Likewise Group Plc (LIKE.L) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen. Welcome to the Likewise Group plc 2025 Pre-close Update and Outlook for 2026 presentation. [Operator Instructions] Company may not be in a position to answer every question received during today's meeting. The company can review all questions submitted today and we'll publish those responses where it's appropriate to do so. Before we begin, I'd like to submit the following poll, and I'm sure the company will be grateful for your participation. I'd now like to hand over to CEO, Tony Brewer. Tony, good afternoon.

Many thanks, Mark, and thanks, everybody, for joining this afternoon. You'll know that we had a pre-close statement a couple of weeks ago, which confirmed the top line numbers for 2025. But I think the key for this afternoon's meeting really is demonstrating we are building a very good business with strong foundations and an excellent team of people. And across those 12 distribution and logistics centers, we have been putting extra capacity, which I'll go through in the course of the presentation, fantastic support from our suppliers in those key product areas of carpet, residential vinyl, laminate, luxury vinyl tile, artificial grass, underlayments, flooring accessories and commercial products. And we've now extended the sales team to total 102 people who are focused on looking after our customers, putting new point of sale into retail and contractors and generally developing the business. And to support that, we've increased the delivery fleet, and that will total at least 160 during the course of 2026. And throughout the businesses, we have excellent staff who understand and have been brought up in the flooring industry, and that's whether that's in our management, our sales teams, our internal sales, warehouse staff and delivery drivers. And we believe there's fantastic opportunity to develop the business further and get more and more point of sale into the market through our 7,000 independent customers, which are flooring retailers and flooring contractors. And whilst we set out a goal in the early days of getting to GBP 200 million sales revenue, we can see opportunities now to take the business some way beyond that number. And this just demonstrates the consistency and evolution of the business over a number of years with that seasonality. And you can see that top line growth, 2025 overall up by 8.6% and likewise, floors actually ahead by 13.3%. We see a very consistent seasonal trend. The spring was very positive for us, probably some challenges, but we still exceeded the previous year during those summer months when it was particularly hot and that crescendo then towards the end of the year, October, November and December being the busiest trading periods. And whilst we're very early into the year, January is a lower trading month, but that seasonality, but it's fair to say we've made a particularly positive start to this year, and that I think gives us confidence for the year as a whole. And I mentioned the management team, we've really got some excellent people there, who have learned the business, understand the IT and the logistics product, great customer and supplier relationships. And I think what's really further encouraging is that we've got a number of younger people coming into the business that no doubt will be on that page in the not-too-distant future. And it gives us, again, confidence in the development of the business for the future. And those sales teams across the country in the various locations, as I said, a total of 102, 21 additional in the last year or so. And again, that's further investment and commitment in the business. And in terms of market presence and displays, you can see an array of products there, from the left-hand side, luxury vinyl tile from Karndean, the Cotswold engineered wood collection, the Vitality laminate in the foreground, various derivatives of luxury vinyl tile across the back wall with residential vinyl in the far right-hand corner and array of carpet products, including our premium Lewis Abbott product where, again, we've invested in 3 additional salespeople dedicated to that particular product category. And in Valley, again, we've increased their market presence through various types of display stands, the carpet stands in the center, you can see the laminate, which was launched in the back end of '24, and we did really well with that product during '25. And the vinyl stands on the left-hand side, just about to go into the marketplace. And furthermore, with the success of the laminate, we will be launching a luxury vinyl tile into Valley in the spring. And in terms of the infrastructure, the business started when we acquired the business in Sudbury in 2018. You can see thereafter everything on that page, additional 11 sites have all been established, albeit some through acquisition, of course, in Valley, but all been established in the last 4 years. And that infrastructure, if we take Likewise Floors to begin with, the 3 main hubs in Birmingham, Leeds and Glasgow where anything wide with, that's carpet, residential vinyl and artificial grass is stored, processed cut and then shipped out to the logistics centers overnight. And each of those lines on that map represent overnight movement of goods from the 3 hubs to the logistics centers. And furthermore, with the development in Newport, which is currently under construction and will be completed by the middle of the year, that will create a fourth hub and increase the capacity significantly within Likewise Floors and Valley. And then the Valley network, which the main center is in Erith in Southeast London, we have now got the cutting table in Derby operational. So that increases Valley's capacity and allows them to develop the business for the future and with their additional sites in Newport and Plymouth. And this just shows the overall infrastructure of the business with comprehensive coverage of the U.K. And at some point, and the Board is considering various options, we will need to invest further in capacity to push us through that well through the 200. I think it's fair to say the infrastructure that we have, particularly with the benefit of Newport, could certainly go well through 200. But if we have aspirations to be at 250, 300 and beyond, then we will need to invest in the infrastructure further. And this just demonstrates the cutting capacity where we've invested in additional capacity in Glasgow during the course of last year. We've actually installed between Christmas and New Year, a new cutting machine into Leeds, which increased our capacity and reliability there. Erith and Derby, I've mentioned where we're now cutting in Derby. And of course, that facility expanded in Newport to be operational during the course of the second half of the year. And that just demonstrates really the Newport extension, which actually increases our -- or doubles our capacity that we currently have in Newport. So intended to be a fairly brief meeting just to update you and answer any questions, but we've made further significant progress in the last 12 months. We put extra capacity in and have opportunities to further increase that. Newport is quite an important step for us to increase that capacity. And those excellent management and sales teams with the support of our suppliers and our customers, there are lots of opportunities in the flooring industry in the U.K., and we see going through that GBP 200 million and well into GBP 250 million and beyond. Thank you.

That's very kind of you, Tony. Thank you very much indeed to why Tony takes a couple of moments to review the questions submitted already. I'd like to remind you recording of this presentation along with a copy of the slides and the published Q&A can be accessed via your Investor Meet Company dashboard. Tony, thank you very much indeed for the update. And I know you've touched on a number of points, but we did receive a number of questions ahead of today's meeting as well as you've received a number throughout. So thank you to everybody for your engagement. First question, and I guess, ties in around M&A. Mark has asked a question last year, you were relatively neutral on possible acquisition activity. What is your view on this? And if I maybe combine that with on the pre-submitted is, what would the company look at buying a business with a turnover that would propel it forward if it was surpass its short-term target of GBP 200 million? So I guess maybe a little bit of color around thoughts around M&A.

Sure, absolutely. I think, obviously, we always consider opportunities as they present themselves, and they do periodically. I think it's fair to say our strategy is not to just buy turnover and pay goodwill just to enlarge the top line. That's not our strategy, but strategic acquisitions certainly. I guess we're a bit mean when it comes to paying goodwill. So we'll be very cautious with that. But yes, we'd consider it, but we equally see lots of opportunities to grow the business organically. And that's where our main focus is and investing in salespeople to help to achieve that.

That's great. Question here, please, could you outline what you consider as your competitive advantage in the domestic floor covering market and maybe some examples of how you're aiming to strengthen these?

I think it's our people, as I've said at the outset of the presentation. It's our speed to market, our decision-making, Adrian Laffey, who leads the residential side of the business, we're constantly looking at product and developing product with our suppliers, making quick decisions on what we need to do, getting that product into the marketplace, having attractive point of sale, product that's well priced and competitive. I think we are leading the market in that way.

Great. Do you consider that the recent price rises may provide some respite for the weaker players that have been losing market share?

I think the industry probably needs some price increases. I think we all know our costs are going up. Our people costs are going up, the well-publicized NI cost, the business rates going up, our delivery trucks. So we've got to be able to cover those costs. And importantly, the business needs to make an improved return to be able to further invest and then give increased and improved service to our customers. Where that helps weaker competitors, I'm not so sure, but it's important that we have, I think, some -- a little bit of price inflation while still keeping floor covering affordable for the consumer.

Thank you, Tony. A couple of questions around, I guess, the momentum that you guys are seeing in the -- operationally. What do you see as the main constraints on investing in further growth? Is it purely financing? Or are there perhaps other operational considerations?

I think the -- we have great support from our principal banks, and we've obviously talked to them about what we need to do for the future, and we could be making some fairly significant investments at the right time, and the Board is considering the options on what we should do there. We realize we need to put some further capacity into the business over the next 1 or 2 years to take advantage of market opportunities. So I don't think there's particularly a constraint on that. And it's fair to say our shareholders have been very supportive, and I think we'll continue to do so if we have the right investment opportunities.

Thank you, Tony. A question from Mark. Mark, thank you very much indeed for your question. Can you say more on this statement? The Board is now considering various investment options to materially exceed that figure. Is there any color or clarity you can give on that for Mark?

I think that's covered by the last answer really. We do need to put -- we put a lot into the sites we've developed over the last 4 years from 2021 when we had a sea change when we moved into the Leeds distribution center from what we previously had and then built those other centers around that across the country. We will be prepared to make further steps in investment to give us more capacity at the appropriate time.