Likewise Group plc (LON:LIKE), the fast growing UK floor coverings distributor, has announced its unaudited interim results for the six months ended 30 June 2024 and a continued increase in sales, notwithstanding a prolonged period of challenging market conditions.
Summary highlights
· Total Sales revenue increased by 6.2% to £70.7m (H1 2023: £66.6m)
· Continued growth in Likewise Floors sales of 16.8%
· Gross margin increase of 1.1% to 31.1% in H1 2024 (H1 2023: 30.0%)
· Underlying EBITDA1 of £3.63m (H1 2023: £3.11m)
· Underlying profit from operations of £1.21m (H1 2023: £1.19m)
· Underlying profit before tax2 of £0.34m (H1 2023: £0.71m) reflecting the rising cost of interest
· Positive cash generation from Operating Activities of £2.88m (H1 2023: £1.68m)
· Deferred consideration of £4.27m paid in settlement of all outstanding acquisition obligations
· Interim Dividend of 0.125 pence per share to be paid on 15 November 2024 – a 25% increase on H1 2023 (0.1p per share)
1 Underlying EBITDA is defined as profit before finance costs, tax, depreciation, amortisation, separately disclosed items and share based payments.
2 Underlying profit before tax is defined as profit before amortisation, separately disclosed items and share based payments.
H1 2024 highlights
Likewise is pleased to announce further positive progress towards its medium term objectives during the first six months of 2024.
Despite challenging market conditions and widely publicised unprecedented events throughout all sectors of the UK flooring industry, Likewise increased total sales revenue by 6.2% with the organic growth through Likewise Floors specifically of 16.8% during H1 2024 compared to the corresponding period last year.
The Group continues to invest in the logistics infrastructure plus extensive sales and marketing initiatives including the recruitment of 14 additional Sales Executives in the last twelve months taking the total number to 94.
Notwithstanding the increased investment, particularly in the various Sales Teams, Underlying Operating Profit of £1.21 million is ahead of the previous year.
Reflecting the confidence in the future of the Group, the Board proposes to pay an Interim Dividend of 0.125 pence per Ordinary Share. The interim dividend will be paid on 15 November 2024
Operations
The Group has developed with support from its key manufacturing partners and has now further strengthened following additional strategic developments with other important European manufacturers. The product launches in Q3, and planned for Q4 2024, are at a significantly higher level than at any time during our short history and gives us every confidence that we will be able to continue to grow the business strongly into 2025.
Valley Wholesale Carpets (“Valley”) makes an important contribution to Group profitability and positive Cash Flow. Valley is currently undertaking a number of initiatives to increase geographical market presence, enlarge product portfolio into various types of resilient flooring, extensive Point of Sale & Display Stands and expanding the core Carpet Range. All of which provides Valley with every opportunity to increase Sales and Profitability through the excess capacity in the established Logistics Network of Erith, Derby and Newport.
In Likewise Floors the Glasgow Distribution Hub established in 2023 is now making a meaningful contribution to the Likewise Logistics Network and capacity will be increased further in the Spring 2025 to help facilitate the growth of Likewise Floors in Scotland in addition to England and Wales.
Likewise North and North East are very well established in both Residential and Commercial Flooring. Their strong relationship with Flooring Retailers and Contractors provides every opportunity with the extensive product launches planned throughout the business in Q3 and Q4 2024 and into 2025.
A&A is now operational from its new Logistics Centre in Manchester and whilst the delay in moving impacted the business in the short term, A&A is now really well positioned to capitalise on the market opportunities before them.
Likewise Midlands now has a particularly strong presence in the Central Region and the Distribution Hub is a key contributor to the Likewise Floors Network.
In Newport South Wales, Likewise Wales formed in January 2024 has now established itself and will further invest in additional Sales Executives to expand their presence. The Group is now exploring planning consent to enlarge the Distribution Centre to become a 4th Hub in Likewise Floors in addition to creating extra capacity for Valley. This will provide the Group with meaningful additional processing capability from 2026. The project will be funded through existing facilities and free cash flow.
Floors by Lewis Abbott has just launched its new Collection of Premium Carpet Products at the recent Harrogate National Flooring Exhibition. Innovative Displays will be placed into Retailers during Q4 2024, enhancing the business during this period but more so providing an exciting future into 2025 and beyond.
Recent management changes at Delta Carpets will allow this semi-national business to fulfil its potential in Residential Flooring.
The businesses of Likewise South, Likewise London and Likewise South East are all making good progress in the South of England but still have huge untapped potential in this very important geographical area.
Likewise Rugs and Matting continues to develop its business in DIY, Garden Centres, Hardware Stores and General Independent Retailers.
Throughout the businesses of Valley, A&A, Delta, H&V, Floors by Lewis Abbott and Likewise Floors, the Group has 94 external Sales Executives visiting Flooring Retailers and Contractors each day to position new Point of Sale continually increasing the Group’s market presence.
The Group is intending to increase its geographical reach into the South West of England with an additional Logistics Centre for both the Valley and Likewise businesses.
The current Logistics Network has capacity to comfortably exceed £200 million Sales Revenue and with limited investment, particularly in the Newport Distribution Hub can progress much further in 2026 and 2027.
The Group has banking relationships with NatWest, Barclays and HSBC and is operating well within the facilities provided. In addition, the Group has £22.0m of freehold property with very limited fixed debt.
The Board would like to thank all Suppliers, Customers, Management, Staff and Shareholders for their support and contribution to the ongoing development of Likewise Group.
Dividend
The Board is pleased to announce a 25% increase in the interim dividend compared to H1 2023, reflecting its commitment to a progressive dividend policy, and its confidence in the long-term strategy of the Group.
The interim dividend of 0.125 pence per Ordinary Share will be paid on 15 November 2024 to shareholders on the register at the close of business on 11 October 2024, the ex-dividend date being 10 October 2024.
Shareholders can also take advantage of the Dividend Reinvestment Plan (“DRIP”) by registering their intentions with the Company’s registrar by 25 October 2024.
Outlook
With extensive Sales and Marketing initiatives throughout its businesses, the Group looks forward to taking advantage of the traditionally busy Autumn trading period in Q4.
However, the quantum of the upturn in Q4 remains very difficult to predict given the unprecedented widespread restructuring in the UK flooring industry.
More importantly the Group is strategically well positioned to maximise the opportunities presented in the medium term and the Board is particularly confident in 2025, 2026 and beyond.
Tony Brewer, Chief Executive of Likewise Group plc, said:
“The Group remains committed in its ongoing investment to ultimately maximise future opportunities, however the immediate return is diluted by difficult market conditions. Therefore, whilst the short term profit aspirations remain challenging, the Board is absolutely confident that the foundations are being prepared for a much larger business to achieve the medium term objectives.
With the longstanding relationship with flooring manufacturers and customers, combined with the flooring product knowledge of the people throughout our business and the Logistics Infrastructure established over the last three years, the Group is in an unrivalled position to take huge advantage of the opportunities before us. Notwithstanding the further progression as consumer demand and markets return to more normal levels.”
