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Strategic Report
Chairman’s Introduction
Results overview I am pleased to report that the Group’s strong performance in 2020 continued into 2021 with further sales growth and increased profit before tax. This both reflects the resilience of our core business strategy and the contribution of every employee throughout the Group during a further successful year despite the ongoing challenges faced from the global pandemic. Group sales, underpinned by Lucy Electric’s strong commercial performance, increased in 2021 by 29% to £263.8m (2020: £204.0m) and profit before tax increased to £42.2m (2020: £27.1m), with this including a £4.2m increase in the fair value of the Group’s investment properties (2020: £3.2m). There was a cash inflow of £30.0m (2020: £14.9m) and an increase in the Group’s net assets to £238.4m (2020: £201.4m) at the year-end. We started to see in the second half of 2021 the impact of commodity price increases, developing inflation and ongoing supply chain issues which will place significant pressure on the Group’s performance in 2022. Our key performance indicators, set out on page 7, are used to monitor the main drivers of the business, and underline the Group’s strong full year performance with all financial indicators being positive. Carbon emissions rose due primarily to an increase in the use of logistics arising from the higher level of sales and some limited travel returning following restrictions in many areas in the previous year. We have continued to invest in expansion of the Group’s international sales capabilities with additional resources in key markets. Our targeted innovation and product development, including those for the electric vehicle sector, smart city technology and smart ring main units for electricity networks, will provide the Group with a product portfolio capable of delivering long-term value for its stakeholders with sustainability and the drive towards meeting ‘net zero’ targets cornerstones for a rapidly evolving environment and marketplace. Our focus on value-engineering, strong cost control and management of overheads
Annual Report and Accounts
continued to partially mitigate pricing pressures from an increasingly competitive market, and we remain committed to the delivery of cost reductions and efficiencies throughout our procurement processes and from the supply chain wherever possible. Whilst there has to date been little impact on the Group following the UK leaving the European Union (‘EU’) and the subsequent transition period ending on 31 December 2021, we are aware that political and economic uncertainty remains which may disrupt and add additional costs to the Group’s supply chain. In addition there may be increased difficulties of retaining and securing skilled labour which could adversely impact performance and increase the Group’s cost base. The Group is firmly positioned to capitalise on commercial opportunities that present themselves as normality returns after the global pandemic with strong foundations capable of supporting strategic investment to deliver long-term growth and value to our stakeholders. We are immensely proud of our people, where everyone is a member of the ‘Lucy Team’ which we are committed to invest in to attract, retain and develop for the longterm benefit of the Group. Aligned to this is the continued investment in our business systems with our Microsoft D365 cloud-based platform, which supports our financial and supply chain processes and information, expanded to include Lawson Fuses’ Indian business, and Lucy Electric’s implementation of a sales pipeline project to streamline and improve business planning. Lucy Real Estate has identified a specialist partner to support its development of new business systems for the future requirements of its rental and development businesses. Increased digitisation of the Group’s activities is central to improving the efficiency and accuracy of data and providing critical information analysis and insights for the Group.
Dividend The Board recommends a final dividend of 140p to be paid on 5th May 2022 to shareholders on the register on 31st March 2022
which, including the interim dividend of 93p per share, represents a full year dividend of 233p (2020 normalised full year dividend: 215p). There were two special dividends paid in 2021 of 125p, on 24th June, and 150p, on 8th December, with the former reflecting our exceptional performance in 2020, and the latter 2021’s results.
Strategic Developments In accordance with its core leadership role, the Board sets, reviews and shapes the Group’s long-term strategic vision and direction, with each business unit leadership team preparing their own medium-term plans and identifying the level of resources required to deliver them. During 2021, the Board received regular updates and presentations to enable it to review performance against the Group’s strategy and the respective business plan and address any concerns and issues that were identified. This enabled the Board and each business to successfully address prevailing commercial and business matters and the continuing issues arising from Covid-19 to deliver another profitable year which will support the Group’s prospects for future growth. Lucy Electric started 2021 on a strong footing and delivered a very successful full year’s results. There was continued progress on product development, operational improvements, and cost containment activities, with investments in plant and machinery to automate manufacturing processes and a continued emphasis on a value-led approach to engineering. Good progress has been made on the development of a cost effective, environmentally friendly ring main unit. In recognition of the evolving market for electricity networks and for electric vehicles, Lucy Electric and Lucy Zodion have worked together, assisted and facilitated by external specialist consultants, to identify and develop the available commercial opportunities. The global shortage of semi-conductors, and reduced customer demand principally due to Covid-19, contributed to a further challenging year for Lucy Zodion. The semi-conductor
