But, Tony, before redirecting investors to provide you with their feedback, which I know is particularly important to yourself, could I please ask you for a few closing comments? I think, we've we've come a long way. And thanks to our our management and all of our staff, the business has developed very well over the last three to four years. We've established the market position, and I think we're now the opportunity with our distribution infrastructure and with our sales teams, as I've said, to continue to grow the business through those initial targets.

15:14 Perfect, 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 valued 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. Okay. Thanks, everybody. Thank you.