Luceco Plc Regulatory News (LUCE)

Luceco plc

24 March 2020

Reporting moratorium and coronavirus impact

Reporting moratorium

The Board of Luceco plc (the "Group" or "Luceco") has decided to delay the announcement of the Group's final audited financial statements for the year ended 31 December 2019 in response to guidance recently issued by the Financial Conduct Authority and the Financial Reporting Council.

The original reporting date of 31 March 2020 fell within the two-week moratorium recommended by both bodies.

The Group will therefore report no earlier than 6 April 2020. We are choosing not to set a revised announcement date at this time, mindful that any new commitment could be impacted by further regulatory guidance. We will commit to a new date as soon as the regulatory backdrop becomes clearer.

The Group confirms that it expects to announce results in line with those set out in the Group's Full Year Trading Update dated 28 January 2020.

Coronavirus impact

The full potential impact on the Group of the coronavirus pandemic is not yet clear, but the commentary below summarises the latest position.

Supply impact

· The Group sources nearly all of its products from China.

· Approximately half of these products come from the Group's own production facility in Jiaxing, roughly 800km from Wuhan. It employs 1,000 people out of a Jiaxing population of 5 million.

· The Jiaxing area has been relatively unaffected by the outbreak. At the time of writing there is only 1 active case of COVID-19 in the city.

· There have been no infections in the Group's worldwide workforce.

· In response to the outbreak, our facility was closed for the two weeks immediately following the Chinese New Year holidays but reopened on 17 February albeit at reduced capacity due to a lack of workers. Capacity has gradually recovered since.

· The rate of product supply from our facility and our OEM manufacturers has now returned to normal.

· Our fulfilment operations in the markets in which we sell continue to operate at normal capacity levels thanks to the contingency plans we put in place at an early stage, learning from our experience in China. We are also working with some of our customers to ensure their products can continue to be distributed to end-users in the event that their own distribution network is disrupted by government controls.

Demand impact

· The coronavirus has not adversely impacted sales of the Group's products to date. Profit is expected to be in line with budget in Q1 2020 despite supply disruption thanks to proactive cost control.

· However, the increasing constraints being placed on free movement by governments to contain the spread of the virus will have an inevitable adverse impact on near-term demand across our industry.

· It is impossible to predict the extent of the impact but, like most other businesses, we expect it to be significant.

· We have good financial flexibility to respond to this uncertainty and we are already taking action to improve it further. This is explored in more detail below.

Guidance & dividends

The Board considers it prudent to retain maximum financial flexibility and therefore will suspend any dividend payments until the impact of the virus is better understood.

In these uncertain and unprecedented circumstances, the Board cannot give any profit guidance for 2020 at present but will do so as soon as it can be reasonably assessed.

Financial flexibility

· The Group has £50m of committed borrowing facilities provided by a long-standing relationship bank that mature on 31 December 2021:

o £30m revolving credit facility

o £20m invoice financing facility

· At 31 December 2019, the Group had drawn £26m against these lines, leaving £24m undrawn.

· The position and limit of the two main financial covenants that apply to these facilities are as follows:

o Net debt : Adjusted LTM EBITDA of less than 2.5x:

§ At 31 December 2019: 1.06x with EBITDA headroom of £14.9m

o Adjusted LTM EBITDA : Adjusted Net Finance Expense of less than 4.0x:

§ At 31 December 2019: 11.77x with EBITDA headroom of £17.1m

o Both tested every calendar quarter

· The Group has either enacted or has planned in detail the following steps to preserve cash and reduce cost:

o Suspension of dividends

o Cancellation of bonus payments

o Temporary pay cuts

o Reducing production headcount in China

o Furloughing sales, administration and distribution headcount in the rest of the Group

o Cancellation of all discretionary spend including capex

· Through these measures, the Group expects to be able to reduce its fixed cost spend (i.e. minimum spend with no sales or purchase activity) from £5.4m to £3.5m per month.

· The Group has in the recent past accessed up to £20m of additional funding, all of which it obtained when the Group's leverage was considerably higher than it is today. These facilities have been progressively repaid over the last two years by the Group's healthy free cash flow. The Group expects to be able to call on these sources again in extremis.

John Hornby, Chief Executive Officer, said:

"We enter this period of unprecedented uncertainty with our highest profitability, lowest leverage and with significant liquidity headroom. We have a comprehensive plan to minimise the disruptive impact of the coronavirus on our business. The plan ensures that we retain maximum flexibility to respond to a range of possible short-term outcomes to maximise long-term value. I believe our business model, healthy balance sheet and good financial performance provide a strong starting point. The Group has already proven its ability to withstand challenges and I have the utmost confidence it will do so again."

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Business summary

Luceco is a manufacturer and distributor of high quality and innovative wiring accessories, LED lighting and

portable power products for a global customer base.

The Group supplies trade distributors, retailers, wholesalers and project developers with a wide range of

products which broadly fall into the following market recognised brands:

· British General ("BG"): wiring accessories (including switches, sockets), circuit protection and cable

management products;

· Luceco and Kingfisher Lighting: energy efficient LED lighting products and associated accessories;

· Masterplug: cable reels, extension leads, surge protection, timers and adaptor products; and

· Ross: television wall mounts, audio visual accessories and other items.

Luceco's long-established BG brand commands a loyal following amongst professional electrical contractors

in both the UK and overseas. It is synonymous with quality, safety, innovation and value for money. The

production of BG wiring accessories is the main focus of the Group's Chinese manufacturing facility, allowing

it to control product quality, cost and availability.

The Luceco and Kingfisher LED lighting brands combine to present a comprehensive range of indoor and

outdoor LED lighting solutions. The range focuses largely on professionally installed products with an

emphasis on performance and quality. The Group is able to support these products by offering customers

access to its in-house installation design team.

Masterplug is the market leading brand in the UK Portable Power category. It is sold largely to consumers

through retail distribution and online. Its products are offered in a wide range of global electrical standards

and they are sold in every territory in which the Group operates.

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 has no obligation to update these forward-looking statements. Nothing in this announcement should be construed as a profit forecast.