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Luceco looking brighter

The LED lighting specialist saw margins improve in the first half of 2019 as UK performance stabilised
September 9, 2019

After a tumultuous first half of 2018 marred by a UK retail downturn and currency and commodity price challenges, Luceco (LUCE) is hoping the worst is behind it. The LED lighting and portable power product specialist swung to a £7m operating profit during the six months to 30 June, up from a £3.1m loss at the same point last year.

IC TIP: Hold at 81p

A 7.7 percentage point expansion in the adjusted gross margin to 35 per cent has been driven by a shift towards higher-value professional-grade products, manufacturing efficiencies and favourable currency movements. Given the seasonality of business following the retail calendar – where peak trading is in the second half – the group expects further margin improvement ahead.  

Brexit has inevitably reared its head, with professional customers in the UK delaying placing orders. But chief executive John Hornby remains upbeat on the UK’s prospects, pointing to scale and market share benefits “under normal circumstances”. But as the uncertainty persists, the group remains highly exposed to the UK market, where 80 per cent of revenue was derived.

Peel Hunt forecasts adjusted pre-tax profit of £15.2m and EPS of 7.2p for the full year, rising to £17m and 8p in 2020.

LUCECO (LUCE)   
ORD PRICE:81pMARKET VALUE:£129m
TOUCH:80.2-81p12-MONTH HIGH:133pLOW: 32p
DIVIDEND YIELD:1.5%PE RATIO:13
NET ASSET VALUE:26p*NET DEBT:72%**
Half-year to 30 JunTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201875-4-2.7nil
20198352.60.6
% change+10---
Ex-div:19 Sep   
Payment:25 Oct   
*Includes intangible assets of £23.1m, or 14p a share **Includes lease liabilities of £3.1m