Likewise Group (LSE:LIKE) — Interim Results

0:00 Good morning, ladies and gentlemen, welcome to the LIKEWISE GROUP PLC Interim Results Investor Presentation. At any time and press send. The company may not be in a position to answer a question every question received during today's meeting. However, the company review all questions submitted today and publish responses where it's appropriate to do so. Before we begin, we'll shortly submit the following poll. And I'd now like

0:31 to hand over to CEO, Tony Brewer. Thank you, Mark. Good morning, everybody, and thanks for taking the time to see this presentation. I think it's fair to say that LIKEWISE has made significant progress during 2022, really establishing a meaningful flocker and distribution business. So in terms of the numbers, sales increased over 108%, up to GBP 58,400,000. Also organic growth plus the benefit of the Vale acquisition. Organic sales encouragingly up 28%, reflecting the investment in additional sales representatives and a huge amount of new product going into the marketplace. A slight improvement in gross margin and culminating in pretax profit of GBP 1,900,000.

1:18 Very importantly, net assets increasing to just under GBP 40,000,000 gives us a very good foundation for the future, particularly helped by the in excess of 20,000,000, the freehold property of the group now has in its balance sheet. And gross cash sitting at the half year at 7,900,000 and net cash, 1.9. So a good solid position to be in. And importantly, the distribution capacity in the group in the last twelve months has increased from 8,000,000 cubic feet a year ago to now 15,000,000 cubic feet. And that supports the extensive sales and marketing activities of new product launches and new sampling going into the marketplace. And of course, two acquisitions completed in the period as well, the important strategic step of Vale plus the further acquisition of Delta in April.

2:10 So the floor covering market is about £2,000,000,000 at manufacture pricing. That gives us, with our current annualized sales, about 6% market share. I think we're all aware of the challenges before us generally in the economy, but I think we're very well positioned with the business we've established, to take advantage of the market and grow the market even if conditions are difficult.

2:34 The group is is very young, just over four and a half years, and a lot of progress made in the last two years, particularly with the flotation on to AIM in August last year, and of course, this important strategic acquisition of Vale plus Delta, as I mentioned. So in terms of sourcing product, in The UK, typically commercial product that we're bringing in where the manufacturer establishes specifications, foreign contractors bid for those, and we supply that demand. So very much to be fair, the manufacturer creates the market demand. And we have relationships with all of the key players in the commercial market. In residential, again, we've had fantastic support from manufacturers in Holland, Belgium, where we buy carpet and residential vinyl and laminate from Germany.

3:24 Turkey also important for carpet and rugs, and then further afield into Asia for our matting products and artificial grass and LVT. So great support from suppliers across the globe, particularly that's strong from in Western Europe and The UK. The logistics network that we've established in the LIKEWISE branded business, carpet residential vinyl housing in Leeds and now Birmingham, that gives us a network that we're able to then distribute overnight to give customers a next day delivery service. So from Leeds to Newcastle and Glasgow, Leeds to Birmingham, and then Birmingham down to Sudbury, Peckham, now Newbury, and also starting today out of Newport.

4:10 So a comprehensive distribution network. And then Valley acquired in January, main distribution hub in Erith, Southeast London. Again, Valley's shipping into the Southeast and South and then through the Derby distribution hub into the Midlands and North. And again, we will now start distributing Vale from, Newport into the Southwest and South Wales. Manchester, where ANA is housed, we're looking to relocate that. We're at the final stage of negotiation to be able to establish a new center for ANA, which if that goes to plan, be at the beginning of twenty four.

4:51 This map really just reflects the geographical opportunity we have both in Vale, where you'll see they're not really present in the South Southwest and South Wales. And although the LIKEWISE business has some presence in the Midlands and Southwest, that that's, you know, a fledging situation which will continue to develop, and as I've said, now distribute out of, Newport to go into South Wales and fully into the South Of England.

5:21 Salespeople are particularly important to us in recruiting, salespeople with experience of the floor covering marketplace and, very importantly, relationship with retailers. We've said previously that our management at twenty two is pretty much established in terms of sales management and product, but we will continue to increase the number of sales representatives and expand the geographical area of the group and the presence of where we are currently. And this slide really just demonstrates that that you can see the yellow line at the bottom fairly flat just and then the blue line where we're increasing the number of sales representatives and pushing that, sales revenue up supported by the delivery vehicles we require. And we'd look for some operational gearing to start to kick in there.

6:09 Along with the sales representatives and their relationship with retailers is very much the market presence in terms of display stands, whether that be lecterns, wall stands, or other types of display, increasing our presence in independent retailers and with literally thousands of pattern books going into those, marketplace.

6:34 This really demonstrates the opportunity before us. The business, is strongly positioned in carpet, and we continue to extend that. But certainly, the commercial presence can increase. And products such as LVT, laminate, artificial grass are also big opportunities to expand our position in the market. The business to business website that we launched in the spring, now in the LIKEWISE branded businesses, 20% of sales are coming through that, medium. And in our best business, that's actually 30%, therefore giving an an opportunity for our customers to check stock at any time of the day and place orders, which really enhances our service proposition to the customer.

7:22 And importantly, the additional sales representatives, we are, on an ongoing basis, increasing the number of active accounts and the presence the group has in The UK floor covering market. And there you can see the sales revenue continued to increase both on an organic basis and with the benefit of the Valley and Delta acquisitions.

7:47 So importantly, the income statement. Sales revenue, as we've said, increased a 108%. Gross profit just ticking up slightly. Overheads, we are investing in the business, particularly in terms, again, of additional sales representatives and delivery vehicles to support that. But profitability at a pretax level increasing to 1,900,000. And as we said at the outset, the balance sheet continues to strengthen with net assets just under GBP 40,000,000, supported by GBP 20,000,000 of freehold property. So we believe that gives us a really good foundation for the future.

8:35 Net cash at the half year, 1,900,000. We have had some outflows. Obviously, the acquisition of Delta of $1,500,000 also, the dividend that was paid to shareholders and investment in the working capital, particularly the stockholding in Birmingham, and also the infrastructure development at sites such as Newcastle, Derby, Newport, and Newbury.

9:02 So overall, we've had really positive progress in 2022. The two acquisitions are trading where we'd expected them. Sales revenue well through the 100,000,000 mark, sat with net cash at the half year and a 20,000,000 freehold property portfolio. So it's fair to say significant steps forward, and the infrastructure, very importantly, to achieve our medium term objectives. Thank you, Mark. That concludes the presentation. That's great. Tony, thank you very much indeed for your presentation and for updating investors on today's call. Ladies and gentlemen, please do continue to submit your questions using the Q and A tab situated on the right hand corner of your screen. But just while the company take a few moments to look at the company's questions this afternoon, I'd like to remind you that recording of this presentation along with a copy of the slides and the published Q and A can be accessed via your Investor Meet company dashboard, of course, I meant this morning. Tony, as you can see, you've had a number of questions from investors through today's meeting. If I could just ask you to click on that q and a tab. And if I could ask you just to read out the questions and then give a response where it's appropriate to do so, sir, and I'll pick up from you at the end. Okay. So what are the plans in terms of new products in the pipeline and how will you look to these to the market? Well, we have launched many new products during the course of this year and will continue to do so.

10:23 That's supported by the display stands and point of sale that are demonstrated both in terms of lecterns, wall stands, and sample books, which with the support of the manufacturers, and we're putting a significant amount of those into the retailer and foreign contractor. Okay. Yeah. I've got that, Paul. Will the next dividend be announced at the end of twenty twenty two figures? Yeah. I think that we've said that the board is committed to increase dividend in line with earnings. Are all the acquisitions now fully integrated and rebranded into the business? Any lessons learned? Well, we have different styles of that. One, Vale is kept completely autonomous from LIKEWISE both in terms of its branding and its distribution out of Eryth and and Derby, albeit we will utilize Newport for both brands.

11:37 Any lessons learned? Yes. We'd like to keep businesses separate. And in some cases, we are linking them to LIKEWISE in the in the case of ANA, for instance, and also more recently, Delta and H and V.

11:50 But each business has its own management team and retains its autonomy. Okay. Excuse me. Congratulations on your interims. How will you continue to grow organic share in a declining market, at least on the consumer side? What does this imply for pricing and gross margin? Well, we have, as we said, recruited a lot of very good salespeople, and we believe, with the support of the manufacturers and and new products, we can continue to grow our market share even in the declining market. What does this imply for pricing and gross margin? Well, we'll maintain our pricing position. I guess there will be further pressure on prices, but, we we will contain our gross margin.

12:45 How easy is it to find and recruit and importantly keep sales staff? What What is the optimum number of salesperson required to meet your growth ambitions? Well, I think it's fair to say salespeople have wanted to join likewise on this journey, and, you know, we continue to look to increase the number of salespeople that we have. Do you expect to benefit from the recent reduction in stamp duties, housing transactions potentially improve? Absolutely. I think, we've got activity with the government, to help support the consumer, then that would undoubtedly help us. House moves are certainly a key part of the business, but also so is household refurbishment.

13:41 What contributions are manufacturers making to the new stands to be introduced into independent retailers? Well, that is a genuine three way investment where the manufacturer is supporting us with sample material, and, we're investing in the display stands in conjunction with the retailer. Okay. I think that completes the questions. Thank you. That's great. Tony, thank you very much indeed for updating investors this morning, and thank you to everybody for your questions. If any further questions do come through, Tony, what we'll do is we'll make those available to you post the meeting, and we can always publish any additional responses at that time. I know investor feedback is important to you, I'll shortly redirect investors on the call to give you their thoughts and expectations.

14:44 Before doing so, Tony, I wonder if I may just ask you for a few closing comments, and then I'll redirect investors for their feedback. Certainly. I think we have made significant progress in the last six to nine months, and the group is very well positioned positioned to continue to take market share and increase its sales revenue and, most importantly, its profitability. Thank you. That's great. Tony, thank you once again for updating investors this morning. Can I please ask those on the call not to close this session? As we now automatically redirect you for the opportunity to provide your feedback in order the management team can better understand your views and expectations. This won't take a few moments to complete, but I'm sure it'll be greatly valued by the company. On behalf of the management team of LIKEWISE PLC, we'd like to thank you for attending today's presentation. I wish you all a very pleasant morning.