Likewise Group (LSE:LIKE) — Investor Presentation

0:02 Good morning, and welcome to the LIKEWISE GROUP PLC 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 received during the meeting itself. However, the company will review all questions submitted today and publish responses where it is appropriate to do so. Before we begin, I would like to submit the following poll.

0:32 I would now like to hand you over to CEO, Tony Brewer. Good morning, sir. Good morning. Thank you very much, and welcome, everybody. Thanks for joining this presentation. Happy New Year to you all. So we've made an announcement to the stock exchange this morning just updating on the year end sales numbers, which I'll run through in this presentation, and give you some background to what we've been doing over the last couple of years. So, total sales revenues increased by a 104% to just over a £124,000,000. It got us through that benchmark, £100,000,000 clearly, and with a strong fourth quarter, a 107% up. And similarly, like for like sales have increased by 25.7% for the full year, and, again, slightly stronger fourth quarter showing progressive sales.

1:21 Logistics network certainly developing as I'll demonstrate during the course of this presentation, and we've got really well established sales teams, but we're absolutely clear that we now need to improve the return on the investment in those salespeople. Market presence definitely increasing and very encouraging. The value acquisition has done exactly what we expected last year in what were quite clearly challenging markets. Progression with Sid Cup, which literally opens on Monday of next week, replacing the previous Peckham site. Glasgow was starting to install the the racking and cutting tables, and that will be operational in the fourth in the second quarter. And Manchester, we're just at the final stages of hopefully concluding negotiations to relocate ANA.

2:07 So very much significant progress in the last two years.

2:13 Sorry. Sorry about that. Okay. So the market, we talk about a market of about £2,000,000,000. That gives us just over 6% market share with our aspiration to have, you know, 10% market share over the next, three to four years, giving us 200,000,000 sales revenue and beyond.

2:36 So in terms of the logistics network, you can see there pretty comprehensive coverage of The UK, within our effectively three divisions across, the various operations. So first of all, the LIKEWISE branded businesses. Now if we go back to the fourth quarter of two thousand and twenty, this was our distribution hub for floor covering. So I think it reflects how far we've come in the last couple of years. We moved into the new site in Leeds at the beginning of twenty one. You'll see here, you know, excellent housekeeping, presentation of cut lengths to our retail customers, absolutely top grade in the industry. Plenty of pallet capacity, and we're just about to enlarge that.

3:22 So we ship overnight from Leeds to this current site in Glasgow. Not very glamorous, it's fair to say, but we have built a business there. And this is the new site which we've just took possession of, 47,000 square feet, high bay warehousing, which, as I said, racking just being installed, cutting table, and that will be operational in the second quarter. There's plenty of capacity there. And we will also back ship, on the container that goes from Leeds overnight, be able to back ship to Leeds to increase capacity into England as well. The office accommodation to be, to be furnished. This is the Newcastle site that we moved into at the beginning of, '22, giving that business more capacity. With this, we've been able to ship overnight again carpet from Leeds to Newcastle each night.

4:15 Plenty of pallet storage, a very busy tray counter. That allows Newcastle to expand their business in the Northeast. Birmingham, which was opened in the summer of twenty one, increasing the productivity in that site. Again, excellent housekeeping. Plenty of pallet capacity, and again, you'll see the the housekeeping we demand. Good environment for our employees. The far progression from what you saw as our original distribution hub. This is the Newbury site, which we opened in the summer of twenty two. Again, carpet shipped overnight from Birmingham to Newbury from were distributed into the South Of England.

5:06 The pallet capacity in Newbury and tray counter operation. Then this was our 1st Floor covering site in Peckham, in Southeast London. We're just rehousing this, as I said, over this weekend, literally, at the operation on Monday, from much better premises in Sydcup, again, giving better environment for the employees, more capacity, carpet and vinyl shipped overnight from Birmingham, and a much better logistics location for servicing the Southeastern London. You see there the capacity in Sidco. And again, the racking is now being installed. This was the original LIKEWISE site in Sudbury where our matting and rug business is housed and also likewise Southeast.

5:52 The business owns the freehold of this facility, 80,000 square feet of high bay warehousing. This is a showroom for for rugs and doormats, both indoor and outdoor. This is actually a loom where we produce a product for the marquee industry. If you liken it to a a shoelace, it's a poly a thickness of a shoelace. It's a polypropylene twine, which is woven, as I said, for the marquee industry. And, again, plenty of capacity to expand our business to key accounts in for rugs and matting.

6:27 Okay. And that really shows the LIKEWISE network that we have with the main distribution hubs in Birmingham and Leeds, from the distribution overnight to Glasgow, Newcastle, and from Birmingham to Sudbury, Sitcup, and Newbury.

6:44 Now this certainly isn't is not a glamorous building. This is ANA in Manchester. We acquired the business at the beginning of 2020. Been an ex excellent acquisition, performed really well for the last three years. Profitable and cash generative, but not a particularly great environment, as you can see. However, this is the site that we have identified. The negotiations are not yet concluded. There's 50,000 square feet, high bay warehousing. It was much better capacity to expand the business and give, obviously, a much better environment for our employees as well. And this is inside, clear span, 12 meters high. Again, it gives business plenty of capacity for the future. We hope to conclude that over the coming weeks. So onwards to to Valley, which we acquired literally a year ago. This is the main distribution hub in Erith, where the cutting is currently undertaken.

7:39 It's a fantastic carpet distribution business. You see plenty of capacity, huge volume of cut lens produced every day. And three cutting machines working across six shifts, day and night cutting of carpet. And then this is the Derby Distribution Center, which we've now extended during the course of last year, racking being installed, plenty of capacity for four rolls of carpet. And then this is the cutting machine that we've installed to give Vale more capacity as we progressively enlarge that business.

8:23 This is the the Newport site, and I should mention that that Erith, Derby and Newport, the company owns the freehold of. This was an unused facility, but we now have started to operate from November into South Wales, and then furthermore, we'll go into the Southwest. And you can see literally currently an empty warehouse for further development of the group. And that shows the valley network where we distribute out of areas into the South And Southeast Of England, then transship overnight to Derby for onward delivery into the Midlands and North Of England. I think that summarizes what's been achieved over the last couple of years in terms of the logistics infrastructure. So Leeds replacing that Dewsbury warehouse in January 21, followed by Birmingham middle of twenty one and progressively increasing the productivity there. Newcastle rehoused January 22, The new facility in Newbury in the summer of twenty two.

9:25 Derby extension during the second half of last year. Newport becoming operational in November 22. Syd Cup literally next week becomes operational, replacing that small facility in Peckham. Glasgow will be operational by April of this year. And then Manchester, we're looking to conclude. And all of that is investment in racking, cutting table, offices and the infrastructure So for the buildings, we own the freehold, others we rent, so we obviously rent and rates, and investment in the stock with the support of our suppliers. And that really shows you that network again a distribution across The UK. And ultimately, we will do something in the Southwest. But our priority really is over the next few years is getting a return from the investments we've made.

10:18 That really shows the geographical market presence. You know, we're progressively going into South Wales, into the South Of England, and we will go into the Southwest. This demonstrates the number of external salespeople we've got, which is 61. Our challenge for this year is is to get some of the newer sales representatives up to the pace of our middle and and high performing salespeople. There's quite a disparity between the the best performing in the middle to lower, and we know it's a challenge for our management and for our representatives, again, to get return on on the overall investment of the group. This really shows the investment and and how we're getting a return on that. The yellow line at the bottom, you know, we've said for some time, we're well invested in management in terms of product sales and customer facing management. We wouldn't expect that line to increase particularly.

11:14 But the the blue line shown, you know, the ongoing recruitment of sales representatives. That green line is actually commercial vehicles, but it could well be just an investment line. And you'll see what we need to do is get that sales line running ahead of the investment line. And as we do that, that gives us operational gearing and improved profitability and allowing us for further investments in the future. So this demonstrates the kind of displays we've been putting into retailers. It has to be remembered that we are a new business, founded in 2018, but really accelerated forward from the summer of two thousand and twenty. So we're increasing our presence in independent retailers and with flooring contractors.

12:01 So the lecterns at the the forefront on the right, some four and a half thousand of those have been placed in the market, and wall sands progressively over the last few months increasing our presence into retailers.

12:14 And this just demonstrates wall sands, we've got a long, long way to go in terms of that presence. Lecterns and Lecterns, we're making further progress with.

12:33 Again, given we're a new business, we've just launched in the summer of last year a business to business website, and you can see there that 25% of the business is now coming through that business to business website for trade customers that can access our stock files and place orders at any time of the day. And in conjunction with our developing sales representatives is the number of active accounts, and you can see again the progression from July through to December. And that's, again, a focus for this year to enlarge the number of active accounts we have. And all that culminates in that sales increase. So the turquoise line you can see in the middle is the like for like, likewise branded businesses, a positive progress during the course of last year. And the red line at the top reflects total group sales with the benefit of the Vale acquisition and also Delta.

13:29 This is the cash position showing that we're sat with 6,000,000 gross cash, net cash broadly neutral, which is the difference between the invoice discount that we fund part of the business through and the small commercial mortgage we have on on the Sudbury Freehold property. But, you know, you can see that the business has been investing heavily with that infrastructure that we've developed. And so just summarizing, I think sales development, we would have liked to move further forward. It has been a challenging market, but we've made a huge amount of progress. So think the sales revenue is largely on target to reach those medium term objectives of having, you £200,000,000 plus business. You can see that the logistics infrastructure is well established with some final things to be done. And now we really need to secure that return on the investment and improve the operational gearing and profitability.

14:26 Hopefully, that's given you a good demonstration of of the development the group's made over the last few years. Thank you. Tony, thank you very much indeed for your presentation. Ladies and gentlemen, please 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. Tony, as you can see, we have received several questions throughout today's presentation, and thank you to all investors for submitting their questions. Tony, could I please ask you to read out the questions and give responses where appropriate to do so? And I'll pick up from you at the end. Thank you. Okay. Fine. So the first question is, the 5,000,000 shares as part of the Valley acquisition where there's an underpinned price of £1 per share, is the difference to be made up by cash? And the answer is yes. It is. It will be made up by cash, and that will be due on the 01/14/2024.

15:31 Okay? The next question is, what are the typical cost savings you make from acquisitions? Does that impact margins? What is the normal normalized target margin for the group? Well, it depends on the type of acquisition. Valley, quite clearly, is a stand alone business from its three locations.

15:51 Business performs extremely well. So directly, there aren't really any cost savings with that other than maybe some synergies and things like insurance and that type of thing. But if you then take a Delta acquisition where we acquired the business, moved it from its previous premises into our leads distribution center, we remove a number of costs there with regard to logistics and administration, retain the sales costs, and and that can improve the return on that business. Our target margin, as we've stated, is to get to a 5% return on sales, the business is progressing towards that. And certainly, as we develop and get that operational gearing, we would see that as being achievable and hopefully succeeded.

16:40 Next question is, are they are you seeing more acquisition opportunities? We have looked at businesses, but I think it's fair to say that what we want to concentrate in the foreseeable future is a return on the investment that we've made. We don't see ourselves paying significant amounts of goodwill to make acquisitions, and we'd rather get the return from our own devices. I think the next question is similar. How do we see operating margins evolve over the next five years? And that challenge is for us to get to that 5% operating margin, which, you know, we believe is achievable over time. I think the next question is what is the next key milestone we should see for 2023?

17:29 Well, it's developing the business really during the spring, summer, and into the autumn of twenty three. The, obviously, Glasgow site and Manchester, as we've described, and getting that return on the investments that we've made. Specifically, in terms of next announcement, that is likely to be at the end of the first quarter. The next question is with regard to if the share price remains where it is, will we need to strengthen the balance sheet post the deferred payments, for Valley? Our cash flow, we believe, obviously, we look for the share price to improve as much as possible and close that gap, but it's within our cash flow forecast.

18:20 Okay. That's all of the questions answered, I believe. Tony, that's great. Thank you very much for addressing those questions you can from investors. And, of course, the company will review all questions submitted today, and we'll publish those responses on the investor meet company platform. Before redirecting investors to provide you with their feedback, which I know is particularly important to the company, Tony, could I please ask you for a few closing comments? I think it's it's very much as we've said. Our focus is on return on the investment. And I keep saying that, but that is the key for us. We invested heavily in the infrastructure, in the acquisition, see in the the sales resource, and it's all about getting a return on that investment and taking the business forward. 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 management team can better understand your views and expectations.

19:15 This will only take a few moments to complete, and I am sure will be greatly valued by the company. On behalf of the management team of LIKEWISE GROUP PLC, we would like to thank you for attending today's presentation. Good morning to you all.