Luceco issues profit warning after accounting error

The company said it would now deliver gross margin of approximately 33%, leading to a £3.5m reduction in profit after tax to £13.2m, compared to current market expectations of £16.7m.

“Regrettably, the gross margin weakness was not identified sooner due to an incorrect assessment of the value of the group's stock,” the board said in its statement.

“The group's financial controller has resigned as a result of this error.”

Luceco said system improvements were being put in place to make sure the issue would not recur.

It explained that the principal reasons for the gross margin weakness were the strengthening of renminbi against the dollar, alongside the ongoing weakness in sterling and increased commodity costs.

“The group will be able to mitigate some of these headwinds through internal efficiency savings and overhead reductions, with margins expected to recover to long term expectations in the second half of 2018 as a result of these actions.

“The group also intends to increase its foreign exchange and commodity price hedging activities with particular focus on renminbi versus the dollar.”

Luceco said its revenue forecasts for 2017 and 2018 remained in line with market expectations.

“We continue to expand the group's product ranges and our geographic reach,” the board said.

“Luceco's balance sheet remains strong and the board continues to assess opportunities to invest in the future growth of the business.”