Likewise Group (LSE:LIKE) — Trading Update

0:01 Good morning, and welcome to the LIKEWISE GROUP PLC Trading Update 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 will review all questions submitted today and publish responses where it is appropriate to do so. Before we begin, I would

0:31 like to submit the following poll. And I would now like to hand you over to CEO, Tony Brewer. Good morning to you. Good morning. Thank you. And thanks, everybody, for taking the time to attend. So this is an update on our first quarter trading and the general development the group over the last couple of years. So if we just go forward, we see that total sales revenue has increased by 19.7% in the first three months against the corresponding period last year. And, encouragingly, if we take the LIKEWISE branded business, which exclude, the Valley acquisition and more recently the Delta acquisition, sales have increased by 25.7% on a like for like basis, which really demonstrates the development of our sales teams and the market presence of the group generally.

1:18 And in conjunction with that, the logistics infrastructure continues to be developed, and I'll update you as we go through the presentation. And the Vale acquisition, along with the Delta acquisition that we made during the course of last year, have been particularly positive. So there you see the the sales trend. So the top line really reflects the overall group sales for the first quarter, so you can see a nice upward trend. And then the third line, Dan, is that like for like likewise trend, and we look forward to the the spring with some optimism. So an accolade we received, which is quite encouraging, is that we were deemed to be the fastest growing business in The Midlands over the last three years, culminating in 2021. And given that the business grew by a further 104% in 'twenty two, we'd like to think we'd be well at that league table again.

2:12 The management team we've put together, is really strong, very experienced in the floor covering industry. People that really have started on the shop floor, learned their trade, understand the product, have great relationship with manufacturers, with with, customers, and understand the IT and the logistics of the business. So a very strong team who can develop this floor covering distribution business. The market as a whole is over £2,000,000,000 at manufacturer prices. We have between 67% market share currently. We have aspiration to grow that to 10% to have a GBP 200,000,000 business. And obviously, that isn't a ceiling. That's about developing our business for the medium and long term.

2:58 Really demonstrates the overall logistics network that we've put together, and we'll break that down into the various divisions that we have. If we go back to 2020, yes, we had the distribution hub for the matting and rug business in Sudbury where the company has the freehold. But for LIKEWISE flooring, this was our distribution hub in Dewsbury. We've moved forward tremendously since then. This is the new center we moved into in Leeds in the beginning of twenty one. And very sophisticated material handling, really good housekeeping, and plenty of palletized capacity. So a true distribution hub from the basic warehouse we had previously. This is our current site in Glasgow where the team there have been able to develop the business.

3:49 We're now moving into 47,000 square foot high bay warehousing. Racking systems are just being installed. That will be completed by the end of April and be operational into May. And obviously, that allows us to enlarge the business in Scotland. But also, because we ship overnight from Leeds to Glasgow and will continue to do so, we will back ship product to allow us to increase the capacity to develop the business further in England and Wales. And importantly, it also gives a much better environment for our employees. This is the logistics center in Newcastle that we moved into at the beginning of year. Again, this business was started from much smaller premises. Carpet and residential vinyl is shipped overnight from Leeds to Newcastle from delivery to customers, and palletized goods are stored within Newcastle Center, again, to help service customers in the Northeast Of England.

4:46 Again, a busy tray count in the Newcastle facility. This is the Birmingham Centre, which we started in '21 but really became fully operational during '22, again, creating bigger capacity for carpet and residential vinyl. Again, the housekeeping and disciplines are as we expect within the business, and plenty of palletized capacity. And again, a good working environment for the employees. This is the Newbury Center that we opened in the middle of last year to allow us service customers in the South Of England. Again, carpet residential vinyl shipped overnight from Birmingham to Newbury for onward delivery to customers in the South and a tray counter there enabling customers to collect.

5:37 This was the first floor covering business that we established in 2019 in Peckham. We've recently moved in January this year to a much better facility in Sidcup, much closer to the M25, allowing the better logistics to customers in the South And Southeast Of England. Again, a much better working environment for our employees and palletized goods stored in the logistics center there. This is the freehold facility in Sudbury, 80,000 square feet of highway warehousing where the company, as I owns the freehold. It's the original matting and rug business that we have, so a wide array of indoor and outdoor doormats and rugs where we're supplying the widespread retailers.

6:26 We actually produce a product there, which is a product for the marquee industry. I'd like it's a polypropylene twine, which I'd like into the thickness of a typical shoelace, and it gets us exposure into that marquee industry. And, again, plenty of capacity in the Sudbury distribution center to as long with the matting and rug business, we also operate likewise southeast from this facility. So that really gives you the picture of the the LIKEWISE network where the two main distribution centers in Leeds and Birmingham, obviously, establishing Glasgow, Leeds looking after the North and into the Northeast, and obviously, Scotland, and Birmingham looking after the Midland South and into the Southeast.

7:13 This is the operation of ANA in Manchester. I have to say it's not very glamorous, but it's done a great job for us over the last three years. But we really need to move that facility. We're on with negotiating for new premises. It's not quite a done deal yet, but we're hoping to progress that over the coming weeks.

7:33 Okay. This is the Valley operation in Erith, which we acquired beginning of last year. A huge carpet cut length business distributing to customers in the South And Southeast Of England, then, again, utilizing the Derby Distribution Center to customers in the Midlands and the North.

7:56 And you can see huge warehouse, 70,000 square feet, high bay warehousing. And that's typical of the the cutting tables where we are able to cut carpet up to five meters wide.

8:11 This is the the Derby facility, which we extended last year. The company owns the freehold of this along with Arith. Rocking installed. And, again, we've put into that facility a brand new cutting table that that as as we we expand the Vale operation, it gives us capacity to fulfill our future aspirations. This is the Newport facility, which, again, the company owns the Freehold, which came as part of the Valley acquisition. And we are now starting to operate into South Wales, and we will enlarge that into Bristol and the M 5 Corridor and the M 4 Corridor.

8:57 So that gives you the valley network based in Erith where the main cutting center is. Delivery, as I've said, into the South and Southeast from Erith and then onward to Derby for the Midlands and North and and now now operating out of Newport for South Wales and into the Southwest Of England. So over the last two years, a huge amount has been done on the logistics operation, moved into the Leeds facility in January 2021, established Birmingham and really became operational in 2022. Newcastle, we moved in January 2022. Newbury established in the middle of last year. Derby, the extension during the second half of twenty two. Newport now operational from November last year. Sid cut the move in January.

9:45 Glasgow will be operational from May, and that's pretty much finished now in terms of the racking and the cutting table. And we just need to solve that Manchester situation. And all of that is investment in in racking, cutting tables, the establishment and the infrastructure, and, of course, the the stock build that we develop. So that gives you the full network again across the country. So pretty comprehensive. Obviously, there's a gap down there in the Southwest, which is on our to do list at some point to be completely national. This really shows the investment in the business. Now we were perhaps questioned in going back to 2021, but we had a large management team for the size of business. And and we we acknowledged that but said we're building a business around that management, increasing the number of salespeople that we need. And you can see that blue line heading upwards, and we'll continue to recruit salespeople to develop the business.

10:48 The green line is commercial vehicles, but it's effectively an investment line as well. And what you know, the challenge we're doing now is pushing that sales line ahead of the investment line whilst we continue to develop the business. Don't be alarmed at those that drop in January, February. That's purely seasonality. You can see that in '21 exactly the same. The reason it doesn't appear in '22 is because of the Vale acquisition coming on board, But the group is progressing really well. In terms of geographical suppliers, then The UK is dominated by commercial suppliers where they're getting their product specified, creating demand, contractors are bidding for those specifications, and we are supplying those foreign contractors.

11:37 In residential product, it's very much about us creating the market demand where manufacturers are providing us with point of sale, so carpet producers in Holland and Belgium, residential vinyl from Belgium, laminate from Germany. And then further afield, can see doormats from Greece, doormats from India. We buy carpet and rugs from Turkey, and we buy artificial grass from Vietnam, luxury vinyl tile and rugs from China, and luxury vinyl tiles from Korea. So a very wide supply base, albeit you can see it's concentrated primarily from Europe and from The UK. We've recently joined Carpet Recycling UK, which is an initiative that's been going on a number of years. We feel with our position in the industry now, it's right for us to be involved in that, contributing to it, and having some influence on the development of of carpet recycling.

12:34 This really demonstrates our sales teams. You can see there, there are 60 employed sales representatives alongside 22 management that are very much customer facing. So 82 people developing our business with customers and supported by a very strong internal and experienced sales team.

12:55 This really reflects the point of sale that we're putting into the marketplace. So the lectern is on the right hand side of that slide. You can see over 5,000 going into the market in the last couple of years and developing the wall sands you can see at the rear. And this really shows the market presence. So wall sands is a new initiative for us. The lecterns are far further progressed. You can see pretty well established market presence, but we still have some way to go on this journey. And this really demonstrates the number of active accounts on a 12 basis, you can see the development there from July of last year through to March of this year. And with our sales teams, we will continue to push to increase the number of active accounts.

13:42 Business business website. You know, we are a new business. We're playing catch up, but we launched this in May of last year. We can see now over 20% of our orders are coming through the online medium. And customers can place orders at any time of the day, whether through a laptop, mobile device, or tablet, and access their stock files and place orders at any time. This really demonstrates the proportion of products. So carpet is the largest individual area and lots of opportunity to develop our business across those various product sectors. And, again, just bringing you back to that that sales line where we can see total group sales very positive in the first quarter and really encouraging that like for like, likewise branded sales increasing by 25.7%.

14:37 This demonstrates the geographical presence. I think it's fair to say we're reasonably well established in the North, Northeastern Scotland, but still lots of market share to go for. In the Midland, Southeast, and South, really, those are fledgling businesses. You can see on the left hand side, huge opportunity for us to progress. And then on the right hand side, you can see Vale business where we're we're now operating in South Wales. But again, as I mentioned earlier, the M 5, M 4 corridor, lots of opportunities to develop

15:07 the the Valley business from its existing infrastructure. And the important thing is that with that infrastructure we put together across LIKEWISE and Valley, we have an opportunity to pretty much double the business we're currently doing from that infrastructure.

15:25 Cash position, positive gross cash. Obviously, there is some cash absorption there, which no apology for because we've been investing in the business heavily to develop that infrastructure, increasing the stock levels, improving our customer service overall. But it's likely once we can establish that new Manchester site for ANA, that investment inevitably will slow, and the business will be far more cash generative. So I think it's fair to say encouraging sales development, really good progress through last year and into the first quarter of this year. We're very much on target to achieve those medium term objectives. Distribution infrastructure, I think we've demonstrated. That's really well progressed over the last couple of years. And it's now all about securing and developing a return on investment.

16:17 The operational gearing will kick in and improve our profitability. Hopefully, that's given you a comprehensive overview of where the group has developed. Thank you. Tony, thank you very much indeed for your presentation this morning. 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 our investor dashboard. Tony, as you can see, we have received a number of questions throughout today's presentation. And thank you to our investors for submitting their questions. Tony, if I may hand back to you and kindly 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. Okay. Thank you very much. So the first question is, will you retain the freehold in Newport, or do you have a preference for leasehold sites?

17:12 Well, we have a balance across the group because we have four freehold properties. Just to recap, that's Sudbury, Erith, Derby and Newport. The conservative valuation of those four sites is 21,400,000, which gives us strength in the balance sheet. And we we don't have any any desire to to sell or lease back those properties at all. We'd rather keep them and have a balance between the leasehold position and freehold.

17:41 Okay. Next question is, when you talk a £200,000,000 target, do you need to add to the current business to achieve this? And do you have everything in place from a logistics and operational perspective? How much turnover can the current operations handle? Well, think as I touched on this, that the current infrastructure, including, to be fair, obviously, Glasgow operation coming on board and, rehousing ANA in Manchester, would mean that we could go well through that 200,000,000 medium term target. And perhaps to put a perspective on that as well, and carpet is only part of the business, but an important part, we have currently 10 teams of people cutting carpet on those five meter wide cutting machines across the country.

18:26 Through Through that logistics infrastructure, we could easily run 18 teams and probably more if we pushed it, but certainly 18. And that, again, demonstrates that we could pretty much double the business from where we are currently. The next question is actually similar, at what level of capacity are you currently trading. I think that I've really answered that question. We within the infrastructure we have, the group can expand and meet its medium term aspirations. So question, if the group is performing broadly in line with board's expectation, why is the share price so low? I think I've done to the investment community.

19:16 I can't really answer that. We'll work hard at developing the business. And as I've always taught, you know, the share price will look after itself ultimately. It's all about really running the business and the stock market judging the performance. There's a question, is a large acquisition imminent to further develop the business?

19:36 No. We're really focused on organic growth. And, you know, the investment we put into the business, it is all about now getting a return on that. That's not to say that investment will stop because we'd look to continue to develop the business, of course, but it's really about getting a return on the the infrastructure that we have and the sales team and the market presence we're developing. Okay. And I think that's the end of the questions currently. Thank you, Tony, for that. And I think you have addressed those questions you can for investors today. And of course, the company will review all questions submitted today, and we'll publish those responses on the Investor Meet company platform. But perhaps before redirecting investors to provide you with their feedback, which I know is particularly important to you and the company, Tony, could I please ask you for a few closing comments?

20:26 I think the the group has made, you know, fantastic progress over the last couple of years and particularly then in the first quarter this year. Now we are optimistic about the future. We believe there's lots of market there to go for. We still only have a small market share, and we have a great team of people in place to be able to optimize the performance of the business. So thank you all, and enjoy your Easter. Tony, thank you once again for updating investors this morning. 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. 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 would like to thank you for attending today's presentation.

21:17 That concludes today's meeting. Good morning to you all. Okay. Thank you very much.