Luceco PLC Annual Report 2016 and Notice of AGM (0212D)

TIDMLUCE

RNS Number : 0212D

Luceco PLC

21 April 2017

21 April 2017

Luceco plc

(the "Company')

Annual Report and Accounts 2016 and Notice of 2017 Annual General Meeting

Following the announcement on 3 April 2017 of its preliminary results for the year ended 31 December 2016, Luceco plc announces that it has today published its Annual Report and Accounts 2016.

The Company also announces that it will hold its Annual General Meeting at 1.00pm on Thursday 25 May 2017 at the offices of Numis Securities Limited, The London Stock Exchange Building, 10 Paternoster Square, London EC4M 7LT.

Copies of the Annual Report and Accounts 2016 and the Notice of the 2017 Annual General Meeting are available to view on the Company's website at http://www.luceco.com/investors. They have also been submitted to the National Storage Mechanism and will shortly be available for inspection at http://www.morningstar.co.uk/uk/nsm.

Copies of those documents, together with a form of proxy for use in connection with the 2017 Annual General Meeting, have been posted or made available to the Company's shareholders.

A condensed set of Luceco plc financial statements and information on important events that have occurred during the year and their impact on the financial statements were included in the Company's preliminary announcement on 3 April 2017. The information contained in the preliminary announcement, together with the information set out below, all of which is extracted from the Annual Report for the year ended 31 December 2016 (the "Annual Report") constitute the requirements of DTR 6.3.5 which are to be communicated via a RIS in full unedited text. This announcement is not a substitute for reading the full Annual Report. Page and note references in the text below refer to page numbers in the Annual Report.

Principal risks and uncertainties

Below are details of the principal risks identified and actions taken to minimise their potential impact extracted from pages 23 to 25 of the Annual Report. This is not an exhaustive list but those the Board believes may have an adverse effect on the Group's cash flow and profitability.

 
 Principal risk           Impact                                                          Mitigation 
-----------------------  --------------------------------------------------------------  -------------------------------------------------------------- 
 Risk 1: Disruption to operations 
------------------------------------------------------------------------------------------------------------------------------------------------------- 
 The Group's key 
  manufacturing            *    The Group's Chinese operation and supply chain could        *    The Board and senior management team are in regular 
  operation is                  be adversely affected if there is any disruption to              liaison with their Chinese counterparts and aware of 
  based in China.               legal, political, economic or social conditions in               any changing dynamics in the country. 
  Any change to                 China. 
  China's current 
  political situation                                                                       *    The Group has an IT strategy and a disaster recovery 
  could impact             *    If the key operational sites went offline for any                plan in place to protect its operations. 
  the Group's ability           reason or period of time, it would have a material 
  to manufacture                adverse effect upon the Group's ability to 
  its products.                 manufacture and bring its products to market,               *    The Chinese factory comprises separate buildings, 
  The Group is                  severely impacting its business, financial position              reducing disruption. 
  reliant on the                and future prospects. 
  UK and Chinese 
  sites remaining                                                                           *    Appropriate precautions are taken in all factories 
  fully operational        *    Loss of sensitive data as a result of an IT security             and warehouses to safeguard against theft and fire. 
  at all times.                 breach could negatively impact the Group's operations 
  The Group is                  and reputation. 
  reliant on its                                                                            *    IT security systems in place, and tested regularly, 
  IT systems to                                                                                  to protect commercial and sensitive data. 
  ensure its operations 
  function efficiently. 
  Any loss of IT                                                                            *    IT technological and security developments are 
  service or compromise                                                                          monitored regularly. 
  of IT security 
  (through a cyber 
  attack) could 
  adversely impact 
  the business. 
-----------------------  --------------------------------------------------------------  -------------------------------------------------------------- 
 Risk 2: Input costs 
------------------------------------------------------------------------------------------------------------------------------------------------------- 
 Raw materials 
 represent a               *    Suppliers may increase product prices as a result of        *    Copper prices are monitored regularly. Where 
 significant                    copper or other commodity price fluctuations,                    fluctuations are severe, the exposure is determined 
 cost to the Group.             reducing profit margins.                                         and customer pricing is considered and adjusted 
 The Group faces                                                                                 accordingly. 
 risks from copper 
 price volatility          *    Profitability will be negatively impacted if the 
 and is reliant                 Group is unable to pass price fluctuations on to its        *    Price fluctuations are passed on to customers as soon 
 on third party                 customers or there is a time lag in achieving a price            as practicable. 
 suppliers for                  increase. 
 some of its products 
 and components.                                                                            *    The Group has long--term relationships, and some 
                           *    Suppliers may not fulfil order requirements or                   exclusive arrangements, with its suppliers who 
                                products may be of poor quality, negatively impacting            reliably fulfil orders to the required standard. 
                                the Group's reputation, financial position and 
                                contractual commitments. 
                                                                                            *    Quality control teams are in place at all key 
                                                                                                 operational locations to ensure quality of supply. 
-----------------------  --------------------------------------------------------------  -------------------------------------------------------------- 
 Risk 3: Loss of market share 
------------------------------------------------------------------------------------------------------------------------------------------------------- 
 The Group could 
  lose market share           *    Any reduction in the Group's revenue or market share       *    The Group invests heavily in R&D to remain at the 
  through the loss                 would have a material adverse effect on the Group's             forefront of capturing and delivering changing 
  of one or more                   future prospects.                                               customer requirements and market trends. 
  of its major customers 
  with whom it does 
  not have long--term         *    LED technology is constantly changing and customer         *    The Group registers its designs with the design and 
  contracts, or                    demand rapidly evolving, giving risk of product                 patent office in the country of the market the 
  if it is unable                  obsolescence.                                                   product is sold in. 
  to maintain its 
  innovative edge, 
  particularly in             *    Any defence or claim against intellectual property         *    The Group has long-standing relationships with many 
  the competitive                  ("IP") rights could be costly to instigate and                  of its customers and works closely with them to meet 
  LED lighting market              pursue.                                                         their requirements. 
  where barriers 
  to entry are low. 
                              *    Infringement of third--party IP would limit the            *    Dedicated customer support teams in all key trading 
                                   Group's product offering and ability to compete.                locations maintaining excellent customer service. 
 
 
                              *    Customers could stop trading with the Group at short 
                                   notice as many agreements are on a rolling annual 
                                   basis. 
-------------------------  --------------------------------------------------------------  ------------------------------------------------------------ 
 Risk 4: Concentration 
------------------------------------------------------------------------------------------------------------------------------------------------------- 
 Approximately 
 86% of the Group's           *    Any economic downturn in the UK economy could             *    Mitigation through innovation and product development 
 revenue is generated              adversely impact the Group's financial position if             as diversification of products enables the Group to 

 from the UK and                   demand for its products reduces and there are                  grow by exploiting market gaps protecting it from any 
 profitability                     limitations on its ability to increase or maintain             market downturn. 
 is directly influenced            its prices. 
 by the UK economic 
 climate.                                                                                    *    The economies and markets of all the Group's 
 The Group has                *    A significant proportion of the Group's trade is with          operations are reviewed regularly by the Board with 
 a large number                    a small number of customers that are not committed to          mitigating action taken. 
 of customers but                  purchasing the Group's products on a long-term basis. 
 there is significant              Customers could cease to purchase from the Group at 
 concentration                     relatively short notice negatively impacting trading      *    Continued international expansion will lessen 
 within the customer               and working capital as there would be a lag in                 reliance on any particular economy or customer. 
 base. This concentration          adjusting manufacturing volumes. 
 presents a risk 
 should one or                                                                               *    The Group has long-standing relationships with its 
 more of the customers                                                                            customers providing a strong competitive barrier. 
 cease purchasing 
 from the Group. 
 Customer agreements                                                                         *    The Group's ability to rapidly embrace new consumer 
 are typically                                                                                    trends and its distribution flexibility make it a 
 on a rolling annual                                                                              valued supplier. 
 basis. 
-------------------------  --------------------------------------------------------------  ------------------------------------------------------------ 
 Risk 5: Financial impact of international operations 
------------------------------------------------------------------------------------------------------------------------------------------------------- 
 With its Chinese 
  operation and               *    Any weakening of Sterling relative to the US Dollar        *    The Group hedges excess CNY net outflows over US 
  FOB sales, the                   and CNY, could adversely affect profit.                         Dollar net inflows. 
  Group is exposed 
  to exchange rate 
  fluctuations of             *    There will be a time lag from the change in exchange       *    Currency fluctuations mitigated by hedging policy; 
  the CNY and US                   rate to any recovery through pricing with a potential           pricing action is undertaken when appropriate. 
  Dollar as a significant          negative impact on profit. 
  proportion of 
  the Group's revenue                                                                         *    Continued international diversification will dilute 
  is invoiced in              *    The UK referendum decision and negotiations may cause           the impact of currency fluctuations. 
  US Dollars and                   further currency volatility, potentially adversely 
  the majority of                  impacting profits. 
  costs are paid 
  in CNY. 
  The UK's referendum 
  decision to leave 
  the EU also presents 
  a risk to the 
  business. In the 
  short term, the 
  Group is managing 
  the associated 
  currency volatility 
  but the longer-term 
  risks of this 
  decision are not 
  yet clear. The 
  Board continues 
  to monitor the 
  position closely. 
-------------------------  --------------------------------------------------------------  ------------------------------------------------------------ 
 Risk 6: Regulatory non-compliance 
------------------------------------------------------------------------------------------------------------------------------------------------------- 
 The risk of regulatory 
 non-compliance               *    Changes in the laws and regulations in the countries      *    The Board monitors the changing landscape of laws and 
 is increasing                     the Group operates in could result in incurring costs          regulations in the jurisdictions in which it 
 as the Group is                   and adversely impact its reputation should it be               operates. 
 expanding rapidly                 found to be non--compliant with any aspect. 
 into new territories, 
 each with its                                                                               *    The Board seeks appropriate advice before setting up 
 own laws and                 *    The Group's third-party supply chain in China may not          operations in new territories. 
 regulations.                      meet the Group's ethical resourcing standards, 
 Keeping up to                     compromising its reputation. 
 date with changing                                                                          *    The Group has long--standing relationships with its 
 laws and regulations                                                                             suppliers and the Executive Directors frequently 
 is also a risk                                                                                   visit their operations. 
 that the Group 
 faces with its 
 current operations. 
-------------------------  --------------------------------------------------------------  ------------------------------------------------------------ 
 Risk 7: Pursuit of the acquisition strategy 
------------------------------------------------------------------------------------------------------------------------------------------------------- 
 The acquisition 
  strategy may incur          *    Expenses may be incurred, whether or not an                *    Costs are tightly controlled and cash flow is 
  substantial expense              acquisition is completed, reducing profitability.               monitored daily. 
  and divert management 
  attention from 
  the day-to-day              *    The cost and integration of an acquisition may reduce      *    The Board closely monitors the strategy and the 
  business.                        profit and increase indebtedness in the short-term.             resources required to deliver it. 
  The ability to 
  pursue such a 
  strategy is dependent       *    Time required in pursuit of an acquisition may divert      *    The Group has an experienced senior management team 
  upon the retention               attention from other business concerns.                         in place to ensure that the day--to--day activities 
  of key personnel                                                                                 of the Group's business are managed effectively. 
  to ensure that 
  there is no disruption 
  to the Group's 
  operations. 
-------------------------  --------------------------------------------------------------  ------------------------------------------------------------ 
 
 

Related party transactions

At 31 December 2016, the Group had the following liabilities owing to EPIC Investments LLP "EPIC"), which holds 24.30% (2015: 48.89%) of the Group's issued share capital:

-- Series A notes 2017 - Eurobond - GBPnil (2015: GBP6,935,726)

-- Loan facility 2016 - GBPnil (2015: GBP3,201,729)

During the year, interest and finance charges accrued on the above liabilities of GBP544,924 (2015: GBP723,787). Interest and capital payments of GBP10,682,379 (2015: GBP1,958,109) were made in the year.

During the year, the Group incurred monitoring and rechargeable expenses of GBP75,000 (2015: GBP100,000) from EPIC Private Equity LLP, adviser to EPIC Investments LLP.

At 31 December 2016, the Company had the following liabilities owing to John Hornby, CEO, who holds 20.77% (2015: 23.07%) of the Company's issued share capital:

-- Shareholder loans of GBP246,832 (2015: GBP2,498,298)

During the year, interest accrued on the above liabilities of GBP179,445 (2015: GBP341,594). Interest and capital payments of GBP2,431,361 (2015: GBP1,992,532) were made in the year.

Shareholder loans due to John Hornby, as detailed above, include GBPnil (2015: GBP1,492,311) due to Mrs P Hornby, John Hornby's wife. Mrs P Hornby holds 1.43% of the Company's issued share capital.

Transactions with key personnel

The compensation of key management personnel, including the Executive Directors, is included in note 4 of the Notes to the Consolidated Financial Statements (on pages 80-81 of the Annual Report).

Statement of Directors' Responsibilities

The Annual Report contains the following statements regarding responsibility for the financial statements in compliance with DTR 4.1.12.

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

We confirm that to the best of our knowledge:

-- The financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole

-- The Strategic Report includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face

We consider the Annual Report and Financial Statements, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Group's position and performance, business model and strategy.

John Hornby, Chief Executive Officer

David Main, Chief Financial Officer

3 April 2017

For further information, please contact

 
Luceco plc                              via MHP Communications 
 John Hornby, Chief Executive Officer    020 3128 8100 
 David Main, Chief Financial Officer 
MHP Communications 
 Tim Rowntree 
 James White 
 Ollie Hoare 
 Rossina Garcia                         020 3128 8100 
Numis Securities 
 Stuart Skinner 
 Oliver Hardy 
 Toby Adcock                            020 7260 1000 
 

Notes to the Editors

About Luceco plc

Luceco is a rapidly growing manufacturer and distributor of high quality and innovative LED lighting products and wiring accessories for a global customer base. The Group supplies a blue chip and diversified customer base of trade distributors, retailers, wholesalers and project developers with a wide range of products which broadly fall into the market recognised brands of Luceco (LED Lighting), British General (Wiring Accessories), Masterplug (Portable Power) and Ross (AV Accessories).

Luceco operates a fully integrated operating model which includes wholly-owned manufacturing and product development facilities in the UK and China that enables the Group to maintain strong control over its cost base and the quality of its products while allowing Luceco to bring products to market quickly and at low cost.

The Group is well positioned for future growth with recent investment made in the expansion of its Chinese manufacturing facility and sales network, both in the UK and internationally, to support the Group's existing and new product ranges.

This information is provided by RNS

The company news service from the London Stock Exchange

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April 21, 2017 09:00 ET (13:00 GMT)