29 September 2023

Likewise Group plc

("Likewise", the "Company" or the "Group")

Interim results for the six months ended 30 June 2023

Further positive sales progress and well on track for 2023 and beyond

Likewise Group plc (AIM:LIKE), the fast growing UK floor coverings distributor, is pleased to announce its unaudited interim results for the six months ended 30 June 2023 (the "Period" or "H1 23") and a continuation of positive sales growth, notwithstanding market conditions which provide well publicised challenges. 

Summary highlights

·      Total sales revenue increased by 17.3% from £56.8 million to £66.6 million

·      Continued growth in Likewise Branded sales of 23.3%

·      Adjusted EBITDA¹ of £3.1 million (H1 2022: £3.6 million)

·      Adjusted underlying profit from operations of £1.2 million (H1 2022: £2.0 million)

·      Adjusted profit before tax² of £0.7 million, principally impacted as expected by the accelerated investment in the business (H1 2022: £1.9 million)

·      Positive cash generation from Operating Activities of £1.68 million, allowing further investment in property, plant and equipment

·      Interim dividend of 0.1p per share

·      Increased capacity of distribution network to 15,000,000 cu. ft.

·    Continuing investment in point of sale  

·    On target to meet market expectations for FY23

¹ Adjusted EBITDA is defined as profit before finance costs, tax, depreciation, amortisation, separately disclosed items and share based payments.

² Adjusted profit before tax is defined as profit before amortisation, separately disclosed items and share based payments.

H1 23 highlights

Group Revenue in H1 23 increased by 17.3% from £56.8 million to £66.6 million. Whilst profitability reduced in the short term this is principally due to investing in the future growth.

The strong increases in Group Revenue over the past four years demonstrates an exponential gain in Market Share and the ongoing enlargement of Logistics and Sales Infrastructure will facilitate the continuation of Market Share progress.

The Balance Sheet continues to be strong with Net Assets of £38.9 million including four Freehold Properties valued at £22.3 million and net debt of £2.1 million.

To demonstrate the progress the Group has made in the last three years the Board is proposing its maiden Interim Dividend of 0.1 pence per Ordinary Share. The dividend will be paid on 17 November 2023 to shareholders on the register at the close of business on 13 October 2023, the ex-dividend date being 12 October 2023.

Shareholders can also take advantage of the Dividend Reinvestment Plan ("DRIP") by registering their intentions with the Company's registrar by 27 October 2023.

Current trading and outlook

With H2 23 starting well the Group is well on target to meet market expectations for the financial year ending 31 December 2023 ("FY23") and more importantly is now ahead of the Group Revenue milestones to achieve its medium term aspirations. 

Further testimony of the Group's progress is that August was a record month for Sales Revenue which provides confidence entering the traditionally busy Autumn period. 

The Group is beginning to benefit from operational gearing in H2 this year which will contribute towards continued investment in order to achieve short and medium objectives. 

The significant investments made in the last three years will allow the Group to achieve its short term objectives of Group Revenue in excess of £200 million and with that initial target in sight the Group can now progress to further objectives in Sales with the corresponding Return on Sales and Investment. 

Operations

In conjunction with Suppliers and Customers, the Group continues to invest in a significant amount of Point of Sale which is increasing market presence and expanding sales in all key product types; Carpet, Residential Vinyl, Laminate, Luxury Vinyl Tile, Artificial Grass with both Residential and Commercial categories performing strongly. 

Valley Wholesale Carpets Limited ("Valley") continues to be an important contributor to Profitability and Positive Operational Cash Flow. Following development in South Wales, Valley is now poised to expand its operations to the South West of England and furthermore will extend its product offering into certain Hard Flooring. The further development of Valley can be achieved through the infrastructure already established. 

Along with normal business development, the Group has accelerated its logistics capabilities. The New High Bay Distribution Centre in Glasgow is now operational and the Group is in the process of significantly increasing the cutting capacity in Birmingham and Derby, with additional opportunities to now fully utilise the previously dormant Distribution Centre in Newport. 

Likewise has now established a sophisticated Logistics Network from its Distribution Centres in Glasgow, Newcastle, Leeds, Manchester, Birmingham, Newbury, Sudbury and London.  Valley distributes significant volume from three Distribution Centres in Erith London, Derby and Newport. The Group will continue to increase Market Share and expand its Geographical reach into 2024. 

The Group is currently using less than 60% of its total processing capacity through its established Logistics Operations and this headroom could be further increased with relatively small investment and Capital Expenditure. 

People

Following five successful years implementing the financial infrastructure, reporting procedures and supporting our successful listing on AIM, Roy Povey has chosen to step down from his role as Chief Financial Officer for personal reasons. Roy will continue to support the business until his proposed exit in Spring 2024. Roy will be replaced in the immediate term by a combination of internal promotions for Ben Ashforth to Head of Financial Accounting and Reporting with Ian Roberts and David Fullard who will be responsible for the Operational Finance team. The Board wishes Roy well for his future and thanks him for his significant contribution to the Group's development.

Undoubtedly the most pleasing aspect is that we have recently been able to make announcements whereby individuals who are "learning their trade" have been promoted into senior and middle management positions across our various activities of Logistics, IT, Sales and Finance. As the Group continues to expand it allows hardworking, diligent people the opportunity to fulfil their career aspirations with Likewise. 

It is really encouraging that our management across the country are developing their skills in all aspects of the business, whilst in most cases being still relatively young and have many years ahead of them in their business career. Additionally there are a number of people who have joined the Group over the last few years who are already demonstrating skills and commitment with the likelihood of being management of the future. 

The Board would like to thank all Suppliers, Customers, Management and Employees for their support and contribution to the ongoing development of Likewise. 

The Group has been able to establish a meaningful Flooring Distribution business in challenging markets which must provide confidence that the Management Team established along with all employees can accelerate this growth as the economy and consumer spending improves. 

Tony Brewer, Chief Executive of Likewise Group plc, said:

"The Group continues to make significant progress and it is brilliant to see our people being given the opportunity to progress their careers and make an increasingly important contribution to the Group's future.

"We have so many opportunities before us as we continue to enlarge the Group's Infrastructure which will create additional Sales and increased Profitability. With the original Targets before us, the Group can now focus on creating a much larger Business than previously anticipated."

For further information, please contact:

CAUTIONARY STATEMENT

Certain statements included or incorporated by reference within this announcement may constitute "forward-looking statements" in respect of the Group's operations, performance, prospects and/or financial condition. Forward-looking statements are sometimes, but not always, identified by their use of a date in the future or such words and words of similar meaning as "anticipates", "aims", "due", "could", "may", "will", "should", "expects", "believes", "intends", "plans", "potential", "targets", "goal" or "estimates". By their nature, forward-looking statements involve a number of risks, uncertainties and assumptions and actual results or events may differ materially from those expressed or implied by those statements. Accordingly, no assurance can be given that any particular expectation will be met and reliance should not be placed on any forward-looking statement. Additionally, forward-looking statements regarding past trends or activities should not be taken as a representation that such trends or activities will continue in the future. No responsibility or obligation is accepted to update or revise any forward-looking statement resulting from new information, future events or otherwise. Nothing in this announcement should be construed as a profit forecast. This announcement does not constitute or form part of any offer or invitation to sell, or any solicitation of any offer to purchase any shares or other securities in the Group, nor shall it or any part of it or the fact of its distribution form the basis of, or be relied on in connection with, any contract or commitment or investment decisions relating thereto, nor does it constitute a recommendation regarding the shares or other securities of the Group. Past performance cannot be relied upon as a guide to future performance and persons needing advice should consult an independent financial adviser. Statements in this announcement reflect the knowledge and information available at the time of its preparation.

CHIEF FINANCIAL OFFICER'S REPORT

* The figures initially presented in the interim accounts to 30 June 2022 included consolidation of Valley's results for the full 6 month period 1 January to 30 June 2022, and therefore included 13 days of pre-acquisition trade as the entity did not prepare daily management accounts and therefore the pre-acquisition trade was therefore not known. It was subsequently agreed with the Group's auditors to project the pre-acquisition trade based on January's full month results and to reduce revenue and cost of sales accordingly. In addition, the H1 2022 revenue figure previously disclosed also incorrectly included £582,192 of inter-group sales due to an error in a supporting schedule, but was identified and subsequently corrected in the annual financial statements for the year ended 31 December 2022. Please see note 19 for more information on this restatement of comparative information.

** Non?underlying values are exceptional items, which include share based payment transactions, acquisition costs, amortisation of acquisition intangibles and strategic project costs. Adjusted results are non?GAAP metrics used by management and are not an IFRS disclosure. Details of these charges can be seen in note 5 in the accounts below.

Revenue and Margin

In the six months to June 2023, Group revenue was £66.6 million, (H1- 2022: £56.6 million).

This represents a year on year increase of 17.3%.

Reflecting the continued investment in the group and the Likewise brand, the organic growth in the six months to June 2023 is 22.3%.

Gross profit for the period increased by 13% from £17.5 million to £19.8 million.

With the opening of the new facility in Glasgow and the distribution capacity now established at 15 million cubic feet, the group has started to see improvements in its operational gearing.

In the six months to June 2023, distribution costs as a percentage of sales were 13.8%, an improvement of more than one percentage point over the 14.9% in the corresponding period in 2022.

Underlying profit before tax in the period to June 2023 was £0.7 million compared to £1.91 million for the same period in 2022.

Financial position

Net assets at 30 June 2023 were £38.9 million compared to £39.1 million, as presented in the full year financial statements to 31 December 2022.

The group balance sheet remains strong and with debt levels relatively low is well placed to support the business through the next phase of its development.

The closing cash position of £4.5 million was a reduction of -£1.4 million from the closing balance of £5.9 million as at 31 December 2022.

The positive operating cash generation in the period allowed the group to continue with investment in property, plant and equipment of £2.9 million and support the increased levels of working capital required, £0.8 million.

There was a small receipt of asset funding in the six months to June 2023, £0.3 million and the group will continue to consider appropriate forms of funding to support future growth.

Consolidated statement of profit or loss and other comprehensive income for the six months ended 30 June

Consolidated statement of financial position as at 30 June

Consolidated statement of changes in equity for the period ended 30 June

Consolidated statement of cash flows for the period ended 30 June

Notes to the consolidated financial statements for the period ended 30 June 2023

1.    General information

The Company is a public company limited by shares, registered in England and Wales and listed for trading on the Alternative Investment Market operated by the London Stock Exchange Plc (AIM). The registered company number is 08010067 and the address of the registered office is Unit 4 Radial Park, Radial Way, Birmingham Business Park, Solihull, Birmingham, United Kingdom, B37 7WN.

The principal activity of the Group is the wholesale distribution of floorcoverings and associated products.

2.    Accounting policies

Basis of preparation

The condensed and consolidated interim financial statements for the period from 1 January 2023 to 30 June 2023 have been prepared in accordance with International Accounting Standards ("IAS") 34 Interim Financial Reporting as adopted by the UK and on the going concern basis. They are in accordance with the accounting policies set out in the statutory accounts for the year ended 31 December 2022 and those expected to be applied for the year ended 31 December 2023 unless otherwise stated below.

These interim financial statements do not include all of the information required in annual financial statements in accordance with UK adopted International Accounting Standards and should be read in conjunction with the consolidated financial statements for the year ended 31 December 2022.

The comparatives shown are for the period 1 January 2022 to 30 June 2022, and 31 December 2022 and do not constitute statutory accounts, as defined in section 435 of the Companies Act 2006, but are based on the statutory financial statements for the year ended 31 December 2022.

A copy of the Group's statutory accounts for the year ended 31 December 2022 has been delivered to the Registrar of Companies and the accounts are available to download from the Company website at www.likewiseplc.com.

The financial information is presented in pounds sterling, which is the functional currency of the entity and rounded to the nearest £. The financial statements are prepared on the historical cost basis unless otherwise specified within these accounting policies.

Going concern

Given the uncertainty in the wider economic climate and the subsequent impact this has on discretionary household spend, the Group continue to monitor the impact of the high inflationary environment. Whilst the Group has naturally faced increased costs, we have continued to work with our suppliers and ensured where possible we protect our customers from widespread price increases.

As noted in the Chief Executive's statement, the trading performance of the business remains positive and as such from review of the Group's projections, the Board have reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future and thus continue to adopt the going concern basis in preparing these interim financial statements.

These projections include the cash outflow required to fulfil the contingent acquisition consideration linked to the acquisitions of Valley Wholesale Carpets and Delta Carpets in the prior year. Whilst not expected, the Board also consider that should there be any deviation from these projections there are various mitigating factors that could be taken in order to provide the cash required to fulfil these obligations as they fall due. These include, but are not limited to increasing the Group's invoice financing facilities or other borrowing arrangements, reduction in capital expenditure or the disposal of freehold property.

Impact of new international reporting standards

There are no accounting pronouncements which have become effective from 1 January 2023 that have a significant impact on the Group's interim condensed consolidated financial statements.

Estimates

The preparation of the interim financial information requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.

In preparing this condensed interim financial information, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those applied to consolidated financial statements for the year ended 31 December 2022. These are impairment of trade receivables, accounting for defined benefit pension scheme, inventory valuation and valuation of land and buildings.

3.    Segmental reporting

For the purposes of segmental reporting, the Group's Chief Operating Decision Maker (CODM) is considered to be the Executive Board of Directors. The Board has not identified any separate operating segments within the business. The Board reviews revenue and expenses for the business as a whole and makes decisions about resources and assesses performance based on this information.

Revenue is derived from continuing operations and arises entirely through the wholesale of goods. Segmental analysis is therefore not presented.

The Group is not reliant on any one customer and no customer exceeds 10% of total annual turnover.

The Group generates revenue from both the UK and overseas as detailed below:

Seasonal fluctuations

The overall demand for the wholesale of goods has previously been higher in the third and fourth quarters of the year. In the previous six month period to 30 June 2022 revenue equated to 45.9% of the annual revenue generated.

4.    Other operating income

5.    Operating profit

Operating profit is stated after charging:

6.    Taxation on ordinary activities

Tax is calculated at 23.5% for the six months ended 30 June 2023 representing the best estimate of the average annual effective tax rate expected to apply for the full year. No income tax is expected in the period given the losses previously incurred by the Group.

The Group has tax losses available to be carried forward. Due to uncertainty around timing of the Group's projects, management have not considered it appropriate to recognise all losses as an asset in the financial statements. Tax losses of £11,539,175 were available for offset against future taxable profits at 31 December 2022. A deferred tax asset of £1,577,985 was not recognised at 31 December 2022 in relation to these losses.

7.    Earnings per share

Basic profit per share is based on the profit after tax for the period and the weighted average number of shares in issue during each period.

8.    Dividends

Dividends were declared for the period to 30th June 2023 totalling £Nil (2022 - £487,590).

9.    Intangible assets

The Group tests goodwill annually for impairment, or more frequently if there are any indications that goodwill might be impaired.

The Directors have considered the impact of the current economic uncertainty on the value of the goodwill but do not consider any impairment required as at 30 June 2023 (31 December 2022 - £Nil).  

10.  Other intangible assets

11.  Property, plant and equipment

12.  Loans and borrowings

The directors consider that the carrying amount of the invoice discounting facility and bank loan approximates their fair value.

The invoice discounting facility is secured against the related trade debtor balances and by a floating charge over the assets of the Group. The invoice discounting facility is denominated in Sterling.

The invoice discounting facility is held for Likewise Floors Limited and has a fixed service charge of £18,000 per annum.

During 2018 the Parent Company obtained a bank loan of £2,280,000. Repayments commenced on 5th August 2018 and were due to continue until 5th January 2033. The loan is secured by a fixed and floating charge over the Group's assets. The loan carries interest on a floating rate basis with interest at Bank of England rate plus a margin of 2.95%. A twelve month capital repayment holiday was granted effective April 2020, with interest payments made throughout the period to April 2021 when capital repayments recommenced.

The loan was refinanced after the period end. Further details are provided in note 20.

The loan is at a floating interest rate and exposes the Group to fair value interest rate risk.

13.  Financial instruments

The fair value hierarchy groups financial assets and liabilities into three levels based on the significance of inputs used in measuring the fair value of the financial assets and liabilities.

The fair value hierarchy has the following levels:

- Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;

- Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly

- Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

The only financial instruments the Group holds which are measured at fair value through the Income Statement (as level 2 above) are forward currency contracts. All other financial assets and liabilities are held at amortised cost.

The tables below set out the Group's accounting classification of each class of its financial assets and liabilities.

All of the above financial assets' carrying values are approximate to their fair values, as at each reporting date disclosed.

All of the above financial liabilities' carrying values are considered by management to approximate to their fair values, as at each reporting date disclosed.

14.  Provisions

All provisions are considered to be due within one year.

15.  Share Capital

The Company has one class of ordinary share which carry no right to fixed income.

On 2 May 2023, the Company allotted 22,500 new £0.01 shares for consideration of £0.10 per share, totalling £2,250. These shares were issued under the Company's SAYE scheme.

16.  Share-based payments

Equity settled share option plan

The Group has a number of share options plans including a Savings-Related Share Option Plan ("SAYE") for all employees of the Group. In accordance with the terms of the plan, as approved by shareholders, employees of the Group may be granted options to purchase ordinary shares. There are no performance criteria for the SAYE and options are issued to participants in accordance with HMRC rules. Vesting is conditional on continuity of service.

As at 31 December 2022, 8,140,830 share options remained active. During the current period 4,462,181 new options were issued at a weighted average option price of £0.17 per share and 1,873,707 options lapsed on employees leaving the Group. During the current period, 22,500 options were exercised as detailed in note 15. The average remaining contractual life of the remaining 10,706,804 options is approximately 2.5 years.

In addition, as at 31 December 2022, 11,350,000 share options remained active which were issued under Enterprise Management Incentives (EMIs). During the current period 150,000 options lapsed on employees leaving the Group. The remaining contractual life of these options is approximately 1.5 years.

In addition, as at 31 December 2022, 4,150,000 share options remained active which were issued under a Company Share Option Plan ("CSOP"). During the current period 200,000 options lapsed on employees leaving the Group. The remaining contractual life of these options is approximately 3 years.

Share options are valued using the Black-Scholes model. The inputs to the model are the option price and share price at date of grant, expected volatility (20%), expected dividend rate (0%) and risk free rate of return (4% - 5.25%). The model has been adjusted for expected behavioural considerations.

The cost of options is amortised to the Statement of Comprehensive Income over the service life of the option resulting in a charge of £114,955 for the period.

A deferred tax asset has not been recognised in relation to the charge for share based payments.

17.  Retirement benefit plans

Defined benefit scheme

William Armes Limited, a subsidiary of the Group since 9 January 2018, operated a pension scheme providing benefits based on final pensionable pay. The Scheme is closed to new members and is closed to future accrual. For pensions earned after 5 April 1997 and for Guaranteed Minimum Pensions earned between 6 April 1998 and 5 April 1997, increases in payment will be in line with CPI rather than RPI. Revaluations of pensions in deferment are linked to RPI. The scheme has been transferred to Likewise Floors Limited as part of the transfer of trade and assets in December 2021.

The assets of the Scheme are held separately from those of the Group in trustee-administered funds. The level of contributions is determined by a qualified actuary on the basis of triennial valuations. The latest full valuation was completed by an independent actuary on 28 March 2022.

The latest set of workings and assumptions can be found in the full Likewise Group Plc financial statements to 31 December 2022. At 31 December 2022, there was no recognition on the statement of financial position as the pension scheme assets equalled the defined benefit obligation. An updated valuation could not be obtained at 30 June 2023 and so no further disclosure has been made in this set of interim financial statements.

18.  Related party transactions

Key management personnel remuneration is disclosed as follows:

Included in the figures disclosed for the period ended 30 June 2022 is the bonus paid in respect of the successful acquisition of Valley Wholesale Carpets (2004) Limited, as set out in the acquisition document.

19.  Restatement of comparative

The Group acquired Valley Wholesale Carpets Limited as a subsidiary entity on 14 January 2022. The figures initially presented in the interim accounts to 30 June 2022 included consolidation of Valley's results for the full 6 month period 1 January to 30 June 2022, and therefore included 13 days' of pre-acquisition trade, as the entity did not prepare daily management accounts and the pre-acquisition trade was therefore not known. It was later agreed with the Group's auditors to project the pre-acquisition trade based on January's full month results, and to reduce income and cost of sales accordingly. The adjustment of £1,013,349 was made in the financial statements for the year ended 31 December 2022, and has therefore also been made to the comparatives in these interim financial statements to reflect this.

In addition, the H1 2022 revenue and cost of sales figures previously disclosed incorrectly included £582,192 of inter-group sales/purchases due to a formula error in a supporting schedule. The was not identified prior to issuance of the 2022 interim results but was identified and corrected in the annual financial statements for the year ended 31 December 2022, and as such these were not misstated as a result of this error. Revenue and cost of sales have been reduced by this amount to correct the results for the comparative period.

20.  Post balance sheet events

On 31 July 2023, the Group obtained a bank loan of £2,495,000 to refinance its existing borrowing. On  2 August 2023, the existing bank loan, and all outstanding interest accrued to this date, was repaid in full. Repayments of the new loan commenced on 31 August 2023 and will continue until 30 June 2038. This loan is secured by a fixed and floating charge over the Group's assets. The loan carries interest on a floating rate basis with interest at Bank of England base rate plus a margin of 2.35%.