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Luceco switches on in second half

The LED specialist has turned its fortunes around after a tough 12 months
April 9, 2019

There is light at the end of the tunnel for Luceco (LUCE). After botching its inventory valuations in 2017 and issuing three subsequent profit warnings, the specialist in LED lighting, power and wiring accessories restored profitability in its second half.

IC TIP: Hold at 81p

Price increases were imposed across the entire Luceco customer base to help revive margins, with apparent success – the gross margin rose to 30.3 per cent from 28.9 per cent. Improvements at the Chinese factory, favourable movements in currency and commodity rates and closure of its US operation all contributed towards restoring Luceco to profitability.

Better working capital management helped to reduce Luceco’s net debt from £37.2m to £32.2m. Cash generation improved through the period, while a renewed focus on financial discipline was reflected in a substantial reduction in inventory levels and a fall in stock days from 135 to 112 days. The group has also rejigged its capital structure and banking facilities, adopting a more conservative policy towards leverage. Longer banking facilities, which now continue until 2021, carry more traditional bank lending and less invoice financing.  

Analysts at Numis forecast full-year 2019 pre-tax profits of £12.2m and EPS of 5.8p, rising to £14.9m and 7.2p in 2020.

LUCECO (LUCE)   
ORD PRICE:81pMARKET VALUE:£130m
TOUCH:80.5-82p12-MONTH HIGH:87pLOW: 32p
DIVIDEND YIELD:0.7%PE RATIO:90
NET ASSET VALUE:26p*NET DEBT:78%
Year to 31 DecTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
2014825.53.2nil
20151038.34.2nil
20161349.14.60.3
201716812.36.20.8
20181643.00.90.6
% change-2-76-85-25
Ex-div:2 May   
Payment:31 May   
*Includes intangible assets of £23.3m, or 15p a share