Earnings Call: H2 2024

May 12, 2025

Annual report

Summary

FY2024 revenue rose 7.4% to £150m, with Likewise Floors up 15.5% and gross margin at 30.7%. Sales accelerated into 2025, supporting a stated £200m revenue ambition over the next few years.

Good morning, ladies and gentlemen. Welcome to the Likewise Group plc investor presentation. Throughout today's recorded presentation, investors will be in listen-only mode. Questions are encouraged and can be submitted at any time just using that Q&A tab situated on the right-hand corner of your screen. Simply type in your questions at any time and press send. The company may not be in a position to answer every question it receives during today's meeting. However, the company can review all questions submitted today and will publish those responses where it's appropriate to do so. Before we begin, we'd like to submit the following poll, and I'm sure the company will be most grateful for your participation. It gives me great pleasure to hand over to CEO, Tony Prow. Good morning, Tony. Good morning. Thank you, Mark, and welcome everybody, and thanks for joining this presentation. Just starting with the first slide, we see a pretty impressive truck and trailer there. We've had three of those delivered over the last three months, March, April, and May, helping the capacity of the group, particularly on the night transfers. Over and above that, we have 32 new trucks coming into Likewise during the course of the year. Including those which we had in the second half of last year, 20 new trucks into Valley Wholesale Carpets. So significant investment to improve the fleet and delivery service to our customers. As you know, I'm sure that the business is focused on the product development, sales, marketing, and distribution of flooring to independent retailers and flooring contractors. With the additional site that we acquired in January in Plymouth, we now have 12 distribution and logistics centers, and I'll demonstrate during the course of this presentation where we have additional capacity. We now have 87 key suppliers of general flooring products, which includes, of course, carpet, residential vinyl, laminate, luxury vinyl tile, artificial grass, commercial flooring, adhesives and leveling compounds, and other flooring accessories. Very importantly, 96 executives who are very much focused on our customer needs, as are the rest of the employees within the business, and 144 delivery vehicles offering that next-day service to our customers. We've now increased to 545 staff, and a huge majority of those, of course, are the management, the sales teams, the internal sales, warehouse staff, delivery drivers, many of which have long-standing floor covering experience. We continue to increase our market presence with displays and sampling going into retailers. That culminates in having just over 7,000 customers across the business. Whilst we'll report sales revenue of GBP 150 million for 2024, we are heading towards that original target of getting through GBP 200 million, and we believe that we can now look forward to exceeding that in future years. In terms of the results for 2024, the group's made really strong progress, particularly in the last eight months. But overall, sales revenue for 2024 up 7.4%, in Likewise Floors, a very substantial 15.5%. Whilst we are competitive in the marketplace, no question about that, equally, we are not buying market share, and we see a slight improvement in our gross margin, as you can see, up to 30.7%. The underlying EBITDA, which is a measurement used in some of the financial circles, up to GBP 8.8 million. Profit before tax down slightly, but that reflects the additional investment we have made, particularly in our sales teams, during the course of last year and particularly in H1. Importantly, a positive cash generation of GBP 7.2 million. The overall dividend now has been increased to GBP 0.375, with a final dividend of GBP 0.25 being proposed. As I said, the last eight months particularly, and if we take the four months of 2025, increasing by 10.2%. But taking into account one less working day so far this year, the actual like-for-like increases are a very impressive 11.5%. What is particularly important is that sales revenue now is consistently exceeding GBP 13 million going on GBP 14 million, which is where we see an improved operational gearing and subsequent profitability. In terms of the income statement, given you the key numbers, I think probably one thing to look at is that non-underlying. As the Group through its formative years has been moving out of old sites, restructuring the business, incurring dilapidation costs and other restructuring costs, dual running costs, that is why we have had to use that non-underlying column. But as the business is much more strongly positioned now, I think going forward, the only cost we would expect to see in there is probably the set of costs in the southwest, in Plymouth, and the additional marketing costs that we do to accelerate our market share and growth. On the balance sheet, I think the key numbers to pull out there are we now have, including the benefit of the Plymouth site, GBP 23.5 million of freehold property, with just GBP 2.3 million of debt against that. The cash and cash equivalents reducing year-on-year, but that is wholly to do with the GBP 4.3 million deferred consideration on the acquisitions of Valley and of Delta. Overall, cash generation is positive. I think a very solid balance sheet gives us the foundations to continue to grow the business. The sales line, as you look at that blue line for 2024, very consistent and solid performance from January through to August. But thereafter that, you can see in September, October, November, the business really starting to accelerate with some pretty positive increases, with the final quarter being 10.2% up as against the total year 7.4%. Then you can see clearly, going into 2025, that acceleration continuing with some strong performances. Actually, the growth has accelerated each month. From January, February, March, and April, with April being 14.2% up. So a very strong performance. Obviously, it is not all about the sales, of course, but it is that key volume that then creates that operational gearing and the improved profitability we have seen, which gives us confidence in the market forecast for 2025 being a real step change in the overall performance of the business. I guess this is a pretty impressive slide of our management team. There is a cross-section there and a balance of experience, but also there are some really good young people taking management positions literally in their 20s, 30s, and 40s. Plenty of experience being gathered, but really exciting careers ahead for this team of people. Then I touched on our sales team. There's 25 management who are very much product and customer-focused, the 71 external salespeople literally visiting our customers on a daily basis, positioning new product and point of sale. They're supported by the 50 internal people with a wealth of experience and appreciating very much our customer needs. In terms of the point of sale and market presence, a myriad of displays there you can see, whether it be laminate, engineered wood, various derivatives of luxury vinyl tile, residential vinyl, and of course, various carpet ranges. Important strategic moves that we made in the autumn of last year with two key suppliers. One, Associated Weavers in carpet and Unilin in laminate. We've had very good relationship with these suppliers for many years, not done business within Likewise for a variety of reasons. The timing was right in the autumn to launch product, and we're experiencing a lot of success, even in the formative months on those products. Just literally last week, we've launched to our sales team a product from Karndean. Interestingly, Karndean came to us asking us to distribute this product in conjunction with themselves. So we've just launched the Palio product, and really good feedback from our customers and with the number of display stands we're already getting commitment for. The Lewis Abbott premium carpet products we launched again in Q4 last year, getting some good traction on a number of the products, and that's an exciting part of our future in that premium end of the carpet market. Two other key products here on the left-hand side from a new partner, Kronoswiss, a laminate product, but also excitingly, the engineered wood that we've now launched, and again, good traction to begin with on that product. That's a completely new product category for Likewise. In Valley, historically, Valley relies on sample books and been very successful with it, but we've now put hardware in, particularly in the second half of last year, with lecterns, an eight-bay stand, and just about to be launched the laminate stands to expand the Valley business. In terms of the infrastructure, this is a very important slide in how we've put the business together. So we started in 2018 when we acquired what is now Likewise Matting in Sudbury. Thereafter, as you can see from the dates on that slide, everything else has been achieved since the beginning of 2021 when we moved into the new distribution center in Leeds. We followed that up with Glasgow in the spring of 2023 from small premises just around the corner from the large facility we have now. Newcastle, beginning of 2022. Manchester, we moved in the summer of last year, 2024. Birmingham was operational during 2022. Sidcup, the beginning of 2023, and Newbury, the summer of 2022. Of course, the acquisition of Valley in January 2022 with their three locations. More recently, Plymouth completing our full coverage of the U.K. But I emphasize, there's GBP 23.5 million worth of freehold property there with just GBP 2.3 million of debt, 50% of our capacity, given some of the larger centers that we own. It just gives us a very firm position on our balance sheet, an opportunity to expand the business for the future. This is the network that we now have within Likewise Floors, with the three main hubs being in Birmingham, Leeds, and Glasgow, where carpet, residential vinyl, and artificial grass are stocked and then distributed. Each of those lines represent overnight movement of trucks for then unloading in the early hours of the morning, loaded onto our outgoing delivery trucks, therefore giving our customers a next-day delivery service. Similarly, the network within Valley, where currently, the main cutting is done in Erith in Southeast London, but we're just about to start cutting in Derby as well to give us more capacity within the Valley business. That just really demonstrates the overall network and the geographical coverage that the group has. Just a simple chart just to show where our capacity is. We've just started the second shift within the Glasgow business, literally in April, giving us extra capacity. Leeds, with further capacity, and we've literally just ordered a new cutting machine for the Leeds business. That's a large 5-meter-wide carpet and vinyl cutting machine. In Derby, as I've said, we're about to start cutting there, an opportunity to start one shift and follow with the next second shift as volumes require. Newport, we're just in the process and hope that the later stages of obtaining planning permission to be able to extend that facility. Again, we've ordered the cutting table, and we're soon to order the racking, and that would be planned to be operational realistically in Q2 next year. It's just a simple diagram of the Newport extension. You can see on the left-hand side, the lighter gray is the existing facility, which is 35,000 sq ft, with the top part being the planned extension, and with raised loading bay to give much better material handling. That's a 60% increase in capacity within the Newport facility. Then geographical coverage, I think it's fair to say that Likewise is now pretty well covered across the whole of the U.K. Plymouth literally became operational earlier this morning, to cover the southwest and similarly in Valley, extending out, and we'll just cover those areas just in the mid and the south over the coming months. I just thought I'd bring you back to that sales graph because I think it is so important that, again, you can see through 2024, a good performance, the seasonality quite consistent and nice growth year-on-year, but really accelerating through that September, October, November, and then very much carried forward into the early part of this year with a very strong performance in the first four months, which I'm pleased to say is continuing in May as well. Just summarizing, I think we made significant progress really since 2021 with moving into the Leeds facility, being the real start of Likewise Floors accelerating forward. I think we are benefiting in the last eight months now from all the foundations we have laid over the previous four years. Whilst the sales are accelerating quickly, we have the logistics capacity to cope with that. As I have demonstrated, we have excellent management teams across the country in our various operations. I think it is fair to say really significant support from our suppliers and obviously our customers are extremely important. We believe there are lots of opportunities within the U.K. flooring industry to continue to grow our business. We are not there yet, but we believe that GBP 200 million is well in sight. Certainly, the infrastructure that we have, particularly with the additions of what I have talked about in Glasgow, Derby, and Newport, and notwithstanding the other operations, we can certainly go through GBP 200 million. I think now the board is looking to say, what do we need to do to invest to get through that GBP 250 million and beyond. Thank you. Tony, that is great. Thank you very much indeed for updating investors this morning. Tony, we have had a number of questions from investors, both ahead of today's meeting and during your presentation. Firstly, thank you to everybody for your engagement today. Let us just start off with the first question. Do you think that joining the main market for AIM would increase exposure to institutional investors? Is there any future ambition to do so? There are not any plans to do that. I think the benefit on AIM, of course, with IHT, is particularly helpful. Believe that it is all about, in terms of our rating, in terms of improving the profitability, which we are setting to do, and we believe the objectives before us for this year and the analyst forecasts are deliverable. I think if we can do that, and obviously the signs so far are very good, then our rating will improve subsequently. Great. Thank you. There is a number of questions, both ahead of today's event, during the live presentation around what you are going to do with the free cash flow. Would it be debt reduction, perhaps further share buybacks, dividends, acquisitions? How do you see that shaping out? Okay. We launched a share buyback this morning, committing a quarter of a million GBP. That will unfold over the coming days, weeks, and we will just keep that under review for future share buyback. As we have said, in terms of the investment in Plymouth, where we have acquired the freehold and the fitting out of that is done through our own cash resources. Similarly, the plan is with the Newport extension, and that is within our budgeted cash flow to fund that. At some point, we will make further step changes, I guess, in how we invest in the business and deploy that cash generation. In terms of acquisitions, we can never say never. My phone rang this morning, not with an acquisition, but somebody talking about M&A and what we are planning to do. I think we would consider the right acquisition. If we go back, obviously, we had the original acquisition of William Armes and creating Likewise Matting. Heatseam and factory flooring was a step change for us. We acquired that business in Dewsbury in 2019, and then moving, of course, to the Leeds facility in 2021. Of course, Valley Wholesale Carpets was a massive move for us to establish that. I think it is fair to say, would we pay lots of goodwill to build the group? No, I do not believe we would. I think if we had opportunities for asset-backed acquisitions, we would of course consider that or anything else we felt was of a strategic benefit. Our focus is very much on continuing to grow the business and investing in the sales teams. We have added 18 new sales execs in the last, since the beginning of 2024, so in the last 16 months or so. We continue to consider opportunities to invest in additional people, but not pay huge amounts of goodwill. Great. Thank you, Tony. With the addition of supplying cladding ranges, do you have any other leading flooring brands to be added to the portfolio, such as perhaps Quick-Step or any other brands? Well, interestingly, the Vitality product that we launched in the fourth quarter of last year is from Unilin, who are the manufacturer of Quick-Step. There's not any immediate plans. I think we're doing really well with Vitality, and we'll continue to build on that. There's nothing specific. I think having taken Associated Weavers and Vitality from Unilin and Karndean, that was three key players that for a variety of reasons we weren't previously working with, that we now are. Thank you once again. Obviously, I know you touched on the GBP 200 million of sales target, but how realistic would it be to hit that milestone within the year of 2026? We're being asked. I think a bit early for 2026. But I would say over the next few years, we should be hitting that target. That's great. Thank you. Let's take a question here. Obviously, we've touched on further acquisitions, so let me jump past that one. Given your strong property ownership and low fixed debt, is there scope to unlock value from your property assets to maybe accelerate shareholder returns, do you think? No. We have no plans whatsoever to sell our properties. We would rather add to that rather than sell any. And sale and leaseback, no way. No possibility. Got a question from Mark. Mark, thank you for your question. What does the board view as a key potential threat from LFL growth other than, I guess, the macroeconomy? Well, as I said, we've invested in the business, that we believe we can grow the business organically, if that's what the question's pointing at. Absolutely. We keep putting new product into the marketplace, lots of point of sale. We continue pushing our management and sales teams to put more point of sale into retailers, and that's what will fuel our like-for-like growth. Great. Thank you. Question here around, I guess, expansion in the market. Is your growth outlook weighted more towards expansion and market share from existing regions or perhaps a deeper penetration into newer territories, perhaps like Wales or South Wales? Well, South Wales, we are covering both from Likewise, Delta, and importantly from Valley. The step into the southwest of England, into Devon and Cornwall is actually really starting today, because we were running two-day deliveries from South Wales into the Southwest until today, and now we are running a daily delivery service. So that is stepping up. I think we have pretty much got the U.K. geographically covered. It is that there are areas where we should increase our market share and market position. Tony, that is great. Thank you very much indeed. There are a few other questions that I know we have covered, either in the presentation or perhaps what we could do is I can present those to you post today's meeting. I know you have got a busy schedule of investor presentations, so what I will do, Tony, if I may, just come back to you for a couple of closing comments before I redirect investors to give you their feedback. Thank you. Tony, thank you very much indeed for your time today. If I could please ask investors not to close this session as well. I will now automatically redirect investors to provide you with their feedback in order that you can better understand their views and expectations. Your feedback will only take a couple of moments to submit, but I am sure it will be greatly valued by the company. On behalf of the management team of Likewise Group plc, we would like to thank you for attending today's presentation and wish you all a good rest of your day. Thank you for joining us. This