BRINGING
POWER TO LIFE
ANNUAL REPORT AND
FINANCIAL STATEMENTS
2022
Reasons
to invest
Find out more
on pages 5 to 7
Delivering on
our strategy
Find out more
on pages 27 to 33
Operating
responsibly
Find out more
on pages 37 to 59
What’s inside
Strategic Report Directors’ Report Financial Statements
1 Our purpose, strategy and culture
2 Highlights
3 At a Glance
4 Review of the Year
5 Three Reasons to Invest
8 Chair’s Statement
10 Chief Executive O cer’s Review
14 Chief Financial O cer’s Review
23 Our Attractive Markets
24 Our Advantaged Business Model
25 Our Business Model in Action
27 Strategy
28 Strategy in Action
34 Key Performance Indicators
37 Environment, Social and Governance
60 Our Stakeholders
64 Principal Risks and Uncertainties
72 Viability Statement
75 Non-fi nancial Information Statement
77 Chair’s Introduction
79 Compliance with the 2018 UK
Corporate Governance Code
80 Board of Directors
83 Corporate Governance Report
90 Nomination Committee Report
93 Audit Committee Report
97 Remuneration Committee Report
127 Other Statutory Disclosures
132 Statement of Directors’
Responsibilities
133 Independent Auditor’s Report
141 Consolidated Income Statement
141 Consolidated Statement of
Comprehensive Income
142 Consolidated Balance Sheet
143 Consolidated Statement of
Changes in Equity
145 Consolidated Cash Flow Statement
147 Notes to the Consolidated Financial
Statements
191 Company Balance Sheet
192 Company Statement of Changes
inEquity
193 Notes to the Company Financial
Statements
198 Company Information
200 Advisers
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Luceco plc
Annual Report and Financial Statements 2022
We are a leading
supplierof innovative
electrical and lighting
products that bring
Powerto Life for our
customers.
Our strategy
Our purpose Our culture
To help people harness power
sustainably in everyday life.
See pages 27 to 33
See pages 55 to 59
Innovate
we are led by our customers to innovate
brilliant products in an agile and
entrepreneurial manner
Grow
to maximise sales of both existing and new
products to an increasing customer base
Sustain
to provide products that promote sustainable
choices and to invest across our business to
sustain our competitive advantage
Customer-driven Team-focused
Bold and innovative Principled
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Luceco plc
Annual Report and Financial Statements 2022
Highlights
Financial highlights
Revenue
£206.3m
2021: £228.2m
Adjusted
1
Operating Profit
£22.0m
2021: £39.0m
Adjusted
1
Earnings Per Share
11.1p
2021: 20.2p
Gross profit
£74.3m
2021: £84.7m
Operating profit
£20.0m
2021: £35.3m
Earnings Per Share
7.1p
2021: 17.6p
ESG highlights
ESG – emissions
Carbon
Neutral
operations in 2022
ESG – low carbon sales
38%
revenue from low carbon products in 2022
(2021: 25%)
1. The definitions of the adjustments made and reconciliations to the statutory figures can be found in note 1 of the consolidated financial statements on page 148 and are used throughout this document.
The measures provide additional information for users on the underlying performance of the business, enabling consistent year-on-year comparisons.
Read more about our ESG strategy on pages 37 to 59
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Luceco plc
Annual Report and Financial Statements 2022
At a Glance
What we sell:
Who we sell to:
Wiring Accessories
36%
of Group revenue
#2 in UK
LED Lighting
39%
of Group revenue
Top 10 in UK
Portable Power
25%
of Group revenue
#1 in UK
Revenue by sales channel Revenue by distribution type Revenue by product destination
26%
27%
28%
19%
Professional Wholesale
Hybrid
Retail
Professional Projects
26%
27%
28%
19%
Professional Wholesale
Hybrid
Retail
Professional Projects
68%
32%
Collected in China
Sold in end market
Revenue by distribution type
68%
32%
Collected in China
Sold in end market
Revenue by distribution type
4%
80%
2%
4%
10%
Americas
Europe
UK
Asia Pacific
Middle East & Africa
Revenue by product destination
4%
80%
2%
4%
10%
Americas
Europe
UK
Asia Pacific
Middle East & Africa
Revenue by product destination
4%
80%
2%
4%
10%
Americas
Europe
UK
Asia Pacific
Middle East & Africa
Revenue by product destination
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Luceco plc
Annual Report and Financial Statements 2022
Key business achievements:
Review of the Year
We entered
the EV
charger
market
Kingfi sher
Lighting
produced
outstanding
results
Committed
to the
Science Based
Targets
initiative
Supported the
next generation
of contractors
DW Windsor
integration
We gained a valuable
foothold into the EV
charger market through
the acquisition of Sync EV
and have used the skills
and knowledge we
obtained to launch our
new highly competitive
range of BG Sync EV
chargers. We are looking
forward to broadening
our product o ering
in2023.
Celebrating fi ve years
since its acquisition,
Kingfi sher Lighting
enjoyed an outstanding
year. Revenue grew by
27% and operating profi t
by 16% thanks to new
products developed and
made for Kingfi sher
Lighting by the
widerGroup.
We committed to the
Science Based Targets
initiative (“SBTi”), targeting
a 46.2% reduction in
operational emissions and
a 27.5% reduction in value
chain emissions by 2031
1
.
Our operations continue to
o er one of the lowest
operational carbon
footprints in our industry
and our progress was
recognised with an
upgraded rating by the
Carbon Disclosure Project
in 2022.
As the headline sponsors
of the prestigious eFIXX
30 under 30 awards,
recognising up-and-
coming talent within the
UK’s electrical contracting
industry, we are
encouraging both
students and apprentices
to become brand
ambassadors, and help
toadvance Luceco’s
worktowards a cleaner,
sustainable world.
We are making good
progress in integrating
DW Windsor, supporting
its drive to gain share in
the street lighting market
by using our in-house
resources to enhance its
current product range.
Weare confi dent that
over time these e orts will
deliver similar benefi ts to
those now being seen in
Kingfi sher Lighting.
1. Subject to SBTi validation, expected in 2023.
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Luceco plc
Annual Report and Financial Statements 2022
Opportunity
Demand for our products is driven
by activity in four distinct
construction markets that exhibit
attractive long-term growth.
RESIDENTIAL – DIY
4.5%
Annualised average growth since 2012
RESIDENTIAL – PROFESSIONAL
4.0%
Annualised average growth since 2012
NON-RESIDENTIAL
5.7%
Annualised average growth since 2012
INFRASTRUCTURE
7.8%
Annualised average growth since 2012
…that are supported by long-term growth
drivers
1: We operate in attractive
markets
THREE REASONS
TO INVEST
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Luceco plc
Annual Report and Financial Statements 2022
THREE REASONS
TO INVEST
Our business model o ers
unique advantages over
ourcompetitors.
Our high quality, low cost,
verticallyintegrated model allows
our experienced design team to
work closely with our well invested
manufacturing facilities to bring
innovative new products to market
quickly using established brands
that people know they can trust.
Our customer-focused “can-do”
culture underpins everything
wedo.
…which o ers unique advantages to our
customers and over our competition
2: We have an advantaged
business model
Our advantage
Read more about our business
model on pages 24 to 26
Design
F u l fi l Market
Make
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Luceco plc
Annual Report and Financial Statements 2022
THREE REASONS
TO INVEST
FINANCIAL TARGETS
REVENUE
>5%
ADJUSTED OPERATING MARGIN
>15%
ADJUSTED FREE CASH FLOW
MARGIN
>10%
ROCI
>20%
COVENANT NET DEBT
LEVERAGE
1.0-2.0x
DIVIDEND PAYOUT
40-60%
...which we commit to with clear “through the
cycle” fi nancial targets
3: We deliver compelling fi nancial
outcomes
Delivering
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Luceco plc
Annual Report and Financial Statements 2022
Strong progress made in
recent years leaves Luceco
well positioned to
win in a post-pandemic
world
GILES BRAND
Chair
I am pleased to introduce the Company’s results for the
year ended 31 December 2022, a year of solid strategic
progress which leaves us well positioned to win in a
post-pandemic world.
Performance
The Group has made remarkable progress over recent
years and, in so doing, set a high bar for itself in 2021.
This proved di cult to match in 2022.
The Group’s progress in 2022 was signifi cantly
infl uenced by pandemic-driven changes in stock levels
within its customers’ distribution networks. Customer
stock levels increased in 2021, adding to Group sales,
then reduced sharply in 2022, reducing Group sales.
Further explanation is provided in the Chief Executive
O cer’s Review. This change in customer stock levels
fully explains the reduction in Group revenue and profi t
between 2021 and 2022.
Manufacturers such as Luceco typically have limited
visibility of the stock of their products held in the
distribution channel, which usually has limited infl uence
on manufacturing activity levels. But the unusual
circumstances of the pandemic created an exception to
this rule. Once the extent of the overstocking became
apparent, the Group management team worked with
customers to quantify the likely impact on performance
and it is evident from this work that the temporary
performance headwind created by destocking is now
abating.
Whilst temporary customer destocking left results lower
than last year, the Board is pleased with the Group’s
underlying progress. Over the last fi ve years, Luceco has
evolved into a strategically focused, profi table, highly
cash generative and well capitalised business. It has
grown organically in its most attractive markets, added
M&A to its growth strategy and become more diverse
and therefore resilient. It responded with agility to the
challenges of the pandemic, providing continuity of
product supply to customers whilst protecting
profi tability from associated infl ation. The near-term
macroeconomic outlook is somewhat clouded but I
believe the Group is very well positioned to win
longterm.
Strategy
The Group’s strategy can be described simply as to
Grow, Innovate and Sustain.
Growth was invigorated this year by the acquisition of
Sync EV, which provided the Group with an accelerated
entry into the residential electric vehicle (“EV”) charger
market. On behalf of the Board, I am delighted to
welcome our new colleagues at Sync EV to the Group.
Management has a clear and compelling strategy to
grow in the rapidly expanding EV charging equipment
market.
Innovation activities in 2022 were largely focused on
improving the products o ered by our most recent
acquisitions: Sync EV and DW Windsor. Similar activities
in Kingfi sher Lighting, acquired by the Group in 2017,
have generated signifi cant value.
The Group continued to invest in its business model to
sustain future development. Further progress was made
in automating the Group’s manufacturing processes, as
well as adopting more e cient ways of working within
the Group’s sales and marketing functions.
Chair’s Statement
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Luceco plc
Annual Report and Financial Statements 2022
Chair’s Statement continued
Environment, Social and Governance (“ESG”)
Sustainability is an increasingly important responsibility
and opportunity for the Group.
In 2022, the Group committed to the influential Science
Based Targets initiative. This puts Luceco’s overall CO
2
emissions on a reduction pathway consistent with the
Paris Agreement. Given that the Group’s operations
remained carbon neutral in theyear, greater focus will
now be placed on delivering targeted emission
reductions elsewhere in the value chain.
Luceco grew low carbon sales to £78m (2021: £56m)
and is on track to meet its previously announced target
of £100m of such sales by 2025.
Board changes
Julia Hendrickson joined the Board as a Non-Executive
Director in June 2022. Her extensive knowledge of
multi-channel commercial strategy will prove a valuable
reference point to the Group in the coming years.
As previously announced, Matt Webb informed the
Board in January 2023 of his decision to step down as
Chief Financial Ocer after five years in the role to
pursue other opportunities. Matt will step down on
31March 2023 and will be succeeded as Chief
FinancialOcer by Will Hoy, formerly a Non-Executive
Director of the Company and until recently its Audit
Committee Chair.
Will was succeeded as Audit Committee Chair in
January 2023 by Tim Surridge, a current Non-Executive
Director with extensive relevant experience.
On behalf of the Board, I would like to thank Matt for his
outstanding contribution to Luceco’s progress over the
last five years. He leaves the business in great shape and
we wish him every success in his future career.
We are delighted that Will has agreed to be our next
Chief Financial Ocer. His strong track record of
delivery in world-class manufacturing environments and
knowledge of the Group make him an ideal addition to
the Executive team.
Dividend
The Group’s dividend policy has a payout ratio of
40-60% of Adjusted Profit After Tax.
The Board is recommending a final dividend of
3.0ppershare which, with the interim dividend of 1.6p,
isconsistent with a 41% payout, payable on 19 May 2023
toshareholders on the register on 11 April 2023.
Conclusion
As a Board we believe Luceco’s purpose is to help
people harness power sustainably in their everyday lives.
Our products make it easier for people to make
sustainable choices. Luceco’s successful navigation of
the pandemic and recent strategic development leaves
it better placed than ever to continue this important
work. None of this would be possible without our
employees, whom I would like to thank for their skill and
continued dedication that has left the Group so well
positioned for the future.
GILES BRAND
Chair
20 March 2023
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Luceco plc
Annual Report and Financial Statements 2022
2022 was a year of
strategy delivery, robust
cash generation and
increasing underlying
momentum
JOHN HORNBY
Chief Executive O cer
Performance highlights
In 2022, we delivered revenue of £206.3m (2021:
£228.2m; 2019: £172.1m) and Adjusted Operating Profi t
of £22.0m (2021: £39.0m; 2019: £18.0m).
The reduction in trading performance versus the prior
year refl ects particularly buoyant demand in our core
residential RMI construction market in 2021 as well as
previously fl agged destocking by our major distributor
customers in 2022.
Whilst it proved di cult to keep pace with our
exceptional 2021 results, we have delivered signifi cant
growth in both revenue and profi t versus pre-COVID
2019 comparatives, underlining the strategic progress
we have made over recent years which positions us well
for the future.
The slower activity versus a buoyant 2021, combined
with diligent working capital management, generated
arecord cash infl ow in 2022. This has left our balance
sheet in great shape, allowing us to plan and invest
withconfi dence.
I am also encouraged by the way in which our
performance improved as the year progressed,
providing healthy earnings momentum as we start
anewfi nancial year.
Customer stock movements
Nearly all of our sales are made to distributors, who
in turn sell to the end users of our products, namely
consumers or professional installers. The demand we
experience is therefore a product of end user activity
plus stock movements in the distribution channel.
The pandemic caused some very unusual distributor
stock movements.
In 2021, the combination of strong end user demand and
exceptionally constrained global supply chains caused
our distributor customers to materially increase their
stock of our products, adding to our sales. In 2022, they
largely unwound the extra inventory added as both
demand and supply chain constraints eased, reducing
our sales.
This sharp transition from stocking up to stocking down
had a signifi cant impact on our year-on-year
performance. Customer stock movements explain all of
our revenue and profi t reduction in 2022. The data we
have from our major customers shows that they reduced
their stock levels by c.£20m in 2022, with a further
c.£5m reduction expected in 2023. We therefore
believethat we are nearing the end of this temporary,
post-pandemic destocking phase, which is encouraging
for the future.
C o s t i n fl a t i o n
Aside from customer stock movements, the other key
driver of our results in 2022 was our close management
of input cost infl ation.
Global supply and demand imbalances in the wake of the
pandemic resulted in signifi cant industry-wide input cost
infl ation from late 2020 onwards. We identifi ed these
trends early and reset selling prices accordingly without
impacting on our competitive position.
Despite protection from hedging arrangements and
inventory cover, unusually rapid infl ation resulted in costs
rising faster than selling prices in 2021, leading to an
under-recovery of infl ation in that year. As anticipated,
this gap closed in 2022 as selling price updates delivered
their full expected benefi t. Indeed, the cost of key items
such as sea freight and commodities retreated as the
year progressed, which is encouraging for 2023. In short,
we have the prices we need in the market to manage the
current wave of global infl ation and the proven ability to
adapt if circumstances change.
Chief Executive O cer’s Review
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Luceco plc
Annual Report and Financial Statements 2022
Underlying demand
The prevalence of pandemic-driven customer stock
movements and cost inflation in 2022 makes it harder
toisolate our underlying performance trends.
Our analysis shows that our like-for-like revenue
absentcustomer stock movements was broadly flat
year-on-year, with a 9% average price increase
osettinga 9% volume decline. The volume decline
largely arose from the residential RMI market,
particularly in the DIY segment following the start of
theUkraine conflict, whilst the non-residential market
remained more resilient. Encouragingly, the rate of
volume decline slowed as the year progressed due to
the combination of easier comparatives and growing
demand for LED retrofit projects as energy prices
increased.
Whilst this is encouraging, we remain mindful that
2023could bring continued pressure on discretionary
consumer spending. However, any future volume
slowdown would be mitigated by the improvements
wehave made throughout the year to gross margin,
which was above 38% at the end of 2022, with a
full-yearaverageof 36%.
Supply chain management
For professional contractors, time is money. We know
that product availability is a key driver of their loyalty.
We gained market share during the pandemic by
helping our distributor customers to remain in stock
ofour products despite unprecedented turmoil in the
global supply chain.
Our vertically integrated manufacturing model allowed
us to respond with agility to rapid changes in demand.
In2021, we took the decision to add a £12m buer to
ourown inventory to compensate for elongated delivery
lead times and preserve customer service levels.
I am pleased to say that lead times have normalised in
2022 and we have therefore removed the extra
inventory. This, combined with diligent cash collection,
were the key drivers of our record Adjusted Free Cash
Flow of £30.7m in 2022 (2021: £18.8m; 2019: £18.9m).
Strategic highlights
The pandemic has presented a series of unique and
consuming challenges over the last three years. The fact
that we have risen to them whilst also delivering on our
Grow, Innovate and Sustain strategy is testament to the
strength of our business model and the dedication of
the Luceco team.
Our progress is evident in our financial performance.
Since pre-pandemic 2019, we have grown our revenue
and Adjusted EPS by 20% and 44% respectively. Whilst
impressive, I do not believe this does justice to the
actions we have taken to improve the quality and
sustainability of our business over recent years, which
leave us well positioned for the future.
Key aspects of our strategic progress are summarised
below.
Grow
We have gained market share over recent years.
We have complemented the Group’s long history of
organic growth with acquisitions funded by our
consistently strong cash flow. The acquisition of Sync EV
in 2022 has given us a valuable foothold in the rapidly
growing EV charger market. We now have the right
foundations for a successful “buy and build” M&A
strategy.
Kingfisher Lighting, celebrating five years of Luceco
ownership, enjoyed an outstanding year. Following our
help with the design, sourcing and manufacture of new
lower cost, high quality products, the business has been
able to improve its profitability and gain share in the
Sports, High Mast and Rail outdoor lighting markets.
Thisdemonstrates the value we can add to the
businesses we buy.
Through organic growth and M&A, we have increased
our sales of professionally installed products over recent
years, a key strategic priority, to complement our
historic weighting towards consumer installed products.
This has given us greater access to a typically higher
margin and more resilient market. Our growth in the
non-residential construction market has proved
particularly beneficial as consumer-led construction
hasnormalised post-COVID and institutions have
increasingly demanded LED retrofit projects to
combatenergy cost increases.
We have also continued to refine our portfolio,
shiftingcapital towards those businesses with
greatestlong-term potential. This resulted in the
closureof our sales oce in Germany in 2022.
Chief Executive Ocer’s Review continued
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Luceco plc
Annual Report and Financial Statements 2022
Chief Executive Ocer’s Review continued
Strategic highlights continued
Innovate
The Group has approximately 100 product development
specialists globally. Their focus is on developing new
products whilst continually enhancing our existing range.
Our product development process is customer-centric,
rapid and carries relatively low execution risk. It has been
a key driver of the Group’s historic success.
The focus of our innovation activities in 2022 was on
entering the EV charger market and bringing product
development benefits to our acquired businesses.
We launched our new range of residential EV chargers
inthe year, which we are making very competitively at
our production facility in China. They are sold jointly
under the BG and Sync EV brands for maximum market
appeal. These have been well received by installers and
have helped us achieve a 4% share of the UK market in
our first year. We will continue to expand our product
range in 2023, including the launch of EV chargers for
installation in commercial settings.
We are making good progress in integrating DW
Windsor, supporting its drive to gain share in the street
lighting market by sourcing and manufacturing a more
competitive alternative to its current product range.
Whilst 2022 has been a year of transition for the
business, we hope that over time these eorts will
deliver similar benefits to those now being seen in
Kingfisher Lighting.
We continue to innovate our core oering to deliver
higher margin products, with a particular focus on
redesigning products to simplify their installation by
professional contractors. We are pleased with contractor
feedback on our recently launched range of circuit
protection and weatherproof devices.
Sustain
We have made significant progress with our climate
goals, which we hope will be a source of increasing
competitive advantage in the future.
We committed to the Science Based Targets initiative
(“SBTi”), targeting a 46.2% reduction in operational
emissions and a 27.5% reduction in value chain emissions
by 2031. We expect these targets to be validated by the
SBTi in 2023. Our operations continue to oer one of
the lowest operational carbon footprints in our industry
and our progress was recognised with an upgraded
rating by the Carbon Disclosure Project in 2022.
We have held over 100 contractor training seminars
nationwide so far this year, hosted in conjunction with
our major professional wholesale customers.
We continue to invest in the next generation of
contractors. We were proud to sponsor the prestigious
eFIXX 30 under 30 awards, aimed at recognising
talented, young electricians in the UK.
We continue to invest in our business model to sustain
and accelerate future growth. It was exciting to see the
collective impact of our eorts to automate our
production facility in China during my first visit there in
three years after a pandemic-enforced hiatus. I am
confident that this work will continue to deliver
improvements in manufacturing eciency and product
quality, with the latter being key to making further
inroads with the professional contractor. We are also
making progress with defining our longer-term
manufacturing diversification strategy – a key priority
for 2023.
I am also pleased with the changes we are making within
our commercial functions to improve their reach. New
CRM software is enabling a more ecient sales process
and recent investments in our online capability are
bearing fruit.
In summary, I am proud of the progress the entire
Luceco team have made in the year. We have made
further steps towards our sustainability goals,
integration of our recent acquisitions is going well and
the right actions are being taken to deliver on our
long-term strategy.
How we create value
I think it is important to assess how our business
ultimately creates value for our customers, shareholders
and other stakeholders, as well as providing great
products for our end consumers.
Our attractive markets
Over the course of the last decade, we have worked
hard to both grow our share of existing markets as well
as entering adjacent markets where we see a
competitive advantage. As a result, we now hold
enviable positions across a range of industries that are
poised for future growth.
Although demand from residential construction and DIY
markets has slowed by 5.1% in the year relative to the
buoyant 2021 performance boosted by lockdowns, these
markets remain more active than they were in 2019.
Consumers continue to spend more time living and
working from home than they did pre-pandemic, which
continues to be a benefit to us.
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Luceco plc
Annual Report and Financial Statements 2022
Chief Executive Ocer’s Review continued
How we create value continued
Our attractive markets continued
Non-residential construction markets have grown 13.2%
in the year with higher energy prices driving increased
interest in our energy-saving LED lighting retrofit
projects.
I am also encouraged that the infrastructure market,
which we serve through our Kingfisher Lighting and
DWWindsor businesses, grew by 10.1% versus 2021.
Ourcustomers operating within the infrastructure
market have long recognised the benefits that premium
exterior lighting can have on an environment, but given
the current cost of energy, these advantages have
become even more pertinent.
I am confident that the right fundamental drivers are
inplace in each of our chosen markets for us to see
sustained growth over the coming years, despite
operating in a period of short-term macroeconomic
uncertainty. What is more, I am certain that we have
theright strategy in place to outperform these markets
over the long term.
Our advantaged business model
Our advantaged business model is a key reason why we
are able to capture opportunities in our chosen markets.
Over the course of the pandemic our vertical integration
gave us unmatched control of supply, enabling us to
provide greater product availability to our customers
and fuelling our own market share gains.
In 2022, our business model has enabled us to continue
to remain agile as short-term demand changed as a
result of our customers’ stock movements. As our
operating environment altered, our close control of our
own manufacturing and distribution channels enabled
us to respond quickly by flexing our inventory levels,
generating cash and maintaining good gross margins.
Although our markets are attractive, the opportunities
they create can only be harnessed by those with the
correct processes and knowledge. Regulatory change
isa key part of our industry, with new wiring regulations
introduced approximately every two years. Our
advantaged business model allows us to redesign to
meet these new regulations, manufacture the new
product at our own facilities and bring the product to
market quickly and eciently under our trusted brands.
The same advantages apply when considering the end
consumers’ increasing desire for more technology and
increased functionality, which we can respond to more
quickly than others.
Finally, our business model is allowing us to respond
more quickly to the climate emergency. Notonly does
our control over our processes allow ustoact to
minimise our environmental impact, with our operations
remaining carbon neutral in 2022, it also enables us to
design products that promote sustainable choices.
Compelling financial outcomes
Our attractive markets and how we operate within them
create compelling financial outcomes. This is evident
from our historic financial performance. Whilst customer
stock movements made progress more challenging in
2022, temporary headwinds such as this do not change
my view on our long-term potential. This view is
supported by progressive improvements during 2022 to
both gross margin and cash generation, which are the
foundations on which much of our financial performance
is built.
I am particularly pleased with the way we ended the
year and our ability to respond to the challenges we
have faced lends further support to the success of our
long-term strategy.
Our long-term performance targets remain unchanged
and are covered in the Chief Financial Ocer’s Review.
Outlook
Trading in early 2023 has been in line with our
expectations, with tailwinds from reduced customer
destocking, improved gross margin and lower input
costs balancing less residential RMI activity. Whilst the
macroeconomic outlook for 2023 remains dicult to
judge, I am encouraged by the healthy underlying
trading momentum we are carrying into the year which
leaves us well positioned to progress as market
conditions improve.
JOHN HORNBY
Chief Executive Ocer
20 March 2023
Directors’ Report Financial StatementsStrategic Report
14
Luceco plc
Annual Report and Financial Statements 2022
The Group is well
positioned to continue
the strong progress
it has made over
recentyears
MATT WEBB
Chief Financial O cer
Chief Financial O cer’s Review
Revenue
£206.3m
2021: £228.2m
Revenue Growth
-9.6%
2021: 29.5%
Adjusted Operating Margin
10.7%
2021: 17.1%
Adjusted Operating Profi t
£22.0m
2021: £39.0m
Adjusted Earnings Per Share
11.1p
2021: 20.2p
Covenant Net Debt Ratio
0.8x
2021: 0.7x
Comparisons with 2021 are hampered by unusually buoyant COVID-driven conditions experienced in that year.
Aswe emerge from the pandemic and markets normalise, I have chosen to add a 2019 pre-pandemic comparator
throughout this review to provide a clearer view of our underlying progress.
Summary of reported results
Summary results (£m)
Reported
2022
Reported
2021
Reported
2019
Revenue 206.3 228.2 172.1
Operating profi t 20.0 35.3 20.2
Profi t before tax 11.7 33.3 17.1
Taxation (0.7) (6.2) (4.0)
Profi t for the year 11.0 27.1 13.1
Operating profi t of £20.0m was £15.3m lower than 2021 due to customer stock movements, as explained in more
detail overleaf. It was broadly in line with our 2019 performance despite less favourable trading conditions caused
by customer destocking in 2022.
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Luceco plc
Annual Report and Financial Statements 2022
Chief Financial Ocer’s Review continued
Summary of reported results continued
Adjusting items
Adjusting items are those which we consider unusual by virtue of their size or
incidence and therefore not representative of our underlying trading performance.
Wehave identified £2.0m of such items within our reported operating profit for 2022.
They consist of:
• Amortisation of acquired intangibles: £1.8m
• Acquisition-related costs of £1.2m
• Restructuring provision release of £1.0m
Adjusted Operating Profit for the year, excluding the items above, was therefore
£22.0m (2021: £39.0m; 2019: £18.0m).
Income statement
Revenue
Revenue of £206.3m was £21.9m (9.6%) lower than 2021 but £34.2m (19.9%) higher
than 2019. The main movements are summarised below:
Bridge from 2021 Bridge from 2019
Revenue bridge: £m Change % £m Change %
2021/2019 228.2 172.1
Acquisition/closures 17.3 7.6% 23.0 13.4%
Like-for-like (decrease)/increase
1
(46.6) (20.4%) 9.7 5.6%
Constant Currency
2
198.9 (12.8%) 204.8 19.0%
Currency movements 7.4 3.2% 1.5 0.9%
2022 206.3 (9.6%) 206.3 19.9%
1. Like-for-like revenue increase excludes the impact of currency movements and acquisitions,
seenote 20 of the financial statements for currency rates.
2. 2022 revenue translated at 2021 and 2019 exchange rates for the relevant bridge.
Revenue benefited from the acquisition of DW Windsor in late 2021 and Sync EV in
early 2022. This added £17.3m to Group revenue in 2022, net of the impact of closing
our operations in France and Germany.
Like-for-like revenue declined by £46.6m compared to 2021 due overwhelmingly to
customer stock movements. In 2021, our Retail and Hybrid distributor customers
experienced buoyant demand in the residential RMI market as people spent more time
and money on their homes during the pandemic. A swing in consumer spending from
services to goods during the pandemic stretched global supply chains, lengthening
product delivery lead times. Our customers responded to this by increasing their
inventory cover of our products in 2021, adding to our already buoyant sales. The end
of pandemic restrictions in 2022 normalised consumer spending patterns and supply
chains. Our customers have therefore reduced their inventory of our products in 2022,
reducing our sales. The sharp reversal in customer stocking trends from upward to
downward explains all of our like-for-like revenue reduction versus 2021. The eect
was particularly pronounced in the second half. Most of this destocking activity is now
complete. We estimate that customers only need to reduce their inventory levels by a
further c.£5m in 2023 to achieve their targeted inventory cover.
Our analysis shows that like-for-like revenue absent customer stock movements was
broadly flat year-on-year, with 9% growth from price increases osetting a 9%
underlying volume decline. We saw an inevitable slowdown in demand from the
residential RMI market, particularly within the DIY segment. After a strong start to the
year, demand cooled in the second quarter as hostilities in Ukraine eroded consumer
confidence and prompted a squeeze on domestic incomes. However, we were
pleasantly surprised by the resilience of this market as the year progressed. We also
benefited from our enlarged presence in non-residential and infrastructure
construction markets, which saw strong demand for energy-saving LED lights and a
gradual release of commercial capital expenditure post-COVID. The 9% average price
increase in 2022 largely reflects the full-year impact of selling prices amended in2021
in response to input cost inflation. Adjusting for customer stock movements, we
believe we have increased our market share during the pandemic, as our growth
versus 2019 indicates, and enriched our margin mix by increasing the proportion of
our sales made to professional end users.
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Luceco plc
Annual Report and Financial Statements 2022
Chief Financial Ocer’s Review continued
Income statement continued
Revenue continued
We group our customers into the following sales channels:
• Retail: Distributors serving consumers only, including DIY sheds, pure-play online
retailers and grocers
• Hybrid: Distributors serving both consumers and professionals, typically with
multi-channel service options
• Professional Wholesale: Distributors serving professionals only, largely via a branch
network
• Professional Projects: Sale agreed by Luceco direct with professionals, but largely
fulfilled via Professional Wholesale
Performance by sales channel was as follows:
Like-for-like revenue by
sales channel:
2022
£m
2022
% of total
2019
% of total
Change vs
2021 %
Change vs
2019 %
Retail 48.8 27.7% 33.4% (31.7%) (7. 9%)
Hybrid 35.7 20.2% 20.5% (36.6%) 9.3%
Professional
Wholesale 51.0 28.9% 27.4% (12.8%) 11.8%
Professional Projects 40.9 23.2% 18.7% 17. 9% 17. 8 %
Like-for-like
revenue 176.4 100.0% 100.0% (20.4%) 5.6%
Currency impact 7.4
Acquisitions/
closures 22.5
Total revenue 206.3 (9.6%) 19.9%
The Group has increased its presence in sales channels serving professional
contractors since 2019 and thereby created a more diversified revenue base. This has
been achieved through like-for-like growth, as shown in the table, and acquisitions.
Ithelped to soften the impact of the slowdown in Retail and Hybrid sales in 2022 as
pandemic-boosted DIY activity normalised and the associated sales channel
destocked. We aim to continue to diversify our revenue base, diluting the influence
ofindividual sectors and customers and making the Group increasingly resilient over
time.
Nearly all of the destocking impact we experienced in the year arose within the Retail
and Hybrid channels. These customers hold greater inventory of our products relative
to their size because they buy from us on long lead times direct from China on a Free
On Board (“FOB”) basis and therefore hold the product for longer. The amount of
inventory cover they needed rose sharply in 2021 as demand increased and delivery
times from China extended. The removal of this extra inventory cover in 2022 is
evident from the larger revenue reduction in these channels.
The slowdown in the Professional Wholesale channel was more modest and
contrasted with the performance of the Hybrid channel despite both selling to
professional contractors. This underlines the impact of destocking. Traditional
electrical wholesalers buy from us on short lead times in the country in which they
operate, meaning they had less need to destock in 2022. Our Professional Wholesale
business largely serves professional residential RMI construction, which proved more
resilient than DIY-driven RMI due to contractors bringing significant project backlogs
into the year. The channel also benefited from growing EV charger sales as the year
progressed.
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17
Luceco plc
Annual Report and Financial Statements 2022
Chief Financial Ocer’s Review continued
Income statement continued
Revenue continued
We saw like-for-like growth in the Professional Projects channel in the year thanks
toarecord performance from Kingfisher Lighting and growing commercial and
institutional demand for LED retrofits in the UK as electricity prices increased.
Revenue by
geographical location
of customer:
2022
£m
2021
£m
2019
£m
Change vs
2021 %
Change vs
2019 %
UK 165.3 181.2 135.1 (8.8%) 22.4%
Europe 19.7 24.0 17.6 (17. 9%) 11.9%
Middle East and
Africa 8.7 7.6 9.0 14.5% (3.3%)
Americas 8.0 10.6 4.3 (24.5%) 86.0%
Asia Pacific 4.6 4.8 6.1 (4.2%) (24.6%)
Total revenue 206.3 228.2 172.1 (9.6%) 19.9%
Customer destocking impacts were largely confined to the UK market, which explains
the UK revenue decline of 8.8% versus 2021.
European sales reduced in the year following the closure of our operations in Germany
and France. These actions have improved regional profitability.
Sales in the Middle East and Africa grew by 14.5% versus 2021. Regional construction
projects resumed apace following a slower 2021, underpinned by a healthy oil price.
Growth was also helped by favourable currency movements.
The sales decline in the Americas is attributable to the US market. A key customer in
the US DIY channel over-bought stock in 2021, whilst temporarily elevated sea
container costs also reduced the price competitiveness of our Portable Power
products. However, we were encouraged by our progress in Mexico, where sales
increased by 17% thanks to further share gains in the project-based LED lighting
market.
Our progress in Asia Pacific was hampered by COVID restrictions, which are now
finally easing.
Profitability
Adjusted Operating Profit of £22.0m for 2022 was £17.0m lower than 2021 but £4.0m
higher than 2019. The key drivers were as follows:
Adjusted Operating Profit
Bridge
from 2021
£m
Bridge
from 2019
£m
2021/2019 39.0 18.0
Acquisitions/closures 1.2 1.6
Like-for-like (decrease)/increase
1
(17.1) 2.9
Currency movements (1.1) (0.5)
2022 22.0 22.0
1. Like-for-like profit movements exclude the impact of currency movements and acquisitions/
closures, see note 20 of the notes to the financial statements for currency rates.
The net impact of acquisitions and closures added £1.2m to Adjusted Operating Profit.
This includes one-o losses incurred during stock clearance activity in Germany.
DWWindsor experienced a slower year for tendered street lighting projects, but we
expect profits to grow in 2023 following actions taken to improve gross margin and
lower overheads.
The reduction in revenue due to customer stock movements had a material impact on
like-for-like profit since it largely impacted the sale of high margin Wiring Accessories
made in-house. Manufacturing overheads were consequently less well utilised than in
2021. The end of destocking should therefore materially help future profitability,
notwithstanding changes in macroeconomic conditions.
We benefited as expected from a catch up in the pass through of pandemic-driven
input cost inflation, which added £8.1m to like-for-like profit in the year. We now have
the selling prices we need in the market to insulate ourselves from the recent wave of
global inflation.
Indeed, in recent months we have seen a gradual reversal of those input costs most
elevated by the pandemic, such as sea freight and certain commodities. As a result,
my estimate of the total impact of input cost inflation on our annual cost base since
pre-pandemic 2019 has reduced from £21.5m at half year 2022 to £14.0m now. This is
a helpful development, but we will remain alert to cost changes until macroeconomic
conditions stabilise.
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Luceco plc
Annual Report and Financial Statements 2022
Chief Financial Ocer’s Review continued
Income statement continued
Profitability continued
The table below provides a more detailed view of the currency impact in the year:
Adjusted
2022
actual
1
£m
Currency impact
Adjusted
2022 at
Constant
Currency
2
£m
Constant Currency
variance to 2021 Adjusted
2021
actual
£m£m % £m %
Revenue 206.3 7.4 3.2% 198.9 (29.3) (12.8%) 228.2
Cost of sales (132.0) (8.3) 5.8% (123.7) 19.8 (13.8%) (143.5)
Gross profit 74.3 (0.9) (1.1%) 75.2 (9.5) (11.2%) 84.7
Gross margin % 36.0% (1.8ppts) 37.8% 0.7ppts 37.1%
Operating costs (52.3) (0.2) 0.4% (52.1) (6.4) 14.0% (45.7)
Operating profit 22.0 (1.1) (2.8%) 23.1 (15.9) (40.8%) 39.0
Operating margin % 10.7% (0.9ppts) 11.6% (5.5ppts) 17.1%
1. Year ended 31 December 2022 translated at 2022 average exchange rates.
2. Year ended 31 December 2022 translated at 2021 average exchange rates.
Operating costs
Adjusted Operating Costs increased by £6.6m to £52.3m. £5.4m of the increase came from acquisitions, net of closures. The remaining £1.2m increase is from a combination of
wage inflation, increased direct marketing to the professional contractor and currency movements.
Net finance expense
Adjusted Net Finance Expense increased by £1.0m to £2.6m in 2022, reflecting an increase in borrowing and interest rates.
We entered into swaps in the period to fix the interest rate applicable to approximately 70% of our borrowings on a rolling three-year basis, resulting in an eective interest rate
of 4.9% (subject to small changes driven by the impact of debt leverage on lending margin in the future). 30% of our borrowing remains at floating interest rates.
Taxation
The eective tax rate on Adjusted Profit Before Tax reduced by 5.3ppts to 11.3% in 2022. The Group’s mix of profits by country would indicate a typical eective tax rate of
c.19.5%. Work done over recent years to maximise available tax incentives, particularly those relating to research and development, has lowered this to c.15%. The slightly lower
rate of 11.3% achieved in 2022 also reflects certain one-o benefits relating to prior years. We expect a Group eective tax rate of c.20% when the new UK corporation tax
regime takes eect in April 2023.
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Luceco plc
Annual Report and Financial Statements 2022
Chief Financial Ocer’s Review continued
Adjusted Free Cash Flow
Adjusted
1
Free Cash Flow (£m)
Adjusted
1
2022
Adjusted
1
2021
Adjusted
1
2019
Operating profit 22.0 39.0 18.0
Depreciation and amortisation 7.1 6.7 7. 9
EBITDA 29.1 45.7 25.9
Changes in working capital 13.4 (12.6) 1.0
Other items 1.2 1.9 0.3
Operating cash flow 43.7 35.0 27. 2
Operating Cash Conversion
2
198.6% 89.7% 151.1%
Net capital expenditure (5.6) (6.4) (3.6)
Interest paid (2.7) (1.7) (2.1)
Tax paid (4.7) (8.1) (2.6)
Free cash flow 30.7 18.8 18.9
Free cash flow as % revenue 14.9% 8.2% 11.0%
1. A reconciliation of the reported to Adjusted results is shown within note 1 of the consolidated
financial statements.
2. Adjusted Operating Cash Conversion is defined as Adjusted Operating Cash Flow divided by
Adjusted Operating Profit.
In 2021, we added £12.0m of buer stock to our own inventory to combat supply chain
disruption. At half year 2022, with supply chains normalising, we announced that this
would be largely removed and converted into cash in the second half. I am pleased to
report that this has now been done. This, combined with disciplined cash collection,
resulted in record Operating Cash Conversion of 198.6% and Adjusted Free Cash Flow
of £30.7m. The one-o benefit from selling through buer stock means that, whilst cash
generation should remain healthy, we are unlikely to match 2022’s performance in 2023.
Capital expenditure
The Group’s net capital expenditure consists of capitalised product development
costs and the purchase of physical assets. Capex reduced slightly by £0.8m to £5.6m
(2021: £6.4m; 2019: £3.6m) but was 2.7% of revenue (2021: 2.8%; 2019: 2.1%) which is
approaching our target range of 3-4%. We continue to see opportunities to invest in
low risk, high return automation projects in our Chinese production facility and
continue to invest in R&D projects, particularly in relation to acquired businesses.
Capital structure and returns
Return on capital
Return on Capital Invested was lower than prior year at 18.2% (2021: 36.4%).
Aspreviously flagged, our returns will naturally reduce as Luceco transitions from a
Group created organically to one growing equally via M&A (with its required investment
in goodwill). However, the reduction experienced in 2022 also reflects the temporary
impact of customer destocking on profit. The growing significance of M&A to the Group
means the time is right to reset our target for Return on Capital Invested. We expect
average Return on Capital Invested through the economic cycle to be 20% or higher.
Acquisitions
The acquisition of Sync EV was completed in March 2022. Sync EV is a well-regarded
supplier of EV charge points focused on the residential market in the UK. Until June
2022, the installation of EV chargers into residential settings was subsidised by a
government grant that resulted in installations being arranged directly between
homeowners, equipment suppliers and a network of approved installers. The removal
ofthe grant has, as expected, opened up a growing market to others. Whilst many
installations still originate via automotive OEMs who assign the work to approved
partners, a growing proportion are arranged directly between homeowner and
electrician, with the electrician sourcing the charger via their chosen Wholesaler or
Hybrid. We are in a prime position to gain a sizeable share of the market due to our
brand recognition amongst electricians, access to the Hybrid and Wholesale channels
and our vertically integrated, scalable supply chain. The acquisition of Sync EV has given
us technical know-how and extra presence in the market. We have wasted no time in
launching a new range of single-phase Mode 3 chargers under a joint BG Sync EV
branding. They address opportunities within the Residential and Commercial sectors and
are selling well. We are in the process of designing a higher power, three-phase charger
for use in large homes and commercial premises. We have plans to enter the important
fleet market and are investigating on-street charging options with DW Windsor.
EV charging is a fast-growing, adjacent product category that is highly synergistic
with our core BG oering so the potential for future growth in this space is exciting.
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Luceco plc
Annual Report and Financial Statements 2022
Chief Financial Ocer’s Review continued
Capital structure and returns continued
Capital structure
The business continues to consistently generate ample cash flow to support its
dividend policy and fund M&A activity.
2022 2021 Change
Reported net debt £29.4m £38.1m (22.8%)
Less: IFRS 16 Finance Leases (£6.3m) (£8.2m) (23.2%)
Finance leases – pre-IFRS 16 £0.7m £0.7m —
Covenant Net Debt £23.8m £30.6m (22.2%)
Covenant Net Debt : Covenant EBITDA 0.8 0.7 14.3%
Strong cash generation in the second half resulted in a reduction in borrowing in the
year, despite investing £7.8m in Sync EV. It also resulted in Covenant Net Debt
leverage similar to last year at 0.8x. The Group’s non-utilised facilities totalled £56.9m,
with an option (subject to lender consent) to add a further £40.0m under the terms of
its new syndicated bank facility signed in October 2021. The facility matures in
September 2025 and the Group has an option to trigger a one-year extension
thereafter. The Group’s balance sheet is therefore in good shape, allowing us to plan
and invest with confidence.
The Company’s covenant position and headroom at 31 December 2022 was as follows:
2022 full-year covenant Covenant Actual Headroom
Covenant Net Debt : Covenant
EBITDA
3.0 : 1 0.8 : 1 Covenant Net Debt
headroom: £67.1m
1
Covenant EBITDA
headroom: £22.4m
Covenant EBITDA : Adjusted
Net Finance Expense
4.0 : 1 11.7 : 1 Covenant EBITDA
headroom: £19.9m
Net finance expense
headroom: £5.0m
1. Headroom with increased facility. Current facility headroom is £56.9m.
The key measures which management use to evaluate the Group’s use of its financial
resources and capital management are set out below:
2022 2021
Adjusted
1
Earnings Per Share (pence) 11.1 20.2
Covenant Net Debt : Covenant EBITDA (times) 0.8 0.7
Adjusted
1
Free Cash Flow (£m) 30.7 18.8
1. Note 1 in the notes to the consolidated financial statements provides an explanation of the Group’s
alternative performance measures.
The Group complied with its covenant requirements throughout the year with
significant headroom on all metrics. The Group has conducted a full going concern
review and this is outlined on page 147 of the Annual Report and Accounts. TheGroup
has a strong balance sheet and significant facility headroom under even arealistic
severe but plausible downside scenario. No covenant breaches occur in any of our
severe but plausible downside scenarios, all of which are before any mitigating
actions, illustrating our financial resilience.
Dividends
The Board is proposing to pay a final dividend of 3.0p, taking the full-year dividend to
4.6p, representing a payout of 41% of earnings. The final dividend will be paid on
19May2023 to shareholders on the registrar on 11 April 2023.
Operating segment review
The revenue and profit generated by the Group’s operating segments are shown
onthe next page. Operating profits are stated after the proportional allocation of
fixed central overheads. The profit contribution for each segment, before fixed central
overheads, is also shown, to illustrate the likely profit impact of future growth.
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21
Luceco plc
Annual Report and Financial Statements 2022
Chief Financial Ocer’s Review continued
Operating segment review continued
Wiring Accessories
Adjusted
1
Reported
2022 2021 Change 2022 2021 Change
Revenue £73.7m £104.5m (29.5%) £73.7m £104.5m (29.5%)
Contribution profit £20.1m £36.3m (44.6%) £20.1m £36.3m (44.6%)
Contribution margin % 27.3% 34.7% (7.4ppts) 27.3% 34.7% (7.4ppts)
Operating profit £13.9m £29.2m (52.4%) £13.9m £29.2m (52.4%)
Operating margin % 18.9% 27.9% (9.0ppts) 18.9% 27.9% (9.0ppts)
1. Further details of adjustments are in note 1 of the consolidated financial statements.
Wiring Accessories is the Group’s most profitable segment, generating 63% of the Group’s operating profit and 36% of its revenue, under a brand established over 80 years ago.
Sales into the Wiring Accessories segment were £30.8m (29.5%) less than 2021. We estimate that most of this decline was caused by customer stock movements, particularly
within the Hybrid channel, as well as the impact of pre-buying by Professional Wholesalers ahead of sizeable selling price increases. We estimate that sales excluding these
temporary influences were broadly flat on 2021 but ahead of 2019 thanks to new business wins. Sales continue to be supported by healthy demand for professionally installed
wiring devices within the residential repair and remodel market as contractors work through project backlogs built up during the pandemic. Whilst the decline in revenue
inevitably impacted segmental profit, Wiring Accessories remains the most significant contributor to Group profitability and its contribution should improve as Hybrid
customers in particular balance their post-pandemic inventory positions.
LED Lighting
Adjusted
1
Reported
2022 2021 Change 2022 2021 Change
Revenue £81.4m £63.2m 28.8% £81.4m £63.2m 28.8%
Contribution profit £8.4m £7.4m 13.5% £7.8 m £4.1m 90.2%
Contribution margin % 10.3% 11.7% (1.4ppts) 9.6% 6.5% 3.1ppts
Operating profit £3.4m £3.4m — £2.8m £0.1m 2700.0%
Operating margin % 4.2% 5.4% (1. 2ppts) 3.4% 0.2% 3.2ppts
1. Further details of adjustments are in note 1 of the consolidated financial statements.
The Group entered the lighting market in 2013 as the industry adopted LED technology and it now represents 39% of Group revenue.
Revenue from the LED Lighting segment was £18.2m (28.8%) higher than 2021. £15.9m (25.2%) of this additional revenue arose from the acquisition of DW Windsor, acquired
inOctober 2021. A £1.9m (3.0%) revenue decline arose from the closure of our operations in France and Germany, which were LED focused. Organic growth was therefore
6.6%, driven by strong demand for energy-saving retrofits within the non-residential and infrastructure sectors and an outstanding year for Kingfisher Lighting, following its
successful entry in the Sports, High Mast and Rail segments.
Directors’ Report Financial StatementsStrategic Report
22
Luceco plc
Annual Report and Financial Statements 2022
Chief Financial Ocer’s Review continued
Operating segment review continued
LED Lighting continued
Adjusted Operating Profit of £3.4m was in line with 2021, and is expected to improve following the rationalisation of our overseas sales presence and as DW Windsor
increasingly benefits from Group support.
Portable Power
Adjusted
1
Reported
2022 2021 Change 2022 2021 Change
Revenue £51.2m £60.5m (15.4%) £51.2m £60.5m (15.4%)
Contribution profit £8.9m £10.3m (13.6%) £7.5m £9.9m (24.2%)
Contribution margin % 17.4% 17.0% 0.4ppts 14.6% 16.4% (1.8ppts)
Operating profit £4.7m £6.4m (26.6%) £3.3m £6.0m (45.0%)
Operating margin % 9.2% 10.6% (1.4ppts) 6.4% 9.9% (3.5ppts)
1. Further details of adjustments are in note 1 of the consolidated financial statements.
The Portable Power segment consists of two main elements:
• Cable reels, extension leads and associated accessories sold under the Masterplug brand
• EV chargers sold under the BG Sync EV brand
The Group enjoys a leading position in the UK portable power market. The business generates 25% of Group revenue and 21% of Group Adjusted Operating Profit.
Revenue in the period was 15.4% lower than the prior year due to customer destocking but 7.1% higher than 2019.
EV charger sales totalled £5.4m, slightly lower than our target of £7.0m due to a shortfall in sales of electric vehicles in the UK. Our share of the market was in line with
expectations at 4%. The product is being sold within existing sales and distribution channels leading to a high profit contribution. Segmental Adjusted contribution margin
consequently increased by 0.4 ppts to 17.4%.
Going concern and viability statement
The Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future and as such have applied
the going concern principle in preparing the Annual Report and Accounts. This is considered in more detail in note 1 of the consolidated financial statements. The Group’s
Viability Statement can be found on pages 72 to 74 and the Group’s Going Concern Statement can be found on page 147.
MATT WEBB
Chief Financial Ocer
20 March 2023
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23
Luceco plc
Annual Report and Financial Statements 2022
We operate in attractive markets, with healthy and stable historic
growth that is poised to benefit from future decarbonisation eorts.
1. Regulatory change
Impact
+110%
increase in the average
sales price of UK
consumer units since 2010
(ex. inflation)
+60%
increase in Luceco
consumer unit sales
during EICR regulation
change
Our response
Our advantaged business
model allows us to update
our designs eciently to
meet these new
regulations, manufacture
the new product in our
own facilities and bring the
product to market more
quickly and eectively
than our competitors.
Driver
The electrical industry
undergoes frequent
regulatory changes. These
are often designed to
improve safety or product
eciency and result in
both the renewal of
installations and increases
in value of the electrical
products used within the
installation.
2. New technology
Impact
Plastic
socket
sales price
dierence
USB – A/C
socket
Our response
We interact regularly with
our consumers, installers
and distributors to
understand their emerging
needs. We ensure these
needs are reflected in new
product designs.
Driver
Consumers are
increasingly demanding
greater control and
eciency from their wiring
devices and lighting, whilst
installers are demanding
technologies that simplify
installation. This desire for
increased functionality
drives up product value.
Our Attractive Markets
Long-term growth drivers:
3. Investment in the built environment
Impact
4 million
UK homes below Decent
Homes Standard
40%
of UK retail space needs
re-purposing
Our response
Whether it is our
market-leading Wiring
Accessories range, our
highly ecient LED
Lighting retrofits, or our
Portable Power products
helping our customers get
the job done, our products
are helping people invest
in their homes and working
environments using brands
they know and trust.
Driver
A limited stock of new
homes combined with
consumers spending more
time living and working at
home, drives long-term
house price appreciation
and existing home
renovation. These trends
sustain demand for our
products within repair and
remodel projects.
4. Climate emergency
Impact
£1.4 trillion
investment required for
UK to meet net zero
14 million
UK homes to install EV
chargers
28 million
UK homes require low
carbon heating solutions
Our response
We acquired Sync EV to
enter the EV charging
market. We are targeting
£100m of low carbon sales
by 2025 to ensure we are
at the forefront as
consumers adopt
sustainable alternatives.
Driver
The electrification of
household energy and
transport is a key driver of
future growth within the
markets we serve,
supported by specific
regulatory changes such
as phasing out the sale of
new gas boilers and
internal combustion
vehicles over the coming
decade.
+800%
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Our Advantaged Business Model
How we add value
• We are the innovators within the
product categories we serve.
Innovation allows us to up-sell and
improve profitability
• We bring new ideas to market
quickly
• Our designs oer great quality at
a great price
• Our designs start with the
customer in mind
• We have been serving our largest
customers for many years
• We have a highly skilled and
experienced sales team
• We operate in diverse but
synergistic sales channels
• We invest in our digital presence
and estate
• We invest in the next generation
of electrical contractors
• We operate a vertically integrated
manufacturing model
• Our production output is able to
quickly adapt to changing
demand
• Our facilities are well invested,
allowing us to make high quality,
low cost products
• We have long-established OEM
partners
• Our customers know where our
products come from and the
conditions in which they are made
• Our supply chain:
• Is flexible to customer needs
• Oers high outbound service
levels
• Maintains a breadth of
inventory close to the customer
• Uses the best available
technology
• Oers products as part of a
solution
MarketFulfil
Design Make
Competitive advantage
High quality, low cost,
vertically integrated
manufacturing:
Find out more on pages 25 and 26
Strong product
development
Find out more on pages 30 and 31
Strong, well invested
and expandable brands
Find out more on pages 10 to 13
Entrepreneurial,
can-do culture
Find out more on pages 55 to 59
Outcomes
People:
1,755
Number of employees
Customers:
>2,000
Number of customers
Suppliers:
>1,000
Key suppliers
Shareholders:
40-60%
Annual dividend payout
Communities:
Actively supporting
training of electrical contractors
Environment:
38%
Revenue from low carbon products
Underpinned by our culture
Customer-driven Team-focused
Bold and innovative
Principled
Find out more on pages 55 to 59
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Luceco plc
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Our work this year for the Great Mosque of
Mecca provides a clear illustration of how our
integrated business model enables us to add
value throughout the customer journey by
providing clear quality and cost advantages
for our customers and rewarding our people,
partners and shareholders.
Our Business
Model in Action
Project scope
The Great Mosque of Mecca, also called
Holy or Haram Mosque, was built to
enclose the holiest shrine in Islam, the
Ka’bah, and is visited by millions of
worshippers every year. The Great
Mosque has undergone major
renovations through the years and during
recent enhancements Luceco was
honoured to be selected to supply
lighting to the inner walkways of the
Great Mosque.
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The nature of the Group’s vertically integrated business model means we are able to
deliver large scale projects within set timeframes whilst still remaining flexible to create
bespoke designs that meet our individual customer needs.
Design
Through decades of experience and expertise, our
design team based in the UK have built a market-leading
portfolio of lighting products that can be applied to
meet our specific customer needs. At the Great Mosque,
the unique parameters of the project required a
balanced approach as high footfall meant it was
essential all walkways were well lit, yet the products
used had to be sensitive to the original architecture of
the building. Furthermore, due to the challenges that
significant maintenance would bring and to mitigate any
future disturbance to the site, products supplied had to
have a strong track record for reliability.
Luceco were able to meet these challenging
requirements through our flagship Platinum LED lighting
range, which has evolved through years of development
to deliver market-leading performance and eciency.
The recessed Platinum design delivers performance and
ecacy that competing tenders could not, providing
thestrong lighting levels that are essential for the site.
The product’s unique design allows quick and easy
installation, whilst the ability to surface mount the light
fitting unobtrusively was important in a building of such
architectural sensitivity.
Make
We operate a fully owned, well invested and vertically
integrated manufacturing facility which provides us
withcertainty over product supply and greater control
over cost.
The Great Mosque is the eighth largest building in the
world and the project scope required us to supply 3,000
luminaires in total. The scale and level of control we have
over our manufacturing output meant we could be relied
upon to deliver our products in line with our customer
requirements and within the specific time windows
required to support the wider enhancements taking
place at the Great Mosque at the time.
Market
Our experienced team works hard to develop strong
relationships with existing customers, mechanical and
engineering contractors, electrical contractors and
wholesalers. Maintaining these relationships is
paramount to our business model; it means we win more
business, and it helps limit costs and protect margins.
We were able to clearly illustrate to each of the
stakeholders involved in the Great Mosque project that
our solution met their needs using products within our
portfolio that were tried and tested.
Furthermore, having our own manufacturing
experiencemeant we could deliver to the scale required.
This approach helped us develop a strong customer
relationship from the outset, helping us not only win
thetender but deliver on our commitments.
Fulfil
Having control over our supply chain is the final critical
element of our model. At Luceco we understand that the
work we do often forms part of broader enhancements
being undertaken by the customer. We see our ability to
reliably fulfil projects on time as another opportunity to
outperform our competition.
Our relationships with our partners and customers at the
Great Mosque began in 2019 and despite disruption to
the overall enhancements at the site as a result of
COVID-19, we were able to remain flexible to our
customer’s evolving needs over this time.
Our flexible approach and focus on fulfilment has meant
we have created a reputation for being able to deliver
large scale projects both in the UK and internationally.
Our Business Model in Action continued
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Luceco plc
Annual Report and Financial Statements 2022
Our strategic priorities can be summarised under three simple headings: Grow, Innovate and Sustain.
Strategy
Grow Innovate Sustain
Luceco has a proven track record of growth.
Since2000, we have grown our sales twice as fast
as the UK market and supplemented this growth by
launching our successful business model overseas.
Domestic
We are focused on utilising our well-developed UK
infrastructure, broad product portfolio and strong
customer relationships to grow our domestic sales.
We have supplemented this growth through targeted
acquisitions which complement our growth strategy.
International
We have expanded our international market share,
focusing on markets where we hold a competitive
advantage through our product portfolio and
experience of project delivery.
We use market-leading innovation to seize our
growth opportunities. Our Innovate strategy
covers both the products that we design and the
services that accompany them.
Product
We constantly innovate to meet customer needs.
We design high functioning, higher margin devices
in both existing as well as new product categories
– such as EV chargers. Our customer-driven, bold
and innovative culture is embodied within the
products we develop.
Service
We continually innovate the services that accompany
our products to improve the customer experience
and sell our products as part of a solution. We have
well-developed lighting installation design teams to
help specifiers turn their concepts into reality.
Our Sustain strategy ensures we maintain our
competitive advantage. We invest in our own
people as well as our industry to sustain our
performance in the long term. We are committed
to ensuring the work we do contributes
increasingly to society’s sustainability goals.
People
Our products are designed, made, distributed and
installed by people. We invest to ensure our
talentedteam have the skills and tools they need to
exceed customer expectations. We invest in the
training and development of those working within
our industry to ensure they have the skills they need
to do the job right.
Planet
We aim to lead our industry by lowering our
environmental footprint, and in doing so help our
customers to achieve their own sustainability targets.
Growth in action
Find out more on pages 28 and 29
Innovation in action
Find out more on pages 30 and 31
Sustainability in action
Find out more on pages 32 and 33
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Grow
Strategy in Action
Key stats
6.2%
Group revenue three-year CAGR
£26.2m
Group M&A investment
in the last three years
Celebrating fi ve years with the Group, Kingfi sher Lighting has
grown its revenue by 46% since acquisition. It illustrates how
we target acquisitions that expand our market reach whilst
complementing our existing business.
We are focused on growing within
ourchosen markets by leveraging
oursuccessful business model,
bothintheUK and overseas.
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When Kingfisher was acquired for £9.8m in 2017, it was
agood business with significant potential. Not only did
the business hold established positions within the
attractive UK exterior lighting market, it also
represented an excellent cultural fit, with clear values
and an excellent reputation with its customers. We saw
that, with access to our advantaged business model, we
could create synergies that would further enhance this
business.
The hard work over the course of the last five years was
borne out in 2022, with the business generating revenue
of £17.7m and operating profit of £2.3m, an increase of
46% and 92% respectively since acquisition. The
business is now generating a Return on Capital Invested
approaching 20%.
Top-line revenue growth has come from multiple
sources. Existing customers now see the business as
their preferred external lighting supplier due to
innovative new products created through the Kingfisher
Lighting and Luceco design teams working side-by-side.
Furthermore, the business has been able to expand its
Sports and High Mast divisions. Supported by the
Luceco-developed “Amnis” product range, sales of £4m
were generated within these markets in 2022, a ten-fold
increase from 2018.
Importantly, Luceco have invested for the long term,
withstang numbers carefully increased from 70 to 90
since acquisition. These additional team members have
enabled growth whilst still maintaining excellent service
levels. Furthermore, our existing in-house IT and HR
support have improved Kingfisher’s supporting
infrastructure and reliability. Our additional investment
and back-oce support leave the business well
positioned for the future.
Costs have also been reduced where appropriate.
In2018 Kingfisher had 12 significant suppliers, which has
now been reduced to five with Luceco’s own in-house
facilities contributing to product manufacturing. Product
development processes have been streamlined and now
the business is able to move from concept to launch
more eciently.
The future looks set to oer further opportunities, which
we are excited to be in a position to capture as a result
of our knowledge gained with Kingfisher Lighting. This
experience in developing and manufacturing larger
luminaires leaves us well positioned to do the same with
DW Windsor. Furthermore, the combined portfolios of
Kingfisher Lighting and DW Windsor presents the
opportunity to create a complementary product oering
for a wider customer base.
Strategy in Action continued
Grow
Kingfisher Lighting, celebrating five years of Group ownership,
enjoyedanoutstanding year in 2022 and clearly illustrates the
Group’sgrowth strategy.
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Key stats
£3.6m
2022 R&D expenditure
c.250
2022 new product SKUs
This ongoing design philosophy is particularly evident
through the launch of our new highly competitive range of
BGSync EV chargers, which has helped us achieve 4% market
penetration in our fi rst year.
We have a strong track record of innovating
to grow our business. We bring our
innovations to market quickly and are often
the architects of change in our industry.
Strategy in Action
Innovate
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Annual Report and Financial Statements 2022
Our innovative culture spans our entire product range.
Within Wiring Accessories, we were the first in the UK
market to add USB functionality to mains sockets,
whilstour LED Lighting products provide the consumer
with both energy savings and superior lighting levels.
Our drive for innovation remains a key part of our
strategy as it not only dierentiates our products from
the competition, but it also enables us to up-sell what
we manufacture to maintain consistently high margins.
Through focus groups, social media interactions and
feedback gathered via our sales teams, we are launching
new products that meet the contractor’s desire for
quality, value for money and ease of installation.
This ongoing design philosophy is particularly evident
through the launch of our new highly competitive range
of BG Sync EV chargers. The 7.2kW chargers are
perfectly designed for home use that is convenient, safe
and reliable.
We have designed an internet-enabled device that oers
functionality that is convenient to the end user, such as
charge scheduling and monitoring via a smartphone.
Wehave also focused on the needs of the installer by
oering free training seminars and online installation
videos.
Designed with safety and ease of installation in mind,
the range is amongst the safest on the market, with
built-in current overload and grid fault protection.
The range is being made in-house and at scale by
ourteam in China, which gives us a cost and product
availability advantage in a rapidly growing market.
Weare encouraged by the results of our first full year
inthis new market, where we have sold 14,200 units in
total, equivalent to 4% penetration of plug-in vehicles
sold in the year.
Looking forward into 2023, we are excited by the planned
launch of our next generation of EV chargers, which will
include a 22kW version for faster charging in a
commercial setting to further enhance our product range.
We have a long history of leading change within our industry,
consistently producing products with enhanced functionality
andcutting-edge designs.
Strategy in Action continued
Innovate
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Key stats
Over 100
2022 contractor training seminars
Carbon Neutral
2022 operations
Luceco and eFIXX have revealed their deserving winners for
the brand new “30 under 30 awards”. The awards were set up
to recognise, reward and champion the next generation of
electrical contractors.
We invest in both our business and our
industry to sustain our competitive
advantage and to contribute to society’s
sustainability goals.
Strategy in Action
Sustain
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Annual Report and Financial Statements 2022
Long-term growth within our industry is underpinned by
the constant evolution of electrical regulations. The UK’s
wiring regulations are updated on average once every
two years. Updates are largely focused on improving
safety features, which increase the value of the products
we sell and shortens the product replacement cycle,
increasing demand.
We have provided electrical contractors with access
tofree resources to train them on the latest wiring
regulations in the UK, thereby supporting the
development of our industry and investing in our
brandimage. We have held over 100 training seminars
nationwide this year, hosted in conjunction with our
major professional wholesale customers. Digital
traininghosted on our Luceco Academy website,
ourprofessional development portal for UK electricians,
was consumed by nearly 10,000 contractors in 2022.
To help further professional development within the
industry we have become the headline sponsor of the
prestigious eFIXX 30 under 30 awards, aimed at
recognising up-and-coming talent within the electrical
industry and to showcase work from the next generation
of electrical contractors. We were proud to announce
2022’s successful winners, recognising individuals who
are willing to go the extra mile and deliver outstanding
service and results.
One of those crowned a worthy winner was Alexander
Sime, founder of Neo Electrical Solutions, who showed
his gratitude for Luceco Group and explained what it
meant to have the Group’s support:
“Having such industry heavyweights like Luceco Group
sponsor these awards and individual categories, in my
opinion, really adds another level to the eFIXX 30 under
30 awards. To be accepting an award presented by
representatives of manufacturers that we regularly use
on some of our projects and to be recognised by some
of the biggest in the industry is a great feeling.”
We are also working with industry leaders to drive
change and contribute to society’s sustainability goals.
During the year we were proud to announce our
collaboration with the latest clean electricity campaign
from the Electrical Contractors Association (“ECA”),
“Leading the Charge”.
Our support for ‘Leading the Charge’ and eFIXX’s 30
under 30 awards are both integral parts of our Sustain
strategy, encouraging both students and apprentices to
become brand ambassadors, and advance Luceco’s
work towards a cleaner, sustainable world.
Our investment within the industry we operate in illustrates how we look
to the future to ensure we sustain our competitive advantage within our
chosen markets and contribute to society’s sustainability goals.
Strategy in Action continued
Sustain
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Annual Report and Financial Statements 2022
Key Performance Indicators
Increase sales to professional customers Increase our sales of low carbon products
• Grow our sales of professional-grade products designed
for installation by professional contractors to complement
our existing strong presence in the retail/DIY market
• Leverage the route to market provided by Wiring
Accessories to sell other products via the Professional
Wholesale channel, e.g. LED Lighting and EV charging
• Sell our products as part of a design
• Leverage the opportunity presented by electrification
and therefore decarbonisation of energy and
transportation
• Grow our sales of low carbon products to £100m by 2025
Growth percentage (%)
Link to risk Link to risk
Key to strategy
Key to principal risks
1
Impact of coronavirus
2
Operational concentration risk
3
Customers and products
concentrationrisk
4
Macroeconomic, political
andenvironmental
5
Loss of IT/data
6
Loss of key employees
7
Acquisitions
8
Legal and regulatory
9
Finance and treasury
Revenue generated from low carbon products (£m)
33.92022 vs 2019
-2.0
32.3
2022 vs 2021
2021 vs 2020
782022
56
44
2021
2020
1
2
4 6 7 9 1
2
4 6 7 9
Grow Innovate Sustain
Grow
3.82020 vs 2019
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Key Performance Indicators continued
Number of new product SKUs Research and development expenditure
• Sell adjacent products through existing sales channels
• Sell international variants of existing UK products
• Enhance the value of existing categories through
innovation and product value-add
• Leverage our own manufacturing capabilities and
relationships
• Continue to be at the forefront of innovation in our
industry
• Progressively add greater technology, such as controls,
smart functions and connectivity to the Group’s products
Number of new product SKUs
Link to risk Link to risk
Key to strategy
Key to principal risks
1
Impact of coronavirus
2
Operational concentration risk
3
Customers and products
concentrationrisk
4
Macroeconomic, political
andenvironmental
5
Loss of IT/data
6
Loss of key employees
7
Acquisitions
8
Legal and regulatory
9
Finance and treasury
Research and development expenditure (£m)
3.6249 20222022
3.0407
2.2598
20212021
20202020
3
4
6 7 8
1
6
7
Grow Innovate Sustain
Innovate
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Key Performance Indicators continued
Capital expenditure Carbon associated with our operations
• Invest in the agility and eciency of our vertically
integrated manufacturing
• Invest in our fulfilment capabilities
• Invest in our e-commerce oering
• Invest in enabling technology
• Keep our operations carbon neutral
• Reduce our value chain emissions by hitting
science-based targets
Capital expenditure (£m)
Link to risk Link to risk
Key to strategy
Key to principal risks
1
Impact of coronavirus
2
Operational concentration risk
3
Customers and products
concentrationrisk
4
Macroeconomic, political
andenvironmental
5
Loss of IT/data
6
Loss of key employees
7
Acquisitions
8
Legal and regulatory
9
Finance and treasury
Carbon emissions from operations net of carbon osets
(tCO
2
e)
1
2 3 4
5 6 7 9 4
8
9
Grow Innovate Sustain
Sustain
—5.6 20222022
—6.4
4,6734.4
20212021
20202020
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Annual Report and Financial Statements 2022
We believe that through the way we act, Luceco has a significant opportunity to create a lasting
positiveimpact on the world around us. We aim to do this through addressing three key areas of focus:
creating a sustainable future, empowering people and working with integrity and transparency.
Creating a
sustainable future
Operating sustainably is a key part of the Group’s
culture and is reflected within our Purpose, Mission
and Strategy; where we have made sustainability a
central pillar of the Group’s success. Our product
portfolio, combined with our business model and
experience, puts us in a strong position to help
create a sustainable future for all. Our immediate
targets have focused on realigning our product
portfolio to concentrate on the sale of low carbon
products, ensuring the plastic we use is recycled
and further that the packaging of the products we
sell is recyclable. Looking forward, we have
committed to the Science Based Targets initiative
(“SBTi”), targeting a 46.2% reduction in operational
emissions and a 27.5% reduction in emissions arising
from the use of sold products by 2031. Whilst we
recognise there is more to do, our operations
continue to oer one of the lowest operational
carbon footprints in our industry and we are
continuing to progress our sustainability agenda
moving forwards.
See pages 38 to 54
Environment, Social and Governance
Empowering
people
The key to our business model operating eectively
is the “can-do” culture created by our fantastic
teams. In order for this culture to continue to
flourish, we need our people to feel empowered to
excel in their work at Luceco. We endeavour to
recruit people from a range of backgrounds who are
passionate about innovation and customer service.
We invest in the training and development of new
and existing employees and we make sure we
engage with our teams to improve their experience
and help them feel part of the business.
Beyond our own teams we also look to empower
those who use our products. We provide
professionals with access to free training resources
and are supporting the development of the next
generation of electrical contractors.
See pages 55 to 57
Working with integrity
andtransparency
We are committed to acting with integrity and
transparency at all times, not just because it builds
trust with those we work with, but because it is the
right thing to do. As a global business, operating in
markets and countries with dierent cultures and
practices, we maintain consistently high ethical
standards by following our global Code of Conduct,
which applies to all Group employees and our
external business partners. We follow health and
safety best practices and all local regulations; always
striving to promote the health of our people and to
minimise risks in the workplace. Our approach is
supported by strong corporate governance and
zero-tolerance policies in relation to behaviour
which does not align to our values, and we
endeavour to ensure our suppliers share those same
values. Finally, we are keen to contribute to the
communities we operate in and encourage our
people to propose ways we can help.
See pages 58 and 59
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Climate change
As one of the biggest challenges the world currently
faces, climate change represents both a responsibility
and opportunity for our business. We have seen a
growing mandate from our stakeholders who are
seeking meaningful action to tackle greenhouse gas
emissions.
Recognising this, climate change is now included as a
principal business risk. The Group is well positioned to
make an increasing contribution to society’s climate
objectives, which presents new business opportunities
during the transition towards net zero. The Group has
been working with external consultants since 2021 to
better understand and mitigate our contribution to
climate change.
Task Force on Climate-related Financial Disclosures
(“TCFD”)
We are pleased to confirm that we have included
climate-related financial disclosures consistent with
thefour recommendations and the 11 recommended
disclosures set within our TCFD report, in compliance
with the FCA’s Listing Rule 9.8.6.R(8). Our report is set
out under the four TCFD pillars: Governance, Risk
Management, Strategy, and Metrics and Targets.
Governance
Board level
The Board has overall responsibility for climate-related
matters that aect the Group. The “Matters Reserved for
the Board” includes Environmental, Social and
Governance (“ESG”) matters to ensure there is clear
oversight of ESG-related considerations, including
climate change.
The Board’s key responsibilities regarding climate
change include:
• Approving the Company’s ESG Policy, ensuring it
remains aligned with the Company’s strategic
objectives
• Monitoring and assessing the impact of
climate-related risks and opportunities on the
Company’s business strategy and financial planning
• Approving the metrics and targets used by
theCompany to assess and manage relevant
climate-related risks and opportunities, and
monitorperformance against targets
During 2022, we committed to join the Science Based
Targets initiative (“SBTi”) in order to establish an
emissions reduction target aligned with the goals of the
Paris Agreement (limiting global warming to 1.5 degrees
celsius). Our commitment letter and proposed targets
were submitted in July 2022 with validation of the
targets by the SBTi currently underway.
Environment, Social and Governance continued
Creating a sustainable future
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Environment, Social and Governance continued
Task Force on Climate-related Financial Disclosures
(“TCFD”) continued
Governance continued
Board level continued
The Board has delegated responsibility for
climate-related matters to the Chief Financial Ocer
(“CFO”). The CFO is responsible for the development
and implementation of our climate change management
strategy. The CFO also provides a monthly update to the
Board on climate and ESG-related matters within
financial reporting and delivers a more detailed update
on a quarterly basis. Progress against our climate-related
targets is reported annually to the Board.
Management level
To support the CFO in the implementation of the
strategy, and the eective identification and
management of climate-related risks and opportunities,
two working groups have been established that meet on
a twice-yearly basis.
The first working group comprises senior management
from key business areas including: manufacturing,
product development, operations, finance, and supply
chain. They are responsible for the identification and
management of climate-related matters within their area
of the business and supporting the implementation of
carbon reduction measures.
The second working group comprises senior
management from customer-facing roles. The “Markets
and Trends” working group is responsible for monitoring
and providing feedback on changes in customer
requirements around climate and wider ESG matters, as
well as providing regular updates to customers on our
climate strategy.
In 2023, we are going to engage with our key customers
to understand their climate commitments and how they
may impact the Group in greater detail, as well as using
this as an opportunity to provide an update on our
progress.
Risk management
The identification, assessment and management of
climate-related risks is fully integrated into our risk
management framework and mirrors the approach
detailed on pages 64 to 71.
Two risk and opportunity assessment sessions are held
annually with each of the working groups to appraise
arange of climate-related risks and opportunities.
Theoutputs from these sessions are integrated into our
macroeconomic, political and environmental risk within
the principal risk assessment.
The risk assessment process considers a number of
categories, such as:
• Current and emerging regulations
• Legal
• Market
• Technology
• Customers
• Physical (acute and chronic)
When considering climate-related opportunities, the
following categories were considered:
• Resource eciency
• Energy source
• Products and services
• Market
• Resilience
Three principal climate-related risks and two principal
opportunities have been identified that impact the
Group. For more information see pages 43 to 47.
Creating a sustainable future continued
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Environment, Social and Governance continued
Task Force on Climate-related Financial Disclosures
(“TCFD”) continued
Risk management continued
Physical risk: scenario analysis
To better understand our exposure to the physical
impacts of climate change, we have conducted scenario
analysis. EarthScan™ allows us to evaluate physical risk
on assets critical to our business (manufacturing
facilities, warehousing and significant third-party OEMs)
for a suite of dierent hazards, timescales and scenarios.
We used EarthScan’s data and insights in our portfolio
and asset-level climate risk assessment for the following
climate hazards: flooding, heat stress, precipitation,
extreme wind, drought and wildfire.
Three IPCC scenarios have been used to assess physical
climate risks:
Business as usual (SSP5/RCP8.5) Emissions continue to
rise over the 21st century, in the worst-case scenario.
Emissions peak in 2040 (SSP2/RCP4.5) Emissions do
not increase beyond 2040. With current commitments,
this is the climate scenario that most closely resembles
current policy commitments.
Paris aligned (SSP1/RCP2.6) Emissions are aligned with
Paris Agreement targets. This is the best-case scenario.
The results from the business-as-usual (“BAU”) scenario
are shown below over the historical short, medium and
long-term time horizons.
Risk type Potential impact
Short
term
Present
Medium
term
2030
Long
term
2050
Drought Droughts are expected to increase under the BAU scenario. Our warehouses located in Spain and the UAE have
the highest exposure, and manufacturing sites in China and the UK have a low-risk exposure.
2 2 3
Flooding One of our sites is exposed to low-medium flooding risk while all other locations are considered low risk
(overallrisk is considered low).
1 1 1
Heat stress Most locations are exposed to a medium level of heat stress which will increase under the BAU scenario.
Although the risk level is medium, we have mitigation to help minimise disruption (air conditioning in our China
manufacturing facility).
4 4 4
Precipitation Precipitation risk refers to the risk caused by exposure to extreme precipitation events. Four sites are exposed to
a medium-high risk.
3 3 3
Wildfire All sites are at a low risk from wildfire events.
1 1 1
Wind Extreme wind events can occur during weather events such as storms, hurricanes and tornadoes. The overall risk
is low, however sites located in China are at a medium-high risk.
2 2 2
Creating a sustainable future continued
Risk exposure
1
2
3
4
5
6
Low High
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Environment, Social and Governance continued
Task Force on Climate-related Financial Disclosures (“TCFD”) continued
Risk management continued
Adaptation and mitigation measures
Both the acute and chronic physical impacts of climate change could pose a risk to our operations. We will continue to monitor our exposure and maintain a range of mitigation
measures to limit any potential disruptions to our operations. Due to high levels of preparedness and resilience, we have not experienced any significant impacts from the
physical impacts of climate change on our operations. For more information on how we mitigate physical risks please refer to climate-related risk three on page 43.
Climate-related risks
CR1
Changing customer behaviour
Risk owner: CFO
Risk and impact:
• Eight of our top ten customers have made a
commitment to achieve net-zero emissions and/or
established a science-based emissions reduction target
• Failure to meet the increasing expectations of our
customers on climate action could lead to a loss of
revenue
Mitigation:
• Management liaises closely with customers to
understand their ambitions and requirements relating to
climate change
• Development of climate change strategy with
independent consultants and setting a science-based
emissions reduction target
• Responding to the Carbon Disclosure Project to increase
transparency of our actions to address climate change
• Proactive approach to emissions reductions including
investment into operational eciency, sourcing
renewable electricity and osetting residual Scope 1
emissions
Link to strategy:
Products & Services,
Supply Chain, Research &
Development, and
Operations
Change in year:
Risk appetite:
Risk accepting
Time horizon:
Long term
Net risk level:
Low Medium High
Metric:
Total GHG emissions
% revenue under GHG target
Creating a sustainable future continued
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Environment, Social and Governance continued
CR2
Increased stakeholder concern or negative stakeholder feedback
Risk owner: CFO
Risk and impact:
• ESG issues, particularly climate change, are an
increasing focus area for our key stakeholders, including
customers, consumers, investors and employees
• Damage to our reputation in relation to climate change
could lead to a loss of revenue or negative impact on
share prices
Mitigation:
• Management liaises closely with customers to
understand their ambitions and requirements relating to
climate change
• Development of our climate change strategy with
independent consultants and setting a science-based
emissions reduction target
• Responding to the Carbon Disclosure Project to increase
transparency of our actions to address climate change
and adopt a proactive approach to requests for
information from stakeholders
• Proactive approach to emissions reductions including
investment into operational eciency, sourcing
renewable electricity and osetting residual Scope 1
emissions
Link to strategy:
Products & Services,
Supply Chain, Research &
Development, and
Operations
Change in year:
Risk appetite:
Risk averse
Time horizon:
Short to medium term
Net risk level:
Low Medium High
Metric:
Total GHG emissions
% revenue under GHG target
Creating a sustainable future continued
Task Force on Climate-related Financial Disclosures (“TCFD”) continued
Risk management continued
Climate-related risks continued
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Annual Report and Financial Statements 2022
Environment, Social and Governance continued
CR3
Increased severity and frequency of extreme weather events
Risk owner: CFO
Risk and impact:
• Following our detailed assessment of physical risks,
wehave identified that extreme weather events
(precipitation and wind risk) could pose a risk to our
sites and supply chain, particularly in China
• Severe disruption to our sites or suppliers could result
ina loss of revenue
Mitigation:
• A buer stock is held in our UK warehouses in the event
of supply disruption in China
• All suppliers are provided with visibility of forward
orders and supply issues are discussed upfront
• Our production facility in China is spread across multiple
buildings on the same site to mitigate site disruptions
• The Group owns its product designs and production
tooling, allowing manufacturing activities to be moved
between suppliers more easily
• Business continuity plans have been developed and
business interruption insurance put in place for our
manufacturing facility, as well as key OEM suppliers
Link to strategy:
Operations and Supply
Chain
Change in year:
Risk appetite:
Risk accepting
Time horizon:
Long term
Net risk level:
Low Medium High
Metric:
Physical risk exposure rating
(EarthScan rating)
Creating a sustainable future continued
Task Force on Climate-related Financial Disclosures (“TCFD”) continued
Risk management continued
Climate-related risks continued
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Environment, Social and Governance continued
CO1
Access to new markets
Risk owner: CFO
Description:
• The electrification of energy presents a significant
opportunity for the Group as new markets emerge from
the transition to net zero
• Demand for electric vehicle charging solutions for
homes and commercial premises is set to increase
significantly
• Increased electrification could create opportunities for
new product categories that complement our existing
oering, such as battery storage, inverters and solar PV
Realising the opportunity:
• Investment in R&D will enable us to bring new and more
ecient products to market to maintain competitive
advantage and grow market share
• Acquisition of Sync EV and launch of single-phase Mode
3 EV chargers under the joint BG Sync EV brand
• Opportunity to acquire businesses poised to benefit
from the electrification of residential energy use
Link to strategy:
Products & Services,
Supply Chain, and
Research & Development
Change in year:
Metric:
Revenue from low carbon
products
Time horizon:
Medium to long term
Net opportunity level:
Low Medium High
Task Force on Climate-related Financial Disclosures (“TCFD”) continued
Risk management continued
Climate-related opportunities
Creating a sustainable future continued
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Environment, Social and Governance continued
CO2
Expansion of existing products and services
Risk owner: CFO
Description:
• The transition to net zero relies on the electrification of
energy within homes and commercial buildings which
could increase demand for our existing products and
services
• We could see an increase in demand for low carbon
products and “green home tech” solutions such as smart
plugs and controls, extension leads and ultra-ecient
LED lighting
• Increased electrification within buildings could create
additional demand for wiring accessories as building
electrics are upgraded to manage the additional
electrical load
Realising the opportunity:
• Investment in R&D to enable us to bring new and more
ecient products to market to maintain competitive
advantage and grow market share
• Investment in LED lighting lens design to improve
lighting eciency
• Investment in lighting controls oering to improve
lighting eciency. We have seen a 3.5-fold increase in
revenue from lighting controls in 2022
• Acquisition of DW Windsor to expand our energy
ecient lighting oering
Link to strategy:
Products & Services,
Supply Chain, and
Research & Development
Change in year:
Metric:
Revenue from low carbon
products
Time horizon:
Short to medium term
Net opportunity level:
Low Medium High
Creating a sustainable future continued
Strategy
Climate change has the potential to impact our business
across the short, medium and long term. Our business
strategy and financial planning processes provide
mitigation against the risks and position us well to
capitalise on the opportunities.
Time horizons
When considering climate-related risks and
opportunities, the following time horizons are used:
• Short term: 0 to 1 year
• Medium term: 1 to 3 years
• Long term: 3 to 10+ years
As part of the scenario analysis, we expanded the
medium and long-term horizons (2030 and 2050
respectively) to gain a better understanding of how
these risks and opportunities could evolve in the future
and test the resilience of our strategy.
Task Force on Climate-related Financial Disclosures (“TCFD”) continued
Risk management continued
Climate-related opportunities continued
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Annual Report and Financial Statements 2022
Environment, Social and Governance continued
Task Force on Climate-related Financial Disclosures
(“TCFD”) continued
Strategy continued
Financial planning
Climate-related matters influence various elements of
our financial planning process. Acquisitions continue to
play a key role in our sustainable growth strategy; Sync
EV, a well-regarded supplier of residential EV charge
points within the UK, was acquired in March 2022 to
help accelerate our growth into the expanding EV
charging market.
This builds on the acquisition of DW Windsor, which was
completed in October 2021 to expand our LED lighting
product oering.
Raw material costs such as copper have continued to be
elevated during the year as the post-pandemic recovery
continues. Demand for copper is expected to increase,
driven in part by the electrification of energy and
transportation. We continue to use forward purchasing
strategies and hedging along with short-term fixed price
agreements to protect against volatility.
Our aim is to leverage our position as the UK’s leading
provider of domestic electrical devices to seize
opportunities presented by the electrification of
residential energy and private transportation.
To this end, we have made excellent progress against our
£100m revenue by 2025 from low carbon products
during 2022. Low carbon products are classified as LED
lighting, excluding revenue from lighting columns, and EV
chargers.
When evaluating risks and opportunities, the potential
financial impact is also evaluated as part of the
assessment process to understand the scale of the
impact.
Carbon pricing mechanisms (“CPMs”) are not
currentlyused by the Group. The use of a CPM is
considered burdensome at this stage, given the heavy
involvement of the finance team in the management of
climate-related matters.
Products & Services
Our low carbon product ranges (LED
lighting, EV chargers and smart standby
products) help customers to reduce their
GHG emissions and transition towards a
low carbon future. We strive to develop
more ecient products and better
controls to improve energy eciency.
Supply Chain
One of our strengths is the relationship
we have with our suppliers. We recognise
that we must work together to make more
sustainable choices across product
design, material choices and the
manufacturing processes.
Research & Development
Our business is well placed to take
advantage of the inevitable electrification
of energy as we transition towards a low
carbon economy. Opportunities for
expansion into electric vehicle charging
and other low carbon solutions such as
smart home tech.
Operations
One of our first priorities is to reduce the
emissions from our operations. By
implementing eciency improvements,
we can reduce energy use, raw material
use, waste and water use to limit our GHG
emissions.
Link to climate-related risks and
opportunities:
CR1
CR2
CO1
Link to climate-related risks and
opportunities:
CR1
CR2
CR3
C01
CO2
Link to climate-related risks and
opportunities:
CR1
CR2
CO1
Link to climate-related risks and
opportunities:
CR1
CR2
CR3
C01
CO2
Creating a sustainable future continued
Integration of climate-related issues into our strategy
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Environment, Social and Governance continued
Products & Services
• Acquisition of Sync EV and launch of
single-phase Mode 3 EV chargers
under the joint BG Sync EV brand
• £78m of revenue from low carbon
product categories, delivering
significant progress against our £100m
low carbon product revenue target for
2025
• 3.5-fold increase in lighting control
revenue for LED lighting projects in
2022
Supply Chain
• Insourcing of EV charger production
within our China manufacturing facility
with 100% renewable electricity supply
• Acquisition of DW Windsor with UK
manufacturing capability and 100%
renewable electricity supply
• Evaluation of key supplier’s physical
climate risk exposure to understand
vulnerabilities within our supply chain
Research & Development
• Specialist R&D function in China and
the UK and R&D expenditure of £3.6m
in 2022
• Development of higher power,
three-phase EV chargers for larger
homes and commercial premises
• Investigating on-street EV charging
solutions within DW Windsor
• Dedicated optical engineer focusing on
improvements to lens design to
improve lighting eciency
• Working towards the development of
environmental product declarations
(“EPD”) and industry best practice on
circular design in lighting
Operations
• Sourced renewable electricity for all
Group operations in 2022, bring our
Scope 2 emissions to zero
• Osetting residual Scope 1 emissions
for 2022
• Investment in energy eciency and
automation projects within the China
manufacturing facility
• Evaluation of our key locations
(manufacturing and distribution
centres) to better understand physical
climate risk exposure to understand
vulnerabilities across direct operations
• All plastic packaging is recyclable with
a minimum 30% recycled content
Achievements during 2022
Targets and commitments
Luceco plc commits to reduce absolute Scope 3
GHG emissions from the use of sold products 27.5%
by 2031 from a 2021 base year.
Luceco plc commits to reduce absolute Scope 1
and Scope 2 GHG emissions 46.2% by 2031 from
a2021 base year.
Luceco plc commits to generating £100m revenue
from low carbon product sales by 2025 from a 2021
base year.
Creating a sustainable future continued
Task Force on Climate-related Financial Disclosures (“TCFD”) continued
Strategy continued
Integration of climate-related issues into our strategy continued
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Annual Report and Financial Statements 2022
Environment, Social and Governance continued
Task Force on Climate-related Financial Disclosures (“TCFD”) continued
Strategy continued
Scenario analysis: transition risks and opportunities
We have assessed how our main climate-related transition risks and opportunities could evolve under three scenarios, based upon the Network for Greening the Financial
Systems (“NGFS”) climate scenarios. Potential impacts and their materiality were considered across short (present), medium (2030) and long-term (2050) horizons. The three
scenarios were based upon:
Net Zero 2050 (“NZ”) – an ambitious scenario that limits global warming to 1.5°C through stringent climate policies and innovation, reaching net zero CO
2
emissions no later than 2050.
Delayed Transition (“DT”) – assumes global emissions do not peak until 2030, followed by strong policies that are needed to limit warming to below 2°C. This scenario
explores the impact that a delayed and disorderly transition could have.
Current Policies (“CP”) – assumes that only currently implemented policies are preserved, leading to a “hot-house world”, a higher degree of physical risk and lower impact of
transitional risk.
Transition risks Description Scenarios
Short
term
Medium
term
Long
term Potential financial impact
Changing customer
demands
Trend within our retail customer base of ambitious carbon
reduction targets that requires suppliers to set similarly
ambitious targets.
NZ
3 4 6
Failure to respond to increasing customer demand for
climate action could lead to a loss of revenue through
reduced demand for products and services.
DT
2 3 6
CP
2 2 2
Increased stakeholder
concern
ESG issues, particularly climate change, are a large
concern for our key stakeholders (investors, customers,
employees and consumers).
NZ
3 4 6
Damage to our reputation in relation to climate
change could lead to a loss of revenue or negative
impact on share prices.
DT
2 3 6
CP
2 2 2
Increased pricing
ofGHG emissions
To achieve the ambitious goal of net zero emissions by
2050, the policy landscape around GHG emissions will
need to evolve to create the necessary environment to
enable the transition to a low carbon economy.
NZ
4 4 4
More ambitious climate policies could increase direct
and indirect operating costs. Failure to comply with
reporting obligations could have a negative impact
on our reputation.
DT
2 2 5
CP
1 1 1
Creating a sustainable future continued
Materiality
Risk
1
2
3
4
5
6
Low High
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Environment, Social and Governance continued
Transition risks Description Scenarios
Short
term
Medium
term
Long
term Potential financial impact
Increased cost of raw
materials
Demand for critical materials, such as copper, is projected
to rapidly grow as sustainable technologies are deployed
(renewable energy, electrification, EVs etc.) in pursuit of
net zero. Rapid growth in demand and the timespan to
develop new supplies of metals can aect the supply and
demand balance.
NZ
4 4 4
Increased raw materials costs would inevitably lead
to increased product costs, although these costs
can usually be passed on. Constrained supply chains
could temporarily reduce production output.
DT
2 2 5
CP
2 2 2
Opportunities Description Scenarios
Short
term
Medium
term
Long
term Potential financial impact
Access to new markets
The electrification of energy presents a significant
opportunity for the Group through the net zero transition.
This predominantly relates to EV charging solutions but could
also extend to new product categories that complement our
existing oering (battery storage, inverters, solar PV etc.).
NZ
4 6 6
The transition to net zero presents a range of exciting
opportunities for the Group to grow revenues from
new product categories. For example, the UK EV
charging market is estimated to be worth £500m
annually by 2025.
DT
2 4 6
CP
2 4 4
Expansion of existing
products and services
The transition to net zero relies on the electrification of
energy and eciency gains within buildings which could
increase demand for our products. This includes low
carbon products (LED lighting, smart plugs and controls)
and wiring accessories as building electrics are upgraded
to manage the additional electrical load.
NZ
4 6 6
The transition to net zero presents a range of exciting
opportunities for the Group to also grow revenues
within existing product categories.
DT
2 4 6
CP
2 4 4
We have identified a range of transition risks and opportunities relating to reputation, policy and market and feel well equipped to eectively manage them. Our sustainable
growth strategy will focus on continued organic growth and targeted acquisitions to gain access to emerging product markets and expand our existing product oerings.
Sustainability will continue to be a key pillar of our business strategy as the world transitions to net zero. To maintain strong relationships with our key customers and
stakeholders, we have established a carbon management strategy and committed to setting science-based emissions reduction targets.
Creating a sustainable future continued
Task Force on Climate-related Financial Disclosures (“TCFD”) continued
Strategy continued
Scenario analysis: transition risks and opportunities continued
Materiality
Risk
1
2
3
4
5
6
Low High
Materiality
Opportunity
1
2
3
4
5
6
Low High
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Environment, Social and Governance continued
Task Force on Climate-related Financial Disclosures
(“TCFD”) continued
Strategy continued
Scenario analysis: transition risks and opportunities
continued
In 2022, 100% of electricity consumption was from
renewable sources and our residual Scope 1 emissions
were oset. We will continue our eorts to keep pace
with customer expectations and develop innovative
products that help our customers to reduce their energy
consumption and associated climate impacts.
We believe that these eorts also represent a significant
growth opportunity for the Group, as demand for
bothexisting and new products increases over the
coming years.
Metrics and targets
Streamlined Energy and Carbon Reporting
The Companies Act 2006 (Strategic Report and
Directors’ Report) Regulations 2013 requires the Group
to disclose its annual energy consumption and
greenhouse gas emissions from Streamlined Energy
andCarbon Reporting (“SECR”) regulated sources.
The Group’s emissions have been independently
calculated in accordance with the GHG Protocol
1
, utilising
emission factors published by the UK Government and
the International Energy Agency (“IEA”).
The table below details our GHG emissions from all
Group operations and our value chain across Scopes 1, 2
and 3 for the year ending 31 December 2022, compared
against the previous year.
Creating a sustainable future continued
1. GHG Protocol Corporate Accounting and Reporting Standard
and the Corporate Value Chain (Scope 3) Standard.
2. Scope 1 includes emissions from natural gas, propane, refrigerant
gases and Company-owned vehicles.
3. Scope 2 emissions are associated with our electricity
consumption. The market-based methodology (“MBM”) has
been adopted to reflect the energy generated on site via the
solar PV array in China and the sourcing of renewable energy
certificates for all Group operations. Our location-based
emissions (“LBM”), reflecting the grid average emissions
intensity for each country of operation, were 4,140 tCO
2
e in
2022 (5,241 tCO
2
e for 2021).
4. Remaining Scope 3 emissions include capital goods, fuel
and energy-related activities not included in Scopes 1 and 2,
business travel, waste generated in operations, up/downstream
transportation and distribution, and the end-of-life treatment of
sold products.
5. Operational carbon neutrality was achieved by retiring high
quality carbon osets against residual Scope 1 emissions.
GHG emissions (tCO
2
e) 2022 2021 Change (%)
Scope 1
2
886 969 (9%)
Scope 2 (MBM) — 195 (100%)
Scope 3
3
Use of sold products 461,169 526,775 (12%)
Purchased goods and services 97,593 125,502 (22%)
Remaining Scope 3 emissions
4
24,096 32,590 (26%)
Total Scope 1 + 2 emissions 886
5
1,165 (24%)
Total Scope 3 emissions 582,858 684,867 (15%)
Total GHG emissions 583,745 686,032 (15%)
Outside of Scope direct biogenic emissions 20 27 (28%)
Emissions intensity ratio
Scope 1 + 2 tCO
2
e/£m turnover 4.30 5.10 (16%)
Scope 3 tCO
2
e/£m turnover 2,825 3,006 (6%)
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Environment, Social and Governance continued
Task Force on Climate-related Financial Disclosures (“TCFD”) continued
Metrics and targets continued
Streamlined Energy and Carbon Reporting continued
Total GHG emissions have fallen by 15% compared to last year. 2021 was a particularly buoyant year for the Group as we experienced increased demand for our products
because of COVID lockdowns and increased stocking by our distributor customers. In 2022, demand within the DIY market normalised and customers ran down their
stockholdings, reducing demand for our products. This has seen our emissions decrease across all emission categories except for business travel, which largely reflects a
resumption of normal business activities following the easing of COVID restrictions. The in-use emissions from our products has fallen by 12% as a result of falling demand,
improvements in product eciency and a decrease in the emissions intensity of grid electricity where our products are sold. Purchased goods and services emissions have
decreased by 22% as a result of falling demand for products and all other Scope 3 emissions have reduced by 26%.
Operational (Scope 1 and 2) emissions have fallen by 24% as production output slowed during the year. We also increased our sourcing of renewable electricity to 100%,
reducing Scope 2 emissions to zero. We continue to invest in eciency improvements in our manufacturing facility, including projects for automation to reduce wastage and
increased throughput and air conditioning control systems to reduce energy demand.
The table below details our underlying energy usage across global operations, of which 36% is from UK-based operations. Energy usage has decreased 22% relative to last year.
Energy use (kWh) 2022 2021 Change (%)
Natural gas 2,082,037 2,362,484 (13%)
Propane 27,051 27,636 2%
Company vehicles 1,747,676 1,937,879 (11%)
Electricity 7,619,816 9,675,502 (27%)
Total 11,476,580 14,003,501 (22%)
Creating a sustainable future continued
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Task Force on Climate-related Financial Disclosures
(“TCFD”) continued
Metrics and targets continued
Renewable electricity
We have continued our eorts to eliminate our Scope 2
emissions and sourced 100% renewable electricity
across all operations in 2022. Renewable Energy
Certificates (“REC”) have been sourced to cover the
electricity consumption for all operational locations,
accounting for 92% of our total energy consumption.
The solar PV array at our manufacturing facility in China
generated 8% of total electricity consumption.
Carbon neutrality
For the second year running, we have oset our residual
Scope 1 and 2 emissions to achieve operational carbon
neutrality. As our Scope 1 and 2 emissions for 2021 have
been restated, we have oset the discrepancy between
the figures reported last year and this year along with
our residual Scope 1 emissions for 2022. In total, we have
retired 947
1
credits, sourced from the Weyerhaeuser
Aorestation Project in Uruguay. The project covers
over 18,800 hectares of degraded land which is
expected to continue to degrade in the absence of this
aorestation project. The certificates have been
awarded by the Rainforest Alliance in accordance with
the Verified Carbon Standard.
Calculation methodology
Natural gas – Calculated using metered consumption
from supplier invoices as kWh figure. Where actual
consumption data was not available, consumption has
been estimated based on floor areas and published
benchmarks or heating degree day regression analysis.
HFCs – Refrigeration emissions have been calculated
from service records where available. Where records
were unavailable, HFC losses have been estimated using
the screening methodology. Emissions from rented
oces with shared air conditioning services have been
excluded due to a lack of data, however emissions are
immaterial.
Company-owned vehicles – Emissions have been
calculated using fuel consumption data where available.
Vehicle type and mileage has been used to calculate
emissions where fuel data is not available. UK
Government “SECR” kWh emission factors have been
utilised to calculate the underlying energy use.
Electricity – Calculated primarily using metered
consumption from supplier invoices and half-hourly
consumption data. Where actual consumption data is
not available, consumption has been estimated based on
floor areas and published benchmarks.
Scope 3 – Purchased goods and services, capital goods,
business travel, waste generated in operations,
transportation and distribution have been calculated
using a financial screening methodology which uses
high-level environmentally extended input output
(“EEIO”) factors to estimate associated GHG emissions
from financial spend information. Energy-related
activities not included in Scope 1 and 2 have been
calculated using kWh consumption data and UK
Government emission factors.
Use of sold products emissions have been modelled
based on sales and product data and assumptions
surrounding the use of our products over their expected
lifespan. Finally, the end-of-life treatment of sold
products has been screened based on the estimated
weight of products sold during the year.
Environment, Social and Governance continued
Creating a sustainable future continued
1. 61 credits for the restatement of 2021 Scope 1 and 2 emissions
and 947 credits for 2022.
Electricity sourcing mix
2021 2020
Standard
grid
REC
Solar PV
2022
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Environment, Social and Governance continued
Task Force on Climate-related Financial Disclosures
(“TCFD”) continued
Metrics and targets continued
Noted changes in 2021 emissions
The methodology for use of sold products has been
updated. In 2021, an assumption was made on the
average usage of a lighting product. This assumption
has been updated to consider 75% of the expected
lifespan of our lighting products. LED lighting products
have an expected lifespan ranging from 15,000 to
100,000 hours, therefore this approach more accurately
represents the emissions associated with product use.
Improvements have also been made to the end-of-life
treatment of sold products calculations to use actual
weight data rather than approximations.
Emissions have been restated to account for the
acquisition of Sync EV and the opening of our Southern
European Distribution Centre in Barcelona.
In line with SBTi GHG inventory guidance on minimum
boundaries, hotel stays (a sub-set of business travel
emissions) and process of sold products have been
excluded from the GHG inventory.
Carbon Disclosure Project (“CDP”)
We received a management-level score (B) for our
response to the CDP Climate Change questionnaire in
2022. This is our second year of reporting to the
platform, so we are delighted to have achieved a strong
grade that reflects our swift progress integrating
climate-related issues into our business operations.
Our response contains further information on our
climate governance and risk management processes,
climate-related risks and opportunities, GHG emissions
and business strategy.
Creating a sustainable future continued
Scope 1 and 2 target (tCO
2
e) Scope 3 target (tCO
2
e) Low carbon product revenue £m
2022
906
461,169
2022 20222031
641
381,912
56
78
100
2031 20252021
1,192
526,775
2021 2021
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ESG objectives
At the start of the year, the Board agreed the following
ESG objectives for 2022:
1. Make significant progress towards delivering £100m
of revenue from low carbon products in 2025
2. Commit to the Science Based Targets initiative
(“SBTi”) and seek the validation of associated
emission reduction targets
3. Ensure all products sold in the year use recyclable
plastic packaging
4. Ensure 30% of plastic packaging used in the year is
recycled
Low carbon product revenue
We have delivered significant progress against our low
carbon product revenue target and are on track to
achieve this target by 2025.
Science Based Targets initiative
During 2022, the Board signed o our commitment letter
to join the Science Based Targets initiative (“SBTi”).
TheSBTi defines and promotes best practice in
science-based target setting and establishes how quickly
organisations need to reduce their GHG emissions to
prevent the worst eects of climate change.
Our target submission was made in July 2022 and the
targets are currently being reviewed by the SBTi. Our
proposed targets are to:
• Reduce absolute Scope 1
1
and Scope 2 GHG emissions
46.2% by 2031 from a 2021 base year
• Reduce absolute Scope 3 GHG emissions from the use
of sold products 27.5% by 2031 from a 2021 base year
To achieve our Scope 1 and 2 target, we have increased
our sourcing of renewable electricity to 100% and will
investigate opportunities to reduce our reliance on fossil
fuels across transportation, heating and process use.
This includes transitioning to electric vehicles for
company cars and the use of heat pumps to replace
gas-fired heating systems in our oces and distribution
centres. We will also focus on improving energy
eciency to reduce costs and GHG emissions.
For our Scope 3 target, we will continue to innovate to
improve the energy eciency of our products. We have
a track record of increasing lumens per watt and
continue the integration of controls with lighting
products to reduce energy use. Our R&D eorts within
EV chargers will focus on how to enhance smart
connectivity, reduce charging losses, and reduce
standby power consumption. Finally, eorts made by
countries in which our products are sold to decarbonise
the electricity grid will help deliver significant reductions
in our emissions from the use of sold products.
We have made great progress in the first year of our
target and will continue our work to reduce GHG
emissions across our entire value chain.
Plastic packaging
During 2022, we have improved our packaging
specifications, particularly around plastic packaging.
The first improvement we have made is to ensure that
packaging is made from one single polymer to ensure
they are recyclable. The second improvement has been
to increase the minimum recycled content of plastic
packaging to 30%.
Next steps and plan for 2023
Our ESG objectives for 2023 are as follows:
• Formally engage with key customers to better
understand their climate ambitions and to
communicate our strategy
• Undertake detailed energy audits of UK operations as
part of the Energy Savings Opportunity Scheme
• Develop a Research and Development roadmap for
over the short, medium and long term that will help us
deliver our Scope 3 science-based target
• Begin work to develop a set of product design criteria
that help to improve the sustainability of our products
Creating a sustainable future continued
Environment, Social and Governance continued
1. Scope 1 emissions include the biogenic elements as per the SBTi
target requirements.
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Environment, Social and Governance continued
Empowering people
Our culture
Our business model is underpinned by the “can-do”
culture of our teams. Our people are customer-driven,
designing products which we know our customers will
love and that will improve the customer experience. We
are team-focused, working together to achieve our
objectives. We ensure that we reward achievement with
opportunity. We aim to be bold and innovative, thinking
dierently and trusting each other to create great
products for our customers. Finally, alongside all these
qualities, we are principled in the way we act with our
customers and suppliers. We do what we say and do
what is right.
We recognise that in order for this “can-do” culture to
continue to thrive, we need to invest in our people. We
focus on the training and development of our teams, so
they have the skills to innovate and confidence to move
quickly. We carefully recruit from all backgrounds to
ensure our teams work well together. We engage with
our employees and act on their feedback, to ensure our
teams feel part of our business and go the extra mile for
our customers. Above all else, we treat our teams with
the respect and recognition that their hard work
deserves and apply the same principled mindset to them
as they do to our customers.
Equality and diversity
We understand the importance and benefits of greater
diversity, including social and professional background,
cognitive and personal strengths, sexual orientation,
disability status, gender and ethnicity throughout the
organisation. We are committed to ensuring that
recruitment and promotion of individuals at all levels of
the business is based on merit and objective criteria and
that, within this context, each candidate is judged on
their unique combination of skills, knowledge and
experience, as well as their social and professional
background, cognitive and personal strengths, sexual
orientation, disability status, gender and ethnicity.
This is reflected in our Equality and Diversity Policy,
which demonstrates our commitment to:
• Developing an ethos which respects and values all
individuals equally
• Eliminating all forms of discrimination
• Ensuring there are no barriers based upon colour,
culture, ethnicity, race, religion, disability, gender,
sexuality or age which limit or discourage access to
promotion, recruitment or training
• Ensuring that all aspects of employment avoid
stereotyping based upon colour, culture, ethnicity,
race, religion, disability, gender, sexuality or age
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Environment, Social and Governance continued
Equality and diversity continued
• Promoting good understanding of cultural, racial,
ethnic and religious diversity, good race relations,
disability, gender and age equality
• Taking positive action to encourage the development
of a more diverse workforce
The policy is available on our intranet and all new
starters are made aware of it during their induction into
the business and are expected to subscribe to it at the
time of their appointment.
The policy is reviewed on an ongoing basis and a full
review takes place at least annually.
We do not tolerate behaviour which breaches the policy
and encourage sta to use our grievance procedure to
report any actual or suspected breaches. We are not
aware of any breaches during the year.
Gender diversity
The table below shows the gender diversity of our
workforce at the year end. The gender balance
comparatives have been impacted by the integration of
the acquisitions of DW Windsor and Sync EV. We have
taken a number of steps in recent years to promote the
retention of female talent, including improving maternity
benefits and improving flexible working.
Flexible working
We appreciate the importance of flexible working in the
modern workplace and we empower our employees to
work flexibly when possible. We have a stand-alone
Flexible Working Policy and employees have a right to
make an application from day one of their employment.
This policy allows employees to request a change to the
number of hours that they work, change the pattern of
hours worked or perform some or all of the work from
the employee’s home. We also endorse hybrid working
with our Homeworking Policy and, where circumstances
allow, there is a minimum requirement of 40% oce
attendance with the remaining 60% being home
working. We recognise we have a duty of care to
employees working from home and we ensure that
working from home risk assessments are performed in
order to ensure our teams have the correct tools and
environment to work comfortably.
2022 2021
Male Female Male Female
Board 6 75% 2 25% 6 86% 1 14%
Senior management
1
12 86% 2 14% 11 85% 2 15%
Direct reports
2
72 81% 17 19% 53 75% 18 25%
Other employees 1,015 62% 629 38% 822 53% 729 47%
Total 1,105 63% 650 37% 892 54% 750 46%
1. Individuals reporting directly to the CEO or CFO.
2. Individuals reporting directly to senior management.
Empowering people continued
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Environment, Social and Governance continued
Employee involvement
We know the importance of good internal
communication. The Board communicates the strategy
to employees each year and we provide regular updates
on progress and any changes taking place in the
business. Employees are invited to contribute product or
operational ideas and are supported by their line
managers and HR department if they have any concerns.
Employee engagement
A Group-wide employee engagement survey was
conducted in the year. This covered all businesses,
including those recently acquired.
The survey indicated that employees welcomed
increased eorts to invest more in training and
development and hoped that further progress could be
made in this area. Employees also welcomed our flexible
working policy introduced during the pandemic and
retained in certain sites where operationally possible.
The survey highlighted understandable concerns
regarding the impact of inflation on the cost of living.
We have responded to this with salary increases for
2023 that are on average greater than the wider market,
with the largest percentage increases given to the
lowest paid. As the Group continues to expand, the
survey has also highlighted a need to improve the
definition and internal communication of our vision,
culture and values. Employees also hoped that more
could be done to improve diversity within the Group.
This will be a key focus area for 2023.
Remuneration arrangements
We ensure that our remuneration policies and practices
are aligned to our purpose and values, support the
delivery of the Group’s strategy and promote long-term
sustainable success. We regularly benchmark employee
pay against the external market to ensure it is fair
throughout the Group and we reward achievement with
opportunity.
All UK employees are encouraged to participate in the
Company’s performance through our share incentive
plan, helping them feel part of the business and allowing
them to share in the Group’s success.
Learning and development
We know that high quality and sustained learning and
development (“L&D”) is crucial to the ongoing success
of the business. We are also aware that with an increase
in flexible working, it is all the more important that we
maintain consistency in our training procedures, and this
starts on day one of an individual’s employment at
Luceco. Within their first week of employment all sta
receive a Company induction from their Human
Resources Manager, Payroll Manager and a Health,
Safety and Facilities Coordinator. This ensures the new
team member feels comfortable in their environment
and that they know we are available to help should they
need assistance. We also recognise how important the
line manager’s role is in the induction process and we
ensure that all line managers are trained in how to work
with new starters, how to identify their initial needs and
how to set clear goals and objectives.
Following induction, we continue to develop employees
for the long term. Through our Annual Performance
Review process, we do not just look to appraise
performance in the year, we identify individual training
needs and ensure specific personal development plans
are in place to tailor to that team member’s
requirements.
Luceco has invested heavily in our L&D tools in recent
years, partnering with Hays Thrive/Go 1 to introduce our
first L&D platform, which is available to all employees.
This platform covers compulsory training, such as
“Anti-money Laundering” to ensure our teams have the
knowledge they need to comply with all relevant laws
and regulations, but also includes modules related to
more personal development and growth. We are
pleased with the continued success of this project in
2022, with 3,975 training modules completed by our
employees during the year.
Importantly, the L&D platform covers learning regarding
mental health and general wellbeing, which is something
that we have sign-posted to our employees, especially in
light of the pandemic. Our employees’ health, happiness
and wellbeing is paramount to us and we are pleased
that this platform is providing further support.
Empowering people continued
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We act fairly in our dealings with fellow employees,
customers, suppliers and business partners. Our global
Code of Conduct applies to all Group employees and
our external business partners. It aims to ensure that
Luceco maintains consistently high ethical standards
across the globe, while recognising that our businesses
operate in markets and countries with cultural
dierences and practices.
The Code of Conduct is available on our intranet and
allnew employees are made aware of it during their
induction.
Health and safety
Our Health and Safety Policy sets out our approach to
providing attractive working conditions for our people.
We aim to prevent harm to, and promote the health of,
all employees, by applying health and safety
programmes, rules and regulations at all of our sites.
Allemployees are responsible for complying with health
and safety regulations and we have a health and safety
champion in each operating unit, who is responsible for
ensuring compliance with best practice and all local
regulations.
Our Health and Safety Policy is made available in local
languages and all new starters must confirm that they
have read and understood it. The policy is reviewed in
full at least annually and more regularly if required.
We continually monitor our health and safety
performance to ensure compliance and to enable us to
take any corrective action if issues are identified. During
the year, there were 19 non-reportable accidents
reported in our Telford facility (2021: 14) and, in China,
two minor accidents were reported (2021: ten).
Anti-bribery and Corruption Policy
Our Anti-bribery and Corruption Policy sets out our
zero-tolerance approach, which extends to all business
dealings and transactions in which we are involved.
Thepolicy is widely publicised across all our operations
and is also available on our intranet. All new starters
aremade aware during their induction. It includes a
prohibition on oering or receiving inappropriate gifts
or making undue payments to influence the outcome of
business dealings. We routinely review our policy and
guidance in this area.
We maintain a log of all hospitality and gifts oered to
and by our people, whether or not the hospitality or
gifts are accepted. The policy also makes clear how our
people can raise concerns or report any issues, which
should be raised with the Chief Financial Ocer as soon
as possible. No concerns were reported during the year.
Whistleblowing
We encourage an open culture, so any issues can be
raised and handled at a local business level. However,
werecognise that there may be times when it is
uncomfortable or inappropriate for our people to raise
aconcern through line management.
We therefore have a Whistleblowing Policy (“Speak
Up”), which is available on the corporate intranet.
Thepolicy is widely publicised across our operations
and sets out clearly how colleagues should report
whistleblowing concerns.
Whistleblowing contacts are initially received by an
independent specialist company, then passed to a
nominated Non-Executive Director, the Chief Financial
Ocer and the HR Manager for further investigation
asnecessary.
The Board routinely reviews the whistleblowing process
and the reports arising from its operation, and ensures
that arrangements are in place for the proportionate and
independent investigation of such matters and for
follow-up action. Matters raised during the year were all
investigated and resolved satisfactorily.
Environment, Social and Governance continued
Working with integrity and transparency
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Environment, Social and Governance continued
Human rights
One of our business principles is that we will support
fundamental human rights, in line with the legitimate
role of business. Our Code of Conduct sets out our
policies in respect of a range of human rights and
related issues, including child labour, forced labour, the
right to organise, collective bargaining and participation
in political life.
The Group’s operations in high-risk countries must
perform self-assessments, to make sure they are aware
of the human rights impact of their operations. If a
negative impact seems possible or likely, they are
encouraged to take precautions or find solutions that
are beneficial for employees and the communities in
which they operate.
Among our international operations, China is the
location where people’s rights could be most at risk.
Byowning the facility in China, we can directly control
the environment and conditions in which our employees
live and work, to ensure they are treated fairly and in
accordance with our policies. Until the introduction of
pandemic travel restrictions, the Directors regularly
visited China and routinely invited customers to the
facility, so they could witness the working and living
conditions of our employees. This helps our customers
to fulfil their own responsibility agendas.
The UK Modern Slavery Act 2015 requires us to outline
the steps we take to identify and prevent modern
slavery within our organisation and supply chain.
Thelatest statement is available on our website:
www.lucecoplc.com.
Approach to taxation
We are committed to complying with all applicable tax
laws; both in the UK and in all countries in which we
operate. It is a core principle of the Group that
deliberately failing to comply with tax law is
unacceptable; our tax aairs are kept in good order and
uncertainties are minimised. We have a low tolerance to
tax risk, and we plan our taxes with reference to current
relevant tax legislation. When entering into commercial
transactions, where appropriate we seek to take
advantage of available tax incentives, reliefs and
exemptions, in line with local tax legislation, but we do
not undertake tax planning unrelated to our commercial
transactions. We apply the OECD transfer pricing
guidelines to intercompany transactions so as to ensure
the prohibition of tax avoidance through transfer
pricing. We do not, and will not, have a presence in a
country in which we are not commercially operating,
simply to minimise the Group’s global tax liabilities.
External tax advisers prepare tax benchmarking analysis
to support all Group transfer pricing arrangements.
Supply chain
The Group wants to do business with partners who
endorse our values and our social and environmental
standards. We regard the application of our business
principles as being of prime importance in deciding
whether to enter into or to continue relationships with
suppliers and contractors. Our Supplier Code of
Conduct is designed to ensure that all of our business
partners, suppliers and manufacturing meet our basic
expectations of doing business related to legal
requirements, ethical practices, human rights and
environmental management.
These standards are based on well-respected and
recognised international standards, including the
International Labour Organisation, United Nations
Universal Declaration of Human Rights and industry
bestpractices.
We source raw materials and certain products from
suppliers in close proximity to the factory in China.
TheExecutive Directors visit suppliers periodically,
subject to COVID restrictions, to inspect their operations
and ensure they are satisfied by how the supply process
is managed, the quality of products produced and the
working environment of the employees.
Communities
We are keen to contribute to the communities we
operate in and our Code of Conduct encourages our
people to actively participate and to propose projects
tosite management or site committees.
In Jiaxing, China, we are heavily involved with the local
university, establishing a “Luceco class” where students
were selected to receive weekly lectures for three terms.
These are led by our managers or technical experts and
aim to provide students with greater business sense and
awareness, career advice and preparation for entering
the work environment, with exposure to marketing,
management, product knowledge and development
andproject management.
Working with integrity and transparency continued
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Strong relationships with all our stakeholders are vitally important for us to achieve long-term success
andfulfil our purpose – to help people harness power sustainably in everyday life.
Our Stakeholders
Customers
Our customers are at the forefront of all business decisions,
from product innovation and development to our superior
customer service oering. They can be grouped into the
following categories:
• Distributors to retail consumers
• Distributors to professional contractors
• Professional contractors
• Housebuilders
• Influencers over the above groups, such as designers,
architects and specifiers
The Group engages to ensure customers are satisfied with
existing services and is well positioned to meet their future
needs.
Their material issues
• Product design and innovation
• Product quality
• Adherence to codes of conduct, e.g.
ethical treatment of employees
• Product availability
• On-time delivery
• Price
• Payment terms
How we engage
• Salespeople with assigned
relationships who are in continuous
contact with our customers
• Attendance at trade shows
• Attendance at our customers’
supplier events
• Customer visits to our key
manufacturing and distribution sites
• Meetings with our customers’ senior
management teams to discuss
long-term strategy
• Regular customer satisfaction surveys
2022 outcomes
• Sales growth of 19.9% since 2019
• 249 new products launched
• Increasing the proportion of
deliveries made on time and in full
Further information
• Strategy and KPIs section on pages
27 to 36
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Our Stakeholders continued
Employees
Our people are the source of our competitive advantage.
They win new business, take sales orders, develop and
manufacture our products and ensure they are delivered to
our customers on time. It is paramount to us that we look
after our colleagues and recently we have focused on their
mental wellbeing just as much as physical.
The Group employs 1,755 people worldwide, with the
majority based in the UK and China.
It is critical that we continuously engage with them to learn
new ways to improve our business and to develop them as
individuals.
Their material issues
• Learning and development
• Health and safety
• Opportunities for career progression
• Diversity and inclusion
• Reward
How we engage
• Completion of annual Group-wide
Employee Opinion Survey
• Annual visits by the Board to major
Group locations
• Regular visits by the CEO/CFO to all
Group locations, which include
employee “town hall” meetings
• Regular visits by Julia Hendrickson,
our Non-Executive Director
responsible for employee
engagement, to Group locations to
consult with small groups of
employees
• Creation of personal development
plans for each employee
• Fair remuneration benchmarked
against the external market
• Monthly employee newsletter
• Employee access to a whistleblowing
helpline
• Monthly meetings with employee
representatives to discuss health and
safety matters
2022 outcomes
• Continuing to endorse hybrid
working, together with frequent
communication with our employees
• Our Learning & Development
platform delivered 3,975 learning
modules to our employees in the
year
Further information
• Empowering people section of
Environment, Social and Governance
on pages 55 to 57
• Workforce engagement section in
Corporate Governance Report on
page 85
Suppliers
Strong supplier relationships are crucial in ensuring we can
fulfil our customers’ needs and provide a high level of
customer service.
We have the following types of suppliers:
• Raw material/component suppliers
• Original equipment manufacturers (“OEMs”)
• Service providers
The Group engages with suppliers to ensure those in its
supply chain work collaboratively to meet customer needs.
Their material issues
• Long-term partnership
• Price
• Fair payment terms
How we engage
• Site visits by the CEO/CFO to major
OEMs and electrical component
manufacturers
• Group-wide Supplier Code of
Conduct
• Supplier performance audits
• On-site quality testing teams
• Electronic auctioning of supply
contracts
• Monitoring of creditor days to ensure
payments are being made to terms
2022 outcomes
• Adjusted Gross Margin of 36.0%
• Creditor days of 72
Further information
• Strategy and KPIs section on
pages27 to 36
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Our Stakeholders continued
Shareholders
We favour a transparent and open conversation with our
shareholders and we have maintained this dialogue
virtually throughout the pandemic.
The Group’s largest shareholders are listed on page 130.
Engagement ensures there is a clear understanding of the
Group’s strategy and performance, allowing shareholders
to make an informed investment decision.
Their material issues
• Transparent strategy and
performance
• Adequate return on investment
• Appropriate governance, including
ESG matters
How we engage
• Investor Relations section of
www.lucecoplc.com
• Twice-yearly results announcements
and subsequent shareholder visits by
the CEO/CFO
• Regular trading updates
• Liaison with research analysts
• Regulatory news announcements
• Annual General Meeting
2022 outcomes
• Strong shareholder engagement
• 59 investor meetings
Further information
• www.lucecoplc.com
• Shareholder engagement section in
Corporate Governance Report on
page 89
Funding providers
Borrowings allow the Group to invest in future growth
whilst taking advantage of low interest rates and osetting
borrowing costs against taxable profits.
The Group is currently funded by syndicated bank debt.
Engagement maximises access to sources of funding.
Their material issues
• Transparent strategy and
performance
• Repayment in accordance with loan
agreements
• Compliance with loan covenants
• Security
How we engage
• Regular meetings between the CFO
and relationship bank(s)
• Meetings with existing and future
lenders ahead of planned refinancing
• Covenant compliance certification
2022 outcomes
• Covenant Net Debt to Covenant
EBITDA ratio of 0.8 times in the
period
• Bank facilities in place to at least
September 2025
Further information
• Financial instruments disclosures on
pages 175 to 183
• Capital management notes on pages
183 and 184
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Our Stakeholders continued
Local communities
We aim to have a positive impact on the environment in
locations in which we operate. We have a vested interest in
the long-term success of each community, from which our
workforce is drawn.
We operate in nine locations globally and contribute in
each of the local communities.
Their material issues
• Job creation
• Environmental compliance
• Contribution to the development of
the wider community
How we engage
• The enlistment of c.1,750 jobs
globally
• Compliant with various recognised
environmental standards: ISO 14001,
WWF LCMP, ESOS II
• Heavily involved in local university in
Jiaxing, establishing a “Luceco class”
2022 outcomes
• Tonnes of Scope 1 and 2 CO
2
per £m
of revenue reduced by 16% over the
period
Further information
• Environment, Social and Governance
on pages 37 to 59
Section 172(1) Statement
The Directors confirm that they have acted in a way that
they consider, in good faith, to be most likely to promote
the success of the Company for the benefit of its
members as a whole, and in doing so have had regard,
amongst other matters, to the matters set out in s172(1)
of the Companies Act 2006 (“s172 Matters”). This
statement, together with the examples on pages 60
to63 and those sections of the Annual Report
incorporated by cross reference, describe how the
Directors have had regard for s172 Matters in respect
ofthe year.
The Company Secretary sets out the s172 Matters in all
Board meeting packs to ensure these are front of mind,
and the Directors are reminded of their duty under
s172(1) at the start of each Board meeting. Consideration
of the broader s172 Matters forms an integral part of
Board discussion; the Directors as a matter of course
have regard to the need to maintain a reputation for
high standards of business conduct, the need to act
fairly between shareholders, and the long-term
consequences of their decisions. These considerations
are referenced in meeting papers as relevant and
discussions thereof recorded in the meeting minutes.
With regard to more Company-specific stakeholder
groups, the Board has identified those key to the
Company based on each group’s potential to a)
be impacted by the Company’s activities, and/or b) have
an impact on the Company’s activities. These key
stakeholders, as agreed by the Directors, are set out on
pages 60 to 63, together with information about their
material issues and methods of engagement.
Whilst Directors engage directly with stakeholders on
certain topics, stakeholder considerations on the whole
are brought to the Board’s attention through reports
and presentations from the Executive Directors and
senior management. This is an integral element of
regular Board reporting and, in the case of certain
stakeholders such as the workforce, may be discussed
as a separate agenda item.
As a result of these processes, the Directors have the
necessary oversight of the Company’s engagement with
stakeholders to enable them to discharge their duty
under s172(1) in the course of their decision-making.
Moreover, the Board has concluded that the Company’s
key stakeholders set out on pages 60 to 63 are
appropriate and that the methods of engagement for
each are proportionate and eective. The Company’s
key stakeholders and methods of engagement will be
kept under review and reported on each year in the
Company’s Annual Report.
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The Board is responsible for identifying, reviewing and managing business and operational risk. It is also
responsible for determining the level of risk appetite it is prepared to take in the ordinary course of business
to achieve the Group’s strategic objectives and to ensure that appropriate and sucient resource is allocated
to the management and mitigation of risk.
In addition to the risk management framework, the
Board has delegated responsibility to the Audit
Committee for reviewing the overall process of
assessing business risks and managing the impact on
the Group as described on pages 93 to 96. The Group’s
risk management process is set out below.
The principal risks identified and actions taken to
minimise their potential impact are included on pages
66 to 71. This is not an exhaustive list but those the
Board believes may have an adverse eect on the
Group’s cash flow and profitability.
In determining whether it is appropriate to adopt the
going concern basis in the preparation of the financial
statements, the Directors have considered these
principal risks and uncertainties. The Viability Statement
on pages 72 to 74 considers the prospects of the Group
should a number of these risks crystallise together.
Risk management process
The senior management team maintains a register of
identified business risks (financial and non-financial)
which it categorises in terms of probability of
occurrence and the potential impact on the Group
should the risk crystallise. Mitigating actions undertaken
and recommendations for further reduction of risk are
also included. Recommended actions are put forward to
the Executive Directors for consideration.
The Executive Directors review and challenge the
content of the risk register and the recommendations.
Risk mitigation actions are agreed, and a plan is created.
Each action is assigned an owner who is responsible for
carrying out the required action within an agreed
timescale.
The Executive Directors review the progress made
against any actions that have been carried forward.
The Audit Committee regularly reviews risk
management and is provided an update in respect of
progress made in the reduction of existing risks,
summary of newly identified risks and the actions
agreed to reduce them to an acceptable level.
These risks are reviewed in conjunction with the Audit
Committee’s other responsibilities, including the internal
control framework, external audit process and financial
reporting.
The Audit Committee provides an update and
appropriate recommendation to the Board, where
required, for the Board to consider in conjunction with
the strategic objectives of the Group.
Independent assurance is provided through the annual
statutory audit and the periodic internal control reviews
and the monitoring of, and adherence to, policies and
procedures by an external assurance provider.
Principal Risks and Uncertainties
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Principal Risks and Uncertainties continued
Heatmap
1. China supply chain
2. Poor quality of supplied or shipped goods
3. Loss or inappropriate release of data
4. Transfer pricing
5. Talent
6. Laws and regulations
7. Intellectual property challenge
8. Foreign exchange
9. Misappropriation of Group assets by employee
10. Impact of acquisition
11. Energy costs
12. Increase in input costs
13. Accounting error – external or management reporting
14. Disruption to key supplier facility
15. Disruption to non-China facility
16. UK macroeconomy
17. Fail to innovate/market shift/Black Swan
18. Supply and transportation disruption
19. Loss of key customer
20. Disruption to production facility in China
21. Liquidity
22. Impact of coronavirus
23. Investor or customer pressure on ESG
Impact
Likelihood
3
2
5
1
6
4
7
8
9
10
11
12
13
14
15
16
17
18
19
23
20
21
22
Senior
management
Executive
Directors
Audit
Committee
The
Board
Independent
assurance
Reviews and updates the risk
register for new risks,
identifies mitigations in place
and recommends actions to
reduce risk.
Review and challenge the
risks identified and the
actions proposed to mitigate
them; approve and monitor
agreed actions.
Monitors and reviews the
risks in conjunction with the
internal control framework,
audit process and financial
reporting.
Holds overall responsibility
for eective internal control,
risk management and the risk
appetite of the Group.
Periodic internal control
reviews and monitoring of
adherence to policies and
procedures by an external
audit and assurance provider.
Statutory audit by a
registered auditor.
Risk management process continued
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Principal Risks and Uncertainties continued
Principal risks
Concentration risks associated with operations:
Risk owner: CEO
Risk and impact:
• The Group’s products are overwhelmingly sourced from
one country (China) and a large proportion are made in
one location (Jiaxing)
• Disruption to our Jiaxing facility could compromise our
ability to serve our customers, including issues arising
from a constrained global energy market
• General disruption, including to shipping routes
between China and our selling markets (particularly the
UK), could increase our costs or limit our ability to serve
our markets
• China could be impacted by events in Ukraine/Russia,
which impacts our ability to manufacture products
Mitigation:
• UK buer stock is held in the event of supply disruption
in China
• All suppliers are provided with visibility of forward
orders and supply issues are discussed upfront
• Production facilities in China are spread across multiple
buildings on the same site to mitigate risk
• The Group owns its product designs and production
tooling, allowing manufacturing to be moved between
suppliers more easily
• Business continuity plans are in place for the Jiaxing site
• Business interruption insurance is in place for the Jiaxing
site, Telford site and our OEM supplier of Portable Power
products
Risk appetite:
Risk neutral
Change in year:
Net risk level:
Low Medium High
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Principal Risks and Uncertainties continued
Concentration risks associated with customers and products:
Risk owner: CEO
Risk and impact:
• The Group has a number of key customers representing
c.50% of Group revenue. A change in demand from
these customers could result in reduced sales and
profits
• The Group’s committed order book extends two to three
months forward. Orders thereafter are uncommitted
• Geopolitical instability creates price changes and
shortages of materials and the impact of inflation on
input costs from energy and material costs impacting
product cost and profitability
• A change in energy prices could increase the Group’s
operating costs, reduce profits and/or price
competitiveness
• The Group has a material exposure to the purchase price
of copper. An adverse move could reduce profits and/or
price competitiveness
Mitigation:
• Key customers typically follow a tender process,
providing visibility of business wins and losses
• Large customers typically take 6-12 months to
implement a large range change throughout their
networks, giving us time to react
• The cost of range changes for large customers is high,
reducing the likelihood of occurrence
• Relationships with the Group’s large customers are
established
• Capacity at our factory and at our OEM partners in
China can be changed quickly and cost eectively
• The Group hedges its USD:RMB and copper exposures
according to a Board-approved policy. The hedging
matches the duration of any fixed selling price
commitment oered to customers
• The Group has fixed price gas and electricity contracts
covering a significant proportion of its energy use
• Application of the hedging policy is reviewed by
theBoard
Risk appetite:
Risk neutral
Change in year:
Net risk level:
Low Medium High
Principal risks continued
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Principal Risks and Uncertainties continued
Macroeconomic, political and environmental:
Risk owner: CEO
Risk and impact:
• A deterioration in trade relations between the UK and
China could disrupt product supply and/or increase
costs
• The Group has a concentrated exposure to the UK
market. UK economic headwinds could reduce profits
• A failure to respond to governmental, cultural, customer
or investor requirements on ESG in the following areas:
changing customer behaviour and demands (e.g.
electric vehicle charging), increased stakeholder
concern, negative feedback or non-compliance on ESG
strategy, increased severity and frequency of extreme
weather events accelerating ESG progress; all of which
could result in reduced profits or a reduced share price
Mitigation:
• We have clear ESG objectives tied to management
compensation plans. Our progress is visible via
independent bodies such as CPD and SBTi
• The Group is expanding and developing its product
range of low carbon products (e.g. LED lighting and
electric vehicle chargers)
• The Group is diversified by market segment within the
UK, reducing risk
• The Group is largely exposed to the RMI cycle, which is
less susceptible to macroeconomic forces
• The Group’s overseas businesses are expected to grow
faster than the UK, diluting the UK exposure
• UK buer stock is held in the event of supply disruption
in China
• A “China Plus 1” sourcing strategy is being developed
• Management liaises closely with investors and customers
to understand their future ESG needs and responds
accordingly
Risk appetite:
Risk accepting
Change in year:
Net risk level:
Low Medium High
Loss of IT/data:
Risk owner: CFO
Risk and impact:
• Loss of IT functionality would compromise operations,
leading to increased costs or lost sales
• Loss of sensitive data from our IT environment would
expose the Group to regulatory, legal or reputational risk
• Increased cloud server usage increases risk of data loss
or compromise and cyber risk is on a upward trend,
impacting operations and reputational risk
Mitigation:
• Market-leading cyber security tools and monitoring are
in place
• Market-leading data backup tools are in place
• IT disaster recovery plans are in place throughout the
Group
• We conduct regular penetration testing
• We conduct regular Group-wide cyber security training
for employees
• IT incidents are reported to the Board
Risk appetite:
Risk averse
Change in year:
Net risk level:
Low Medium High
Principal risks continued
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Principal Risks and Uncertainties continued
Risks associated with the coronavirus:
Risk owner: CEO
Risk and impact:
• Operational disruption or enforced site closure limits the
rate of product supply
• Risk of unexpected changes in product demand
• Communication and corporate alignment are
compromised by remote working and/or inability to
travel to international operating sites
Mitigation:
• Regular review of local virus case data to respond to
emerging threats to global operations
• COVID-19-secure protocols are in place at relevant
global sites
• Sales order book and access to customer sales data
gives visibility of changing demand patterns
• Virtual communication tools ensure close collaboration
• Increased communication with team members during
the pandemic
Risk appetite:
Risk accepting
Change in year:
Net risk level:
Low Medium High
People and labour shortages:
Risk owner: CFO
Risk and impact:
• Loss of key employees could damage business
relationships or result in a loss of knowledge
• A shortage of available labour for key roles could disrupt
operations and impact long-term progress
• Depending on the job role and team, COVID-19 has
changed employees’ and employers’ work place
expectations. A more fluid working environment in both
the oce and home is more commonplace. The risk of
not adapting to this change in working practices could
lead to loss of employees and an inability to attract
talent
Mitigation:
• Key relationships are typically shared between more
than one employee
• The Group’s service oering is multi-faceted, reducing
the risk that the loss of an employee would result in lost
sales
• Retention of key employees is driven by long-term
personal development and incentive plans and ensuring
compensation is regularly benchmarked for
competitiveness. These plans are reviewed by the
Remuneration Committee
• Workforce engagement surveys ensure employee needs
are identified and addressed, promoting retention
• Adoption of hybrid working practices within appropriate
teams and locations
Risk appetite:
Risk neutral
Change in year:
Net risk level:
Low Medium High
Principal risks continued
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Principal Risks and Uncertainties continued
Acquisitions:
Risk owner: CFO
Risk and impact:
• An ill-judged acquisition could reduce Group profit and
return on capital
• Unable to grow or develop an acquired business in line
with expectations, leading to lower profits
• The Group’s acquisition strategy could compromise/
distract the execution of strategy in other areas
Mitigation:
• Our acquisition strategy is set by the Board
• Board members possess relevant M&A experience
• The acquisition strategy is implemented by an
experienced in-house team
• The Group’s key markets are relatively stable, meaning
acquisition targets typically have an established track
record
• Individual acquisitions are typically small relative to the
size of the Group, reducing the impact of each deal and
reducing potential distraction
• The Group conducts extensive due diligence prior to
acquisition
• All acquisitions are approved by the Board
Risk appetite:
Risk neutral
Change in year:
Net risk level:
Low Medium High
Legal and regulatory:
Risk owner: CFO
Risk and impact:
• The Group could infringe upon the IP of others, leading
to legal claims
• The Group’s products could fail to meet regulatory
requirements or experience quality failures, resulting in
legal claims and/or reputational damage
• The Group’s businesses could fail to meet regulatory
requirements in their countries of operation
• The Group could fail to comply with local tax laws,
particularly regarding transfer pricing
Mitigation:
• The Group receives IP advice from external experts
• The Group’s products are certified for use prior to
launch by external experts
• The Group has extensive quality assurance resources in
the UK and China
• Suppliers are required to adhere to a strict Code of
Conduct
• Supplier compliance with the Code of Conduct is
audited by our in-house teams
• Product liability claims are reported to the Board
• Product liability insurance is in place globally
• The Group’s transfer pricing policies are reviewed
regularly with the help of external experts
Risk appetite:
Risk averse
Change in year:
Net risk level:
Low Medium High
Principal risks continued
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Principal Risks and Uncertainties continued
Finance and treasury:
Risk owner: CFO
Risk and impact:
• The Group could fail to provide sucient funding
liquidity for its operations
• The Group has a material exposure to movements in the
USD and RMB currency rates. An adverse move could
reduce short-term profits and/or long-term
competitiveness
• The Group could fail to report its financial performance
accurately, leading to inappropriate decision-making
and regulatory breaches
• The Group could suer fraud across its widespread
operations
Mitigation:
• The Group hedges its currency exposures according to
aBoard-approved policy. The hedging matches the
duration of any fixed selling price commitment oered
to customers
• The Group has a clear Capital Structure Policy that is
designed to provide sucient liquidity
• The Capital Structure Policy is implemented by Treasury
experts and monitored by the Board
• The Treasury team prepares regular cash flow forecasts
• The Group’s financial statements require relatively few
judgements or estimates, reducing the risk of
misstatement
• The Group’s accounting policies and internal accounting
manual are approved by the Board
• The Group operates two main accounting centres in the
UK and China, which are overseen closely by the Group
Finance team
• The Group has invested in market-leading financial
accounting and reporting software
Risk appetite:
Risk averse
Change in year:
Net risk level:
Low Medium High
Principal risks continued
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Viability Statement – assessing long-term prospects
Current position
• The Group has a significant share of the UK market,
particularly for Wiring Accessories and Portable
Power products. It has expert market knowledge,
long-established customer relationships and a broad
product oering. Its high share of this market
generates significant economies of scale
• The Group has successfully penetrated the growing
LED market. Its competitive range of high quality,
aordable products should sustain future market
share gains
• The Group is using its product experience to build
profitable businesses internationally
• The Group has a successful track record of new
product development
• The Group’s own manufacturing facility in China
allows high quality products to be brought to market
quickly and cost-eciently
• The Group’s policy is to operate with Covenant Net
Debt between 1.0 and 2.0 times Covenant EBITDA to
ensure the Group has sucient cash to reinvest in
growth and respond to changing circumstances
Strategy and business model
• Business model:
• Design: we are the innovators within the product
categories we serve. Innovation allows us to up-sell
and improve profitability. Our designs, starting with
the customer in mind, are brought to the market
quickly
• Make: we operate a vertically integrated business
model with an agile production capability. We have
invested in our facility to ensure we can make high
quality, low cost products
• Market: we have been serving our largest customers
for many years. We operate in diverse but
synergistic sales channels. We are investing in our
online marketing and academy for customers and
contractors
• Fulfil: we have a supply chain which is flexible to
customer needs and oer high outbound service
levels using the best available technology
• Strategy:
• Grow: to maximise sales of both existing and new
products to an increasing customer base
• Innovate: we are led by our customers to innovate
brilliant products in an agile and entrepreneurial
manner
• Sustain: we invest across our business from
manufacturing to customer service, to sustain
ourcompetitive advantage and to contribute
increasingly to society’s sustainability goals
Principal risks to strategy and business model (in order
of impact on viability)
• Macroeconomic, political and environmental
AUKmacroeconomic downturn, due to higher living
costs and global energy and material price increases,
could adversely aect the demand for and pricing of
our products. The Group is facing a changing ESG
environment which impacts a number of stakeholders
from customers to investors that could lead to loss in
revenue and profitability – although currently this
exposure is low
• Concentration risks associated with operations
due to an event such as a fire, flood, power outage,
orIT failure in China. Shipping and transportation
disruption between the Group’s end markets and its
sources of product supply which are overwhelmingly
in China
• Concentration risks associated with customers
andproducts
The loss of a key customer would result in a short-
term shortfall in profit and cash whilst sales were
replaced by growth elsewhere
Viability Statement
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Viability Statement continued
LUCECO PLC – VIABILITY STATEMENT APPROACH
Viability – assessing
long-term prospects
Viability – assessment analysis
Underlying assumptions
andassessment
Viability Statement
Current position
Strategy and business model
Principal risks
Scenario testing
Mitigation
Likely output
Viability
principal risk
Viability Statement – assessment analysis
Principal risk
Scenario test Likely output
Macroeconomic,
political and
environmental
• Management have modelled the following two scenarios in UK macroeconomic downturn:
1. Reduction in UK revenue and gross profit for 18 months from April 2023 of 10%. Phased
return by 2023 with 2023 10% down reflecting the impact of the year one recession
assumption
2. Total loss of the Group’s largest customer range from 2023 onwards
• Management have completed this scenario test and
concluded this would not impact compliance with its
financial covenants or viability
Concentration risks
associated with
operations
• Management have run a scenario in which the Group loses all of its sales of products
sourced from China for which no inventory buer is held outside of China for six months
whilst alternative sourcing arrangements are made
• Management have also modelled the impact of disruption to shipping and transport.
Thiswas modelled as a revenue reduction for three months relating to 50% of revenue
(FOBrevenue) with shipping costs up 20% for six months starting from Q2 2023
• Management have completed this scenario test and
concluded this would not impact compliance with its
financial covenants or viability
Concentration risks
associated with
customers and
products
• Management have modelled the following scenario:
• Total loss of the Group’s largest customer from 2023 onwards
• Management have completed this scenario test and
concluded this would not impact compliance with its
financial covenants or viability
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Viability Statement continued
The Viability Statement is dependent on the following
process and assumptions
Process:
• The financial forecast on which the Viability
Statement is based is aligned with the annual
corporate plan for 2023 to 2025 approved by the
Board in December 2022 with input from the Group’s
senior management team
• Progress against financial budgets and key objectives
is reviewed on a monthly basis to determine progress
and identify any changes to the original detailed plan
Assumptions:
• Future organic growth assumptions are consistent
with those recently achieved by each of the Group’s
businesses
• Working capital as a percentage of revenue is held
broadly flat
• Capex broadly equal to depreciation
• Dividends consistent with the Group’s dividend policy
• No additional investment in acquisitions (since these
are discretionary and within the control of
management)
The Viability Statement
• The Board considers that it is a reasonable
expectation that the Company will be able to meet its
liabilities as they fall due over a three-year period to
31December 2025
This assessment has been chosen for the
followingreasons:
• A full assessment of prospects and assessment of
viability has been completed
• The financial and strategic planning period is currently
three years, which is the current level of visibility we
have as a Board on the forecasts
• The Company has secured banking facilities over the
period, expiring on 30 September 2025 with the
option to extend by a further year
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The table below sets out where stakeholders can find information in our Strategic Report that relates to
non-financial matters detailed under Section 414CB of the Companies Act 2006.
Reporting requirement Where to read more in this report Page
Environmental
matters
Environment, Social and Governance Statement – Creating a sustainable future 38 to 54
Employees Environment, Social and Governance Statement – Empowering people, health and safety
Chief Executive Ocer’s Review
Principal Risks and Uncertainties – People and labour shortages
55 to 58
10 to 13
69
Human rights Environment, Social and Governance Statement – Supply chain, human rights 59
Social matters Environment, Social and Governance Statement – Communities 59
Anti-bribery and corruption Environment, Social and Governance Statement – Anti-bribery and Corruption Policy 58
Business model Advantaged Business Model 24
Principal risks Principal Risks and Uncertainties 64 to 71
Non-financial KPIs Strategy and KPIs 27 to 36
Non-financial Information Statement
The Strategic Report on pages 1 to 75 was
approvedby the Board of Directors on
20March2023.
JOHN HORNBY
Chief Executive Ocer
MATT WEBB
Chief Financial Ocer
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What’s in this section
77 Chair’s Introduction
80 Board of Directors
83 Corporate Governance Report
90 Nomination Committee Report
93 Audit Committee Report
97 Remuneration Committee Report
127 Other Statutory Disclosures
132 Statement of Directors’ Responsibilities
DIRECTORS’
REPORT
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The Group’s corporate
governance structure is
fundamental in ensuring
we fulfi l our purpose as
abusiness and deliver
on our long-term strategy
GILES BRAND
Chair
Chair’s Introduction
Dear Shareholder,
I am pleased to present the Corporate Governance
Report for the year ended 31December2022 (“year”).
This section of the Annual Report describes our
corporate governance structures and processes and
how they have been applied throughout theyear.
Good corporate governance is fundamental to the
success of our business. TheBoard and its Committees
play a key role in our governance framework by
providing external and independent support and
challenge, understanding the views of shareholders
andwider stakeholder communities, and ensuring that
aculture of good governance is promoted globally
throughout the business. Ourcontinuing aim is to
promote and maintain an environment of openness,
transparency, accountability andresponsibility.
My role as Chair
My role is to ensure that the Luceco Board operates
e ectively in delivering the long-term success of the
Company. Infulfi lling this role, I seek to ensure that
Board proceedings are conducted in a way that allows
all Directors to have the opportunity to express their
views openly and that, in particular, the Non-Executive
Directors can provide constructive support and
challenge to the senior management team. Moreabout
my role, and the roles of all the Directors and
Committees, canbe found on pages 81 to 83.
The Board’s ongoing response to COVID-19
All Board and Committee meetings following the lifting
of COVID-19 related restrictions in January2022
(withtheexception of ad-hoc meetings) were held in
person. TheBoard met eight times in 2022. TheBoard
also acknowledges the advantage of virtual meetings,
notingthat the use of videoconference meetings in
2021and 2020 did not hinder e ective discussion and
decision-making. Accordingly, the Board will continue
totake advantage of both in person and virtual
meetings, as deemedappropriate.
Board changes and induction
On 19 January 2023, it was announced that Matt Webb,
Luceco’s Chief Financial O cer, is stepping down to
pursue other opportunities after fi ve years in the role.
Iwould like to thank Matt for his outstanding
contribution to Luceco’s progress over the last fi ve
years, a period in which the Group has evolved into a
strategically focused, highly profi table and well
capitalised business. WillHoy, formerly a Non-Executive
Director of Luceco and Chair of the Audit Committee,
assumed an Executive Director position from 1March2023
and will become the Chief Financial O cer on 1April2023.
Willstepped down from his position as Chair of the
Audit Committee on 19January2023 and was
succeeded in the role by Non-Executive Director,
TimSurridge.
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Chair’s Introduction continued
Board changes and induction continued
In addition, following an extensive search process led by
the Nomination Committee, the Board welcomed Julia
Hendrickson as a Non-Executive Director in June 2022.
She became a member of the Remuneration Committee
and the Audit Committee in October 2022. Idiscuss
Julia’s appointment process in the Nomination
Committee Report on page91. Itis my responsibility to
ensure that new Directors are provided with a full and
formal induction which is tailored to their individual
requirements. TheCompany Secretary provided Julia
with a formal induction in June which included
introductory meetings with key Group personnel and the
provision of a comprehensive Directors’ induction pack
outlining director duties and the governance structure
of the Board andCommittees.
Board and Committee evaluation
As Chair I am also responsible for leading the annual
evaluation of the eectiveness of the Board,
Committees and individual Directors (“Evaluation”).
The2022 Evaluation was undertaken internally by
wayof a questionnaire, a method appropriate and
proportionate to the Company, and which yields
usefulresults. The 2022 Evaluation considered the
composition, balance of skills, experience, knowledge,
and collaboration on the Board, as well as other factors
relevant to its eectiveness, including diversity. We also
received and considered a number of suggestions
regarding skills and expertise which could benefit the
Board in respect of future appointments. Resultsof the
Evaluation were anonymised by the Company Secretary
and provided to me for analysis. Ipresented the findings
to the Board, including individual recommendations
made byDirectors.
My performance was appraised by the independent
Non-Executive Directors under the leadership of the
Senior Independent Director. Wediscussed the
outcomes and agreed that the Board, Committees and
individual Directors were operating eectively, whilst
also noting areas for development. The Evaluation also
assisted us in identifying our key areas of focus for 2023,
including developing:
• A strategy for diversification of our manufacturing
• The Company’s growth strategy
• The Company’s talent management process
• The Company’s electric vehicle (“EV”) oering
We also agreed our strategic priorities for 2023.
Theseare set out in the Strategic Report on pages
1to75.
The year ahead
The Board has made further progress this year in
enhancing its governance arrangements, butwe still
strive to move forward. Iam committed to continually
monitoring and improving the governance ofour Board
and will continue to seek out ways to enhance our
corporate governance in line with developing best
practice, particularly with regard toenhanced diversity
reporting and the governance framework around
climate-related risks andopportunities.
GILES BRAND
Chair
20 March 2023
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Compliance with the 2018 UK
Corporate Governance Code
The Company is required to report on its compliance
with the Principles and Provisions of the 2018 UK
Corporate Governance Code (“Code”), acopy of
whichis available at www.frc.org.uk. For the year ended
31 December 2022, the Board considers that it has
complied in full with the Code’s Principles and Provisions
in a manner that would enable shareholders to evaluate
how the principles have been applied, with the exception
of Provisions 4, 9 and 19. Provision 4 states that when
20% or more of votes have been cast against the board
recommendation for a resolution at the Annual General
Meeting (“AGM”), an update on the views received from
shareholders and actions taken should be published no
later than six months after the shareholder meeting.
Atthe AGM held on 12 May 2022, more than 20% of
shareholders voted against a resolution that would have
allowed the Company to disapply Rule 9 of the Takeover
Code. The Company believes that being able to disapply
Rule 9 is a prerequisite for the Company to be able to
commence a share buyback programme. The Company
published an update via RNS on 13 January 2023, which
was eight months after the AGM, to allow time for
appropriate engagement with shareholders. Provision 9
states that the Chair should be independenton
appointment when assessed against thecircumstances
set out in Provision 10. Therefore, asamajor shareholder,
Giles Brand was not independent onappointment.
Provision 19 states that the Chair should not remain in
post beyond nine years from the date of their first
appointment to the Board. Gileswas appointed as a
Director of the Company in 2010 and then appointed
Chair in 2016 when the Company listed on the London
Stock Exchange. TheCompany’s relationship with Giles
Brand and ESO Investments 2 Limited (whotogether
own 28% of the Company’s voting rights)is governed by
a relationship agreement whichserves toregulate the
relationship and deliver eectiveindependence.
Further information
Board leadership and Company purpose
See pages 85 to 89
Division of Directors’ responsibilities
See page 83
Composition, succession and evaluation
See pages 91 and 92
Audit, risk and internal control
See pages 93 to 96
Remuneration
See pages 97 to 126
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Board of Directors
The Board of Directors has overall responsibility for the Group. Its principal aim is to enhance the Company’s
long-term value forthebenefit of shareholders.
Other roles
Giles is currently the Non-Executive Chair
ofWhittard of Chelsea.
Other roles
Matt holds no other listed or non-listed
directorships.
Other roles
John holds no other listed or non-listed
directorships.
Skills and experience
Giles is the founder and Managing Partner of EPIC
Investment Partners LLP, an independent
investment manager, advisory and placement agent
and administrator. Giles is a director of its subsidiary
EPIC Investment Partners (UK) Limited, the
investment manager of ESO Investments 2 Limited,
the Company’s largest shareholder. Since 2001, Giles
has led over 30 buyout, turnaround, distressedand
growth capital transactions. Manyofthese
transactions have made multiple bolt-on acquisitions
in the UK andoverseas.
Skills and experience
John was appointed Chief Executive Ocer of
theGroup in 2005 having originally joined Luceco
in1997. John led the original management buyout
ofLuceco from a listed plc in 2000 and led the
secondary buyout with EPIC Investment Partners
LLP (formerly EPIC Private Equity LLP) in 2005.
Since then, John has led the development of the
Group’s Chinese operations. Johnbegan his career
with Knox D’Arcy Management Consultants
following his graduation from the University
ofOxford with a degree inEconomics.
Skills and experience
Matt was appointed Chief Financial Ocer in 2018
and will step down from the role on 31March2023.
Matt joined from FTSE 100 listed multinational
building materials distribution company
Fergusonplc, where he most recently spent five
years as Finance Director for its market-leading
USBlended Branches business, based in the USA.
Priorto that, Matt held other senior finance roles
atFerguson, including Group Financial Controller
and Strategic Planning Manager, and at construction
products manufacturer BPB plc. Matt qualified as a
Chartered Accountant with KPMG LLP and holds a
degree in Engineering Science from the University
ofOxford.
JOHN HORNBY
Chief Executive Ocer
GILES BRAND
Non-Executive Chair
MATT WEBB
Chief Financial Ocer (until 31 March 2023)
Key Remuneration Committee Audit Committee Nomination Committee Disclosure Committee Chair
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Board of Directors continued
Other roles
Will holds no other listed or non-listed directorships.
Other roles
Caroline is currently a Non-Executive Director of two
other listed companies: IP Group plc and WAG
Payment Solutions plc.
Other roles
Pim is Chief Executive Ocer of Constantia Flexibles.
Skills and experience
Will joined the Group as a Non-Executive Director
in2019 and was appointed as Chair of the Audit
Committee in October 2021. Hestepped down from
his position as Chair of the Audit Committee on
19January2023 and became an Executive Director
of the Group on 1March2023. Willassumes the
position of Chief Financial Ocer on 1April2023.
Most recently, Will held the position of Chief
Financial Ocer for GKN Aerospace, the
UK-headquartered global aerospace technology
leader. Hehas held a number of senior finance roles
in a career with GKN that spanned over 20 years,
including nine years as Head of Corporate Finance
inwhich he oversaw GKN’s M&A activities. Priorto
joining GKN, Willqualified as a Chartered
Accountant at KPMG LLP and worked in its
Corporate Financedepartment.
Skills and experience
Pim joined the Board as Senior Independent
Non-Executive Director in 2020 and became a
member of the Audit Committee in October 2021,
bringing extensive Board-level international
manufacturing experience to the Group. Pim
isChiefExecutive Ocer of the leading flexible
packaging manufacturer Constantia Flexibles.
Previously, hespent 12 years at RPC Group Plc,
initially as Chief Financial Ocer and then as
ChiefExecutive Ocer. Pim was also Chair ofthe
Audit Committee and Senior Independent Director
of Avon Rubberplc from March2015
toJanuary2021.
Skills and experience
Caroline joined the Board as an independent
Non-Executive Director and was Chair of the
AuditCommittee from October 2016 to October
2021. Shehas managed divisions of FTSE 100
groups andAIM businesses with international
industrial andtechnology operations and has
worked as a corporate finance adviser with various
leading banks. She is a Fellow of the Chartered
Institute ofManagement Accountants and has
chaired audit committees of listed companies for
the past 20years. She holds a degree and PhD in
Natural Sciences from the University of Cambridge
and anMBA from the University of London.
PIM VERVAAT
Senior Independent Non-Executive Director
WILL HOY
Executive Director, Chief Financial Ocer from 1 April 2023
CAROLINE BROWN
Independent Non-Executive Director
Key Remuneration Committee Audit Committee Nomination Committee Disclosure Committee Chair
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Gender diversity
1
Male
Female
1. At the latest practicable
date; from 1 April 2023
the gender diversity ratio
will be fi ve male and two
female
Sector experience
8 | Finance/Capital Markets
8 | Governance
8 | Operational
8 | Strategy
8 | Manufacturing/Industrial
4 | Consumer/Retail
3 | Digital
Board of Directors continued
Board balance
Other roles
Tim is currently a Principal at NM Capital.
Other roles
Julia is Chief Executive O cer of Linnaeus.
Skills and experience
Tim joined the Group as an independent
Non-Executive Director in 2016 and was appointed
Chair of the Audit Committee on 19January2023.
Previously, Tim has served as Group Chief Financial
O cer at Olive Group Capital Limited,
aDubai-based security solution provider, and as
Chief Financial O cer and an Executive Director
atDangote Cement plc, Nigeria’s largest cement
producer. Tim joined KPMG LLP UK in 1991 and
became a partner in the fi rm’s Transactional
Services business in 2006. Tim has considerable
accounting and advisory experience including stock
market listings, reverse takeovers, management
buyouts and acquisitions. Tim is a qualifi ed
CharteredAccountant.
Skills and experience
Julia joined the Group as a Non-Executive Director
in June 2022 and became a member of the
AuditCommittee and Remuneration Committee
from October 2022. Julia has spent her career in
commercial leadership roles within large retail and
FMCG organisations. She has extensive international
experience in developing and implementing
customer-focused commercial strategy,
includingwithin the e-commerce channel. Julia is
Chief Executive O cer of Linnaeus, a leading
veterinary health business in the UK and Republic of
Ireland. Previously, she led the Commercial &
Marketing function within the International Retail
division of Walgreens Boots Alliance and was
Managing Director of its European retail business.
JULIA HENDRICKSON
Independent Non-Executive Director
TIM SURRIDGE
Independent Non-Executive Director
Key Remuneration Committee Audit Committee Nomination Committee Disclosure Committee Chair
6
2
Ethnic diversity
100% White British or other White (including minority-white
groups)
Independence
1
Independent
Non-Executive Directors
Executive Directors
2
1. Excluding the Chair
2. At the latest
practicabledate
4
3
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Corporate Governance Report
Senior Independent Director (“SID”)
Pim Vervaat
In addition to the responsibilities of an independent NED,
theSID is available to shareholders should they have concerns
which contact through the Chair or other Board members
hasfailed to resolve or for which such contact is inappropriate.
The SID is also responsible for conducting the annual
performance evaluation of the Chair, in conjunction with the
other independent NEDs. All Board members who wish to deal
in the Company’s securities must seek approval from the SID.
Non-Executive Directors (“NEDs”)
Caroline Brown, Tim Surridge, Julia Hendrickson
All of the NEDs are independent and contribute to the
strategic direction of the Group, providing an independent
sounding board to the Chair and Executive Directors. They
have been appointed for their knowledge and expertise and
provide healthy debate and challenge to the Executive
Directors and senior management team. The independent
NEDs are also members of the Board Committees, except for
the Disclosure Committee, with responsibility for the oversight
of audit, financial control and risk management, composition
and remuneration of the Board. Julia Hendrickson joined the
Board as a Non-Executive Director on 1June 2022 and
became a member of the Audit and Remuneration
Committees from 1 October 2022. Julia took over the role of
designated Non-executive Director for workforce engagement
from 21 November 2022.
INDEPENDENT NON-EXECUTIVE DIRECTORS
Chief Financial Ocer (“CFO”) until 31 March 2023
Matt Webb
The CFO works closely with the CEO to ensure that strategic
plans are underpinned by strong financials and that they
delivergrowth in shareholder value. The CFO is responsible for
producing budgets and forecasts to deliver and measure
againstthe strategy and assessing the benefit of new investment
opportunities. He is also responsible for internal control and
riskmanagement, in conjunction with the AuditCommittee.
Executive Director and CFO from 1 April 2023
Will Hoy
On 19 January 2023 it was announced that Matt Webb would
step down as Chief Financial Ocer on31March2023 and
wouldbe succeeded as Chief Financial Ocer by Will Hoy.
Willassumed an Executive Director position on 1March2023
andwillbecome Luceco’s Chief Financial Ocer on 1April2023.
Chief Executive Ocer (“CEO”)
John Hornby
The CEO has delegated responsibility for the management of the
Group’s day-to-day operations, including product development,
quality control, sourcing of raw materials, customer and supplier
relations, distribution and health and safety. TheCEO also
prepares and communicates the strategy of the Group and the
detailed underlying operational plans to deliverit.
EXECUTIVE DIRECTORS
Giles Brand
Giles Brand has held the role
of Chair since 2October 2016.
The Chair is Non-Executive
and isresponsible for the
leadership and governance
ofthe Board, organising,
planning and setting the
agenda of Board meetings
(inconjunction with theChief
Executive Ocer) and
communicating information
to shareholders. The Chair
maintains regular contact
with the independent NEDs
todiscuss and address any
issues or concerns outside
offormal Board meetings.
The Chair also provides
support to the Executive
Directors whererequired.
CHAIR
The Board is fully accountable to the shareholders for the performance and conduct of the business and
recognises the importance of maintaining an open dialogue, keepingthem informed of the Group’s strategy,
progress and prospects.
Board division of responsibilities
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Corporate Governance Report continued
Board composition
At the time of this report, the Board comprises the Chair,
three Executive Directors and four independent
Non-Executive Directors (“NEDs”). From1April2023,
the Board will comprise the Chair, two Executive
Directors and four independent NEDs.
The four independent NEDs are considered by the
Board to meet the independence criteria set out in
Provision 10 of the Code and to be independent of the
Company’s executive management and free from any
business or other relationship that could aect their
ability to exercise independent judgement. The letters
ofappointment of the Chair and independent NEDs
areavailable for inspection at the Company’s registered
oce.
The rules concerning the appointment and replacement
of Directors are set out in the Company’s Articles of
Association and in the Companies Act 2006. There are
no agreements between the Company and its Directors
concerning any compensation for their loss of oce that
occurs because of a takeover bid.
Re-election
In accordance with the Code and the Company’s Articles
of Association (“Articles”), all Directors are subject to
annual re-election by the shareholders at the Annual
GeneralMeeting.
The Directors’ biographical details are set out on pages
80 to 82 of this Report. These demonstrate the wide
range of skills and experience that they bring to the
Board. The individual performance of each Director
standing for re-election has been evaluated and it is
recommended that shareholders vote in favour of their
re-election at the AGM. Accordingly, resolutions to
re-elect all Directors will be contained within the 2023
AGM Notice of Meeting, which will be sent to
shareholders within the prescribed timescales.
Time commitment
Each Director’s other commitments are disclosed and,
inthe case of significant appointments, approved by
theBoard in advance. The Board reviews a schedule
ofDirectors’ interests at each Board meeting. TheBoard
issatisfied that the other commitments of the Chair
andthe independent NEDs do not prevent them from
devoting sucient time to the Company. TheExecutive
Directors work solely for the Group; neither John
Hornby, Matt Webb nor Will Hoy hold any external
directorships.
Access to advice
All Directors have access to the advice and services
ofthe Company Secretary, who is responsible for
advising the Board on corporate governance matters.
TheDirectors are able to take independent,
professionaladvice to assist them, if necessary,
attheCompany’sexpense.
Matters reserved for the Board
The Board keeps a formal schedule of matters
specifically reserved for its decision. These include
theapproval of the annual and half-yearly results
andassociated announcements, recommendation
ofdividends, convening of shareholder meetings,
Boardappointments, strategic plans and budgets,
ESGplans, significant capex proposals, acquisitions,
systems of internal control and risk management
andcorporate governance arrangements. Noone
Boardmember has the power to make a decision
without thesanction of the othermembers.
Committee responsibilities
The Board has formally delegated specific
responsibilities for audit, risk management and
financialcontrol, public announcements, Board
composition and remuneration to four standing
Committees, namely theAudit Committee, Nomination
Committee, Remuneration Committee and Disclosure
Committee. Each Committee is chaired by the Chair or
an independent NED, enabling them to take an active
role in influencing, overseeing and challenging the work
of the Executive Directors and senior management
team.
Details of the Disclosure Committee are provided below;
information on the composition, responsibilities and
activities of the other Board Committees are set outin
their respective reports on the followingpages:
• Audit Committee pages 93 to 96
• Nomination Committee pages 90 to 92
• Remuneration Committee pages 97 to 126
The terms of reference of the Committees are
reviewedannually.
Disclosure Committee
The Board has delegated responsibility to the Disclosure
Committee to oversee the Company’s compliance with
the FCA’s Listing Rules and Disclosure Guidance and
Transparency Rules, and the Market Abuse Regulation,
in respect of the disclosure and control of inside
information directly concerning the Company.
TheCommittee meets as appropriate and met five times
during the year. The Disclosure Committee is Chaired by
Giles Brand and its other members are John Hornby and
Matt Webb. Will Hoy will replace Matt Webb as member
of the Disclosure Committee from 1 April 2023. Its terms
of reference can be found on the Company’swebsite.
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Corporate Governance Report continued
Leadership and Company purpose
The Board is collectively responsible for leading and
controlling all activities of the Group, with overall
authority for establishing the Company’s purpose,
values and culture and overseeing the management
andconduct of the Group’s business, strategy and
development. The Board sets the Group’s strategic
direction and approves strategic projects, policy and
investment decisions. These decisions are underpinned
by financial reporting and a robust approach to risk
management. The Board is also responsible for ensuring
appropriate resources are in place to enable the senior
management team to deliver the strategic objectives
and enact their policies and decisions.
The Board has agreed the Company’s purpose, as stated
on page 1, and has satisfied itself through regular
reports from, and discussions with, management that
the culture promoted by the Board and by senior
management supports this purpose.
People and culture
The Board assesses and monitors Company culture
through a number of channels, including regular reports
from the Executive Directors and senior management,
whistleblowing reports and employee surveys.
Peopleremained a key focus of discussion during the
year given concerns around the residual impact of the
coronavirus pandemic on the workforce, particularly
inChina. The Board was updated throughout the year
through reports from the Executive Directors on steps
taken to mitigate against these challenges. Additionally,
at the Directors’ request, the Asia Managing Director
gave a detailed update to the Board on initiatives to
further improve health and safety culture more broadly
within the China factory.
More about the Company’s approach to its people
andculture can be found in the ESG section on pages
55to 57.
Workforce engagement
In accordance with the Code, the Board appointed Julia
Hendrickson as the designated Non-Executive Director
for workforce engagement, to take over this role from
Tim Surridge from 21 November 2022. Julia recently
held one face-to-face and two virtual group sessions
with employees from across the business, representing
avariety of functions and geographical locations.
Thefeedback which arose from these sessions was
broadly positive across all locations with employees
expressing pride in the Company’s achievements during
2022, appreciation of financial rewards received and
positivity around hybrid working, which employees felt
led to better productivity.
Feedback from the UK teams identified opportunities
for further employee engagement on the direction of
the business and greater focus on diversity. The team
inChina identified the potential for further training to
develop employees’ skills and recruitment of the right
skill set to drive quality within the team.
The results of the annual employee engagement survey
(discussed in the Environment, Social and Governance
section on page 57 and the Remuneration Committee
Report on page 98) were discussed by the Board, the
findings of which were largely consistent with the
feedback from Julia’s sessions. In 2023, Julia will
continue to engage with the workforce, through physical
visits to both the UK and China operations where
possible. The Board will continue to monitor the
eectiveness of its methods of workforce engagement.
Further information on the Company’s policies
withregard to its people can be found within the
Empowering people section of Environment,
SocialandGovernance on pages 55 to 57.
Whistleblowing and compliance
The Board is responsible for monitoring and periodically
reviewing the Group’s whistleblowing, anti-bribery and
anti-fraud policies. The Board reviewed these during
2022 andsatisfied itself that sucient arrangements are
in place to assist in the prevention of fraud and enable
employees to report irregularities confidentially and
allow appropriate investigation and follow-up action to
be taken. The Board is also responsible for reviewing any
whistleblowing reports.
Wider stakeholder considerations
The Company’s key stakeholder groups are set out
inthe Strategic Report on pages 60 to 63.
Furtherinformation is included in the Section 172(1)
Statement in the Strategic Report on page63.
Sustainability
Full details of the Company’s sustainability strategy and
performance with regard to sustainability are provided
within the Creating a sustainable future section of
Environment, Social and Governance on pages 38 to 54.
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Corporate Governance Report continued
Board meetings
In advance of its meetings, the Board is provided with anagenda and all relevant documentation and financial information in a timely manner to assist it in the discharge of its
duties and ensuring that decisions are well informed and made in the best interests of the Group. If any member is unable to attend a Board meeting, they have the opportunity
to discuss any agenda items with the Chair before the meeting. Conflicts of interest are managed in accordance with theprocedure described under “Directors’ conflicts
ofinterest” on page129.
Meeting attendance
The table below shows the number of scheduled Board and Committee meetings attended by each Director during the year against the total number of possible meetings
inrespect of eachDirector.
Name Board
Audit
Committee
Nomination
Committee
Remuneration
Committee
Disclosure
Committee
Giles Brand 8/8 n/a 2/2 n/a 5/5
John Hornby 8/8 n/a n/a n/a 5/5
Matt Webb 8/8 n/a n/a n/a 5/5
Caroline Brown 8/8 n/a 2/2 3/3 n/a
Will Hoy 8/8 3/3 n/a n/a n/a
Tim Surridge 8/8 3/3 n/a 3/3 n/a
Pim Vervaat 8/8 3/3 2/2 3/3 n/a
Julia Hendrickson
1
4/4 1/1 n/a 1/1 n/a
1. Julia Hendrickson was appointed to the Board as at 1 June 2022 and became a member of the Audit and Remuneration Committees in October 2022.
Board activity
The Board agenda focuses on the themes of driving strategy, monitoring risk and execution of the strategy through regular business, financial and departmental updates.
These are complemented and underpinned byupdates and discussions around culture, people andstakeholders, as well as corporate governance considerations including
legal and regulatory matters. Asummary of the activity of the Board during the year is set out asfollows:
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Corporate Governance Report continued
• Regularly considered the potential impact of
COVID-19 on the Group’s operations and actions
taken and proposed by management in response
• Regularly received and discussed strategic updates,
proposals and reviews from the Executive Directors
and senior management; supported the
development of strategy through individual insights
and robust challenge
• Received and discussed updates on performance
and strategy from the managers of DW Windsor and
the Group’s operations in Spain, Mexico and Dubai
• Received and discussed a presentation from the Asia
Managing Director regarding progress on the
transformation of the Group’s Chinese factory and
improvements to its workingculture
• Considered the Group’s IT information systems
infrastructure and the importance of shifting
towards a global IT team to allow for global metrics
and knowledge sharing
• Approved the acquisition of Sync EV in March 2022
• Continued to develop the Company’s Environment,
Social and Governance strategy
• Reviewed the Group’s climate strategy and TCFD
Compliance Report and discussed the status of
the2022 ESG objectives and future objectives
• Received the outcome of market research and
customer surveys conducted with professional
installers of the Group’s products
• Received an update on work completed to develop
the Group’s manufacturing diversification strategy
Strategy
• Reviewed the Group’s approach to risk
management and carried out a robust
assessmentof the Company’s emerging and
principal risks
• Approved changes to the Company’s hedging
arrangements
• Oversaw the continued implementation and
eectiveness of the Group’s Finance Manual,
including a review of the Group’s Inside
Information Policy and the Group’s Dealing Code
• Discussed with the Asia Managing Director
ongoing initiatives to improve health and safety
atthe Group’s Chinese operations
Internal control and risk management
• Considered the financial performance of the Group
and key performance targets, including a review of
the monthly management accounts at each
Boardmeeting
• Monitored performance through regular
presentations from the CFO
• Approved the Annual Report, half-year and annual
results announcements and analyst presentations
• Approved the implementation of an interest rate
hedging policy whereby 60-80% of floating rate
interest would be transferred into fixed rates on
arolling three-yearbasis
• Approved the use of a new tax incentive in China
• Approved the Group’s financing arrangements
• Approved the 2023 budget and three-year plan
• Reviewed and challenged management’s going
concern assessment
Financial
Board activity continued
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Corporate Governance Report continued
• Discussed the outcome of the Evaluation of Board
Eectiveness and agreed actions for 2023,
including a number of suggestions with regard to
skills and experience that would enhance the Board
as a whole, including M&A experience, diversity,
senior management succession planning and
developing the Company’s digital and e-commerce
oering
• Considered feedback from brokers and analysts as
relevant throughout theyear
• Received regular updates on legal and governance
developments aecting the Company, including
new diversity and inclusiontargets
• Reviewed and established science based targets in
line with requirements set out by the Science Based
Targets initiative, relating to reduction of carbon
emissions
• Appointed Julia Hendrickson as a Non-Executive
Director and a member of the Audit Committee
andRemunerationCommittee
• Reviewed and approved the Company’s Share
DealingCode
• Reviewed and approved the Company’s
Anti-bribery Policy and Anti-corruption Policy
• Reviewed and approved the Company’s Related
Party TransactionPolicy
• Reviewed and approved the Company’s Diversity
&InclusionPolicy
Corporate governance
• Discussed the results of the 2022 annual
employee engagement survey carried out in the
UK and progress made as a result of actions taken
in response to the 2021survey
• Received an update on employee engagement
meetings from the designated Non-Executive
Director for workforce engagement; discussed
findings in conjunction with surveyresults
• Reviewed and approved the Group’s
Whistleblowing (“Speak Up”) Policy and
oversawits eectiveness
Culture, people and stakeholders
Board activity continued
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Corporate Governance Report continued
COVID-19 and consideration of stakeholders
During 2022 the Board monitored the financial health of
the Company and any residual impact on stakeholders
arising from the coronavirus pandemic. The Board heard
regular updates from Executive Directors and it was
determined that no extraordinary measures were
required during the year. Visits to China have begun
more frequently in early 2023 and the China coronavirus
risk has lowered.
Shareholder engagement
The Board, led by the Chair, is committed to maintaining
an open and constructive dialogue with shareholders,
toensure there is a common understanding of the
strategic objectives, governance and performance of
theGroup. The CEO and the CFO undertake investor
roadshows following the release of financial results,
withthe presentations made available on the Company’s
website. Any feedback gained from a roadshow is
reported to the Board, to enable Directors to understand
the views of shareholders. Where appropriate, the
Company consults with shareholders on significant
issues. During 2022, major shareholders were oered
the opportunity to meet the Chair, CEO and CFO
virtually todiscuss Luceco’s strategy and governance
arrangements. In addition, the Company has appointed
financial public relations advisers and corporate brokers
to gather investor and analyst feedback, which is
presented to and reviewed by the Board.
Following the lifting of the UK Government’s prohibition
on non-essential travel and public gatherings, the
Company was able to convene its 2022 AGM inperson,
enabling shareholders the opportunity to meet and
directly engage with the Directors.
Shareholder engagement following the 2022 AGM
At the Company’s 2022 AGM, the resolution to approve
the Rule 9 Waiver (Resolution 20) failed to pass, with
29.9% of participating independent shareholders voting
in favour.
In accordance with the Code, throughout 2022 and
ahead of the 2022 AGM, the Company engaged with
itsshareholders to understand their views, the majority
of whom were supportive of the rationale for permitting
the Company to buy back shares as proposed.
Theapproval of the Rule 9 waiver under Resolution 20 is
a prerequisite for the Company to be able to commence
a share buyback programme and, therefore, the Board
believes it to be in the best interests of the Company
and the Non-Concert Party Shareholders as a whole
toapprove the Rule 9 waiver resolution. Per the Notice
of AGM, the members of the Concert Party were not
entitled to vote on the Resolution.
The Board was naturally disappointed in the failure to
pass the resolution by a majority of votes cast by the
independent shareholders of the Company. After the
AGM the Company sought to engage with key investors
to ensure it fully understood the reasons for their vote
against the proposal and to continue a transparent and
constructive dialogue on this topic. The Company
published an update via RNS on 13 January 2023, which
was eight months after the AGM, to allow time for
appropriate engagement with shareholders.
The Board continues to consider that the ability for the
Company to buy back shares is in the best interests of
allshareholders. Following discussions with major
shareholders who had not supported the Resolution
tounderstand the reasons for their vote against the
proposal, the Board intends (subject to approval by the
Takeover Panel) to propose a Rule 9 waiver resolution at
the 2023 AGM, limiting the Concert Party’s interest in
shares (if the Company were to repurchase from
persons other than members of the Concert Party all
theordinary shares for which it is seeking authority
andassuming no other allotments of ordinary shares)
to49.99% of the issued share capital of the Company.
TheCompany will continue to engage as appropriate
with those shareholders regarding their views in
thisarea.
Annual General Meeting
The 2023 AGM will take place at Numis Securities,
45Gresham Street, London EC2V 7BF on Wednesday,
10May2023. The AGM is the principal forum for
dialoguewith shareholders and usually includes a
presentation outlining recent developments in the
business, followedby a question-and-answer session
toenable shareholders to ask about specific areas or
thebusinessin general. It is intended that the AGM will
take place inperson. Shareholders intending to attend
the AGM areasked to register their intention as soon
aspracticablebyemailing the Company Secretary at
luceco@linkgroup.co.uk. Shareholders are strongly
encouraged to register their proxy votes online.
Shareholders may also wish to send their questions
forthe Board via email to luceco@linkgroup.co.uk in
advance of the meeting. Further details will be included
in the Notice of AGM, which will be sent to shareholders
within the prescribed timescales.
GILES BRAND
Chair
20 March 2023
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Ensuring we have a broad
range of skills, experience
and diversity, particularly
at Board and senior
management level, is key
to ensuring our teams
are well equipped to
meet the evolving
needs of the business
GILES BRAND
Nomination Committee Chair
Nomination Committee Report
Dear Shareholder,
I am pleased to present the report of the Nomination
Committee (“Committee”), which details the role of
theNomination Committee, the work it has undertaken,
andthe matters considered during the year ended
31December 2022. The role of the Nomination
Committee is vital to ensuring that the Company has
astrong Board with a broad range of skills, experience
and diversity, and we have made excellent progress
during the year, having welcomed Julia Hendrickson
tothe Board as a Non-Executive Director in June 2022.
Board Diversity & Inclusion Policy
The Board Diversity & Inclusion Policy (“Policy”)
wasreviewed by the Committee in December 2022,
withrecommended updates approved by the Board.
Aspart of Board discussions, recognition was given
tothe importance and benefi ts of greater diversity,
includingsocial and professional background,
cognitiveand personal strengths, sexual orientation,
disability status, gender and ethnicity throughout
theorganisation, including on the Board itself.
TheBoard iscommitted to ensuring that recruitment
and promotion of individuals at Board and senior
management level is based on merit and objective
criteria and that, withinthis context, each candidate
isjudged on their unique combination of skills,
knowledge and experience, as well as their social
andprofessional background, cognitiveand personal
strengths, sexual orientation, disability status,
genderand ethnicity. TheCommittee reviews the
e ectiveness of this Diversity & Inclusion Policy
annuallyand recommends any required amendments
tothe Board forapproval.
The Committee’s main responsibilities, as outlined
inits terms of reference, are:
• Reviewing the size, structure and composition
ofthe Board and its Committees
• Identifying and nominating candidates to fi ll
Board vacancies as the need arises
• Ensuring adequate succession planning is in place
for Directors and members of the senior
management team
• Overseeing the development of a diverse pipeline
for succession
The Committee’s terms of reference are available
onthe Company’s website. Committee meeting
attendance is set out on page 86.
Key responsibilities
Chair: Giles Brand
Other members: Caroline Brown and Pim Vervaat
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Nomination Committee Report continued
Board Diversity & Inclusion Policy continued
The Board welcomes the recent changes to the Listing
Rules which build on the recommendations from the
Hampton-Alexander Review on gender diversity on
boards and the Parker Review regarding ethnic
representation on boards. The UK Listing Rulesrequire
listed companies with financial years beginning on or
after 1 April 2022 to disclose annually their position
against the following board diversitytargets:
• At least 40% of women on the board
• At least one woman in the position of the Chair,
SeniorIndependent Director, Chief Executive or
ChiefFinancial Ocer
• At least one director from an ethnic minority
background
The Company will fully report against the diversity
targets in the prescribed format under the Listing Rules
in the Company’s 2023 Annual Report.
During its review of the Policy in December 2022,
theNomination Committee recommended changes
tothe Policy to bring it in line with the wording in the
Listing Rules and to include new diversity targets
(“Targets”), which the Board approved at its meeting on
13 December 2022. The Targets aim to bring the Board
in line with the requirement to have at least 40%female
Directors on the Board by 2024, to have at least one
ethnic minority Director on the Board by 2025 and to
have at least one woman in any of the senior positions
above by 2030. It is recognised that periods ofchange
in Board composition may result in temporary periods
when this balance is not achieved, however the
Committee feels that these Targets are realistic and
achievable within these timeframes.
Gender balance of senior management and
directreports
The gender balance of the Board, senior management
and direct reports is included in the Environment,
Socialand Governance Report on page 56.
Resignations and appointments
In 2022 the Committee continued to focus on
strengthening the mix of skills, diversity and experience
on the Board, particularly with a view to enhancing the
Board’s expertise in mergers and acquisitions, climate
change, data science and digital marketing and sales
channels, to meet the evolving needs of the business
and to ensure that the Board is well equipped to meet
the current and future needs of the Group. To this end,
the Committee commenced a search for an additional
Non-Executive Director in early 2022 and Julia
Hendrickson was appointed to the Board with eect
from 1June2022. Julia brings to the Board extensive
international experience in developing and
implementing customer-focused commercial strategy,
including within the e-commerce channel.
On 19 January 2023, it was announced that Matt Webb,
Luceco’s Chief Financial Ocer, is stepping down to
pursue other opportunities after five years in the role.
WillHoy, formerly a Non-Executive Director of Luceco
and Chair of the Audit Committee, assumed an Executive
Director position from 1March2023 and will become the
Chief Financial Ocer on 1April2023. Willstepped down
from his position as Chair of the Audit Committee on
19January2023 and was succeeded in the role by
Non-Executive Director, TimSurridge.
Board composition
Each year the Committee formally reviews the size,
composition and capabilities of the Board, including
itsdiversity, as part of the annual Evaluation of Board
Eectiveness. The Committee concluded in the 2022
Evaluation that the Board had an appropriate mix of
skills and experience to provide strong and eective
leadership, noting that this was being strengthened
through ongoing succession planning. The standing
Board Committees were also considered, and it was
agreed that the composition of each was appropriate
and balanced. Informed by this review and ongoing
monitoring, the Committee will continue to oversee
therefreshment of the Board and Committees and to
maintain an appropriate balance of skills, commercial
expertise and diversity to satisfy the evolving needs
ofthe Group. The Board and the Nomination Committee
have spent a significant amount of time considering
Board succession during the course of the year to
ensure that the Board has the right mix of skills and
experience, as well as the capability to provide eective
challenge and promote diversity.
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Nomination Committee Report continued
Succession planning
The Board has delegated responsibility to the
Committee for leading the process for identifying and
nominating Board candidates, as well as keeping the
diversity of the Board under review. When making a
Board appointment, the Committee seeks to identify
anindividual with the skills, knowledge and experience
required to fulfil the role, within this context taking
account of the added value that the individual brings
tothe Board in terms of creating a diverse, and therefore
more eective, decision-making body.
The Committee also oversees the development of a
diverse pipeline of potential Directors and senior
managers. This is supported by the Group’s Equality
andDiversity Policy, described on page 55, which
ensures that all employees, regardless of gender,
ethnicity, ageor other factors, are provided with the
opportunity to progress within the organisation,
supported by an inclusive culture underpinned by fair
and equitable practices and procedures. The Committee
believes thatthis is an appropriate and balanced
approach tofacilitating the development of a diverse
pipeline.
All Non-Executive Directors are appointed for initial
terms of three years and may be terminated by either
party upon one month’s notice or by shareholder vote at
the AGM. The Non-Executive Directors do not have any
entitlement to compensation (or payment in lieu of
notice) if they are not re-elected by shareholders
following any retirement.
Full details of the remuneration of the Non-Executive
Directors can be found on pages 114 to 116 of this
document in the Directors’ Remuneration Report.
Annual evaluation of the Nomination Committee
As part of the Evaluation of Board Eectiveness
conducted during 2022, the Committee undertook
anevaluation of its own eectiveness and having
considered the structure, size and composition of the
Board and its Committees as well as reviewing its terms
of reference, to which no changes were proposed,
concluded that it was operating eectively. Details of
the full Evaluation of Board Eectiveness, including
howit was conducted and the actions taken as a result,
canbe found on page78.
Directors’ performance
The Directors’ biographies are set out on pages 80 to
82. The Committee has considered the performance of
each Director and concluded that they continue to
demonstrate the necessary knowledge and commitment
to contribute eectively to the Board.
Priorities for 2023
During the forthcoming year, the Committee will
continue to focus on strengthening the mix of skills,
diversity and experience on the Board, particularly
witha view to enhancing the Board’s diversity and
expertise in mergers and acquisitions, climate change,
data science and digital marketing and sales channels.
TheCommittee will also undertake an in-depth review
ofthe diversity, development and pipeline of the talent
pool below Executive Director level to meet the evolving
needs of the business.
GILES BRAND
Nomination Committee Chair
20 March 2023
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In 2022, the Committee
received updates on the
Group’s rolling programme
on internal control reviews
and its preparations for
planned UK corporate
governance reform
TIM SURRIDGE
Audit Committee Chair
Audit Committee Report
Dear Shareholder,
I am pleased to present the report of the Audit
Committee (“Committee”) for the year ended
31December2022. During the year, the Committee
continued to challenge and support management
throughout its response to the coronavirus pandemic
and closely monitored the Group’s position in light of
thesituation. The Committee also continued to oversee
and assess the enhancement of internal controls across
the Group and the development of the Group’s
FinanceManual.
I would like to thank the fi nance team members and
ourexternal assurance providers for their dedication
and work under challenging conditions during the last
year. Iwould also like to welcome Julia Hendrickson
whojoined the Committee in October 2022, and who
brings extensive commercial leadership experience
witha background in international, large retail and
Fast-Moving Consumer Goods sectors.
We continue to make progress in strengthening the
controls environment and the quality of our reporting.
Signifi cant issues
The signifi cant issues that were considered by the
Committee in 2022 and early 2023 are set out below.
These were addressed through reporting from,
anddiscussion with, the Chief Executive O cer,
ChiefFinancial O cer and the auditor, all of whom
areregular Committee meeting attendees. KPMG LLP
has set out its audit approach and the work it
performedtosatisfy its audit requirements in these
areas in its independent Auditor’s Report on pages
133 to 140.
The Committee’s main responsibilities, as outlined
inits terms of reference, are:
• Recommending the half and full-year fi nancial
results to the Board
• Maintaining the integrity of all fi nancial and
non-fi nancial reporting
• Monitoring the Group’s internal fi nancial controls
and risk management systems
• Overseeing the relationship with the external
auditor and reporting the fi ndings and
recommendations of the auditor to the Board
The Committee’s terms of reference are available
onthe Company’s website. Committee meeting
attendance is set out on page 86.
Key responsibilities
Chair: Tim Surridge
Other members: Pim Vervaat and Julia Hendrickson
Julia Hendrickson became a member of the Audit
Committee on 1 October 2022. Will Hoy was a
member and Chair of the Audit Committee until
19January2023
1
.
1. Committee meetings are also routinely attended bythe Chair
of the Board, Chief Executive O cer, Chief Financial O cer,
senior fi nance team members and the external auditor. The
Committee met separately with the external auditor without
management present.
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Significant issues continued
COVID-19
The Committee continued to review management’s
response to the coronavirus pandemic, including its
impact on accounting judgements, financial reporting,
controls and going concern and it remained a key
agenda item during 2022. It was encouraging that the
impact of the coronavirus pandemic on the Company
eased significantly throughout the course of the year,
and any residual impact has now subsided.
Other matters
Other matters discussed by the Committee during
theyear included:
• Consideration of forecasts against available
bankfacilities as part of the viability and going
concernreviews
• Focus on stress testing climate-related risks, noting
the requirements of the Task Force on Climate-related
Financial Disclosures (“TCFD”) aspart of the viability
and going concern reviews
• The integration of recently acquired businesses
• Inventory valuation in terms of any obsolescence risk
arising from increased stock levels, and the impact
ofrising input prices on stockcost
• Receivables valuation and customer creditworthiness
• The application of the Company’s dividend policy
• The carrying value of intangible assets, including
those arising onacquisition
• Finalisation of the fair value of DW Windsor
• Consideration of an audit and assurance policy
inresponse to the BEIS consultation on corporate
governancereform
• Deferred tax and transfer pricing
• The application of the Whistleblowing “Speak Up”
Policy and improvements including enabling online
access to thepolicy
• Rollout of a new cyber security policy and online
training, in addition to an anti-bribery trainingmodule
• The Group’s use of alternative performance measures,
which are included alongside IFRS measures to
provide the users of the financial statements with
abetter-informed view of the Group’sperformance
• Annual review of the Company’s requirement for
aninternal auditfunction
Financial statements
The Committee considered in particular the following
matters, as identified by the auditor, in relation to the
Group’s half-year and full-year financialstatements:
• Inventory valuation
• Acquisition accounting
• Impairment of goodwill
• Valuation of intangibles on acquisition of Sync EV
• Recoverability of intra-group debt
• Going concern disclosure quality
• Transfer pricing relating to overseas subsidiaries
• Revenue recognition
• Management override of controls
The Committee confirms that it is satisfied that the
presentation of the financial statements for the year
ended 31December2022 is appropriate and in
accordance with the Group’s accountingpolicies.
Going concern
In preparation for publication of the 2022 Annual
Report, the Committee and Board conducted a
comprehensive review of the Company’s 12-month going
concern position in March 2023. Management
considered the 12-month assessment of going concern,
together with sensitivity analysis results covering the
period December 2023 to December2025 with respect
to the viability statement. The full Board discussed the
results in detail, including: practicalities of the sensitivity
testing process; therationale behind the choice of risks
subject to sensitivity testing and the treatment of
one-o versus recurringrisks.
Internal controls
The Group conducts a rolling programme of internal
control reviews across its worldwide operations.
Thescope of the programme is approved by the
Committee each year. This year’s programme included
areview of the Company’s newly acquired business,
DWWindsor, by Group Finance personnel. The
Committee discussed actions arising from the review in
the areas of inventory reporting, accounts payable and
receivable and health and safety training. PwC
undertook a detailed third-party verification of controls
eectiveness at theGroup’s Chinese operations in 2022,
following a similar review conducted in 2020. PwC’s
review determined that financial controls were
functioning welloverall but identified some
opportunities for improvement within supply chain
management, quality assurance andthe purchasing
process. The Committee also assessed the findings of a
review, undertaken internally, of internal controls across
the Group, and agreed furtherreviews to be undertaken
in2023.
Audit Committee Report continued
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Audit Committee Report continued
Significant issues continued
Internal controls continued
During the year, PwC also conducted independent
verification of the eectiveness of controls at the
Group’s operations in the UAE. Whilst controls were
considered appropriate given the size and scale ofthe
business, PwC recommended that approvals which
required independent review be revisited to identify
potential enhancements to sign-o protocols incritical
areas. PwC further recommended that a review be
performed to ensure controls are suciently localised
and take account of local laws and regulations.
Governance
The Committee discussed the reporting requirements
ofthe Task Force on Climate-related Financial
Disclosures (“TCFD”) recommendations on corporate
reporting and further engaged with management on
preparation for the expected introduction of legislation
by the UK Government’s Corporate Governance and
Audit Reform proposals. The Committee also
consideredspecific outcomes from the BEIS
consultation on corporate governance reform,
suchasthe requirement to publish an audit and
assurance policy and undertook preparatory work
inadvance of a timetable for adoption being set.
Internal financial controls and risk
managementsystems
The Board is responsible for the Group’s risk
management framework and the Committee has
beendelegated responsibility for reviewing the overall
process of assessing business risks and managing the
impact on the Group. The Board retains overall
responsibility for the level of risk the Group is willing
totake and for allocating sucient resource to the
management of business risk. The risk management
process is detailed on pages 64 and 65.
The Group operates its system of internal control
byusing the following key elements:
• Regular review meetings of various groups,
includingbusiness functions, senior management,
sub-committees and the Board, to discuss key issues
• A detailed business planning process, combining
top-down and bottom-up approaches, with outputs
reviewed by the Directors
• A system of financial controls, including preventative
controls and a review process
• Ongoing dialogue with Directors, including financial
reports and trading updates
• Conducting root and branch reviews of internal
control systems at companies targeted for acquisition
as part of the due diligence process
The Committee, on behalf of the Board, has reviewed
the eectiveness of the internal control systems and risk
management processes in place during the year, taking
account of any material developments since the year
end. The Group’s rolling programme of internal controls
reviews are conducted using a standardised risk-based
testing approach introduced in the year.
A new KPI dashboard of financial and non-financial KPIs
was completed during the year and a draft audit and
assurance policy document had been produced.
Further progress was made in 2022 including
enhancements to the Whistleblowing Policy, with
introduction of aQR code for online access, translation
into Chinese andupdates to the cyber security,
anti-money laundering and anti-bribery policies with
associated training programmes rolled out to
employees.
Review of half and full-year financial results
The Board is ultimately responsible for reviewing and
approving the Annual Report and Financial Statements
and the half-yearlyreports.
Throughout the year the Committee ensured that the
impact of COVID-19 was adequately explained in the
Group’s published financialstatements.
At the Board’s request, the Committee has reviewed the
Annual Report and Financial Statements and is satisfied
that the information contained therein is fair, balanced
and understandable and provides shareholders with the
necessary information to assess the Group’s position
and performance, business model andstrategy.
Principal risks and uncertainties
The Committee has considered the impact of risk
associated with coronavirus, concentration risks
associated with operations, concentration risk
associated with customers and products (including
product and shipping cost inflation), macroeconomic
and political and environmental risk, loss of IT/data, loss
ofkey employees, acquisitions, legal and regulatory
andfinance andtreasury risk.
The principal risks and uncertainties of the Group and
their mitigation are included on pages 66 to 71.
Thecrystallisation of these risks has been considered
inthe Viability Statement on pages 72 to 74 and going
concern assessment on page147.
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External auditor
In accordance with Articles 17 and 41 of the Regulation
(EU) No 537/2014 we are required to tender the
statutory audit before the end of the 2026 financial year,
being ten years from when Luceco PLC was first listed.
The Board’s current intention is to tender the audit
during 2024 and seek approval for the preferred
candidate at the Company’s 2025 AGM. The Board
chose not to run a tender process sooner, because in
2023, we now have a new CFO, new Audit Committee
Chair and due to rotation within KPMG a new Senior
Statutory Auditor.
The Committee regularly considers the independence
and objectivity of the auditor, taking into consideration
relevant UK professional and regulatoryrequirements.
The Committee reviews an annual statement from
theauditor detailing its independence policies and
safeguards and confirming its independence, also taking
into account the Group’s External Auditor Independence
Policy, which incorporates the Group’s non-audit
services policy and relevant ethical guidance regarding
the provision of non-audit services by the
externalauditor.
The Committee has considered and approved the terms
of engagement and fees of the external auditor for the
year ended 31 December 2022. Audit fees payable by
the Group to KPMG LLP in 2022 totalled £0.6m
(2021:£0.5m). There were no contingent fee
arrangements. The Committee reviewed the level of
non-audit services and fees provided by KPMG LLP;
inrespect of the year ended 31 December 2022, these
were £0.1m (2021: £0.1m) and related to the 2022 Interim
Review and covenant confirmation. The Committee
determined that KPMG LLP were best placed to
undertake this work in view of their deep knowledge of
the Group’s global operations. Theratio of non-audit
fees to audit fees for the year was 1:7 (2021: 1:7).
The Committee has agreed that this does not pose a
threat to the auditor’s independence, taking into
account the absolute level of fees incurred by the
Company in relation to KPMG LLP’s revenues as a whole.
The Committee oversees the Group’s relationship with
its external auditor and makes recommendations to the
Board concerning the appointment, re-appointment
andremuneration of the auditor. The Committee
reviewed the eectiveness and quality of the external
audit process by reviewing the audit plan, including how
the audit of the Chinese operations was to be performed
given ongoing travel restrictions, monitoring changes in
response to the new issues and changing circumstances,
receiving reports on the results of the audit work
performed and questioning the auditor about
theirfindings.
Internal audit
During the year, the Group did not have an internal audit
function as it had been agreed that the Group’s size and
activities were such that internal assurance was
achievable through other means. In addition to reports
from and discussions with management, further
assurance was provided during the year as described
above under “Internal controls”. The Committee
considered, as it does annually, whether the Group
hadaneed for an internal audit function. The Committee
concluded that regular management reports and
discussions, augmented by additional external and
internal reviews, such as those undertaken during the
year, as and when required, were an appropriate means
of obtaining assurance as to the eectiveness of the
Group’s internal controls, given the size and complexity
of the Group, and that a permanent internal audit
function was therefore notrequired.
Climate-related financial disclosures
Throughout the year, the Committee considered the
TCFD recommendations on corporate reporting in the
context of the Company’s operations and reviewed the
Company’s sustainability strategy. The Company’s
TCFDdisclosures are set out on pages 38 to 53.
Annual evaluation of the Audit Committee
As part of the Evaluation of Board Eectiveness
conducted during 2022, the Committee undertook an
evaluation of its own eectiveness and concluded that
itwas operating eectively. The Board has satisfied
itself that Tim Surridge, Pim Vervaat and Julia
Hendrickson have recent and relevant financial
experience and that the Committee as a whole has
competence relevant to the sectors in which the
Company operates.
Priorities for 2023
During the forthcoming year, the Committee will
continue to support and challenge management through
the evolution of the Group’s internal controls framework,
including continued integration of the DW Windsor finance
team and updating training across the Group in respect
of key policy areas. The Committee will also continue to
bring increased focus to the risks associated with climate
change and the impact of such risks on the financial
statements through the TCFD reporting requirements and
will further consider the additional requirements expected
from the BEIS Corporate Governance and Audit Reform
proposals, including the introduction of an Audit and
Assurance Policy.
TIM SURRIDGE
Audit Committee Chair
20 March 2023
Audit Committee Report continued
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Annual Report and Financial Statements 2022
Dear Shareholder,
On behalf of the Board, I am pleased to present the
Remuneration Committee’s report on remuneration for
the year ended 31December2022.
Although the Group has made signifi cant progress in
recent years, trading performance in 2022 was held
back by the temporary destocking of our major
distributor customers. This temporary trend combined
with some softening of the buoyant demand seen
throughout the pandemic left profi t in 2022 lower than
2021 and below the incentive targets set. However,
management have been successful in meeting their cash
fl ow targets, where diligent working capital
management, combined with the slowdown in activity
versus 2021, created a record cash infl ow in 2022.
This year has also generated some key operational and
strategic highlights. The integration of DW Windsor is
going well, albeit this has caused a short-term reduction
in profi tability, and plans are in place to use wider Group
resources to improve the business’s product range in
order to gain share in the street lighting market. In
addition, the acquisition of Sync EV in 2022 has enabled
the business to obtain a foothold in the EV charger
market. Furthermore, Kingfi sher Lighting, acquired in
2017, has had an outstanding year supported by the
Group’s experience in designing and manufacturing low
cost, high quality products.
Our approach to
remuneration continues
to incentivise management
to drive long-term
sustainable performance
for shareholders
TIM SURRIDGE
Remuneration Committee Chair
Remuneration Committee Report
Chair: Tim Surridge
Other members: Caroline Brown, Pim Vervaat and
Julia Hendrickson
Julia Hendrickson became a member of the
Remuneration Committee on 1 October 2022
1
.
The Group has also made continued progress against its
sustainability agenda and has committed to the Science
Based Targets initiative as planned. Operations remain
carbon neutral in the year and the business remains on
track to meet its previously announced target of £100m
low carbon sales by 2025.
2023 Directors’ Remuneration Policy review
Luceco last sought shareholder approval for its
Directors’ Remuneration Policy at the AGM in 2020 and
therefore, in accordance with the remuneration
reporting regulations, is required to seek shareholder
approval for its Policy at the AGM in 2023. In light of this,
the Committee undertook a review of the Policy during
the year. The Committee concluded that the overall
framework – based on an annual bonus plan plus a
performance share plan – remains appropriate to
continue to incentivise management to drive long-term
sustainable performance for shareholders. As such, no
signifi cant changes are proposed to the Policy.
Remuneration paid for 2022
The signifi cant step forward the Group made in 2021 has
made for a challenging set of comparatives in 2022.
That said, even against this challenging backdrop,
management have been able to make good strategic
progress in the year and are well positioned to generate
sustained, profi table growth as we look ahead.
The annual bonus targets for 2022 were based on
Adjusted Profi t After Tax, Adjusted Free Cash Flow and
individual strategic objectives, including measures linked
to our ESG strategy.
1. The Chair of the Board and other Board members also attend
Committee meetings at the invitation of the Remuneration
Committee Chair.
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Remuneration Committee Report continued
Remuneration paid for 2022 continued
Adjusted Profit After Tax performance was £17.2m,
andAdjusted Free Cash Flow was £30.7m. Adjusted
Profit After Tax was below the target set, due to
customer destocking creating a temporary unforeseen
headwind. Adjusted Free Cash Flow exceeded the
maximum target set, driven by diligent working capital
management in the year. The CEO and CFO both
performed strongly during the year and delivered good
progress against their individual strategic objectives in
challenging market circumstances (further details are
set out on page 118). The Committee determined that
the CEO would receive a payment of 5% out of a
maximum of 20% for his performance objectives and
that the CFO would receive a payment of 10% out of
amaximum of 20% for his performance objectives.
Theoverall bonus payable to the CEO is therefore 55%
of maximum and the overall bonus payable to the CFO is
60% of maximum. The Committee believes that this level
of bonus is appropriate, recognising the strong cash
performance during the year and the strategic progress
of the business.
Strategic performance
• Adjusted Profit After Tax £17.2m (2021: £31.2m)
• Adjusted Free Cash Flow £30.7m (2021: £18.8m)
• Adjusted EPS 3-year CAGR 13.0% (2021: 91.0%)
• TSR 3-year performance
1
-16% (2021: 965%)
The Executive Directors were granted PSP awards in
July 2020. These awards were based 50% on Adjusted
EPS performance for the year ended 31December2022
and 50% on TSR performance over a three-year period
from the date of grant. Adjusted EPS was 11.1p in the
period, resulting in 52.5% of this element of the award
vesting. TSRperformance will be assessed to the third
anniversary of the date of award and we will confirm
performance in next year’s report. TSR performance
iscurrently tracking such that this portion of the award
would lapse in full.
The Committee believes that the incentive outcomes
area fair reflection of our one-year and three-year
performance and therefore the Committee has not
exercised discretion in relation to incentive outcomes
during the year. We pride ourselves in our enabling
culture, which means that we reward achievement,
akeypillar in our Remuneration Policy, and this supports
our decision not to exercise any downward discretion.
Directorate changes
On 19 January 2023, we announced that Matt Webb
would be stepping down from the Board and as CFO on
31 March 2023 after five years in the role. Matt will be
succeeded as CFO by Will Hoy. The end of Matt’s
six-month notice period is 18 July 2023, and he will remain
employed for some of that period supporting Will and the
Board with the transition of the role. The exact date of his
cessation of employment is still to be determined and he
will receive pay in lieu of any remaining notice period.
Fulldetails of his leaving arrangements, including
treatment of outstanding bonus and PSP awards will
bedisclosed once he steps down.
Will was appointed as an Executive Director from
1March 2023 and will become CFO on 1 April 2023.
Willhas been appointed on a salary of £350,000. He is
entitled to receive a pension contribution of 5% of salary,
in line with the pension opportunity of the UK workforce,
and benefits in line with the Policy.
His annual bonus opportunity will be 100% of salary,
andhis LTIP opportunity will be 150% of salary. No
otherawards or payments will be made in respect of
Will becoming CFO.
Wider workforce engagement
A Group-wide employee engagement survey was
conducted in the year, the findings from which are
summarised on page 57.
Our Non-Executive Director responsible for workforce
engagement, Julia Hendrickson, also conducted
meetings with employees from across the business to
understand their feedback. Her findings are summarised
on page 85.
Both exercises identified understandable concerns
regarding the impact of inflation on the cost of living. We
have responded to this with salary increases for 2023 that
are on average greater than the wider market, with the
largest percentage increases given to the lowest paid.
Growth provides our employees with opportunities for
continued career development. Growth is supported by
remaining cost competitive. However, we also have a duty
to ensure that our compensation arrangements protect
our employees from the financial hardship that often
accompanies periods of high inflation. We believe our
salary plan for 2023 achieves both aims. Oering larger
increases to the lowest paid means that the percentage
pay increases given in 2023 to the Executive Directors are
below the wider workforce average.
I look forward to receiving your support for both
ourDirectors’ Remuneration Policy and our Annual
Remuneration Report at the AGM.
TIM SURRIDGE
Remuneration Committee Chair
20 March 2023
1. TSR performance for 2022 has been calculated over the
three-year period between 1 January 2020 and
31December2022.
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Annual Remuneration Report
The Directors’ Remuneration Report that follows has been prepared in accordance with the provisions of the2018 UK Corporate Governance Code (“Code”), theListing Rules,
the Large and Medium-sized Companies and Groups (Accounts and Reports) (Amendment) Regulations 2013 and the Companies Act2006.
Remuneration “at a glance”
How our policy was implemented in 2022
Key component Summary How we implemented in 2022
Base salary
8% increase to the CEO’s salary to reflect the increased size and complexity
of the organisation.
18% increase to the CFO’s salary to reflect an increase in the scope and
responsibilities of the role.
John Hornby – CEO Matt Webb – CFO
£400,000 £375,000
Pension
The CEO does not receive a pension allowance.
The CFO received a pension allowance of 5% of salary, in line with the wider
UK workforce.
n/a £18,750
Benefits
Benefits included car allowance/company car, mobile phone, life insurance
and private medical insurance.
£24,344 £10,966
Annual bonus
Maximum opportunity of 100% of salary in 2022.
Performance measures for the 2022 annual bonus were as follows:
• 30% Adjusted Profit After Tax
• 50% Adjusted Free Cash Flow
• 20% individual strategic objectives
Outturn as a percentage of
maximum: 55%
£220,000
Outturn as a percentage
ofmaximum: 60%
£225,000
PSP
Awards of 100% of salary were made to the CEO and CFO respectively
in2020.
Performance measures for the 2020 award were as follows:
• 50% TSR relative to the FTSE SmallCap, excluding investment trusts,
overthree years from the date of grant
• 50% Adjusted EPS for the year ended 31 December 2022
Percentage of award vesting: the Adjusted EPS target was met to some
extent, resulting in 52.5% vesting against this element. The TSR performance
will be assessed to the third anniversary of the date of the awards and we
willconfirm performance in next year’s report. TSR performance is currently
tracking such that this portion of the award would lapse in full.
CEO: £81,383
CFO: £69,757
Shareholding
requirements
200% of salary 7,041% 279%
Remuneration Committee Report continued
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2023 Remuneration Policy
The following table sets out our Remuneration Policy for Directors (“Policy”). This Policy will be put forward to shareholders for their binding approval at the AGM
on10May2023 and will apply to payments made from this date.
Further details regarding the operation of the Policy for the 2023 financial year can be found on pages 112 and 113.
Policy table
Purpose and link
tostrategy
Operation Maximum opportunity
Performance
measures
Base salary
To ensure that the
Company is able to attract
and retain talented
Executive Directors to
deliver the strategy of the
business.
The Committee sets base salary taking into account:
• The individual’s skills, experience and their performance
• Salary levels at other companies of a similar sizeand
complexity
• Pay and conditions elsewhere in the Group
Any salary increases are normally eective from 1January
but may be eective at other times if considered
appropriate.
Whilst there is no maximum salary, increases will normally
bein line with the increases awardedto other employees in
theGroup.
However, increases may be above this level in
certaincircumstances suchas:
• Where an Executive Director has been appointed to the
Board at a lower than typical market salary to allow for
growth in the role, larger increases maybe awarded to
move salary positioning closer to typical market level
asthe Executive Director gainsexperience
• Where an Executive Director has been promoted or
hashad a change in responsibilities
• Where there has been a significant change
inmarketpractice
• Where there has been a change in the size andcomplexity
of the organisation
n/a
Pension
To provide appropriate
levels of retirement benefit
for Executive Directors.
Executive Directors generally receive a contribution to
adefined contribution pension scheme (or equivalent)
oracash allowance in lieu of a pension.
The maximum annual pension contribution or cash
allowance is in line with the rate received by the majority of
the workforce in the UK, which is currently 5% of base salary.
n/a
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Purpose and link
tostrategy
Operation Maximum opportunity
Performance
measures
Benefits
To ensure that the benefits
oered by theCompany
remain competitive in the
markets in which it
operates and are in line
with those provided to
other Group employees in
a position of management
or responsibility.
Current benefits include a car allowance (£9,000 p.a.),
mobile phone, life insurance and private medical insurance.
Executive Directors may participate in the Share Incentive
Plan and any other all-employee plans onthe same basis as
other employees, up to HMRC approved limits.
The Committee may introduce other benefits if it
isconsidered appropriate to do so.
Executive Directors shall be reimbursed for all reasonable
expenses and the Company may settle any tax incurred.
Where an Executive Director is required to relocate
toperform their role, the appropriate one-o or ongoing
expatriate benefits may be provided (e.g.housing,
schoolingetc).
There is no maximum level of benefit. n/a
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Purpose and link
tostrategy
Operation Maximum opportunity
Performance
measures
Annual bonus
The role of the annual
bonus is to incentivise and
reward Executive Directors
for the delivery of the
Group’s strategy and
objectives.
Bonuses are normally paid in cash following theyearend.
Where an Executive Director has not met the shareholding
guideline set out, they will normally be expected to invest
50% of their post-tax annual bonus into Company shares.
The Committee may determine that this requirement shall
not apply where it deems that the Executive Director is
already on course to meet their shareholding guideline.
Bonuses are not pensionable.
Bonuses are based on annual performance targets.
Malus and clawback provisions apply, detailed on page 106.
The Committee may, in its discretion, adjust annual bonus
payments, if it considers that the outcome does not reflect
the underlying financial or non-financial performance of
theparticipant or the Group over the relevant period or
thatsuch payout level is not appropriate in the context
ofcircumstances that were unexpected or unforeseen
whenthe targets were set. When making this judgement,
theCommittee may take into account such factors asit
considers relevant.
Maximum annual bonus opportunity of 100% of basesalary.
Normally 50% of the bonus shall pay out for on-target levels
of performance. The annual bonus normally starts to accrue
for meeting threshold levels of performance. Up to 20%
ofthe maximum bonus maybe payable for
thresholdperformance.
The Committee shall
determine performance
measures for the bonus
each year. These may
include financial measures
(for example, profitability
and cash flow), other
metrics linked to the
delivery ofthe business
orESG strategies or
personal objectives.
No less than 70% of
theannual bonus will
bebased on financial
measures.
The Committee has the
discretion in exceptional
circumstances to adjust
the performance targets/
set dierent measures if
events occur outside of
management’s control
orwhere the target
nolonger satisfies
itsoriginal purpose
toensure that pay
isaligned with
performance.
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Purpose and link
tostrategy
Operation Maximum opportunity
Performance
measures
PSP
The PSP aligns the
Executive Directors and
participating employees
with shareholder interests,
incentivising them to
achieve specified
performance measures
over a three-year period.
The PSP also acts
asaretention tool.
Awards can be in the form of conditional shares or nil-cost
options or in such other form that the Committee
determines has the same economic eect. Where awards
are in the form of nil-cost options, participants may have
upto ten years from grant to exercise awards.
Awards may also be granted in conjunction with a
tax-advantaged Company Share Option Plan (“CSOP”)
uptothe HMRC limits as an “Approved PSPAward”.
The vesting of an Approved PSP Award will be scaled back
to take account of any gain made on exercise of the
associated CSOP option. An approved PSP Award will
enable the Executive Director and the Company to benefit
from tax advantaged treatment on part of their PSP award
without increasing the pre-tax value delivered to the
Executive Director or cost to the Company.
Awards normally vest based on performance assessed
overa period not shorter than three years.
Awards will normally be subject to a post-vesting holding
period for two years following the end of the
performanceperiod.
The Committee may in its discretion adjust PSP vesting
levels, if it considers that the outcome does not reflect the
underlying financial or non-financial performance of the
participant or the Group over the relevant period or that
such vesting level is not appropriate in the context of
circumstances that were unexpected or unforeseen when
the targets were set. When making this judgement, the
Committee may take into account such factors as it
considers relevant.
Malus and clawback provisions apply, as detailed
onpage106.
The maximum award in respect of a financial year is150% of
base salary.
Normally 25% of awards vest for threshold levels
ofperformance.
The Committee shall
determine performance
measures for awards
granted each year. These
may include share price
related measures, financial
measures (for example,
profitability and cash flow)
or other metrics linked to
the delivery of the business
or ESG strategies.
Awards granted in 2023
will vest subject to a
combination of Adjusted
EPS and relative TSR.
These measures will be
equally weighted.
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Purpose and link
tostrategy
Operation Maximum opportunity
Performance
measures
Company Share Option Plan
It is not intended that
awards will be made to
Executive Directors under
this Plan during the life of
the Policy.
The CSOP aligns
participating employees
with shareholder interests,
incentivising them to
achieve specified
performance measures
over a three-year period.
The CSOP also acts as
aretention tool.
Awards can take the form of market value share options.
Awards would be subject to performance assessed over
aperiod of no less than three years.
The Committee retains the discretion to adjust the final
vesting level if it does not consider that it reflects the
underlying performance of the Company.
Awards may be exercised once vested for up to ten years
following the date of grant.
Options can be granted in the form of unapproved options
or HMRC approved options up to the HMRC limit at the date
of grant.
Malus and clawback provisions apply, as detailed on
page106.
The maximum annual award is 100% of salary.
Normally 25% of awards vest for threshold levels
ofperformance.
If this plan were operated,
appropriate performance
conditions would be
determined by the
Committee at the time of
award and disclosed in the
Remuneration Committee
Report forthat year.
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Purpose and link
tostrategy
Operation Maximum opportunity
Performance
measures
Share ownership guidelines
Aligns the interests of
Executive Directors and
shareholders and
encourages long-term
shareholding and
commitment to the
Company both in and post
employment.
The Company encourages its Directors to hold shares in the
Group to strengthen their commitment to the organisation
interms of delivering the strategic objectives.
Executive Directors are expected to build and maintain a
holding of Luceco shares equal to at least200% of base
salary. Executive Directors areexpected to retain 50% of
anypost-tax shares thatvest under any share incentive plans
until this shareholding is reached.
The Committee also has a policy to promote interests in
share awards following cessation of employment toenable
former Executive Directors to remain aligned with the
interests of shareholders for an extended period after
leaving the Company.
Following stepping down from the Board, Executive
Directors will normally be expected to maintain a minimum
shareholding of 200% of salary (or actual shareholding if
lower) for the first 12 months followingdeparture from the
Board and 100% ofsalary (oractual shareholding if lower)
for the subsequent 12months. The Committee retains
discretion to waive this guideline if is not considered
tobeappropriate inthe specific circumstance.
n/a n/a
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Malus and clawback
Annual bonus payments may be clawed back for a
period of three years from the date of payment. Malus
and clawback provisions apply under the PSP and CSOP
from award to the fifth anniversary of the grant date.
The circumstances in which malus/clawback may apply
are a material misstatement of financial results, an
errorin assessing performance or in the information/
assumptions used, a material failure of risk management,
serious reputational damage, serious misconduct by the
participant, or any other similar circumstances.
Share plan operation
Awards under any of the Company’s share plans may:
• Have any performance conditions applicable to them
amended or substituted by the Committee in
circumstances where the Committee determines an
amended or substituted performance condition would
be more appropriate and not materially less dicult
to satisfy
• Incorporate the right to receive an amount equal to
the value of dividends which would have been paid on
the shares under an award that vests up to the time of
vesting. Thisamount may be calculated assuming that
the dividends have been reinvested in the Company’s
shares on a cumulative basis. This provision does not
apply to the CSOP
• Be settled in cash at the Committee’s discretion.
ForExecutive Directors, this provision will only be
used in exceptional circumstances such as where for
regulatory reasons it is not possible to settle awards
inshares
• Be adjusted in the event of any variation of the
Company’s share capital or any demerger, delisting,
special dividend or other event that may aect the
Company’s share price
Summary of decision-making process and
changestopolicy
During the year, the Committee undertook a review
ofthe Directors’ Remuneration Policy and its
implementation to ensure that the Policy supports the
execution of strategy and the delivery of sustainable
long-term shareholder value. The Committee discussed
the content of the Policy at Remuneration Committee
meetings during the year. Throughout the review
process, the Committee took into account the 2018 UK
Corporate Governance Code, wider workforce
remuneration and emerging best practice in relation to
Executive Director remuneration. The Committee also
considered input from management and our
independent advisers. The Committee considers that
the overall remuneration framework – based on an
annual bonus plan plus a performance share plan –
remains appropriate to continue to incentivise
management to drive long-term sustainable
performance for shareholders. As such, no significant
changes are proposed to the Policy. Minor changes have
been made to the wording of the Policy to aid operation
and to increase clarity.
The Committee believes that the proposed Policy is
clear and transparent and aligned with our culture.
TheCommittee has taken into account Provision 40
ofthe UK Corporate Governance Code and considers
we comply as described below.
We operate a simple incentive framework, with award
levels capped and payouts linked to performance
against a limited number of measures which are well
linked to our strategy. Stretching but fair targets are set.
This ensures that potential reward outcomes are clear
and aligned with performance achieved, with the
Committee having the discretion to adjust payouts
where this is not considered to be the case.
Pay levels are set taking into account external market
levels as well as internal practice to ensure pay remains
competitive while being equitable within the Company.
Malus and clawback, discretion provisions, LTIPholding
periods and shareholding guidelines, including
post-employment, are in place to mitigate
reputationaland other risk.
Approved payments
The Committee reserves the right to make any
remuneration payments and/or payments for loss of
oce (including exercising any discretions available
toitin connection with such payments) notwithstanding
that they are not in line with the Policy set out above
where the terms of the payment were agreed (i) before
25May2017; (ii) before the Policy set out above came
into eect, provided that the terms of the payment
wereconsistent with the shareholder-approved
directors’ remuneration policy in force at the time
theywere agreed; or (iii) at a time when the relevant
individual was not a Director of the Company (or other
persons to whom the Policy set out above applies) and,
in the opinion of the Committee, the payment was not in
consideration for the individual becoming a Director of
the Company or such other person. For these purposes,
“payments” includes the Committee satisfying awards
ofvariable remuneration and, in relation to an award
over shares, the terms of the payment are “agreed” no
later than at the time the award is granted. This Policy
applies equally to any individual who is required to be
treated as a Director under the applicable regulations.
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Selection of performance measures
Annual bonus
The annual bonus performance measures are intended
to incentivise Executive Directors to achieve the financial
objectives of the Group and deliver the business
strategy. The particular bonus metrics are selected
bythe Committee each year to ensure that Executive
Directors are appropriately focused on the key
objectives for the next 12 months.
Performance Share Plan
Our long-term strategic objective is to provide
long-term sustainable returns for all of our shareholders.
It is intended that awards made in 2023 will be based
onrelative TSR performance and Adjusted EPS growth.
TheCommittee believes the measures are aligned with
our strategy and will incentivise Executive Directors to
deliver enhanced shareholdervalue.
Performance targets for both the annual bonus and PSP
are set taking into account internal budget forecasts,
external expectations and the need to ensure that
targets remain motivational.
Remuneration arrangements throughout the Group
Remuneration arrangements are determined throughout
the Group based on the same principle: that the
remuneration policies and practices should be aligned to
Company purpose and values, support the delivery of
the strategy and promote long-term sustainable
success.
The senior management team, managers and members
of the sales teams are eligible to earn bonuses subject
todelivering against specific performance measures.
Employees have access to healthcare provisions in
proportion to their seniority. Other benefits may be
provided and are limited to the grade, seniority and
roleperformed by the employee. The Company also
contributes to employee pensions either through its
defined contribution pension scheme or through
ThePeople’s Pension depending on the grade of
theemployee.
Remuneration outcomes in dierent
performancescenarios
The charts below set out an illustration of the Policy
for2023. The charts provide an illustration of the
proportion of total remuneration made up of each
component of the Remuneration Policy and the value
ofeach component.
Three performance scenarios have been illustrated
foreach Executive Director:
Below threshold
performance
• Fixed remuneration
• No annual bonus payout
• No vesting under
thePSP
Mid-range performance • Fixed remuneration
• 50% annual bonus
payout
• 25% vesting under
thePSP
Maximum performance • Fixed remuneration
• 100% annual bonus
payout
• 100% vesting under
thePSP
Maximum performance
plus 50% share price
growth
• Fixed remuneration
• 100% annual bonus
payout
• 100% vesting under the
PSP + 50% share
pricegrowth
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Remuneration outcomes in dierent
performancescenarios continued
The charts have been prepared on the following basis:
• Base salary – the base salary used for the CEO is as
at1 January 2023, and the base salary used for the
incoming CFO is that set on his appointment
• Benefits – based on the disclosed benefits value
inthe single figure for 2022. For the incoming CFO,
anestimate has been used, aligned with the 2022
disclosed benefits value for the outgoing CFO
• Pensions – based on a contribution of 5% of base
salary for the CFO. The CEO does not receive any
pension benefit
• Bonus – based on the maximum award of 100%
ofbase salary
• PSP – based on the maximum award of 150% of
basesalary
No payment of dividend equivalents has been assumed.
Potential benefits under all-employee plans have not
been included. No share price growth has been assumed
other than where stated.
Minimum
performance
Maximum
Mid-point
Salary/benefits
£2,000k
£200k
£1,200k
£400k
£1,400k
£1,800k
£1,600k
Annual bonus LTIP
Share price appreciation
£0k
£800k
£1,000k
£600k
Maximum
performance
with share price
appreciation
CEO
£1,458k
£1,766k
£792k
£433k
25%
35%
17%
23%
30%
42%
28%
55%
26%
19%
100%
Minimum
performance
Maximum
Mid-point
Salary/benefits
£2,000k
£200k
£1,200k
£400k
£1,400k
£1,800k
£1,600k
Annual bonus LTIP
Share price appreciation
£0k
£800k
£1,000k
£600k
Maximum
performance
with share price
appreciation
CFO
£1,253k
£1,516k
£685k
£378k
25%
35%
17%
23%
30%
42%
28%
55%
26%
19%
100%
Remuneration Policy for newly appointed Directors
When determining the remuneration package for a
newly appointed Executive Director, the Committee
would seek to apply the following principles:
• The package should be market competitive to
facilitate the recruitment of individuals of sucient
calibre to lead the business. At the same time, the
Committee would intend to pay no more than it
believes is necessary to secure the required talent
• New Executive Directors will normally receive a base
salary, benefits and pension contributions in line with
the Policy described on pages 100 to 105 and would
also be eligible to receive awards under the bonus and
share incentive plans up to the limits set out in the
Policy
• In addition, the Committee has discretion to include
any other remuneration component or award which
itfeels is appropriate taking into account the specific
circumstances of the recruitment, subject to the limit
on variable remuneration set out below. The key terms
and rationale for any such component would be
disclosed as appropriate in the Remuneration Report
for the relevant year
• Where an individual forfeits outstanding variable
payopportunities or contractual rights at a previous
employer as a result of appointment, the Committee
may oer compensatory payments or awards,
insuchform as the Committee considers appropriate,
takinginto account all relevant factors including
theform of awards, expected value and vesting
timeframe of forfeited opportunities
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Remuneration Policy for newly appointed Directors
continued
• When determining any such “buyout”, the guiding
principle would be that awards would generally be
ona “like-for-like” basis unless this is considered by
the Committee not to be practical or appropriate.
• The maximum level of variable remuneration which
may be awarded (excluding any “buyout” awards
referred to above) in respect of recruitment is 250%
ofsalary, which is in line with the current maximum
limit under the annual bonus and PSP.
• Where an Executive Director is required to relocate
from their home location to take up their role, the
Committee may provide assistance with relocation
(either via one-o or ongoing payments or benefits).
• In the event that an internal candidate is promoted
tothe Board, legacy terms and conditions would
normally be honoured, including any accrued pension
entitlements and any outstanding incentive awards.
To facilitate any “buyout” awards outlined above, in the
event of recruitment, the Committee may grant awards
to a new Executive Director relying on the exemption
inthe Listing Rules which allows for the grant of awards
tofacilitate, in unusual circumstances, the recruitment
ofan Executive Director without seeking prior
shareholder approval or under any other appropriate
Company incentive plan.
The remuneration package for a newly appointed
Non-Executive Director would normally be in line
withthe structure set out in the policy table for
Non-Executive Directors on page 114.
Executive Directors’ service contracts and
leavingpolicy
When determining leaving arrangements for an
Executive Director, the Committee takes into account
any contractual agreements including the provisions
ofany incentive arrangements, typical market practice
andthe performance and conduct of the individual.
The service contracts are available for inspection at the
AGM and at the Company’s registered oce. For new
appointments, notice will normally be limited to nine
months on eitherside.
In the event of early termination of the employment, a
payment in lieu of notice may be made based on base
salary, pension and contractual benefits only for the
outstanding notice period. Payments in lieu of notice
willbe paid at the Committee’s discretion, either in
monthly instalments or in a lump sum. Payments will
normally besubject to mitigation by the Executive
Director being required to take reasonable steps to
findan alternativeposition.
The Committee may make any other payments in
connection with a Director’s cessation of oce or
employment where the payments are made in good
faith in discharge of anexisting legal obligation (or by
way of damages for breach of such an obligation) or
byway of settlement of any claim arising in connection
withthe cessation of a Director’s oce or employment.
Anysuch payments may include, but are not limited to,
paying any fees for outplacement assistance and/or the
Director’s legal and/or professional advice fees in
connection with their cessation of oce or employment.
The service contracts of the Executive Directors contain
restrictive covenant clauses for a period of 12 months
post-employment relating to non-competition,
non-engagement and non-solicitation of the Group’s
customers, suppliers and employees and confidentiality
undertakings. In addition, they provide for the Group
toownanyintellectual property rights created by the
Directors in the course of their employment.
Annual bonus
The Committee may determine that an Executive
Director remains eligible to receive a pro-rata bonus for
the financial year in respect of the period they remained
inemployment. The Committee will determinethe level
of bonus taking into account time inemployment and
performance.
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Share plan leaver rules
The treatment of leavers under the Company’s long-term incentive plans is determined by the rules ofthe relevant plans.
Good leavers
1
Leavers in other circumstances
Performance Share Plan
If a participant dies, their PSP award will vest to the extent determined by the Committee, taking into account the extent
towhich the performance conditions have been met and, unless the Committee determines otherwise, the proportion of
theperformance period that has elapsed.
If the participant ceases to be an ocer or employee of the Group for any other “good leaver” reason, their award will vest
onthe original vesting date, or, if the Committee so determines, as soon as practicable after the date of cessation. The extent
towhich awards vest in these circumstances will be determined by the Committee, taking into account the extent to which
theperformance conditions have been satisfied, and, unless the Committee determines otherwise, the proportion of the
performance period that has elapsed.
Participants have six months to exercise awards (12 months in the case of death) from the cessation of employment.
Awards lapse. Participants have six months from the
cessation of employment toexercise vested options.
Company Share Option Plan
A participant’s CSOP award will vest to the extent determined by the Committee, taking into account the extent to which
theperformance conditions have been met and pro-rata to the proportion of the vesting period elapsed since grant,
unlesstheCommittee determines the performance conditions should be waived.
Participants have six months to exercise their awards (12 months in the case of death) from the cessation of employment.
Awards lapse. Participants have six months from the
cessation of employment toexercise vested options.
SIP
Leaver provisions are determined in accordance with HMRC-approved provisions.
1. Death, ill-health, injury, disability, retirement or the sale of their employing entity out of the Group, or for any other reason at the Committee’s discretion.
Change of control
In the event of a takeover or winding up of the Company, share awards may vest early. The extent to which CSOP awards vest will be determined by the Committee
byreference to, unless the Committee determines otherwise, the performance conditions and the proportion of the vesting period that has elapsed. The extent to which
PSPawards vest will be determined by the Committee taking into account the extent to which the performance conditions have been satisfied and, unless the Committee
determines otherwise, the proportion of the performance period that has elapsed.
In the case of a demerger, special dividend or similar circumstances, awards may, at the Committee’s discretion, vest early on the same basis as for a takeover.
Remuneration Committee Report continued
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Remuneration Policy table for Non-Executive Directors
Purpose and link to strategy Operation Maximum value
Fees
To enable the Company to attract and retain experienced,
skilled Non-Executive Directors that arecapable of advising
and supporting the Executive Directors.
Paid in cash.
Fees for the Non-Executive Chair and Non-Executive Directors are set taking into account
thetime commitment required to fulfil the role and typical practice at other similarcompanies.
Our Non-Executive Director fee policy is to pay a basic fee for membership of theBoard, and
additional fees for the SID and chairmanship of a Committee to takeinto account the
additional responsibilities and time commitment of theseroles.
Additional fees may be paid to reflect additional Board or Committee responsibilities as
appropriate.
Fees paid to Non-Executive
Directors, including the
Non-Executive Chair, are
subject to consideration
and approval by the
Committee.
No maximum value
isspecified in the
Company’s Articles.
Benefits and expenses
To provide suitable arrangements to allow Non-Executive
Directors to discharge their duties eectively.
Reasonable costs in relation to travel and accommodation for business purposes are
reimbursed to the Chair and Non-Executive Directors. The Company may meet
anytaxliabilities that may arise on such expenses.
The Chair and Non-Executive Directors are not entitled to participate in any of theGroup’s
incentive plans or pension plans.
Additional non-significant benefits may be introduced if considered appropriate.
n/a
Terms and conditions for the Chair and Non-Executive Directors
The Chair and Non-Executive Directors serve the Company on the basis of renewable letters of appointment which can be terminated by written notice by either party.
TheChair’s appointment is subject to three months’ notice and the other Non-Executive Directors are subject to one month’s notice. No compensation is awarded on
termination. Letters of appointment are available for inspection at the AGM and the Company’s registeredoce.
Consideration of conditions elsewhere in the Company
The Committee does not consult with employees specifically on its Remuneration Policy for Executive Directors. However, the Committee is mindful of the salary increases
andbenefits applying across the whole business when considering the remuneration package of Executive Directors. The Company has an open and collaborative management
structure which provides a number of channels for employees to raise their views, including via our employee representative Non-Executive Director.
Consideration of shareholder views
The Committee will consider shareholder views received throughout the year and at the AGM in shaping the Remuneration Policy and when it undertakes the annual
remuneration review. It is the Committee’s intention to consult with major shareholders in advance of making any material changes to remuneration arrangements.
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Summary of Remuneration Policy and implementation for 2023
The following provides a summary of how the Policy will be implemented during 2023 (subject to receiving shareholder approval at the 2023 AGM) and the key changes
intheapproach to implementation from 2022.
Element Overview of implementation for 2023 Changes from 2022
Base salary
From 1 January 2023, salaries will be as follows:
• CEO – £410,000
• Outgoing CFO – £384,375
• Incoming CFO – £350,000
Our approach this year has been to focus salary increases
onlower-paid workers to provide additional support in the
context of the macroeconomic environment. Salaries for
theExecutive Directors have increased by 2.5%, which
hasbeen determined using the same principles used to
determine salary increases for the wider workforce.
TheCFO’s salary was set on appointment and he was
noteligible for an increase for 2023.
Pension
The CEO does not participate in any pension arrangement.
Both the outgoing and incoming CFO will receive a pension contribution of 5% ofsalary,
inlinewith the pension opportunity for the UK workforce.
No change.
Benefits
Benefits currently include: a company car or car allowance (£9,000 p.a.), mobile phone,
lifeinsurance and private medical insurance. Executive Directors may also participate
inall-employee share plans on the same basis as other employees.
No change.
Annual bonus
Maximum annual bonus opportunity of 100% of salary.
Normally paid in cash. Where an executive has not met their shareholding guideline, or is not
on course to meet the guideline, then it is expected that the executive invests at least 50% of
the post-tax annual bonus into Company shares.
For 2023, performance measures are as follows:
• 30% on Adjusted Profit After Tax
• 50% on Adjusted Free Cash Flow
• 20% on individual strategic objectives
The Committee believes the balance of these measures incentivises executives tocontinue to
grow the business and improve profit performance, to focus on operational eciencies and the
generation of cash to fund growth, and to achieve specific operational and strategic objectives.
The bonus starts accruing for threshold levels of performance; 50% of the bonuspays out for
target performance with full payout for achieving stretching performance targets.
Bonus targets are commercially sensitive and therefore have not been disclosed.
It is intended that targets will be disclosed in full in the 2023 Directors’ Remuneration Report.
No change.
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Element Overview of implementation for 2023 Changes from 2022
Performance
shareplan
It is intended that 2023 PSP awards for the CEO and incoming CFO will be 150% ofbase
salary. The outgoing CFO will not receive a PSP award in respect of 2023. The Committee is
conscious that the current share price is lower than the share price used to determine
awardsin 2022 and of shareholder guidance in relation to windfall gains in this context.
TheCommittee does not currently intend to make a reduction in the grant level, however,
thiswill be reviewed further based on the share price at the date of award. The Committee
willreview the award outcome on vesting and will consider scaling back the level of vesting
ifit considers that management have benefited from a windfall gain.
Awards vest based on performance over a three-year period and are subjectto a post-vesting
holding period for two years following the end of the performanceperiod.
For 2023, award performance measures are as follows:
• 50% based on total shareholder return (“TSR”) relative to the FTSE SmallCap index
excluding investment trusts. 25% of this portion vests for median TSR with100% vesting
forupper quartile TSR
• 50% based on the compound annual growth rate (“CAGR”) of Adjusted Earnings Per Share
(“EPS”) performance for the financial year ended 31 December 2025. 25% of this portion
vests if the CAGR in this period is 5%, with 100% vesting if the CAGR is 15%. There will be
straight-line vesting between each point
The Committee believes these measures incentivise executives to achieve excellent profit
growth while generating above-market returns for shareholders compared toour peers.
No change.
Shareholding
guideline
Executive Directors are expected to build and maintain a holding of Luceco shares equal to
atleast 200% of base salary.
Following stepping down from the Board, Executive Directors will normally be expected to
maintain a minimum shareholding of 200% of salary (or their actual shareholding if lower)
forthe first 12 months following departure from the Board and 100% of salary (or their
actualshareholding if lower) for the subsequent 12 months. This guideline does not apply
toany shares purchased by the Executive Director.
No change.
Executive Directors’ service contracts
The service contract of John Hornby is dated 14 October 2016. Matt Webb’s service contract is dated 19 February 2018. These are rolling service contracts with no fixed expiry
date. The service contract of the CEO is terminable on nine months’ written notice by either party. The service contract of the CFO is terminable on six months’ written notice
by either party.
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External appointments
Executive Directors are permitted to hold Non-Executive Director positions in other companies where it is considered appropriate and subject to approval by the Board.
Disclosure of any such earnings is required to be made to the Board, to shareholders and in the Annual Report and Financial Statements. For the year ended 31December2022,
neither Executive Director held any external directorship during the year.
Non-Executive Directors
Element Overview of implementation for 2023 Changes from 2022
Fees
From 1 January 2023, the Non-Executive Chair and Non-Executive Director fees are asfollows:
• Non-Executive Chair – £108,200
• Non-Executive Director base fee – £44,500
• SID, Audit and Remuneration Committee Chair fee – £11,200
Non-Executive Director fees were increased by 2.5% with
eect from 1 January 2023, and were determined using the
same principles used to determine salary increases for the
wider workforce, asset out above.
Expenses
Reasonable costs in relation to travel and accommodation for business purposes are
reimbursed. The Group may meet any tax liabilities that may arise on such expenses.
No change.
Non-Executive Director terms of appointment
The dates of appointment for the Chair and Non-Executive Directors are shown in the table below:
Non-Executive Director Date of appointment
Giles Brand 1 May 2010
Caroline Brown 27 September 2016
Tim Surridge 27 September 2016
Pim Vervaat 1 September 2020
Julia Hendrickson 1 June 2022
The Chair and Non-Executive Directors serve the Group on the basis of renewable letters of appointment which can be terminated by written notice by either party. TheChair’s
appointment is subject to three months’ notice and the other Non-Executive Directors are subject to one month’s notice. No compensation is awarded ontermination.
Inaccordance with the principles of the Code, the Chair, the Non-Executive Directors and the Executive Directors are subject to voluntary re-election byshareholders.
Theirappointments may be terminated in the event of them not being re-elected by shareholders or otherwise in accordance with the Articles.
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Alignment of our policy with the UK Corporate Governance Code
The Committee considers that the proposed Remuneration Policy and its proposed implementation appropriately addresses the following principles, as set out in the
UKCorporate Governance Code.
Principle How the Committee has addressed this
Clarity
The Committee is committed to providing open and transparent disclosures with regard to executive remuneration arrangements.
In addition, Julia Hendrickson acts as the designated Non-Executive Director for workforce engagement and actively engages with employees onarange of
issues aspart of this role.
Simplicity
In determining the remuneration framework, the Committee was mindful of avoiding complexity and ensuring that arrangements are easy tounderstand.
Our remuneration arrangements are simple in nature, comprising three main elements – fixed pay (comprising of base salary, pension and benefits), variable
short-term incentives (annual bonus), and variable long-term incentives (PSP awards). This framework is well understood byboth participants and shareholders.
Risk
The Committee believes that the structure of remuneration arrangements does not encourage excessive risk-taking.
The remuneration framework has a number of features which align remuneration outcomes with risk, including a two-year post-vesting holding period applied
toany PSP awards granted from 2020 onwards, and personal shareholding guidelines applying both in employment and post employment.
In addition, malus and clawback provisions apply to both the annual bonus and PSP awards.
Predictability
The Remuneration Policy outlines the threshold, target and maximum levels of pay that Executive Directors can earn in any given year over the three-year life
ofthe approved Remuneration Policy. Actual incentive outcomes vary depending upon the level of performance against various measures, with performance
against targets normally disclosed in the Annual Report on Remuneration each year.
Proportionality
The Committee is satisfied that the Remuneration Policy does not reward poor performance. Payment of the annual bonus and PSP is subject to the achievement
of stretching performance targets, which are clearly linked to the Group’s strategy.
Both the Committee and Executive Directors are cognisant of the pay and conditions for the wider workforce, and this is taken into account when considering
executive remuneration.
Additionally, the Committee retains the discretion to adjust formulaic outcomes under the annual bonus and/or PSP should it consider that theoutcome is not
aligned to the underlying performance of the Company or individual.
Alignment to culture
The performance measures that are used for the annual bonus and PSP are clearly linked to delivery of the Group’s KPIs. In addition, 20%oftheannual bonus
isbased on achievement against non-financial strategic targets, which ensures both financial and non-financial strategic goals are considered. Non-financial
goals reflect the Group’s ESG objectives.
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Implementation of Remuneration Policy during 2022
Single figure of total remuneration (audited)
The table below sets out the single figure of total remuneration received by the Executive and Non-Executive Directors for the years ended 31 December 2022 and 2021.
Director (£’000) Year
Basic
salary/fees Benefits Pension
Total
fixed
Annual
bonus
Long-term
incentives
Total
variable Total
John Hornby 2022 400 24 — 424 220 82
1
302 726
2021 369 20 — 389 185 979
2
1,164 1,553
Matt Webb 2022 375 11 19 405 225 69
1
294 699
2021 317 11 16 344 158 839
2
997 1,341
Giles Brand 2022 106 — — 106 — — — 106
2021 103 — — 103 — — — 103
Caroline Brown 2022 44 — — 44 — — — 44
2021 50 — — 50 — — — 50
Tim Surridge 2022 54 — — 54 — — — 54
2021 53 — — 53 — — — 53
Will Hoy 2022 54 — — 54 — — — 54
2021 45 — — 45 — — — 45
Pim Vervaat 2022 54 — — 54 — — — 54
2021 53 — — 53 — — — 53
Julia Hendrickson 2022
3
25 — — 25 — — — 25
1. The Executive Directors were granted PSP awards in July 2020. These awards were based 50% on Adjusted EPS performance for the year ended 31 December 2022 and 50% on TSR performance over a
three-year period from the date of grant. The Adjusted EPS targets have been met to some extent, resulting in 52.5% vesting against this element. TSR performance will be assessed to the third anniversary
of the date of award and we will confirm performance in next year’s report. TSR performance is currently tracking such that this portion of the award would lapse in full. The value of the award disclosed in
the single figure therefore assumes 26.25% of each award vests and is based on the average share price over the last three months of the financial year ended 31 December 2022 of 85.41p. This amount
includes the value of additional shares awarded in respect of dividend equivalents. Between grant and the share price used to value the award for single figure purposes, the share price had decreased from
109.33p to 85.41p. The proportion of the value disclosed in the single figure attributable to share price growth is therefore 0%. The Remuneration Committee did not exercise discretion in respect of the share
price depreciation.
2. TSR performance for the 2019 PSP was assessed to the date of vesting. In the 2021 report, we estimated that vesting would be 100% based on performance to date. The three-year TSR performance to
9April2022 was 360%, which resulted in 100% of the TSR element of this award vesting. The value of the 2019 PSP awards has been restated to reflect the share price at vesting of 194.2p. The share price
had increased from 77p to 194.2p between grant and vesting. The proportion of the value disclosed in the single figure attributable to share price growth is therefore 60%. In line with the Schedule
5requirements there are no exercise gains in the period.
3. Julia Hendrickson joined the Board on 1June2022 and fees are shown from this date.
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Explaining the single figure
Salary
Given the expansion of the Company over recent years, the Board reviewed and increased the scope of the CFO role to include responsibility for ESG, M&A integration,
ITandGroup inventory management, and expanded the CFO’s responsibility of banking relationships and investor relations. In light of the increased size and complexity
oftheorganisation, his personal performance and contribution to the growth of the business, as well as his expanded role, the Committee determined that it was appropriate
toincrease his base salary from £316,750 to £375,000 (c.18% increase) from 1January2022.
The CEO’s base salary was also increased from £369,500 to £400,000 (8% increase) to reflect the increased size and complexity of the organisation.
Benefits
Benefits for the year included private medical insurance, life insurance and a fully expensed car or cash equivalent.
Pension
The CFO received a pension contribution of 5% of base salary during the year. This is in line with the contribution levels available to other employees in the UK.
TheCEOdoesnot receive a pension contribution from the Group.
Annual bonus
For the year ended 31 December 2022, the maximum annual performance bonus was 100% of base salary. The annual bonus was based on the following measures:
Measure Rationale Weighting
Adjusted Profit After Tax To incentivise executives to continue to grow the business and improve
profitperformance
30%
Adjusted Free Cash Flow To continue to focus executives on operational eciencies and the generation
ofcashtofund growth
50%
Individual strategic objectives, including ESG metrics To incentivise executives to achieve specific operational and strategic
businessobjectives
20%
Total 100%
Performance during 2022 against financial targets set was as follows:
Measure
Threshold
0% payout
Target
50% payout
Maximum
100% payout
Achievement
for 2022
Percentage
of bonus
payable
Adjusted Profit After Tax (30% weighting) £30.0m £33.3m £36.6m £17. 2m 0%
Adjusted Free Cash Flow (50% weighting) £22.0m £24.4m £26.8m £30.7m 50%
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Individual strategic objectives
The individual strategic objectives were set at the start of 2022 and are set out in the table below.
Overview of objectives and performance
Committee’s
assessment of
performance
CEO For 2022, the CEO’s objectives were set around the management of cost inflation, growing the EV charger business, integrating
DW Windsor into the Group and developing a manufacturing diversification strategy.
The CEO has performed strongly this year and delivered a good performance against these objectives, although not all
objectives have been met in full. The CEO ensured that cost inflation was adequately tracked, measured and mitigated without
impacting competitiveness, leading to an improvement in gross margin as the year progressed. The Group’s presence in the EV
charger market was enhanced by the acquisition of Sync EV in March 2022 and EV sales have grown significantly despite an
unexpected shortfall in sales of electric vehicles. Under the CEO’s direction, DW Windsor is making use of the Group’s product
development, sourcing and low-cost manufacturing capabilities that are expected to improve future profitability. Progress on
manufacturing diversification was hampered by COVID controls limiting travel to candidate countries, but faster progress is
expected in 2023.
The Committee judged
that overall, 5% of this
element of the bonus
should be paid.
CFO For 2022, the CFO’s objectives were set around improving inventory management, delivering the ESG strategy and defining a
long-term IT solution for the Group’s outdoor lighting businesses.
The CFO has delivered a strong performance against these objectives. The CFO oversaw the removal of buer inventory built
up during the pandemic without impinging on customer service, leading to record cash generation and reduced indebtedness
in 2022. The CFO led the Group’s commitment to the Science Based Targets initiative in the year, setting the Group on a
pathway of carbon emission reduction consistent with the Paris Agreement. Improvements to ESG strategy made by the CFO
also resulted in an improved rating by the Carbon Disclosure Project. The CFO oversaw the development of an IT solution for
DW Windsor and Kingfisher Lighting that is now being implemented.
The Committee judged
that overall, 10% of this
element of the bonus
should be paid.
This performance against targets set therefore resulted in an overall bonus of 55% of maximum for the CEO and 60% of maximum for the CFO. Bonus payments are therefore
as follows:
CEO
£220,000
CFO
£225,000
The Committee also considered the underlying financial performance of the Company during 2022, taking into account performance against key financial and strategic
performance indicators as well as the experience of shareholders and other stakeholders during the period. The Committee also considered whether there had been a
significant negative event (such as an ESG event) which would warrant an adjustment. The Committee concluded that the proposed payout outcome of 55% of maximum for
the CEO and 60% of maximum for the CFO was appropriate.
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Long-term incentives
The Executive Directors were granted PSP awards in July 2020. These awards were based 50% on Adjusted EPS performance for the year ended 31 December 2022 and 50%
on TSR performance over a three-year period from the date of grant. Adjusted EPS for the year ended 31 December 2022 is 11.1p and therefore this portion of the award will
vest at 52.5% of maximum. The TSR performance period is not yet completed and we will provide details of final vesting in the 2023 Annual Report. TSR is currently tracking
such that this portion of the award would lapse in full.
Measure Weighting Threshold Maximum Achievement
Element
vesting
Adjusted EPS for the year ended 31 December 2022 50% 10.0p 13.0p 11.1p 52.5%
TSR relative to the FTSE SmallCap excluding investment trusts 50% Median Upper
quartile
TSR to be
measured to
13 July 2023
Currently
tracking to
lapse in full
Therefore the vesting of the award shall be as follows:
Executive Director Date of grant
Number of
awards
granted
Number of
shares vesting
based on
estimated
performance
Dividend
equivalents
(number of
shares)
Total number
of shares
vesting
Total
estimated
value of
award
vesting
1
John Hornby 14 July 2020 329,736 86,556 8,729 95,285 £81,383
Matt Webb 14 July 2020 282,631 74,191 7,482 81,673 £69,757
1. The value of the awards vesting is based on the average share price over the last three months of the financial year ended 31 December 2022 being 85.41p. The estimated value of the vesting awards has
been included within the “single figure of total remuneration” table on page 116.
Overall, the Committee considers that the Remuneration Policy has operated as it intended during 2022 and that the pay outcomes are aligned with the experience
ofshareholders and other stakeholders.
Matt Webb’s leaving arrangements
On 19 January 2023, we announced that Matt Webb would be stepping down from the Board and as CFO after five years in the role. Matt will step down from the Board on
31March 2023, and will be succeeded as CFO by Will Hoy. The end of Matt’s six month notice period is 18 July 2023, and he will remain employed for some of that period
supporting Will and the Board with the transition of the role. The exact date of his cessation of employment is still to be determined and he will receive pay in lieu of any
remaining notice period. Full details of his leaving arrangements including treatment of outstanding bonus and PSP awards will be disclosed once he steps down.
Payments to former Directors (audited)
There were no payments made to former Directors during the year.
Payments for loss of oce (audited)
There were no payments made for loss of oce during the year.
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Share interests awarded during the year as long-term incentives (audited)
The following awards were granted under the PSP during the year.
Board Directors Role Form of award Date of award
Number of
shares
awarded
Face value
of award
1
Percentage
vesting for
achieving
minimum
performance
Performance
period
John Hornby Chief Executive Ocer
Nil cost option over
ordinary shares of 0.05p
31 March
2022
283,018 £559,527 25% See below
Matt Webb Chief Financial Ocer 265,330 £524,557 25% See below
1. Calculated based on a share price of 198p, being the average of the closing price for the three dealing dates preceding the date of award.
The awards will vest 50% subject to the Group’s Adjusted EPS and 50% subject to TSR performance relative to the FTSE SmallCap excluding investment trusts as
outlinedbelow.
Performance condition
CAGR Adjusted EPS in the three-year
period ending 31 December 2024
Rank of the Group’s TSR compared to
the comparator group
Extent to which the relevant portion of
the award vests
15% Upper quartile or above 100%
Between 5% and 15% Between median and upper quartile On a straight-line basis between 25% and 100%
5% Median 25%
Less than 5% Below median 0%
TSR performance will be assessed based on performance over a three-year period from the date of grant of awards. TSR is assessed based on the three-month average at the
beginning and end of the performance period.
Shareholding guidelines
The Group encourages its Directors and employees to hold shares in the Group to strengthen their commitment to the organisation in terms of delivering the strategic
objectives. Executive Directors are expected to build and maintain a holding of Luceco shares equal to at least 200% of base salary (increased from 100% on 1 January 2020).
Executive Directors are expected to retain 50% of any shares that vest under any share incentive plans until this shareholding is reached. Where a Director has not met, or is
noton course to meet, their shareholding guideline they will also be expected to invest at least 50% of any post-tax annual bonus earned into Luceco shares.
Remuneration Committee Report continued
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Directors’ shareholdings and share interests (audited)
The beneficial interests of the Directors in the ordinary shares of the Group are set out below. None of the Directors had any interest in the shares of any subsidiary company.
Executive Directors
Director
Ordinary
shares
held at
16 March
2023
Ordinary
shares
held at
31 December
2022
Ordinary
shares
held at
31 December
2021
Nil cost
options
subject to
performance
measures
1
Nil cost
options not
subject to
performance
measures
Market value
options
subject to
performance
measures
Shareholding
requirement
(% of salary)
Shareholding
held at
31 December
2022
2
Requirement
met?
John Hornby 28,973,632 28,412,532 31,434,286 544,662 503,949 27,440 200% 7,041% Yes
Matt Webb 715,078 215,078 215,078 81,673 1,606,703 27,440 200% 279% Yes
1. Includes shares accrued to date in respect of dividend equivalents on unvested LTIP awards.
2. Shareholding as a percentage of salary.
Shares beneficially held count towards Executive Directors’ shareholding guidelines. Any unvested shares or unexercised nil cost options which are not subject
toperformanceconditions may count towards the guideline on a net of tax basis. The value of Executive Directors’ shareholding has been calculated using the
share price on31December2022 of 98.2p.
Non-Executive Directors
Ordinary
shares
held at
16 March
2023
Ordinary
shares
held at
31 December
2022
Ordinary
shares
held at
31 December
2021
Giles Brand
1
9,466,919 9,466,919 9,466,919
Caroline Brown — — —
Tim Surridge 44,331 44,331 56,731
Pim Vervaat — — —
Julia Hendrickson
2
— — —
Will Hoy
3
45,000 45,000 45,000
1. Giles Brand is a Managing Partner of EPIC Investment Partners LLP and a director of its subsidiary, EPIC Investment Partners (UK) Limited. EPIC Investment Partners (UK) Limited is the investment manager
of ESO Investments 2 Limited. ESO Investments 2 Limited owns 35,564,260 shares in the Group.
2. Julia Hendrickson joined the Board on 1 June 2022.
3. Will Hoy stepped down from his position of Non-Executive Director and became an Executive Director on 1 March 2023. Will assumes the position of Chief Financial Ocer on 1 April 2023.
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Performance graph and table
Review of past performance
The graph below shows the historical TSR of the Group, the FTSE SmallCap index exclusive of investment trusts and the FTSE All-Share Electronics and Electrical Equipment
index for the period from IPO on 17 October 2016 to 31 December 2022. The Group has chosen these indices to reflect its size and the key sector within which it operates.
The table below shows the CEO’s “single figure” remuneration for the ten years ended 31 December 2022. John Hornby was CEO for the full period.
£’000 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Total remuneration 219 251 314 337 365 504 726 699 1,553 726
Annual bonus (% of max) nil nil 50% 100% 90% 50% 55%
LTIP vesting
1
(% of max) n/a n/a n/a n/a n/a n/a 0% n/a
2
100% 26.25%
3
1. No LTIPs were in place during the reporting periods 2012 to 2016. The first LTIP awards post-IPO were granted in 2017, with vesting based on performance to 31 December 2019.
2. On 27 November 2018, John Hornby surrendered the 2018 PSP award granted to him on 27 July 2018. This award would have vested at 100% of maximum.
3. The PSP awards granted in 2020 are expected to vest at 26.25% of maximum. The TSR performance period for these awards runs to 14 July 2023 and final vesting will be determined at this point.
The CEO received a reduced remuneration package during the period 2012 to 2014, reflective of the financial position of the Group, having undertaken extensive investment
inits Chinese manufacturing operation and LED Lighting operation. His salary changed in 2015 and 2016 to better reflect the market rate of remuneration of a CEO in a similarly
sized operation. With eect from 1 January 2018, the CEO accepted a temporary reduction in salary in response to the Group’s performance at that time. With eect from
1January2019, the CEO’s salary reverted to £350,000. To recognise the increased size and complexity of the organisation, from 1 January 2022, the CEO’s salary
was£400,000.
250
200
150
100
50
0
17 Oct
2016
31 Dec
2016
31 Dec
2017
31 Dec
2018
31 Dec
2020
31 Dec
2022
31 Dec
2021
31 Dec
2019
Luceco
Price (p)
FTSE SmallCap ex investment trusts
FTSE All-Share Electronics and Electrical Equipment
Remuneration Committee Report continued
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Annual Report and Financial Statements 2022
Remuneration Committee Report continued
Annual percentage change in remuneration of Directors and employees
The following table sets out the change in remuneration paid to the Directors who served on the Board from 2019 to 2022 compared with the average percentage change
forUK-based employees. The Committee considers this the most meaningful comparison as the Group does not have a harmonised salary and benefits structure across its
global operations. Furthermore, the majority of its overseas employees are based in Asia, where the pay structure is significantly dierent to that of the Executive Directors,
which does not facilitate a like-for-like comparison.
Executive Directors Non-Executive Directors
John
Hornby
Matt
Webb
Giles
Brand
Caroline
Brown
3
Tim
Surridge
Will
Hoy
1,3
Pim
Vervaat
2
Julia
Hendrickson
4
UK
employees
2022 vs. 2021
Base salary/fees 8.3% 18.4% 3.0% (13.2)% 3.0% 21.1% 3.0% n/a 3.0%
Benefits 22.7% 0.7% — — — — — — —
Bonus 19.1% 42.1% — — — — — — (5.8)%
2021 vs. 2020
Base salary/fees 2.5% 2.5% 2.5% (7.4)% 2.5% 8.9% 207. 3% n/a 2.5%
Benefits 41.7% (0.9)% — — — — — — —
Bonus (43.1)% (43.1)% — — — — — — (4.5)%
2020 vs. 2019
Base salary/fees 3.0% 3.0% 100% 3.0% 3.0% 21.7% n/a n/a 3.0%
Benefits (44.3)% — — — — — — — —
Bonus (7. 3 )% (7. 3)% — — — — — — (1.5)%
1. Will Hoy was appointed to the Board on 1 September 2019.
2. Pim Vervaat was appointed to the Board on 1 September 2020.
3. Will Hoy succeeded Caroline Brown as Chair of the Audit Committee in October 2021.
4. Julia Hendrickson joined the Board on 1 June 2022.
The main benefits provided include a company car or cash equivalent, medical cover and life assurance. There has been no change in the level of benefits provided to
Groupemployees.
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Remuneration Committee Report continued
Relative importance of spend on pay
The table below shows the total amount paid by the Group to its employees and distributions to shareholders for 2022 and 2021.
£m
31 December
2022
31 December
2021 % change
Overall spend on pay for employees including Executive Directors
1
40.3 36.4 10.7%
Distributions to shareholders 10.9 11.2 (2.7)%
1. Figures are taken from note 4 of the consolidated financial statements.
CEO pay ratio
For the year ended 31 December 2022, the Chief Executive’s total remuneration as a ratio against the full-time equivalent remuneration of UK employees is detailed in the
tablebelow:
Year Method
25th
percentile
pay ratio
Median
pay ratio
75th
percentile
pay ratio
2022 Option B 27 : 1 17 : 1 11 : 1
2021 Option B 68 : 1 45 : 1 25 : 1
2020 Option B 30 : 1 21 : 1 11 : 1
2019 Option B 30 : 1 22 : 1 15 : 1
Year
25th
percentile
pay ratio
Median
pay ratio
75th
percentile
pay ratio
2022 Salary £23,759 £37,755 £45,642
Total pay £27,106 £42,948 £68,798
The ratios have been calculated using Option B, as defined under the relevant regulations, as it is considered to be the most appropriate methodology for Luceco based on the
availability of data at the time the Annual Report is published. This utilises data analysed within our Gender Pay Gap report, with employees at the three quartiles identified
from this analysis based on the 2021-22 snap-shot date. Their respective single figure values for 2022 have then been calculated. No estimates were required, and no elements
of pay were omitted in calculating the relevant single figures.
The single figure values for individuals immediately above and below the identified employee at each quartile within the Gender Pay Gap analysis were also reviewed. It was
determined that the chosen individuals were representative of the 25th percentile, median and 75th percentile employees and therefore no adjustments were necessary.
The CEO pay ratio has been rounded to the nearest whole number and represents a decrease on the 2021 ratio. The main reason for the change in the ratio from last year is the
lower level of LTIP vesting in respect of the year for the CEO. The Board has confirmed that the ratio is consistent with the Company’s wider policies on employee pay, reward
and progression. Pay for senior leaders within the Group has a much greater emphasis on performance-based pay through the annual bonus and the LTIP. The ratios are
therefore likely to vary year-on-year depending on bonus and LTIP outcomes.
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Remuneration Committee Report continued
Role of the Committee
The Committee assists the Board in determining its
responsibilities in relation to the following aspects of
remuneration:
• Setting the principles, parameters and governance
framework to provide a transparent Remuneration
Policy that aligns with the long-term strategy of the
business
• Determining the individual remuneration and benefits
package of each of the Executive Directors and the
Company Secretary, considering the interests of
relevant stakeholders
• Monitoring the level and structure of remuneration of
senior management in conjunction with the
ExecutiveDirectors
• Reviewing the implementation and operation of any
Group share option schemes, bonus schemes and
long-term incentive plans
The Committee is chaired by Tim Surridge. Pim Vervaat,
Caroline Brown and Julia Hendrickson (joined
1June2022) are also members of the Committee. There
have been three meetings of the Committee during the
year. The Committee has met once since the year end
and the date of issuing the Annual Report and Financial
Statements to consider the Remuneration Policy and its
implementation for 2023 and to agree performance
targets for2023.
The Group Chair and other Non-Executive Directors are
invited to attend meetings. In addition, the CEO,
theCFO and the HR Manager may attend meetings from
time totime at the invitation of the Committee and
provide information and support as requested. Directors
are not present when their own remuneration is
beingdiscussed.
During the remainder of 2023, the Committee is
scheduled to meet at least twice and the areas that the
Committee intends to focus attention on are as follows:
• The implementation of the Remuneration Policy
for2023 as outlined in this report
• Determining reward outcomes for 2023
• Review of remuneration trends and governance
developments
Remuneration Committee advisers
During the year to 31 December 2022, the Committee
engaged the services of external advisers Deloitte LLP
(“Deloitte”).
Deloitte is a founding member of the Remuneration
Consultants Group and adheres to its Code in relation
toexecutive remuneration consulting in the UK.
TheCommittee is satisfied that the Deloitte engagement
team, which provide remuneration advice to the
Committee, do not have connections with Luceco plc
orits Directors that may impair their independence.
TheCommittee reviewed the potential for conflicts
ofinterest and judged that there were appropriate
safeguards against such conflicts.
Deloitte’s fees are charged on a time and materials basis.
During the year, Deloitte was paid £61,455 for advice
provided to the Committee. Deloitte did not provide any
additional services to the Group during the year.
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Remuneration Committee Report continued
Shareholder voting
Shareholder voting in relation to the resolution to approve the Directors’ Remuneration Report (June 2022 AGM) and to approve the Remuneration Policy (June 2020 AGM)
areas follows:
Votes for % for
Votes
against % against
Votes
withheld
To approve the Directors’ Remuneration Report (2022) 96,826,276 83.29% 19,421,351 16.71% 18,000
To approve the Remuneration Policy (2020) 113,292,183 91.5% 10,509,986 8.5% 4,609
TIM SURRIDGE
Remuneration Committee Chair
20 March 2023
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Luceco plc
Annual Report and Financial Statements 2022
Other Statutory Disclosures
This report contains the additional information the Directors are required to include in the Annual Report
andFinancial Statements in accordance withtheCompanies Act 2006 and the Listing Rules.
Disclosures required under Listing Rule 9.8.4R
The information required to be disclosed under Listing Rule 9.8.4R, where applicable to the Group, can be found in the Annual Report and Financial Statements
atthereferences provided below:
Listing Rule requirement Annual Report location
Interest capitalised Not applicable
Publication of unaudited financial information Not applicable
Details of long-term incentive schemes Page 119
Waiver of emoluments by a Director Not applicable
Waiver of future emoluments by a Director Not applicable
Non-pre-emptive issues of equity for cash Not applicable
Non-pre-emptive issues of equity for cash by a major subsidiary Not applicable
Parent participation in a placing by a listed subsidiary Not applicable
Contracts of significance Not applicable
Provision of services by a controlling shareholder Page 131
Dividend waivers Page 131
Agreements with controlling shareholders Page 131
Results and dividends
The Group’s profit for the year ended 31 December 2022 was £11.0m (2021: £27.1m); details are shown in the Consolidated Income Statement on page 141. The Directors
recommend the payment of a final dividend of 3.0p per ordinary share which, subject to the approval of shareholders at the AGM on 10May2023, will be paid on 19May2023
to ordinary shareholders registered as members of the Company at the close of business on 11April2023. The final date for elections under the Company’s dividend
reinvestment plan will be 26 April 2023. An interim dividend of 1.6p per share was paid during the year. TheCompany’s dividend policy is to pay out between 40% and 60%
ofAdjusted Earnings PerShare.
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Annual Report and Financial Statements 2022
Directors
The Directors who held oce during the year were:
• John Hornby
• Matt Webb (until 1 April 2023)
• Giles Brand
• Caroline Brown
• Will Hoy
• Tim Surridge
• Pim Vervaat
• Julia Hendrickson (appointed 1 June 2022)
Biographical details of the Directors appear on pages
80to 82. Information on the Directors’ remuneration,
employee share schemes and service contracts is given
in the Remuneration Committee Report on pages 97
to126.
Appointment and replacement of Directors
The rules about the appointment and replacement
ofDirectors are contained in the Company’s Articles.
Theyprovide that the Directors may be appointed by
ordinary resolution of the shareholders or by the Board.
Directors appointed by the Board may only hold oce
until the next AGM of the Group and then shall be
eligible for election. The Group may remove a Director
by ordinary resolution where special notice has been
given and the necessary statutory procedures are
complied with. In line with best practice corporate
governance, all Directors will seek election or re-election
at the AGM on 10 May 2023.
Powers of Directors
The general powers of the Directors are set out in Article
22 of the Company’s constitution. This Article provides
that the business of the Group shall be managed by the
Board, which may exercise all the powers of the Group,
subject to any limitations imposed by applicable
legislation, the Articles and any directions given by
special resolution of the shareholders of the Group.
Compensation for loss of oce
The Company does not have arrangements with any
Director that would provide compensation for loss of
oce or employment resulting from a takeover.
Future developments
In accordance with s414C(11) of the Companies Act
2006, the Group has disclosed future developments
within its Strategic Report on pages 1 to 75.
Corporate governance
A report on corporate governance and the Company’s
compliance with the UK Corporate Governance Code
isset out on page 79 and forms part of this report
byreference.
Post balance sheet events
There were no post balance sheet events.
Research and development
The Directors consider that investment in research and
development (“R&D”) is critical to enable the Group
tomaintain its competitive advantage and continue to
grow its market share. The Group has a substantial
specialist R&D function in China which works alongside
the UK R&D team. R&D expenditure in the year was
£3.6m (2021: £3.0m), of which £1.7m (2021: £0.9m)
wascapitalised and amortised.
Asset values
Property, plant and equipment is disclosed in note 9 of
the consolidated financial statements on pages 161 to
164. The Directors do not believe there is any material
dierence between the carrying value and market value.
Financial instruments
An analysis of the Group’s financial instruments,
riskmanagement objectives and its exposure to
creditandliquidity risk are disclosed in note 20
oftheconsolidated financial statements.
The Group’s exposure to fluctuations in foreign
exchange rates and the steps it takes to mitigate them
are detailed in the principal risks and uncertainties on
pages 64 to 71, and the Chief Financial Ocer’s Review
on pages 14 to 22.
Global operations
The Group’s executive head oce, accounting, domestic
sales and support functions are based in the UK.
TheGroup has four UK sites in London, Telford,
Mansfield and Hoddesdon. The Group’s London facility
serves as the Group’s head oce, with the executive
function and certain sales and support functions based
there. The Hoddesdon location is the primary base for
DW Windsor Group. The Mansfield location is the
primary base for Kingfisher Lighting. The Telford facility
serves as the UK assembly and distribution centre,
accounting and support functions, and houses the
remainder of the Group’s UK sales, as well as a portion
of the Group’s R&D function.
The Group’s manufacturing and product development
functions are based in Jiaxing, China. The Group also
hassales oces with some support functions in Spain,
Dubai, Mexico and Ireland.
Other Statutory Disclosures continued
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Annual Report and Financial Statements 2022
Other Statutory Disclosures continued
Political donations
No political donations were made and no political
expenditure was incurred during the year (2021: nil).
Employees
Information on how we promote employee involvement
can be found on page 57. Details of the Group’s
employment policies and its approach to diversity and
disability can be found in the Environment, Social and
Governance section on pages 55 and 56.
An explanation of the activities of the appointed
Non-Executive Director for workforce engagement
canbe found on page 85.
UK employees are encouraged to participate in the
Company’s performance through our share incentive
plan, discussed on pages 185 to 187.
Greenhouse gas emissions
Details of the Group’s greenhouse gas emissions can
befound in the “Creating a sustainable future” section
ofthe Environment, Social and Governance section
onpages 38 to 54.
Task Force on Climate-related Financial Disclosures
(“TCFD”)
Details of the Group’s TCFD reporting are outlined in
theEnvironment, Social and Governance section on
pages 38 to 54.
Directors’ interests and share options
During the year ended 31 December 2022, no Director
had an interest in any third-party contract between the
Company or any of its subsidiaries.
Directors’ shareholdings are disclosed in the
Remuneration Committee Report on page 121. Details
ofDirectors’ share options are set out in note 22 of
theconsolidated financial statements.
Directors’ conflicts of interest
In accordance with the Companies Act 2006 and its
Articles, the Company has arrangements in place to
consider and, where appropriate, authorise any
Directors’ direct or indirect interests which may conflict
with those of the Group. Authorisation is only eective
where the matter is put to a vote, excluding the Director
who is subject to the conflict authorisation. If a Director
becomes aware that they or a connected party have an
interest in an existing or proposed transaction with the
Group, they should notify the Company Secretary as
soon as possible. Directors have a continuing obligation
to update any changes to conflicts and the Board
formally reviews any such conflicts periodically.
Aregister of conflicts or potential conflicts is
maintainedand available at Board meetings.
Directors’ liability and indemnity insurance
The Group maintains Directors’ and ocers’ liability
insurance, which gives appropriate cover for legal action
brought against its Directors. In addition, third-party
qualifying indemnity provisions (as defined in s234 of
the Act) for its Directors and ocers were in force
during the year ended 31 December 2022 and remain
inforce. There were no qualifying pension scheme
indemnity provisions.
Articles of Association
A copy of the Articles of Association can be obtained
from the Company’s registered oce. The Articles
mayonly be amended by special resolution of the
shareholders.
Share capital and waiver of pre-emption rights
The Group has one class of share in issue. The rights
attached to each share are identical and each share
carries equal rights to dividends, return of capital on
thewinding up of the Group and one vote at general
meetings of the Group. There are no securities carrying
special rights. There are no restrictions on the transfer
ofshares in the Group (other than following a service
ofnotice under s793 of the Act) and there are no
restrictions on any voting rights or deadlines, other than
those prescribed by law. The Group is not aware of any
arrangements between its shareholders which may
result in the restriction on the transfer of shares or
voting rights. Further details of the rights and
obligations attached to the shares are set out in the
Company’s Articles.
At the AGM on 12 May 2022, authority was given to
theDirectors to allot new ordinary shares up to a
nominal value of £26,800, equivalent to 33.33% of the
issued share capital of the Group. In addition, authority
was given to the Directors to allot further new ordinary
shares up to a nominal value of £53,600, equivalent to
66.67% of the authorised share capital of the Group.
These authorities expire on the conclusion of the 2023
AGM. No shares have been allotted under these
authorities as at the date of this report.
At 31 December 2022, the Group had 160,800,000 fully
paid ordinary shares of 0.05p each in issue which are
traded on the London Stock Exchange. Details of the
share capital at 31 December 2022 are disclosed in note
23 on page 187.
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Annual Report and Financial Statements 2022
Authority for the Group to purchase its own shares
A resolution will be proposed at the 2023 AGM that the Company be authorised to purchase up to approximately 10% of its ordinary shares at the Directors’ discretion.
Iftheresolution is passed, the new authority will lapse at the conclusion of the 2024 AGM or, if earlier, on 30 June 2024.
At the AGM held on 12 May 2022, authority was given for the Company to make market purchases of its ordinary shares provided that the maximum aggregate number of
ordinary shares that may be purchased is limited to 16,080,000, with a minimum price of 0.05p per share. The maximum price (exclusive of expenses) which may be paid for
each ordinary share shall be the higher of (i) an amount equal to 105% of the middle market quotations for an ordinary share as derived from the London Stock Exchange
DailyOcial List for the five business days immediately preceding the date on which the ordinary share is purchased; and (ii) an amount equal to the higher of the price of
thelast independent trade of any ordinary share and the highest current independent bid for an ordinary share on the trading venue where the purchase is carried out.
Theseauthorities shall expire at the conclusion of the 2023 AGM.
Substantial shareholdings
The Company has been notified of the following disclosable interests in its issued share capital in accordance with DTR 5 as at 31 December 2022 and at 16 March 2023
(beingthe latest practicable date prior to the date of this report). The shareholdings of John Hornby and his persons closely associated (“PCAs”) and Giles Brand also take
account ofshare movements announced under the UK Market Abuse Regulation (“MAR”) that did not trigger notifications under DTR 5. The transactions by John Hornby and
his PCAs notified to the market on 27 January 2023, in accordance with MAR, resulted in no change to the combined beneficial shareholdings of John Hornby and his PCAs.
At 16 March 2023 At 31 December 2022
Shareholder
Number of
shares held
% voting
rights
Number of
shares held
% voting
rights
ESO Investments 2 Limited
1
35,564,260 22.12 35,564,260 22.12
John Hornby 12,373,632 7.70 9,153,374 5.69
Deanmor Investments
2
13,000,000 8.08 16,000,000 9.95
Philippa Hornby
3
3,400,000 <3% 3,259,158 <3%
PCA of John Hornby
4
100,000 <3% 35,997 <3%
PCA of John Hornby
5
100,000 <3% 35,997 <3%
Giles Brand 9,466,919 5.89 9,466,919 5.89
BlackRock Inc 6,523,932 4.06 6,523,932 4.06
Polar Capital LLP 7,943,623 4.94 7,943,623 4.94
1. On 16 June 2022, EPIC Investments LLP completed a distribution in specie of 100% of its shares to its parent company, ESO Investments 2 Limited.
2. Deanmor Investments is an investment vehicle wholly owned by John and Philippa Hornby and is a PCA of John Hornby.
3. Philippa Hornby is a PCA of John Hornby.
4. Details disclosed to market in accordance with DTR 3.
5. Details disclosed to market in accordance with DTR 3.
Other Statutory Disclosures continued
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Annual Report and Financial Statements 2022
Other Statutory Disclosures continued
Provision of services by substantial shareholders
Giles Brand is Luceco plc’s Chair and Managing Partner
of EPIC Investment Partners (“EPIC”) LLP (formerly
EPIC Private Equity LLP), which is controlled by ESO
Investments 2 Limited. Giles Brand and ESO Investments
2 Limited are therefore connected parties and
substantial shareholders of the Company. Giles Brand
was paid a monthly fee of £8,798 (£105,575 per annum)
in respect of his services as Chair during 2022.
John Hornby has a service contract with the Group,
asdetailed on page 113, which is available for inspection
at the AGM and at the Group’s registered oce.
Furtherdetails of his remuneration can be found in
theRemuneration Committee Report on pages 97
to126.
Significant agreements
The Group has an agreement with its significant
shareholders, ESO Investments 2 Limited (which
controls EPIC Investments LLP) and Giles Brand
(“connected parties”), who collectively exercise or
control 28.0% ofthe voting rights. With respect to this
agreement, both the Group and ESO Investments 2
Limited have complied with the independence
provisions and procurement obligation as required
under the Listing Rules.
The agreement remains in place until the connected
parties cease to exercise or control 10% or more in
aggregate of the total voting rights or if neither
connected party has exercised or controlled any voting
rights for at least two years. The agreement would
automatically terminate if the Group’s shares ceased
trading on the London Stock Exchange or if the Group
were to appoint an administrative receiver.
Change of control
Change of control provisions are included in the Group’s
banking agreements. Should a change of control event
occur, the Group’s revolving credit facility would be
subject to immediate cancellation and the Bank may call
for immediate repayment of any balance outstanding.
Shareholder waiver of dividends
There is an evergreen dividend waiver in place in respect
of the shares held in the Company’s Employee Benefit
Trust. No dividends were paid in respect of these shares
during the year.
Directors’ statement regarding disclosure of
information to the auditor
The Directors confirm that, so far as they are each
aware, there is no relevant audit information of which
the Group’s auditor is unaware. The Directors also
confirm that they have taken all reasonable steps
tomake themselves aware of any relevant audit
information and to establish that the Group’s auditor
isaware of that information.
Appointment of auditor
On the recommendation of the Audit Committee,
resolutions will be proposed at the 2023 AGM to
re-appoint KPMG LLP as auditor of the Group and
toauthorise the Audit Committee to set the auditor’s
remuneration.
Annual General Meeting
The Group’s AGM will be held on 10 May 2023.
Detailsofthe resolutions to be proposed at the AGM
areset out in the Notice of Meeting, which is provided
toall shareholders.
The Directors’ Report was approved by the Board of
Directors and authorised for issue on 20 March 2023.
By Order of the Board
MATT WEBB
Chief Financial Ocer
Company registered number: 05254883
Registered oce:
Luceco plc
Building E Staord Park 1
Staord Park
Telford
Shropshire TF3 3BD
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Annual Report and Financial Statements 2022
The Directors are responsible for preparing the Annual
Report and the Group and Parent Company financial
statements in accordance with applicable law and
regulations.
Company law requires the Directors to prepare Group
and Parent Company financial statements for each
financial year. Under that law they are required to
prepare the Group financial statements in accordance
with UK-adopted international accounting standards
andapplicable law and have elected to prepare the
Parent Company financial statements in accordance
with UK accounting standards and applicable law,
including FRS 102 The Financial Reporting Standard
applicable in the UK and Republic of Ireland.
Under company law the Directors must not approve
thefinancial statements unless they are satisfied that
they give a true and fair view of the state of aairs of
theGroup and Parent Company and of the Group’s
profit or loss for that period. In preparing each of the
Group and Parent Company financial statements,
theDirectors are required to:
• select suitable accounting policies and then apply
them consistently;
• make judgements and estimates that are reasonable,
relevant, reliable and prudent;
• for the Group financial statements, state whether
theyhave been prepared in accordance with
UK-adopted international accounting standards; for
the Parent Company financial statements, state
whether applicable UK accounting standards have
been followed, subject to any material departures
disclosed and explained in the Parent Company
financial statements;
• assess the Group and Parent Company’s ability to
continue as a going concern, disclosing, as applicable,
matters related to going concern; and
• use the going concern basis of accounting unless they
either intend to liquidate the Group or the Parent
Company or to cease operations, or have no realistic
alternative but to do so.
The Directors are responsible for keeping adequate
accounting records that are sucient to show and
explain the Parent Company’s transactions and disclose
with reasonable accuracy at any time the financial
position of the Parent Company and enable them to
ensure that its financial statements comply with the
Companies Act 2006. They are responsible for such
internal control as they determine is necessary to enable
the preparation of financial statements that are free
from material misstatement, whether due to fraud or
error, and have general responsibility for taking such
steps as are reasonably open to them to safeguard the
assets of the Group and to prevent and detect fraud
andother irregularities.
Under applicable law and regulations, the Directors
arealso responsible for preparing a Strategic Report,
Directors’ Report, Directors’ Remuneration Report and
Corporate Governance Statement that complies with
that law and those regulations.
The Directors are responsible for the maintenance and
integrity of the corporate and financial information
included on the Group’s website. Legislation in the UK
governing the preparation and dissemination of financial
statements may dier from legislation in other
jurisdictions.
In accordance with Disclosure Guidance and
Transparency Rule 4.1.14R and the requirements of
Companies Act 2006, the financial statements will form
part of the annual financial report prepared using the
single electronic reporting format. The auditor’s report
on these financial statements provides no assurance
over the ESEF format.
Responsibility statement of the Directors in respect
ofthe annual financial report
Each of the Directors whose names are listed on pages
80 to 82 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
asawhole; and
• the Strategic Report includes a fair review of the
development and performance of the business
andthe position of the issuer and the undertakings
included in the consolidation, taken as a whole,
together with a description of the principal risks
anduncertainties that they face.
We consider the Annual Report and Accounts,
takenasa 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 Ocer
MATT WEBB
Chief Financial Ocer
20 March 2023
Statement of Directors’ Responsibilities
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Annual Report and Financial Statements 2022
1. Our opinion is unmodified
We have audited the financial statements of Luceco plc (“the Company”) for the
year ended 31 December 2022 which comprise the Consolidated Income Statement,
Consolidated Statement of Comprehensive Income, Consolidated Balance Sheet,
Consolidated Statement of Changes in Equity, Consolidated Cash Flow Statement.
Company Balance Sheet, Company Statement of Changes in Equity and the related
notes, including the accounting policies in note 1 and 28.
In our opinion:
• the financial statements give a true and fair view of the state of the Group’s and of
the parent Company’s aairs as at 31 December 2022 and of the Group’s profit for
the year then ended;
• the Group financial statements have been properly prepared in accordance with
UK-adopted international accounting standards;
• the parent Company financial statements have been properly prepared in
accordance with UK accounting standards, including FRS 102 The Financial
Reporting Standard applicable in the UK and Republic of Ireland; and
• the financial statements have been prepared in accordance with the requirements
of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing
(UK) (“ISAs (UK)”) and applicable law. Our responsibilities are described below.
Webelieve that the audit evidence we have obtained is a sucient and appropriate
basis for our opinion. Our audit opinion is consistent with our report to the audit
committee.
We were first appointed as auditor by the shareholders on 20 February 2015.
Theperiod of total uninterrupted engagement is for the 9 financial years ended
31December 2022. We have fulfilled our ethical responsibilities under, and we remain
independent of the Group in accordance with, UK ethical requirements including the
FRC Ethical Standard as applied to listed public interest entities. No non-audit
services prohibited by that standard were provided.
Overview
Materiality: Group financial
statements as a whole
£1.1m (2021: £1.7m)
4.8% (2021: 4.6%) of normalised profit before tax
Coverage 100% (2021: 96%) of Group profit before tax
1
Key audit matters vs 2021
Recurring risks
Recoverability of finished goods
Parent Company: Recoverability of parent’s debt
due from Group entities
1. This is the profit and losses as a percentage of total profits and losses that made up the Group
profit before tax
Independent Auditor’s Report
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Independent Auditor’s Report continued
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2. Key audit matters: our assessment of risks of material misstatement
Key audit matters are those matters that, in our professional judgement, were of most significance in the audit of the financial statements and include the most significant
assessed risks of material misstatement (whether or not due to fraud) identified by us, including those which had the greatest eect on: the overall audit strategy; the allocation
of resources in the audit; and directing the eorts of the engagement team. We summarise below the key audit matters (unchanged from 2021), in decreasing order of audit
significance, in arriving at our audit opinion above, together with our key audit procedures to address those matters and, as required for public interest entities, our results from
those procedures. These matters were addressed, and our results are based on procedures undertaken, in the context of, and solely for the purpose of, our audit of the financial
statements as a whole, and in forming our opinion thereon,and consequently are incidental to that opinion, and we do not provide a separate opinion on these matters.
The risk Our response
Recoverability of finished
goods (excluding Luceco
Electrical (Jiaxing) Limited,
DW Windsor Group Limited
and Kingfisher Lighting
Limited)
Refer to page 94 (Audit
Committee Report), page 170
(accounting policy) and page
170 (financial disclosures).
Subjective estimate:
The Group operates in an evolving industry in terms of technology,
legal standards and customer demand. These factors can lead to
obsolete inventory that is un-sellable or only sellable at discounted
prices.
Inventories are carried at the lower of cost and net realisable value
with the result that the directors apply judgement in estimating the
appropriate provisions for inventory based upon analysis of inventory
levels, discontinued inventory and sales margins.
The subjectivity in these assessments by the directors means that
there is a risk that the assessment of the level of these provisions is
inappropriate.
Our procedures included:
• Benchmarking assumptions: We assessed the directors’
assumptions behind the provision against finished goods against
available data on selling price(s) of these goods;
• Tests of detail: We obtained an understanding of the directors’
process in calculating the provision and we calculated the
inventory provision using alternative methods, comparing these
results and investigating dierences; and
We performed the tests above rather than seeking to rely on any of
the Group’s controls because the nature of the balance is such that
we would expect to obtain audit evidence primarily through the
detailed procedures described.
Our results
• As a result of our work, we consider the recoverable amount used
for inventory to be acceptable (2021: acceptable).
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Independent Auditor’s Report continued
to the members of Luceco plc
2. Key audit matters: our assessment of risks of material misstatement continued
The risk Our response
Parent Company risk:
Recoverability of parent’s
debt due from Group entities
(£84.5 million; 2021:
£77.8million)
Refer to page 94 (Audit
Committee Report), page 197
(accounting policy) and page
197 (financial disclosures).
Low risk, high value:
The carrying amount of the intra-Group debtor balance represents
95.2% (2021: 96.0%) of the parent Company’s total assets.
Their recoverability is not at a high risk of significant misstatement or
subject to significant judgement.
However, due to their materiality in the context of the parent
company financial statements, this is considered to be the area that
had the greatest eect on our overall parent Company audit.
Our procedures included:
• Test of details: We compared the carrying amount of 100% of
debt due from the Group entity to the total balance with the
relevant subsidiary draft balance sheet to identify whether it had a
positive net asset value and therefore coverage of the debt owed,
and also assessed whether the subsidiary has historically been
profit-making. We considered the results of that work on the ability
of that subsidiary to fund the repayment of the receivable.
We performed the tests above rather than seeking to rely on any of
the Group’s controls because the nature of the balance is such that
we would expect to obtain audit evidence primarily through the
detailed procedures described.
Our results
• We found the Group’s conclusion that there is no impairment of
the parent’s debt due from Group entities to be acceptable (2021:
acceptable).
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Independent Auditor’s Report continued
to the members of Luceco plc
3. Our application of materiality and an overview of the scope of our audit
Materiality for the Group financial statements as a whole was set at £1.1m (2021: £1.7m),
determined with reference to a benchmark of Group profit before tax from continuing
operations (PBTCO). We normalised PBTCO by adding back adjustments that do not
represent the normal, continuing operations of the Group and additionally in 2022 by
averaging over 4 years. The items we adjusted for were Sync EV acquisition and
related costs of £1.2m, reversal of restructuring expenses of £1m and a loss on
remeasurement of derivative instruments of £5.7m (2021: determined with reference to
a benchmark of Group profit before tax, normalised to exclude restructuring expenses
of £2.3m, DW Windsor acquisition costs of £0.7m and a loss of £0.4m in respect of
remeasurement of derivative instruments) of which it represents 4.8% (2021: 4.6%).
Weselected 4 years (2019 to 2022) to average Group profit before tax to account for
the fluctuations in the Group’s performance due to the unusual changes in the
customer’s demand on account of the anticipated bottlenecks in the supply chains.
Materiality for the parent Company financial statements as a whole was set at
£0.34m (2021: £0.34m), determined with reference to a benchmark of Company
total assets, of which it represents 0.38% (2021: 0.41%).
In line with our audit methodology, our procedures on individual account balances
and disclosures were performed to a lower threshold, performance materiality, so as
to reduce to an acceptable level the risk that individually immaterial misstatements in
individual account balances add up to a material amount across the financial
statements as a whole.
Performance materiality was set at 75% (2021: 75%) of materiality for the financial
statements as a whole, which equates to £0.82m (2021: £1.27m) for the Group and
£0.25m (2021: £0.25m) for the parent Company. We applied this percentage in our
determination of performance materiality because we did not identify any factors
indicating an elevated level of risk.
We agreed to report to the Audit Committee any corrected or uncorrected identified
misstatements exceeding £55,000 (2021: £85,000), in addition to other identified
misstatements that warranted reporting on qualitative grounds.
Of the Group’s 22 (2021: 22) reporting components, we subjected 4 (2021: 3) to full
scope audits for Group purposes and 8 (2021: 9) to specified risk-focused audit
procedures. The latter were not individually financially significant enough to require
a full scope audit for Group purposes, but did present specific individual risks that
needed to be addressed.
We subjected 8 (2021: 9) components to specified risk-focused audit procedures
over cash and 6 components (2021: 8) over inventory.
The components within the scope of our work accounted for the percentages
illustrated opposite.
Normalised Group profit
before tax
£24.3m (2021: £36.7m)
Group materiality
£1.1m (2021: £1.7m)
£1.1m
Whole financial
statements materiality
(2021: £1.7m)
£0.82m
Whole financial
statements performance
materiality (2021: £1.27m)
£0.88m
Range of materiality at
4 components (£0.34m to £0.88m)
(2021: Range of materiality at 3
components £0.3m to £1.4m)
£0.055m
Misstatements reported to the
audit committee (2021: £0.08m)
Normalised PBT
Group materiality
Group profit before
adjusted items and tax
Group
total assets
100%
(2021: 100%)
Group profit after
adjusted items
100%
(2021: 100%)
84%
(2021: 100%)
100%
(2021: 100%)
Group revenue
83
17
75
25
12
78
88
89
15
79
21
82
15
11
62
29
Full scope for Group
audit purposes 2022
Specified risk-focused
audit procedures 2021
Full scope for Group
audit purposes 2022
Specified risk-focused
audit procedures 2021
Residual components
Normalised Group profit
before tax
£24.3m (2021: £36.7m)
Group materiality
£1.1m (2021: £1.7m)
£1.1m
Whole financial
statements materiality
(2021: £1.7m)
£0.82m
Whole financial
statements performance
materiality (2021: £1.27m)
£0.88m
Range of materiality at
4 components (£0.34m to £0.88m)
(2021: Range of materiality at 3
components £0.3m to £1.4m)
£0.055m
Misstatements reported to the
audit committee (2021: £0.08m)
Normalised PBT
Group materiality
Group profit before
adjusted items and tax
Group
total assets
100%
(2021: 100%)
Group profit after
adjusted items
100%
(2021: 100%)
84%
(2021: 100%)
100%
(2021: 100%)
Group revenue
83
17
75
25
12
78
88
89
15
79
21
82
15
11
62
29
Full scope for Group
audit purposes 2022
Specified risk-focused
audit procedures 2021
Full scope for Group
audit purposes 2022
Specified risk-focused
audit procedures 2021
Residual components
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Independent Auditor’s Report continued
to the members of Luceco plc
into account the Group’s current and projected cash and facilities (a reverse stress
test). We also assessed the completeness of the going concern disclosure.
Our conclusions based on this work:
• we consider that the directors’ use of the going concern basis of accounting in the
preparation of the financial statements is appropriate;
• we have not identified, and concur with the directors’ assessment that there is not,
a material uncertainty related to events or conditions that, individually or
collectively, may cast significant doubt on the Group’s or parent Company’s ability
to continue as a going concern for the going concern period;
• we have nothing material to add or draw attention to in relation to the directors’
statement in note 1 to the financial statements on the use of the going concern
basis of accounting with no material uncertainties that may cast significant doubt
over the Group and parent Company’s use of that basis for the going concern
period, and we found the going concern disclosure in note 1 to be acceptable; and
• the same statement is materially consistent with the financial statements and
ouraudit knowledge.
However, as we cannot predict all future events or conditions and as subsequent
events may result in outcomes that are inconsistent with judgements that were
reasonable at the time they were made, the above conclusions are not a guarantee
that the Group or the parent Company will continue in operation.
5. Fraud and breaches of laws and regulations – ability to detect
Identifying and responding to risks of material misstatement due to fraud
To identify risks of material misstatement due to fraud (“fraud risks”) we assessed
events or conditions that could indicate an incentive or pressure to commit fraud or
provide an opportunity to commit fraud. Our risk assessment procedures included :
• Enquiring of directors, the audit committee and inspection of policy
documentation as to the Group’s high-level policies and procedures to prevent
and detect fraud and the Group’s channel for “whistleblowing”, as well as whether
they have knowledge of any actual, suspected or alleged fraud.
• Reading Board, audit committee, remuneration and nomination committee minutes.
• Considering remuneration incentive schemes and performance targets for
directors including the EPS target for management remuneration.
• Using analytical procedures to identify any unusual or unexpected relationships.
• Consultation with forensic specialists to brainstorm over plausible fraud risk factors.
3. Our application of materiality and an overview of the scope of our audit
continued
The Group team instructed component auditors as to the significant areas to be
covered and the information to be reported back. The Group team approved the
component materialities, which ranged from £0.34m to £0.88m (2021: £0.3m to
£1.4m), having regard to the mix of size and risk profile of the Group across the
components. The work on 1 of the 4 components (2021: 1 of the 3 components)
wasperformed by component auditors and the rest, including the audit of the
parentCompany, was performed by the Group team. The Group team performed
procedures on the items excluded from normalised Group profit before tax.
The scope of the audit work performed was predominately substantive as we placed
limited reliance upon the Group’s internal control over financial reporting.
The Group team visited 1 (2021: 1) component in China (2021: China) to assess the
audit risk and strategy. Video and telephone conference meetings were also held
with the component auditors. At these visits and meetings, the findings reported to
the Group team were discussed in more detail, and any further work required by the
Group team was then performed by the component auditor.
4. Going concern
The directors have prepared the financial statements on the going concern basis as
they do not intend to liquidate the Group or the parent Company or to cease their
operations, and as they have concluded that the Group’s and the parent Company’s
financial position means that this is realistic. They have also concluded that there are
no material uncertainties that could have cast significant doubt over their ability to
continue as a going concern for at least a year from the date of approval of the
financial statements (“the going concern period”).
We used our knowledge of the Group, its industry, and the general economic
environment to identify the inherent risks to its business model and analysed how
those risks might aect the Group’s and parent Company’s financial resources or
ability to continue operations over the going concern period. The risks that we
considered most likely to adversely aect the Group’s and parent Company’s available
financial resources and metrics relevant to debt covenants over this period were:
• Concentration risks with associated operations;
• Macroeconomic, political and environmental risks.
We considered whether these risks could plausibly aect the liquidity or covenant
compliance in the going concern period by assessing the degree of downside
assumption that, individually and collectively, could result in a liquidity issue, taking
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Independent Auditor’s Report continued
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The potential eect of these laws and regulations on the financial statements varies
considerably.
Firstly, the Group is subject to laws and regulations that directly aect the financial
statements including financial reporting legislation (including related companies
legislation), distributable profits legislation and taxation legislation and we assessed
the extent of compliance with these laws and regulations as part of our procedures
on the related financial statement items.
Secondly, the Group is subject to many other laws and regulations where the
consequences of non-compliance could have a material eect on amounts or
disclosures in the financial statements, for instance through the imposition of fines
orlitigation. We identified the following areas as those most likely to have such an
eect: health and safety, anti-bribery, employment law and certain aspects of
company legislation. Auditing standards limit the required audit procedures to
identify non-compliance with these laws and regulations to enquiry of the directors
and other management and inspection of regulatory and legal correspondence, if
any. Therefore if a breach of operational regulations is not disclosed to us or evident
from relevant correspondence, an audit will not detect that breach.
We discussed with the audit committee matters related to actual or suspected
breaches of laws or regulations, for which disclosure is not necessary, and
considered any implications for our audit.
Context of the ability of the audit to detect fraud or breaches of law or regulation
Owing to the inherent limitations of an audit, there is an unavoidable risk that we may
not have detected some material misstatements in the financial statements, even
though we have properly planned and performed our audit in accordance with
auditing standards. For example, the further removed non-compliance with laws and
regulations is from the events and transactions reflected in the financial statements,
the less likely the inherently limited procedures required by auditing standards would
identify it.
In addition, as with any audit, there remained a higher risk of non-detection of fraud,
as these may involve collusion, forgery, intentional omissions, misrepresentations, or
the override of internal controls. Our audit procedures are designed to detect
material misstatement. We are not responsible for preventing non-compliance or
fraud and cannot be expected to detect non-compliance with all laws and
regulations.
5. Fraud and breaches of laws and regulations – ability to detect continued
Identifying and responding to risks of material misstatement due to fraud
continued
We communicated identified fraud risks throughout the audit team and remained
alert to any indications of fraud throughout the audit. This included communication
from the Group audit team to full scope component audit teams of relevant fraud
risks identified at the Group level and request to full scope component audit teams
to report to the Group audit team any instances of fraud that could give rise to a
material misstatement at the Group level.
As required by auditing standards, and taking into account possible pressures to
meet profit targets and our overall knowledge of the control environment, we
perform procedures to address the risk of management override of controls, in
particular the risk that Group and component management may be in a position to
make inappropriate accounting entries. On this audit we do not believe there is a
fraud risk related to revenue recognition because there is limited perceived pressure
and opportunity to inflate revenue as the Group is trading significantly below
incentive thresholds for this year and revenue recognition does not involve complex
judgement.
We did not identify any additional fraud risks.
Identifying and responding to risks of material misstatement due to
non-compliance with laws and regulations
We identified areas of laws and regulations that could reasonably be expected to
have a material eect on the financial statements from our general commercial and
sector experience and through discussion with the directors and other management
as required by auditing standards, and from inspection of the Group’s regulatory and
legal correspondence and discussed with the directors and other management the
policies and procedures regarding compliance with laws and regulations.
As the Group is regulated, our assessment of risks involved gaining an understanding
of the control environment including the entity’s procedures for complying with
regulatory requirements.
We communicated identified laws and regulations throughout our team and
remained alert to any indications of non-compliance throughout the audit. This
included communication from the Group audit team to full-scope component audit
teams of relevant laws and regulations identified at the Group level, and a request for
full scope component auditors to report to the Group audit team any instances of
non-compliance with laws and regulations that could give rise to a material
misstatement at the Group level.
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to the members of Luceco plc
• the Principal risk disclosures describing these risks and how emerging risks are
identified, and explaining how they are being managed and mitigated; and
• the directors’ explanation in the viability statement of how they have assessed the
prospects of the Group, over what period they have done so and why they considered
that period to be appropriate, and their statement as to whether they have a
reasonable expectation that the Group will be able to continue in operation and meet
its liabilities as they fall due over the period of their assessment, including any related
disclosures drawing attention to any necessary qualifications or assumptions.
We are also required to review the viability statement, set out on pages 72 to 74
under the Listing Rules. Based on the above procedures, we have concluded that the
above disclosures are materially consistent with the financial statements and our
audit knowledge.
Our work is limited to assessing these matters in the context of only the knowledge
acquired during our financial statements audit. As we cannot predict all future
events or conditions and as subsequent events may result in outcomes that are
inconsistent with judgements that were reasonable at the time they were made, the
absence of anything to report on these statements is not a guarantee as to the
Group’s and parent Company’s longer-term viability.
Corporate governance disclosures
We are required to perform procedures to identify whether there is a material
inconsistency between the directors’ corporate governance disclosures and the
financial statements and our audit knowledge.
Based on those procedures, we have concluded that each of the following is
materially consistent with the financial statements and our audit knowledge:
• the directors’ statement that they consider that 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;
• the section of the annual report describing the work of the Audit Committee,
including the significant issues that the audit committee considered in relation to
the financial statements, and how these issues were addressed; and
• the section of the annual report that describes the review of the eectiveness of
the Group’s risk management and internal control systems.
We are required to review the part of the Corporate Governance Report relating to the
Group’s compliance with the provisions of the UK Corporate Governance Code
specified by the Listing Rules for our review. We have nothing to report in this respect.
6. We have nothing to report on the other information in the Annual Report
The directors are responsible for the other information presented in the Annual
Report together with the financial statements. Our opinion on the financial
statements does not cover the other information and, accordingly, we do not express
an audit opinion or, except as explicitly stated below, any form of assurance
conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider whether,
based on our financial statements audit work, the information therein is materially
misstated or inconsistent with the financial statements or our audit knowledge.
Based solely on that work we have not identified material misstatements in the other
information.
Strategic report and directors’ report
Based solely on our work on the other information:
• we have not identified material misstatements in the strategic report and the
directors’ report;
• in our opinion the information given in those reports for the financial year is
consistent with the financial statements; and
• in our opinion those reports have been prepared in accordance with the
Companies Act 2006.
Directors’ remuneration report
In our opinion the part of the Directors’ Remuneration Report to be audited has been
properly prepared in accordance with the Companies Act 2006.
Disclosures of emerging and principal risks and longer-term viability
We are required to perform procedures to identify whether there is a material
inconsistency between the directors’ disclosures in respect of emerging and
principal risks and the viability statement, and the financial statements and our audit
knowledge.
Based on those procedures, we have nothing material to add or draw attention to in
relation to:
• the directors’ confirmation within the viability statement on pages 72 to 74 that
they have carried out a robust assessment of the emerging and principal risks
facing the Group, including those that would threaten its business model, future
performance, solvency and liquidity;
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Annual Report and Financial Statements 2022
Independent Auditor’s Report continued
to the members of Luceco plc
The Company is required to include these financial statements in an annual financial
report prepared using the single electronic reporting format specified in the TD
ESEF Regulation. This auditor’s report provides no assurance over whether the
annual financial report has been prepared in accordance with that format.
9. The purpose of our audit work and to whom we owe our responsibilities
This report is made solely to the Company’s members, as a body, in accordance with
Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been
undertaken so that we might state to the Company’s members those matters we are
required to state to them in an auditor’s report and for no other purpose. To the
fullest extent permitted by law, we do not accept or assume responsibility to anyone
other than the Company and the Company’s members, as a body, for our audit work,
for this report, or for the opinions we have formed.
MICHAEL FROOM (SENIOR STATUTORY AUDITOR)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
One Snowhill
Snow Hill Queensway
Birmingham B4 6GH
20 March 2023
7. We have nothing to report on the other matters on which we are required to
report by exception
Under the Companies Act 2006, we are required to report to you if, in our opinion:
• adequate accounting records have not been kept by the parent Company, or
returns adequate for our audit have not been received from branches not visited
by us; or
• the parent Company financial statements and the part of the Directors’
Remuneration Report to be audited are not in agreement with the accounting
records and returns; or
• certain disclosures of directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
We have nothing to report in these respects.
8. Respective responsibilities
Directors’ responsibilities
As explained more fully in their statement set out on page 132, the directors are
responsible for: the preparation of the financial statements including being satisfied
that they give a true and fair view; such internal control as they determine is
necessary to enable the preparation of financial statements that are free from
material misstatement, whether due to fraud or error; assessing the Group and
parent Company’s ability to continue as a going concern, disclosing, as applicable,
matters related to going concern; and using the going concern basis of accounting
unless they either intend to liquidate the Group or the parent Company or to cease
operations, or have no realistic alternative but to do so.
Auditor’s responsibilities
Our objectives are to obtain reasonable assurance about whether the financial
statements as a whole are free from material misstatement, whether due to fraud or
error, and to issue our opinion in an auditor’s report. Reasonable assurance is a high
level of assurance, but does not guarantee that an audit conducted in accordance
with ISAs (UK) will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if,
individually or in aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of the financial statements.
A fuller description of our responsibilities is provided on the FRC’s website at
www.frc.org.uk/auditorsresponsibilities.
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Consolidated Income Statement
for the year ended 31 December 2022
£m Note Adjusted Adjustments
1
2022 Adjusted Adjustments
1
2021
Revenue 2 206. 3 — 20 6.3 2 28. 2 — 228 . 2
Cost of sales (132 .0 ) — (132 .0 ) (14 3. 5 ) — (143. 5 )
Gross profit 74 . 3 — 74 . 3 84 .7 — 8 4.7
Distribution expenses (9. 2 ) — (9. 2 ) (7. 8 ) — (7. 8 )
Administrative expenses (4 3 . 1 ) (2 .0 ) (4 5 . 1 ) (3 7. 9 ) (3 .7 ) (41 . 6 )
Operating profit 3 22 .0 (2 . 0 ) 2 0.0 39.0 (3 .7 ) 35 .3
Finance expense 5 (2 .6 ) (5 .7 ) (8 . 3 ) (1 .6 ) (0 . 4 ) (2 .0 )
Net finance expense (2. 6 ) (5 . 7 ) (8 . 3 ) (1 .6 ) (0 . 4 ) (2 .0 )
Profit before tax 19.4 (7. 7 ) 11.7 3 7. 4 (4 . 1 ) 33.3
Taxation 6 (2 . 2 ) 1. 5 (0 . 7 ) (6 . 2 ) — (6 . 2 )
Profit for the year 1 7. 2 (6. 2 ) 11.0 31.2 (4 . 1 ) 2 7. 1
Earnings Per Share (pence)
Basic 7 11 .1 p (4 . 0 p) 7. 1 p 20. 2 p (2 . 6 p) 1 7. 6 p
Diluted 7 11.0 p (4 . 0 p) 7. 0 p 1 9.8 p (2 . 6 p) 1 7. 2 p
1. Definition of the adjustments made and reconciliations to the reported figures can be found in note 1 of the consolidated financial statements on page 148.
The accompanying notes on pages 147 to 190 form an integral part of these financial statements.
Consolidated Statement of Comprehensive Income
for the year ended 31 December 2022
£m 2022 2021
Profit for the year 11.0 2 7. 1
Other comprehensive income – amounts that may be reclassified to profit or loss in the future:
Foreign exchange translation dierences – foreign operations 2 .4 0. 3
Total comprehensive income for the year 13 .4 2 7. 4
All results are from continuing operations.
The accompanying notes on pages 147 to 190 form an integral part of these financial statements.
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Annual Report and Financial Statements 2022
£m Note 2022
Restated
1
2021
Non-current liabilities
Interest-bearing loans and borrowings 16 28 .4 36. 8
Other financial liabilities 17 4. 3 6.0
Deferred tax liability 12 2.3 —
Provisions 17 2.3 1.8
Total liabilities 91.4 115. 3
Net assets 86 .7 8 7. 7
Equity attributable to equity holders of the
parent
Share capital 23 0 .1 0 .1
Share premium 23 24. 8 24 . 8
Translation reserve 23 2 .6 0. 2
Treasury reserve 23 (8 . 7 ) (6 . 7 )
Retained earnings 6 7. 9 69. 3
Total equity 86 .7 8 7. 7
1. Amounts at 31 December 2021 have been restated for the finalisation of acquisition accounting
for DW Windsor (note 26).
The accompanying notes on pages 147 to 190 form an integral part of these financial
statements.
These financial statements were approved by the Board of Directors on
20March2023 and were signed on its behalf by:
JOHN HORNBY MATT WEBB
Chief Executive Ocer Chief Financial Ocer
Company registered number: 05254883
£m Note 2022
Restated
1
2021
Non-current assets
Property, plant and equipment 9 21.4 21. 2
Right-of-use assets 9 6 .1 7. 8
Intangible assets 10 41 . 7 33 .7
Investment in associate 11 — 2 .1
Financial assets held for trading 20 0.5 4.3
Deferred tax asset 12 0. 8 0. 3
Current assets
Inventories 13 4 7. 5 56 .6
Trade and other receivables 14 52 . 9 69 .7
Financial assets held for trading 20 0.7 0.4
Current tax asset 1.2 —
Cash and cash equivalents 15 5. 3 6.9
Total assets 178 .1 203 .0
Current liabilities
Trade and other payables 18 49. 8 6 6.6
Current tax liabilities — 1.8
Financial liabilities held for trading 20 2.3 0 .1
Other financial liabilities 17 2.0 2. 2
Consolidated Balance Sheet
at 31 December 2022
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Consolidated Statement of Changes in Equity
for the year ended 31 December 2022
£m
Share
capital
Share
premium
Translation
reserve
Retained
earnings
Treasur y
reserve
Total
equity
Balance at 1 January 2021 0.1 24. 8 (0. 1 ) 52.4 (6 . 8 ) 70 . 4
Total comprehensive income
Profit for the year — — — 2 7. 1 — 2 7. 1
Foreign currency translation dierences on investments in overseas entities — — (1 .1 ) — — (1 .1 )
Currency translation dierences — — 1 .4 — — 1 .4
Total comprehensive income for the year — — 0.3 2 7. 1 — 2 7. 4
Transactions with owners in their capacity as owners
Dividends — — — (11 . 2 ) — (11 . 2 )
Purchase of own shares — — — — (1. 3 ) (1 .3 )
Disposal of own shares — — — (1. 3 ) 1.4 0 .1
Deferred tax on share-based payment transactions — — — 0.7 — 0 .7
Share-based payments charge — — — 1.6 — 1 .6
Total transactions with owners in their capacity as owners — — — (1 0. 2 ) 0.1 (1 0 .1 )
Balance at 31 December 2021 0.1 24. 8 0. 2 69. 3 (6 .7 ) 8 7. 7
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Consolidated Statement of Changes in Equity continued
for the year ended 31 December 2022
£m
Share
capital
Share
premium
Translation
reserve
Retained
earnings
Treasur y
reserve
Total
equity
Balance at 31 December 2021 0.1 24. 8 0. 2 69. 3 (6 .7 ) 8 7. 7
Total comprehensive income
Profit for the year — — — 11 .0 — 11.0
Foreign currency translation dierences on investments in overseas entities — — 2.5 — — 2.5
Currency translation dierences — — (0 .1 ) — — (0 .1 )
Total comprehensive income for the year — — 2 .4 11.0 — 13. 4
Transactions with owners in their capacity as owners
Dividends — — — (10 . 9 ) — (1 0 . 9 )
Purchase of own shares — — — — (2 .4 ) (2 .4 )
Disposal of own shares — — — (0 . 4 ) 0.4 —
Deferred tax on share-based payment transactions — — — (1 .6 ) — (1 .6 )
Corporate tax on foreign currency translation dierence on investments in overseas entities — — — (0 . 5 ) — (0 . 5 )
Share-based payments charge — — — 1 .0 — 1 .0
Total transactions with owners in their capacity as owners — — — (12 . 4 ) (2 .0 ) (1 4 . 4 )
Balance at 31 December 2022 0.1 24 . 8 2.6 6 7. 9 (8 .7 ) 86 .7
The accompanying notes on pages 147 to 190 form an integral part of these financial statements.
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Consolidated Cash Flow Statement
for the year ended 31 December 2022
£m Note Adjusted Adjustments
1
2022 Adjusted Adjustments
1
2021
Cash flows from operating activities
Profit for the year 1 7. 2 (6. 2 ) 11.0 31.2 (4 . 1 ) 2 7. 1
Adjustments for:
Depreciation and amortisation 9,10 7. 1 1.8 8.9 6 .7 1 .0 7. 7
Financial expense 5 2 .6 5 .7 8.3 1.6 0.4 2.0
Taxation 6 2.2 (1 . 5 ) 0.7 6. 2 — 6.2
Loss on disposal of tangible assets 0.1 — 0.1 — — —
Increase in provisions 0 .1 — 0.1 0. 2 — 0.2
Share-based payments charge 22 1 .0 — 1.0 1 .7 — 1.7
Other non-cash items — 0. 5 0. 5 — — —
Operating cash flow before movement in working capital 30.3 0. 3 30.6 4 7. 6 (2.7 ) 44. 9
Decrease in trade and other receivables 19. 2 — 19. 2 6.2 — 6. 2
Decrease/(increase) in inventories 12 .3 (0 . 3 ) 12 .0 (14 .6 ) 1.5 (13 .1 )
(Decrease)/increase in trade and other payables (1 8 .1 ) (0 . 4 ) (1 8. 5 ) (4 . 2 ) 0.4 (3 . 8 )
Cash from operations 43.7 (0 . 4 ) 43. 3 35 .0 (0 . 8 ) 34.2
Tax paid (4 . 7 ) — (4 . 7 ) (8 .1 ) — (8 .1 )
Net cash from operating activities 39.0 (0. 4 ) 38 .6 26. 9 (0 . 8 ) 2 6 .1
1. Definition of the adjustments made and reconciliations to the reported figures can be found in note 1 of the consolidated financial statements on page 148.
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Consolidated Cash Flow Statement continued
for the year ended 31 December 2022
£m Note Adjusted Adjustments
1
2022 Adjusted Adjustments
1
2021
Cash flows from investing activities
Acquisition of property, plant and equipment (4 .1 ) — (4 . 1 ) (5 .7 ) — (5.7 )
Acquisition of other intangible assets (1 .7 ) — (1.7 ) (0 . 9 ) — (0 . 9 )
Disposal of tangible assets 0. 2 — 0. 2 0. 2 — 0. 2
Acquisition of subsidiary 26 (7. 8 ) — (7. 8 ) (16.3 ) — (16 .3 )
Investment in associate 11 — — — (2 .1 ) — (2.1 )
Net cash used in investing activities (1 3 . 4 ) — (13 . 4 ) (24 . 8 ) — (24. 8 )
Cash flows from financing activities
(Repayment)/origination of borrowings (8. 9 ) — (8 . 9 ) 14.5 — 14. 5
Interest paid (2 .7 ) — (2 . 7 ) (1 .7 ) — (1 .7 )
Dividends paid (1 0. 9 ) — (1 0 . 9 ) (1 1 . 2 ) — (11 . 2 )
Finance lease liabilities 17 (1 . 9 ) (0 . 3 ) (2 . 2 ) (1 . 4 ) — (1 . 4 )
Purchase of own shares 23 (2 . 4 ) — (2 . 4 ) (1 .3 ) — (1.3 )
Net cash used in financing activities (26 . 8 ) (0. 3 ) (2 7. 1 ) (1 .1 ) — (1 .1 )
Net (decrease)/increase in cash and cash equivalents (1 . 2 ) (0 .7 ) (1 . 9 ) 1 .0 (0 . 8 ) 0. 2
Cash and cash equivalents at 1 January 6.9 6 .7
Eect of exchange rate fluctuations on cash held 0. 3 —
Cash and cash equivalents at 31 December 15 5. 3 6.9
1. Definition of the adjustments made and reconciliations to the reported figures can be found in note 1 of the consolidated financial statements on page 148.
The accompanying notes on pages 147 to 190 form an integral part of these financial statements.
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Notes to the Consolidated Financial Statements continued
for the year ended 31 December 2022
1 Introduction, other judgements and estimates, APMs and adjustments continued
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Notes to the Consolidated Financial Statements continued
for the year ended 31 December 2022
1 Introduction, other judgements and estimates, APMs and adjustments continued
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Notes to the Consolidated Financial Statements continued
for the year ended 31 December 2022
1 Introduction, other judgements and estimates, APMs and adjustments continued
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for the year ended 31 December 2022
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Company Balance Sheet
at 31 December 2022
£m Note 2022 2021
Non-current assets
Investments 29 4.3 3.3
Debtors 30 84.5 7 7. 8
Net assets 88.8 81.1
Capital and reserves
Called-up share capital 31 0.1 0.1
Share premium account 24.8 24.8
Treasury reserve (8.7) (6.7)
Profit and loss account 72.6 62.9
Equity 88.8 81.1
The accompanying notes on pages 193 to 197 form an integral part of these financial statements.
The Company reported a profit for the year ended 31 December 2022 of £20.0m (2021: £40.0m).
These financial statements were approved by the Board of Directors on 20 March 2023 and were signed on its behalf by:
JOHN HORNBY MATT WEBB
Chief Executive Ocer Chief Financial Ocer
Company registered number: 05254883
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Annual Report and Financial Statements 2022
Company Statement of Changes in Equity
for the year ended 31 December 2022
£m
Share
capital
Share
premium
Retained
earnings
Treasur y
reserve
Total
equity
Balance at 1 January 2021 0.1 24.8 33.9 (6.8) 52.0
Total comprehensive income
Profit for the year — — 40.0 — 40.0
Total comprehensive income for the year — — 40.0 — 40.0
Transactions with owners in their capacity as owners:
Dividends — — (11.2) — (11.2)
Purchase of own shares — — — (1.3) (1.3)
Disposal of own shares — — (1.4) 1.4 —
Share-based payments charge — — 1.6 — 1.6
Total transactions with owners in their capacity as owners — — (11.0) 0.1 (10.9)
Balance at 31 December 2021 0.1 24.8 62.9 (6.7) 81.1
Total comprehensive income
Profit for the year — — 20.0 — 20.0
Total comprehensive income for the year — — 20.0 — 20.0
Transactions with owners in their capacity as owners:
Dividends — — (10.9) — (10.9)
Purchase of own shares — — — (2.4) (2.4)
Disposal of own shares — — (0.4) 0.4 —
Share-based payments charge — — 1.0 — 1.0
Total transactions with owners in their capacity as owners — — (10.3) (2.0) (12.3)
Balance at 31 December 2022 0.1 24.8 72.6 (8.7) 88.8
The accompanying notes on pages 193 to 197 form an integral part of these financial statements.
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Notes to the Company Financial Statements
for the year ended 31 December 2022
28 Accounting policies
The following accounting policies have been applied consistently in dealing with
items which are considered material in relation to the financial statements, except
asnoted below.
Basis of preparation
These financial statements were prepared in accordance with Financial Reporting
Standard 102 The Financial Reporting Standard applicable in the UK and Republic of
Ireland (“FRS 102”) as issued in August 2014. All applicable amendments to FRS 102
have been applied since its issue in August 2014. The presentation currency of these
financial statements is sterling. All amounts in the financial statements have been
rounded to the nearest £0.1m. The financial statements are prepared on the historical
cost basis.
Under s408 of the Companies Act 2006, the Company is exempt from the
requirement to present its own profit and loss account. The Company did not trade
during the year.
In these financial statements, the Company is considered to be a qualifying entity
(for the purposes of this FRS) and has applied the exemptions available under FRS
102 in respect of the following disclosures:
• Reconciliation of the number of shares outstanding from the beginning to the end
of the period
• Cash flow statement and related notes
• Key management personnel compensation
As the consolidated financial statements of the Company include the equivalent
disclosures, the Company has also taken the exemptions under FRS 102 available in
respect of the disclosures required by FRS 102.11 Basic Financial Instruments and
FRS 102.12 Other Financial Instrument Issues in respect of financial instruments not
falling within the fair value accounting rules of Paragraph 36(4) of Schedule 1.
The Company proposes to continue to adopt the reduced disclosure framework of
FRS 102 in its next financial statements.
Amounts receivable by the Company’s auditor and its associates in respect of
services to the Company and its associates, other than the audit of the Company’s
financial statements, have not been disclosed as the information is required instead
to be disclosed on a consolidated basis in the consolidated financial statements.
Going concern
Note 1 of the consolidated financial statements contains the going concern
statement.
Taxation
Tax on the profit or loss for the year comprises current and deferred tax. Tax is
recognised in the profit and loss account except to the extent that it relates to items
recognised directly in equity or other comprehensive income, in which case it is
recognised directly in equity or other comprehensive income.
Current tax is the expected tax payable or receivable on the taxable income or loss
for the year, using tax rates enacted or substantively enacted at the balance sheet
date and any adjustment to tax payable in respect of previous years.
Deferred tax is provided on timing dierences which arise from the inclusion of
income and expenses in tax assessments in periods dierent from those in which
they are recognised in the financial statements. Deferred tax is measured at the tax
rate that is expected to apply to the reversal of the related dierence, using tax rates
enacted or substantively enacted at the balance sheet date. Unrelieved tax losses
and other deferred tax assets are recognised only to the extent that it is probable
that they will be recovered against the reversal of deferred tax liabilities or other
future taxable profits.
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Notes to the Company Financial Statements continued
for the year ended 31 December 2022
At the end of each reporting period, the Group revises its estimates of the number of
options that are expected to vest based on the non-market-based vesting conditions.
Itrecognises the impact of the revision to original estimates, if any, in the income
statement,with a corresponding adjustment to equity.
The Group operates an employee share benefit trust as part of its incentive plans for
UK-based employees.
All assets and liabilities of the trust are recorded in the balance sheet as assets and liabilities
of the Company until such time as the assets are awarded to the beneficiaries. All income
and expenditure of the trust is similarly brought into the results of the Company.
Where the Company grants options over its own shares to the employees of its subsidiaries,
it recognises, in its individual financial statements, an increase in the cost of investment in its
subsidiaries equivalent to the equity-settled share-based payment charge recognised in its
consolidated financial statements, with the corresponding credit being recognised directly
to equity.
£m 2022 2021
Balance at 1 January 3.3 1.7
Share-based payment charge relating to subsidiaries 1.0 1.6
Balance at 31 December 4.3 3.3
28 Accounting policies continued
Basic financial instruments
Trade and other debtors/creditors
Trade and other debtors are recognised initially at transaction price less attributable
transaction costs. Trade and other creditors are recognised initially at transaction
price plus attributable transaction costs. Subsequent to initial recognition they are
measured at amortised cost using the eective interest method, less any impairment
losses in the case of trade debtors. If the arrangement constitutes a financing
transaction, for example if payment is deferred beyond normal business terms, then
it is measured at the present value of future payments discounted at a market rate of
instrument for a similar debt instrument.
29 Fixed asset investments
Accounting policy – investments
These are the separate financial statements of the Company. Investments in subsidiaries are
carried at cost less impairment.
Accounting policy – share-based payments
Incentives in the form of shares are provided to employees through the Company’s Share
Incentive Plan (“SIP”) and Long-Term Incentive Plan (“LTIP”) schemes. Equity-settled
share-based payments are measured at fair value (excluding the eect of non-market-based
vesting conditions) at the date of grant. The fair value determined at the grant date of the
equity-settled share-based payments is expensed on a straight-line basis over the vesting
period, based on the Group’s estimate of the number of shares that will eventually vest.
The grant date fair value of an equity-settled payment under the SIP is measured as the face
value of the award on the date of grant.
The grant date fair value of the awards under the Group’s LTIP is measured by the use of the
Monte Carlo simulation for any market-related performance conditions (given the increased
uncertainty around the potential vesting of share options).
The expected life used in the model has been adjusted, based on management’s best
estimate, for the eects of non-transferability, exercise restrictions and behavioural
considerations. Charges made to the income statement in respect of share-based payments
are credited to reserves.
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Notes to the Company Financial Statements continued
for the year ended 31 December 2022
29 Fixed asset investments continued
The Company holds 100% of the share capital of the following companies (with only Luceco Holdings Limited being a direct investment) whose principal activities were
asfollows:
Company Registered oce Principal activity
% of
shares held
Luceco Holdings Limited*
(Reg: 05254785)
Luceco Distribution Centre
Staord Park 1, Telford TF3 3BD, UK
Intermediate holding company 100
Luceco UK Limited*
(Reg: 02255270)
Luceco Distribution Centre
Staord Park 1, Telford TF3 3BD, UK
Electrical accessories importer and distributor 100
BG Electrical Limited*
(Reg: 01388059)
Luceco Distribution Centre
Staord Park 1, Telford TF3 3BD, UK
Electrical accessories importer and distributor 100
Luceco Electrical (Jiaxing) Limited 1,438 Jiachung Road
Xiuzhou Industrial Park,
Jiaxing, Zhejiang 314000, China,
Manufacturing company 100
Luceco (Hong Kong) Limited Room 2401, 24th Floor,
CC Wu Building, 302-308
Hennessy Road, Wanchai, Hong Kong
Registered oce 100
Luceco Inc Batallon de San Patricio 109 Sur, Col.
Valle Oriente San Pedro Garza Garcia, Mexico
Administrative and development oce 100
Luceco SAS 3 Rue de Courtalin, 77700 Magny
Le Hongre, France
Administrative and development oce 100
Luceco GmbH Holstenplatz 20b, 22765 Hamburg, Germany Administrative and development oce 100
Luceco Mexico Batallon de San Patricio 109 Sur, Col.
Valle Oriente San Pedro Garza Garcia, Mexico
Administrative and development oce 100
BG Electrical SDN No. 2 Jalan SS 24/17, 47301 Petaling
Jaya, Selangor, Malaysia
Administrative and development oce 100
Nexus Industries PTE Limited 3,791 Jalan Bukit Merah #09-25
(E-center@redhill), Singapore, 159471
Administrative and development oce 100
Luceco Southern Europe SL CL Bobinadora 1-5, Local 7, 08302
Mataro Barcelona, Spain
Administrative and development oce 100
Luceco Middle East FZCO Building 5EB, Oce 342, DAFZA
PO Box 371128, Dubai
Administrative and development oce 100
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Notes to the Company Financial Statements continued
for the year ended 31 December 2022
Company Registered oce Principal activity
% of
shares held
Kingfisher Lighting Limited*
(Reg: 02236337)
Luceco Distribution Centre
Staord Park 1, Telford TF3 3BD, UK
Electrical accessories importer, installer and distributor 100
DW Windsor Group Limited*
(Reg: 08849218)
Luceco Distribution Centre
Staord Park 1, Telford TF3 3BD, UK
Intermediate holding company 100
D.W. Windsor Limited*
(Reg: 01309755)
Luceco Distribution Centre
Staord Park 1, Telford TF3 3BD, UK
Manufacture of electric lighting equipment 100
Pulsar Lighting Solutions Limited*
(Reg: 00943317)
Luceco Distribution Centre
Staord Park 1, Telford TF3 3BD, UK
Manufacture of electric lighting equipment 100
Urban Control Limited*
(Reg: 09950591)
Luceco Distribution Centre
Staord Park 1, Telford TF3 3BD, UK
Manufacture of electric lighting equipment 100
Fusion Lighting Limited Luceco Distribution Centre
Staord Park 1, Telford TF3 3BD, UK
Dissolved 13 September 2022 100
Street Lighting Limited Luceco Distribution Centre
Staord Park 1, Telford TF3 3BD, UK
Dissolved 13 September 2022 100
EV Charge Points UK
T/A EVCP Limited*
(Reg: 12454736)
Burlands, Charlwood Road, Ifield,
Crawley, England RH11 0JZ
Manufacture of electric vehicle chargers 100
* All UK registered subsidiaries are exempt from audit, which is set out within Section 479A of the Companies Act 2006 for the year ended 31 December 2022. The Company will guarantee the debts and
liabilities of each of the UK subsidiary undertakings at the balance sheet date in accordance with Section 479C of the Companies Act 2006. The Company has assessed the probability of loss under the
guarantee as remote.
Luceco Holdings Limited is the only company which is owned directly. All other companies are owned and controlled by virtue of the Company’s holding in
LucecoHoldingsLimited.
29 Fixed asset investments continued
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Annual Report and Financial Statements 2022
Notes to the Company Financial Statements continued
for the year ended 31 December 2022
30 Debtors
£m 2022 2021
Amounts owed by Group undertakings 84.5 77.8
Amounts owed by the Group’s subsidiaries are repayable at the Company’s demand
and attract no interest.
31 Capital and reserves
Accounting policy
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue
of ordinary shares are recognised as a reduction from equity, net of any tax eects.
Allotted, called up and
fully paid
Number of shares in issue
(thousands)
2022
£
2021
£
2022
Number
2021
Number
At 1 January 80,400 80,400 160,800 160,800
At 31 December 80,400 80,400 160,800 160,800
Each ordinary share carries one vote, participates equally with the other ordinary
shares in distribution of dividends and capital (including on a winding up) and is not
redeemable.
32 Ultimate parent and controlling party
There is no controlling party.
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Company Information
Financial calendar
Dividend record date 11 April 2023
Dividend reinvestment plan final date for
election
26 April 2023
Annual General Meeting 10 May 2023
Dividend paid 19 May 2023
Half-year end 30 June 2023
Half-year end trading update 18 July 2023
Half-year interim management statement 5 September 2023
Year end 31 December 2023
Full-year results March 2024
Share price history
The following table sets out the reported high, low, average and financial year end
(31 December or immediately preceding business day) closing middle market
quotations of Luceco’s ordinary shares on the London Stock Exchange for the period
1 January 2022 to 31 December 2022.
Share price (pence) High Low Average
Financial
year end
1
2022 337.5 66.0 148.8 98.2
2021 497.0 231.0 336.9 348.5
1. Last trading day at the London Stock Exchange, 30 December 2022.
Shareholder queries
Shareholders who change address, lose their share certificates, wish to amalgamate
multiple shareholdings or have payments paid directly into their bank account,
orotherwise have a query or require information relating to their shareholding,
should contact the Company’s registrar.
This can be done by writing to Link Group, 10th Floor, Central Square, 29
Wellington Street, Leeds LS1 4DL. Alternatively, shareholders can contact Link
Group on +44 (0)371 664 0300 (calls cost 12p per minute plus network extras; lines
are open 9.00am to 5.30pm Monday to Friday), or on +44 (0)371 644 0300 if calling
from overseas, or email their enquiry to shareholderenquiries@linkgroup.co.uk,
indicating they are a Luceco shareholder.
Shareholders are also able to access and amend details of their shareholding, via the
registrar’s website at www.signalshares.com. If you have not previously registered to
use this facility you will need your investor code, which can be found on your proxy
card or on any share certificate issued by Link Asset Services.
You can access the service via the investor relations section of Luceco’s website at
www.lucecoplc.com.
Online shareholder services
Luceco provides a number of services online in the investor relations section of its
website at www.lucecoplc.com, where shareholders and other interested parties may:
• View and/or download annual and half-year reports
• Check and/or download current or historic share prices
• Check the amounts and dates of historic payments to shareholders
• Use interactive tools to calculate the value of shareholdings
• Chart Luceco ordinary share price changes against indices
• Register to receive email alerts regarding press releases, including regulatory news
announcements, Annual Reports and Company presentations
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Company Information continued
Protect yourself
1) Reject cold calls
If you have been cold called with an oer to buy or sell shares, it is likely to be a
high-risk investment or scam. You should treat the call with extreme caution. The
safest thing to do is hang up.
If you are oered unsolicited investment advice, discounted shares, a premium price
for shares you own, or free company or research reports, you should get the name of
the person and organisation contacting you and take these steps before handing
over any money.
2) Check the firm on the Financial Services Register at www.fca.org.uk/register
The Financial Services Register is a public record of all the firms and individuals in
the financial services industry that are regulated by the FCA. Use the details on the
Financial Services Register to contact the firm.
3) Get impartial advice
Think about getting impartial financial advice before you hand over any money.
Seekadvice from someone unconnected to the firm that has approached you.
REMEMBER, if it sounds too good to be true, it probably is!
If you use an unauthorised firm to buy or sell shares or other investments, you will
not have access to the Financial Ombudsman Service or Financial Services
Compensation Scheme if things go wrong.
Report a scam
If you suspect you have been approached by fraudsters, please tell the FCA using
the share fraud reporting form at www.fca.org.uk/consumers/report-scam-
us#Report where you can find out more about investment scams. You can also call
the FCA Consumer Helpline on +44 (0)800 111 6768.
If you have lost money to investment fraud, you should report it to Action Fraud on
+44 (0)300 123 2040 or online at www.actionfraud.police.uk.
Find out more at www.fca.org.uk/scamsmart.
ShareGift
Luceco supports ShareGift, the share donation charity (registered charity number
1052686). ShareGift was set up so that shareholders who have only a very small
number of shares which might be considered uneconomic to sell are able to dispose
of them by donating them for the benefit of UK charities. Donated shares are
aggregated and sold by ShareGift, the proceeds being passed on to a wide range of
UK charities. Donating shares to charity gives rise neither to a gain nor a loss for UK
capital gains purposes and UK taxpayers may also be able to claim income tax relief
on the value of the donation.
Further information about donating shares to ShareGift is available either from its
website at www.sharegift.org, by writing to ShareGift at 4th Floor Rear, 67/68
Jermyn Street, London SW1Y 6NY or by contacting them on +44 (0)20 7930 3737.
Even if the share certificate has been lost or destroyed, the gift can be completed.
The service is generally free; however, there may be an indemnity charge for a lost or
destroyed share certificate where the value of the shares exceeds £100.
Unsolicited mail
The Company is obliged by law to make its share register publicly available should a
request be received. As a consequence, shareholders may receive unsolicited mail
from organisations that use it as a mailing list. Shareholders wishing to limit the
amount of such mail should either write to Mailing Preference Service, DMA House,
70 Margaret Street, London W1W 8SS, register online at www.mpsonline.org.uk or
call the Mailing Preference Service (“MPS”) on +44 (0) 207 291 3310. MPS is an
independent organisation which oers a free service to the public.
Warning to shareholders – boiler room scams
Each year in the UK, £1.2bn is lost to investment fraud, with the average victim losing
around £20,000. What is more, it is estimated that only 10% of the people that
become victims of investment fraud actually report it.
Investment scams are becoming ever-more sophisticated – designed to look like
genuine investments, they are increasingly dicult to spot. They are targeted at
those most at risk, typically people in retirement who are actively seeking an
investment opportunity.
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Annual Report and Financial Statements 2022
Advisers
Company’s registered oce
Luceco plc
Building E Staord Park 1
Staord Park
Telford TF3 3BD
www.lucecoplc.com
ir@luceco.com
Independent auditor
KPMG LLP
Statutory Auditor
Chartered Accountants
One Snowhill
Snow Hill Queensway
Birmingham B4 6GH
Financial advisers and brokers
Numis Securities
45 Gresham Street
London EC2V 7BF
Liberum
Ropemaker Place
Level 12
25 Ropemaker Street
London EC2Y 9LY
Registrars
Link Group
10th floor
Central Square
29 Wellington Street
Leeds LS1 4DL
shareholderenquiries@linkgroup.co.uk
Company secretarial services
Company Matters
6th floor
65 Gresham Street
London EC2V 7NQ
luceco@linkgroup.co.uk
Financial PR advisers
MHP Communications
6 Agar Street
London WC2N 4HN
luceco@mhpgroup.com
Cautionary statement
This Annual Report and Financial Statements has been prepared for the shareholders
of Luceco plc, as a body, and no other persons. Its purpose is to assist shareholders
of the Company to assess the strategies adopted by the Group, the potential for
those strategies to succeed and for no other purpose. The Company, its Directors,
employees, agents or advisers do not accept or assume responsibility to any other
person to whom this document is shown or into whose hands it may come and any
such responsibility or liability is expressly disclaimed.
This Annual Report and Financial Statements contains certain forward-looking
statements that are subject to risk factors associated with, amongst other things,
theeconomic and business circumstances occurring from time to time in the
countries, sectors and markets in which the Group operates. It is believed that the
expectations reflected in these statements are reasonable, but they may be aected
by a wide range of variables which could cause actual results to dier materially
fromthose currently anticipated.
No assurances can be given that the forward-looking statements in this Strategic
Report will be realised.
The forward-looking statements reflect the knowledge and information available
atthe date of preparation of this Strategic Report and the Company undertakes
noobligation to update these forward-looking statements. Nothing in this Annual
Report and Financial Statements should be constituted as a profit forecast.
Strategic and Directors’ Reports
The Strategic Report, the Corporate Governance Report and Financial Statements
form a Directors’ Report. Both the Directors’ Report and Strategic Report have been
drawn up and presented in accordance with English company law and the liabilities
of the Directors in connection with those reports shall be subject to the limitations
and restrictions provided by such law. In particular, the Directors would be liable to
the Company (but not to any third party) if the Strategic Report and/or Directors’
Report contain errors as a result of recklessness or knowing misstatement or
dishonest concealment of a material fact, but would not otherwise be liable.
The Strategic Report forms part of the Annual Report and Financial Statements,
fullcopies of which can be obtained free of charge from the Group’s website at
www.lucecoplc.com or from the Company’s registered oce.
The paper used in this report is produced using virgin wood fibre from
well-managed, FSC®-certified forests and other controlled sources. Allpulps
usedare elemental chlorine free and manufactured at a mill that has been awarded
the ISO 14001 and EMAS certificates for environmental management. The use of the
FSC® logo identifies products which contain wood from well-managed forests and
other controlled sources certified in accordance with the rules of the Forest
Stewardship Council®.
Printed by an FSC® and ISO 14001 certified company.
Designed by
www.lyonsbennett.com
Luceco plc
Registered oce
Building E Staord Park 1
Staord Park
Telford TF3 3BD
www.lucecoplc.com
ir@luceco.com
Company number
05254883