Luceco Plc Regulatory News (LUCE)

20 October 2022

LUCECO PLC

Q3 2022 TRADING UPDATE

Luceco plc ("the Group" or "Luceco"), the supplier of wiring accessories, EV chargers, LED lighting, and portable power products, provides the following update on trading for the three months ended 30 September 2022 ('Q3 2022').

The Group has traded in line with expectations in Q3 2022 and generated strong cash flow. However, our order book now suggests our distributor customers will destock faster in Q4 than we originally expected, resulting in Adjusted Operating Profit for 2022 in the range of £20-22m, below previous estimates. Our estimate of total destocking for 2022 and 2023 combined remains unchanged.

Q3 2022 trading

The Group has traded in line with expectations in Q3 2022 and delivered strong cash flows.

Q3 2022 revenue was 11% lower than Q3 2021 and 14% higher than pre-COVID Q3 2019.

The trading performance relative to the strong prior year comparatives reflects buoyant residential RMI market conditions in 2021 and destocking by our distributor customers in 2022, as previously reported. Strong revenue growth versus Q3 2019 underlines the good progress made by the business in recent years.

Demand from the UK DIY market continued to slow in Q3, as expected. Promotional campaigns run by some of our customers helped to stimulate demand toward the end of the quarter and these continue in Q4.

Demand from professionals remains stronger than from consumers, particularly for non-residential LED lighting projects.

The Group generated free cash flow of £11m in Q3 2022, which included the benefit of ongoing inventory reduction. Pre-IFRS 16 net debt at 30 September 2022 of £43.5m (30 June 2022: £53.9m) equalled 1.3x LTM Adjusted EBITDA (30 June 2022: 1.4x).

We are on track to deliver H2 2022 free cash flow margin of at least 10% and an inventory reduction of c.£10m. We expect year-end net debt leverage to be similar to Q3 2022.

Update on customer destocking

Given that underlying demand is evolving as expected, our estimate of the total destocking required to normalise our customers' inventory levels remains unchanged.

We now have good visibility of orders due for shipment to these customers in Q4. This confirms they plan to reduce their inventory by more than we had originally expected in 2022, leaving less to do in 2023.

We now estimate that customers will reduce their inventory levels by c.£20m in total for 2022 (previous estimate of c.£14m). At current activity levels, this would leave a remaining reduction of up to c.£5m for 2023 (previous estimate of £5-10m). The faster destocking profile in Q4 means that we now expect 2022 Adjusted Operating Profit to be in the range of £20-22m.

Update on cost inflation

Our estimate of the total impact of cost inflation emerging from the pandemic has reduced materially in recent weeks as key cost drivers such as sea container and currency rates have moved rapidly in our favour. At current prices, this would lead to a reduction in our annual cost base between 2022 and 2024 once existing inventory has been sold through and current hedging arrangements mature.

2023 outlook

There is an unusually broad range of macroeconomic outcomes for 2023.

If pressure on residential RMI activity from reduced household disposable income and fewer housing transactions continues as expected, this is likely to lead to profits in 2023 being similar to 2022, with performance underpinned by tailwinds from reduced customer destocking, growth in EV charger sales and input cost deflation.

The Group's healthy balance sheet, strong cash generation and agile business model will enable it to navigate this period with confidence.

- ENDS-

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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 Company'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.

Note to Editors

Luceco plc - Bringing Power To Life

Luceco plc (LSE:LUCE) is a supplier of high quality and innovative wiring accessories, EV chargers, LED lighting and portable power products for a global customer base.

For more information, please visit www.lucecoplc.com.

Forward-looking statements

This announcement contains forward‑looking statements that are subject to risk factors associated with, among other things, the economic and business circumstances occurring from time to time in the countries, sectors and markets in which the Group operates. It is believed that the expectations reflected in these statements are reasonable, but they may be affected by a wide range of variables which could cause actual results to differ materially from those currently anticipated. No assurances can be given that the forward‑looking statements in this announcement will be realised.

The forward‑looking statements reflect the knowledge and information available at the date of preparation of this announcement and the Company undertakes no obligation to update these forward‑looking statements. Nothing in this announcement should be construed as a profit forecast.