EP Special Opportunities dives on Luceco profit warning – EP Special Opportunities’ shares are 23.3% lower at lunchtime today (15 December) following a profit warning from its largest investment.
Luceco profit warning
Luceco made the following announcement this morning “Luceco plc, the manufacturer and distributor of high quality and innovative LED lighting products, wiring accessories and portable power products, is today issuing the following trading update for the year to 31 December 2017.
The Group has seen gross margins weaken during the second half of the year and will now deliver gross margin of approximately 33%, leading to a GBP3.5m reduction in profit after tax to GBP13.2m, versus current market expectations of GBP16.7m.
Regrettably, the gross margin weakness was not identified sooner due to an incorrect assessment of the value of the Group’s stock. The Group’s Financial Controller has resigned as a result of this error. System improvements are being put in place to make sure this issue does not recur.
The principal reasons for the gross margin weakness have been the strengthening of the Chinese RMB versus the US Dollar, alongside the ongoing weakness in GBP and increased commodity costs.
The Group will be able to mitigate some of these headwinds through internal efficiency savings and overhead reductions, with margins expected to recover to long term expectations in H2 2018 as a result of these actions. The Group also intends to increase its foreign exchange and commodity price hedging activities with particular focus on the Chinese RMB versus the US Dollar.
Luceco’s revenue forecasts for 2017 and 2018 remain in line with market expectations. We continue to expand the Group’s product ranges and our geographic reach. Luceco’s balance sheet remains strong and the Board continues to assess opportunities to invest in the future growth of the business.”
Impact on EP special opportunities
The Directors of EPE Special Opportunities plc have noted the fall in the Luceco plc share price following a trading announcement this morning. They said that, should the Luceco plc share price close today at 145.0 pence per ordinary share, the estimated EP Special Opportunities fully diluted Net Asset Value will be 315.57 pence per ordinary share. Unfortunately, Luceco shares fell further after this announcement.
ESO / LUCE : EP Special Opportunities dives on Luceco profit warning