Luceco plc

Good morning everybody and welcome to Le Seco's first half results presentation for 2025. Thank you everyone who is joining on the webcast. Revenue approximately £126 million up almost 15% on last year. Operating profit of circa £14 million up almost 10% on last year. adjusted operating margin of 11%. This is slightly down on last year, reflecting the investments we are making in the future growth, especially in the energy transition business. This is mainly engineering activity, but also the software development. And the benefits of this will start to come through in the second half. Thus, I expect the full-year operating margin to be ahead of last year. As we know, our second half is always significantly stronger for us than the first half, and this year that will be particularly so. Leverage at 1.6%, our dividend up almost 6%, and EPS slightly ahead of last year. As I said, first-half revenues up almost 15%. This is partly due to M&A, but also extremely strong growth within the EV category. When we bought the business in the 12 months up to acquiring it in 2022, Pinky V turned over 4 million and this year should be closer to 18 million. We lost approximately 1% of the group revenue in the first half due to tariff issues in the US and other international weakness was a timing issue which will come back in the second half. There was an FX headwind because of the weaker dollar. Chinese New Year holiday in January this year was particularly early which meant that strong FOB shipments were pushed to the end of last year as we were concerned about possible disruption. This impacted the first quarter's revenues and hence like-for-like growth of only 4.6% in Q1 versus 3.2% in Q2. H1 was also impacted by some supply issues which are now resolved. We have seen a further pickup in demand in Q3, which I think is most likely market share gains, and so hope to finish the year with light-for-light growth closer to our 5% organic target. As I said, the primary driver is the energy-related products, the energy transition-related products. We have recently launched our new battery system, more about which later, and have been awarded Hive EV chargers into Centrica. This is a large project on which we have been working for a long time. It is mainly a software project because we have to get our product to integrate with the Hive ecosystem. The integration of the recently acquired businesses is also going well, and we are on track to achieve the targeted synergies, which mainly come about through integration with the group supply chains. And within D-Line, we've also been successful in winning significant new business as a result of leveraging group customer relationships. And with that, Will, I'll hand over to you.

Thank you, John. Good morning, everybody. Let me start by pulling out some of the key themes within our numbers. You will have seen the top line numbers from the announcement this morning, but the key points for me would be continued progress, albeit with some seasonality in the first half temporarily suppressing our margin. Slide six, income statement. Overall revenue at £125.7 million grew 14.7%. A strong contribution from our recent acquisitions was complemented by like-for-like growth of 2%. A good achievement against the backdrop of a lacklustre market environment. We're seeing increasing demand for our DIY products. At this stage, we anticipate modest market growth this year, and so we expect to be able to continue to deliver above-market growth. As expected, D-Line and CMD contributed just under 23 million pounds to revenue in this half year. Both integrations are progressing well and we look forward to seeing further benefits flowing through our results over the coming year. Our infrastructure business, DW Windsor, is having a much better time in 2025. We're very pleased with its first half performance. will recall we discussed how by its nature as a projects operation it can be vulnerable to the flow of construction projects which has slowed this time last year john has already mentioned the success of our electric vehicle charger offering which continues to grow at an excellent pace we saw over 90 growth in the first half of 2025 as ev charger sales hit 8.3 million pounds We also expect this to continue into the second half and beyond as the new Hive contract begins to bring volumes through. Our gross margin for the half was 42%. Our raw material bill remained well controlled and factory efficiency continues to improve. Our goods continue to travel around the south of Africa rather than through the Red Sea. This has become more the norm now and so we have not seen spikes in freight costs this year. We expect our usual second half weighted sales pattern this year, though you'll remember gross margins can sometimes be a little lower due to less favourable mix in the second half. Operating costs are up in 2025, the majority of the increase coming from the acquisitions of D-Line and CMD. An operating margin of 11% is a good performance at a low point in the market cycle. slightly below this time last year because some seasonal factors accelerated revenue back into 2024. I said at our full year results meeting in March that the timing of the Chinese New Year meant our retail and trade customers needed to stock up before the end of 2024 to avoid empty shelves in early 2025. The impact is noticeable in a half-on-half comparison. However, I expect we won't notice in the full year performance. Our interest bill has increased as expected following the additional borrowings we incurred to fund last year's acquisitions. We've secured a new revolving credit facility totalling £120 million, which will give us the necessary capacity to continue to pursue our strategy. We make over 80% of our profits in the UK, so the increase in the UK corporation tax rate to 25% has affected us. I have mentioned previously that as a consequence we expected our effective tax rate to rise. This half year, however, we have seen a reduction in our tax charge because we are now able to access some historic tax losses in the USA, a helpful side benefit from the D-line acquisition. We're pleased to report a 3.5% improvement in first half earnings per share and our board has consequently increased the interim dividend to 1.8p, an increase of almost 6%. Revenue bridge. This slide provides a bit more detail on the drivers of our revenue performance. The most significant improvement for this half compared to the first half of 2024 is the additional £15.5 million from CMD and D-line. Both are performing well. D-Line has been with us long enough now to be realizing some revenue synergies, which John may well discuss a bit later. Our like-for-like increase of 2% reflects a 3.6% growth in the UK, a solid market outperformance in our core market, helped by excellent EV charger progress. Our organic overseas operations in the Americas and the Middle East have had a slower time in the first half of 2025. I have confidence that our Middle East team will again deliver a strong second half. The organic Mexican and US operations, though, are experiencing the direct and the indirect impacts of the new tariff environment. Fortunately, they are relatively small parts of our business today. The seasonal faxes I mentioned earlier impacted our organic wiring accessories segment much more than the others, leaving it somewhat below the performance it delivered in the first half of 2024. The segment now includes the contributions from CMD and D-Line, which is why overall wiring accessories revenue is up some £15 million, half on half. The adverse currency noted here is a consequence of the FOB sales that we make in US dollars. profit bridge. This slide shows the key drivers of our adjusted operating profit performance. D-lines and CMDs lives within Luceco have seen good starts. We look forward to further improving contribution as we jointly deliver on the synergies. As we have said the synergies associated with the sourcing of product to the Luceco in-house manufacturing center in Jiaxing will take time to come through into our results. We had planned to make more use of our China sourcing capability in support of D-line, but this makes a bit less sense in the current tariff environment, so alternative cost opportunities are also being pursued. Less progress in organic adjusted operating profit this half, however we continue to see the benefits of efficiencies coming through the factory. Copper and sea freight costs have been more contained this half, but the seasonal split between H1 and H2 is expected to be a bit more pronounced at operating profit level than last year. Our organic operating costs have increased by £1.9 million. driven by labour inflation, but also targeted investments to secure additional future sales. Very pleasing to see the LED segment delivered a 6% operating margin in this first half, a substantial improvement on the first half of 2024. Improving trends. Looking more deeply into our P&L comparison back to 2023 shows the continuing progress in gross margin. It's pleasing to see our gross margins now up to 42% delivered through raw material cost control and efficiencies at the Jarshing manufacturing facility. This improvement was in part countered by the increasing cost of living, especially in the UK, and the select investments in certain overhead areas, which we believe will improve the business going forward. We've mentioned in the past the decisions to increase marketing spend and a more focused EV charger team to pursue opportunities. These have and will add cost, but should provide revenue benefit in the future. Lucico has historically enjoyed higher sales in H2 than in H1. We expect this year to follow this normal pattern. Adjusted free cash flow bridge. Lucico's working capital profile reflects the seasonal nature of some of the business. This is ordinarily reflected with a higher requirement in the middle of the year. I mentioned at the full year results that certain customers increased their deliveries in November and December. Last year, creating an unusual sizeable increase in our accounts receivable. From a cash flow perspective, it's pleasing to see this reversing during the first half of 2025. As I've mentioned, our interest bill increased when we acquired the two businesses last year. We have since secured a new bank facility with capacity to allow us to continue our organic and M&A strategy. The majority of the cash tax benefit was caused by a refund from 2022-3 and our RDEC receipt, which we'll keep. The remainder is timing, which I expect to reverse in H2. The cash flow benefit from our ability to now utilize the US tax losses, though, will help our future cash tax flows. Finishing up on the numbers. This slide summarizes our working capital cash flow and debt performance. Starting at the top left of this chart, our inventory levels are usually higher in the middle of the year than at the year end. Mid-year 2024, our inventory stood at 54 million pounds. Since then, we gained some 5.3 million of additional inventory through the acquisition of CMD. You will recall that we gained some 5.6 million pounds inventory as we acquired D-Line earlier last year. And the shipping route around the South of Africa continues to leave our stock in transit at some elevated levels. Lusico's working capital profile usually reflects the seasonal nature of some of the business. I've said before that our bank net debt and adjusted free cash flow historically show working capital sits around £10 million higher in the middle of the year than at the year end. This year, the unusually high accounts receivable balance we arrived with into 2025 has offset most of the cash cost of the normal inventory build. The bank net debt position at June of some £68 million sits comfortably within our £120 million borrowing facilities. And with that, I'll hand you back to John to talk through our business review and outlook.

Thank you, Will. We at Luceco believe we are well positioned to deliver growth ahead of the market. And this slide indicates how we think we can do that. Our sustainable competitive advantage is our ability to innovate and manufacture high quality, low cost branded products, thus ever expanding the portfolio into our extensive distribution networks. And we have a strong track record of doing this across multiple different product categories. and we can further accelerate the growth by using our cash generative model to fund further product and or distribution expansion via M&A. There are structural growth opportunities that exist for our industry due to the electrification of energy sources, heating, and transport. For example, if a heat pump is installed in a property, that will require an upgrade to the main power system utilizing our hardware. And more specifically, we now have approximately an 8% market share and growing of new installs of cloud connected residential electric vehicle charging points. Our strategy is therefore to strengthen our position in these high growth segments while continuing to grow our market share in the core business and can be summed up as product innovation combined with our extensive distribution network, which we can both expand organically and via M&A. Slide four illustrates some of the high-growth structural markets that we are now exposed to. And you can particularly see on the right hand side that the residential EV market in which we have a growing market share is in its infancy. And if we can continue to grow our share, which I believe we can, then only the EV segment of the energy transition piece should be a very significant category for the group. Moving on to the next slide. So most of these products that I'm talking about and all of the EV charging and home energy management systems products are made at our own factory in China, just outside Shanghai. And we have a video here that shows the operation. So we built that from scratch. We bought a field in 2007. There was nothing in Jiaxing at all at that time, and now we have a business that turns over almost £100 million. But combining our manufacturing capability and our innovation capability with our unrivaled distribution network And here you can see some of the customers and the channels in which we operate. Architects, consultants, contractors, developers, end users, electrical wholesalers, we basically deal with them all. Hybrids, from which we mean the likes of Screwfix and Toolstation. Screwfix, as we know, is a very large account for us. Then we have the online and the retail piece. Amazon is increasingly important, but we have unique positions within Wix, Argos, B&Q, etc. I think in the UK we have something approaching 10,000 distribution points for our products. And the strong track record of innovation. Next slide. The strong track record of innovation. I'm going to illustrate here with another video. This is a product that we launched last month. We looked at the EV charging category. What everyone else does is they put a big ugly box on the outside of your house. And the socket is inside that ugly box. And the electronics and the communications, because all these things are cloud connected, sit inside that big ugly box that you put on the outside of your house. What we thought is, why don't we separate just the socket from the ugly sort of box of electronics? So we created a product called Link. No one else has done this. We've managed to patent the idea. And we're now going to show a video.