2021 was a transformational year for Likewise Group plc (LON:LIKE) as it gained scale and became the clear number two player in the floor covering distribution market. Revenue increased 28% to £60.5m (FY20: £47.3m) and, since it listed on AIM in August 2021, Likewise has successfully completed two acquisitions adding c. £40.0m of annualised revenue. Zeus forecasts assume a CAGR in revenue of 38% over the next three years, taking revenue to over £160.0m. Profit before tax of £1.6m is in line with forecasts and had been communicated to the market in December. The improvement in profitability has been driven by scale but also a 390bp in gross margin due to improved product and customer mix. A maiden dividend will be paid in FY22 and the Company, subject to gaining permission and the AGM, could undertake a buyback should accretive acquisitions not present themselves. Trading in the current year remains solid and is on track to meet FY expectations, Zeus estimates are unchanged.
Despite economic headwinds the business has structural growth
¨ Maiden year of profitability: Likewise has announced £1.6m of adj. Profit Before Tax (FY20: Loss Before Tax £1.5m) a maiden year of profitability since the business was created by Tony Brewer (CEO) and his team in 2018. A maiden dividend will be paid in FY22, fulfilling its commitment to instigate a progressive pay out policy.
¨ Growth in FY21 has created a business of scale: Revenue increased 28% to £60.5m (FY20: £47.3m) and over 100% on the £30.0m generated in FY19. The growth has been both organic and through acquisition. Businesses acquired have added scale, product, customers but also capacity and footprint, meaning the business has the infrastructure to support materially higher volumes. This is reflected in Zeus’ revenue estimate in FY23 being 125% up on FY21A. Already the clear number two player in the distribution market, Likewise remains materially behind the market leader Headlam in terms of market share.
¨ Acquisitions post period end underpin FY22 expectations: Zeus Revenue estimate for FY22 is £114.9m. a c.90% uplift on today’s reported FY21A. The acquisitions of Valley Wholesale Carpets (VWC) (Jan 2022) and Delta Carpets (Apr 2022) will add an annualised c.£40.0m of revenue. Organic growth will be double digit as site utilisation increases on the back of market share win. Cost inflation remains an issue, but price increases will be used to offset these, the most recent being introduced on May 1st.
¨ Valuation: Likewise offers best in class growth in a fragmented market with a single dominant player and a management team that has done it before. The current year earnings multiple of 25x falls to sub 12x in FY24. On an EV/EBITDA basis, including leases, the reduction in the rating is 11.1x to 5.5x over the same period.
Summary financials
| Price | 31.5p |
| Market Cap | £76.8m |
| Shares in issue | 243.8m |
| 12m Trading Range | 29.3p– 49.7p |
| Free float | 71.60% |
| Next Event | Interims September |
Financial forecasts
| Yr end Dec (£’m) | 2020A | 2021E | 2022E | 2023E |
| Revenue | 60.5 | 114.9 | 136.6 | 160.8 |
| yoy growth (%) | 27.8 | 90 | 18.9 | 17.7 |
| EBITDA | 3.8 | 8.7 | 14.2 | 17.7 |
| EBIT | 1.7 | 4.7 | 6.9 | 9.9 |
| Adj. PBT | 1.6 | 4.2 | 6.2 | 9.1 |
| Adj. PAT | 1.7 | 3.4 | 4.9 | 7.3 |
| EPS (p) basic adj. | 0.9 | 1.4 | 2 | 3 |
| EPS (p) ful dil. Adj. | 0.8 | 1.3 | 1.8 | 2.7 |
| DPS (p) | – | 0.3 | 0.5 | 0.7 |
| Net cash/(debt)^ | 4.3 | -2.9 | 5.4 | 5.4 |
| P/E | 39.7 | 24.9 | 17.1 | 11.6 |
| EV/EBITDA | 22.1 | 11.1 | 6.6 | 5.5 |
| Div yield (%) | – | 1.1 | 1.6 | 2.4 |
^Net cash/(dent) excludes leases
Source: Audited Accounts and Zeus estimates
