Floorcoverings distributor Likewise Group (LON: LIKE) is growing despite a declining underlying market. AIM-quoted Likewise is gaining market share, but it is still not a large company, and it has further capacity to grow into.
In 2023, revenues improved 13% to £139.5m, while pre-tax profit dipped from £2.6m to £2.3m. That was slightly lower than expected due to additional hiring of sales and marketing personnel. The benefits of the investment will show through this year.
Net debt increased to £1.9m at the end of 2023 and it will rise again because £4.3m of deferred consideration on past acquisitions has been paid. Cash generation will improve, though, and debt will fall next year, even though there will be continued investment in operations. The total dividend has been raised from 0.31p/share to 0.35p/share.
The past investment in distribution capacity means that Likewise has good geographic coverage with southwest England the only place that might require a distribution centre. There is capacity to grow into and this will help to increase margins.
Zeus forecasts a jump in 2024 pre-tax profit to £3.5m. The share price rose 1p to 17p, which is 16 times prospective earnings.
It will take an upturn in consumer confidence for the floorcoverings market to recover, but Likewise appears set to grow whatever happens. The operational gearing means that a market upturn could have a significant effect on prospective earnings.
