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Luceco looks to EV charger market

Diversification into a new market looks like a good move, after a torrid 12 months for the shares
September 6, 2022
  • Destocking causing issues
  • Two acquisitions in the half

Luceco (LUCE) is both a beneficiary and a victim of the pandemic. Booming home improvement demand boosted sales (and the share price) during lockdown. But now the wiring and LED lighting supplier faces a post-pandemic drop in demand for DIY products and is dealing with the destocking of supply chains – management expects this “significant but temporary headwind” to run until early next year.  

Revenue for the half came in at 29 per cent above pre-pandemic, helped by average selling prices being 13.5 per cent higher than in the same period in 2019. But the retail revenue (down 13 per cent to £29mn), hybrid revenue (down 35 per cent to £18mn), and professional wholesale revenue (down 21 per cent to £25mn) sales channels all tumbled heavily against 2021. Only professional projects (up by a fifth to £17mn) posted an uplift, with Covid-paused LED installation projects getting the green light from customers.

A key thing to watch is Luceco’s move into the electric vehicle (EV) charger market. It acquired Sync EV, which supplies charge points to the UK residential market, in March and this has around a 2 per cent market share in a growing sector. Luceco said it has the potential “to gain a material share” of the market.

Peel Hunt analysts cut their target price from 185p to 125p. Luceco’s shares trade at six times the broker’s 2023 earnings forecast, far below the average five-year forward price to earnings ratio of 13 times. On the one hand, the valuation doesn't look too demanding. On the other, despite a results day surge, the shares have a very long way to climb to recover to recent heights. We move our recommendation downwards for now. Hold.

Last IC View: Buy, 439p, 7 Sep 2021

LUCECO (LUCE)    
ORD PRICE:92pMARKET VALUE:£148mn
TOUCH:91-95p12-MONTH HIGH:488pLOW: 74p
DIVIDEND YIELD:7.7%PE RATIO:8
NET ASSET VALUE:52p*NET DEBT:64%
Half-year to 30 JunTurnover (£mn)Pre-tax profit (£mn)Earnings per share (p)Dividend per share (p)
202110816.68.702.60
20221064.602.701.60
% change-2-72-69-38
Ex-div:15 Sep   
Payment:21 Oct   
*Includes intangible assets of £41.4mn, or 26p a share