Telford-based LED lighting designer and manufacturer Luceco (LUCE) could at last be emerging from a ‘particularly challenging’ few months that had destroyed a huge chunk of shareholder value.

The business published full year results to 31 December 2017 on Monday that showed increases in both revenue and profits. The figures confirmed a 25% jump in revenue to £167.6m and pre-tax profits of £12.3m, surging from £9.1m in 2016.

But £3m worth of adjustments to operating profit, under pressure profit margins and the likelihood of a second half weighted 2018 have capped any recovery in investor confidence. Luceco’s share price slipped a couple of percentage points in morning trade on Monday to 66p, valuing the business at about £106m.

PROFIT WARNINGS PAIN

Luceco was forced to issue a series of profit warnings during the past few months, forcing the resignation of the company’s financial controller.

A warning in December 2017 came after the discovery of incorrect assessment of the value of the group's stock. A second warning followed in March.

During that three month period Luceco’s share price collapsed, falling from 232p to just 50p at their lowest.

‘We identified in the second half of 2017 that our inventory valuation, which was being incorrectly calculated, was masking underlying deterioration in our gross margins caused by currency movements and commodity price increases,’ spelled out chairman Giles Brand today.

That issue was compounded by the reassessment of its balance sheet in response, which revealed ‘errors in the group's historic financial information, necessitating a restatement.’

‘The key now is in stabilizing/recovery in the margins.'

‘As evidence of this comes through so the shares should start to recover some of their value,’ say analysts at broker Numis Securities. But ‘evidence of this is unlikely until the interims hence our hold recommendation.'

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Issue Date: 30 Apr 2018