LucyGroup-ARA2024_spreads web ready_FINAL

FINANCIAL REVIEW

BUSINESS OVERVIEW STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS SHAREHOLDER INFORMATION

Dividends The Board recommends an increased final dividend of 179 pence per share which, taken together with the interim dividend of 122 pence per share, gives a full year core dividend of 301 pence per share (2023: 286 pence per share). This represents a 5.2% increase for the year. A special dividend of 600 pence per share was paid in December, reflecting the Group’s strong performance, compared with a special dividend of 300 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 considers it appropriate after reviewing both profits and cash requirements. Acquisitions There were no acquisitions in the year. In 2024, the integration of the assets and IP of Fundamentals’ Artificial Intelligence and Machine Learning (AI/ML) business has expanded Lucy Electric’s intelligent low voltage remote monitoring and digital substation capabilities, supporting the Group’s growth strategy. 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 The Group had a free cash inflow of £44.9m (2023: £21.8m) and £1.9m of foreign currency borrowings were repaid during the year. Operating cash flow before changes in working capital, interest and taxes was an inflow of £88.2m (2023: £67.1m), largely driven by strong operating profits. business units. Cash flow

mortgage rates continue to reduce demand in the Oxford property market, with many properties being sold below their asking price. This year, increased rents have more than offset the higher returns demanded by landlords for remaining in an increasingly regulated rental market. This revaluation of investment property has resulted in a Group operating profit after valuation adjustments of £83.2m (2023: £59.9m). Profit before tax PBT for the year was £85.2m (2023: £59.5m) after crediting net finance income of £2.0m, compared with net finance costs of £0.4m last year. Finance income was £3.7m (2023: £2.3m) with interest receivable benefiting from higher cash deposits despite a modest reduction in bank interest rates. Finance costs reduced to £1.7m (2023: £2.7m) from a combination of lower borrowings and lower interest rates, and there was a decrease in foreign exchange losses. Taxation The Group’s tax expense for 2024 is £13.3m (2023: £19.0m), resulting in a headline effective tax rate of 16% (2023: 32%). The current year’s rate includes a reduction in the current tax charge of £1.3m, in respect of adjustments relating to prior periods. Last year’s rate included an adjustment of £10.8m, in respect of additional assessed tax on prior periods in the Kingdom of Saudi Arabia. Removing the impact of the above non-recurring adjustments provides a more reliable measure: on this basis, the adjusted effective rate of tax is 17% (2023: 14%). 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.

the Group’s manufacturing facilities are responsible for lower product costs. Material as the largest element of cost of sales continues to be a management focus and is closely monitored. Lower commodity prices and the procurement team’s supply chain improvements have positively contributed to lower input prices. Ongoing value engineering remains a key area of focus, reducing product cost and improving Group sustainability through lower raw material usage and reduced waste. In general, input lead times have improved in 2024, although semiconductor supply chain constraints continued throughout the year. Overheads Overhead costs increased by £6.4m (+10.8%) compared to 2023, largely driven by investment in people and strategic product development. Research and development expenditure increased by 33.2% (2023: 9.9%) to £13.0m and by 11.1% on an OCC basis. No development expenditure was recognised as an intangible asset this year (2023: nil). People costs increased by 11.9% and total overhead costs increased on an OCC basis by 13.3% after excluding currency movements. Other operating Items The relocation of Lucy Electric’s business in Saudi Arabia at a cost of £2.2m (2023: £0.5m) decreased net other operating income to £3.6m (2023: £5.7m). Underlying net operating income from rental properties remained unchanged at £5.4m, as increased income was offset by higher costs for refurbishments and energy efficiency upgrades. Operating profit Group operating profit before valuation gains was £80.8m (2023: £62.3m), an increase of 29.7% compared with last year. There was a £2.4m gain from the annual valuation of the Group’s investment property assets compared with a loss of £2.5m last year. Higher

Management of working capital remains a key focus for achieving our cash generation objectives during this period of growth. In 2024, working capital increased by £18.3m (2023: £20.9m) to support both this year’s sales and future projected sales. Inventory increased by £10.5m (2023: £19.7m) to support higher volumes and to mitigate ongoing supply chain disruptions, whilst an investment of £2.3m in Lucy Real Estate’s inventory supported its strategic growth plan. Receivables decreased by £2.5m, or 3%, as sales slowed in the second half of the year, whilst overdue receivables reduced compared with 2023. Payables decreased by £8.8m and provisions decreased by £2.4m. There was a £0.8m inflow from changes in the value of derivative financial instruments. Net interest received was an inflow of £1.9m (2023: £0.4m) and tax payments were £11.5m, compared with £10.4m in 2023. Investing activities at £15.3m (2023: £14.3m) included capital expenditure of £15.6m (2023: £15.4m). Proceeds from disposals of property, plant and equipment contributed £0.3m (2023: £1.2m). Capital commitments at the end of the year were £2.6m (2023: £6.1m). Financial position The Group’s £43.0m Revolving Credit Facilities (RCF) with HSBC Bank PLC were unchanged during the year, whilst actual bank borrowings decreased by £1.9m to £12.0m at 31st December 2024. Also, the Flashnet S.A. minority shareholder loans of £0.3m were repaid on 7th October 2024. The Group had net cash of £99.9m (2023: £58.8m) and net assets increased during the year by £69.8m to £394.0m. The Group’s financial metrics remain strong, with gearing of 3.0% (2023: 4.3%) and interest costs covered 82 times (2023: 59 times).

Gary Ashton Group Finance Director

“ 2024 marked another year of strong financial results combined with strategic investment in long-term growth. ”

The Group reported record sales and profits for the year, delivering a 21.6% return to shareholders.

Real estate rental income increased during the year by 8.7% to £9.9m and occupancy levels were maintained at 99% (2023: 99%). Residential rents increased by 8.8% (2023: 7.5%) in line with market prices and there was one commercial rent increase. There were no additions to the investment property portfolio during the year. The annual passing rent now stands at £10.4m (2023: £9.7m), split 91:9 between residential and commercial tenancies. Gross margin Gross margin increased by 2.7 percentage points from 32.2% in 2023 to 34.9% in 2024. Higher sales volumes and an improved product mix comprising more intelligent infrastructure products is driving this increased revenue. Lower material input costs and increased utilisation of

Order intake and revenue Order intake for the year was £402.6m (2023: £340.4m), up 18.3% from last year, although the closing order book decreased by £6.7m or 3.5%. Lower order intake was responsible for 14.4% lower sales in the second half of the year. Group sales were £409.3m (2023: £359.1m) for the year, 14.0% higher than 2023 or 16.6% on an organic constant currency basis (OCC). The Group’s businesses each recorded increased sales, with Lucy Electric and Lucy Controls benefitting from their position in growth markets, whilst Lucy Real Estate’s increased pipeline of sites provided growth despite difficult market conditions.

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Lucy Group Ltd Annual Report & Accounts 2024

LUCYGROUP.COM

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