Q3 Trading Update

RNS Number : 7382P

Luceco PLC

21 October 2021

 

21 October 2021

Luceco plc

Q3 2021 trading update

Continued strong growth and profitability despite industry-wide supply chain challenges

Luceco plc ("the Group" or "Luceco"), the manufacturer and distributor of wiring accessories, LED lighting and portable power products, is pleased to provide the following update on trading for the three months ended 30 September 2021 ('Q3 2021') and to confirm expectations of Adjusted Operating Profit of not less than £39m for the year to 31 December 2021.

Q3 2021 performance

Revenue

Revenue growth %	Q3 2021		YTD 2021
	vs 2020	vs 2019	vs 2020	vs 2019
Constant currency	20%	36%	43%	36%
Currency impact	(5%)	(8%)	(7%)	(6%)
Actual	15%	28%	36%	30%

· Constant currency growth versus pre-COVID 2019 comparatives unchanged from H1, with market share gains continuing:

o  Continued, strong demand from Hybrid customers, supported by new business wins.

o  Modest slowdown in growth versus Q3 2019 within the Professional Wholesale channel during the summer holiday season, as previously reported, however improving toward the end of the quarter.

o  Acceleration in growth versus Q3 2019 within the Retail channel driven by strong demand for Portable Power products overseas.

· As expected, growth versus Q3 2020 has slowed against a strong comparative period that was boosted by abnormally high demand after the first wave of COVID lockdowns.

Gross Margin

· Q3 2021 Adjusted Gross Margin slightly lower, as expected, at 37.0% (H1 2021: 38.5%), due to temporary compression from cost inflation.

· Inflationary pressures have continued to increase since our last update:

o  Annualised impact increased from £20m to £25m, of which £10m impacting the current year.

o  Increase driven by a rise in sea container rates.

o  Impact deferred by elongated supplier leads times and increased inventory cover.

o  Selling price plans updated.

· Deferred impact means margin compression will continue into H1 2022, before selling price benefits deliver improvements from H2 2022.

· No change in long-term margin expectations.

Operating Margin

· Q3 2021 Adjusted Operating Margin similar to H1 2021 (H1 2021: 17.7%), with profitability insulated from cost inflation by continued high operating leverage on strong sales growth and tight overhead control.

Business update

· Continuing to provide good customer service, despite ongoing supply chain disruption thanks to manufacturing agility and extra inventory cover, supporting market share gains.

· Working with the Chinese authorities to deliver requested energy use reductions at our manufacturing facility until the end of 2021.  The reductions currently requested should not impact our ability to deliver 2021 orders but are likely to drive further commodity inflation in the supply chain.

· Completed the acquisition of the DW Windsor Group on 13 October 2021 for £16.9m, in line with our strategy of adding complimentary, established brands to our portfolio that serve professionals.  Expected to be earnings enhancing from 2022.

· Completed a successful refinancing, both to diversify our source of funds and to increase credit facilities, enabling the Group to borrow up to £120m to fund future investment and expansion.

· Pre-IFRS 16 net debt to LTM Adjusted EBITDA of 0.6x as at 30 September 2021, and 0.9x pro-forma for the acquisition of DW Windsor.  The Group continues to carry additional inventory to offset elongated supplier lead times, meaning that full year 2021 free cash flow margin is likely to be similar to H1 2021 at circa 5%.

Full year 2021 outlook

· Luceco has grown stronger during COVID: growing revenue, increasing market share and expanding profitability against a backdrop of healthy RMI construction demand and a difficult supply chain for all participants. 

· We continue to expect Adjusted Operating Profit of not less than £39m, a record result for the Group, whilst recognising the potential for external supply chain factors to impact our short-term forecasts.

Initial 2022 outlook

· Temporary margin compression from cost inflation should peak in early 2022, resulting in a challenging H1, before margins are expected to recover in H2 as selling prices increases take effect.

· We expect to make steady organic progress in 2022, with a higher H2 weighting, supplemented with profits from the acquisition of DW Windsor and potential future M&A opportunities.

John Hornby, Chief Executive Officer, said:

"I am pleased that we continued to deliver a resilient financial performance in the third quarter against the backdrop of increasing pressure on the construction industry's supply chain, underlining the strength and robustness of our business model, our superior customer service and the dedication of our employees.

Forward visibility is limited but it seems likely that external impacts will increase over the next six months as the global economic system continues to adjust to a post-pandemic world.  However, I believe that we can continue to make progress from a strong platform, with greater capacity to invest in the business and acquisitions to deliver benefits.  We have adapted rapidly to changing circumstances throughout the pandemic, growing stronger in the process, and I am confident the same will hold true for next year."

- ENDS-

For further information, please contact:

Luceco plc	Contact
John Hornby, Chief Executive Officer	020 3128 8572 (Via MHP Communications)
Matt Webb, Chief Financial Officer	020 3128 8572 (Via MHP Communications)
MHP Communications	Contact
Tim Rowntree	020 3128 8572
James Bavister	020 3128 8572

This announcement is released by Luceco plc and contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) 596/2014 (MAR).  It is disclosed in accordance with the Group's obligations under Article 17 of MAR.  Upon the publication of this announcement, this information is considered to be in the public domain.

For the purposes of MAR and Article 2 of Commission Implementing Regulation (EU) 2016/1055, this announcement is being made on behalf of Luceco plc by Matt Webb, Chief Financial Officer.

Business summary

Luceco is a manufacturer and distributor of high quality and innovative wiring accessories, LED lighting and portable power products for a global customer base.

The Group supplies trade distributors, retailers, wholesalers and project developers with a wide range of products which broadly fall into the following market recognised brands:

· British General ("BG"): wiring accessories including switches and sockets, circuit protection and cable management products;

· Luceco, Kingfisher Lighting and DW Windsor: energy efficient LED lighting products and associated accessories; and

· Masterplug: cable reels, extension leads, EV chargers, surge protection, timers and adaptor products.

Luceco's long-established BG brand commands a loyal following amongst professional electrical contractors in both the UK and overseas.  It is synonymous with quality, safety, innovation and value for money.  The production of BG wiring accessories is the main focus of the Group's Chinese manufacturing facility, allowing it to control product quality, cost and availability.

The Luceco, Kingfisher and DW Windsor LED lighting brands together offer a comprehensive range of indoor and outdoor LED lighting solutions.  The range focuses largely on professionally installed products with an emphasis on performance and quality.  The Group is able to support these products by offering customers access to its in-house installation design team.

Masterplug is the market leading brand in the UK Portable Power category.  It is sold largely to consumers through retail distribution and online.  Its products are offered in a wide range of global electrical standards and they are sold in every territory in which the Group operates.

 

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