Likewise flags higher-than-expected revenue but lower full-year earnings

Floorcovering distributor Likewise said in an update on Friday that its ongoing investment in sales representatives, point-of-sale and logistics infrastructure had resulted in sales revenue progressively increasing month-on-month.

The AIM-traded firm said revenue growth in the third quarter, of 23% organic and 96% total growth, exceeded its second-quarter performance, with full-year revenues set to “slightly exceed” current market expectations.

It said investment in all aspects of the business had been undertaken over recent years, to create a “nationwide platform” with a current logistics capacity of 15 cubic metres.

That, it said, would provide the opportunity to grow revenues and profitability to achieve its long-term aspirations.

“Notwithstanding the increase in revenues, it is expected that the group's profitability will be lower than originally anticipated due to unfavourable market conditions caused by the terrible war in Ukraine, political instability in the UK and a particularly hot summer,” the board said in its statement.

“The pace of investments and inflationary cost pressures have continued into the group's key trading period, and as a result, fourth quarter profitability is expected to be lower than previously anticipated.

“Subsequently, the board is now expecting profit before tax margins to be below current expectations at 2%.”

Likewise said consumer spending was likely to remain volatile, and inflationary cost pressures to continue into 2023, and as a result it was expecting adjusted profit before tax for the 2023 financial year to remain “broadly in line” with 2022.

“The board is committed to its key objectives and will continue to invest in the logistics infrastructure with the new high bay distribution centre in Glasgow scheduled to be operational in the first quarter of 2023.

“Productivity continues to increase in the new Birmingham distribution hub.”

The board said it was pleased with the performance of Valley Wholesale Carpets, which was acquired in January.

“The extension to the Derby distribution centre will be completed in November, and the cutting table is commissioned to increase the cutting capacity in the Valley logistics infrastructure.

“This will also allow the previously-dormant distribution centre in Newport to commence operations, to expand Valley's market presence to South Wales and South West England.

“Whilst continuing to invest, the group is also very mindful of increasing profitability, but it does not believe it to be in the best interest of stakeholders to solely maximise short-term profitability which would compromise the clearly stated medium-to-long-term objectives.”

Profits were expected to increase on the previous year, and the board said it was “confident” in achieving its longer-term goals.

“With the benefit of a strong balance sheet, having in excess of £40m of net asset value, the board intends to announce a maintained dividend in line with that paid in July when the final results for 2022 are announced next year.”

At 1425 BST, shares in Likewise Group were down 16.97% at 15.05p.

Reporting by Josh White for Sharecast.com.