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

Financial Review continued

STRATEGIC REPORT

Post-employment benefits The Group accounts for post employment benefits in accordance with IAS 19 Employee Benefits. The balance sheet reflects the net surplus of the W Lucy Defined Benefit Pension Scheme in the UK as at 31st December 2025, based on the market value of assets at that date and the valuation of liabilities using AA corporate bond yields adjusted to reflect the duration of the Scheme’s liabilities. This Scheme was closed in 2002 to new entrants to reduce the risk of volatility of the Group’s liabilities. The last triennial valuation of the Scheme was performed as at 6th April 2023. This valuation revealed a Scheme surplus of £11.2m and a funding level of 121%, compared with a deficit of £4.4m in the previous valuation, following a significant increase in bond yields. As part of the actuarial valuation, the Company agreed from 1st January 2024 to pay contributions of £0.2m for expenses plus 21.5% of pensionable salary in respect of the Scheme’s active members, compared with 28.8% in the previous valuation. The separate IAS 19 valuation performed as at 31st December 2025 showed a Scheme surplus of £21.2m (2024: £18.2m). This represents an increase in the funding level from 140% to 147% during the year. The Scheme’s assets outperformed the expected rate of interest during the year by £2.1m, which increased previous review date has increased the surplus by £1.0m. A decrease in the expectations of future inflation compared with the previous review has decreased the value placed on the Scheme’s liabilities, leading to an actuarial gain of £0.8m from the changes to the financial assumptions, which has served to further increase the surplus. the surplus, while the interest on the Scheme’s surplus at the

Management of working capital remains a key priority for achieving our cash generation during this period of growth. In 2025, working capital increased by £12.6m (2024: £18.3m) to support both this year’s sales and future projected sales. Inventory increased by £5.3m (2024: £10.5m), including an investment of £7.6m in Lucy Real Estate’s inventory to support its strategic growth plan. Receivables decreased by £2.6m, or 5%, as sales slowed in the second half of the year, while overdue receivables increased compared with 2024. Payables decreased by £6.9m and provisions by £0.5m and there was a £2.6m outflow from changes in the value of derivative financial instruments. Net interest received was an inflow of £2.9m (2024: £1.9m) and tax payments were £17.1m, compared with £11.5m in 2024. Investing activities at £25.4m (2024: £15.3m) included capital expenditure of £10.7m (2024: £15.6m) and the acquisition of Blakley Electrics Ltd net of cash for £15.7m. Proceeds from disposals of property, plant and equipment contributed £0.9m (2024: £0.3m). Capital commitments at the end of the year were £2.3m (2024: £2.6m). Financial position The Group’s £43.0m Revolving Credit Facilities (RCF) with HSBC Bank PLC were unchanged during the year, while actual bank borrowings decreased by £4.4m to £7.6m at 31st December 2025. The Group had net cash of £95.9m (2024: £99.9m) and net assets increased during the year by £37.0m to £430.9m. The Group’s financial metrics remain strong, with gearing of 1.8% (2024: 3.0%) and interest costs covered 66 times (2024: 82 times). Return on net assets The Group recorded a return on net assets of 12.9% (2024: 21.6%) during the year.

Changes to the mortality projection assumption has altered the expected life expectancies for members of the scheme. The impact of this change has been to increase the value of the Scheme’s liabilities by £0.3m, which has decreased the surplus. Allowing for actual pension increases and revaluation in deferment during the year results in an experience loss of £0.3m, which has decreased the surplus. The costs of further accrual of benefits by members and the Scheme’s expenses have exceeded contributions paid by the Company during the year, reducing the surplus by £0.3m. The discount rate to value the Scheme’s liabilities remained unchanged between the valuations. The related deferred tax liability of £5.3m resulted in a net pension asset of £15.9m (2024: £13.6m) at the end of the year. The amount of the surplus is sensitive to changes in the main financial assumptions, particularly the rate used to discount the liabilities (the discount rate). A change in the discount rate of 0.1% would increase/decrease the surplus by £0.5m (2024: £0.5m). The value of non-UK defined post employment benefits was £7.6m (2024: £7.4m) at the end of the year. International Financial Reporting Standard The consolidated financial statements of the Group have been prepared under UK adopted International Financial Reporting Standards (IFRS) to represent the international nature of the Group’s business activities. The parent company has elected to prepare its financial statements in accordance with FRS 101.

Gary Ashton Group Finance Director 24 March 2026

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Lucy Group Ltd Annual Report & Accounts 2025

LUCYGROUP.COM

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