32816-Lucy-Group-AR-2025 web ready spreads_FINAL

Financial Review

STRATEGIC REPORT

Other operating Items Other operating income increased to £11.6m (2024: £10.5m) from higher commercial and residential property rental income. Other operating expenses decreased to £4.3m (2024: £6.9m) following the completion last year of Lucy Electric’s business relocation in Saudi Arabia. The impact of these factors was to increase net operating income to £7.3m (2024: £3.6m). Operating profit Group operating profit before valuation gains was £46.7m (2024: £80.8m), a decrease of 42.2% compared with last year. The annual valuation of the Group’s investment property assets gave rise to a revaluation of £5.9m (2024: £2.4m). Residential market prices in Oxford are broadly unchanged, although well located properties as in the Group’s portfolio have seen modest price increases. A new five-year commercial lease and increased rent for Eagle House, Oxford, has increased its investment value. The impact of these valuations on the Group’s investment property has resulted in a Group operating profit after valuation adjustments of PBT for the year was £55.6m (2024: £85.2m) after crediting net finance income of £3.0m (2024: £2.0m). Finance income was £4.8m (2024: £3.8m), with interest receivable benefiting from higher cash deposits despite lower bank interest rates. Finance costs increased to £1.8m (2024: £1.7m) from interest on overdue tax payments partially offset by decreases in interest costs and currency losses. Taxation The Group’s tax expense for 2025 is £9.5m (2024: £13.3m), resulting in a headline effective tax rate of 17% (2024: 16%). The current year’s £52.6m (2024: £83.2m). Profit before tax

Acquisitions On 18th December 2025 the Group acquired Blakley Electrics Ltd, a UK market leader in power distribution systems and industrial lighting equipment, for a consideration of £15.7m net of cash. Based in Crayford, Kent, Blakley also has manufacturing and engineering activities in Harlow, Essex and a sales and service centre in Leeds. The Blakley acquisition expands the Group’s infrastructure offering - providing access to the construction, rail, military and outdoor events sectors - and will become part of the acquisition, there was minimal trading activity before the close of the year. The Group has a strategy of growing through a combination of organic expansion and acquisition. We continue to seek acquisitions that support the development of our business units. Lucy Controls business unit. Given the timing of the Blakley

rate includes an increase in the total tax charge of £1.1m, in respect of adjustments relating to prior periods, and a £2.1m deferred tax credit in respect of recognition of previously unrecognised deferred tax assets. Last year’s rate includes a reduction in the current tax charge of £1.3m, in respect of adjustments relating to earlier periods. Removing the impact of the above non-recurring adjustments provides a more reliable measure: on this basis, the adjusted effective rate of tax is 19% (2024: 17%). The Group expects its adjusted effective tax rate to remain marginally lower than the standard UK tax rate, due to marginally lower tax rates in many of the countries where the Group makes taxable profits. The Group’s tax strategy seeks to ensure that key tax risks are appropriately mitigated and that the Group’s reputation as a responsible taxpayer is safeguarded. Dividends The Board recommends an increased final dividend of 186 pence per share which, taken together with the interim dividend of 128 pence per share, gives a full year dividend of 314 pence per share (2024: 301 pence per share). This represents a 4.3% increase for the year. A special dividend of 400 pence per share was paid in December, reflecting the Group’s trading performance, compared with a special dividend of 600 pence per share last year. Our dividend policy is to grow core dividends at least in line with the Retail Price Index (RPI) and to supplement core dividends with special dividends when the Board

“ Despite more challenging trading conditions, the Group delivered a 12.9% return to shareholders.”

Gary Ashton

Group Finance Director

The Group reported increased sales for the year although, as expected, profits decreased while continuing to provide a strong return to shareholders.

in reported results, with impacts recognised outside the relevant financial year. The substantial increases in import tariffs in some key markets - which put pressure on margins - are harder to control, although the procurement teams are reconfiguring the supply chain to help mitigate these tariff increases. Value engineering remains a key area of focus, to reduce product cost and to support sustainability through lower raw material usage and reduced waste. High utilisation of the Group’s manufacturing facilities has continued to support lower product costs. Overheads Overhead costs increased by £11.9m (17.8%) compared to 2024 and on an OCC basis by 22.0%, largely driven by investment in people, strategic product development and inflationary pressures. Research and development spend on product development increased by 22.3% (2024: 33.2%) to £15.9m and by 24.6% on an OCC basis. No development expenditure was recognised as an intangible asset this year (2024: nil).

There were no additions to the investment property portfolio during the year. The annual passing rent now stands at £11.3m (2024: £10.4m), split 89:11 between residential and commercial tenancies. Gross margin Gross margin decreased by 7.2 percentage points from 35.2% in 2024 to 28.0% in 2025. This is largely due to a decrease in selling prices as a result of heightened competition in some of Lucy Electric’s key markets, while soft pricing in Lucy Real Estate’s development business also had an adverse impact on margins. Given that materials represent our largest cost of sales, they remain a key management focus. Commodity prices have been largely stable during the year except for copper prices, which increased significantly during the final quarter. We actively hedge our copper exposure to manage price volatility. However, in accordance with IFRS 9, the Group is unable to hedge account. Consequently, the timing of recognising associated gains and losses will not align with the underlying transactions. As a result, some volatility may arise

Order intake and revenue Order intake for the year decreased by 8.8% to £367.1m (2024: £402.6m) and on an Organic Constant Currency (OCC) basis by 7.3%. Order intake was weaker in the second half of the year as several key markets reduced infrastructure spending and the UK residential property development market continued to be subdued. The lower order intake was largely responsible for a £54.7m decrease in the closing order book, with adverse foreign exchange movements of £6.3m accounting for the balance. Group sales were £421.8m (2024: £409.3m) for the year, 3.0% higher than last year or 5.4% on an OCC basis. Reported sales were adversely impacted by a foreign exchange translation headwind of £9.5m. Rental income increased during the year by 10.9% to £11.0m, while occupancy levels were marginally lower at 98% (2024: 99%). Residential rents increased by 6.8% (2024: 8.8%), with commercial rents increasing by 29.3% (2024: nil), largely driven by a five-year rent review for Eagle House in Oxford.

Cash flow The Group had a free cash inflow of £1.7m (2024: £44.9m) and £4.4m of foreign currency borrowings were repaid during the year. Operating cash flow before changes in working capital, interest and taxes was an inflow of £54.0m (2024: £88.2m), largely driven by strong operating profits.

considers it appropriate after reviewing both profits and cash requirements.

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Lucy Group Ltd Annual Report & Accounts 2025

LUCYGROUP.COM

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