Lighting provider Luceco (LUCE) is an optimistic mood as it reports full year results. ‘We currently have a strong order book and revenue growth is running in line with expectations,’ says chief executive officer (CEO) John Hornby.
The more important point for investors is contained in Hornby’s commentary which we’ve marked in bold:
‘We are confident of reporting adjusted operating profit for 2019 comfortably ahead of current market expectations.’
Before the full year results analysts at Numis Securities had been anticipating £11m of pre-tax profit for 2019, having raised their forecast from £10m in January following a positive trading update. The broker now expects pre-tax profit of £12.2m.
Shares in the company have rallied more than 5% in early trade, now changing hands for 80.1p and valuing the business around £130m.
PAST AND FUTURE
Luceco started out more than a decade ago making wiring components and power leads that are mainly sold to consumers and construction customers through a network of trade and retail arrangements.
It has since grown an important LED lighting business from scratch that is now showing signs of profitable growth.
But in its short life on the UK stock market - it floated in October 2016 - Luceco has earned a patchy track record.
End market demand, raw material price increases and, worst of all, a disastrous control of stock and its value, led to a hefty profit warning in December 2017 that triggered a share price crash from 232.5p to just 36p last summer.
PROFIT SCARS
‘We have made considerable progress addressing the issues that we faced at the start of the year and ended 2018 in a much stronger position, both operationally and financially,’ says Hornby.
Better competitive position, internal controls and processes, and gross margins are all promising signs. Cutting the £32.2m of net debt is big objective for Luceco this year although at roughly two times earnings before interest, tax, depreciation and amortisation (EBITDA), it looks comfortably under control.
‘This gives us a sound platform for future profitable growth,’ concludes Hornby, but investors must decide for themselves after such an accident-prone past.
