Shares in lighting group Luceco (LUCE) were marked up following its full-year results announcement, providing some relief for shareholders following events at the tail end of 2017. The share price cratered last December when management uncovered errors in how inventory was being valued and inter-company balances reconciled, leading it to slash the year’s net profit expectations to £13.2m from £16.7m, subsequently again to £11m. The financial controller resigned and restatements had to be made to the prior year comparables, as it dawned that the balance sheet was hiding a multitude of sins.
The overvaluation of inventory effectively masked the margin impact of adverse currency and commodity price movements, which shrank the gross margin to 28.9 per cent in 2017, from 30.3 per cent the year before. Mitigating actions are not expected to deliver improvements until the second half of 2018.
But efforts to make the business less reliant on the UK are showing signs of progress. Revenues in the UK were up 21 per cent, much slower than Europe, the Middle East and the Americas, but significant given the domestic market still accounts for 83 per cent of sales.
Numis lowered its forecasts on signs of weaker UK consumer markets and now expects adjusted pre tax profit of £14m, giving EPS of 7p in 2018 (from £12.8m and 6.5p in 2017).
| LUCECO (LUCE) | ||||
| ORD PRICE: | 72p | MARKET VALUE: | £116m | |
| TOUCH: | 72.2-72.4p | 12-MONTH HIGH: | 268p | LOW: 47p |
| DIVIDEND YIELD: | 1.1% | PE RATIO: | 12 | |
| NET ASSET VALUE: | 24p* | NET DEBT: | 92% | |
| Year to 31 Dec | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2013 | 65.6 | 2.2 | 0.9 | nil |
| 2014 | 82.3 | 5.5 | 3.2 | nil |
| 2015 | 103 | 8.3 | 4.2 | nil |
| 2016 (restated) | 134 | 9.1 | 4.6 | 0.30 |
| 2017 | 168 | 12.3 | 6.2 | 0.80 |
| % change | +25 | +35 | +35 | +167 |
| Ex-div: | na | |||
| Payment: | na | |||
| *includes intangible assets of £23.7m, or 14.7p a share | ||||
