Luceco revenue dims after tough year of trading

LED lighting and portable power products specialist Luceco updated the market on its trading for the year ended 31 December on Tuesday, reporting “good progress” in the second half of the year despite what it described as “challenging” UK market conditions.

The London-listed firm said margins had been successfully restored, with the board therefore expecting full-year adjusted operating profit to be in line with market expectations.

It said the business had also been de-risked by reducing net debt, improving working capital efficiency and investing in an enhanced finance function, creating a “sound foundation” for future growth.

The group said it expected to report full-year revenue of £164m - down 2% on the prior year, largely as a result of its previously-reported destocking among consumer-facing retail customers, and adverse foreign currency movements in the first half.

While those headwinds reduced in the second half, overall progress on the revenue line was held back by slower demand from UK professional customers, which the company put down to a more uncertain economic environment.

The group continued to achieve double-digit growth rates overseas.

It said the full year effect of acquiring Kingfisher Lighting increased revenue by £8.5m, although that was offset by a £1.3m revenue reduction due to the previously-reported closure of loss-making US operations.

In line with its expectations, the board said margins improved in the second half.

That reflected the benefit of a continuing strategic shift towards higher margin business in the professional channel, pricing changes, and a more favourable input cost environment, aided in part by the group's currency hedging programme.

Those improvements, together with overhead savings and losses avoided following the US closure, allowed Luceco to deliver year-on-year growth in second half adjusted operating profit, the board said.

Net debt as at 31 December was £32.3m, which was expected to represent 2.0x adjusted EBITDA, having reduced by £9.1m in the second half due to restored profitability and a “sharp improvement” in inventory days.

The group recently extended the maturity of its main banking facilities to 31 December 2021, the board reported, on terms which had allowed it to improve its liquidity position by reducing reliance on invoice financing in favour of “more committed and dependable” traditional bilateral bank lending.

Luceco was targeting a further reduction in net debt in 2019.

“We are pleased to conclude what has been a challenging year for Luceco with second half trading in line with expectations, when operating margins returned close to the double-digit levels we have previously achieved,” said chief executive officer John Hornby.

“We are focused on building a stronger platform to de-risk future growth with significant investment in enhanced finance systems, processes and resources.

“We begin 2019 with a stronger balance sheet, improved profitability and cautious optimism, notwithstanding the current UK economic and political uncertainty.”

Luceco said it planned to announce its full-year results on 9 April.