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BRINGING
POWER TO LIFE
ANNUAL REPORT AND
FINANCIAL STATEMENTS
2021
LUCECO PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
BRINGING POWER
TO LIFE
Our purpose
To help people
harness power
sustainably in
everyday life.
Our 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 – to invest across our
business from manufacturing and
fulfilment to customer service, to
sustain our competitive advantage
and to contribute increasingly to
society’s sustainability goals
Find out more on pages 32 and 33
Our mission
To build a leading portfolio of
thoughtfully designed
anddiligently made products that
provide environmentally
responsible electrical and lighting
solutions to our customers.
To continually invest to sustain the
competitive advantage provided
by our people, culture and
business model.
Our culture
Customer-driven – we understand
what our customers want
Team-focused – our people are
ourkey differentiator, they are
agile, loyal and energetic
Bold and innovative – our
rapidgrowth is due to bold
implementation of innovative
thinking
Principled – We do what is right
andwe hold ourselves to the
highest ethical standards
Find out more on pages 28 and 29
Strategic Report
Luceco plc Annual Report and Financial Statements 2021 01
Revenue
£228.2m
2020: £176.2m
Adjusted
1
Operating Profit
£39.0m
2020: £30.0m
ESG – emissions
Carbon Neutral
operations in 2021
Gross profit
£84.7m
2020: £70.2m
Earnings per share
17.6p
2020: 18.0p
ESG – low carbon sales
25%
revenue from low carbon products in 2021
Operating profit
£35.3m
2020: £29.6m
Adjusted
1
Earnings Per Share
20.2p
2020: 15.5p
ESG – employee satisfaction
2
90.5%
2020: 86.1%
Financial and ESG highlights
Strategic Report
01 Financial and ESG highlights
02 How we Bring Power to Life
06 At a Glance
07 Three Reasons to Invest in Us
08 Review of the Year
10 Chairman’s Statement
12 Chief Executive Officer’s Review
16 Chief Financial Officer’s Review
26 Our Attractive Markets
28 Our Advantaged Business Model
30 Business Model in Action
32 Strategy
34 Strategy in Action
40 Key Performance Indicators
42 Environment, Social and
Governance
56 Our Stakeholders
60 Principal Risks and Uncertainties
66 Viability Statement
Directors’ Report
68 Chairman’s Introduction
70 Board of Directors
72 Corporate Governance Report
78 Nomination Committee Report
80 Audit Committee Report
84 Remuneration Committee
Report
100 Other Statutory Disclosures
104 Statement of Directors’
Responsibilities
Financial Statements
105 Independent Auditor’s Report
113 Consolidated Income Statement
113 Consolidated Statement of
Comprehensive Income
114 Consolidated Balance Sheet
115 Consolidated Statement of
Changes in Equity
116 Consolidated Cash Flow
Statement
117 Notes to the Consolidated
Financial Statements
154 Company Balance Sheet
155 Company Statement of Changes
in Equity
156 Notes to the Company Financial
Statements
160 Company Information
162 Advisers
164 Notes
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 118 and are used throughout this document. The measures provide additional information for users
ontheunderlying performance of the business, enabling consistent year‑on‑year comparisons.
2. Percentage of UK employees fairly or very satisfied with their employer.
What’s inside
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 offer great quality at a greatprice
• Our designs start with the customer inmind
Design
02 Luceco plc Annual Report and Financial Statements 2021
We constantly strive to find
new ways to further improve
the performance of our
products. Ultimately, our goal
is to create cutting-edge
designs, which result in
happy customers with a
lower carbon footprint too.
SIMON SHENTON
HEAD OF LED DEVELOPMENT
HOW WE BRING
POWER TO LIFE
• We operate a vertically integrated manufacturing model
• Our production output is agile, particularly during
COVID-19
• 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
Make
Luceco plc Annual Report and Financial Statements 2021 03
HOW WE BRING
POWER TO LIFE
Our products are designed to
maximise automation in our
sites; we benefit from scale
and our fully owned,
well-invested manufacturing
facility means we have
visibility regarding supply
and more control over cost.
RONNIE YU
ASIA MANAGING DIRECTOR
04 Luceco plc Annual Report and Financial Statements 2021
HOW WE BRING
POWER TO LIFE
We provide a bespoke
serviceand remain true to
ourculture, doing what is
right and never compromising
on quality. Asa result
wehavebuilt strong and
long-standing relationships,
which our customers value.
RICHARD HORTON
NATIONAL SALES MANAGER
• 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
Market
Luceco plc Annual Report and Financial Statements 2021 05
HOW WE BRING
POWER TO LIFE
Last year we experienced multiple
challenges including shipping delays
andraw materials shortages, but our
supply chain remained resilient.
Strongrelationships with our suppliers
minimised issues and, where we needed
alternatives, close internal team
relationships with product managers
meantthere was minimal disruption
toproduct availability.
ELIZABETH BEATTIE
SUPPLY CHAIN PLANNER
• Our supply chain:
• Is flexible to customer needs
• Offers high outbound service levels
• Maintains a breadth of inventory close to the customer
• Uses the best available technology
• Offers products as part of a solution
Fulfil
06 Luceco plc Annual Report and Financial Statements 2021
At a Glance
What we sell:
Who we sell it to:
Where we operate:
Wiring Accessories
46%
of Group revenue
#2 in UK
Revenue by product origin Revenue by distribution type Revenue by product destination
LED Lighting
28%
of Group revenue
Top 10 in UK
Portable Power
26%
of Group revenue
#1 in UK
Our products
• Mains switches and sockets
• Circuit protection
• Junction boxes/cable
management
• Commercial power
5%
49%
1%
45%
UK
China – outsourced
China –
manufactured
Europe
Revenue by product origin
45%
55%
Collected in China
Sold in end market
Revenue by distribution type
5%
79%
2%
3%
11%
Americas
Europe
UK
Asia Pacific
Middle East & Africa
Revenue by product destination
Retail
35%
of Group revenue
Distributors serving
consumers only, including
DIY sheds, pure‑play
online retailers and
grocers
Hybrid
25%
of Group revenue
Distributors serving a
mixture of consumers and
professionals, typically
with multi‑channel service
options
Professional Wholesale
25%
of Group revenue
Distributors serving
professionals only, largely
via a branch network
Professional Projects
15%
of Group revenue
Sale agreed by Luceco
direct with professionals,
but fulfilled via
Professional Wholesale
Our products
• Residential/commercial
• Interior/exterior
• Mains/solar
• Work & site lighting
Our products
• Extension cables
• Cable reels
• EV chargers
• Adapters/accessories
• TV/AV
Strategic Report
Luceco plc Annual Report and Financial Statements 2021 07
Three Reasons to Invest in Us
1:
We operate in attractive markets
• Serving construction
RMI markets
• Growing faster than GDP
• Low cyclicality with sustainablegrowth
• High margin
• Defendable from new entrants
• High brand loyalty
• Opportunities for expansion into adjacent
products/customers
2:
We have an advantaged business model
• Market-leading product development
• High quality, agile, vertically integrated manufacturing
• Flexible fulfilment model
• Established and clear branding focused on quality,
design and value
• Underpinned by our “can-do” culture
3:
We deliver compelling and consistent
financialoutcomes sustainably
Performance through the cycle:
Revenue growth >5%
Adjusted Operating
Margin
>15%
Adjusted Free Cash
FlowMargin
>10%
ROCI >30%
Covenant Net
Debtleverage
1.0-2.0x
Dividend payout 40-60%
2021: Low carbon sales
25%
2021: UK employee satisfaction
90.5%
• Our financial targets demonstrate
our commitment to strong and
sustained financial performance
• Ambition demonstrated by
upwards revision of targets
in 2021
• ESG performance a central pillar
ofthe Group’s success
See pages 28 and 29
See pages 26 and 27
See pages 16 and 17
08 Luceco plc Annual Report and Financial Statements 2021
44.5
2.4
53.3 52.4
65.6
58.5
82.3
133.7
103.1
167.6
163.9
172.1
176.2
228.2
2.6
2.6
5.9
3.2
8.4
14.5
11.5
14.7
8.5
30.0
18.0
39.0
2009 2010 2012 2016 2017 2019 2020 20212011 2014 201820152013
Adjusted Operating Profit £m
Revenue £m
Review of the Year
Key business achievements:
We acquired
DW Windsor,
increasing our
share of the UK
outdoor lighting
market
We entered
theEVcharger
market
We won £27.5m
of new tendered
business
Track record
Strategic Report
Luceco plc Annual Report and Financial Statements 2021 09
We
increasedour
manufacturing
output by 30%
to serve our
customers
Our operations
were carbon
neutral
We sold £56m
of lowcarbon
products
Consistently delivering compelling
financial outcomes year-on-year:
Revenue growth
29.5%
>5%
Target
Adjusted
Operating Margin
17.1%
>15%
Target
Adjusted Free
Cash Flow Margin
8.2%
>10%
Target
ROCI
36.4%
>30%
Target
Covenant Net
Debtleverage
0.7x
1.0‑2.0x
Target
Dividend payout
40%
40‑60%
Target
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 118 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.
10 Luceco plc Annual Report and Financial Statements 2021
The strengths of our business model and
the efforts of our dedicated colleagues
delivered another set of record results
GILES BRAND
Chairman
I am pleased to introduce the
Company’s results for the year ended
31 December 2021, a year in which
Luceco overcame continued
challenges from COVID to deliver
another year of record profits. Driven
by its purpose to bring power into
people’s lives sustainably, Luceco
continued to outperform in 2021
andonce again underlined its
significant long‑term potential.
Performance
The Group delivered significant
progress for the second year in a
row against a backdrop of continued
challenge and uncertainty. Luceco
has doubled its profit over the last
two years, proving the success of
itsstrategy, attractiveness of its
products and the superiority of its
customer service.
Together with strong financial
performance, Luceco’s operational
performance more than withstood a
challenging year. Control of the
supply chain from end to end, from
design and manufacture, through to
marketing and fulfilment, was
particularly advantageous in an
unusually disrupted environment.
The Group was able to proactively
adjust inventory, production levels
and prices without detriment to
demand, enabling profitable growth
significantly above the market.
Whilst the Group continued to
prioritise the health and wellbeing of
its employees during another
COVID‑affected period, the Group
was also the beneficiary of trends
created and accelerated by COVID.
Residential renovation activity was
buoyed by people spending more
time at home, and is likely to be
further buoyed as employers
permanently adopt hybrid working.
We have also seen the electrical
wholesale market shift toward
multi‑channel operators, a channel in
which the Group has a significant
share. Luceco operates in attractive
markets with a comprehensive range
of products, which will sustain the
Group’s performance going forward.
These key advantages resulted in
revenue growth in the year of 29.5%,
outperforming the market, which
converted into Adjusted Operating
Profit growth of 30.0%. Adjusted
Operating Profit for the year was
£39.0m whilst operating profit
was£35.3m.
People
I would like to thank the Group’s
management team for their
operational resilience throughout
the pandemic and the wider
workforce for their diligent
application of our safeguarding
arrangements.
In a period in which it has been
necessary for us all to work remotely
and flexibly, the Group has
responded by investing significantly
in ways to maximise employee
engagement. I am delighted to
report that these efforts have
resulted in record scores from our
annual employee satisfaction survey
and I expect this improving trend to
continue as team members safely
return to the office.
In October, Caroline Brown stepped
down as a member and Chair of the
Group’s Audit Committee. I would
like to thank Caroline for her diligent
stewardship of the Audit Committee
since IPO and am pleased that she
remains a Non‑Executive Director.
Caroline was replaced as Chair by
Will Hoy, a fellow Non‑Executive
Director. Pim Vervaat, the Senior
Independent Director, also joined
the Committee as a member. I would
like to congratulate Will and I am
pleased with the smooth transition
he has overseen.
In December, we were saddened by
the death of John Barton, Luceco’s
Senior Independent Director until
June 2020. We benefited greatly
from his wise counsel and sense of
humour. We will all miss him dearly.
Chairman’s Statement
Strategic Report
Luceco plc Annual Report and Financial Statements 2021 11
Strategy
The Group’s strategy can be
described simply as to Grow,
Innovate and Sustain.
Growth was invigorated this year by
the acquisition of DW Windsor
Group, the exterior lighting and
networking specialist. The Group’s
balance sheet remains efficient and
supportive of further growth
through strategic acquisition.
The Group also won significant new
business with strategic customers
and in high margin product
categories, which underlines the
relative strength of its offering.
Innovation has seen the Group enter
the commercial power and electric
vehicle (“EV”) charging sectors in
2021, both of which offer significant
further growth potential.
Important investment in both supply
chain and manufacturing
infrastructure has provided the
capacity and agility needed to both
meet increased demand and sustain
future growth. The Board is also
pleased with the execution of the
Group’s sustainability strategy,
which is a key part of our mission.
Environment, Social and
Governance (“ESG”)
The Group has made significant
progress against the ambitious
climate targets it set at the start of
the year, as follows:
• The Group’s operations were
carbon neutral in 2021 thanks to
the elimination or offset of all
Scope 1 and 2 greenhouse gas
(“GHG”) emissions
• Scope 3 GHG emissions were
quantified for the first time, with
reduction targets to follow
• The Group commenced
participation in the Carbon
Disclosure Project
• The Group has prepared itself for
participation in the Science‑Based
Target Initiative (“SBTi”), which is
expected to commence in 2022
Luceco already contributes to
carbon reduction through its low
carbon products such as LED
lighting and EV chargers. These
constituted £56m of Group revenue
in 2021. The Group is pleased to
announce that it aims to increase
this to £100m by 2025.
Dividend
The Group’s policy is to pay
dividends equal to 40‑60% of
Adjusted Profit After Tax. The Board
is recommending a final dividend of
5.5p per share which, with the interim
dividend of 2.6p, is consistent with a
40% payout, payable on 20 May 2022
to shareholders on the register on
8April 2022. The final date for
elections under the Company’s
dividend reinvestment plan will be
28April 2022.
Conclusion
The Group’s remarkable progress,
particularly over the last two
challenging years, highlights a
compelling investment case
continually strengthened by the
diligent execution of a consistent
strategy. Luceco continues to
outperform the competition, grow
profitably, generate cash and
reinvest for a sustainable future,
both for it’s stakeholders and wider
society.
So much of this progress is
ultimately due to the fulsome
commitment of the Group’s
employees, whom I would like to
thank again for their outstanding
work in another successful year.
GILES BRAND
Chairman
22 March 2022
12 Luceco plc Annual Report and Financial Statements 2021
Compelling financial outcomes
Luceco’s performance throughout
the COVID‑19 pandemic has
outperformed the industry in terms
of revenue, marketshare and
profitability. Whilstour pre‑COVID
financial momentum was strong, the
results we have achieved over the
last two years have been particularly
compelling, highlighting the Group’s
operational agility and excellent
customer service in uncertain times.
I am proud that our strong culture of
moving quickly and delivering what
we promise has been strikingly clear
in such a challenging environment.
Group revenue increased by 29.5%
to £228.2m in 2021, with growth
within each product group. Revenue
from our largest segment, Wiring
Accessories, grew 28.5% to £104.5m,
supported by key business wins and
increased demand, which we were
able to meet given the control we
have over our manufacturing and
supply chain. Our sources of growth
broadened beyond residential
renovation activity as the year
progressed, with increasing
economic confidence resulting in
increased demand for LED retrofits
into non‑residential settings. Our
LED Lighting business generated
revenue growth of 27.7% to £63.2m.
In our Portable Power segment,
wesecured business wins in the
UKand Europe which contributed
torevenue growth of 33.3% to
£60.5m for the year.
We also achieved healthy growth
across each sales channel in the
year. It was an exceptionally strong
start to 2021 in our Retail, Hybrid
and Professional Wholesale
channels, all of which benefited from
a rapid post‑lockdown recovery in
residential demand as consumers
spent more money on their homes.
In the second half of the year, we
saw some natural normalisation in
UK Residential repair, maintenance
and improvement (“RMI”)
Construction markets, leading to a
modest slowdown in growth within
our Hybrid and Professional
Wholesale channels. Growth
accelerated during the year in our
overseas businesses, and within the
Professional Projects channel as
confidence returned to UK
Non‑Residential RMI Construction
markets, underlining the benefit
ofour sales channel diversity.
2021 has vindicated our
long‑term strategy, highlighted
the success of our business
model and proven the
resilience of our people
JOHN HORNBY
Chief Executive Officer
Chief Executive
Officer’s Review
Strategic Report
Luceco plc Annual Report and Financial Statements 2021 13
The rapid post‑lockdown recovery,
whilst very welcome, led to supply
constraints in our industry.
Increasing optimism and buoyant
demand resulted in inflationary
pressures and global supply chain
disruption. We navigated these
issues well, succeeding in
maintaining our superior customer
service levels by acting quickly to
maintain product availability thanks
to our vertically integrated model.
Price increases were successfully
implemented without impacting our
competitiveness, demonstrating our
competitive strength and the
industry‑wide impact of the
associated inflation.
Supply chain challenges are still
present. Recent COVID outbreaks in
China have not impacted our
business, but could conceivably
result in some short term disruption,
albeit tempered by the inventory we
hold elsewhere in our supply chain.
Recent devastating developments in
Ukraine have triggered a further
round of input cost inflation. We do
not yet know the full impact, but our
achievements this year highlight that
we have the means to manage
change well. While general inflation
and tighter monetary policy may
have an impact on discretionary
construction, particularly in the
residential sector, I have every
confidence that we will continue to
outperform in whatever market we
are faced with.
Gross margins came under pressure
for all manufacturers given inflation
in raw materials and freight costs.
Cost inflation increased
progressively through the year,
costing £13.6m in 2021 and expected
to cost £25.0m on an annualised
basis. We swiftly and successfully
implemented selling price updates
designed to offset the £25.0m
annualised impact in full, albeit with
an inevitable modest lag due to
notice periods and order lead times.
Temporary gross margin compression
from the implementation lag was
mitigated by hedging arrangements,
further manufacturing efficiency
gains from automation and solid
operating leverage on strong sales
growth. The latter is illustrated by the
fact that in the last two years the
Group has added no additional
overheads despite £52.5m of
additional organic revenue. As a
result of these measures, the Group’s
Adjusted Operating Margin for the
year was 17.1%, marginally ahead of
2020 despite significant input cost
inflation.
Growth in revenue and margins led
to a 30.0% increase in Adjusted
Operating Profit to £39.0m (2020:
£30.0m) and operating profit
increased 19.3% to £35.3m (2020:
£29.6m). Strong cash generation,
particularly in the second half, led to
Covenant Net Debt of 0.7x Covenant
EBITDA (2020: 0.4x), below our
capital structure target of 1.0‑2.0x.
Our balance sheet remains strong
and able to support continued
investment in future growth, both
organically and by acquisition. In
2021, we demonstrated our appetite
for M&A through the acquisition of
DW Windsor.
Strong operational performance –
strength of business model
In my last review, I said that 2020
had been a year like no other.
Wesaw further upheaval and
volatility in 2021 and Imust thank
mycolleagues for their continued
dedication, resilience and
adaptability in a challenging and
ever‑changing environment.
Our advantaged business model
hashelped us gain market share
foran extended period, with market
conditions in the last two years
accentuating this growth.
Oursuperior product availability
hasbeen evident throughout the
COVID period and I am proud that
we have remained so agile in such
achallenging environment.
Our vertically integrated
manufacturing and distribution
model proved itself more than ever
in a year defined by supply chain
disruption. It enabled us to add
capacity more quickly than those
businesses reliant on outsourced
models, further increasing our
market share. Output from our
manufacturing facility in China
continued to increase, to record
levels, aided by strong regional
supplier relationships which we
utilised to mitigate global shortages
of key components such as
integrated circuits.
We acted quickly to increase our
inventory cover to help offset
extended supplier lead times which
have almost doubled in the last two
years. Earlier in the year, we
temporarily increased safety stocks
in our sales organisation to ensure
product availability and continuity
ofcustomer service in an unsettled
supply chain. Also key to maximising
service to our customers was the
investment we made in our UK
Distribution Centre to both improve
capacity and order fill rates, as well
as lowering operating costs.
With supply chain uncertainty
continuing in 2022, the advantages
of our business model position the
Group comparatively well to respond
rapidly to change.
14 Luceco plc Annual Report and Financial Statements 2021
Chief Executive
Officer’s Review
continued
Strategic progress
Even with the presence of
COVID‑related challenges, we
managed to progress our strategic
priorities in the year and to redefine
them under three simple headings:
Grow, Innovate and Sustain.
Grow
Luceco has a proven track record of
growth. Since 2000, we have grown
our sales twice as fast as the UK
market and supplemented that by
launching our successful business
model overseas. We now have
leading positions of scale in our key
UK end markets, and yet have £1.8bn
of share still available to us in the
markets we currently address. Our
strategy is to seize this opportunity.
Given the white space around us,
weprioritise our growth
opportunities with care and then
exploit them in full. Our focus over
the last three years has been to
maximise the potential of our most
profitable source of growth, namely
the sale of all existing products to
allexisting customers through our
well‑developed UK infrastructure,
with a particular focus on growing
our share of sales to professional
installers. This has proved successful
as customers have rewarded our
structural ability to deliver,
accentuated during the pandemic,
with new business that has been
very beneficial to profit.
We have used our balance sheet to
accelerate share gains with
professional installers with the
acquisition of DW Windsor, which is
highly complementary to our existing
UK outdoor lighting offering.
Wehave a decent pipeline of other
M&A opportunities at various stages
of progression.
Our continual re‑appraisal of growth
opportunities led us to invest to
accelerate growth in our Southern
European business in the year.
Thiswill be funded in part by our
exit from Northern Europe in 2022,
where regrettably the structure of
the market has made progress
harder and long‑term prospects
lessattractive than other available
opportunities.
Innovate
Luceco also has a proven track
record of using innovation to grow.
We use it to up‑sell higher function,
higher margin devices in existing
product categories, and to enter
new product categories that can
besold to existing customers. I am
pleased to say we made progress
onboth fronts in 2021.
We expanded our range of USB
wiring accessories by being the
firstin the UK market to integrate
high power USB‑C connectivity,
which an increasing number of
consumer electronic devices use,
into mains sockets. We hope this
willfuture‑proof our USB wiring
device offering, which has been a
very successful product line for
theGroup.
We also expanded our range of
consumer Smart Home devices,
particularly in lighting. Both are now
being sold successfully to our
existing customer base.
Our push into new product
categories, with a focus on those
that are professionally installed, was
accelerated by the recent launch of
both private realm EV chargers and
commercial power products. The
market potential of both categories
total £700m in the UK alone and we
are very well positioned to take our
share of this opportunity. Our lower
power Mode 2 EV charger range
launched mid‑year, generating sales
of £1m. Our higher power Mode 3
charger will launch in early Q2 2022
under our established British
General brand and we expect keen
interest from our loyal electrical
contractor customers.
Sustain
The Group’s investment in its
infrastructure, to sustain the
competitive advantage it has built,
bore fruit in 2021. We implemented
new software to manage our
fulfilment operations, which
improved order fill rate, logistics
efficiency and delivery capacity.
Investment in fulfilment capabilities
in the UK has increased output by
40% in five years with no change in
footprint. Similarly, in Southern
Europe we moved our operations
into a larger distribution centre that
can support growth (which has
averaged 42% per annum over the
last five years).
Strategic Report
Luceco plc Annual Report and Financial Statements 2021 15
Purpose and culture
Strategies only succeed if they are
set within the context of a clear
purpose and supportive culture:
wehave both at Luceco.
Our purpose as an organisation is to
bring power into people’s lives
sustainably. I am proud to say that
our products play an expanding role
in everyday life and they are
increasingly the choice of discerning
professional installers who want to
get the job done right. Our products
support essential societal climate
goals by offering a diminishing
carbon footprint and by supporting
the adoption of “green” substitution
such as LED lighting and EV
charging.
I am proud to announce that we are
targeting annual revenue of £100m
from such low carbon products by
2025, underlining both the size of
the market opportunity presented to
us by decarbonisation, as well as our
desire to help society to achieve
essential climate goals.
Our culture has come to the fore in
the last two years. We have been
bold, agile and innovative. Our teams
have worked incredibly hard and
closely together throughout the
customer journey to deliver
exceptional service in very trying
circumstances. I am very proud of
their achievements.
Attractive market backdrop
We estimate the total value of
markets we address with our current
product portfolio to be worth
£2.0bn in the UK alone. Continued
expansion into new product
categories installed by professional
electricians opens up a market worth
up to £3.5bn in the UK alone. In
short, our markets offer ample room
for further growth.
They also exhibit healthy, long‑term
growth. We estimate that 80% of
ourbusiness is driven by RMI
construction activity, the majority
ofwhich is professionally installed.
Since 2000, UK RMI construction
has expanded by 16% more than UK
GDP and has grown in 18 of the
subsequent 21 years.
The events of the last two years have
underlined the relative resilience of
our markets, a period in which
construction has rebounded faster
than wider economic activity.
I am delighted that consistent
growth faster than the competition,
means we now have leading
positions in such structurally
attractive end markets.
Summary and outlook
Luceco has a long history of market
outperformance. The accelerated
progress we have made over the
lasttwo years, in which our profit
has doubled, is the product of our
market focus and business model.
We favour RMI construction markets
because of their resilience in
uncertain times, and undoubtedly
benefited from that focus in 2021.
But it was our advantaged business
model, with its inbuilt resilience and
agility, combined with our “can‑do”
culture, that allowed us to prosper
more than most. We moved quickly,
won new business and saw growth
opportunities across our diversified
customer base.
Such strong progress in 2021
naturally creates a tough
comparative, particularly in the first
half when UK residential RMI activity
was at a lockdown‑driven peak.
Wetherefore expect revenue in the
first half of 2022 to be broadly in line
with last year. We are mindful that
recent geopolitical developments,
and their associated impact on
inflation, may make progress harder
during the year.
We have strong positions in
attractive markets with an
advantaged business model and
aclear strategy. We have a
well‑funded business with clear
growth opportunities, particularly
from our recent entry into the
electrical vehicle charger market.
We face the future better prepared
than ever and I am confident we
have what it takes to continue to
outperform our market.
JOHN HORNBY
Chief Executive Officer
22 March 2022
16 Luceco plc Annual Report and Financial Statements 2021
Consistently delivering
compelling financial
outcomes
MATT WEBB
Chief Financial Officer
Performance versus financial targets
In 2019, I reported that the deployment of our advantaged business model in our attractive and relatively stable
endmarkets should lead to the consistent delivery of compelling Group financial performance. I supported this
withthe publication of detailed “through the economic cycle” financial targets to capture our ambition and aid
investor decision‑making.
Chief Financial
Officer’s Review
Revenue
£228.2m
2020: £176.2m
Adjusted Operating Profit
£39.0m
2020: £30.0m
Revenue Growth
29.5%
2020: 2.4%
Adjusted Earnings Per Share
20.2p
2020: 15.5p
Adjusted Operating Margin
17.1%
2020: 17.0%
Covenant Net Debt Ratio
0.7x
2020: 0.4x
Strategic Report
Luceco plc Annual Report and Financial Statements 2021 17
Both the original targets and the subsequent performance are summarised below, including 2021. The fact that we
have largely achieved or exceeded the targets despite the unprecedented economic disruption of COVID underlines
both our structural resilience, as well as our greater long‑term potential.
Component Metric Target
1
2019
results
2020
results
2021
results
Revenue Total revenue growth 5 to 10% 5.0% 2.4% 29.5%
Profit Adjusted Operating Margin % 15 to 20% 10.5% 17.0% 17.1%
Cash Adjusted Operating Cash Conversion % >100% 151.1% 113.7% 89.7%
Adjusted Free Cash Flow Margin % 10 to 15% 11.0% 12.9% 8.2%
Dividends Earnings payout ratio 40 to 60% 7.8% 40.0% 40.0%
Capex Net capital expenditure as % revenue 3 to 4% 2.1% 2.5% 2.8%
Capital structure
and returns
Return on Capital Invested % 30 to 40% 21.8% 35.7% 36.4%
Covenant Net Debt
2
: Covenant EBITDA 1.0 to 2.0x 1.0x 0.4x 0.7x
Adjusted Net Cash Flow as % revenue 5.0% 8.2% 8.6% 2.8%
1. Expected performance range through the economic cycle for the existing business excluding the impact of future acquisitions.
2. Net debt excludes IFRS 16 Finance Leases for bank purposes.
The table above highlights that 2021 was a truly outstanding year. We grew revenue by 29.5%. New business wins,
favourable channel access and our ability to maintain excellent product availability when competitors were
impacted by supply chain disruption allowed us to make the most of undoubtedly favourable market conditions.
Expanding our AdjustedOperating Margin in a year in which annualised input cost inflation was greater in quantum
than 2019’s entire Adjusted Operating Profit illustrates quite how far we have come in maximising profit and
managing risk. Cashconversion was understandably held back slightly by extra investment in inventory to
minimisesupply chain volatility. However, its impact on overall cash generation was limited by faster cash collection
from customers, leaving the business with only slightly increased Covenant Net Debt leverage despite money spent
on acquisitions.
The original financial targets were set as performance ranges to be maintained throughout the economic cycle.
Wedo not want the upper limits of the range to inadvertently suggest a limit to our ambition, so the targets have
been reset largely as minimum performance expectations to better capture our proven resilience in tough economic
times and our unlimited long‑term potential.
Component Metric Old target
1
New target
1
Revenue Total revenue growth 5 to 10% >5%
Profit Adjusted Operating Margin % 15 to 20% >15%
Cash Adjusted Operating Cash Conversion % >100% >100%
Adjusted Free Cash Flow Margin % 10 to 15% >10%
Dividends Earnings payout ratio 40 to 60% 40 to 60%
Capex Net capital expenditure as % revenue 3 to 4% 3 to 4%
Capital structure
and returns
Return on Capital Invested % 30 to 40% >30%
Covenant Net Debt
2
: Covenant EBITDA 1.0 to 2.0x 1.0 to 2.0x
Adjusted Net Cash Flow as % revenue 5.0% >5.0%
1. Minimum performance for the existing business excluding the impact of future acquisitions.
2. Covenant Net Debt excludes IFRS 16 Finance Leases for bank purposes.
18 Luceco plc Annual Report and Financial Statements 2021
Chief Financial
Officer’s Review
continued
Summary of reported results
Reported profit for the year reduced by £0.8m to £27.1m. Whilst the Group delivered strong conversion of revenue
growth into underlying profit growth, this progress was held back by restructuring costs incurred in Germany and
France, as explained below, and changes in the fair value of our hedging portfolio. Weakening of the US dollar
versus Chinese renminbi increased the value of our hedges in 2020, creating a one‑off profit in that year, and this
was not repeated in 2021.
Summary results (£m)
Reported
2021
Reported
2020
Revenue 228.2 176.2
Operating profit 35.3 29.6
Profit before tax 33.3 33.6
Taxation (6.2) (5.7)
Profit for the year 27.1 27. 9
Adjusting items
Operating profit was £35.3m in 2021. Adjustments of £3.7m were excluded from Adjusted Operating Profit of
£39.0m.
The Adjustments were as follows:
• Restructuring costs from the closure of operations in Germany and France: £2.3m, of which £0.5m will be paid
incash, delivering annual savings of £0.8m
• Amortisation of acquired intangibles and related acquisition costs: £1.4m, of which £0.7m was paid in cash
Income statement
Revenue
Revenue increased by £52.0m (29.5%) to £228.2m. The primary drivers are shown below:
Revenue bridge: £m
Change
%
2020 revenue 176.2
Like‑for‑like increase
1
56.9 32.3%
Acquisition 3.6 2.0%
2021 in Constant Currency
2
236.7 34.3%
Currency movements (8.5) (3.6%)
2021 revenue 228.2
1. Like‑for‑like revenue increase excludes the impact of currency movements and acquisitions, see footnote 2 for currency calculation.
2. 2021 revenue translated at 2020 exchange rates.
Like‑for‑like growth of 32.3% was significantly greater than that of the market. Our ability to continually deliver
competitively priced, high quality products even amid COVID‑driven disruption was rewarded with new tender wins
with our most strategic customers and in our most profitable product categories. Our overweight positions with
multi‑channel capable distributors who themselves outperformed the market during COVID was also beneficial.
TheUK Residential RMI market, consisting of both consumer and professional renovation activity and into which
approximately two‑thirds of our sales are made, enjoyed a very strong start to the year as people continued with
COVID‑driven home improvement projects. Whilst this activity naturally moderated as the year progressed, it was
compensated by increasing activity overseas and within the UK Non‑Residential RMI market. Consequently,
like‑for‑like growth of 36% versus a pre‑COVID 2019 comparative was maintained throughout the year, highlighting
the benefits of our increasingly diversified sources of growth.
Strategic Report
Luceco plc Annual Report and Financial Statements 2021 19
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 fulfilled via Professional Wholesale
Performance by sales channel was as follows:
Revenue by sales channel:
2021
£m
% of
total
Change v
2020 %
Change v
2019 %
Retail 83.0 35.1% 37.9% 38.2%
Hybrid 59.8 25.3% 39.4% 74.1%
Professional Wholesale 59.3 25.0% 24.7% 26.5%
Professional Projects 34.6 14.6% 34.2% 13.2%
Total in Constant Currency 236.7 100.0% 34.3% 37.7%
Currency impact (8.5)
Total revenue 228.2 29.5% 32.6%
Our growth in 2020, early in the pandemic, was heavily skewed towards the Hybrid channel, which consists of
multi‑channel capable distributors that remained open and gained share when traditional branch networks within
the Professional Wholesale channel were forced to close.
It is notable that our growth in 2021 became more broadly based. Fewer COVID restrictions allowed Retail,
Hybridand Professional Wholesale customers to make the most of buoyant Residential RMI market conditions.
Wesupplemented this with new business wins, particularly within the Wiring Accessories category, as competitors
who lack our vertically integrated model struggled to meet healthy demand. We also benefited from our leadership
of the DIY/small electrical contractor market, where market conditions were at their most buoyant.
2021 also saw the return to growth of our Professional Projects channel, largely consisting of LED projects sold into
commercial and institutional settings, as fewer COVID restrictions encouraged business owners to spend
discretionary capex. A sales decline of 6.3% versus a pre‑COVID 2019 comparative in the first half was replaced by
growth of 10.3% in the second half.
2021 also brought a broader base of growth overseas, particularly in the second half, as international markets
increasingly benefited from their vaccine rollout programmes:
Revenue by geographical location of customer:
2021
£m
2020
£m
Change
%
UK 181.2 140.3 29.2%
Europe 24.0 18.4 30.4%
Middle East and Africa 7.6 7.0 8.6%
Americas 10.6 6.7 58.2%
Asia Pacific 4.8 3.8 26.3%
Total revenue 228.2 176.2 29.5%
UK revenue grew by 29.2% in the period, which was broadly based by channel, as described above.
20 Luceco plc Annual Report and Financial Statements 2021
Chief Financial
Officer’s Review
continued
Income statement continued
Revenue continued
European growth emanated from our rapidly expanding Southern European business based in Barcelona, which
moved into a new distribution facility in the year to sustain future growth. Our operations in France were subsumed
therein to share resources and save cost. Our progress in Southern Europe contrasted with that of our Northern
European business which incurred an Adjusted Operating Loss of £0.5m in the year. We announced the closure of
this business towards the end of the year, with an associated one‑off cost of £1.6m related to asset write‑downs and
stock provisions. We will cease operations there in the first half of 2022, allowing resources to be redeployed to
better effect elsewhere.
Revenue in the Americas grew significantly in the period following strong growth in our Mexican business and
increased sales of Portable Power products to US DIY chains. Sales in the Middle East and Africa recovered strongly
from a disappointing start to the year as a more active global economy drove up energy prices and therefore
appetite for regional construction projects in the Gulf states. Growth in Asia Pacific benefited from market share
gains with retailers in Thailand and the Philippines.
Profitability
Adjusted Operating Profit grew by £9.0m to £39.0m. Adjusted Operating Margin increased by 0.1 percentage points
to 17.1%. This was delivered by strong revenue growth, tight control of overheads and the close management of rapid
input cost inflation, as follows:
Adjusted Operating Profit (£m)
(0.1)
13.8
30.0
39.0
(10.0)
(3.6)
7.0
1.9
2020 Input cost
inflation
2021Selling price
increases
Manufacturing
efficiency gain
Operating
leverage on
sales growth
AcquisitionCurrency
movements
Input cost inflation added £10.0m to the cost base in 2021, the majority of which arose from industry‑wide increases
in sea freight and copper prices. Strengthening of the Chinese renminbi, the currency in which the Group makes
most of its purchases, increased our cost base in 2021 by a further £3.6m. Both factors therefore produced a cost
headwind totalling £13.6m in the year and at current prices they would increase our annualised cost base by £25.0m,
with the remaining £11.4m to flow through in later years as hedging arrangements and inventory cover unwinds.
We combated this input cost inflation with gradual selling price increases and manufacturing efficiency gains
totalling £8.9m. Whilst this left a net profit headwind of £4.7m in 2021, we expect to close this gap in full as selling
price updates already in place deliver their full annualised benefit in 2022 and beyond. We therefore expect our
Adjusted Gross Margin from now on to exceed the 35.8% delivered in the second half of 2021 and for it to return to
over 40% in time.
Strategic Report
Luceco plc Annual Report and Financial Statements 2021 21
The net profit headwind from cost inflation and currency in 2021 was more than compensated by very fulsome
conversion of rapid top line growth into bottom line profit. It is notable that the Group has added no additional
overheads since 2019 to support £52.5m of additional organic sales. This reflects highly synergistic sources of
growth and tight control of discretionary spending.
The net result was 30% growth in Adjusted Operating Profit and a 0.1 percentage point expansion in Adjusted
Operating Margin to 17.1% in 2021 – an excellent outcome in a tumultuous year.
Inflationary trends stabilised in the final quarter of 2021 compared to the second and third quarters, but have
resumed in the wake of recent tragic events in Ukraine. We are mindful of the impact that real wage deflation
couldhave on consumer spending, including home improvement, and therefore remain vigilant.
The table below provides a more detailed view of the currency impact in the year:
Adjusted
2021
actual
1
£m
Currency impact
Adjusted 2021
at Constant
Currency
2
£m
Constant Currency
variance to 2020 Adjusted
2020 actual
£m£m % £m %
Revenue 228.2 (8.5) (3.6%) 236.7 60.5 34.3% 176.2
Cost of sales (143.5) 5.1 (3.4%) (148.6) (42.6) 40.2% (106.0)
Gross profit 84.7 (3.4) (3.9%) 88.1 17.9 25.5% 70.2
Gross margin % 37.1% (0.1ppts) 37.2% (2.6ppts) 39.8%
Operating costs (45.7) (0.2) 0.4% (45.5) (5.3) 13.2% (40. 2)
Operating profit 39.0 (3.6) (8.5%) 42.6 12.6 42.0% 30.0
Operating margin % 17.1% (0.9ppts) 18.0% 1.0ppts 17.0%
1. Year ended 31 December 2021 translated at 2021 average exchange rates.
2. Year ended 31 December 2021 translated at 2020 average exchange rates.
Operating costs
Adjusted Operating Costs increased by £5.5m to £45.7m. £1.7m of the increase relates to DW Windsor, acquired
bythe Group in October 2021. £0.8m relates to extra delivery costs from much increased sales. £0.8m relates to
increased share‑based payment charges and National Insurance payable on exercised options. The remaining
£2.2mrelates to a number of smaller increases within professional fees, travel and entertainment as well as strategic
investment in IT and marketing.
2022 is likely to see a circa £2.0m increase in National Insurance costs as particularly valuable employee share
options reach maturity. The final amount will depend upon to what extent, and at what price, option holders exercise
their awards. Option costs will then reduce in subsequent years.
Net finance expense
Covenant Net Debt increased by £14.4m to £30.6m, largely reflecting the acquisition of DW Windsor for £16.3m
inthe year. Adjusted Net Finance Expense increased by £0.3m to £1.6m, reflecting the increased indebtedness and
arrangement fees payable on our newly increased banking facilities which now provide access to up to £120m of
borrowing capacity.
Another year of strong cash generation enabled the Group to maintain a strong balance sheet, with Covenant Net
Debt leverage in the year at 0.7x Covenant EBITDA despite cash spent on acquisitions.
Taxation
The effective tax rate on Adjusted Profit Before Tax increased slightly by 0.2% to 16.6% in 2021.
The Group’s mix of profits by country would indicate a typical effective tax rate of circa 19.5%. We outperformed this
in 2021 because of work done over recent years to maximise tax incentives in China. As a result, it is reasonable to
expect the Group to maintain an effective tax rate below 19% in 2022 until a higher UK corporation tax rate takes
effect in 2023.
22 Luceco plc Annual Report and Financial Statements 2021
Chief Financial
Officer’s Review
continued
Adjusted Free Cash Flow
Adjusted
1
Free Cash Flow (£m)
Adjusted
1
2021
Adjusted
1
2020
Operating profit 39.0 30.0
Depreciation and amortisation 6.7 6.1
EBITDA 45.7 36.1
Changes in working capital (12.6) (3.1)
Other items 1.9 1.1
Operating cash flow 35.0 34.1
Operating Cash Conversion
2
89.7% 113.7%
Net capital expenditure (6.4) (4.4)
Interest paid (1.7) (1.3)
Tax paid (8.1) (5.7)
Free cash flow 18.8 22.7
Free cash flow as % revenue 8.2% 12.9%
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.
The Group converted 89.7% of Adjusted Operating Profit into Adjusted Operating Cash Flow, slightly short of its
target of >100%. This reflects prudent investment in additional inventory to maintain service and mitigate cost
inflation. Delivery times from China increased by 38 days to 135 in 2021, necessitating a 27 day increase in inventory
cover to 134 days. The resulting £14.6m organic increase in inventory was partly funded by collecting cash from
customers on average 11 days quicker – a great performance in the circumstances. The Group expects healthy cash
conversion in 2022 as supply chain stability allows stock to be gradually reduced.
The Group delivered strong Adjusted Free Cash Flow of £18.8m (2020: £22.7m). This represented 8.2% of revenue
(2020: 12.9%), consisting of a disappointing margin of 4.6% in the first half and 11.5% in the second half as supply
chains stabilised.
Capital expenditure
The Group’s net capital expenditure consists of capitalised product development costs and the purchase of
physicalassets. It increased by £2.0m to £6.4m (2020: £4.4m) and equalled 2.8% of revenue (2020: 2.5%),
marginally below 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 which we intend to accelerate now that COVID‑19 driven
disruption appears to be reducing.
Capital structure and returns
Return on capital
Return on Capital Invested is broadly consistent with the prior year at 36.4% (2020: 35.7%) thanks to strong
profitability and tight control of capital expenditure and working capital.
The Group continually reviews the deployment of its capital to ensure it is invested in areas with the greatest
opportunity for future returns. It has set clear investment criteria for the deployment of additional capital.
Itsinvestment in product development activities is focused on the low‑risk expansion of ranges sold through
existing distribution channels. It continually invests in projects that improve internal efficiency and deliver a quick,
relatively assured payback. Through these means, it aims to improve its return on capital over time.
Strategic Report
Luceco plc Annual Report and Financial Statements 2021 23
Acquisitions
DW Windsor Group was acquired for £16.3m in cash in October 2021 with no deferred or contingent consideration.
Based in Hertfordshire, UK, it operates through two business units: DW Windsor and Urban Control.
DW Windsor is a leader in the design and UK‑based manufacture of high quality outdoor and streetlighting
equipment for the specification market, selling mainly to UK local authority end customers. It is highly
complementary to the Group’s Kingfisher Lighting business, which supplies non‑public sector projects, and we are
excited about the opportunity to offer the expanded product portfolio to both customer groups.
Urban Control provides network solutions for infrastructure assets facilitating data collection and control, including
the monitoring and control of streetlights.
For the unaudited 12‑month period ended 30 September 2021 (adjusted for non‑underlying items) DW Windsor
Group generated revenue of £23.9m, operating profit of £1.9m and EBITDA of £2.3m. It generated an Adjusted
Operating Loss of £0.1m in the period from the date of acquisition to 31 December 2021 in what is a seasonally slow
period for the business. The integration business is on track and we are beginning to exploit product development,
sales and sourcing synergies.
Capital structure
Adjusted Free Cash Flow of £18.8m (2020: £22.7m) was used to fund the acquisition of DW Windsor Group outlined
in the section above. The business continues to consistently generate ample funds to support a dividend at the 40%
payout level and to fund M&A activity.
2021 2020 Change
Reported net debt £38.1m £18.3m 108.2%
Less: IFRS 16 Finance Leases £(8.2)m £(2.8)m 192.9%
Finance leases – pre‑IFRS 16 £0.7m £0.7m —
Covenant Net Debt £30.6m £16.2m 88.9%
Covenant Net Debt : Covenant EBITDA 0.7 0.4 0.3
At 31 December 2021, the Group’s non‑utilised facilities totalled £43.2m, 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 2024 with two subsequent one‑year renewal options. The Group therefore has significant
capacity to fund future acquisitions.
The Company’s covenant position and headroom at 31 December 2021 was as follows:
2021 full‑year covenant Covenant Actual Headroom
Covenant Net Debt : Covenant EBITDA 3.0 : 1 0.7 : 1 Covenant Net Debt headroom: £110.1m
1
Covenant EBITDA headroom: £36.7m
Covenant EBITDA : Adjusted Net
Finance Expense
4.0 : 1 29.3 : 1 Covenant EBITDA headroom: £40.5m
Net finance expense headroom: £10.1m
1. Headroom with increased facility. Current facility headroom is £43.2m.
The key measures which management use to evaluate the Group’s use of its financial resources and capital
management are set out below:
2021 2020
Adjusted
1
Earnings Per Share (pence) 20.2 15.5
Covenant Net Debt : Covenant EBITDA (times) 0.7 0.4
Adjusted
1
Free Cash Flow (£m) 18.8 22.7
1. Note 1 in the notes to the consolidated financial statements provides an explanation of the Group’s alternative performance measures.
24 Luceco plc Annual Report and Financial Statements 2021
Chief Financial
Officer’s Review
continued
Capital structure and returns continued
Capital structure continued
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 117 of the Annual Report and
Accounts. The Group has a very strong balance sheet and significant facility headroom under even a realistic 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 recommending to pay dividends equal to 40% of earnings. It is therefore proposing a final dividend of
5.5p per share which, with the interim dividend of 2.6p per share, is a full‑year dividend of 8.1p. The final dividend will
be paid on 20 May 2022 to shareholders on the registrar on 8 April 2022.
Operating segment review
The revenue and profit generated by the Group’s operating segments are shown below. 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.
Wiring Accessories
Adjusted
1
Reported
2021 2020 Change 2021 2020 Change
Revenue £104.5m £81.3m 28.5% £104.5m £81.3m 28.5%
Contribution profit £36.3m £29.5m 23.1% £36.3m £29.5m 23.1%
Contribution margin % 34.7% 36.3% (1.6ppts) 34.7% 36.3% (1.6ppts)
Operating profit £29.2m £23.0m 27.0% £29.2m £23.0m 27.0%
Operating margin % 27.9% 28.3% (0.4ppts) 27.9% 28.3% (0.4ppts)
1. Further details of adjustments are in note 1 of the consolidated financial statements.
Wiring Accessories is the Group’s largest and most profitable segment, generating 46% of Group revenue, with a
brand established over 80 years ago.
We continue to significantly outperform in this category, delivering segmental revenue growth of 28.5% since 2020
and 49.1% since 2019.
We have gained an increasing market share over an extended period thanks to our advantaged business model.
However, the accelerated outperformance in the last two years has been driven by: business wins with strategic
accounts, strong demand in the circuit protection category due to regulatory changes, and superior product
availability, principally thanks to our vertical integration, in the second half’s recovering market.
Despite increasing input prices and supply chain restraints, Adjusted Operating Margin reduced only marginally
by40 basis points.
LED Lighting
Adjusted
1
Reported
2021 2020 Change 2021 2020 Change
Revenue £63.2m £49.5m 27.7% £63.2m £49.5m 27.7%
Contribution profit £7.4m £5.7m 29.8% £4.1m £5.3m (22.6%)
Contribution margin % 11.7% 11.5% 0.2ppts 6.5% 10.7% (4.2ppts)
Operating profit £3.4m £2.8m 21.4% £0.1m £2.4m (95.8%)
Operating margin % 5.4% 5.7% (0.3ppts) 0.2% 4.8% (4.6ppts)
1. Further details of adjustments are in note 1 of the consolidated financial statements.
Strategic Report
Luceco plc Annual Report and Financial Statements 2021 25
The Group entered the lighting market in 2013 as the industry adopted LED technology and it represents 28% of
Group revenue.
The Group has developed a wide range of products which it sold initially through UK channels and subsequently
through its wider overseas network. It has built a circa £63m revenue business in seven years, largely organically
butbolstered by the acquisition of Kingfisher Lighting in 2017 and DW Windsor in 2021.
It continues to invest in both its product line and in the sales resources necessary to grow the business. The focus
for future growth in this segment is on professional‑grade products and expansion in international markets.
Thisinvestment inevitably takes time to mature, which holds back margins in the short term.
Segmental growth accelerated in the second half of the year with revenue of £36.3m versus £26.9m in the first half
of 2021. This was due to an increase in LED retrofit activity as outlined in the sales channels commentary above.
Portable Power
Adjusted
1
Reported
2021 2020 Change 2021 2020 Change
Revenue £60.5m £45.4m 33.3% £60.5m £45.4m 33.3%
Contribution profit £10.3m £7.5 m 37.3% £9.9m £7. 5m 32.0%
Contribution margin % 17.0% 16.5% 0.5ppts 16.4% 16.5% (0.1ppts)
Operating profit £6.4m £4.2m 52.4% £6.0m £4.2m 42.9%
Operating margin % 10.6% 9.3% 1.3ppts 9.9% 9.3% 0.6ppts
1. Further details of adjustments are in note 1 of the consolidated financial statements.
The Group enjoys a leading position in the UK portable power market and this represents 26% of Group revenue.
Revenue in the period was 33.3% higher than the prior year and 26.6% higher than 2019 as the Group won new
business with retailers in Europe and the USA. Our use of outsourced manufacturing and Free on Board (“FOB”)
delivery means low overhead costs, allowing good conversion of the sales growth into profit, offsetting input cost
inflation. Adjusted Operating Margin improved from 9.3% in the prior year to 10.6% in the current year.
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 66 and 67 and the Group’s Going Concern Statement
canbefound on page 117.
MATT WEBB
Chief Financial Officer
22 March 2022
26 Luceco plc Annual Report and Financial Statements 2021
Our Attractive Markets
We operate in attractive markets, with healthy
and stable historic growth that is poised to
benefit from future decarbonisation efforts.
Growing faster
than GDP
There are a number of
factors explaining why
ourmarkets are growing
faster than GDP. In addition
to our fast‑growing
markets,Luceco itself is
outperforming, exhibiting
stronger growth than the
sector and its peers.
House prices and
transactions
A limited stock of new
homes, particularly in the
UK, drives house price
appreciation and existing
home renovation, both of
which sustain demand for
our products within repair
and remodel projects.
Hybrid working
Significant shift
towardshybrid working
post‑COVID is driving
increased residential
renovation, as well as the
reconfiguration of the
commercial estate.
Increasing customer
demands
Rising living standards and
design requirements are
resulting in demand for
electrical products with
greater form and function,
adding to category value.
Total addressable market
£2bn
Luceco share of market
10%
Available share of market
£1.8bn
Within the Group’s existing product segments, it has a 10% market share of
itscurrently addressable market of £2bn in the UK, demonstrating its strong
foothold but also highlighting significant headroom for growth. The total
value of electrical products sold to UK professional installers is £3.5bn,
demonstrating Luceco’s opportunity to sustain growth through expansion
ofits product range.
Strategic Report
Luceco plc Annual Report and Financial Statements 2021 27
Labour and skills
shortage in the trade
shifts value to the product
There is often a shortage
ofqualified electrical
installers within the
marketswe operate in.
Thisplaces an increasing
premium on high quality,
reliable and easy‑to‑install
products, which we are
wellpositioned to command.
Regulatory
change
The electrical industry
undergoes frequent
regulatory changes. These
are often designed to
improve safety or product
efficiency and result in both
the renewal of installations
and increases in value of the
electrical products used
within the installation.
Technology
change
Smart home technology has
increased rapidly with a
growth in automation of
monitoring and controlling
of lighting, climate and
appliances.
Consumers are increasingly
demanding greater control
over their wiring devices
and lighting, increasing the
value of both categories.
ESG
The electrification of
household energy
andtransport is a key
driverof future growth
within the electrical
products industry,
supported by specific
regulatory changes such as
phasing out the sale of new
gas boilers and internal
combustion vehicles over
the coming decade.
EV market opportunity
What’s happening?
The decision by the UK Government
to ban the sale of new petrol
anddiesel vehicles from 2030 is
accelerating adoption of electric
vehicles. We expect EV charging
willoccur at home or the workplace,
creating a £500m market for
privaterealm charging equipmentin
the UK by 2025. Weexpect most to
be installed by qualified electricians,
who already use our wider product
range and frequent our sales
channels.
Our response
We launched our range of
lower‑power “Mode 2” chargers
in2021, followed by higher‑power
“Mode 3” chargers in 2022.
Wearefocused on establishing
ourshareof the private realm
EVcharger OEM market.
Outlook
We are excited by the potential
ofthis market, both in the UK and
abroad. Growth in this category
willenable us to achieve £100m
ofrevenue from low carbon
productsby 2025.
28 Luceco plc Annual Report and Financial Statements 2021
Our Advantaged Business Model
Our business model offers unique advantages
to our customers and over our competition.
Competitive advantage
High quality, low cost, vertically
integrated manufacturing:
Our advantaged business model has enabled us to
achieve stronger‑than‑market growth. During the
pandemic, the agility we have through our
verticallyintegrated manufacturing model has
proven its worth, allowing the Group to withstand
supply chain disruption.
We had another year of record output from our
manufacturing plant in China and ownership and
responsiveness of this facility enabled sales growth
in a challenged year.
Strong product development:
Despite the challenging market backdrop,
wemaintained our focus on innovative
productdevelopment in 2021.
New product launches in the year included 30W
Type‑C USB sockets, providing our customers with
the most powerful and fastest‑charging USB wall
sockets.
We also increased our presence in smart home
systems, launching Luceco Smart!
We have a strong pipeline of product development
and new launches in 2022.
Strong, well invested and
expandable brands:
Our brands have a clear meaning within our loyal
customer base. They stand for thoughtful design
and high quality at a competitive price point.
Weuseproduct development to extend our
brandequity into adjacent product categories.
Entrepreneurial, can-do culture:
Our culture was critical to the success we achieved
last year. Our “can‑do”, customer‑centric culture
allowed us to quickly adapt our manufacturing and
inventory, fulfilment and prices, all of which enabled
us to tackle global supply chain disruptions
effectively.
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 offer great quality at a
greatprice
• Our designs start with the customer
inmind
• Our supply chain:
• Is flexible to customer needs
• Offers high outbound service levels
• Maintains a breadth of inventory close
to the customer
• Uses the best available technology
• Offers products as part of a solution
Fulfil
Design
Underpinned by our culture
Our culture facilitates
delivery of the above
Strategic Report
Luceco plc Annual Report and Financial Statements 2021 29
Outcomes
People:
1,642
Number of employees
Customers:
1,907
Number of customers
Suppliers:
>1,000
Key suppliers
Shareholders:
40-60%
Annual dividend payout
Communities:
Actively supporting
training of electrical contractors
Environment:
25%
Revenue from low carbon products
How we add value
• 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 agile, particularly
during COVID‑19
• 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
Market
Make
Underpinned by our culture
Our culture facilitates
delivery of the above
Customer-driven
We design products with
ourcustomers in mind
We continually improve
theirexperience
Team-focused
We provide talented people
with great opportunities
We reward achievement
Bold and innovative
We think differently
We move quickly
We trust each other to deliver
Principled
We do what we say
We do what is right
We never compromise
onsafety
30 Luceco plc Annual Report and Financial Statements 2021
Business Model in Action
Our work for customers reflects every aspect of our integrated
businessmodel, adding value throughout the customer journey
byproviding clear quality and cost advantages for our customers
andrewarding our people, partners and shareholders.
Design at Luceco is customer led,
and our project at Trafford had the
unique opportunity of providing a
safer and more comfortable
environment for vulnerable and
elderly dementia patients within a
hard‑working NHS hospital.
• Bespoke designs and shapes for
all lighting created, to maximise
the available working space
• Nurses’ stations designed to
provide both high and lower‑level
lighting for working
• Two‑stage lighting fitted to
patient beds, providing
patientswith reading and
examination lights
• Wireless controls introduced to
enable adjustments to lighting
levels throughout the day and
night, ensuring patients did not
become disorientated
• Uniform lighting in rooms and
corridors provided which is
essential to reduce vestibular
impairment, reducing patient
dizziness and imbalance
• All regulations followed
stringently during the design
phase which included the
Department of Health’s
guidanceon lighting in hospitals,
CIBSE guidance and the hospital’s
own criteria
Our innovative and bespoke design work, utilising our superior
products,is well illustrated through Luceco’s lighting upgrade
project atTrafford General Hospital in Greater Manchester in 2021.
Project scope
Trafford General Hospital, an existing client, selected Luceco to work
alongside its architect and contractor partners to update lighting
across several wards in its busy NHS hospital. Our previous project
had demonstrated the quality of our work, built a strong relationship
with the customer, and led to this larger, more complex opportunity.
The project required the complete redesign and installation of
lighting across patient accommodation and clinical working areas,
nurses’ stations and rest areas.
Design challenges
Working in a high intensity, critical environment provides unique
challenges for any design team. Patients have very particular needs,
and the primarily elderly patients at Trafford, including patients with
dementia, meant that patient and clinician welfare was a key priority
for our design team.
Customer outcomes
Our culture and team ethos supported the delivery of an exceptional
outcome for the hospital and its patients.
• Our team delivered a tangible improvement to patient safety,
experience and wellbeing, resulting in fewer trip hazards, lower
levels of confusion amongst the residents, lower incidents of
disorientation and a more comfortable and effective working
environment for clinical staff and carers
• We achieved significant energy and cost efficiencies. The switch
from fluorescent to LED lighting almost halved the energy needed
and the introduction of our wireless controls resulted in further
efficiencies. Absence detection prevents the lights being on at all
times, reducing usage
Design
Strategic Report
Luceco plc Annual Report and Financial Statements 2021 31
We operate a fully‑owned,
well‑invested andvirtually‑integrated
manufacturing facility which provides
us with certainty over product supply
and greater control over cost.
• We endeavour to support local
economies which results in many
benefits; it supports local jobs
andcommunities and also
reducescarbon emissions
asproducts onlyneed to
betransported once
• The Trafford products were
sourced directly from our
distribution centre in Telford
andthe electrical contractor
ordered additional products from
a local wholesaler in Manchester,
supporting our stockist route
to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.
• Our track record having already
completed a successful
installation at Trafford General
Hospital meant that this project
ensured consistency and
continuity for the customer
• Luceco has since completed more
projects in the same hospital,
upgrading lighting in two
operating theatres with a further
two more future projects planned
Having control over our supply
chainis the final critical piece of
ourmodel.
• By sourcing the products
directlyfrom our Telford
distribution centre, we had access
to stock with no delays from
COVID‑related supply chain issues
• Investment in smart technology at
Trafford improved the experience
for the end users. We trained
hospital employees to use the
tablet‑controlled lighting systems
and offered ongoing support with
remote log ins
• Our centrally controlled software
highlights inefficiencies in the
lighting design giving us
visibilityto improve the design
and implement energy‑saving
solutions at the hospital
Make
Market Fulfil
Delivery facilitated by our
‘can‑do’ culture and team:
Jay Taylor
Lighting Designer
Richard Horton
National Sales Manager
Elizabeth Beattie
Supply Chain Planner
32 Luceco plc Annual Report and Financial Statements 2021
Strategy
Our strategic priorities consist of three pillars:
Grow, Innovate and Sustain.
Luceco has a proven track record of growth.
Since2000, we have grown our sales twice as fast
as the UK market and supplemented this growth by
launching our successful business model overseas.
We have leading positions of scale in our key UK
end markets, and yet have £1.8bn of share still
totake in the markets we currently address.
Ourstrategy is to seize this opportunity.
Our focus over the last three years has been to
maximise our most profitable source of growth,
namely the sale of all existing products to all existing
customers through our well‑developed UK
infrastructure, with a particular focus on growing
ourshare of sales to professional installers. This has
proved successful as customers have rewarded our
structural ability to deliver, accentuated during the
pandemic, with new business wins that have been
very beneficial to profit.
We have continually expanded our product
rangeover recent years, increasing the size of
ouraddressable market, with a focus on selling
moreproducts installed by electrical contractors.
Weestimate the total market for goods sold to
electrical contractors in the UK totals £3.5bn,
providing additional capacity for future growth.
We have used our balance sheet to accelerate share
gains with professional installers with the acquisition
of DW Windsor, which is highly complementary to
our existing specified UK lighting offering.
Our continual re‑appraisal of growth opportunities
led us to invest to accelerate growth in our
SouthernEuropean business in the year.
We use market-leading innovation to seize our
growth opportunities. We use it to up-sell higher
function, higher margin devices in existing product
categories, and to enter new product categories
that can be sold to existing customers.
For instance, we were the first in the UK market to
add USB functionality to mains sockets. Over the
last seven years, we have added £16m to revenue
byup‑selling USB sockets to existing wiring device
customers, in addition to selling to new customers.
Likewise, we have added £26m to revenue over the
same time period by entering the LED lighting
market and cross‑selling our range to wiring
accessories customers.
Our push into new product categories, with a focus
on those that are professionally installed, was
accelerated in 2021 by the launch of both private
realm EV chargers and commercial power products.
The market potential of both products totals £700m
in the UK alone and we are very well positioned to
take our share of this opportunity.
Our Innovate strategy covers both the products
that we design and the services that accompany
them.
1. Product
We constantly innovate to meet customer needs.
Inrecent years we have progressively added to our
range of products with “smart home” capability.
Wehave also introduced products with greater
ESGcredentials such as EV chargers. Our
customer‑driven, bold and innovative culture is
embodied within the products we develop.
2. 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 concept into a reality.
Weoffer simple online lighting design tools for
contractors. We offer comprehensive online training
modules for installers via our recently launched
Luceco Academy portal. We are renovating our
digital estate to provide customers with online access
to specification materials and to transactdigitally.
Grow Innovate
Strategic Report
Luceco plc Annual Report and Financial Statements 2021 33
Our Sustain strategy has two objectives: 1) invest
to sustain our competitive advantage; and 2) to
make an increasing contribution to society’s
sustainability goals. Over recent years, we have
stepped up investment in our business
infrastructure to provide a platform for long-term
growth.
We are focused on providing products to customers
that meet their increasing environmental
requirements.
We aim to sustain advantage through long‑term
investment in:
1. People
Our products are designed, made, distributed and
installed by people. We invest to ensure our talented
team have the skills they need to exceed customer
expectations. We call them our Luceco Heroes.
Wealso invest in training content to ensure our
professional installers have the skills they need
todothe job right.
2. Processes
We have invested in people, processes
andequipment at our manufacturing facility
inChinatomake it the best facility in the world
formanufacturing British Standard wiring devices.
Wehave invested in infrastructure, equipment and
IT at our distribution centres to improve customer
service levels and lower fulfilment cost.
3. Planet
We also aim to lead our industry by lowering our
environmental footprint, and in doing so help our
customers to achieve the sustainability targets they
may have for their supply chain partners.
Strategy
in action
page 34
Strategy
in action
page 36
Strategy
in action
page 38
Sustain
34 Luceco plc Annual Report and Financial Statements 2021
We maximise sales of both existing and new
products to an increasing customer base as
well as growing market share through M&A.
In addition to growing organically,
last year we progressed our strategy
to grow market share through M&A
by acquiring DW Windsor Group
(“DWWG”), a complementary
exterior lighting and technology
provider. DWWG is an established
business with a recognised heritage,
brand and loyal customers in the UK
public realm lighting market, which
we aim to expand as part of our
growth strategy.
DWWG operates two businesses:
DW Windsor and Urban Control.
DW Windsor is a leader in the design
and manufacture of high quality
outdoor and streetlighting
equipment for the specification
market, selling mainly to UK local
authority end customers.
Urban Control provides network
solutions for infrastructure assets
facilitating data collection and
control, including the monitoring
and control of streetlights.
DW Windsor is one of the strongest
brands in the UK’s specification
exterior lighting industry with a
strong track record of delivery on
public sector lighting projects and
impressive network technology
credentials.
It is highly complementary with the
Group’s Kingfisher Lighting business,
which supplies non‑public sector
projects, and we are excited about
the opportunity to offer the
expanded product portfolio to both
customer groups.
This acquisition is part of our
strategy to use M&A to gain share in
the market for electrical products
installed by professional contractors.
Strategy in Action
Grow
DW Windsor is an
established business with a
recognised heritage, brand
and loyal customer base
• Leader in the design and manufacture of
highquality outdoor streetlighting
• Strong track record of delivery
• Highly complementary with the Group’s
KingfisherLighting business
• £16.3m investment in October 2021
Case study:
DW Windsor
Strategic Report
Luceco plc Annual Report and Financial Statements 2021 35
Key stats
29.5%
2021 Group revenue growth
£18.4m
2021 M&A investment
36 Luceco plc Annual Report and Financial Statements 2021
We use simple but deceptively hard
to replicate innovation to gain
market share and grow the value of
the products we sell.
An illustration of this is the double
switched mains socket – the
mainstay of our Wiring Accessories
business.
The basic product has not changed
in form or function in decades.
Our strategy over many years has
been to use low cost, low risk, high
return product development to
complement the basic product with
a comprehensive range with
increasingly sophisticated design
and technology.
The graphic below illustrates how
this strategy converted the humble
mains socket into a stylish household
device that has an increasing impact
on our customers’ daily lives.
The market‑leading integration of
existing technology from outside our
industry into our devices has allowed
us to gain share and command a
higher price and higher margin for
the products we sell.
We have a strong track record in innovating to grow
ourbusiness. We bring our innovations to market quickly
and are often the architects of change in our industry.
Innovate
Strategy in Action continued
1980s
Plastic
socket
1x selling price
2004
Metal finish
socket
2x selling price
2013
USB‑A
socket
6x selling price
2017
Wifi extender
socket
7x selling price
2019
Smart
socket
5x selling price
2021
USB‑C
socket
8x selling price
Year introduced:
We have complemented
the basic socket with a
comprehensive range of
design and technology
improvements
• The average person now owns 6.5 connected
devices
• Our sockets with multiple functions are
perfectlysuited to the modern home
• Our most sophisticated sockets now deliver a
50%charge in just 30 minutes – 70% faster than
standard 5W charging
• Our market‑leading technology has allowed us to
gain market share and command a higher price
Case study:
Mains socket
Luceco plc Annual Report and Financial Statements 2021 37
Key stats
2.8%
2021 R&D expenditure
407
2021 New product SKUs
Strategic Report
We see significant opportunity in the
EV charging market, supported by
government regulation and a shift
inconsumer preferences driven by
environmental awareness.
Electric car sales are booming
despite the pandemic impacting
thenumber of new car sales. In 2021,
new car registrations grew just 1%,
and were almost 30% on
pre‑pandemic levels in 2019.
However, EVs had their most
successful year ever, with new EV
registrations 76.3% higher than the
year before or 190,727 new electric
cars being sold. This represents an
12% share of all new cars sold.
Thesignificant growth in
registrations yet relatively small
share of sales highlights the huge
opportunity in this space.
Following billions of pounds of
investment into new technology
bymanufacturers, more than 40%
ofmodels are now available as
plug‑ins. Indeed, the shift in
customer preference for these new
technologies continues apace, with
December seeing battery electric
vehicles (“BEVs”) take a record
market share in a non‑locked down
trading month, accounting for 25.5%
of all new registrations.
The UK Government has announced
its intention to ban the sale of new
internal combustion engine vehicles
by 2030, which will lead to greater
penetration of EVs. In turn, this
increases demand for chargers or
Electric Vehicle Supply Equipment
(“EVSE”) for installation in private
residential and workplace parking,
akey target market for Luceco.
Last year, we launched Mode 2 EV
chargers and we will imminently
belaunching higher power and
smart‑technology enabled Mode 3
chargers which will become the
mainstay of private realm vehicle
charging in years to come. We have
high hopes for the EV market
opportunity and expect to gain
good market share in the medium
term.
Cleanest and greenest
As well as signifying future potential
revenue growth for Luceco, the trend
for increasing sales of EVs willalso
fulfil our mission – to build aleading
portfolio of thoughtfully designed
and diligently made products that
provide environmentally responsible
electrical and lighting solutions to
ourcustomers.
We invest across our business to sustain our competitive
advantage and to contribute to society’s sustainability goals.
Strategy in Action continued
Sustain
38 Luceco plc Annual Report and Financial Statements 2021
Case study:
People engagement
We invest to develop
ourown people and those
who use our products
• Employee satisfaction in the UK increased 4.4%
to90.5% in2021
• Rollout of new online training portal to sustain
employee development during COVID
• Introduction of the Luceco Academy to support
professional development within the electrical
contractor community
• Headline sponsors of the new eFixx 30 under
30awards, recognising up‑and‑coming talent
inthe electrical industry
• Hybrid working adopted post‑lockdown to
maintain productivity benefits we have seen
fromhome working whilst ensuring employees
remain connected
Luceco plc Annual Report and Financial Statements 2021 39
Key stats
90.5%
2021 UK employee satisfaction
Carbon neutral
2021 Operations
Strategic Report
40 Luceco plc Annual Report and Financial Statements 2021
Growth percentage (%)
Key Performance Indicators
Increase sales to professional customers
Increase our sales of low carbon products
Number of new product SKUs
• Complement our historic strength in
UK retail by gaining share of sales to
professional customers
• Leverage the route to market
provided by Wiring Accessories to
sell other products via the
Professional Wholesale channel, e.g.
LED Lighting, smart devices and EV
charging
• Sell products as part of a solution
• Leverage the opportunity presented
by electrification and therefore
decarbonisation of energy and
transportation
• Grow our sales of low carbon
products to £100m by 2025
• 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 own manufacturing
capabilities and relationships
Link to strategy
1
Link to strategy
1
Link to strategy
2
Link to risk
1
2
4
6
7
9
Link to risk
1
2
4
6
7
9
Link to risk
3
4
6
7
8
Revenue generated from low carbon
products (£m)
Number of new product SKUs
32.3
56
407
3.8
44
598
11.3
48
493
2021
2021
2021
2020
2020
2020
2019
2019
2019
Key to strategy:
1
 Grow
2
 Innovate
3
  Sustain
Grow:
Innovate:
Strategic Report
Luceco plc Annual Report and Financial Statements 2021 41
Research and development expenditure
Capital expenditure
Carbon associated with our operations
• 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
• Invest in the agility and efficiency
ofour vertically integrated
manufacturing
• Invest in our fulfilment capabilities
• Invest in our e‑commerce offering
• Invest in enabling technology
• Eliminate or offset Scope 1 and 2 GHG
• Quantify then reduce our Scope 3
GHG
• Set science‑based targets
Link to strategy
2
Link to strategy
3
Link to strategy
3
Link to risk
1
6
7
Link to risk
1
2
3
4
5
6
7
8
9
Link to risk
4
8
9
Research and development expenditure (£m)
Capital expenditure (£m)
Carbon emissions from operations
netofcarbon offsets (tCO
2
e)
3.0
6.4
—
2.2
4.4
4,673
2.4
3.6
4,497
2021
2021
2021
2020
2020
2020
2019
2019
2019
Key to principal risks:
1
 Impact of coronavirus
2
 Operational concentration risk
3
  Customers and products
concentrationrisk
4
  Macroeconomic, political
andenvironmental
5
  Loss of IT/data
6
  Loss of key employees
7
  Acquisitions
8
  Legal and regulatory
9
  Finance and treasury
Sustain:
42 Luceco plc Annual Report and Financial Statements 2021
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
JOHN HORNBY
Chief Executive Officer
Sustainability
As set out in the following pages,
2021 has been a further year of
progression of our sustainability
programme, even against a
challenging backdrop resulting
fromCOVID‑19 and supply chain
constraints. Our product portfolio,
combined with our business model
and experience, puts us in a strong
position to capture future ESG
opportunities; however, we
recognise there is more to do and
we look forward to continuing to
progress our sustainability agenda
moving forwards.
Leveraging our business model
The nature of the Group’s Business
Model means we are able to
consider and minimise our impact
onthe environment right through
from initial product designs, to how
those designs are made, through to
how our orders are fulfilled.
Design: Our efficient product
designs not only help manage
ourcosts but further enable our
customers to enjoy our products
knowing they have chosen a more
sustainable option.
• As far as possible, we use recycled
materials for packaging our
products and we are further
enhancing our products with
increased use of recycled
materials, particularly recycled
plastics
• Our designers intensely focus
ondriving down the power
consumption of our products
using the most efficient designs
and technologies
Make: The way we produce our
products is a key component in our
environmental considerations and
will be a significant area of focus as
we progress our environmental
agenda.
• Emissions arising from production
are controlled at source through
lean and efficient manufacturing
processes which minimise
inefficient rework or quality issues
• We ensure wherever possible that
the energy used to power our
sites is sourced renewably
• We employ a solar PV array at
ourChina manufacturing facility,
which delivers 8% of our total
electricity consumption
• We obtain high quality carbon
offsets, to mitigate emissions
wehave not yet been able to
completely mitigate
Environment, Social
and Governance
Strategic Report
Luceco plc Annual Report and Financial Statements 2021 43
Market: The way we build
relationships and understanding
withour customers means we are
not only well positioned to adapt
totheir changing needs, but also
toadvise them on their individual
requirements.
• Our electric vehicle charging
range is expanding and we are
excited about the benefits this
willhave on our customers
andsociety as a whole
• Our experienced project sales
team work with the customer to
bring ideas they may not have
considered, such as absence
detection, bringing an end to
lights being left on when not
required
Fulfil: It has been a challenging year
for our teams focused on managing
the delivery of our products given
current global supply chain
constraints, but we are proud to
have progressed our environmental
agenda even against this backdrop.
• We have invested in a new
Warehouse Management System
at our Telford site, designed to
increase levels of automation as
well as minimise waste and
inefficiency. Better planning of
stock availability has resulted in
asignificant reduction in the
number of deliveries required
tofulfil each customer order,
lowering associated emissions
• We are reviewing the packaging
dimension of all our product
ranges not only to reduce
packaging, but also to ensure
maximum efficiency when
shipping
• We continue to focus on Free on
Board sales, which significantly
reduce the miles over which our
products travel to customers
Sustainability policies
Our approach to managing the
Group’s environmental
responsibilities is set out in our Code
of Conduct and more detail can be
found in the Ethical business section
on page 53.
Our Code requires us to seek to
protect the environment, by
preventing or minimising the
environmental impact of our
activities and products through
appropriate design, manufacturing,
distribution and disposal practices.
The Group also has a Supplier Code
of Conduct. This requires suppliers
to:
• Comply with all applicable legal
environmental requirements
• Continuously monitor, and
disclose to us, their energy and
natural resource usage, emissions,
discharges, carbon footprint and
disposal of waste
• Take a progressive approach to
minimising their impact on the
environment
• Reduce our environmental impact
44 Luceco plc Annual Report and Financial Statements 2021
Environment, Social
and Governance
continued
Sustainability continued
Climate change
As one of the biggest challenges
that the world currently faces,
climate change represents both a
significant risk and opportunity for
our business. We have seen a
growing mandate from our
stakeholders demanding meaningful
action to tackle our 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 throughout 2021
to better understand our impact on
climate change and develop a
robustcarbon management strategy.
Our aim is toreduce our greenhouse
gas emissions in line with the Paris
Agreement and establish a
science‑based emission
reductiontarget.
Task Force on Climate-related
Financial Disclosures
We are pleased to confirm that we
have included in our TCFD Report
climate‑related financial disclosures
consistent with the four
recommendations and the 11
recommended disclosures set,
however as we try and align our
approach to the updated TCFD
additional guidance (Implementing
the Recommendations of the Task
Force on Climate‑related Financial
Disclosures (“2021 TCFD Annex”))
which was released in October 2021,
there are some recommendations in
the 2021 TCFD Annex: All Sector
Guide that will require more time for
us to fully consider. In line with the
current Listing Rules requirements
(as referred to in Listing Rule
9.8.6R(8)), the areas where we
require more time to implement are:
• Categorisation of the
climate‑related risks and
opportunities which are
considered to be short, medium
and long term time horizons:
which need to be done at
businessgroup level
• Finalisation of the decarbonisation
roadmap with interim milestones
to be agreed
We will also be working to
implement the rest of the 2021 TCFD
Annex recommendations over the
course of 2022 and intend to apply
these more fully in our next TCFD
report as required by the Listing
Rules for the next financial year.
Governance
The Board has overall responsibility
for the climate‑related matters that
affect the Group. The “Matters
Reserved for the Board” has been
updated to ensure there is clear
oversight of Environmental, Social
and Governance (“ESG”) matters,
including climate change.
The Board has delegated
responsibility for climate‑related
matters to the Chief Financial Officer
(“CFO”), approved a series of ESG
objectives for 2021 (please refer to
ESG Objectives on page 50) and
linked executive compensation plans
to the achievement of these
objectives.
The CFO provides an update to the
Board on climate‑related matters
biannually and as important matters
arise.
A working group has been
established to support the CFO
inthe development of our strategy.
Inorder to effectively address our
key emissions sources, the working
group is comprised of
representatives across all areas of
the Group, including finance,
operations, sales, product
development and manufacturing.
The working group is responsible
forthe assessment and management
of climate‑related risks and
opportunities and ensuring that
mitigation measures are adequate.
The CFO then updates the Board on
the outcome of this assessment.
During 2021, the working group
hasbeen involved in the
development of our ESG strategy
and attended a series of workshops
to develop their knowledge and
understanding of climate‑related
matters. Heading into 2022, the
working group will meet on a more
frequent, quarterly basis.
Risk management
The identification, assessment and
management of climate‑related risks
has been fully integrated into our
risk management framework and
mirrors the approach detailed on
pages 60 to 65.
During 2021, a climate
riskappraisalsession was
facilitatedwiththe CFO and Group
Director ofFinance and integrated
with our macroeconomic, political
and environmental risk. Therisk
assessment process considers a
wide range of climate‑related risks,
including:
• Current and emerging regulations
• Legal
• Market
• Technology
• Customers
• Physical (acute and chronic)
When considering climate‑related
opportunities, the following
categories were considered:
• Resource efficiency
• Energy source
• Products and services
• Market
• Resilience
There are three principal
climate‑related risks and two
principal opportunities that
impactthe Group:
Strategic Report
Luceco plc Annual Report and Financial Statements 2021 45
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 or have
established a science‑based
emission reduction target
• If we do not keep pace with our
customers’ changing expectations
on climate action, this 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 emission
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 efficiency,
sourcing renewable energy
certificates and offsetting residual
emissions across Scope 1 and 2
Link to strategy:
Products & Services, Supply Chain,
Research & Development, and
Operations
Time horizon:
Long term
Risk appetite:
Risk accepting
Net risk level:
Low Medium High
Change in year:
CR2

Increased stakeholder concern or negative stakeholder feedback
Risk owner: CFO
Risk and impact:
• ESG issues, particularly climate
change, are a large concern for our
key stakeholders
• 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 climate change
strategy with independent
consultants and setting a
science‑based emission
reductiontarget
• Responding to the Carbon
Disclosure Project to increase
transparency of our actions
• Proactive approach to emissions
reductions, including investment
into operational efficiency,
sourcing renewable energy
certificates and offsetting residual
emissions across Scope 1 and 2
Link to strategy:
Products & Services, Supply Chain,
Research & Development, and
Operations
Time horizon:
Short to medium term
Risk appetite:
Risk adverse
Net risk level:
Low Medium High
Change in year:
46 Luceco plc Annual Report and Financial Statements 2021
Environment, Social
and Governance
continued
CR3

Increased severity and frequency of extreme weather events
Risk owner: CFO
Risk and impact:
• Extreme weather events could
become more prevalent as a
resultof climate change,
causingdisruption throughout
oursupply chain
• Severe disruption within the
supplychain could result in loss
ofrevenue
Mitigation:
• A buffer 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
Time horizon:
Long term
Risk appetite:
Risk accepting
Net risk level:
Low Medium High
Change in year:
Climate-related opportunities
CO1

Shift in consumer preferences and access to new markets
Opportunity owner: CFO
Description:
• The transition to net zero and the
electrification of energy presents
asignificant opportunity for the
Group
• Demand for electric vehicles
andassociated home charging
equipment is increasing
• We also anticipate an increase in
demand for low carbon products
and “green home tech” solutions
such as plugs, extension leads
andultra‑efficient LED lighting
Realising the opportunity:
• Investment in R&D will enable us
tobring new and more efficient
products to market to maintain
competitive advantage and grow
market share
• Launch of next generation high
power EV charging products
in2022
• Opportunity to acquire businesses
poised to benefit from the
electrification of residential
energyuse
• Launch of next generation USB
sockets with lower standby power
in 2022
• Improvement in lumens per watt
of next generation LED products
Link to strategy:
Products & Services, Supply Chain,
and Research & Development
Time horizon:
Medium to long term
Net opportunity level:
Low Medium High
Change in year:
Sustainability continued
Risk management continued
Climate-related risks continued
Strategic Report
Luceco plc Annual Report and Financial Statements 2021 47
CO2

Use of more efficient production and distribution processes
Opportunity owner: CFO
Description:
• Efforts to reduce our GHG
emissions also provides efficiency
savings across our operations and
distribution processes
• We forecast that our
manufacturing operations could
become up to 10% more efficient
than we are today, which will
deliver cost, energy and emission
reductions
Realising the opportunity:
• Investment in efficiency
improvements at the
manufacturing facility in China
• Focus on increased consolidation
of deliveries and improved
shipping container fill to reduce
emissions from our distribution
processes
Link to strategy:
Supply Chain and Operations
Time horizon:
Short term
Net opportunity level:
Low Medium High
Change in year:
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 5+ years
Given the long‑term nature of
climate‑related impacts, particularly
relating to physical risk, a ten‑year
horizon was used when assessing
these risk categories. As the physical
impacts of climate change also vary
by geographic location, our
assessments have been initially
focused on strategic locations for
Group operations including Telford,
UK and Jiaxing, China.
Adaptation and mitigation
There could be a long‑term risk to
our operations as a result of more
extreme and frequent weather
events. We will continue to monitor
this risk and maintain a range of
mitigation measures to limit any
potential disruptions to our
operations.
Financial planning
Climate‑related matters influence
various elements of our financial
planning process. One significant
area of both direct and indirect
costsrelates to the price of copper.
Theprice of copper is in part driven
by the electrification of energy and
transportation. To protect against
price volatility, the Group has
increased forward purchases and
hedging and started to opt for
shorter‑term fixed price agreements.
In 2021, we generated revenue of
£56m from low carbon products.
Our target is to increase this to
£100m by 2025 as we 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.
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 currently used by
the Group. The use of a CPM was
considered to be burdensome at this
stage, given the heavy involvement
of the finance team in the
management of climate‑related
matters.
48 Luceco plc Annual Report and Financial Statements 2021
Environment, Social
and Governance
continued
Sustainability continued
Climate-related scenario analysis
The Group recognises the important
role scenario analysis plays in
assessing the resilience of our
business strategy into the future
given the long‑term nature of
climate change‑related issues.
Our first year of aligning with the
TCFD recommendations has been
focused on:
• Establishing a strong
climate‑related governance
structure
• Embedding climate change
intoour overall business
riskassessment process
• Quantifying our emissions to
establish a baseline and more
effectively track our progress
As we look to continually improve
our management of climate‑related
matters, we plan to undertake
scenario analysis during 2022 to test
our business strategy across a range
of timeframes and emission
scenarios.
Products & Services
Our low carbon product
ranges (LED lighting, EV
chargers and smart
standby products) help
customers lower their
GHG emissions and
transition towards a low
carbon future. We strive
to develop more efficient
products and better
controls to improve
energy efficiency.
• Estimated to have
avoided 477,077
tCO
2
efrom LED
lighting products sold
during 2021
• 10x increase in revenue
from EV charging
products
• Acquisition of DW
Windsor to expand
low carbon product
offering
• Launch of next
generation high power
EV charging products
in H1 2022
• Launch of next
generation USB
sockets with lower
standby power in 2022
• Quantification of
scope 3 emissions
• Piloting engagement
with suppliers on GHG
emissions with LED
suppliers
• Investigating
nearshore
manufacturing options
• R&D critical to
competitive advantage
and growth
• Specialist R&D
function in China and
the UK
• 2021 R&D expenditure
of £3.0m
• Improvement in
lumens per watt of
next generation LED
products
• Redesign of products
to reduce packaging
requirements
• Sourced renewable
electricity for UK and
China‑based
operations
• Offset Scope 1 and
remaining Scope 2
emissions
• Investment in
efficiency
improvements to the
manufacturing facility
in China
• Greater consolidation
of deliveries to reduce
logistics emissions
Supply Chain
One of our strengths is
the strong relationships
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.
Operations
One of our first priorities
is to reduce the emissions
from our operations. By
improving the efficiency
of our operations, 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
Achievements during 2021
Strategic Report
Luceco plc Annual Report and Financial Statements 2021 49
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 and Carbon Reporting
(“SECR”) regulated sources. The Group’s emissions have been independently calculated in accordance with the
GHG Protocol, utilising emission factors published by the UK Government and the International Energy Agency
(“IEA”).
The table below shows our GHG emissions from global operations across Scope 1 and 2 for the year ending
31December 2021, along with a comparison against last year. Our Scope 1 emissions include the use of natural gas
for heating and manufacturing processes, refrigerant gases, propane used in forklift trucks and the operation of
company vehicles.
Scope 2 emissions are associated with our electricity consumption. The market‑based methodology (“MBM”) for
quantifying Scope 2 emissions has been adopted to reflect the energy generated on site via the solar PV array in
China and the use of renewable energy certificates. Our location‑based emissions (“LBM”), reflecting the grid
average emissions intensity for each country of operation, were 5,189 tCO
2
e in 2021 (4,141 tCO
2
e for 2020).
GHG emissions (tCO
2
e) 2021 2020 Change (%)
Scope 1 960 814 17. 8%
Scope 2 (MBM) 143 3,857 (96.3%)
Total emissions 1,103
1
4,673 (76.4%)
Emissions intensity ratio
tCO
2
e/£M turnover 4.8 26.5 (81.8%)
1. Operational carbon neutrality was achieved by retiring high quality carbon offsets against residual emissions.
Emissions have fallen significantly compared to last year as a result of our efforts to procure renewable energy
certificates for our manufacturing operations and UK sites, excluding DW Windsor. Scope 1 emissions have risen,
primarily through increased activity in company vehicles, as activity levels return back to pre‑pandemic levels.
The table below shows our underlying energy usage across global operations, of which 30% is from UK‑based
operations. Energy usage has increased by over 21% compared to the previous year.
Energy use (kWh) 2021 2020 Change (%)
Natural gas 2,362,484 2,241,266 5.4%
Propane 27,636 22,869 20.8%
Company vehicles 1,909,176 1,418,607 34.6%
Electricity 9,341,349 7,544,359 23.8%
Total 13,640,645 11,227,101 21.5%
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
offices with shared air conditioning
services have been excluded due to
a lack of data, however emissions
are considered to be 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.
Where supplier‑specific emission
factors were not available for the
market‑based calculation, the
location‑based emissions have been
used as a proxy.
Noted changes in 2020 emissions
The 2020 GHG inventory has been
updated to include emissions from
the recently acquired DW Windsor.
Electricity emissions have been
updated to reflect changes in the
emission factors published by the
IEA. The emissions intensity ratio
has been restated and calculated
using the market‑based
methodology for Scope 2.
50 Luceco plc Annual Report and Financial Statements 2021
Environment, Social
and Governance
continued
Sustainability continued
ESG objectives
At the start of the year, the Board
agreed the following ESG objectives
for 2021:
1. Achieve operational carbon
neutrality via the elimination or
offset of Scope 1 and 2 GHG
emissions by year end
2. Quantify Scope 3 GHG emissions
3. Commence participation in the
Carbon Disclosure Project
4. Launch a comprehensive ESG
strategy
5. Commit to set science‑based
emission reduction target
Elimination and offset of
Scope1and 2 GHG
We are proud to report that we
achieved operational carbon
neutrality in 2021.
This means we have been successful
in eliminating or offsetting the
Scope 1 and 2 GHG emissions
produced by our global operations,
as planned.
This was achieved as follows.
Electricity is our largest emissions
source where we have direct control.
Renewable Energy Attribute
Certificates
1
have been sourced
tocover the electricity consumption
of our distribution centre in Telford,
Kingfisher Lighting, our London
office and our manufacturing facility
in China for 2021, accounting for
86% of our total energy
consumption. There is also a solar
PV array at our manufacturing
facility in China, which represents 8%
of our total electricity consumption.
Overall, 94% of our total energy
consumption during 2021 was from
renewable and zero carbon sources.
For our smaller sales offices where
energy usage is minimal, we have
not been able to obtain renewable
energy certificates due to small
volume or limited control over the
electricity supply arrangements.
In2022, we will look to expand
ourcoverage to include the newly
acquired DW Windsor in full.
The second approach was to obtain
high quality Voluntary Emission
Reduction (“VER”) certificates to
tackle our Scope 1 and residual
Scope 2 emissions. The certificates
have been sourced from the
Weyerhaeuser Afforestation 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
afforestation project. The certificates
have been awarded by the
Rainforest Alliance in accordance
with the Verified Carbon Standard.
Atotal of 1,104 certificates have
been retired for 2021, resulting in
usachieving operational carbon
neutrality overall.
Scope 3 screening assessment
In addition to the mandatory Scope 1
and 2 emissions, we have quantified
our Scope 3 emissions for the first
time in 2021. A high‑level screening
assessment of our Scope 3
emissions has been conducted to
identify key emission “hot spots”
where we can focus our efforts.
Ourestimated Scope 3 emissions
for2021 are 360,291 tCO
2
e.
Our key Scope 3 emission sources
relate to the use of our sold products
(211,016 tCO
2
e, 58%) and purchased
goods and services (125,106 tCO
2
e,
35%). All other applicable Scope 3
emission sources account for 24,169
tCO
2
e and 7% of our 2021 emissions.
Grid electricity
The use of sold products is our
largest emission source,
accounting for 58% of our
greenhouse gas inventory. The
main driver of these emissions is
the carbon intensity of the
electricity grids where our
products are used. Whilst this is
beyond our direct control, many
countries have made
commitments to decarbonise
their electricity grids – for
example, the UK Government
has committed to delivering a
net zero electricity grid by 2035.
In conjunction with our efforts to
innovate and improve the energy
efficiency and control of our
products, we forecast there will
be significant emissions
reductions in this area over the
coming years.
Carbon Disclosure Project
We responded to the climate change
module of the Carbon Disclosure
Project (“CDP”) for the first time in
2021. Our climate change submission
contains further information on our
climate governance and risk
management processes, climate‑
related risks and opportunities, GHG
emissions and business strategy.
We received an awareness level
score (C) and look forward to
updating the CDP on our efforts to
integrate the management of
climate‑related matters further into
our day‑to‑day operations.
ESG strategy
We have been working with external
consultants to develop a
comprehensive strategy and
implement the TCFD
recommendations.
Science-based target
We are committed to establishing a
science‑based emission reduction
target and will seek validation
through the Science Based Targets
Initiative (“SBTi”). This will set us on
an emissions reduction pathway that
is aligned with the Paris Agreement
and will aim to avoid the worst
impacts of climate change. We aim
to have our target validated during
2022.
Next steps and plan for 2022
Our ESG objectives for 2022 are as
follows:
1. Make significant progress towards
delivering £100m of revenue from
low carbon products in 2025
2. Commit to the Science Based
Target 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
1. Renewable Energy Guarantee of Origin
(“REGO”) and International Renewable
Energy Certificates (“I.REC”).
Strategic Report
Luceco plc Annual Report and Financial Statements 2021 51
People
We aim to recruit and retain people
who are passionate about innovation
and customer service, and to
recognise and reward outstanding
performance.
People policies
The Group’s primary people‑related
policy is its Equality and Diversity
Policy. This policy reflects 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
• 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
staff 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. 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. In 2021, we introduced a
stand‑alone Flexible Working Policy
and employees have a right to make
an application from day one of their
employment. We also endorsed
hybrid working by introducing our
very first Homeworking Policy and,
where circumstances allow, there is a
minimum requirement of 20% office
attendance with the remaining 80%
being home working.
2021 2020
Male Female Male Female
Board 6 86% 1 14% 6 86% 1 14%
Senior
management
1
11 85% 2 15% 9 82% 2 18%
Direct reports
2
53 75% 18 25% 33 70% 14 30%
Other employees 822 53% 729 47% 902 49% 934 51%
Total 892 54% 750 46% 950 50% 951 50%
1. Individuals reporting directly to the CEO or CFO.
2. Individuals reporting directly to senior management.
2021 Group finance team
52 Luceco plc Annual Report and Financial Statements 2021
Environment, Social
and Governance
continued
People continued
Employee involvement
We recognise 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
An Employee Opinion Survey was
undertaken in 2021. Employee
satisfaction increased in 2021
compared with 2020, with 90.5% of
UK employees in 2021 reporting they
were either “fairly satisfied” or “very
satisfied” with Luceco as an
employer, up from 86.1% in 2020. In
addition, 80.4% of employees said
they would recommend Luceco as
an employer to their friends and
family, up from 75.3%.
We make sure that we listen to our
employees and act upon their
feedback. In recent years, our
employees reported that they felt
they received insufficient information
regarding Group performance and
strategy, so we implemented monthly
team meetings, monthly CEO emails
and relaunched our employee
newsletter.
Greater sharing of information has
made our employees feel more
valued and part of a team,
consequently increasing employee
engagement.
In 2021, the most improved area in
the survey was in Learning and
Development, reflecting our
investment here and the new
platform described below. Our
employees also reported increased
satisfaction with their working
environment, including working
fromhome. However, as time
progresses, we are aware that
working from home can lower
people’s connection to employers.
Greater communication and learning
and development, as we have
described, will ensure our employees
remain connected. In addition, we are
promoting hybrid working, helping
our employees to collaborate,
balanced with home working too.
Learning and Development
In 2021, Luceco invested heavily
inlearning and development
(“L&D”)and we introduced our first
L&D platform.
We partnered with Hays Thrive/Go 1
in order to provide the business with
this exciting platform which is
available to all employees.
Since its introduction in April 2021,
5,280 learning modules have been
completed by our employees, some
of which has been compulsory
learning such as “Anti‑money
Laundering” but the rest has been
related more to personal
development.
The L&D platform also 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 the introduction of this platform
provides further support.
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. All
employees 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
14 non‑reportable accidents reported
in our Telford facility (2020: 13) and
in China, ten minor accidents were
reported (2020: nine).
Strategic Report
Luceco plc Annual Report and Financial Statements 2021 53
Ethical business
We require our people to act fairly in
their 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 differences
and practices.
The Code of Conduct is available on
our intranet and all new employees
are made aware of it during their
induction.
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. The policy
is widely publicised across all our
operations and is also available on
our intranet. All new starters are
made aware during their induction.
Itincludes a prohibition on offering
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 offered 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 Officer 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,
we recognise that there may be
times when it is uncomfortable or
inappropriate for our people to raise
a concern through line management.
We therefore have a whistleblowing
policy (“Speak Up”), which is
available on the corporate intranet.
The policy 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 Officer and the
HR Manager for further investigation
as necessary.
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.
There were no reports that required
follow up in the year.
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.
54 Luceco plc Annual Report and Financial Statements 2021
Environment, Social
and Governance
continued
People continued
Human rights continued
Among our international operations,
China is the location where people’s
rights could be most at risk.
Byowning 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. The latest statement
isavailable on our website,
www.lucecoplc.com.
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 best practices.
We source raw materials and certain
products from suppliers in close
proximity to the factory in China.
The Executive 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 to site
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 and
project management.
Strategic Report
Luceco plc Annual Report and Financial Statements 2021 55
Non-financial information statement
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 – Environmental policy,
environmental impact and greenhouse gas information
42 to 50
Employees Environment, Social and Governance Statement – People policies, gender
diversity, employee involvement, health and safety
Chief Executive Officer’s Review
Principal Risks and Uncertainties – Team members
51 and 52
12 to 15
64
Human rights Environment, Social and Governance Statement – Ethical business, supply
chain, human rights
53 and 54
Social matters Environment, Social and Governance Statement – Communities 54
Anti‑bribery and
corruption
Environment, Social and Governance Statement – Anti‑bribery and
CorruptionPolicy
53
Business model Advantaged Business Model 28 and 29
Principal risks Principal Risks and Uncertainties 60 to 65
Non‑financial KPIs Strategy and KPIs 32 to 41
The Strategic Report on pages01 to 67 was approved bythe Board of Directors on 22March 2022.
JOHN HORNBY MATT WEBB
Chief Executive Officer Chief Financial Officer
56 Luceco plc Annual Report and Financial Statements 2021
Our
Stakeholders
CUSTOMERS
Our customers are at the forefront
of all business decisions, from
product innovation and
development to our superior
customer service offering.
• 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 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
2021 outcomes
• Like‑for‑like sales growth of
32.3%
• 407 new products launched
• Increasing the proportion of
deliveries made on time and
infull
Further information
• Strategy and KPIs section on
pages 32 to 41
Strong relationships with all our stakeholders are vitally important for us
to achieve long‑term success and fulfil our purpose – to help people
harness power sustainably in everyday life.
Strategic Report
Luceco plc Annual Report and Financial Statements 2021 57
EMPLOYEES
Our people are the source of our
competitive advantage. They win
new business, take 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 mental wellbeing just
as much as physical.
The Group employs 1,642 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 Tim Surridge,
our Director responsible for
employee engagement, to Group
locations, subject to COVID
restrictions, 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
2021 outcomes
• Improved employee engagement
measures with more employees
likely to recommend Luceco to
friends and family as an employer
• Introduced hybrid working,
together with improved and
more frequent communication
with our employees
• Introduced our first Learning &
Development platform, delivering
5,280 learning modules to our
employees in the year
Further information
• People section of Environment,
Social and Governance on pages
51 to 53
• Workforce engagement section
in Corporate Governance Report
on page 74
58 Luceco plc Annual Report and Financial Statements 2021
Our
Stakeholders
continued
SUPPLIERS SHAREHOLDERS FUNDING PROVIDERS
Strong supplier relationships are
crucial in ensuring we can fulfil
our customers’ needs and
provide a high level of customer
service. In 2021, our deep
supplier relationships helped us
succeed despite wide‑ranging
disruption.
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,
subject to COVID restrictions
• 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
2021 outcomes
• Adjusted Gross Margin of
37.1%
• Creditor days of 85
Further information
• Strategy and KPIs section on
pages 32 to 41
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 102.
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
2021 outcomes
• Share price growth of 36% in
2021
• Strong shareholder
engagement
• 46 investor meetings
Further information
• www.lucecoplc.com
Borrowings allow the Group to
invest in future growth whilst
taking advantage of low interest
rates and offsetting 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 CEO/CFO and relationship
bank(s)
• Meetings with existing and
future lenders ahead of
planned refinancing
• Covenant compliance
certification
2021 outcomes
• Covenant Net Debt to
Covenant EBITDA ratio
of0.7times in the period
• Bank facilities extended to at
least September 2024
Further information
• Financial instruments
disclosures on pages 141 to 147
• Capital management notes on
page 148
Strategic Report
Luceco plc Annual Report and Financial Statements 2021 59
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.1,650 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”
2021 outcomes
• Tonnes of Scope 1 and 2 CO
2
per
£m of revenue reduced by 82
over the period
Further information
• Environment, Social and
Governance on pages 42 to 55
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 56 to 59 and those sections
of the Annual Report incorporated
by cross reference, describe how
the Directors have had regard for
s172 Matters in respect of the 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 56 to 59, 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 56 to 59 are
appropriate and that the methods
of engagement for each are
proportionate and effective.
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.
60 Luceco plc Annual Report and Financial Statements 2021
Principal Risks
and Uncertainties
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 sufficient
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 80 to
83. 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 61 to 65. This is not an
exhaustive list but those the Board
believes may have an adverse effect
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 66
and 67 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
assuranceprovider.
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
effective 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.
Strategic Report
Luceco plc Annual Report and Financial Statements 2021 61
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. Erosion of customer
base
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. Public health issue
23. Impact of coronavirus
24. Investor or customer
pressure on ESG
Impact
Likelihood
3
2 5
1
6
4
7
8
9
10
24
11
12
13
14
15 1617
18
19
23
20
21
22
Principal risks
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
Net risk level:
Low Medium High
Change in year:
62 Luceco plc Annual Report and Financial Statements 2021
Principal Risks
and Uncertainties
continued
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 to trading
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 buffer 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 and our
OEM supplier of Portable Power
products
Risk appetite:
Risk neutral
Net risk level:
Low Medium High
Change in year:
Concentration risks associated with customers and products:
Risk owner: CEO
Risk and impact:
• The Group has a number of key
customers representing circa 50%
of Group revenue. Loss of a key
customer 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
• The Group has a material exposure
to movements in the USD:RMB FX
rate. An adverse move could
reduce short‑term profits and/or
long‑term 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 particularly
established
• Capacity at our factory and at
ourOEM partners in China can
bechanged quickly and cost
effectively
• 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 offered to customers
• Application of the hedging policy
is reviewed by the Board
Risk appetite:
Risk neutral
Net risk level:
Low Medium High
Change in year:
Strategic Report
Luceco plc Annual Report and Financial Statements 2021 63
Macroeconomic, political and environmental:
Risk owner: CEO
Risk and impact:
• 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
• The Group has a concentrated
exposure to the UK market. UK
economic headwinds from global
input prices, higher living costs
and geopolitical instability could
reduce profits
• A deterioration in trade relations
between the UK and China could
disrupt product supply and/or
increase costs
Mitigation:
• The Group has commenced
participation in the Carbon
Disclosure Project and prepared
itself for participation in the
Science‑Based Target Initiative
beginning in 2022.
• 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 buffer stock is held in the event
of supply disruption in China
• Airfreight can be used to expedite
deliveries if required
• Management liaises closely with
investors and customers to
understand their future ESG needs
and responds accordingly
Risk appetite:
Risk accepting
Net risk level:
Low Medium High
Change in year:
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 are in place following
engagement with cyber security
consultants
• Market‑leading data backup tools
are in place
• IT disaster recovery plans are in
place throughout the Group
• We conduct regular penetration
testing
• IT incidents are reported to
theBoard
Risk appetite:
Risk averse
Net risk level:
Low Medium High
Change in year:
64 Luceco plc Annual Report and Financial Statements 2021
Principal Risks
and Uncertainties
continued
Loss of key employees:
Risk owner: CFO
Risk and impact:
• Loss of key employees could
damage business relationships or
result in a loss of knowledge
• 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
office and home is more common
place. 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 offering 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.
These plans are reviewed by the
Nomination and Remuneration
Committees
• 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
Net risk level:
Low Medium High
Change in year:
Acquisitions:
Risk owner: CFO
Risk and impact:
• An ill‑judged acquisition could
destroy shareholder value
• 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
significant 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
Net risk level:
Low Medium High
Change in year:
Strategic Report
Luceco plc Annual Report and Financial Statements 2021 65
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
Net risk level:
Low Medium High
Change in year:
Finance and treasury:
Risk owner: CFO
Risk and impact:
• The Group could fail to provide
sufficient funding liquidity for its
operations
• The Group could fail to report its
financial performance accurately,
leading to inappropriate
decision‑making and regulatory
breaches
• The Group could suffer fraud
across its widespread operations
Mitigation:
• The Group has a clear Capital
Structure Policy that is designed to
provide sufficient 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
Net risk level:
Low Medium High
Change in year:
66 Luceco plc Annual Report and Financial Statements 2021
Viability
Statement
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
offering. 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, affordable 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‑efficiently
• 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
sufficient 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 offer 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 our
competitive 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 A UK
macroeconomic downturn, due
tohigher living costs and global
energy and material price
increases could adversely affect
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, or IT failure in China.
Shipping and transportation
disruption between the Group’s
end markets and its sources of
product supply which are
overwhelmingly in China
• Risks associated with the
coronavirus The coronavirus
outbreak has the potential to
impact both the supply and
demand of Luceco products.
TheGroup sources nearly all of its
products from China, either from
its own manufacturing facility or
through suppliers
• Concentration risks associated
with customers and products
Theloss of a key customer would
result in a short‑term shortfall in
profit and cash whilst sales were
replaced by growth elsewhere
LUCECO PLC – VIABILITY STATEMENT APPROACH
Viability – assessing
long-term prospects
Viability – assessment analysis
Underlying assumptions
andassessment
Viability Statement
Current position
Strategy and business model
Principal risks
Scenario testing
Mitigation
Likely output
Strategic Report
Luceco plc Annual Report and Financial Statements 2021 67
Viability Statement – assessment analysis
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 2022 of 10%. Phased return by 2023 with 2023 10% down
reflecting the impact of the year 1 recession assumption
2. Total loss of the Group’s largest customer range from
2022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
buffer 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. This was modelled as a revenue reduction
for three months relating to 50% of revenue (FOB revenue) with
shipping costs up 20% for six months starting from Q2 2022
• Management have
completed this scenario
test and concluded this
would not impact
compliance with its
financial covenants or
viability
Risks associated
with the
coronavirus
• Management have modelled two scenarios:
1. Base case:
a. Lockdown Q2 2022 which uses the experience of the
lockdown in March 2020 resulting in a 16% reduction in
revenue and gross profit
b. Gradual recovery, with 15% increase in revenue and gross
profit in the following quarter
2. Plausible downside case:
a. Lockdown Q2 2022, with the same activity as the base case
b. No recovery in the following quarter
• 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 customers’ range from 2022
onwards
• Management have
completed this scenario
test and concluded this
would not impact
compliance with its
financial covenants or
viability
The Viability Statement is dependent on the following process and assumptions
Viability
principal risk
Process:
• The financial forecast on which
the Viability Statement is based is
aligned with the annual corporate
plan for 2022 to 2024 approved
by the Board in December 2021
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
31December2024.
This assessment has been chosen
for the following reasons:
• 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 2024 with the
option to extend by two years
68 Luceco plc Annual Report and Financial Statements 2021
The Group’s corporate governance structure enabled
theBoard to execute the Group’s strategy and navigate
through the challenges of the coronavirus pandemic
GILES BRAND
Chairman
Dear Shareholder,
I am pleased to present the
Corporate Governance Report for
the year ended 31 December 2021
(“year”). This section of the Annual
Report describes our corporate
governance structures and
processes and how they have been
applied throughout the year.
Good corporate governance is
fundamental to the success of our
business. The Board and its
Committees play a key role in our
governance framework by providing
external and independent support
and challenge, understanding the
views of shareholders and wider
stakeholder communities, and
ensuring that a culture of good
governance is promoted globally
throughout the business.
Ourcontinuing aim is to promote
andmaintain an environment of
openness, transparency,
accountability and responsibility.
My role as Chairman
My role is to ensure that the Luceco
Board operates effectively in
delivering the long-term success of
the Company. In fulfilling this role,
Iseek to ensure that Board
proceedings are conducted in such
away as to allow 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. More about my
role, and the roles of all the Directors
and Committees, can be found on
pages 72 and 73.
The Board’s response to COVID-19
Although Board and Committee
meetings continued to be held
intermittently byvideo conference
rather than inperson during periods
of COVID-19restrictions, this proved
no barrier to robust discussion and
effective decision-making. Rather,
itdemonstrated the agility,
commitment and effectiveness
ofour Board.
The Board continued to receive
regular COVID-19 updates from
management throughout the year
and continually monitored the
fast-changing situation surrounding
the spread of the virus and resultant
government-imposed lockdowns
and changes to restrictions.
Themonitoring took the form of
additional Board and Committee
meetings and Non-Executive
Directors also made themselves
available to scrutinise and challenge
plans, outside of the boardroom.
TheDirectors monitored the
Company’s outlook as the situation
progressed.
Chairman’s
Introduction
Directors’ Report
Luceco plc Annual Report and Financial Statements 2021 69
Board and Committee evaluation
As Chairman I am also responsible
for leading the annual evaluation of
the effectiveness of the Board,
Committees and individual Directors
(“Evaluation”). The 2021 Evaluation
was undertaken internally by way of
a questionnaire, a method I believe
to be appropriate and proportionate
to the Company, and which yields
useful results. The 2021 Evaluation
considered the composition, balance
of skills, experience, knowledge, and
collaboration on the Board, as well
asother factors relevant to its
effectiveness, including diversity.
Wealso considered lessons learnt
from the COVID-19 pandemic and
how these could be applied to the
Company in the future. Results of the
Evaluation were anonymised by the
Company Secretary and provided to
me for analysis. I presented the
findings to the Board, including
individual recommendations made
by Directors.
My performance was appraised by
the independent NEDs under the
leadership of the Senior
Independent Director. We discussed
the outcomes and agreed that the
Board, Committees and individual
Directors were operating effectively,
whilst also noting areas for
development. The Evaluation also
assisted us in identifying our key
areas of focus for 2022, being:
• Expansion of the business through
organic growth and tactical
acquisitions
• Senior management succession
planning
• A focus on the Company’s
sourcing and manufacturing
strategy
We also agreed our strategic
priorities for 2022. These are set
outin the Strategic Report on
pages01 to 67.
The year ahead
The Board has made good progress
this year in enhancing its governance
arrangements, but we recognise
there is still work to do. I am
committed to continually monitoring
and improving the governance of
our Board and will continue to seek
out ways to enhance our corporate
governance in line with developing
best practice, particularly with
regard to enhanced diversity
reporting and the governance
framework around climate-related
risks and opportunities.
GILES BRAND
Chairman
22 March 2022
The Company is required to report on its compliance with the
Principles and Provisions of the 2018 UK Corporate Governance
Code (“Code”), a copy of which is available at www.frc.org.uk.
Forthe year ended 31 December 2021, the Board considers that it
has complied in full with the Code’s Principles and Provisions with
the exception of Provisions 9 and 19. Provision 9 states that the
Chairman should be independent on appointment when assessed
against the circumstances set out in Provision 10. Therefore,
asamajor shareholder, Giles Brand was not independent on
appointment. Provision 19 states that the Chairman should not
remain in post beyond nine years from the date of their first
appointment to the Board. Giles was appointed as a Director of
the Company in 2010 and then appointed Chairman in 2016 when
the Company listed on the London Stock Exchange. The
Company’s relationship with Giles Brand and EPIC Investments
LLP (who together own 28% of the Company’s voting rights) is
governed by a relationship agreement which serves to regulate
the relationship and deliver effective independence.
Board leadership and company
purpose
See pages 74 to 77
Division of Directors’
responsibilities
See page 72
Composition, succession
andevaluation
See page 79
Audit, risk and internal control
See pages 80 to 83
Remuneration
See pages 84 to 99
Compliance with the 2018 UK Corporate Governance Code Further information
70 Luceco plc Annual Report and Financial Statements 2021
Board
of Directors
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 is Chief
Executive Officer of
the leading flexible
packaging
manufacturer
Constantia Flexibles.
Previously, he spent
12years at RPC Group
Plc, initially as Chief
Financial Officer and
then as Chief
Executive Officer. Pim
was also Chairman of
the Audit Committee
and Senior
Independent Director
of Avon Rubber plc
from March 2015 to
January 2021.
Other roles
Pim is Chief Executive
Officer of Constantia
Flexibles.
PIM VERVAAT
Senior Independent
Non-Executive Director
Skills and experience
Matt was appointed
Chief Financial Officer
in 2018. Matt joined
from FTSE 100 listed
multinational building
materials distribution
company Ferguson
plc, where he most
recently spent five
years as Finance
Director for its
market-leading US
Blended Branches
business, based in the
USA. Prior to that,
Matt held other senior
finance roles at
Ferguson, 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 of
Oxford.
Other roles
Matt holds no other
listed or non-listed
directorships.
MATT WEBB
Chief Financial Officer
Skills and experience
John was appointed
Chief Executive Officer
of the Group in 2005
having originally
joined Luceco in 1997.
John led the original
management buyout
of Luceco 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. John
began his career with
Knox D’Arcy
Management
Consultants following
his graduation from
The University of
Oxford with a degree
in Economics.
Other roles
John holds no other
listed or non-listed
directorships.
JOHN HORNBY
Chief Executive Officer
Skills and experience
Giles is the founder
and Managing Partner
of EPIC Investment
Partners LLP (formerly
EPIC Private Equity
LLP), an independent
investment manager,
advisory and
placement agent and
administrator. EPIC
Investment Partners
LLP is the investment
adviser to EPIC
Investments LLP,
whose affiliates are the
Company’s largest
shareholder. Since
2001, Giles has led
over 30 buyout,
turnaround, distressed
and growth capital
transactions. Many of
these transactions
have made multiple
bolt-on acquisitions in
the UK and overseas.
Other roles
Giles is currently the
Non-Executive
Chairman of Whittard
of Chelsea.
GILES BRAND
Non-Executive Chairman
The Board of Directors has overall responsibility for the Group.
Itsprincipal aim is to enhance the Company’s long-term value for
thebenefit of shareholders.
Key Remuneration Committee
Audit Committee
Nomination Committee
Disclosure Committee
Chair
Directors’ Report
Luceco plc Annual Report and Financial Statements 2021 71
Skills and experience
Will joined the Group
as a Non-Executive
Director in 2019 and
was appointed as
Chair of the Audit
Committee in October
2021. Will most
recently held the
position of Chief
Financial Officer for
GKN Aerospace, the
UK-headquartered
global aerospace
technology leader.
Hehas 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 in
which he oversaw
GKN’s M&A activities.
Prior to joining GKN,
Will qualified as a
Chartered Accountant
at KPMG and worked
in its Corporate
Finance department.
Other roles
Will holds no other
listed or non-listed
directorships.
WILL HOY
Independent
Non-Executive Director
Skills and experience
Tim joined the Group
as an independent
Non-Executive
Director in 2016.
Previously, Tim has
served as Group Chief
Financial Officer at
Olive Group Capital
Limited, a Dubai-based
security solution
provider, and as Chief
Financial Officer and
an Executive Director
at Dangote Cement
plc, Nigeria’s largest
cement producer.
Timjoined KPMG LLP
UK in 1991 and became
a partner in the firm’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 qualified
Chartered Accountant.
Other roles
Tim is currently a
Principal at NM
Capital.
TIM SURRIDGE
Independent
Non-Executive Director
Skills and experience
Caroline joined the
Board as an
independent
Non-Executive Director
and was Chair of the
Audit Committee from
October 2016 to
October 2021. She has
managed divisions of
FTSE 100 groups and
AIM businesses with
international industrial
and technology
operations and has
worked as a corporate
finance adviser with
various leading banks.
She is a Fellow of the
Chartered Institute of
Management
Accountants and has
chaired audit
committees of listed
companies for the past
20 years. She holds a
degree and PhD in
Natural Sciences from
the University of
Cambridge and an
MBA from the
University of London.
Other roles
Caroline is currently a
Non-Executive
Director of four other
listed companies: IP
Group plc, WAG
Payment Solutions plc,
Rockley Photonics
Holdings and Georgia
Capital plc.
CAROLINE BROWN
Independent
Non-Executive Director
Board balance
Gender diversity
Independence
1
Sector experience
1. Excluding the Chairman.
Male
Female
6
1
Independent Non-Executive
Directors
Executive Directors
4
2
Finance/Capital Markets
Governance
Operational
Strategy
Manufacturing/Industrial
Consumer/Retail
Digital
7
7
7
2
7
7
3
72 Luceco plc Annual Report and Financial Statements 2021
Board composition
The Board comprises the Chairman, two Executive Directors and four independent Non-Executive Directors
(“NEDs”). The key responsibilities of the members of the Board, including the division of responsibilities between
theChairman and CEO, are set out below.
Corporate
Governance Report
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, keeping them informed of the Group’s
strategy, progress and prospects.
Giles Brand
Giles Brand has held the role of Chairman since 2 October 2016. The Chairman is Non-Executive and is responsible for the leadership
and governance of the Board, organising, planning and setting the agenda of Board meetings (in conjunction with the Chief Executive
Officer) and communicating information to shareholders. The Chairman maintains regular contact with the independent NEDs to
discuss and address any issues or concerns outside of formal Board meetings. The Chairman also provides support to the Executive
Directors where required.
CHAIRMAN
LUCECO plc
Chief Executive Officer (“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. The CEO also prepares and communicates the
strategy of the Group and the detailed underlying
operational plans to deliver it.
Chief Financial Officer (“CFO”)
Matt Webb
The CFO works closely with the CEO to ensure that
strategic plans are underpinned by strong financials and
that they deliver growth in shareholder value. The CFO is
responsible for producing budgets and forecasts to deliver
and measure against the strategy and assessing the benefit
of new investment opportunities. He is also responsible for
internal control and risk management, in conjunction with
the Audit Committee.
Senior Independent Director (“SID”)
Pim Vervaat
In addition to the responsibilities of an independent NED, the
SID is available to shareholders should they have concerns which
contact through the Chairman or other Board members has
failed to resolve or for which such contact is inappropriate. The
SID is also responsible for conducting the annual performance
evaluation of the Chairman, 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, Will Hoy, Tim Surridge
The NEDs are independent and contribute to the strategic
direction of the Group, providing an independent sounding
board to the Chairman 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. Tim Surridge
has been appointed as the designated Non-Executive
Director for workforce engagement.
The four independent NEDs are considered by the Board
tomeet theindependence criteria set out inProvision 10
ofthe Code and to beindependent of the Company’s
executive management and free from any business or
otherrelationship that could affect their ability to exercise
independent judgement. The letters of appointment of
theChairman and independent NEDs are available for
inspection at the Company’s registered office.
EXECUTIVE DIRECTORS INDEPENDENT NON-EXECUTIVE DIRECTORS
Directors’ Report
Luceco plc Annual Report and Financial Statements 2021 73
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
General Meeting.
Time commitment
Each Director’s other commitments
are disclosed and, in the case of
significant appointments, approved
by the Board in advance. The Board
reviews a schedule of Directors’
interests at each Board meeting.
TheBoard is satisfied that the other
commitments of the Chairman and
the independent NEDs do not
prevent them from devoting
sufficient time to the Company.
TheExecutive Directors work solely
for the Group; neither John Hornby
nor Matt Webb hold any external
directorships.
Access to advice
All Directors have access to the
advice and services of the Company
Secretary, who is responsible for
advising the Board on corporate
governance matters. The Directors
are able to take independent,
professional advice to assist them,
ifnecessary, at the Company’s
expense.
Matters reserved for the Board
The Board keeps a formal schedule
of matters specifically reserved for
its decision. These include the
approval of the annual and
half-yearly results and associated
announcements, recommendation of
dividends, convening of shareholder
meetings, Board appointments,
strategic plans and budgets, ESG
plans, significant capex proposals,
acquisitions, systems of internal
control and risk management and
corporate governance arrangements.
No one Board member has the power
to make a decision without the
sanction of the other members.
Committee responsibilities
The Board has formally delegated
specific responsibilities for audit, risk
management and financial control,
public announcements, Board
composition and remuneration to
four standing Committees, namely
the Audit Committee, Nomination
Committee, Remuneration
Committee and Disclosure
Committee. Each is chaired by the
Chairman or an independent NED,
enabling them to take an active role
in influencing 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 out in their
respective reports on the following
pages:
• Audit Committee pages 80 to 83
• Nomination Committee pages 78
and 79
• Remuneration Committee pages
84 to 99
The terms of reference of the
Committees are reviewed annually.
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.
TheCommittee meets as
appropriate and met seven times
during the year. The Disclosure
Committee is chaired by Giles Brand
and its other members are John
Hornby and Matt Webb. Its terms
ofreference can be found on the
Company’s website.
74 Luceco plc Annual Report and Financial Statements 2021
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 and conduct 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
the inside front cover, 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. People were once
again a key focus of discussion
during the year given concerns
around the continued impact of the
coronavirus pandemic on the
workforce, both in terms of
individual health and safety as well
as the financial impact. The Board
was updated throughout the year
through reports from the Executive
Directors on steps taken to mitigate
against these. Additionally, at the
Directors’ request, the Asia
Managing Director gave a detailed
presentation 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 and culture
can be found in the ESG section on
pages 51 to 55.
Workforce engagement
In accordance with the Code, the
Board has appointed Tim Surridge
as the designated Non-Executive
Director for workforce engagement.
The Board believes that this, in
conjunction with the annual
employee engagement survey, is an
effective mechanism for gathering
the views of and engaging with the
workforce. During the year, Tim held
six virtual group sessions with
employees from across the business,
representing a variety of functions
and geographical locations. The
main themes which arose from these
sessions remained positive across
the UK workforce, with favourable
comments regarding inter-team
communication and workplace
culture. Feedback from the team in
China identified the potential for
management to deliver further
improvement in these areas as the
business emerges from a particularly
busy period of trading and this will
be explored during 2022. The results
of the annual employee engagement
survey (discussed in the
Environment, Social and Governance
section on page 52 and the
Remuneration Committee Report on
page 85) were discussed by the
Board, the findings of which were
largely consistent with the feedback
from Tim’s sessions. In 2022, Tim will
continue to engage with the
workforce, through physical visits to
both the UK and China operations if
possible. The Board will continue to
monitor the effectiveness of its
methods of workforce engagement.
Further information on the
Company’s policies with regard to
itspeople can be found within the
People section of Environment,
Social and Governance on page 51.
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 2021 and
satisfied itself that sufficient
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 in the Strategic
Report on pages 56 to 59. Further
information is included in the
Section 172(1) Statement in the
Strategic Report on page 59.
Stakeholder considerations in the
context of COVID-19 are discussed
inthis Corporate Governance
Reporton page 77.
Sustainability
Full details of the Company’s
sustainability strategy and
performance with regard
tosustainability are provided
withinthe Sustainability section
ofEnvironment, Social and
Governanceon pages 42 to 55.
Board meetings
In advance of its meetings, the
Board is provided with an agenda
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 Chairman
before the meeting. Conflicts of
interest are managed in accordance
with the procedure described under
“Directors’ conflicts of interest” on
page 101.
Directors’ Report
Luceco plc Annual Report and Financial Statements 2021 75
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 in respect of each Director.
Name Board
Audit
Committee
Nomination
Committee
Remuneration
Committee
Giles Brand 7/7 n/a 3/3 n/a
John Hornby
4
7/7 n/a n/a n/a
Matt Webb
4
7/7 n/a n/a n/a
Caroline Brown
1, 3
7/7 2/2 3/3 2/2
Will Hoy 7/ 7 3/3 n/a n/a
Tim Surridge 7/7 3/3 n/a 2/2
Pim Vervaat
2
7/7 1/1 3/3 2/2
1. Caroline Brown attended the November Board meeting for a short period due to other pressing engagements.
2. Pim Vervaat became a member of the Audit Committee in October 2021.
3. Caroline Brown served as Chair of the Audit Committee from October 2016 to October 2021.
4. Matt Webb and John Hornby attended an additional Board meeting in September 2021 to approve the signing of a new revolving
credit facility as approved by the Board at the previous Board meeting.
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 by updates and
discussions around culture, people
and stakeholders, as well as
corporate governance considerations
including legal and regulatory
matters. A summary of the activity
ofthe Board during the year is
setout as follows:
• 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
presentations on a number
ofprojects and warehouses
established in Southern Europe,
North America and the Middle
East, and considered its key
strategies and deliverables
for2022
• Received and discussed a
presentation from the Asia
Managing Director on progress
against plans to further improve
the Group’s Chinese factory and
improve its working culture
• 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
DWWindsor Group Limited
on12October 2021
• Continued to develop an
Environment, Social and
Governance strategy
• Reviewed the Group’s climate
strategy and TCFD Compliance
Report and discussed the status
of the 2021 ESG objectives and
future objectives
Strategy
76 Luceco plc Annual Report and Financial Statements 2021
Corporate
Governance Report
continued
• Considered the financial
performance of the Group and
keyperformance targets,
including a review of the
monthly management accounts
at each Board meeting
• Monitored performance
throughregular presentations
from the CFO
• Approved the Annual Report,
half-year and annual results
announcements and analyst
presentations
• Approved the signing of a new
revolving credit facility
• Approved the delegation of a
number of responsibilities to the
Disclosure Committee such as
therecommendation for an
interim dividend of 2.6p per
ordinary share
• Approved the Group’s financing
arrangements
• Approved the 2022 budget and
three-year plan
• Reviewed and challenged
management’s going concern
assessment
• Discussed the outcome of the
Evaluation of Board
Effectiveness and agreed
actions for 2022
• Considered feedback from
brokers and analysts as relevant
throughout the year
• Received regular updates on
legal and governance
developments affecting the
Company
• Reviewed and approved the
Company’s Share Dealing Code
• Reviewed and approved the
Company’s Anti-bribery Policy
andAnti-corruption Policy
• Reviewed and approved the
Company’s Related Party
Transaction Policy
• Reviewed and approved the
Company’s Diversity & Inclusion
Policy
• Reviewed the Group’s
approach to risk management
and carried out a robust
assessment of the Company’s
principal risks
• Approved changes to the
Company’s hedging
arrangements
• Oversaw the continued
implementation and
effectiveness of the Group’s
Finance Manual, including the
approval of the Group’s Inside
Information Policy and
revision of the Group’s
DealingCode
• Discussed with the Asia
Managing Director ongoing
initiatives to improve health
and safety at the Group’s
Chinese operations
• Discussed the results of the
2021 annual employee
engagement Survey carried
out in the UK and progress
made as a result of actions
taken in response to the 2020
surveys
• Received an update on
employee engagement
meetings from the
designatedNon-Executive
Director for workforce
engagement; discussed
findings inconjunction with
survey results
• Reviewed and approved the
Group’s Whistleblowing
(“SpeakUp”) Policy and
oversaw its effectiveness
Financial
Corporate governance
Internal control and
riskmanagement
Culture, people
andstakeholders
Board activity
continued
Directors’ Report
Luceco plc Annual Report and Financial Statements 2021 77
COVID-19 and consideration
ofstakeholders
During 2021 the Board monitored the
financial health of the Company and
any ongoing impact on stakeholders
as the coronavirus pandemic
continued. The Board heard regular
updates from Executive Directors
and it was determined that no
extraordinary measures were
required during the year.
Shareholder engagement
The Board, led by the Chairman, is
committed to maintaining an open
and constructive dialogue with
shareholders, to ensure there is a
common understanding of the
strategic objectives, governance and
performance of the Group. The CEO
and the CFO undertake investor
roadshows following the release of
financial results, with the
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 2021, major shareholders
were offered the opportunity to
meet the Chairman, CEO and CFO
virtually to discuss 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.
Due to the UK Government’s
prohibition on non-essential travel
and public gatherings, it was not
possible for shareholders to attend
the Company’s 2021 AGM. Instead,
itwas formed with the minimum
quorum of two Directors/
shareholders, with the other
Directors attending by video
conference. Broadcasting the AGM
electronically provided the
opportunity to open the
proceedings to shareholders who
wished to follow the meeting and
ask questions. A number of
shareholders also emailed their
questions in advance, which were
answered at the meeting and on the
Company’s website. As a result, the
Directors were able to engage with
more individual shareholders than at
any previous AGM of the Company.
Annual General Meeting
The 2022 AGM will take place at
12.30 on Thursday 12 May 2022 at
Numis Securities, 45 Gresham St,
London EC2V 7BF. The AGM has
traditionally served as the principal
forum for dialogue with shareholders
and would normally include a
presentation outlining recent
developments in the business,
followed by a question-and-answer
session to enable shareholders to
ask about specific areas or the
business in general. Currently it is
anticipated that the AGM will take
place in person. However, should the
UK Government impose any
prohibition on non-essential travel
and public gatherings at the time of
the AGM, the Company will update
shareholders through an
announcement to the London Stock
Exchange and on the Company’s
website and shareholders will be
able to follow the meeting and put
their questions to the Board via an
online platform. Should this be the
case, shareholders are strongly
encouraged to register their proxy
votes online. Shareholders may
alsowish to send their questions
forthe 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
with the prescribed timescales.
GILES BRAND
Chairman
22 March 2022
78 Luceco plc Annual Report and Financial Statements 2021
Diversity and inclusion, particularly at Board
andseniormanagement level, is key to maintaining
competitiveadvantage
GILES BRAND
Nomination Committee Chair
Dear Shareholder,
I am pleased to present the report of
the Nomination Committee
(“Committee”) for the year ended
31December 2021. During the year,
the Committee consolidated the mix
of skills and experience on the
Board, having appointed Pim
Vervaat as Senior Independent
Director in September 2020.
Diversity & Inclusion Policy
Luceco recognises the benefits of
having a diverse Board and sees
increasing diversity and inclusion at
Board and senior management level
as key to maintaining competitive
advantage. The Board is committed
to ensuring that recruitment and
promotion of individuals at Board
and senior management level 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,
gender and ethnicity. The
Committee reviews the effectiveness
of this Diversity & Inclusion Policy
annually and recommends any
required amendments to the Board
for approval.
Gender balance of senior
management and direct reports
The gender balance of the Board,
senior management and direct
reports is included in the
Environment, Social and Governance
Report on page 51.
Resignations and appointments
Following several changes to the
Board during 2020, 2021 saw a
period of consolidation for the
Board. The Committee continues
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 climate change, data
science, 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. Consequently, the
Committee is leading the search
foran additional Non-Executive
Director and has engaged Russell
Reynolds Associates to lead the
search. Russell Reynolds Associates
has no other connection with the
Company or with any individual
Director. During the early part of
2022, the Committee will review a
short list of candidates and further
announcements on progress will be
released at the appropriate time.
Nomination
Committee Report
Chair: Giles Brand
Other members: Caroline Brown
and Pim Vervaat
The Committee’s main
responsibilities, as outlined in its
terms of reference, are:
• Reviewing the size, structure
and composition of the Board
and its Committees
• Identifying and nominating
candidates to fill 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 on the
Company’s website. Committee
meeting attendance is set out on
page 75.
Key responsibilities
Directors’ Report
Luceco plc Annual Report and Financial Statements 2021 79
Board composition
Each year the Committee formally
reviews the size, composition and
capabilities of the Board, including
its diversity, as part of the annual
Evaluation of Board Effectiveness.
The Committee concluded in the
2021 Evaluation that the Board had
an appropriate mix of skills and
experience to provide strong and
effective 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 the refreshment
of the Board and Committees and to
maintain an appropriate balance of
skills, commercial expertise and
diversity to satisfy the evolving
needs of the Group.
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 an
individual with the skills, knowledge
and experience required to fulfil the
role, within this context taking
account of the added value that the
individual brings to the Board in
terms of creating a diverse, and
therefore more effective,
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 & Diversity Policy,
described on page 51, which ensures
that all employees, regardless of
gender, ethnicity, age or 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
that this is an appropriate and
balanced approach to facilitating the
development of a diverse pipeline.
Annual evaluation of the
Nomination Committee
As part of the Evaluation of Board
Effectiveness conducted during
2021, the Committee undertook an
evaluation of its own effectiveness
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
effectively. Details of the full
Evaluation of Board Effectiveness,
including how it was conducted and
the actions taken as a result, can be
found on page 69.
Directors’ performance
The Directors’ biographies are set
out on pages 70 and 71.
TheCommittee has considered the
performance of each Director and
concluded that they continue to
demonstrate the necessary
knowledge and commitment to
contribute effectively to the Board.
Priorities for 2022
During the forthcoming year, the
Committee will continue to focus on
strengthening the mix of skills,
diversity and experience on the
Board, particularly with a view to
enhancing the Board’s diversity and
expertise in climate change, data
science, digital marketing and sales
channels. The Committee will also
undertake an in-depth review of the
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
22 March 2022
80 Luceco plc Annual Report and Financial Statements 2021
Dear Shareholder,
I am pleased to present the report of
the Audit Committee (“Committee”)
for the year ended 31 December
2021. 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
andprospects in light of the
situation. 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 finance
team members and our external
assurance providers for their
dedication and work under difficult
and challenging conditions during
the last year and I would also like to
take this opportunity, on behalf of
the Committee, to thank Caroline
Brown for her leadership, wisdom,
contribution and support in the
successful execution of the
Committee’s responsibilities.
The continued impact of the
coronavirus pandemic saw much of
the Committee’s time taken up with
discussing COVID-19 matters,
including the impact of supply chain
disruption on customer service and
inventory lead times within the
business. Notwithstanding
COVID-19, we continue to make
progress in strengthening the
controls environment and the quality
of ourreporting.
Significant issues
The significant issues that were
considered by the Committee in
2021 and early 2022 are set out
below. These were addressed
through reporting from, and
discussion with, the Chief Executive
Officer, Chief Financial Officer and
the auditor, all of whom are regular
Committee meeting attendees.
KPMG LLP has set out its audit
approach and the work it performed
to satisfy its audit requirements in
these areas in its independent
Auditor’s Report on pages 105 to 112.
COVID-19
The impact of the coronavirus
pandemic on the Company and the
Committee’s activities continued
throughout 2021. The Committee
reviewed management’s response to
the coronavirus pandemic, including
its impact on accounting
judgements, financial reporting,
controls and going concern.
Audit
Committee Report
Chair: Will Hoy
Other members: Tim Surridge
and Pim Vervaat
Caroline Brown was a member
and Chair of the Audit
Committee until 13 October2021
1
.
The Committee’s main
responsibilities, as outlined in its
terms of reference, are:
• Recommending the half and
full-year financial results to
the Board
• Maintaining the integrity of all
financial and non-financial
reporting
• Monitoring the Group’s
internal financial controls and
risk management systems
• Overseeing the relationship
with the external auditor and
reporting the findings and
recommendations of the
auditor to the Board
The Committee’s terms of
reference are available on the
Company’s website. Committee
meeting attendance is set out on
page 75.
Key responsibilities
My appointment as Chair allows me to support
thecontinued development of the Group’s
maturingfinancialgovernance arrangements
WILL HOY
Audit Committee Chair
1. Committee meetings are also routinely attended by the Chairman of the Board, Chief
Executive Officer, Chief Financial Officer, senior finance team members and the external
auditor. The Committee met separately with the external auditor without management
present.
Directors’ Report
Luceco plc Annual Report and Financial Statements 2021 81
Other matters
Other matters discussed by the
Committee during the year included:
• Consideration of forecasts against
available bank facilities as part of
the viability and going concern
reviews
• Consideration of new revolving
credit facilities, providing the
Group with borrowing of up to
£120m
• Inventory valuation in terms of any
obsolescence risk arising from
increased stock levels, and the
impact of rising input prices on
stock cost
• Receivables valuation and
customer creditworthiness
• The application of the Company’s
dividend policy
• The carrying value of intangible
assets, including those arising on
acquisition
• Deferred tax and transfer pricing
• The application of the
Whistleblowing “Speak Up” Policy
• The treatment of restructuring
costs associated with the closure
of facilities in France and Germany
• The treatment of the Group’s
investment in acquisitions and
associated undertakings
• The Group’s use of alternative
performance measures, which are
included alongside IFRS measures
to provide the users of the
financial statements with a
better-informed view of the
Group’s performance
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
financial statements:
• Inventory valuation
• Acquisition accounting
• Recoverability of intra-group debt
• Management override of controls
The Committee confirms that it is
satisfied that the presentation of the
financial statements for the year
ended 31 December 2021 is
appropriate and in accordance with
the Group’s accounting policies.
Going concern
In preparation for publication of the
2021 Annual Report, the Committee
and Board conducted a
comprehensive review of the
Company’s going concern position
in March 2022. Management
prepared a paper setting out the
methodology behind the assessment
of going concern, together with
sensitivity analysis results covering
the period December 2021 to
December 2024. The full Board
discussed the results in detail,
including: practicalities of the
sensitivity testing process; the
rationale behind the choice of risks
subject to sensitivity testing; the
treatment of one-off versus
recurring risks; and the impact
ofthecoronavirus.
Internal controls
The Group conducts a rolling
programme of internal control
reviews across its worldwide
operations. The scope of the
programme is approved by the
Committee each year. Following on
from a detailed independent
verification by PwC of controls
effectiveness at the Group’s Chinese
operations conducted in 2020, the
Committee considered
management’s assessment of the
control environment and
implementing PwC’s
recommendations, including
translating the Code of Conduct into
local languages and carrying out a
business continuity exercise for
Chinese operations. The Committee
also assessed the findings of a
review, undertaken internally, of
internal controls across the Group,
and agreed further reviews to be
undertaken in 2022.
During the year, PwC conducted
independent verification of the
effectiveness of controls in the
Group’s operations in Mexico and
Spain, benchmarking against control
requirements laid out in the Group’s
Finance Manual. The Committee
discussed in detail PwC’s key
findings. The management team
held Finance Training Conferences in
the year with the Group’s worldwide
finance team to ensure its central
requirements were understood.
Governance
The Committee discussed the
expected changes to the accounting
and auditing environment as a result
of the reporting requirements of the
Task Force on Climate-related
Financial Disclosures (“TCFD”)
recommendations on corporate
reporting and discussed with
management preparation for the
expected introduction of legislation
by the UK Government’s Corporate
Governance and Audit Reform
proposals.
The Committee oversaw the Group’s
participation in the UK Government’s
consultation on audit and corporate
governance reform. It will closely
consider and respond to the
Government’s final proposals once
published.
82 Luceco plc Annual Report and Financial Statements 2021
Audit
Committee Report
continued
Internal financial controls and risk
management systems
The Board is responsible for the
Group’s risk management framework
and the Committee has been
delegated 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 to take and for
allocating sufficient resource to the
management of business risk. The
risk management process is detailed
on page 60.
The Group operates its system of
internal control by using the
following key elements:
• Regular review meetings of
various groups, including business
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
effectiveness 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 Audit Committee agreed a
programme for improving the
Internal Control Questionnaire
framework in 2020 and the
Committee received progress
updates during 2021.
Further progress made in 2021
included the rollout of a revised
Luceco Finance Manual and the
Code of Conduct translated into
local languages for the overseas
operations. A series of virtual
Finance Training Conferences were
held during the year to ensure that
the Luceco Finance Manual was well
embedded in the Group’s
operations, ensuring a strong control
environment.
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-yearly
reports.
Throughout the year the Committee
ensured that the impact of COVID-19
was adequately explained in the
Group’s published financial
statements.
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 and strategy.
Principal risks and uncertainties
The Committee has considered the
impact of the coronavirus,
concentration risks, macroeconomic
and political and environmental
risks, the risk of the loss of key
employees, acquisition risks
(including business combinations),
stock provision and increases in
cyber and IT risks as part of the
ongoing assessment of the
business’s principal risks and
uncertainties. A new Cyber Security
Policy was launched during the year
and the Committee further noted
investment in technology to prevent
cyber security incidents. It should be
noted that as part of their risk
assessment in November 2021,
KPMG confirmed to the Committee
that due to ongoing travel
restrictions, they would conduct
some reviews of component
auditors’ audit documentation
remotely. Kingfisher was no longer
deemed to be a significant
component and therefore is not
subject to a full scope audit.
The principal risks and uncertainties
of the Group and their mitigation are
included on pages 60 to 65.
Thecrystallisation of these risks
hasbeen considered in the Viability
Statement on pages 66 and 67
andgoing concern assessment
onpage 117.
Directors’ Report
Luceco plc Annual Report and Financial Statements 2021 83
External auditor
KPMG LLP has been the Group’s
auditor since 2014 and Michael
Froom has been the senior statutory
auditor since 2018. The Committee
intends to comply fully with the FRC
Guidance on Audit Committees and
carry out an audit tender every ten
years and mandatory rotation at
least every 20 years.
The Committee regularly considers
the independence and objectivity of
the auditor, taking into consideration
relevant UK professional and
regulatory requirements.
The Committee reviews an annual
statement from the auditor 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 external
auditor.
The Committee has considered and
approved the terms of engagement
and fees of the external auditor for
the year ended 31 December 2021.
Audit fees payable by the Group to
KPMG LLP in 2021 totalled £0.5m
(2020: £0.5m). There were no
contingent fee arrangements. The
Committee reviewed the level of
non-audit services and fees provided
by KPMG LLP; in respect of the year
ended 31 December 2021, these
were £0.1m (2020: £0.1m) and
related to the 2021 Interim Review.
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. The ratio of
non-audit fees to audit fees for
theyear was nil:1 (2020: nil:1).
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 and remuneration of
the auditor. The Committee reviewed
the effectiveness 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 their
findings.
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 had a need
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
effectiveness of the Group’s internal
controls, given the size and
complexity of the Group, and that a
permanent internal audit function
was therefore not required.
Climate-related
financialdisclosures
Throughout the year, the Committee
discussed the implications of the
TCFD recommendations on
corporate reporting and supported
the approach presented by
management to develop
asustainability strategy.
TheCompany’s TCFD disclosures
are setout on pages 44 to 49.
Annual evaluation of the
AuditCommittee
As part of the Evaluation of Board
Effectiveness conducted during
2021, the Committee undertook an
evaluation of its own effectiveness
and concluded that it was operating
effectively. The Board has satisfied
itself that Will Hoy, Tim Surridge and
Pim Vervaat 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 2022
During the forthcoming year, the
Committee will continue to support
and challenge management through
the evolution of the Group’s internal
controls framework, including the
integration of the DW Windsor
finance team. 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
considerthe additional requirements
expected from the BEIS Corporate
Governance and Audit Reform
proposals, including the introduction
of an Audit and Assurance Policy.
WILL HOY
Audit Committee Chair
22 March 2022
84 Luceco plc Annual Report and Financial Statements 2021
The approach to remuneration in 2022 has
beenreviewedinthe context of the sustained
strongperformance of theCompany
TIM SURRIDGE
Remuneration Committee Chair
Dear Shareholder,
On behalf of the Board, I am pleased
to present the Remuneration
Committee’s report on remuneration
for the year ended 31 December
2021.
Luceco has delivered exceptionally
strong financial performance,
including another year of record
profits, against a backdrop of
continued uncertainty, with revenue
growth of 29.5% and Adjusted
Operating Profit growth of 30.0%.
The management team have worked
incredibly hard in light of an
unusually disrupted supply chain
environment, and have been
successful in proactively adjusting
inventory, production levels and
prices without detriment to demand,
thereby enabling profitable growth
significantly above that of the
market.
This year also saw the acquisition of
DW Windsor Group, the exterior
lighting and networking specialist.
Our balance sheet remains strong
and very supportive of continued
investment in future growth, both
organically and through M&A.
Throughout the year, we have also
won significant new business with
strategic customers and in high
margin product categories.
Investment in both supply chain and
manufacturing infrastructure has
provided us with the ability to meet
increased demand and sustain future
growth.
Approach to remuneration for 2022
The approach to remuneration for
2022 has been reviewed in the
context of the sustained strong
performance and increase in size
and complexity of the Company
over the last few years, as set out
above. The Committee is mindful
that the scope of the role and
responsibilities of the Executive
Directors, particularly the CFO, has
increased accordingly and therefore
has adjusted remuneration
arrangements to ensure that
theseremain appropriate.
Given the expansion of the
Company, the Board has reviewed
and increased the scope and
responsibilities of the CFO role to
include responsibility for ESG, M&A
integration, IT and Group inventory
management and has expanded the
CFO’s responsibility of banking
relationships and investor relations.
In light of the increased size and
complexity of the organisation,
hispersonal performance and
contribution to the growth of the
business, as well as the CFO’s
expanded role, the Committee
determined that it was appropriate
to increase his base salary from
£316,750 to £375,000
(c.18%increase).
The CEO’s base salary has also been
increased from £369,500 to
£400,000 (8% increase) to reflect
the increased size and complexity of
the organisation. This salary remains
below lower quartile compared to
other companies of a similar size and
complexity, reflecting the CEO’s
position as a major shareholder in
the business.
In addition, the maximum long-term
incentive opportunity for 2022 for
the Executive Directors will be set at
150% of salary. This is within the
overall maximum approved by
shareholders under the
Remuneration Policy, albeit above
the level previously operated (100%
of salary). In line with previous years,
vesting will be determined based
50% on TSR performance compared
to the FTSE SmallCap index and
50% based on Adjusted EPS
performance for the financial year
ended 31 December 2024. Further
detail is given below on the targets
set for each component.
The maximum annual bonus
opportunity will continue to be 100%
of salary. Bonuses will be based 30%
on Adjusted Profit Before Tax, 50%
on Adjusted Free Cash Flow and
20% on individual strategic
objectives, including measures
linked to our ESG strategy.
Remuneration
Committee Report
Chair: Tim Surridge
Other members: Caroline Brown
and Pim Vervaat
Directors’ Report
Luceco plc Annual Report and Financial Statements 2021 85
Remuneration paid for 2021
Luceco has delivered another year
ofsignificant progress against a
backdrop of continued challenge
and uncertainty. The Group’s
performance has been maximised
bya steady pipeline of new business
wins, superior channel access and
timely actions taken to achieve
superior product availability amid
widespread supply chain delays,
enabling a further year of profitable
growth.
The annual bonus targets for 2021
were based on Adjusted Profit After
Tax, Adjusted Free Cash Flow and
individual strategic objectives.
Adjusted Profit After Tax
performance was £31.2m, and
Adjusted Free Cash Flow was
£18.8m. Adjusted Profit After Tax
exceeded the maximum target set.
Adjusted Free Cash Flow was below
the target set, due to higher working
capital as a result of unforeseen high
demand for the Group’s products,
and the unprecedented impact of
COVID-19 on global supply chains.
The CEO and CFO both delivered
excellent performance against their
individual strategic objectives
(further details are set out on
page93). The Committee therefore
determined that it was appropriate
to pay an annual bonus of 50% of
maximum.
Performance
• Adjusted Profit After Tax
£31.2m (2020: £24.0m)
• Adjusted Free Cash Flow
£18.8m (2020: £22.7m)
• Adjusted EPS 3-year CAGR
91.0% (2020: 33.6%)
• TSR 3-year performance
1
965% (2020: 133%)
The Executive Directors were
granted PSP awards in April 2019.
These awards were based 50% on
adjusted EPS performance for the
year ended 31 December 2021 and
50% on TSR performance over a
three-year period from the date of
grant. The Adjusted EPS targets
have been met in full. 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 vest in full.
The Committee believes that the
incentive outcomes are a 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, a key pillar in our
Remuneration Policy, and this
supports our decision not to
exercise any discretion.
Wider workforce engagement
As noted in the Corporate
Governance Report, I am the
designated Non-Executive Director
for workforce engagement. During
the year, I held six virtual one-to-one
sessions with employees from across
the business, representing a variety
of functions and geographical
locations. The main themes which
arose from these sessions remained
positive across the UK workforce,
with favourable comments regarding
inter-team communication and
workplace culture. Feedback from
the team in China identified the
potential for management to deliver
further improvement in these areas
as the business emerges from a
particularly busy period of trading
and this will be explored during
2022.
In addition, we undertook an
Employee Opinion Survey, the
results of which were largely
consistent with the feedback from
my sessions. I will continue to
engage with the workforce in 2022,
through physical visits to both the
UK and China operations if possible.
Further detail can be found in the
Corporate Governance Report on
page 74.
Shareholder engagement
Following the year end I wrote to
shareholders to engage on our
approach to remuneration for 2022.
I look forward to receiving your
support for our Annual
Remuneration Report at theAGM.
TIM SURRIDGE
Remuneration Committee Chair
22 March 2022
1. TSR performance for 2021 has been calculated over the three-year period between
1January 2019 and 31 December 2021.
86 Luceco plc Annual Report and Financial Statements 2021
Remuneration
Committee Report
continued
Annual Remuneration Report
The Directors’ Remuneration Report that follows has been prepared in accordance with the provisions of the 2018
UK Corporate Governance Code (“Code”), the Listing Rules, the Large and Medium-sized Companies and Groups
(Accounts and Reports) (Amendment) Regulations 2013 and the Companies Act 2006.
Remuneration “at a glance”
How our policy was implemented in 2021
Key component Summary How we implemented in 2021
Base salary
2.5% base salary increase awarded from
1January 2021, in line with increases received
by the wider workforce.
John Hornby – CEO Matt Webb – CFO
£369,500 £316,750
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 £15,837
Benefits
Benefits included car allowance/company car,
mobile phone, life insurance and private
medical insurance.
£19,839 £10,888
Annual bonus
Maximum opportunity of 100% of salary in
2021.
Performance measures for the 2021 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: 50%
£184,750
Outturn as a
percentage of
maximum: 50%
£158,375
PSP
Awards of 100% of salary were made to the
CEO and CFO respectively in 2019.
Performance measures for the 2019 award
were as follows:
• 50% TSR relative to the FTSE SmallCap,
excluding investment trusts, over three
years from the date of grant
• 50% Adjusted EPS for the year ended
31December 2021
Percentage of award vesting: the Adjusted EPS
target has been met in full. The TSR performance
will be assessed to the third anniversary of the
date of the awards and we will confirm
performance in next year’s report. TSR
performance is currently tracking such that this
portion of the award would vest in full.
CEO: £1,673,029
CFO: £1,434,025
Shareholding
requirements
200% of salary 29,648% 906%
Directors’ Report
Luceco plc Annual Report and Financial Statements 2021 87
Alignment of our policy with the UK Corporate Governance Code
The Committee considers that the current Remuneration Policy and its implementation appropriately addresses the
following principles, as set out in the UK Corporate 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.
As part of the review of the Remuneration Policy undertaken in 2019, we consulted with
shareholders in order to allow their feedback to be considered by the Committee. We also consulted
with major shareholders regarding the changes to remuneration for 2022.
In addition, Tim Surridge acts as the designated Non-Executive Director for workforce engagement
and actively engages with employees on a range of issues as part of this role.
Simplicity
In determining the remuneration framework, the Committee was mindful of avoiding complexity and
ensuring that arrangements are easy to understand.
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 by both 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 to any 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 of the 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 the outcome 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% of the annual bonus is based 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.
88 Luceco plc Annual Report and Financial Statements 2021
Remuneration
Committee Report
continued
Summary of Remuneration Policy and implementation for 2022
The Remuneration Policy for Directors (“Policy”) was put to shareholders for approval at the AGM on 4 June 2020
and applies to payments made from this date. The following provides a summary of the Policy along with details of
how the Policy will be implemented during 2022. For full details of the Policy approved by shareholders, please refer
to the 2019 Annual Report and Accounts, which can be found at www.lucecoplc.com/reports-and-information/
reports-presentations.
Base salary Maximum opportunity Performance measures Implementation in 2022
Normally reviewed annually.
Any salary increases are
normally effective from
1January.
No maximum but
increases will normally be
in line with the typical
increases awarded to
other employees in the
Group other than in
certain circumstances.
n/a Given the expansion of the
Company, the Board has reviewed
and increased the scope and
responsibilities of the CFO role
toinclude responsibility for ESG,
M&A integration, IT and Group
inventory management and has
expanded the CFO’s responsibility
of banking relationships and
investor relations. In light of the
increased size and complexity of
the organisation, his personal
performance and contribution to
the growth of the business, as well
as the CFO’s expanded role, the
Committee determined that it was
appropriate to increase his base
salary from £316,750 to £375,000
(c.18% increase). The CEO’s base
salary has also been increased
from £369,500 to £400,000 (8%
increase) to reflect the increased
size and complexity of the
organisation. This salary remains
below lower quartile compared to
other companies of a similar size
and complexity, reflecting the
CEO’s position as a major
shareholder in the business.
Pension Maximum opportunity Performance measures Implementation in 2022
Executives generally
receive a defined pension
contribution or cash
allowance in lieu of a
pension.
Maximum contribution/
allowance is 5% of salary.
n/a The CEO does not receive a
pension allowance.
The CFO will receive a pension
allowance of 5% of salary, in line
with the contribution offered to
the wider UK workforce.
Benefits Maximum opportunity Performance measures Implementation in 2022
Benefits currently include:
acompany car or car
allowance (£9,000 p.a.),
mobile phone, life insurance
and private medical
insurance.
Executive Directors
mayalso participate in
all-employee share plans
onthe same basis as
otheremployees.
No maximum level of
benefit.
n/a No change.
Directors’ Report
Luceco plc Annual Report and Financial Statements 2021 89
Annual bonus Maximum opportunity Performance measures Implementation in 2022
Normally paid in cash
following the year end.
Where an Executive has not
met the shareholding
guideline they will normally
be expected to invest 50%
of their post-tax annual
bonus into Company
shares.
The Committee may adjust
the bonus award if it does
not consider that it reflects
the underlying performance
of the Group.
Malus and clawback
provisions apply.
Maximum annual award
of 100% of base salary.
50% of the bonus pays
out for on-target
performance.
The Committee
determines performance
measures for the bonus
each year.
No less than 70% of the
annual bonus will be
based on financial
measures.
Bonus targets are
commercially sensitive
and therefore have not
been disclosed. It is
intended that targets will
be disclosed in full in the
2022 Directors’
Remuneration Report.
Award of 100% of salary.
For 2022, performance measures
are as follows:
• 30% on Adjusted Profit After Tax
• 50% on Adjusted Free
CashFlow
• 20% on individual strategic
objectives, including ESG
measures
The Committee believes the
balance of these measures
incentivises executives to continue
to grow the business and improve
profit performance, to focus on
operational efficiencies and the
generation of cash to fund growth,
and to achieve specific operational
and strategic objectives.
PSP Maximum opportunity Performance measures Implementation in 2022
Awards of conditional
shares or nil-cost options,
based on performance over
a three-year period.
Awards may also be granted
in conjunction with a
tax-advantaged Company
Share Option Plan (“CSOP”)
up to the HMRC limits
(currently £30,000) as an
“Approved PSP Award”.
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
Companyto 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 granted from 2020
onwards are subject to a
two-year post-vesting
holding period.
The Committee has the
discretion to adjust PSP
vesting levels, if it does not
consider that it reflects the
underlying performance of
the Group. Malus and
clawback provisions apply.
Maximum annual award
of 150% of base salary.
25% of the award vests
for threshold
performance.
Awards are subject to
performance measures
determined by the
Committee.
Award of 150% of salary. The PSP
award has been increased from
100% of salary in the prior year to
reflect the increase in the size and
complexity of the organisation
and to better reflect market
practice at other FTSE
SmallCapcompanies.
For 2022, 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,
with100% vesting for upper
quartile TSR
• 50% based on the compound
annual growth rate (“CAGR”)
ofAdjusted Earnings Per Share
(“EPS”) in the three-year period
ended 31 December 2024. 25%
of this portion vests if the CAGR
in this period is 5% and 100%
vests if the CAGR is 15%
The Committee believes these
measures incentivise executives
toachieve excellent profit growth
while generating above-market
returns for shareholders compared
to our peers.
90 Luceco plc Annual Report and Financial Statements 2021
Remuneration
Committee Report
continued
Share ownership
guidelines
Maximum opportunity Performance measures Implementation in 2022
Executives are expected
tobuild and maintain a
shareholding of at least
200% of base salary.
Executives are expected
toretain 50% of any shares
that vest under any share
incentive plans until this
shareholding is reached.
Following stepping down
from the Board, Executives
are expected to maintain a
shareholding of 200% of
salary for the first 12
months, and 100% of
salaryfor the subsequent
12months.
n/a n/a No change.
The Company also has a Company Share Option Plan in place. It is not intended that awards will be made to
Executive Directors under this plan during the life of the Policy.
Malus and clawback provisions
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 error
in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.
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.
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
31December 2021, neither Executive Director held any external directorship during the year.
Non-Executive Directors
Element Overview of implementation for 2022 Changes from 2021
Fees The Chair fee and the Non-Executive Director base fee were increased by 3%
from 1 January 2022. Fees are as follows:
Chairman – £105,575
Non-Executive Director base fee – £43,500
SID, Audit and Remuneration Committee Chair fee – £10,850
Increase consistent with
the rate of salary increases
given to the wider
workforce.
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.
Summary of Remuneration Policy and implementation for 2022 continued
Directors’ Report
Luceco plc Annual Report and Financial Statements 2021 91
Non-Executive Director terms of appointment
The dates of appointment for the Chairman 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
Will Hoy 1 September 2019
Tim Surridge 27 September 2016
Pim Vervaat 1 September 2020
The Chairman 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. The Chairman’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. In accordance with the principles of the Code, the Chairman, the Non-Executive Directors and the
Executive Directors are subject to voluntary re-election by shareholders. Their appointments may be terminated
inthe event of them not being re-elected by shareholders or otherwise in accordance with the Articles.
Implementation of Remuneration Policy during 2021
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 2021 and 2020.
Director (£’000) Year
Basic
salary/fees Benefits Pension
Total
fixed
Annual
bonus
Long-term
incentives
Total
variable Total
John Hornby 2021 369 20 — 389 185 1,673
1
1,858 2,247
2020 361 14 — 375 324 —
2
324 699
Matt Webb 2021 317 11 16 344 158 1,434
1
1,592 1,936
2020 309 11 16 336 278 4,525
3
4,803 5,139
Giles Brand 2021 103 — — 103 — — — 103
2020 100 — — 100 — — — 100
Caroline Brown
4
2021 50 — — 50 — — — 50
2020 54 — — 54 — — — 54
Tim Surridge 2021 53 — — 53 — — — 53
2020 52 — — 52 — — — 52
Will Hoy 2021 45 — — 45 — — — 45
2020 41 — — 41 — — — 41
Pim Vervaat
5
2021 53 — — 53 — — — 53
2020 17 — — 17 — — — 17
1. The Executive Directors were granted PSP awards in April 2019. These awards were based 50% on adjusted EPS performance for the
year ended 31 December 2021 and 50% on TSR performance over a three-year period from the date of grant. The Adjusted EPS targets
have been met in full. 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 vest in full. The value of the
award disclosed in the single figure assumes 100% of each award vests and is based on the average share price over the last three
months of the financial year ended 31 December 2021 of 345.64p. 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 increased from 77p to 345.64p. The proportion of the value disclosed in the single figure attributable to share price growth is
c.78%. The Remuneration Committee did not exercise discretion in respect of the share price appreciation.
2. In November 2018 John Hornby surrendered the PSP award granted to him on 27 July 2018. His action reflected the Group’s
performance at that time.
3. TSR performance for the 2018 PSP was assessed to the date of vesting. In the 2020 report, we estimated that vesting would be 100%
based on performance to date. The three-year TSR performance to 26 July 2021 and 22 November 2021 was 565% and 770%
respectively, which resulted in 100% of the TSR element of both awards vesting. The value of Matt Webb’s 2018 PSP award has been
restated to reflect the share price at vesting for each of the awards granted to him on 27 July 2018 and 23 November 2018 of 403p and
376p respectively. In line with the schedule 5 requirements there are no exercise gains in the period.
4. Includes fees payable in respect of Caroline Brown acting as Interim Senior Independent Director from 4 June to 1 September 2020.
5. Pim Vervaat was appointed to the Board on 1 September 2020 as a Non-Executive Director. Fees shown are from this date.
92 Luceco plc Annual Report and Financial Statements 2021
Remuneration
Committee Report
continued
Explaining the single figure
Salary
Executive Directors received a 2.5% base salary increase with effect from 1 January 2021, in line with the increase
awarded to the wider workforce.
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. The CEO does not receive a pension contribution from the Group.
Annual bonus
For the year ended 31 December 2021, 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 profit performance
30%
Adjusted Free Cash Flow To continue to focus executives on operational efficiencies
and the generation of cash to fund growth
50%
Individual strategic objectives To incentivise executives to achieve specific operational
and strategic business objectives
20%
Total 100%
Performance during 2021 against financial targets set was as follows:
Measure
Threshold
0% payout
Target
50% payout
Maximum
100% payout
Achievement
for 2021
Percentage
of bonus
payable
Adjusted Profit After Tax (30% weighting) £23.6m £26.2m £28.8m £31.2m 100%
Adjusted Free Cash Flow (50% weighting) £25.7m £28.5m £31.4m £18.8m 0%
Directors’ Report
Luceco plc Annual Report and Financial Statements 2021 93
Individual strategic objectives
The individual strategic objectives were set at the start of 2021 and are set out in the table below.
Overview of objectives and performance
Committee’s assessment
of performance
CEO For 2021 the CEO’s objectives were set around the Customer Portal and new
website; increasing factory capacity; managing supplier cost increases and
ensuring selling price increases; developing an ESG strategy and setting
measurable targets for its delivery; and mergers and acquisition strategy.
The CEO has delivered strong performance against these objectives during
theyear. He has made progress in the delivery of the Customer Portal and new
website, which is expected in H1 2022. The CEO has increased factory capacity
to deliver a key new customer contract, respond to high H1 2021 demand, and
clear order backlog from 2020. Price increases and cost inflation were well
managed, with operating margin % protected. The CEO has developed a
climate strategy, and also presented a diversity strategy to the Board. Progress
against the M&A pipeline has also been strong, with the acquisition of DW
Windsor Group.
The Committee judged
thatoverall, the CEO’s
performance against agreed
objectives had been
excellent and that 100% of
this element of the bonus
should be paid.
CFO For 2021, the CFO’s objectives were set around developing contractor insight
to better understand end user needs; defining and executing the mergers and
acquisition strategy; negotiating and arranging additional funding to support
the M&A strategy as required; developing reporting at below-Business Group
level to increase visibility and prioritise allocation of resources; and supporting
the CEO to develop an ESG strategy.
The CFO has delivered excellent performance against these objectives during
the year. He has successfully completed an exercise to better understand end
user needs, and presented the findings to the Board. The CFO has defined and
communicated the M&A strategy to the market, with progress against the M&A
pipeline strong. He has also negotiated and arranged additional funding to
support the M&A activity as necessary. The CFO has standardised reporting at
below-Business Group level, with the same reporting dataset and definitions
now used throughout the business. He has also supported the CEO to develop
the ESG strategy, ensuring compliance with TCFD, measuring Scope 3 GHG
emissions, and working with the CEO to set future GHG emission targets.
The Committee judged
thatoverall, the CFO’s
performance against agreed
objectives had been
excellent and that 100% of
this element of the bonus
should be paid.
This performance against targets set therefore resulted in an overall bonus of 50% of maximum. Bonus payments
are therefore as follows:
CEO
£184,750
CFO
£158,375
The Committee also considered the underlying financial performance of the Company during 2021, 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
the proposed payout outcome of 50% of maximum to be appropriate.
94 Luceco plc Annual Report and Financial Statements 2021
Remuneration
Committee Report
continued
Long-term incentives
The Executive Directors were granted PSP awards in April 2019. These awards were based 50% on adjusted EPS
performance for the year ended 31 December 2021 and 50% on TSR performance over a three-year period from the
date of grant. Adjusted EPS for the year ended 31 December 2021 is 20.2p and therefore this portion of the award
will vest in full. The TSR performance period is not yet completed and we will provide details of final vesting in the
2022 Annual Report. TSR is currently tracking to vest in full.
Measure Weighting Threshold Maximum Achievement
Element
vesting
Adjusted EPS for the year ending
31 December 2021
50% 8.6p 10.6p 20.2p 100%
TSR relative to the FTSE SmallCap
excluding investment trusts
50% Median Upper quartile TSR to be
measured to
9 April 2022
Currently
tracking for
full vesting
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 10 April 2019 463,269 463,269 20,774 484,043 £1,673,029
Matt Webb 10 April 2019 397,0 88 397,08 8 17,8 06 414,894 £1,434,025
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
2021 being 345.64p. The estimated value of the vesting awards has been included within the “single figure of total remuneration” table
on page 91.
Overall, the Committee considers that the Remuneration Policy has operated as it intended during 2021 and that the
pay outcomes are aligned with the experience of shareholders and other stakeholders.
Payments to former Directors (audited)
There were no payments made to former Directors during the year.
Payments for loss of office (audited)
There were no payments made for loss of office during the year.
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
Officer
Nil cost
option over
ordinary
shares of
0.05p
26 March
2021
135,347 £369,497 25% See below
Matt Webb Chief
Financial
Officer
116,025 £316,748 25% See below
1. Calculated based on a share price of 273p, 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.
Directors’ Report
Luceco plc Annual Report and Financial Statements 2021 95
Performance condition
CAGR Adjusted EPS in the three-year
period ending 31 December 2023
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 each point.
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 not on 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.
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
11 March
2022
Ordinary
shares
held at
31 December
2021
Ordinary
shares
held at
31 December
2020
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
2021
2
Requirement
met?
John
Hornby
28,484,286 31,434,286 31,549,975 963,111 — 27,440 200% 29,648% Yes
Matt
Webb
215,078 215,078 215,078 825,538 1,174,747 27,4 40 200% 906% 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 to performance conditions may count towards the guideline
onanet of tax basis. The value of Executive Directors’ shareholding has been calculated using the share price on
31December 2021 of 348.50p.
Non-Executive Directors
Ordinary
shares
held at
11 March
2022
Ordinary
shares
held at
31 December
2021
Ordinary
shares
held at
31 December
2020
Giles Brand
1
9,466,919 9,466,919 9,466,919
Caroline Brown — — —
Tim Surridge 56,731 56,731 69,231
Will Hoy 45,000 45,000 45,000
Pim Vervaat — — —
1. Giles Brand is Managing Partner of EPIC Investments LLP, which owns 35,564,260 (2020: 40,064,372) shares in the Group.
96 Luceco plc Annual Report and Financial Statements 2021
Remuneration
Committee Report
continued
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 2021. The Group has chosen these indices to reflect its size and the key sector within which it operates.
250
200
150
100
50
0
17 Oct
2016
31 Dec
2016
31 Dec
2017
31 Dec
2018
31 Dec
2020
31 Dec
2021
31 Dec
2019
Luceco
Price (p)
FTSE SmallCap ex investment trusts
FTSE All-Share Electronics and Electrical Equipment
The table below shows the CEO’s “single figure” remuneration for the nine years ended 31 December 2021.
JohnHornby was CEO for the full period.
£’000 2013 2014 2015 2016 2017 2018 2019 2020 2021
Total remuneration 219 251 314 337 365 504 726 699 2,247
Annual bonus (% of max) nil nil 50% 100% 90% 50%
LTIP vesting
1
(% of max) n/a n/a n/a n/a n/a n/a 0% n/a
2
100%
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 2019 are expected to vest at 100% of maximum.
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 in its 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 effect from 1 January 2018, the CEO accepted a temporary reduction in salary in
response to the Group’s performance at that time. With effect from 1 January 2019, the CEO’s salary reverted to
£350,000. Following salary increases in line with the increases offered to the wider workforce, with effect from
1January 2021, the CEO’s salary was £369,500.
Directors’ Report
Luceco plc Annual Report and Financial Statements 2021 97
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
2021 compared with the average percentage change for UK-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 different 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
UK
employees
2021 vs. 2020
Base salary/fees 2.5% 2.5% 2.5% (7.4)% 2.5% 8.9% 207.3% 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 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.
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 Group employees.
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
2021 and 2020.
£m
31 December
2021
31 December
2020 % change
Overall spend on pay for employees including Executive Directors
1
36.4 36.0 1.1%
Distributions to shareholders 11.2 4.9 128.6%
1. Figures are taken from note 4 of the consolidated financial statements.
98 Luceco plc Annual Report and Financial Statements 2021
Remuneration
Committee Report
continued
CEO pay ratio
For the year ended 31 December 2021, the Chief Executive’s total remuneration as a ratio against the full-time
equivalent remuneration of UK employees is detailed in the table below:
Year Method
25th
percentile
pay ratio
Median
pay ratio
75th
percentile
pay ratio
2021 Option B 99 : 1 65 : 1 36 : 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
2021 Salary £20,258 £31,000 £51,250
Total pay £22,790 £34,725 £62,146
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 was
published. This utilises data analysed within our Gender Pay Gap report, with employees at the three quartiles
identified from this analysis based on the 2020-21 snap-shot date. Their respective single figure values for 2021 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 an increase on the 2020 ratio.
The main reason for the change in the ratio from last year is the increase in variable pay received by the CEO – the
CEO’s 2019 PSP award is expected to vest at 100% of maximum, whereas the CEO surrendered his 2018 PSP award
(which would otherwise have vested in 2020). 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.
Directors’ Report
Luceco plc Annual Report and Financial Statements 2021 99
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 Executive
Directors
• 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 and Caroline Brown were also members of the Committee.
There have been two 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 2022 and to agree performance targets for 2022.
The Group Chairman is invited to attend meetings. In addition, the CEO, the CFO and the HR Manager may attend
meetings from time to time at the invitation of the Committee and provide information and support as requested.
Directors are not present when their own remuneration is being discussed.
During the remainder of 2022, 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 for 2022 as outlined in this report
• Determining reward outcomes for 2022
• Review of remuneration trends and governance developments
Remuneration Committee advisers
During the year to 31 December 2021, 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 to
executive remuneration consulting in the UK. The Committee is satisfied that the Deloitte engagement team, which
provide remuneration advice to the Committee, do not have connections with Luceco plc or its Directors that may
impair their independence. The Committee reviewed the potential for conflicts of interest 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 £50,600 for advice
provided to the Committee. Deloitte did not provide any additional services to the Group during the year.
Shareholder voting
Shareholder voting in relation to the resolution to approve the Directors’ Remuneration Report (June 2021 AGM)
andto approve the Remuneration Policy (June 2020 AGM) are as follows:
Votes for % for
Votes
against % against
Votes
withheld
To approve the Directors’ Remuneration Report 129,980,603 99.7% 428,500 0.3% 506,949
To approve the Remuneration Policy 113,292,183 91.5% 10,509,986 8.5% 4,609
TIM SURRIDGE
Remuneration Committee Chair
22 March 2022
100 Luceco plc Annual Report and Financial Statements 2021
Other
Statutory Disclosures
This report contains the additional information the Directors are required to include in the Annual Report and
Financial Statements in accordance with the Companies 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 at the references 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 94
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 103
Dividend waivers Page 103
Agreements with controlling shareholders Page 103
Results and dividends
The Group’s profit for the year
ended 31 December 2021 was £27.1m
(2020: £27.9m); details are shown
inthe Consolidated Income
Statement on page 113. The Directors
recommend the payment of a final
dividend of 5.5pperordinary share
which, subject to the approval of
shareholders at the AGM on
12May2022, will be paid on
20 May 2022 to ordinary
shareholders registered as members
of the Company at the close of
business on 8 April 2022. The final
date for elections under the
Company’s dividend reinvestment
plan will be 28 April 2022.
Adividend of 2.6p per share was
paid during the year.
The Company’s dividend policy is to
pay out between 40% and 60% of
Adjusted Earnings Per Share.
Directors
The Directors who held office during
the year were:
• John Hornby
• Matt Webb
• Giles Brand
• Caroline Brown
• Will Hoy
• Tim Surridge
• Pim Vervaat
Biographical details of the
Directorsappear on pages 70
and71. Information on the Directors’
remuneration, employee share
schemes and service contracts
isgiven in the Remuneration
Committee Report on pages 84
to99.
Appointment and replacement
ofDirectors
The rules about the appointment
and replacement of Directors are
contained in the Company’s Articles.
They provide that the Directors may
be appointed by ordinary resolution
of the shareholders or by the Board.
Directors appointed by the Board
may only hold office 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 re-election at the AGM on
12 May 2022.
Directors’ Report
Luceco plc Annual Report and Financial Statements 2021 101
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 office
The Company does not have
arrangements with any Director that
would provide compensation for loss
of office 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01 to 67.
Corporate governance
A report on corporate governance
and the Company’s compliance with
the UK Corporate Governance Code
is set out on page 69 and forms part
of this report by reference.
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 to maintain 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 £3.0m
(2020: £2.2m), of which £0.9m
(2020: £1.1m) was capitalised and
amortised.
Asset values
Property, plant and equipment is
disclosed in note 9 of the
consolidated financial statements on
pages 129 to 132. The Directors do
not believe there is any material
difference between the carrying
value and market value.
Financial instruments
An analysis of the Group’s financial
instruments, risk management
objectives and its exposure to credit
and liquidity risk are disclosed in
note 20 of the consolidated 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 60 to 65, and
the Chief Financial Officer’s Review
on pages 16 to 25.
Global operations
The Group’s executive head office,
accounting, domestic sales and
support functions are based in the
UK. The Group has four UK sites in
London, Telford, Mansfield and
Hoddesdon. The Group’s London
facility serves as the Group’s head
office, 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 has sales offices with some
support functions in Spain, Dubai,
Mexico, Ireland and South Africa.
Political donations
No political donations were made
and no political expenditure was
incurred during the year (2020: nil).
Employees
Information on how we promote
employee involvement can be found
on page 52. 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
page 51.
An explanation of the activities of
the appointed Non-Executive
Director for Workforce Engagement
can be found on page 74.
UK employees are encouraged to
participate in the Company’s
performance through our share
incentive plan, discussed on pages
149 and 150.
Greenhouse gas emissions
Details of the Group’s GHG
emissions can be found in the
carbon footprint section of the
Environment, Social and Governance
section on pages 49 and 50.
Directors’ interests and
shareoptions
During the year ended 31 December
2021, 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 95.
Details of Directors’ share options
are set out in note 22 of the
consolidated 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 effective 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. A register of conflicts or
potential conflicts is maintained and
available at Board meetings.
102 Luceco plc Annual Report and Financial Statements 2021
Directors’ liability and
indemnityinsurance
The Group maintains Directors’ and
officers’ 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
officers were in force during the year
ended 31 December 2021 and remain
in force. 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 office. The Articles may
only 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 the winding 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 of shares in the Group
(other than following a service of
notice 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 13 May 2021,
authority was given to the Directors
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 2022 AGM. No shares have
been allotted under these authorities
as at the date of this report.
At 31 December 2021, 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 2021 are
disclosed in note 23 on page 151.
Authority for the Group to
purchaseits own shares
A resolution will be proposed at the
2022 AGM that the Company be
authorised to purchase up to
approximately 10% of its ordinary
shares at the Directors’ discretion.
Ifthe resolution is passed, the new
authority will lapse at the conclusion
of the 2023 AGM or, if earlier, on
30June 2023.
At the AGM held on 13 May 2021,
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 Daily Official 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 the last 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. These authorities shall expire at
the conclusion of the 2022 AGM.
Other
Statutory Disclosures
continued
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 2021 and at 11 March 2022 (being the latest practicable date prior to the date of this
report). The shareholdings of John Hornby and Philippa Hornby also take account of known share movements that
did not trigger notifications under DTR 5.
At 11 March 2022 At 31 December 2021
Shareholder
Number of
shares held
% voting
rights
Number of
shares held
% voting
rights
EPIC Investments LLP 35,564,260 22.11 35,564,260 22.11
Deanmor Investments
1
16,000,000 9.95 16,000,000 9.95
John Hornby 9,153,134 5.69 12,103,134 7.53
Giles Brand 9,466,919 5.89 9,466,919 5.89
BlackRock Inc 9,130,728 5.68 9,779,946 6.08
Philippa Hornby 3,259,158 <3% 3,259,158 <3%
1. Deanmor Investments is an investment vehicle wholly owned by John and Philippa Hornby.
Directors’ Report
Luceco plc Annual Report and Financial Statements 2021 103
Provision of services by
substantialshareholders
Giles Brand is Luceco plc’s Chairman
and Managing Partner of EPIC
Investment Partners (“EPIC”) LLP
(formerly EPIC Private Equity LLP),
which controls EPIC Investments
LLP. Giles Brand and EPIC
Investments LLP are therefore
connected parties and significant
shareholders of the Company. Giles
Brand was paid a monthly fee of
£8,542 (£102,500 per annum)
inrespect of his services as
Chairman during 2021.
John Hornby has a service contract
with the Group, as detailed on page
90, which is available for inspection
at the AGM and at the Group’s
registered office. Further details of
his remuneration can be found in the
Remuneration Committee Report on
pages 84 to 99.
Significant agreements
The Group has an agreement with
itssignificant shareholders, EPIC
Investments LLP and Giles Brand
(“connected parties”), who
collectively exercise or control 28.0%
of the voting rights. With respect to
this agreement, both the Group and
EPIC 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 to make
themselves aware of any relevant
audit information and to establish
that the Group’s auditor is aware
ofthat information.
Appointment of auditor
On the recommendation of the
AuditCommittee, resolutions will
beproposed at the 2022 AGM to
re-appoint KPMG LLP as auditor
ofthe Group and to authorise the
AuditCommittee to set the auditor’s
remuneration.
Annual General Meeting
The Group’s AGM will be held on
12May 2022. Details of the
resolutions to be proposed at the
AGM are set out in the Notice of
Meeting, which is provided to all
shareholders.
The Directors’ Report was approved
by the Board of Directors and
authorised for issue on
22March2022.
By Order of the Board
MATT WEBB
Chief Financial Officer
Company registered number:
05254883
Registered office:
Luceco plc
Building E Stafford Park 1
Stafford Park
Telford
Shropshire TF3 3BD
104 Luceco plc Annual Report and Financial Statements 2021
Statement of Directors’
Responsibilities
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
and applicable 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 the financial
statements unless they are satisfied
that they give a true and fair view of
the state of affairs of the Group 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, the Directors 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 they have 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 sufficient 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 and other irregularities.
Under applicable law and
regulations, the Directors are also
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 differ from
legislation in other jurisdictions.
Responsibility statement of the
Directors in respect of the annual
financial report
We confirm that to the best of our
knowledge:
• the financial statements, prepared
in accordance with the applicable
set of accounting standards, give
a true and fair view of the assets,
liabilities, financial position and
profit or loss of the Company and
the undertakings included in the
consolidation taken as a whole;
and
• the Strategic Report includes a
fair review of the development
and performance of the business
and the position of the issuer and
the undertakings included in the
consolidation, taken as a whole,
together with a description of the
principal risks and uncertainties
that they face.
We consider the Annual Report and
Accounts, taken as a whole, is fair,
balanced and understandable and
provides the information necessary
for shareholders to assess the
Group’s position and performance,
business model and strategy.
JOHN HORNBY
Chief Executive Officer
MATT WEBB
Chief Financial Officer
22 March 2022
Financial Statements
Luceco plc Annual Report and Financial Statements 2021 105
1. Our opinion is unmodified
We have audited the financial statements of Luceco plc
(“the Company”) for the year ended 31 December 2021
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.
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
affairs as at 31 December 2021 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. We believe that the audit evidence we have
obtained is a sufficient 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 4 December 2014. The period of total uninterrupted
engagement is for the 8 financial years ended
31December 2021. 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
£1.7m (2020: £1.28m)
4.6% (2020: 4.5%) of the
normalised profit before tax
Coverage 96% (2020: 84%) of group profit
before tax
1
Key audit
matters
vs 2020
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
to the members of Luceco plc
106 Luceco plc Annual Report and Financial Statements 2021
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 effect on: the overall audit strategy; the
allocation of resources in the audit; and directing the efforts of the engagement team. We summarise below the
keyaudit matters, 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 80
(Audit Committee
Report), page 137
(accounting policy)
and page 137 (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: Assessing
the directors’ assumptions behind the
provision against finished goods
against available data on selling price(s)
of these goods;
• Tests of detail: Understanding the
Company’s process in calculating the
provision and calculating the inventory
provision using alternative methods,
comparing these results and
investigating differences; and
• Assessing transparency: Assessing the
adequacy of the Group’s disclosures
about the degree of estimation involved
in arriving at the provision.
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
valuation of inventory to be acceptable
(2020: acceptable).
Independent Auditor’s Report continued
to the members of Luceco plc
Financial Statements
Luceco plc Annual Report and Financial Statements 2021 107
The risk Our response
Parent company risk:
Recoverability of
parent’s debt due
from Group entities
(£77.8million; 2020:
£50.3million)
Refer to page 80
(Audit Committee
Report), page 159
(accounting policy)
and page 159 (financial
disclosures).
Low risk, high value:
The carrying amount of the intra-Group
debtor balance represents 88.3%
(2019:97%) 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 effect on our
overall parent company audit.
Our procedures included:
• Test of details: Comparing the carrying
amount of 100% of debt due from Group
entities to the total balance with the
relevant subsidiaries’ draft balance sheet
to identify whether their net assets,
being an approximation of their
minimum recoverable amount, were in
excess of their carrying amount and
assessing whether those subsidiaries
have historically been profit-making.
• Assessing subsidiary audits: Assessing
the work performed by the subsidiary
audit team i.e. KPMG China on the
subsidiary and considering the results
of that work, on the subsidiaries’ profit
and net assets.
Audits of scoped in UK subsidiaries are
performed by the Group audit team and
the audit of one scoped in overseas
subsidiary is performed by KPMG China.
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 assessment of
therecoverability of the parent’s debt
due from Group entities to be
acceptable (2020: acceptable).
108 Luceco plc Annual Report and Financial Statements 2021
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 £1.7m (2020: £1.28m), 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 on remeasurement of derivative instruments of
£0.4m (2020: determined with reference to a
benchmark of Group profit before tax, normalised to
exclude a gain of £5.3m in respect of remeasurement
ofderivative instruments) of which it represents 4.6%
(2020: 4.5%).
Materiality for the parent Company financial statements
as a whole was set at £0.34m (2020: £0.27m),
determined with reference to a benchmark of Company
total assets, of which it represents 0.41% (2020: 0.85%).
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% (2020: 65%)
ofmateriality for the financial statements as a whole,
which equates to £1.27m (2020: £0.83m) for the Group
and £0.25m (2020: £0.17m) 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 £85,000 (2020: £64,000), in addition to
other identified misstatements that warranted
reportingon qualitative grounds.
Of the Group’s 22 (2020: 17) reporting components,
wesubjected 3 (2020: 4) to full scope audits for Group
purposes and 9 (2020: 5) 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.
The components within the scope of our work
accounted for the percentages illustrated opposite.
Independent Auditor’s Report continued
to the members of Luceco plc
Normalised group profit
before tax
£36.7m (2020: £28.3m)
Group materiality
£1.7m (2020: £1.28m)
£1.7m
Whole financial
statements materiality
(2020: £1.28m)
£1.27m
Whole financial
statements materiality
(2020: £0.83m)
£1.4m
Range of materiality at
3 components (£0.3m to £1.4m)
(2020: Range of materiality at 4
components £0.13m to £1.08m)
£0.08m
Misstatements reported to the
audit committee (2020: £0.06m)
Normalised PBT
Group materiality
Group profit before
exceptional and tax
Group
total assets
100%
(2020: 100%)
Group profit after
exceptional
100%
(2020: 100%)
100%
(2020: 100%)
100%
(2020: 100%)
Group revenue
83
17
76
24
12
89
88
89
11
79
21
74
26
11
96
5
Full scope for group audit purposes 2021
Specified risk-focused audit procedures 2021
Full scope for group audit purposes 2020
Specified risk-focused audit procedures 2020
Normalised group profit
before tax
£36.7m (2020: £28.3m)
Group materiality
£1.7m (2020: £1.28m)
£1.7m
Whole financial
statements materiality
(2020: £1.28m)
£1.27m
Whole financial
statements materiality
(2020: £0.83m)
£1.4m
Range of materiality at
3 components (£0.3m to £1.4m)
(2020: Range of materiality at 4
components £0.13m to £1.08m)
£0.08m
Misstatements reported to the
audit committee (2020: £0.06m)
Normalised PBT
Group materiality
Group profit before
exceptional and tax
Group
total assets
100%
(2020: 100%)
Group profit after
exceptional
100%
(2020: 100%)
100%
(2020: 100%)
100%
(2020: 100%)
Group revenue
83
17
76
24
12
89
88
89
11
79
21
74
26
11
96
5
Full scope for group audit purposes 2021
Specified risk-focused audit procedures 2021
Full scope for group audit purposes 2020
Specified risk-focused audit procedures 2020
Financial Statements
Luceco plc Annual Report and Financial Statements 2021 109
The Group team instructed the component auditor 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 £0.3m to
£1.4m (2020: £0.13m to £1.08m), having regard to the
mix of size and risk profile of the Group across the
components The work on 1 of the 3 components
(2020:1of the 5 components) was performed by
component auditors and the rest, including the audit of
the parent Company, 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 one component (2020: none) in
China to assess the audit risk and strategy. Video and
telephone conference meetings were also held with the
component auditor. 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 Company or to cease their
operations, and as they have concluded that the Group’s
and the 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 affect the Group’s and Company’s
financial resources or ability to continue operations over
the going concern period. The risks that we considered
most likely to adversely affect the Group’s and
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
affect the liquidity or covenant compliance in the going
concern period by comparing severe, but plausible
downside scenarios that could arise from these risks
individually and collectively against the level of available
financial resources and covenants indicated by the
Group’s financial forecasts.
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 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
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 related statement under the Listing Rules set out
on pages 117 and 118 is materially consistent with the
financial statements and our audit 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
Company will continue in operation.
110 Luceco plc Annual Report and Financial Statements 2021
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, 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.
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, 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 Company has
exceeded market expectations and revenue recognition
does not involve complex judgement.
We did not identify any additional fraud risks.
We performed procedures including identifying journal
entries to test based on risk criteria and comparing the
identified entries to supporting documentation. These
included those posted by senior finance management
and those posted to unusual accounts.
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 effect 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.
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 team any instances of non-compliance with
laws and regulations that could give rise to a material
misstatement at the Group level.
The potential effect of these laws and regulations on the
financial statements varies considerably.
Firstly, the Group is subject to laws and regulations that
directly affect 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 effect on amounts or disclosures in
the financial statements, for instance through the
imposition of fines or litigation. We identified the
following areas as those most likely to have such an
effect: health and safety, anti-bribery, employment law,
and certain aspects of company legislation recognising
the financial nature of the Group’s activities. 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.
Independent Auditor’s Report continued
to the members of Luceco plc
Financial Statements
Luceco plc Annual Report and Financial Statements 2021 111
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.
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 page 67 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;
• 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 66 and 67 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
Company’s longer-term viability.
112 Luceco plc Annual Report and Financial Statements 2021
Independent Auditor’s Report continued
to the members of Luceco plc
6. We have nothing to report on the other information
in the Annual Report
continued
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 effectiveness 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.
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 104, 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.
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
22 March 2022
Financial Statements
Luceco plc Annual Report and Financial Statements 2021 113
£m Note Adjusted Adjustments
1
2021 Adjusted Adjustments
1
2020
Revenue 2 228.2 — 228 . 2 176 . 2 — 176 . 2
Cost of sales (14 3. 5) — (143 .5) (1 0 6 .0) — (1 0 6 . 0)
Gross profit 84.7 — 8 4.7 70 . 2 — 70 . 2
Distribution expenses (7. 8) — (7. 8) (8 . 6) — (8 .6)
Administrative expenses (3 7. 9) (3.7) (41 . 6) (3 1.6) (0 . 4) (32 .0)
Operating profit 3 39.0 (3. 7) 35 .3 30.0 (0 . 4) 29.6
Finance income 5 — — — — 5.3 5.3
Finance expense 5 (1 .6) (0 . 4) (2 .0) (1 .3) — (1 .3)
Net finance
income/(expense) (1 . 6) (0 . 4) (2 . 0) (1 .3) 5. 3 4 .0
Profit before tax 3 7. 4 (4 .1) 33 . 3 2 8 .7 4. 9 33 .6
Taxation 6 (6 . 2) — (6 . 2) (4 . 7) (1 . 0) (5 .7)
Profit for the year 31.2 (4 . 1) 2 7. 1 24 . 0 3.9 2 7. 9
Earnings Per Share
(pence)
Basic 7 20. 2p (2 . 6p) 1 7. 6p 15. 5p 2.5p 1 8.0p
Fully diluted 7 19. 8p (2 . 6p) 1 7. 2 p 15 . 2p 2. 5p 1 7. 7p
1. Definition of the adjustments made and reconciliations to the reported figures can be found in note 1 of the consolidated statements
on page 118.
The accompanying notes on pages 117 to 153 form an integral part of these financial statements.
Consolidated Income Statement
for the year ended 31 December 2021
Consolidated Statement of Comprehensive Income
for the year ended 31 December 2021
£m 2021 2020
Profit for the year 2 7. 1 2 7. 9
Other comprehensive income – amounts that may be reclassified to profit or loss
inthefuture:
Foreign exchange translation differences – foreign operations 0. 3 0.8
Total comprehensive income for the year 2 7. 4 28 .7
All results are from continuing operations.
The accompanying notes on pages 117 to 153 form an integral part of these financial statements.
114 Luceco plc Annual Report and Financial Statements 2021
Consolidated Balance Sheet
at 31 December 2021
£m Note 2021 2020
Non-current assets
Property, plant and equipment 9 21. 2 1 7. 8
Right-of-use assets 9 7. 8 2 .7
Intangible assets 10 32 . 9 21. 5
Investment in associate 11 2 .1 —
Financial assets held for trading 20 4. 3 1.4
Deferred tax asset 12 0.1 0. 5
68 .4 43.9
Current assets
Inventories 13 5 7. 3 3 7. 2
Trade and other receivables 14 69.7 7 1.8
Financial assets held for trading 20 0.4 4.1
Cash and cash equivalents 15 6.9 6.7
134. 3 1 19. 8
Total assets 202 .7 1 6 3 .7
Current liabilities
Trade and other payables 18 66. 5 63.6
Current tax liabilities 1.8 3 .1
Financial assets held for trading 20 0.1 0. 5
Other financial liabilities 17 2.2 1.2
70. 6 6 8.4
Non-current liabilities
Interest-bearing loans and borrowings 16 36.8 22. 2
Other financial liabilities 17 6 .0 1.6
Provisions 17 1 .6 1 .1
44.4 24 . 9
Total liabilities 115.0 93 . 3
Net assets 8 7. 7 70. 4
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 0. 2 (0 . 1)
Treasury reserve 23 (6 . 7) (6 . 8)
Retained earnings 69. 3 52.4
Total equity 8 7. 7 70. 4
The accompanying notes on pages 117 to 153 form an integral part of these financial statements.
These financial statements were approved by the Board of Directors on 22 March 2022 and were signed on its
behalfby:
JOHN HORNBY MATT WEBB
Chief Executive Officer Chief Financial Officer
Company registered number: 05254883
Financial Statements
Luceco plc Annual Report and Financial Statements 2021 115
Consolidated Statement of Changes in Equity
for the year ended 31 December 2021
£m
Share
capital
Share
premium
Translation
reserve
Retained
earnings
Treasur y
reserve
Total
equity
Balance at 1 January 2020 0.1 24 . 8 (0 . 9) 2 7. 2 (4 . 1) 4 7. 1
Total comprehensive income
Profit for the year — — — 2 7. 9 — 2 7. 9
Foreign currency translation
differences on investments in
overseas entities — — 0. 3 — — 0. 3
Currency translation differences — — 0.5 — — 0. 5
Total comprehensive income
fortheyear — — 0. 8 2 7. 9 — 28 .7
Transactions with owners
intheircapacity as owners
Dividends — — — (4 . 9) — (4 . 9)
Purchase of own shares — — — — (2.7) (2 .7)
Deferred tax on share-based
payment transactions — — — 1. 2 — 1.2
Share-based payments charge — — — 1 .0 — 1 .0
Total transactions with owners
intheir capacity as owners — — — (2 .7) (2. 7) (5 . 4)
Balance at 31 December 2020 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
differences on investments in
overseas entities — — (1 .1) — — (1 .1)
Currency translation differences — — 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 — — — (10. 2) 0.1 (1 0 .1)
Balance at 31 December 2021 0.1 24. 8 0. 2 69.3 (6 . 7) 8 7. 7
The accompanying notes on pages 117 to 153 form an integral part of these financial statements.
116 Luceco plc Annual Report and Financial Statements 2021
Consolidated Cash Flow Statement
for the year ended 31 December 2021
£m Note Adjusted Adjustments
1
2021 Adjusted Adjustments
1
2020
Cash flows from
operating activities
Profit for the year 31. 2 (4 .1) 2 7. 1 24 . 0 3.9 2 7. 9
Adjustments for:
Depreciation and
amortisation 9,10 6 .7 1.0 7. 7 6 .1 0.4 6.5
Financial income 5 — — — — (5. 3) (5 . 3)
Financial expense 5 1 .6 0.4 2 .0 1.3 — 1.3
Taxation 6 6. 2 — 6. 2 4 .7 1.0 5 .7
Loss on disposal of tangible assets — — — 0 .1 — 0.1
Increase in provisions 0. 2 — 0. 2 — — —
Share-based payments
charge 22 1.7 — 1.7 1.0 — 1 .0
Operating cash flow before
movement in working capital 4 7. 6 (2 .7) 44.9 3 7. 2 — 3 7. 2
Decrease/(increase) in trade
and other receivables 6.2 — 6.2 (23 . 5) (5 . 0) (28.5)
(Increase) in inventories (14. 6) 1.5 (1 3 .1) (4 . 8) — (4 . 8)
(Decrease)/increase in trade
and other payables (4. 2) 0.4 (3 . 8) 25. 2 — 25. 2
Cash from operations 35.0 (0 . 8) 34. 2 3 4 .1 (5 .0) 29.1
Tax paid (8 .1) — (8 .1) (5 .7) — (5 .7)
Net cash from operating activities 26.9 (0 . 8) 2 6 .1 28 .4 (5 . 0) 23.4
Cash flows from investing activities
Acquisition of property, plant
and equipment (5. 7) — (5. 7) (3 .3) — (3.3)
Acquisition of other intangible assets (0. 9) — (0. 9) (1 .1) — (1 .1)
Disposal of tangible assets 0. 2 — 0. 2 — — —
Acquisition of subsidiary 26 (16. 3) — (1 6. 3) — — —
Investment in associate 11 (2 .1) — (2 .1) — — —
Net cash used in investing activities (24 . 8) — (24 . 8) (4 . 4) — (4 . 4)
Cash flows from financing activities
Origination/(repayment)
ofborrowings 14. 5 — 14 . 5 (3 . 8) — (3 . 8)
Interest paid (1 .7) — (1.7) (1. 3) — (1 .3)
Dividends paid (11 . 2) — (11 . 2) (4 . 9) — (4 . 9)
Finance lease liabilities 17 (1 . 4) — (1 .4) (1.1) — (1 .1)
Purchase of own shares 23 (1 .3) — (1 .3) (2.7) — (2 .7)
Net cash used in financing activities (1 .1) — (1 .1) (13 . 8) — (13 . 8)
Net increase in cash and cash
equivalents 1 .0 (0 . 8) 0. 2 1 0. 2 (5 .0) 5. 2
Cash and cash equivalents
at 1 January 6.7 1.4
Effect of exchange rate
fluctuations on cash held — 0.1
Cash and cash equivalents
at31 December 15 6.9 6 .7
1. Definition of the adjustments made and reconciliations to the reported figures can be found in note 1 of the consolidated statements
on page 118.
The Group has adjusted the cash flow in respect of trade receivables by £nil (2020: £5 .0m) reflecting the repayment
of non-recourse debt factoring. There was no non-recourse debt factoring at either 31 December 2020 or
31December 2021. The accompanying notes on pages 117 to 153 form an integral part of these financial statements. 
Financial Statements
Luceco plc Annual Report and Financial Statements 2021 117
Notes to the Consolidated Financial Statements
for the year ended 31 December 2021
1 Introduction, other judgements and estimates, APMs and adjustments
Overview
Luceco plc (“Company”) is a company incorporated and domiciled in the UK under the Companies Act 2006.
TheCompany’s registered office is Building E Stafford Park 1, Stafford Park, Telford TF3 3BD. The Group is
primarilyinvolved in trily involved in the manufacturing and distribution of wiring accessories, LED Lighting and Portable Power
products toglots to global markets.
Basis of accounting
The Group financial statements have been prepared and approved by the Directors in accordance with international
accounting standards in accordance with UK-adopted international accounting standards (“UK-adopted IFRS”).
TheCompany has elected to prepare its Parent Company financial statements in accordance with FRS 102; these
arepresented on pages 154 to 159. On publishing the Parent Company financial statements here, together with the
Group financial statements, the Company is taking advantage of the exemption in s408 of the Companies Act 2006
not to present its individual income statement and related notes that form a part of these approved financial
statements.
Basis of preparation
The financial statements are prepared on the historical cost basis except for derivative financial instruments and
financial instruments that are reported at fair value. The consolidated financial statements include the accounts
ofthe Company and all entities controlled by the Company, its subsidiaries, (together referred to as “the Group”)
from the date control commences until the date that control ceases. Control is achieved where the Company: has
power over the investee, is exposed or has rights to a variable return from the involvement with the investee and/or
has the ability to use its power to affect its returns. The purchase method is used to account for the acquisition of
subsidiaries. These financial statements are presented in million pounds sterling, which is the functional currency
ofthe Group and Parent Company.
Accounting policy
Non-statutory measures of performance
The Group will review the financial statements to identify if there are any large/unusual items or transactions that
are required to be removed to reflect the underlying business operations and these are applied consistently over
time. These large/unusual items that have been identified are referred to as “Adjustments” and are detailed on
pages 118 to 123.
The principal accounting policies are set out in the notes to the consolidated financial statements and have,
unless otherwise stated, been applied consistently to all periods presented in these consolidated financial
statements.
Going concern
The Directors have concluded that it is reasonable to adopt a going concern basis in preparing the financial
statements. This is based on an expectation that the Company and the Group have adequate resources to continue
in operational existence for at least 12 months from the date of signing these accounts. The Group has reported a
profit before tax of £33.3m for the year to 31 December 2021 (2020: £33.6m), has net current assets of £63.7m
(2020: £51.4m) and net assets of £87.7m (2020: £70.4m), net debt of £38.1m (2020: £18.3m) and cash generated
from operations of £26.1m (2020: £23.4m). The bank facilities mature on 30 September 2024 as detailed below:
The capital resources at the Group’s disposal at 31 December 2021 and 28 February 2022 were as follows:
• A revolving credit facility of £80.0m, £36.8m drawn at 31 December 2021 and £36.8m drawn at 28 February 2022
The revolving credit facility requires the Group to comply with the following quarterly financial covenants:
• Closing Covenant Net Debt of no more than 3.0 times Covenant EBITDA for the preceding 12-month period
• Covenant EBITDA of no less than 4.0 times Covenant Net Finance Expense for the preceding 12-month period
118 Luceco plc Annual Report and Financial Statements 2021
Notes to the Consolidated Financial Statements continued
for the year ended 31 December 2021
1 Introduction, other judgements and estimates, APMs and adjustments continued
Going concern continued
The Directors ran scenario tests on the severe but plausible downside case. The assumptions in this scenario were as
follows: concentration risks with associated operations (25% reduction in revenue for three months followed by 50%
reduction for three months and 20% increase in shipping costs during the period) and macroeconomic, political and
environmental risks (18-month recession with a 10% reduction in revenue and gross profit). These severe but
plausible downside scenarios do not lead to any breach in covenants nor any breach in facility. All modelling has
been conducted without any mitigation activity. There have been no changes to post balance sheet liquidity
positions.
The Directors are confident that the Group and Company will have sufficient funds to continue to meet its liabilities
as they fall due for at least 12 months from the date of approval of the financial statements and therefore have
prepared the financial statements on a going concern basis.
Estimates and judgements
The Directors do not consider there to be any key estimates or key judgements in preparing these financial
statements.
Statutory and non-statutory measures of performance
The financial statements contain all the information and disclosures required by the relevant accounting standards
and regulatory obligations that apply to the Group.
The Group’s performance is assessed using a number of financial measures which are not defined under IFRS (the
financial reporting framework applied by the Group). Management uses the adjusted or alternative performance
measures (“APMs”) as part of their internal financial performance monitoring and when assessing the future impact
of operating decisions. The APMs disclose the adjusted performance of the Group excluding specific items, although
the IFRS defined measures should also be used when users of this document assess the Group’s performance. The
alternative performance measures allow a year-on-year comparison and identification of core business trends by
removing the impact of items occurring either outside the normal course of operations or as a result of intermittent
activities such as a corporate acquisition. The Group separately reports acquisition costs and other specific items in
the income statement which, in the Directors’ judgement, need to be disclosed separately by virtue of their nature,
size and incidence in order for users of the financial statements to obtain a balanced view of the financial
information and the underlying performance of the business.
In following the guidelines on alternative performance measures issued by the European Securities and Markets
Authorities, the Group has included a Consolidated Income Statement and Consolidated Cash Flow Statement that
have both statutory and adjusted performance measures.
The measures used in the Chief Financial Officer’s Review are defined in the following table and the principles to
identify adjusting items have been applied on a basis consistent with previous years.
Financial Statements
Luceco plc Annual Report and Financial Statements 2021 119
Nature of
measure
Related IFRS
measure
Related IFRS
source Definition
Use/relevance
Adjusted Gross
Profit Margin
• Gross profit
margin
• Consolidated
Income Statement
• Based on the related IFRS
measure but excluding the
adjusting items. A
breakdown of the adjusting
items from 2021 and 2020,
which reconciles the
adjusted measures to
statutory figures, can be
found on pages 122 and 123
• Allows management to
assess the performance of
the business after removing
large/unusual items or
transactions that are not
reflective of the underlying
business operations
Adjusted
Operating Costs
• Operating gross
profit less
operating profit
• Consolidated
Income Statement
Adjusted
Operating Profit
• Operating profit • Consolidated
Income Statement
Adjusted Profit
for the Year
• Profit for the
year (profit after
tax)
• Consolidated
Income Statement
Adjusted Basic
EPS
• Basic EPS • Consolidated
Income Statement
Constant
Currency
• Current period reviewed
translated at the average
exchange rate of the prior
year
• Allows management to
identify the relative
year-on-year performance
of the business by removing
the impact of currency
movements that are outside
of management’s control
EBITDA • Operating profit • Consolidated
Income Statement
• Consolidated earnings
before interest, tax,
depreciation and
amortisation
• Provides management with
an approximation of cash
generation from the Group’s
operational activities
Adjusted
EBITDA
• Operating profit • Consolidated
Income Statement
• Consolidated earnings
before interest, tax,
depreciation and
amortisation and the
adjusting items excluded
from Adjusted Operating
Profit aside from any
amortisation or
depreciation “contained
therein”
• Provides management with
an approximation of cash
generation from the Group’s
underlying operational
activities
Covenant
EBITDA
• Operating profit • Consolidated
Income Statement
• As above definition of
“Adjusted EBITDA” but
including EBITDA generated
from acquisitions between
1January and the date of
acquisition
• Aligns with the definition of
EBITDA used for bank
covenant testing
Contribution
profit
• Operating profit
and operating
costs
• Consolidated
Income Statement
• Contribution profit is after
allocation of directly
attributable adjusted
operating expenses for each
operating segment
• Provides management with
an assessment of
profitability by operating
segment
Contribution
margin
• Operating profit
and operating
costs
• Consolidated
Income Statement
• Contribution margin is
contribution profit, as
above, divided by revenue
for each operating segment
• Provides management with
an assessment of margin by
operating segment
120 Luceco plc Annual Report and Financial Statements 2021
Notes to the Consolidated Financial Statements continued
for the year ended 31 December 2021
Nature of
measure
Related IFRS
measure
Related IFRS
source Definition
Use/relevance
Adjusted
Operating Cash
Flow
• Cash flow from
operations
• Consolidated Cash
Flow Statement
• Adjusted Operating Cash
Flow is the cash from
operations but excluding
the cash impact of the
adjusting items excluded
from Adjusted Operating
Profit
• Provides management with
an indication of the amount
of cash available for
discretionary investment
Adjusted Free
Cash Flow
• Net increase/
(decrease) in
cash and cash
equivalents
• Consolidated Cash
Flow Statement
• Adjusted Free Cash Flow is
calculated as Adjusted
Operating Cash Flow less
cash flows in respect of
investing activities, interest
and taxes paid
• Provides management with
an indication of the free cash
generated by the business
for return to shareholders or
reinvestment in M&A activity
Adjusted
Operating Cash
Conversion
• None • Consolidated Cash
Flow Statement
• Consolidated
Income Statement
• Operating Cash Conversion
is defined as Adjusted
Operating Cash Flow
divided by Adjusted
Operating Profit
• Allows management to
monitor the conversion of
operating profit into cash
Return on
Capital Invested
(“ROCI”)
• None • Operating profit
• Net assets
• Adjusted Operating Profit
divided into the sum of net
assets, net debt and
non-recourse debt factoring
(average for the last two
years) expressed as a
percentage
• To provide an assessment of
how profitably capital is
being deployed in the
business
The following tables illustrate how alternative performance measures are calculated:
Adjusted EBITDA
£m 2021 2020
Adjusted Operating Profit 39.0 30.0
Adjusted Depreciation and Amortisation 6.7 6.1
Adjusted EBITDA 45.7 36.1
Covenant EBITDA
£m 2021 2020
Adjusted EBITDA 45.7 36.1
EBITDA from acquisitions from 1 January 2021 to the date of acquisition 1.2 —
Covenant EBITDA 46.9 36.1
Adjusted Operating Cash Conversion
£m 2021 2020
Cash from operations (from Consolidated Cash Flow Statement) 34.2 29.1
Adjustments to cash from operations (from Consolidated Cash Flow Statement) 0.8 5.0
Adjusted Operating Cash Flow 35.0 34.1
Adjusted Operating Profit 39.0 30.0
Adjusted Operating Cash Conversion 89.7% 113.7%
1 Introduction, other judgements and estimates, APMs and adjustments
continued
Statutory and non-statutory measures of performance continued
Financial Statements
Luceco plc Annual Report and Financial Statements 2021 121
Adjusted Net Cash Flow as % of revenue
2021 2020
Adjusted Free Cash Flow (see below) 18.8 22.7
EBT Purchases (1.3) (2.7)
Dividends (11.2) (4.9)
Adjusted Net Cash Flow 6.3 15.1
Revenue 228.2 176.2
Adjusted Net Cash Flow as % of revenue 2.8% 8.6%
Adjusted Free Cash Flow
£m 2021 2020
Adjusted Operating Cash Flow (see table on previous page) 35.0 34.1
Net cash used in investing activities excluding acquisitions
(from Consolidated Cash Flow Statement)
(6.4) (4.4)
Interest paid (from Consolidated Cash Flow Statement) (1.7) (1.3)
Tax paid (from Consolidated Cash Flow Statement) (8.1) (5.7)
Adjusted Free Cash Flow 18.8 22.7
Revenue 228.2 176.2
Adjusted Free Cash Flow as % revenue 8.2% 12.9%
Return on Capital Investment
£m 2021 2020
Net assets 87.7 70.4
Net debt (see note 16) 38.1 18.3
Capital invested 125.8 88.7
Average capital invested (from last two years) 107.3 84.1
Adjusted Operating Profit (from above) 39.0 30.0
Return on Capital Invested (Adjusted Operating Profit/average capital invested) 36.4% 35.7%
122 Luceco plc Annual Report and Financial Statements 2021
Notes to the Consolidated Financial Statements continued
for the year ended 31 December 2021
1 Introduction, other judgements and estimates, APMs and adjustments continued
Statutory and non-statutory measures of performance continued
Additional metrics
Inventory days – calculated by reference to the closing stock versus the cost of sales over a three-month period.
Debtor days – the “countback” method is used to calculate debtor days by reference to revenue over the prior
period. Creditor days – the “countback” method is used to calculate creditor days by reference to purchases over
the prior period. Organic revenue growth is calculated per the reconciliation on page 22 of the Chief Financial
Officer’s Review.
The following table reconciles all adjustments from the reported to the adjusted figures in the income statement:
£m 2021
Amortisation
of acquired
intangibles
and related
acquisition
costs
1
Re-
measurement
to fair value
of hedging
portfolio
2
Restructuring
3
2021
Adjustments
2021
Adjusted
Revenue 228.2 — — — — 228.2
Cost of sales (143.5) — — — — (143.5)
Gross profit 84.7 — — — — 84.7
Distribution expenses (7.8) — — — — (7. 8)
Administrative expenses (41.6) 1.4 — 2.3 3.7 (37.9)
Operating profit 35.3 1.4 — 2.3 3.7 39.0
Finance income — — — — — —
Finance expense (2.0) — 0.4 — 0.4 (1.6)
Net finance (expense)/income (2.0) — 0.4 — 0.4 (1.6)
Profit before tax 33.3 1.4 0.4 2.3 4.1 37.4
Taxation (6.2) 0.1 (0.1) — — (6.2)
Profit for the year 27.1 1.5 0.3 2.3 4.1 31.2
Gross margin %
(gross profit/revenue) 37.1% 37.1%
1. Relating to Kingfisher Lighting and DW Windsor.
2. Relating to currency hedges.
3. Relating to the closure of Germany and France operations.
Financial Statements
Luceco plc Annual Report and Financial Statements 2021 123
£m 2020
Amortisation
of acquired
intangibles
and related
acquisition
costs
1
Re-
measurement
to fair
value of
hedging
portfolio
2
2020
Adjustments
2020
Adjusted
Revenue 176.2 — — — 176.2
Cost of sales (106.0) — — — (106.0)
Gross profit 70.2 — — — 70.2
Distribution expenses (8.6) — — — (8.6)
Administrative expenses (32.0) 0.4 — 0.4 (31.6)
Operating profit 29.6 0.4 — 0.4 30.0
Finance income 5.3 — (5.3) (5.3) —
Finance expense (1.3) — — — (1.3)
Net finance (expense)/income 4.0 — (5.3) (5.3) (1.3)
Profit before tax 33.6 0.4 (5.3) (4.9) 28.7
Taxation (5.7) — 1.0 1.0 (4.7)
Profit for the year 27.9 0.4 (4.3) (3.9) 24.0
Gross margin % (gross profit/revenue) 39.8% 39.8%
1. Relating to Kingfisher Lighting.
2. Relating to currency hedges.
Standards and interpretations issued
The following UK adopted IFRS have been issued but have not been applied in these financial statements.
Theiradoption is not expected to have a material effect on the financial statements, unless otherwise indicated,
from1 January 2021:
• Amendments to IAS 1 Presentation of Financial Statements: Classification of Liabilities as Current or Non-current
• Amendments to References to the Conceptual Framework in IFRS 3
• Amendments to IAS 16: Property, Plant and Equipment – Proceeds before Intended Use
• Annual Improvements to IFRS Standards 2018-2020
• Amendments to IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors to introduce a new
definition for accounting estimates
• Amendments to IAS 1 Presentation of Financial Statements and IFRS Practice Statements 2 Making Materiality
Judgements
• Amendments to IAS 12 Income Taxes – Deferred Tax Related to Assets and Liabilities Arising from a Single
Transaction
124 Luceco plc Annual Report and Financial Statements 2021
Notes to the Consolidated Financial Statements continued
for the year ended 31 December 2021
2 Operating segments
Accounting policy
Revenue
Revenue is recognised when the Group has satisfied its performance obligations to the customer and the
customer has obtained control of the goods and services being transferred.
The following table summarises the nature, amounts and timing and uncertainty of revenue which follows our
segmental splits of revenue.
Segment Nature of revenue
Amount (as a percentage
of total revenue)
Timing of satisfaction of
performance obligations
Wiring Accessories Revenue from the supply
of goods in the form of
Wiring Accessories to
trade and specialists.
46% Largely when delivered to the
customer. Free on Board
(“FOB”) when legal title passes
to the customer (when the
goods are on the ship).
LED Lighting Revenue from the supply
of commercial and
domestic lighting solutions.
28% Largely when delivered to the
customer. FOB when legal title
passes to the customer (when
the goods are on the ship).
Portable Power Revenue from the supply
of goods in the form of
Portable Power to retailers
and wholesalers.
Revenue from the supply
of Ross-branded
audio-visual products.
26% Largely when delivered to the
customer. FOB when legal title
passes to the customer (when
the goods are on the ship).
Customer rebates
Where the Group has rebate agreements with its customers, the value of customer rebates paid or payable,
calculated in accordance with the agreements in place based on the most likely outcome, is deducted from
turnover in the year in which the rebate is earned.
The Group’s principal activities are in the manufacturing and supply of Wiring Accessories, LED Lighting and
Portable Power equipment. For the purposes of management reporting to the Chief Operating Decision-Maker (the
Board), the Group consists of three operating segments which are the product categories that the Group
manufactures and distributes. TheBoard does not review the Group’s assets and liabilities on a segmental basis and,
therefore, no segmental disclosure is included. Inter-segment sales are not material. Revenue and operating profit
are reported under IFRS8Operating Segments.
£m
Adjusted
2021 Adjustments
Reported
2021
Adjusted
2020 Adjustments
Reported
2020
Revenue
Wiring Accessories 104.5 — 104.5 81.3 — 81.3
LED Lighting 63.2 — 63.2 49.5 — 49.5
Portable Power 60.5 — 60.5 45.4 — 45.4
228.2 — 228.2 176.2 — 176.2
Operating profit
Wiring Accessories 29.2 — 29.2 23.0 — 23.0
LED Lighting 3.4 (3.3) 0.1 2.8 (0.4) 2.4
Portable Power 6.4 (0.4) 6.0 4.2 — 4.2
39.0 (3.7) 35.3 30.0 (0.4) 29.6
Financial Statements
Luceco plc Annual Report and Financial Statements 2021 125
The following table provides an analysis of adjustments made to each segment.
2021 2020
£m Total
Amortisation
of acquired
intangibles
and related
costs
1
Restructuring
2
Total
Amortisation
of acquired
intangibles
and related
costs
1
Cost of sales
Wiring Accessories — — — — —
LED Lighting — — — — —
Portable Power — — — — —
Gross profit — — — — —
Administrative expenses
Wiring Accessories — — — — —
LED Lighting (3.3) (1.4) (1.9) (0.4) (0.4)
Portable Power (0.4) — (0.4) — —
Total (3.7) (1.4) (2.3) (0.4) (0.4)
Operating profit (3.7) (1.4) (2.3) (0.4) (0.4)
Operating profit
Wiring Accessories — — — — —
LED Lighting (3.3) (1.4) (1.9) (0.4) (0.4)
Portable Power (0.4) — (0.4) — —
Operating profit (3.7) (1.4) (2.3) (0.4) (0.4)
1. Relating to Kingfisher Lighting in 2020 and Kingfisher Lighting and DW Windsor in 2021.
2. Restructuring costs relating to the closure of Germany and France operations in 2021.
Revenue by location of customer
£m 2021 2020
UK 181.2 140.3
Europe 24.0 18.4
Middle East and Africa 7.6 7.0
Americas 10.6 6.7
Asia Pacific 4.8 3.8
Total revenue 228.2 176.2
Revenues exceeded 10% or more of total revenue for one customer. This customer’s revenue represents 30% (2020:
31%) of total revenue and is across all operating segments.
Non-current assets by location
£m 2021 2020
UK 51.1 29.2
China 16.3 14.1
Other 1.0 0.6
Non-current assets 68.4 43.9
126 Luceco plc Annual Report and Financial Statements 2021
Notes to the Consolidated Financial Statements continued
for the year ended 31 December 2021
3 Expenses and auditor’s remuneration
Included in the Consolidated Income Statement are the following:
£m 2021 2020
Research and development costs expensed as incurred 3.0 2.2
Depreciation of property, plant and equipment and right-of-use assets 5.3 4.3
Amortisation of intangible assets 2.4 2.2
Auditor’s remuneration:
£m 2021 2020
Audit of these financial statements 0.3 0.3
Amounts receivable by the auditor and its associates in respect of:
Additional amounts in respect of the audit of prior year’s financial statements 0.1 0.1
Audit of financial statements of subsidiaries pursuant to legislation and interim review 0.1 0.1
Total 0.5 0.5
4 Staff numbers and costs
The average monthly number of employees, including the Directors, during the year was as follows:
Number of employees
£m 2021 2020
Administration and support 473 433
Production 1,343 1,218
1,816 1,651
The aggregate remuneration:
£m 2021 2020
Wages and salaries 29.7 32.1
Social security costs 4.2 2.2
Other pension costs 0.8 0.7
Share-based payment expense (note 22) 1.7 1.0
Total staff costs 36.4 36.0
5 Net finance (expense)/income
Accounting policy
Finance income and expenses
The Group’s finance income and finance expense include: interest income, interest expense, dividend income and
the financial currency gain or loss on financial assets and financial liabilities.
Interest income or expense is recognised using the effective interest method.
£m 2021 2020
Finance income:
Net gain on remeasurement to fair value of financial instruments — 5.3
Finance expense:
Net loss on remeasurement to fair value of financial instruments (0.4) —
Interest on finance leases (0.1) —
Interest on bank borrowings (1.5) (1.3)
Net finance (expense)/income (2.0) 4.0
Financial Statements
Luceco plc Annual Report and Financial Statements 2021 127
6 Taxation
Accounting policy
The tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported
in the income statement because it excludes items of income and expense that are taxable or deductible in other
years and it further excludes items which are never taxable or deductible. The Group’s liability for current tax is
calculated using tax rates that have been enacted or substantially enacted by the balance sheet date.
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of
assets and liabilities in the financial statements and the corresponding tax bases used in the computation of
taxable profit. This is accounted for using the balance sheet liability method.
Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are
recognised to the extent that it is probable that taxable profits will be available against which deductible
temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference
arises from goodwill or from the initial recognition of other assets and liabilities in a transaction (other than in a
business combination) that affects neither the taxable profit nor the accounting profit.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or
the asset realised based on tax laws and rates that have been enacted or substantially enacted at the balance
sheet date. Deferred tax is charged or credited in the income statement, except when it relates to items charged
or credited directly to equity, in which case the deferred tax is also dealt within equity.
£m 2021 2020
Current tax expense
Current year – UK 5.4 5.4
Current year – overseas 0.6 1.0
Adjustment in respect of prior years 0.6 (0.4)
Current tax expense 6.6 6.0
Deferred tax (credit)/expense
Origination and reversal of temporary differences (0.6) (0.1)
Adjustment in respect of prior years 0.2 (0.2)
Deferred tax (credit)/expense (0.4) (0.3)
Total tax expense 6.2 5.7
Reconciliation of effective tax rate
£m 2021 2020
Profit for the year 27.1 27.9
Total tax expense 6.2 5.7
Profit before taxation 33.3 33.6
Tax using the UK corporation tax rate of 19.0% (2020: 19.0%) 6.3 6.4
Effect of tax rates in overseas jurisdictions — 0.1
Tax credits (0.4) —
Non-deductible expenses 0.1 0.3
Adjustment in respect of previous periods 0.5 (0.6)
Effect of rate change in calculation of deferred tax 0.2 —
Deferred tax on share-based payments (0.3) (0.3)
Utilisation of unrecognised overseas brought forward tax losses (0.2) (0.2)
Total tax expense 6.2 5.7
128 Luceco plc Annual Report and Financial Statements 2021
Notes to the Consolidated Financial Statements continued
for the year ended 31 December 2021
6 Taxation continued
Reconciliation of effective tax rate continued
A tax reduction of £0.2m within overseas tax occurred in the period due to the utilisation of brought forward
overseas trading losses previously not recognised as a deferred tax asset due to it being deemed unlikely that they
could be utilised. The adjustment in respect of previous periods of £0.5m relates to differences between the Group’s
tax provisions at the date of the accounts being signed and the completion of the final Group’s tax returns.
Factors which may affect future current and total tax charges
An increase in the UK corporation tax rate from 19% to 25% (effective 1 April 2023) was substantively enacted
on24May2021. This will increase the Company’s future current tax charge accordingly. The deferred tax liability
at31December 2021 has been calculated based on these rates, reflecting the expected timing of reversal of the
relatedtemporary/timing differences (2020: 19%).
7 Earnings Per Share
£m 2021 2020
Earnings for calculating basic Earnings Per Share 27.1 27. 9
Adjusted for:
Restructuring of European operations 2.3 —
Amortisation of acquired intangibles and related acquisition costs 1.4 0.4
Remeasurement to fair value of hedging portfolio 0.4 (5.3)
Income tax on above items — 1.0
Adjusted earnings for calculating Adjusted Basic Earnings Per Share 31.2 24.0
Number million 2021 2020
Weighted average number of ordinary shares
Basic 154.1 154.7
Dilutive effect of share options on potential ordinary shares 3.8 2.7
Diluted 157.9 1 57.4
Pence 2021 2020
Basic Earnings Per Share 17.6 18.0
Diluted Earnings Per Share 17.2 17.7
Adjusted Basic Earnings Per Share 20.2 15.5
Adjusted Diluted Earnings Per Share 19.8 15.2
8 Dividends
Accounting policy
Dividends proposed by the Board of Directors and unpaid at the period end are not recognised in the financial
statements until they have been approved by shareholders at the Annual General Meeting.
Amounts were recognised in the financial statements as distributions to equity shareholders as follows:
£m 2021 2020
Final dividend for the year ended 31 December 2020 of 4.7p
(2019: 1.7p) per ordinary share 7.2 2.6
Interim dividend for the year ended 31 December 2021 of 2.6p
(2020: 1.5p) per ordinary share 4.0 2.3
Total dividend recognised during the year 11.2 4.9
The Board is proposing a final dividend for the year ended 31 December 2021 of 5.5p which is an £8.5m cash
payment (2020: £7.2m).
Financial Statements
Luceco plc Annual Report and Financial Statements 2021 129
9 Property, plant and equipment
Accounting policy
Owned assets
Property, plant and equipment are stated at cost or deemed cost, less accumulated depreciation and
accumulated impairment losses.
Depreciation is charged to the Consolidated Income Statement on a straight-line basis over the estimated useful
lives of each part of an item of property, plant and equipment. Land is not depreciated. The estimated useful lives
are as follows:
Buildings over the lease term, to a maximum of 50 years
Plant and equipment three to ten years
Fixtures and fittings one to ten years
Motor vehicles four years
Tooling two to five years
Work in progress no depreciation until the asset comes into economic use
Depreciation methods, useful lives and residual values are reviewed at each balance sheet date.
Leased assets
Identifying a lease: At the inception of a contract, the Group assesses whether a contract is, or contains, a lease. A
contract is, or contains, a lease if it conveys the right to control the use of an identified asset for a period of time
in exchange for consideration. Control is conveyed where the Group has both the right to direct the identified
asset’s use and to obtain substantially all the economic benefits from that use. For each lease or lease
component, the Group follows the lease accounting model as per IFRS 16 Leases, unless the recognition
exemptions can be used.
Recognition exemptions: The Group has elected to account for lease payments as an expense on a straight-line
basis over the lease term or another systematic basis for the following two types of leases:
i) leases with a lease term of 12 months or less and containing no purchase options – this election is made by
class of underlying asset
ii) leases where the underlying asset has a low value when new – this election can be made on a lease-by-lease
basis
The value of leases less than 12 months or low value was £0.1m (2020: £0.1m).
130 Luceco plc Annual Report and Financial Statements 2021
Notes to the Consolidated Financial Statements continued
for the year ended 31 December 2021
9 Property, plant and equipment continued
Lessee accounting: For leases acquired in a business combination, the Company measures the acquired lease
liability at the present value of the remaining lease payments, as if the acquired lease were a new lease at the
acquisition date. The right-of-use asset is measured at acquisition at the same amount as the lease liability,
adjusted to reflect favourable or unfavourable terms of the lease when compared with market terms. Upon lease
commencement the Group recognises a right-of-use asset and a lease liability.
Initial measurement: The right-of-use asset is initially measured at cost, which comprises the initial amount of the
lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct
costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying
asset or the site on which it is located, less any lease incentives received. The lease liability is initially measured at
the present value of the lease payments payable over the lease term, discounted at the rate implicit in the lease if
that can be readily determined. If that rate cannot be readily determined, the Group uses the incremental
borrowing rate. Variable lease payments that depend on an index or a rate are included in the initial measurement
of the lease liability and are initially measured using the index or rate as at the commencement date. Amounts
expected to be payable by the lessee under residual value guarantees are also included. Variable lease payments
that are not included in the measurement of the lease liability are recognised in profit or loss in the period in
which the event or condition that triggers payment occurs, unless the costs are included in the carrying amount
of another asset under another accounting standard.
Subsequent measurement: After lease commencement, the Group measures right-of-use assets using a cost
model. Under the cost model a right-of-use asset is measured at cost less accumulated depreciation and
accumulated impairment. The lease liability is subsequently remeasured to reflect changes in: the lease term
(using a revised discount rate), the assessment of a purchase option (using a revised discount rate), the amounts
expected to be payable under residual value guarantees (using an unchanged discount rate), future lease
payments resulting from a change in an index or a rate used to determine those payments (using an unchanged
discount rate). The remeasurements are matched by adjustments to the right-of-use asset. Lease modifications
may also prompt remeasurement of the lease liability unless they are determined to be separate leases.
Depreciation: The right-of-use asset is subsequently depreciated using the straight-line method from the
commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of lease term.
The estimated useful lives of right-of-use assets are determined on the same basis as those of property, plant
andequipment.
Financial Statements
Luceco plc Annual Report and Financial Statements 2021 131
£m
Land and
buildings
Plant and
equipment
Fixtures
and fittings
Motor
vehicles Tooling
Work in
progress Total
Cost
Balance at
1 January 2020 14.9 11.0 2.2 — 9.6 0.6 38.3
Reclassification (0.5) 0.4 — 0.2 — — 0.1
Additions — 1.3 — — 1.2 0.8 3.3
Disposals — (0.2) (0.1) — (0.5) — (0.8)
Effect of movements
inforeign exchange 0.4 0.1 — — 0.2 — 0.7
Balance at
31 December 2020 14.8 12.6 2.1 0.2 10.5 1.4 41.6
Reclassification — (0.1) — — 0.1 — —
Acquisitions through
business combinations
(note 26) — 0.1 — — 0.8 — 0.9
Additions 0.4 2.9 0.2 — 1.5 0.7 5.7
Disposals — (0.6) (0.1) — (0.4) — (1.1)
Effect of movements
inforeign exchange 0.4 0.2 0.1 — 0.2 0.1 1.0
Balance at
31December 2021 15.6 15.1 2.3 0.2 12.7 2.2 48.1
Depreciation
Balance at
1 January 2020 4.2 7.1 1.8 — 8.2 — 21.3
Transfers (0.3) (0.2) — 0.2 0.1 — (0.2)
Depreciation charge
forthe year 0.5 1.5 0.2 — 0.9 — 3.1
Disposals — (0.2) (0.1) — (0.4) — (0.7)
Effect of movements
inforeign exchange 0.1 0.1 — — 0.1 — 0.3
Balance at
31 December 2020 4.5 8.3 1.9 0.2 8.9 — 23.8
Transfers — (0.1) — — 0.1 — —
Depreciation charge
forthe year 0.6 1.8 0.1 — 1.0 — 3.5
Disposals — (0.5) (0.1) — (0.3) — (0.9)
Effect of movements
inforeign exchange 0.1 0.1 0.1 — 0.2 — 0.5
Balance at
31December 2021 5.2 9.6 2.0 0.2 9.9 — 26.9
Net book value
At 1 January 2020 10.7 3.9 0.4 — 1.4 0.6 17.0
At 31 December 2020 10.3 4.3 0.2 — 1.6 1.4 17. 8
At 31 December 2021 10.4 5.5 0.3 — 2.8 2.2 21.2
132 Luceco plc Annual Report and Financial Statements 2021
Notes to the Consolidated Financial Statements continued
for the year ended 31 December 2021
9 Property, plant and equipment continued
The carrying values of the following right-of-use assets:
£m
Land and
buildings
Plant and
equipment
Motor
vehicles Total
Cost
Balance at 1 January 2020 2.5 1.3 0.4 4.2
Reclassification — (0.1) — (0.1)
Additions 0.9 0.1 0.2 1.2
Disposals (0.2) — — (0.2)
Balance at 31 December 2020 3.2 1.3 0.6 5.1
Acquisitions through business combinations (note 26) 3.5 — 0.1 3.6
Additions 3.0 0.2 0.2 3.4
Disposals (0.9) — — (0.9)
Effect of movements in foreign exchange (0.1) — — (0.1)
Balance at 31 December 2021 8.7 1.5 0.9 11.1
Depreciation
Balance at 1 January 2020 0.8 0.3 0.1 1.2
Reclassification — 0.2 — 0.2
Depreciation charge for the year 0.8 0.2 0.2 1.2
Disposals (0.2) — — (0.2)
Balance at 31 December 2020 1.4 0.7 0.3 2.4
Depreciation charge for the year 1.3 0.3 0.2 1.8
Disposals (0.9) — — (0.9)
Balance at 31 December 2021 1.8 1.0 0.5 3.3
Net book value
At 1 January 2020 1.7 1.0 0.3 3.0
At 31 December 2020 1.8 0.6 0.3 2.7
At 31 December 2021 6.9 0.5 0.4 7.8
Financial Statements
Luceco plc Annual Report and Financial Statements 2021 133
10 Intangible assets
Accounting policy
Goodwill
Goodwill arising on acquisition represents the excess of the cost of acquisition over the share of the aggregate
fair value of identifiable net assets (including intangible assets) of a business or a subsidiary at the date of
acquisition. All material intangible fixed assets obtained on acquisition have been recognised separately in the
financial statements. Goodwill is initially recognised as an asset and allocated to cash-generating units or groups
of cash-generating units that are expected to benefit from the synergies of the combination and is then reviewed
at least annually for impairment. Any impairment is recognised immediately in the income statement and is not
reversed. Goodwill is accordingly stated in the balance sheet at cost less any provisions for impairment in value.
Development costs
Expenditure on research activities is recognised as an expense in the period in which it is incurred.
An internally generated intangible asset arising from the Group’s development of new and enhanced products is
recognised only if all of the following conditions are met:
• An asset is created that can be identified (such as product designs and new processes)
• The costs of developing this asset can be measured reliably
• The technical feasibility of completing the intangible asset so that it will be available for use or sale
• Its intention to complete the intangible asset and use or sell it
• How the intangible asset will generate probable future economic benefits. Among other things, the entity can
demonstrate the existence of a market for the output of the intangible asset or the intangible asset itself or, if it
is to be used internally, the usefulness of the intangible asset
• The availability of adequate technical, financial and other resources to complete the development and to use or
sell the intangible asset
Where no internally generated intangible asset can be recognised, the expenditure is recognised as an expense
inthe period in which it is incurred. The Group has not included any borrowing costs within capitalised
development costs.
Customer relationships and tradenames and brands
A fair value exercise which was conducted following the acquisition of Kingfisher Lighting and DW Windsor
identified customer relationship and tradename intangible assets that met the criteria for separate recognition
under IFRS.
Other intangible assets
Expenditure on internally generated goodwill and brands is recognised in the Consolidated Income Statement as
an expense as incurred. Other intangible assets that are acquired by the Group are stated at cost less
accumulated amortisation and less accumulated impairment losses.
134 Luceco plc Annual Report and Financial Statements 2021
Notes to the Consolidated Financial Statements continued
for the year ended 31 December 2021
10 Intangible assets continued
Accounting policy continued
Amortisation
Amortisation is charged to administrative expenses in the Consolidated Income Statement on a straight-line basis
over the estimated useful lives of internally generated intangible assets. Other internally generated intangible
assets are amortised from the date they are available for use. The estimated useful lives are as follows:
Patents and trademarks ten years
Capitalised development costs five years
Customer relationships two to 12 years
Tradenames and brands five to 15 years
Business combinations
The acquisition of subsidiaries is accounted for using the acquisition method. The cost of the acquisition is
measured at the aggregate of the fair values, at the date of exchange, of assets given, liabilities incurred or
assumed, and equity instruments issued by the Group in exchange for control of the acquisition. Acquisition costs
incurred are expensed. The acquired identifiable assets, liabilities and contingent liabilities that meet the
conditions for recognition are recognised at their fair value at the date of acquisition, except for non-current
assets that are classified as held for resale in accordance with IFRS 5 Non-Current Assets Held for Sale and
Discontinued Operations, which are recognised and measured at fair value less costs to sell.
Goodwill arising on acquisition is recognised as an asset and initially measured at cost, being the excess of the
cost of the business combination over the Group’s interest in the net fair value of the identifiable assets, liabilities
and contingent liabilities recognised. If, after the assessment, the Group’s interest in the net fair value of the
acquired identifiable assets, liabilities and contingent liabilities exceeds the cost of the business combination, the
excess is recognised immediately in the Consolidated Income Statement.
£m Goodwill Patents
Development
costs
Customer
relationships
Tradenames
and brands Total
Cost
Balance at 1 January 2020 13.2 0.6 10.6 4.1 1.2 29.7
Other acquisitions – internally
developed — — 1.1 — — 1.1
Disposals — — (4. 5) — — (4. 5)
Balance at 31 December 2020 13.2 0.6 7.2 4.1 1.2 26.3
Acquisitions through business
combinations (note 26) 5.4 — 2.5 3.2 1.8 12.9
Other acquisitions – internally
developed — — 0.9 — — 0.9
Balance at 31 December 2021 18.6 0.6 10.6 7.3 3.0 40.1
Amortisation
Balance at 1 January 2020 — 0.3 5.7 0.8 0.3 7.1
Amortisation for the year — — 1.8 0.3 0.1 2.2
Disposals — — (4. 5) — — (4. 5)
Balance at 31 December 2020 — 0.3 3.0 1.1 0.4 4.8
Amortisation for the year — 0.1 1.8 0.5 — 2.4
Balance at 31 December 2021 — 0.4 4.8 1.6 0.4 7.2
Net book value
At 1 January 2020 13.2 0.3 4.9 3.3 0.9 22.6
At 31 December 2020 13.2 0.3 4.2 3.0 0.8 21.5
At 31 December 2021 18.6 0.2 5.8 5.7 2.6 32.9
Financial Statements
Luceco plc Annual Report and Financial Statements 2021 135
Impairment testing for cash-generating units containing goodwill
In accordance with the requirements of IAS 36 Impairment of Assets, goodwill is allocated to the Group’s CGUs
which are identified by the way goodwill is monitored for impairment. The Group’s total consolidated goodwill of
£18.6m at 31 December 2021 is allocated as follows:
£m
Goodwill
2021 2020
Portable Power 2.0 2.0
Wiring Accessories 4.0 4.0
LED Lighting 12.6 7. 2
18.6 13.2
Each CGU is assessed for impairment annually and whenever there is a specific indication of impairment. There have
been no impairment indicators in the year.
As part of the annual impairment test review, the carrying value of goodwill has been assessed with reference to
value-in-use over a projected period of five years together with a terminal value. This reflects the projected cash
flows of each CGU based on the actual operating results, the most recent Board-approved budget, strategic plans
and management projections.
The key assumptions on which value-in-use calculations are based relate to business performance over the next five
years derived from the Group’s Strategic Plan, long-term growth rates beyond 2024 and the discount rates applied.
The key estimates are the level of revenue and operating margins anticipated and the proportion of operating profit
converted into cash flow in each year. Forecasts are based on past experience and take into account current and
future market conditions and opportunities.
Growth rates for the period beyond 2025 are assumed to be 2.0% (2020: 2.0%), which is considered to be a
conservative assessment of long-term market trends for these CGUs.
The cash flow projections have been discounted to present value using the Group’s weighted average cost of capital
adjusted for economic and CGU-specific risk factors including markets and size of business. The pre-tax rates,
reflecting factors such as different geographies, expected technological change and growth opportunity risk,
havebeen used for each CGU as follows:
% 2021 2020
Portable Power 9.2 7. 9
Wiring Accessories 10.2 8.8
LED Lighting 11.3 9.7
Sensitivity of results to changes in assumptions
Whilst management believe the assumptions are realistic, it is possible that impairment would be identified if any of
the above key assumptions were changed significantly. For instance, factors which could cause an impairment are:
• Significant underperformance relative to the forecast results
• Changes to the way the assets are used or changes to the strategy for the business
• A material and unexpected deterioration in the UK economy
The impairment review calculations are based upon anticipated discounted future cash flows. All CGUs have
sufficient headroom and the Directors do not foresee that any reasonable or possible changes to the key operating
assumptions are sufficient to generate a different outcome to the impairment calculations undertaken.
The following specific individual sensitivities of reasonable change have been considered for each CGU, resulting in
the carrying amount not exceeding the recoverable amount for each CGU:
• A 10% increase in unlevered beta
• A 200 basis point increase in the discount factor
• A growth rate of 1% for the periods after 2025
• A 10% reduction in cash flows forecast over the next five years in the Group’s Strategic Plan
136 Luceco plc Annual Report and Financial Statements 2021
Notes to the Consolidated Financial Statements continued
for the year ended 31 December 2021
11 Investment in associate
Accounting policy
The Group equity accounts for its investment in associate at cost less impairment in accordance with IFRS 9.
Theinvestment in associate was with EV Charge Points UK T/A EVCP Limited for £2.1m from August 2021, based
inCrawley, England. The business manufactures electrical equipment for the electric vehicle charging sector.
Theinvestment represents 20% of the business. On 21 March 2022, the remaining 80% of the business was
acquired by the Group at a cash and debt free enterprise value of £8.0m.
£m
Carrying value
At 1 January 2021 —
Additions 2.1
Share of profit of associate —
At 31 December 2021 2.1
Summary financial information on associate – 100%
£m 2021
Current assets 1.7
Current liabilities (0.9)
Net assets 0.8
Revenue 2.9
Profit for the year 0.3
12 Deferred tax assets and liabilities
Accounting policy
Deferred tax is provided on temporary differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for taxation purposes. The following temporary differences
are not provided for: the initial recognition of goodwill; the initial recognition of assets or liabilities that affect
neither accounting nor taxable profit other than in a business combination; and differences relating to
investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future. The amount
of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of
assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available
against which the temporary difference can be utilised.
Recognised deferred tax assets and liabilities are attributable to the following:
£m
Assets Liabilities Net
2021 2020 2021 2020 2021 2020
Property, plant and equipment (0.1) — 0.8 0.2 0.7 0.2
Intangible assets — — 2.5 1.4 2.5 1.4
Losses (0.6) (0.4) — — (0.6) (0.4)
Share-based payments (2.6) (1.5) — — (2.6) (1.5)
Financial assets and liabilities (0.1) (0.3) — 0.1 (0.1) (0.2)
Deferred tax liability/(asset) (3.4) (2.2) 3.3 1.7 (0.1) (0.5)
A deferred tax asset of £0.6m has been recognised against carried forward non-trading tax losses of
£2.5m (2020: £2.2m) during the period as it is expected that they can be offset against current year profits.
Financial Statements
Luceco plc Annual Report and Financial Statements 2021 137
Movement in deferred tax (asset)/liability during the year
£m
1 January
2021 Acquisition
Recognised
in income
Recognised
in equity
31 December
2021
Property, plant and equipment 0.2 — 0.6 — 0.8
Intangible assets 1.4 1.5 (0.5) — 2.4
Losses (0.4) — (0.2) — (0.6)
Share-based payments (1.5) — (0.4) (0.7) (2.6)
Financial assets and liabilities (0.2) — 0.1 — (0.1)
(0.5) 1.5 (0.4) (0.7) (0.1)
A deferred tax liability had been recognised from intangible assets acquired when Kingfisher Lighting was acquired
in 2017. A further deferred tax liability of £1.5m has been recognised in respect of intangible assets acquired as part
of the acquisition of the DW Windsor Group in 2021.
Movement in deferred tax (asset)/liability during the prior year
£m
1 January
2020
Recognised
in income
Recognised
in equity
31 December
2020
Property, plant and equipment — 0.2 — 0.2
Intangible assets 1.6 (0.2) — 1.4
Losses (0.5) 0.1 — (0.4)
Share-based payments — (0.3) (1.2) (1.5)
Financial assets and liabilities (0.1) (0.1) — (0.2)
1.0 (0.3) (1.2) (0.5)
13 Inventories
Accounting policy
Inventories are stated at the lower of cost and net realisable value. Cost includes expenditure incurred in
acquiring the inventories, production or conversion costs and other costs in bringing them to their existing
location and condition. In the case of manufactured inventories, cost includes an appropriate share of overheads
based on normal operating capacity.
Provision is made for slow-moving and obsolete stock by comparing the stock holding against the product sales
for the financial year and applying a provision which is based on an estimation of the likely sales price with
reference to the stock category.
£m 2021 2020
Raw materials 9.7 5.0
Work in progress 2.7 1.0
Finished goods 44.9 31.2
57.3 37.2
In 2021, inventories of £123.4m (2020: £104.0m) were recognised as an expense during the year and are included in
“cost of sales”.
The inventory charge for write-downs was £3.8m (2020: £0.1m) in the period, of which £1.5m relates to the
restructuring provision as detailed in note 1.
Write-downs and reversals are included in “cost of sales”. No reversals of stock provision occurred in the current or
prior year.
138 Luceco plc Annual Report and Financial Statements 2021
Notes to the Consolidated Financial Statements continued
for the year ended 31 December 2021
14 Trade and other receivables
Accounting policy
Trade and other receivables are recognised initially at fair value. Subsequent to initial recognition they are
measured at amortised cost using the effective interest method, less any impairment losses.
£m 2021 2020
Trade receivables 67.9 70.1
Prepayments and other receivables 1.8 1.7
69.7 71.8
The following table provides information about the exposure to credit risk and expected credit losses for trade
receivables as at 31 December 2021. The loss amount has increased year-on-year due to an increase in the overall
loss rate and a greater proportion of overdue receivables in the higher ageing category.
31 December 2021 1 January 2021
Age overdue (days)
Loss
rate
(%)
Gross
debtor
(£k)
Loss
amount
(£k)
Loss
rate
(%)
Gross
debtor
(£k)
Loss
amount
(£k)
Current 0.59% 61,021.9 358.6 0.75% 63,468.4 476.0
0-30 0.64% 3,651.4 23.4 0.79% 4,984.7 39.4
30-60 1.24% 3,319.6 41.0 0.81% 2,209.5 17.9
60-90 3.97% 631.9 25.1 2.38% 260.8 6.2
90-120 1.23% 682.9 8.4 1.19% 517. 9 6.2
120+ 47.57% 1,173.7 558.3 34.69% 355.0 123.1
Total 1.44% 70,481.4 1,014.8 0.37% 71,796.3 668.8
15 Cash and cash equivalents
£m 2021 2020
Current cash balances 6.9 6.7
16 Interest-bearing loans and borrowings
This note provides information about the contractual terms of the Group’s interest-bearing loans and borrowings,
which are measured at amortised cost. For more information about the Group’s exposure to interest rate and foreign
currency risk, see note 20 of the consolidated financial statements.
£m 2021 2020
Non-current liabilities
Revolving credit facility 36.8 13.6
Secured bank loans – invoice financing — 8.6
36.8 22.2
Terms and debt repayment schedule
£m Currency
Nominal
interest rate
Year of
maturity
Face value
1
2021
Carrying
amount
1
2021
Face value
1
2020
Carrying
amount
1
2020
Revolving credit facility GBP 1.75% +
SONIA
2024 36.8 36.8 13.6 13.6
Secured bank loan GBP 1.75% +
base rate
Replaced
with RCF as
above
— — 8.6 8.6
36.8 36.8 22.2 22.2
1. For more information on fair value/carrying value assessment, see note 20 of the consolidated financial statements.
Financial Statements
Luceco plc Annual Report and Financial Statements 2021 139
Bank loans are secured by a fixed and floating charge over the assets of the Group.
At 31 December 2021, undrawn facilities were £43.2m (2020: £27.8m).
£m 2021 2020
Net debt as at 31 December represented by:
Revolving credit facility 36.8 13.6
Secured bank loans – invoice financing — 8.6
Cash and cash equivalents (6.9) (6.7)
Finance leases – pre-IFRS 16 0.7 0.7
Covenant Net Debt 30.6 16.2
Finance leases – post-IFRS 16 7.5 2.1
Net debt 38.1 18.3
£m Cash Borrowings
Finance
leases Total
Net debt movement:
As at 1 January 2021 (6.7) 22.2 2.8 18.3
Cash (in)/outflow (0.2) 14.5 (1.4) 12.9
Additions to finance leases — — 6.8 6.8
Effect of exchange rate fluctuations on cash held — 0.1 — 0.1
As at 31 December 2021 (6.9) 36.8 8.2 38.1
17 Other financial liabilities and provisions
Accounting policy
The Group has leases for the main warehouse and related facilities, offices and production building, plant and
machinery, some IT equipment and some vehicles. With the exception of short-term leases and leases of
low-value underlying assets, each lease is reflected on the balance sheet as a right-of-use asset and a lease
liability. Variable lease payments which do not depend on an index or a rate (such as lease payments based on a
percentage of Group sales) are excluded from the initial measurement of the lease liability and asset. The Group
classifies its right-of-use assets in a consistent manner to its property, plant and equipment (see note 9). Leases
of vehicles and IT equipment are generally limited to a lease term of three to five years. Leases of property
generally have a lease term ranging from three years to seven years. Lease payments are generally fixed other
than for property leases where rentals are linked to annual changes in an index (either RPI or CPI).
Each lease generally imposes a restriction that, unless there is a contractual right for the Group to sublet the asset
to another party, the right-of-use asset can only be used by the Group. Leases are either non-cancellable or may
only be cancelled by incurring a substantive termination fee. Some leases contain an option to purchase the
underlying leased asset outright at the end of the lease, or to extend the lease for a further term. The Group is
prohibited from selling or pledging the underlying leased assets as security. For leases over office buildings and
factory premises the Group must keep those properties in a good state of repair and return the properties in their
original condition at the end of the lease. Further, the Group must insure items of property, plant and equipment
and incur maintenance fees on such items in accordance with the lease contracts.
Provisions
£m 2021 2020
Non-current liabilities
Dilapidations provisions 1.1 1.1
Warranty provisions 0.2 —
Warranty provision acquired on acquisition 0.3 —
1.6 1.1
140 Luceco plc Annual Report and Financial Statements 2021
Notes to the Consolidated Financial Statements continued
for the year ended 31 December 2021
17 Other financial liabilities and provisions continued
Finance lease
£m 2021 2020
Current liabilities
Lease liabilities 2.2 1.2
Non-current liabilities
Lease liabilities 6.0 1.6
Finance lease liabilities
Finance lease liabilities are payable as follows:
Future minimum lease
payments Interest
Present value of minimum
lease payments
£m 2021 2020 2021 2020 2021 2020
Less than one year 2.2 1.2 — — 2.2 1.2
Between one and five years 6.5 1.9 (0.5) (0.3) 6.0 1.6
8.7 3.1 (0.5) (0.3) 8.2 2.8
Reconciliation of interest payments from cash flow
£m 2021 2020
Interest paid from leases under IFRS 16 0.1 0.1
Interest paid excluding interest from leases under IFRS 16 1.6 1.2
Interest paid per cash flow 1.7 1.3
18 Trade and other payables
Accounting policy
Trade and other payables comprise amounts outstanding for trade purchases and ongoing costs and are
measured at amortised cost using the effective interest method. The Directors consider that the carrying amount
of trade payables approximates to their fair value. The Group has financial risk management policies in place to
ensure that all payables are paid within the credit timeframe.
£m 2021 2020
Current liabilities
Trade payables 38.8 39.7
Other payables and accrued expenses 27.7 23.9
Trade and other payables 66.5 63.6
19 Employee benefits
Defined contribution plans
Accounting policy
A defined contribution plan is a post-employment benefit plan under which the Company pays fixed
contributions into a separate entity and will have no legal or constructive obligation to pay further amounts.
Obligations for contributions to defined contribution pension plans are recognised as an expense in the
Consolidated Income Statement in the periods during which services are rendered by employees.
The Group operates a number of defined contribution pension plans. UK-based employees of the Group have the
option to be members of a defined contribution pension scheme managed by a third-party pension provider. For each
employee who is a member of the scheme, the Company will contribute a fixed percentage of each employee’s salary
to the scheme. The only obligation of the Group with respect to this scheme is to make the specified contributions.
The total expense relating to these plans was £0.8m (2020: £0.7m).
Financial Statements
Luceco plc Annual Report and Financial Statements 2021 141
20 Financial instruments
Accounting policy
Financial instruments issued by the Group are treated as equity only to the extent that they meet the following
two conditions:
a) They include no contractual obligations upon the Company (or Group as the case may be) to deliver cash or
other financial assets or to exchange financial assets or financial liabilities with another party under conditions
that are potentially unfavourable to the Company (or Group)
b) Where the instrument will or may be settled in the Company’s own equity instruments, it is either a
non-derivative that includes no obligation to deliver a variable number of the Company’s own equity
instruments or is a derivative that will be settled by the Company exchanging a fixed amount of cash or other
financial assets for a fixed number of its own equity instruments
To the extent that this definition is not met, the proceeds of issue are classified as a financial liability. Where the
instrument so classified takes the legal form of the Company’s own shares, the amounts presented in these
financial statements for called-up share capital and share premium account exclude amounts in relation to those
shares.
Where a financial instrument that contains both equity and financial liability components exists, these
components are separated and accounted for individually under the above policy.
Derivative financial instruments and hedge accounting
Derivative financial instruments are recognised at fair value. The gain or loss on remeasurement to fair value is
recognised immediately in the Consolidated Income Statement. Remeasurements to fair value recognised
immediately in the Consolidated Income Statement are excluded from adjusted measurements as explained on
pages 122 and 123. However, where derivative transactions qualify for hedge accounting, recognition of any
resultant gain or loss depends on the nature of the item being hedged (see below).
Non-derivative financial instruments
Non-derivative financial instruments comprise trade and other receivables, cash and cash equivalents, loans and
borrowings, and trade and other payables.
Trade and other receivables
Trade and other receivables are recognised initially at fair value. Subsequent to initial recognition they are
measured at amortised cost using the effective interest method, less any impairment losses.
Trade and other payables
Trade and other payables are recognised initially at fair value. Subsequent to initial recognition they are measured
at amortised cost using the effective interest method.
Investments in subsidiaries are carried at cost less impairment in the Parent Company financial statements.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances and short-term call deposits. Bank overdrafts that are
repayable on demand and form an integral part of the Group’s cash management are included as a component of
cash and cash equivalents.
Interest-bearing borrowings
Interest-bearing borrowings are recognised initially at fair value less attributable transaction costs. Subsequent to
initial recognition, interest-bearing borrowings are stated at amortised cost using the effective interest method,
less any impairment losses, so as to produce a constant rate of return over the period to the date of expected
redemption. In instances where the Company has an early redemption option, the term over which financing
costs are amortised is the period to the earliest date the option can be exercised, unless there is no genuine
commercial possibility that the option will be exercised.
Intra-Group financial instruments
Where the Company enters into financial guarantee contracts to guarantee the indebtedness of other companies
within its Group, the Company considers these to be insurance arrangements and accounts for them as such. In
this respect, the Company treats the guarantee contract as a contingent liability until such time as it becomes
probable that the Company will be required to make a payment under the guarantee.
142 Luceco plc Annual Report and Financial Statements 2021
Notes to the Consolidated Financial Statements continued
for the year ended 31 December 2021
20 Financial instruments continued
Accounting policy continued
Impairment excluding inventories and deferred tax assets
The Company recognises loss allowances for expected credit losses (“ECLs”) on financial assets measured at
amortised cost, debt investments measured at FVOCI and contract assets (as defined in IFRS 15).
The Company measures loss allowances at an amount equal to lifetime ECL, except for other debt securities and
bank balances for which credit risk (i.e. the risk of default occurring over the expected life of the financial
instrument) has not increased significantly since initial recognition, which are measured as 12-month ECL.
Loss allowances for trade receivables and contract assets are always measured at an amount equal to lifetime
ECL. When determining whether the credit risk of a financial asset has increased significantly since initial
recognition and when estimating ECL, the Company considers reasonable and supportable information that is
relevant and available without undue cost or effort. This includes both quantitative and qualitative information
and analysis, based on the Company’s historical experience and informed credit assessment and including
forward-looking information.
The Company considers a financial asset to be in default when:
• The borrower is unlikely to pay its credit obligations to the Company in full, without recourse by the Company
to actions such as realising security (if any is held); or
• The financial asset is more than 120 days past due and if we believe that it will default
Lifetime ECLs are the ECLs that result from all possible default events over the expected life of a financial
instrument.
12-month ECLs are the portion of ECLs that result from default events that are possible within the 12 months after
the reporting date (or a shorter period if the expected life of the instrument is less than 12 months).
The maximum period considered when estimating ECLs is the maximum contractual period over which the
Company is exposed to credit risk.
Measurement of ECLs
ECLs are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all
cash shortfalls (i.e. the difference between the cash flows due to the entity in accordance with the contract and
the cash flows that the Company expects to receive). ECLs are discounted at the effective interest rate of the
financial asset.
Credit-impaired financial assets
At each reporting date, the Company assesses whether financial assets carried at amortised cost and debt
securities at FVOCI are credit impaired. A financial asset is “credit-impaired” when one or more events that have a
detrimental impact on the estimated future cash flows of the financial asset have occurred.
Write-offs
The gross carrying amount of a financial asset is written off (either partially or in full) to the extent that there is no
realistic prospect of recovery.
An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference
between its carrying amount and the present value of the estimated future cash flows discounted at the asset’s
original effective interest rate. Interest on the impaired asset continues to be recognised through the unwinding
of the discount. When a subsequent event causes the amount of impairment loss to decrease, the decrease in
impairment loss is reversed through the Consolidated Income Statement.
Financial Statements
Luceco plc Annual Report and Financial Statements 2021 143
Non-financial assets
The carrying amounts of the Group’s non-financial assets, other than inventories and deferred tax assets, are
reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication
exists, then the asset’s recoverable amount is estimated. For goodwill, and intangible assets that have indefinite
useful lives or that are not yet available for use, the recoverable amount is estimated each year at the same time.
The recoverable amount of an asset or cash-generating unit is the greater of its value-in-use and its fair value less
costs to sell. In assessing value-in-use, the estimated future cash flows are discounted to their present value using
a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific
to the asset.
For the purpose of impairment testing, assets that cannot be tested individually are grouped together into the
smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash
inflows of other assets or groups of assets (“cash-generating unit” or “CGU”). The goodwill acquired in a business
combination, for the purpose of impairment testing, is allocated to groups of CGUs which are expected to benefit
from the synergies of the combination. Subject to an operating segment ceiling test, for the purposes of goodwill
impairment testing, CGUs to which goodwill has been allocated are aggregated so that the level at which
impairment is tested reflects the lowest level at which goodwill is monitored for internal reporting purposes.
An impairment loss is recognised if the carrying amount of an asset or its CGU exceeds its estimated recoverable
amount. Impairment losses are recognised in the Consolidated Income Statement. Impairment losses recognised
in respect of CGUs are allocated first to reduce the carrying amount of any goodwill allocated to the units, and
then to reduce the carrying amounts of the other assets in the unit (group of units) on a pro-rata basis.
Financial risk management
Overview
The Group has exposure to the following risks arising from financial instruments:
• Credit risk
• Liquidity risk
• Market risk
This note presents information about the Group’s exposure to each of the above risks, the Group’s objectives,
policies and processes for measuring and managing risk, and the Group’s management of capital.
Risk management framework
The Board has overall responsibility for the establishment and oversight of the Group’s risk management framework.
The Group’s risk management policies are established to identify and analyse the risks faced by the Group, to set
appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and
systems are reviewed regularly to reflect changes in market conditions and the Group’s activities. The Group,
through its training and management standards and procedures, aims to develop a disciplined and constructive
control environment in which all employees understand their roles and obligations.
Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to
meet its contractual obligations and arises principally from the Group’s receivables from customers.
Exposure to credit risk
The carrying amount of financial assets represents the maximum credit exposure. The exposure to credit risk at the
reporting date was as follows:
Carrying amount
£m 2021 2020
Trade receivables 67.9 70.1
Cash and cash equivalents 6.9 6.7
Financial assets held for trading 4.7 5.5
79.5 82.3
144 Luceco plc Annual Report and Financial Statements 2021
Notes to the Consolidated Financial Statements continued
for the year ended 31 December 2021
20 Financial instruments continued
Trade receivables
The Group’s exposure to credit risk is influenced mainly by the individual characteristics of each customer.
Management also considers the demographics of the Group’s customer base, including the default risk of the
industry and country in which customers operate, as these factors may have an influence on credit risk. The Group’s
credit risk is significantly reduced as the Group utilises Letters of Credit for its largest customer.
The Group has established a credit policy under which each new customer is analysed individually for
creditworthiness before standard payment and delivery terms and conditions are offered. The Group’s review
includes external ratings, when available, and in some cases bank references. Purchase limits are established for
each customer and are reviewed regularly. Customers that fail to meet the Group’s benchmark creditworthiness may
transact with the Group only on a prepayment basis.
All significant Group customers have been transacting with the Group for over three years and, whilst this creates a
concentration of credit risk, no impairment losses have been recognised against these customers. In monitoring
customer credit risk, customers are grouped according to their characteristics, including whether they are an
independent or major multi-national company, geographic location, industry, ageing profile, maturity and existence
of previous financial difficulties.
As at 31 December 2021, the Group had an allowance for impairment of £1.0m (2020: £0.6m). The maximum
exposure to credit risk for trade receivables at the reporting date by geographic region was as follows:
Carrying amount
£m 2021 2020
Europe 57.4 65.9
North America 0.1 0.2
Rest of World 10.4 4.0
67.9 70.1
Of this total balance, £16.1m is with our largest customer.
Cash and cash equivalents
The Group held cash of £6.9m at 31 December 2021 (2020: £6.7m), which represents its maximum credit exposure
on these assets. There are no cash equivalents in the year. Cash and cash equivalents are held with bank and
financial institution counterparties, which are rated “A” to “AA–” based on rating agency ratings.
Liquidity risk
Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its
financial liabilities that are settled by delivering cash or another financial asset. The Group’s approach to managing
liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due,
both under normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s
reputation. It has access to a number of sources of finance to manage its liquidity risk.
The following are the contractual maturities of financial liabilities excluding the impact of netting agreements.
31 December 2021 (£m)
Carrying
amount
Within
1 year
1-2
years
2-5
years
Non-derivative financial liabilities:
Secured bank loans – invoice financing — — — —
Revolving credit facility 36.8 — — 36.8
Financial assets held for trading 0.1 0.1 — —
Finance leases 8.2 2.2 1.9 4.1
Trade payables 38.8 38.8 — —
83.9 41.1 1.9 40.9
Financial Statements
Luceco plc Annual Report and Financial Statements 2021 145
31 December 2020 (£m)
Carrying
amount
Within
1 year
1-2
years
2-5
years
Non-derivative financial liabilities:
Secured bank loans – invoice financing 8.6 — — 8.6
Revolving credit facility 13.6 — — 13.6
Financial assets held for trading 0.5 0.5 — —
Finance leases 2.8 1.2 0.7 0.9
Trade payables 39.7 39.7 — —
65.2 41.4 0.7 23.1
Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates and interest rates, will affect the
Group’s income. The objective of market risk management is to manage and control market risk exposures within
acceptable parameters, while optimising the return.
Interest rate risk
The Group adopts a policy of monitoring its exposure to changes in interest rates on borrowings to ensure that likely
changes do not constitute a material risk to the profitability of the Group.
At 31 December 2021, the Group did not have any interest rate swaps. Interest rate risk is not currently considered to
be material given relative stable monetary policies in the jurisdictions in which the Group borrows and the Group’s
reduced indebtedness.
For the year ended 31 December 2021, a change of 100 basis points in interest rates would have increased/
(decreased) profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular
foreign currency rates, remain constant.
Profit or loss
£m
100bps
increase
100bps
decrease
31 December 2021
Variable rate instruments (0.3) 0.3
Cash flow sensitivity (net) (0.3) 0.3
31 December 2020
Variable rate instruments (0.2) 0.2
Cash flow sensitivity (net) (0.2) 0.2
The Group’s capital structure policy is to ensure Covenant Net Debt remains in a range of 1.0 to 2.0 times Covenant
EBITDA (the definition of the adjustments made and reconciliations to the reported figures can be found in note 1
ofthe consolidated statements on pages 117 to 123).
Currency risk
The Group is exposed to currency risk on the following transactions:
• Sales and purchases by a Group company in a currency other than its functional currency
• Flows arising from the servicing of the Group’s debt under foreign currency
The Group is also exposed to fluctuations in exchange rates in the translation of net assets and profits earned by its
subsidiaries overseas. These profits are translated at average exchange rates for the year, which is an approximation
to the rates at the date of the transaction.
In respect of other monetary assets and liabilities denominated in foreign currencies, the Group’s policy is to ensure
that its net exposure is kept to an acceptable level by buying or selling forward.
146 Luceco plc Annual Report and Financial Statements 2021
Notes to the Consolidated Financial Statements continued
for the year ended 31 December 2021
20 Financial instruments continued
Exposure to currency risk
The table below shows the extent to which the Group had monetary assets and liabilities denominated in currencies
other than the local currency of the Company in which they are recorded:
2021 2020
£m RMB USD EUR RMB USD EUR
Trade receivables — 27.3 0.5 — 33.8 0.6
Bank facilities — (14.6) 0.2 0.3 (26.6) 0.3
Trade payables (10.2) (1.7) (0.2) (8.2) (1.7) (0.2)
Net statement of financial
position exposure (10.2) 11.0 0.5 (7.9) 5.5 0.7
The following significant exchange rates were applied during the year:
Average rate Reporting date spot rate
£m 2021 2020 2021 2020
USD 1.38 1.28 1.35 1.36
EUR 1.16 1.12 1.19 1.11
RMB 8.87 8.92 8.59 8.91
Sensitivity analysis
A strengthening/(weakening) of sterling, as indicated below, against the US dollar and RMB at 31 December would
have increased/(decreased) equity and profit or loss by the amounts shown below. This quantifies the impact of a
change in value of assets and liabilities denominated in a currency other than the functional currency of that
business unit. This analysis is based on foreign currency exchange rate variances that the Group considered to be
reasonably possible at the reporting date. The analysis assumes that all other variables, in particular interest rates,
remain constant and ignores any impact of forecasted sales and purchases. The analysis is performed on the same
basis for 2020, as indicated below.
£m Equity Profit/(loss)
31 December 2021
GBP strengthens against the USD by 10% (1.0) (1.0)
GBP strengthens against the EUR by 10% — —
GBP strengthens against the RMB by 10% 0.9 0.9
31 December 2020
GBP strengthens against the USD by 10% (0.5) (0.5)
GBP strengthens against the EUR by 10% (0.1) (0.1)
GBP strengthens against the RMB by 10% 0.7 0.7
A weakening of sterling against the above currencies at 31 December would have had the equal but opposite effect
on the above currencies to the amounts shown above, on the basis that all other variables remain constant.
The Group holds financial derivative instruments to manage the currency risks on USD and RMB used to transact the
current and future settlement of monetary assets and liabilities.
Financial Statements
Luceco plc Annual Report and Financial Statements 2021 147
Accounting classifications and fair values
Fair values versus carrying amounts
The following assets’ and liabilities’ carrying values meet the definition of financial instruments and are classified
according to the following categories:
£m 2021 2020
Assets carried at amortised cost:
Trade receivables 67.9 70.1
Cash and cash equivalents 6.9 6.7
Assets carried at fair value:
Financial assets held for trading 4.7 5.5
Financial assets 79.5 82.3
Liabilities carried at amortised cost:
Secured bank loans – invoice financing — 8.6
Revolving credit facility 36.8 13.6
Finance leases 8.2 2.8
Trade payables 38.8 39.7
Liabilities carried at fair value
Financial assets held for trading 0.1 0.5
Financial liabilities 83.9 65.2
The fair value of financial assets and liabilities that are held at amortised cost are considered to be the same as the
carrying amounts for the Group.
For trade and other receivables/payables with a remaining life of less than one year, the carrying amount is deemed
to reflect the fair value. For cash and cash equivalents, the amount reported on the Consolidated Balance Sheet
approximates to fair value. For borrowing at floating rates, the carrying value is deemed to reflect the fair value as it
is considered to represent the price of the instrument in the marketplace. For borrowing at fixed rates, the fair
values are considered to be the same as the carrying amount reported on the Consolidated Balance Sheet due to
the frequent updating of these funding facilities in a competitive market.
The table below analyses financial instruments into a fair value hierarchy based on the valuation technique used to
determine fair value.
• Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities
• Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either
directly (i.e. as prices) or indirectly (i.e. derived from prices)
• Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs)
The only Level 2 instruments for 2021 are financial assets held for trading, which relate to forward exchange
contracts. The fair value asset/(liability) is shown below:
£m 2021 2020
Financial asset/(liability) held for trading 4.6 5.0
At 31 December 2021, undrawn facilities were £43.2m (2020: £27.8m).
148 Luceco plc Annual Report and Financial Statements 2021
Notes to the Consolidated Financial Statements continued
for the year ended 31 December 2021
21 Capital management
The Group’s primary capital resources comprise share capital, bilateral bank facilities, invoice financing facilities
andoperating cash flow.
The core debt requirements of the Group are met via a £80m revolving credit facility.
The Board’s policy is to maintain a strong capital base to maintain market confidence and sustain the development
of the business, whilst maximising the return on capital to the Group’s shareholders. The Group’s strategy will be to
maintain facilities appropriate to the working requirements of the Group, to grow organically and through
acquisition and service its debt requirements through cash flow generation.
The Group has set the following capital structure policies:
• Maintain a Covenant Net Debt : Covenant EBITDA (“Leverage Ratio”) within a target range of 1.0 to 2.0 : 1,
averaging 1.5 across each economic cycle
• Maintain Covenant EBITDA : Adjusted Net finance expense (“Interest Cover Ratio”) of at least 4.0 : 1
• Apply a progressive dividend policy, with a payout rate of 40%-60% of adjusted earnings
• Provided it is in compliance with its Leverage Ratio, Interest Cover Ratio and dividend policies, the Company
willreinvest cash generated by the business in organic and acquisitive growth opportunities that it believes will
generate long-term shareholder value. If insufficient opportunities are available to reinvest cash in this way,
theCompany will seek ways to return surplus cash to shareholders in order to maintain its Leverage Ratio policy
The Covenant Net Debt to Covenant EBITDA ratio is calculated in accordance with the Group’s loan agreements,
asfollows:
£m 2021 2020
Covenant EBITDA (see note 1) 46.9 36.1
Covenant Net Debt (see note 16) 30.6 16.2
Covenant Net Debt : Covenant EBITDA 0.7 0.4
The Covenant EBITDA : Net finance expense ratio is calculated as follows:
£m 2021 2020
Covenant EBITDA (see note 1) 46.9 36.1
Adjusted Net finance expense (see note 1) 1.6 1.3
Covenant EBITDA : Adjusted Net finance expense 29.3 27. 8
The Company’s covenants and headroom are summarised as follows:
2021 year-end covenant Covenant 2021 actual Headroom
Covenant Net Debt : Covenant EBITDA 3.0 : 1 0.7 : 1 Covenant Net Debt headroom: £110.1m
1
Adjusted EBITDA headroom: £36.7m
Covenant EBITDA : Adjusted Net
financeexpense
4.0 : 1 29.3 : 1 Adjusted EBITDA headroom: £40.5m
Adjusted Net finance expense
headroom: £10.1m
1. Headroom with increased facility. Current facility headroom is £43.2m.
The key measures which management use to evaluate the Group’s use of its financial resources and capital
management are set out below:
2021 2020
Adjusted Earnings Per Share (pence) 20.2 15.5
Covenant Net Debt : Covenant EBITDA (times) 0.7 0.4
Adjusted Free Cash Flow (£m) 18.8 22.7
Financial Statements
Luceco plc Annual Report and Financial Statements 2021 149
22 Share-based payments
Accounting policy
Incentives in the form of shares are provided to employees through the following schemes: Company Share
Option Plan (“CSOP”), Share Incentive Plan (“SIP”) and Long-Term Incentive Plan (“LTIP”). Equity-settled
share-based payments are measured at fair value (excluding the effect 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 effects of
non-transferability, exercise restrictions and behavioural considerations. Charges made to the income statement
in respect of share-based payments are credited to the reserves.
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. It recognises 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. The Company fulfils exercised options with treasury shares the
Company has purchased. The proceeds received, net of any directly attributable transaction costs, are credited
totreasury shares (nominal value) and share premium.
The share-based payments charge relates to option awards from the LTIP, CSOP and SIP schemes. Vesting periods
for the plans range from one to three years and if the options remain unexercised after a period of ten years from
the date of grant, the options expire. In addition, options are forfeited if the employee voluntarily leaves the Group
before the options vest.
The Group recorded a share-based payment charge of £1.7m (2020: £1.0m) included in the Consolidated Income
Statement within administrative expenses.
Share Incentive Plan
All UK-based employees are eligible to participate in the SIP. The scheme enables employees to buy shares in the
Group out of their salary, before tax deductions, up to a limit of £1,800 per tax year. The shares acquired are called
partnership shares and are held in trust, managed by a third party, on behalf of the employee.
For every partnership share bought by the employee, the Group can award:
a) Matching shares. One share at nil cost
b) Free shares. Up to two shares at nil cost, the number depending on service, subject to a maximum of £3,600 free
shares per tax year
For the SIP conditions to be met, the employees must be continuously employed by the Group for a period of at
least three years from the date of the award grant. If employees voluntarily leave the Group within the three-year
period they must take their shares out of the plan and they will not be entitled to the matching and free shares.
Number of free shares
Number of partnership
and matching shares
2021 2020 2021 2020
Outstanding at 1 January 45,915 64,666 791,324 618,702
Granted during the year — — 80,900 211,566
Forfeited during the year — (4,042) (18,686) (12,711)
Released during the year (9,449) (14,709) (54,952) (26,233)
Outstanding at 31 December 36,466 45,915 798,586 791,324
150 Luceco plc Annual Report and Financial Statements 2021
Notes to the Consolidated Financial Statements continued
for the year ended 31 December 2021
22 Share-based payments continued
Share Incentive Plan continued
For the purposes of IFRS 2, the fair value of these matching shares and free shares is determined as the market
value of the shares at the date of grant. No valuation model is required to calculate the fair value of awards under
the SIP. The fair value of an equity-based payment under the SIP is the face value of the award on the date of grant
because the participants are entitled to receive the full value of the shares and there are no market-based
performance conditions attached to the awards.
The Group recognised a total expense of £0.1m (2020: £0.1m) in the year relating to matching and free share awards.
Company Share Option Plan (“CSOP”)
At the time the free shares were awarded, all eligible employees of the Group were also granted CSOP options. The
CSOP options had an exercise price equal to the market value of the share at the date of grant. The ordinary free
shares award is subject to condition that it will be automatically exercised at the time the CSOP option is exercised.
The options can only be exercisable after the performance period determined by the Board, being three years.
CSOP options will normally be exercisable from release until the tenth anniversary of the grant date.
Long-Term Incentive Plan
Awards have been granted to the Chief Executive Officer and the Chief Financial Officer, and other key management
personnel within the Group, under the Luceco 2017 Performance Share Plan (“PSP”), which was approved by
shareholders at the Company’s AGM held on 25 May 2017.
The following awards have been granted in the form of nominal cost options over the number of ordinary shares of
0.05p in the Company under the terms of the PSP, as set out on page 94:
Executive Directors Role Number of shares awarded
John Hornby Chief Executive Officer 135,347
Matt Webb Chief Financial Officer 116,025
Measurement of fair values
The 2021 LTIP awards will vest subject to the satisfaction of performance conditions measuring the Company’s
Earnings Per Share (“EPS”) and total shareholder return (“TSR”) performance. The extent to which awards will vest
will depend on the extent to which the performance conditions are satisfied over the performance period. For the
EPS condition, this runs from 1 January 2021 to 31 December 2023. For the TSR condition, this runs for three years
from the three-month average TSR to 26 March 2021, the date of the grant, to the three-month average TSR to
25March 2024. No consideration was paid for any of the awards.
As the options under the 2021 award include a TSR performance condition, given the increased uncertainty around
potential vesting, they have been valued using the Monte Carlo model with the following assumptions:
Directors’ and employee share options LTIP award 2021 2021 2020
Three-day average share price before options were issued (pence) 273.00 109.33
Fair value of share options 231.2p 92.2p
Average expected volatility 70% 85%
Expected life 3 years 3 years
Risk-free rate 0.10% -0.11%
The share-based payments charge of £1.7m (2020: £1.0m) included in the Consolidated Income Statement within
administrative expenses is attributable to the LTIP nominal cost options.
Financial Statements
Luceco plc Annual Report and Financial Statements 2021 151
A summary of the number and weighted-average exercise prices of share options under the share option
programmes were as follows:
2021 2020
Options
Weighted-
average
exercise price Options
Weighted-
average
exercise price
Outstanding at 1 January 6,166,222 0.05p 4,790,293 0.05p
Granted during the year 904,591 0.05p 1,516,782 0.05p
Forfeited during the year — 0.05p (140,853) 0.05p
Exercised during the year (1,194,174) 0.05p — 0.05p
Lapsed during the year — 0.05p — 0.05p
Outstanding at 31 December 5,876,639 0.05p 6,166,222 0.05p
As at 31 December 2021, a total of 5,876,639 options were outstanding which had an average exercise price of
0.05p, and a weighted average remaining contractual life to vesting of 13 months.
During the year, 415,323 tax-qualifying share options were granted to employees (2020: 413,615) at an average price
of nil (2020: nil). During the year the fair value of options granted was £1.5m (2020: £1.5m).
The Group has previously purchased its own shares on the basis that they will be used to fulfil the LTIP and the
number of share options granted when they come to be exercised. The purchased shares are held in a Trust which
ismanaged by a third party. At 31 December 2021, the Trust had 5,982,189 shares held at a cost of £6.7m
(31December 2020: 6,676,363 shares at a cost of £6.8m). These shares are held within the treasury reserve and are
shown in the Consolidated Statement of Changes in Equity.
23 Capital and reserves
Share capital
Allotted, called up
and fully paid
Number of shares in issue
(thousands)
2021
£
2020
£
2021
Number
2020
Number
At 1 January 80,400 80,400 160,800 160,800
At 31 December 80,400 80,400 160,800 160,800
All ordinary shares, except for those shares held by the Employee Benefit Trust (“EBT”), carry one vote per share at
general meetings of the Company, participate equally with the distribution of dividends and capital (including on a
winding up) and are not redeemable.
Reserves
The nature and purpose of each reserve is given below:
• The share premium represents the excess of share value paid for shares
• The treasury reserve arose when the Group bought back equity share capital and this is held in trust by the
Trustee of the Group’s EBT to satisfy the Group’s share option schemes. Treasury shares cease to be accounted
for as such when the interest is transferred in full to the participant pursuant to the terms of the relevant plan.
At31 December 2021, the EBT held 5,982,189 of the Company’s shares (2020: 6,676,363 shares)
• The translation reserve comprises all foreign currency differences arising from the translation of the financial
statements of foreign operations, as well as the foreign currency translation differences on investments in
overseas entities
152 Luceco plc Annual Report and Financial Statements 2021
Notes to the Consolidated Financial Statements continued
for the year ended 31 December 2021
24 Related parties
Key personnel include executive and non-executive Board members and the senior management team.
The Group has a related party relationship with its subsidiaries and its Directors. Transactions between Group
companies, which are related parties, have been eliminated on consolidation and are not disclosed in this note.
Transactions between the Company and its subsidiaries are disclosed below. In addition, the remuneration of the
Directors, and the details of their interests in the share capital of the Company, are provided in the audited part of
the Remuneration Committee Report.
Transactions with key personnel
Key management personnel are defined as Executive and Non-Executive Directors and the senior management
team. The compensation of key management personnel is as follows:
£m 2021 2020
Remuneration (including benefits in kind) 6.9 7. 2
Element of share-based payments expense 1.7 1.0
8.6 8.2
The aggregate remuneration paid or receivable by Executive and Non-Executive Directors and the value of
contributions to money purchase pension schemes in respect of qualifying services are disclosed on page 91.
Theremuneration figure reflects £3.3m in respect of the Chief Financial Officer’s and Chief Operating Officer’s 2018
Performance Share Plan. There were no other gains exercised on share options or under long-term incentive
schemes in respect of qualifying services made by any other Executive or Non-Executive Directors in respect of
2021 (2020: nil).
Defined contribution pension scheme retirement benefits are accruing to one Director at the year end (2020: one).
25 Ultimate Parent Company, controlling party and changes in significant accounting policies
There is no controlling party.
26 Acquisitions
Current year acquisition
On 12 October 2021, the Group completed the acquisition of DW Windsor Group Limited. The fair value of the
consideration paid and the consolidated net assets acquired, together with the goodwill arising in respect of this
acquisition, was as follows:
£m
Fair value on
acquisition
Intangible assets 7.5
Property, plant and equipment 4.5
Inventories 5.3
Trade and other receivables 4.2
Cash 2.5
Interest-bearing loans and borrowings (3.5)
Deferred tax assets/(liabilities) (1.5)
Trade and other payables (5.2)
Provisions (0.4)
Total 13.4
Consideration – cash 18.8
Goodwill arising 5.4
The fair value adjustments primarily comprised adjustments to:
• Recognise £3.2m of acquired customer-related intangible assets
• Recognise £2.5m of acquired technology intangible assets
• Recognise £1.8m of acquired brand intangible assets
• Recognise deferred tax balances
Financial Statements
Luceco plc Annual Report and Financial Statements 2021 153
Impact of current year acquisition
Income statement
During the year, this acquisition contributed revenues of £3.6m and operating loss of £0.1m to the Group. If the
acquisition had occurred on 1 January 2021, the results of the Group would have shown revenue of £19.4m and
operating profit of £1.7m.
Cash flow
The cash flow impact of the acquisition in the year can be summarised as follows:
£m
Consideration paid for the current year acquisition 18.8
Cash acquired (2.5)
Total 16.3
Acquisition costs
The Group incurred acquisition-related costs of £0.7m in relation to the acquisition of DW Windsor Group Limited.
These have been included as adjustments to administrative costs, as outlined in note 1.
27 Post Balance Sheet Events
On 21 March 2022 the Group purchased the remaining 80% share of EV Charge Points UK T/A EVCP Limited
following the 20% acquisition of the business in August 2021. A description of this business is found in note 11.
154 Luceco plc Annual Report and Financial Statements 2021
Company Balance Sheet
at 31 December 2021
£m Note 2021 2020
Non-current assets
Investments 29 3.3 1.7
Debtors 30 77.8 50.3
Net assets 81.1 52.0
Capital and reserves
Called-up share capital 31 0.1 0.1
Share premium account 24.8 24.8
Treasury reserve (6.7) (6.8)
Profit and loss account 62.9 33.9
Equity 81.1 52.0
The accompanying notes on pages 156 to 159 form an integral part of these financial statements.
These financial statements were approved by the Board of Directors on 22 March 2022 and were signed on its
behalfby:
JOHN HORNBY MATT WEBB
Chief Executive Officer Chief Financial Officer
Company registered number: 05254883
Financial Statements
Luceco plc Annual Report and Financial Statements 2021 155
Company Statement of Changes in Equity
for the year ended 31 December 2021
£m
Share
capital
Share
premium
Retained
earnings
Treasur y
reserve
Total
equity
Balance at 1 January 2020 0.1 24.8 17. 8 (4.1) 38.6
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 — — (4.9) — (4.9)
Purchase of own shares — — — (2.7) (2.7)
Share-based payments charge — — 1.0 — 1.0
Total transactions with owners
in their capacityasowners — — (3.9) (2.7) (6.6)
Balance at 31 December 2020 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
The accompanying notes on pages 156 to 159 form an integral part of these financial statements.
 
156 Luceco plc Annual Report and Financial Statements 2021
Notes to the Company Financial Statements
for the year ended 31 December 2021
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 as noted 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.
Theamendments to FRS 102 issued in July 2015 and effective immediately have been applied. 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.
Going concern
As highlighted in note 1 to the consolidated financial statements, the Group meets its day-to-day working capital
requirements through its cash reserves and a number of funding facilities.
The Group’s forecasts and projections show that the Group should be able to operate within the level of funding
available.
After making enquiries, the Board has a reasonable expectation that the Company and the Group have adequate
resources to continue in operational existence for the foreseeable future. Consequently, the Directors are confident
that the Company will have sufficient funds to continue to meet its liabilities as they fall due for at least 12 months
from the date of approval of the financial statements and therefore have prepared the financial statements on a
going concern basis.
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 differences which arise from the inclusion of income and expenses in tax
assessments in periods different 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 difference, 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.
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 effective 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.
Financial Statements
Luceco plc Annual Report and Financial Statements 2021 157
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 effect 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 effects of
non-transferability, exercise restrictions and behavioural considerations. Charges made to the income statement
in respect of share-based payments are credited to reserves.
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. It recognises 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.
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 Luceco Holdings Limited.
£m 2021 2020
Balance at 1 January 1.7 0.7
Share-based payment charge relating to subsidiaries 1.6 1.0
Balance at 31 December 3.3 1.7
158 Luceco plc Annual Report and Financial Statements 2021
Notes to the Company Financial Statements continued
for the year ended 31 December 2021
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 as follows:
Company Registered office Principal activity
% of
shares held
Luceco Holdings Limited* Luceco Distribution Centre
Stafford Park 1, Telford TF3 3BD, UK
Intermediate holding
company
100
Luceco UK Limited* Luceco Distribution Centre
Stafford Park 1, Telford TF3 3BD, UK
Electrical accessories
importer and distributor
100
BG Electrical Limited* Luceco Distribution Centre
Stafford 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 office 100
Luceco Inc Batallon de San Patricio 109 Sur, Col.
Valle Oriente San Pedro Garza Garcia,
Mexico
Administrative and
development office
100
Luceco SAS 3 Rue de Courtalin, 77700 Magny
Le Hongre, France
Administrative and
development office
100
Luceco GmbH Holstenplatz 20b, 22765 Hamburg,
Germany
Administrative and
development office
100
Luceco Mexico Batallon de San Patricio 109 Sur, Col.
Valle Oriente San Pedro Garza Garcia,
Mexico
Administrative and
development office
100
BG Electrical SDN No. 2 Jalan SS 24/17, 47301 Petaling
Jaya, Selangor, Malaysia
Administrative and
development office
100
Nexus Industries PTE Limited 3,791 Jalan Bukit Merah #09-25
(E-center@redhill), Singapore, 159471
Administrative and
development office
100
Nexus Industries Design Limited 1,438 Jiachung Road, Xiuzhou
Industrial Park, Jiaxing, Zhejiang
314000, China
Administrative and
development office
100
Luceco Southern Europe SL CL Bobinadora 1-5, Local 7, 08302
Mataro Barcelona, Spain
Administrative and
development office
100
Luceco Middle East FZCO Building 5EB, Office 342, DAFZA
PO Box 371128, Dubai
Administrative and
development office
100
Kingfisher Lighting Limited* Luceco Distribution Centre
Stafford Park 1, Telford TF3 3BD, UK
Electrical accessories
importer, installer and
distributor
100
DW Windsor Group Limited* Luceco Distribution Centre
Stafford Park 1, Telford TF3 3BD, UK
Intermediate holding
company
100
D.W. Windsor Limited* Luceco Distribution Centre
Stafford Park 1, Telford TF3 3BD, UK
Manufacture of electric
lighting equipment
100
Pulsar Lighting Solutions Limited* Luceco Distribution Centre
Stafford Park 1, Telford TF3 3BD, UK
Manufacture of electric
lighting equipment
100
Urban Control Limited* Luceco Distribution Centre
Stafford Park 1, Telford TF3 3BD, UK
Manufacture of electric
lighting equipment
100
Fusion Lighting Limited* Luceco Distribution Centre
Stafford Park 1, Telford TF3 3BD, UK
Dormant 100
Street Lighting Limited* Luceco Distribution Centre
Stafford Park 1, Telford TF3 3BD, UK
Dormant 100
EV Charge Points UK
T/A EVCP Limited
Burlands Charlwood Road, Ifield,
Crawley, England RH11 0JZ
Manufacture of electric
vehicle chargers
100
Financial Statements
Luceco plc Annual Report and Financial Statements 2021 159
* All UK registered subsidiaries are exempt from audit, which is set out within Section 479A of the Companies Act 2006 for the
yearended 31 December 2021. 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.
30 Debtors
£m 2021 2020
Amounts owed by Group undertakings 77.8 50.3
Amounts owed by the Group’s subsidiaries are repayable at the Company’s discretion 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 effects.
Allotted, called up and fully
paid
Number of shares in issue
(thousands)
2021
£
2020
£
2021
Number
2020
Number
At 1 January 2021 80,400 80,400 160,800 160,800
At 31 December 2021 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.
160 Luceco plc Annual Report and Financial Statements 2021
Company Information
Financial calendar
Dividend record date 8 April 2022
Dividend reinvestment plan final date for election 28 April 2022
Annual General Meeting 12 May 2022
Dividend paid 20 May 2022
Half-year end 30 June 2022
Half-year end trading update 19 July 2022
Half-year interim management statement 6 September 2022
Year end 31 December 2022
Full-year results March 2023
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 2021 to 31 December 2021.
Share price (pence) High Low Average
Financial
year end
1
2021 497.0 231.0 336.9 348.5
2020 267.0 44.0 151.0 253.0
1. Last trading day at the London Stock Exchange, 30 December 2021.
Shareholder queries
Shareholders who change address, lose their share certificates, wish to amalgamate multiple shareholdings or have
payments paid directly into their bank account, or otherwise 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 sha[email protected].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
Financial Statements
Luceco plc Annual Report and Financial Statements 2021 161
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 offers 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 difficult to spot. They are targeted at those most at risk, typically people in retirement who are actively
seeking an investment opportunity.
Protect yourself
1) Reject cold calls
If you have been cold called with an offer 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 offered 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. Seek advice 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
https://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.
162 Luceco plc Annual Report and Financial Statements 2021
Advisers
Company’s registered office
Luceco plc
Building E Stafford Park 1
Stafford 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
shareholderenq[email protected]
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
[email protected]
Financial Statements
Luceco plc Annual Report and Financial Statements 2021 163
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, the economic 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 affected by a wide range of variables which could cause actual
results to differ materially from those 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 at the date of preparation of this
Strategic Report and the Company undertakes no obligation 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, full copies of which can be
obtained free of charge from the Group’s website at www.lucecoplc.com or from the Company’s registered office.
164 Luceco plc Annual Report and Financial Statements 2021
Notes
Designed by
www.lyonsbennett.com
This report is printed on Splendorgel which is made of FSC
®
certified and other
controlled material.
Printed sustainably in the UK by Pureprint, a Carbon Neutral company with FSC
®
Chain of custody and an ISO 14001-certified environmental management system
recycling 100% of all dry waste.
Luceco plc
Registered office
Building E Stafford Park 1
Stafford Park
Telford TF3 3BD
www.lucecoplc.com
ir@luceco.com
Company number
05254883
LUCECO PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2021