Interim Results

Lords Group Trading (AIM:LORD), a leading distributor of building materials in the UK, today announces its unaudited Interim Results for the six months ended 30 June 2021 (“H1 2021” or the “Period”).

 

Financial Highlights

  • Group revenues of £179.0 million (H1 2020: £124.0 million)
  • Group like-for-like revenue growth of 36.9% and 20.2% on a two year like-for-like basis** versus H1 2019
  • Gross profit increased by 40% to £29.3 million (H1 2020: £20.9 million)
  • Gross profit margin reduced slightly to 16.4% (H1 2020: 16.8%), due to divisional sales mix disruption as a result of Covid-19
  • Adjusted EBITDA* increased by 62% to £10.5 million (H1 2020: £6.5 million)
  • Profit before tax of £4.5 million (H1 2020: £0.3 million loss before tax)
  • 0.63 pence per share proposed interim dividend, in line with progressive dividend policy outlined at IPO
  • Performance in line with market expectations for the full year

 

*Adjusted EBITDA is defined as earnings before interest, tax, depreciation, amortisation, exceptional and acquisition costs on an IFRS basis and therefore prior to lease liability payments during the period in accordance with IFRS 16.

** like-for-like sales is a measure of growth in sales, adjusted for new, divested and acquired locations.

Operational Highlights

  • Successful admission to AIM on 20 July 2021, raising gross proceeds of £52.0 million in an oversubscribed Placing (£30.0 million for the Group, £22.0 million for existing shareholders)
  • Strong performance across the Group and a notable record contribution from Lords Builders Merchants
  • Continued increase in the Group’s Online Instore strategy with Y-on-Y digital sales growth in H1 2021 of 41.9%
  • Integration of MAP Building & Engineering Supplies Ltd and Condell Limited are well advanced following the acquisition in March 2021 and April 2021 respectively
  • Pipeline of potential acquisition opportunities remains robust and a number of conversations provide interesting inorganic growth potential for the Group
  • The Plumbing and Heating division relocated its Croydon and Bristol facilities to provide capacity for future growth
  • Customer satisfaction remains robustly strong in H1 2021 with a satisfaction score of 4.7 out of 5.0 (H1 2020: 4.7 out of 5), a fantastic testament to the customer-led ethos of the Group’s employees
  • Colleague engagement remains exceptionally high with the Group’s Q2 2021 survey delivering a score of 4.7 out of 5.0 (No comparative available)
  • Continued progress across the Group’s sustainability programme

Current Trading and Outlook

Lords is strategically focused on the Repair, Maintenance, and Improvement (“RMI”) market which represents 80% of Group revenue.  The long-term fundamentals of the RMI market are supported by pent up demand due to historic under investment in the UK housing stock and enhanced consumer savings triggered by the Covid-19 pandemic.

The Board is very encouraged by the strong first half performance across the Group and, while there remain product availability issues for a variety of reasons, it is confident in the full year outlook for Lords against a backdrop of positive macro trends.

Commenting on the Interim Results, Gary O’Brien, Chairman of Lords, commented:

“Market conditions remained favourable in our core markets throughout the period and I am delighted to report on a very strong first half, which was subsequently followed by our successful AIM IPO in July.

“We have continued to focus on our stated strategy of bolt-on acquisitions and organic growth, with H1 2021 reflecting significant milestones in both channels.  I am also pleased to report that the acquisition pipeline remains strong and we are in discussions with a number of potential businesses that would enhance the Group’s proposition.

“The strength of these results supports our first interim dividend payment to shareholders of 0.63 pence per share.

“This period has been hugely successful for the Group, underpinned by the significant milestone of a public listing.  I am extremely grateful to every colleague in the Group for their continued dedication and customer first ethos.”

Shanker Patel, Chief Executive, added:

“I want to thank all of our exceptional colleagues for their superb contribution and customer focus in delivering an excellent set of maiden interim results.  During this period Lords has delivered record operating profits and margins, and continues to deliver strong cash generation.

“2021 represents another key year in our strategic development and I’m delighted with the progress delivered in the half year with the acquisitions of MAP Building & Engineering Supplies Ltd and Condell Limited.  Most importantly, the continued high engagement from our colleagues and customers is nothing short of exceptional and uniquely positions Lords in our market.

“The overall outlook for Lords remains positive given the strength of our diversified portfolio model, macro trends, investment pipeline and strong balance sheet.”

 

Chief Executive Officer's Review

On behalf of the Board, I am pleased to introduce Lord’s maiden set of interim results since the Group’s successful admission to trading on AIM in July 2021.  The Group has performed strongly in the first half of 2021, delivering enhanced profitability and numerous strategic milestones.

Results for H1 2021

The results for H1 2021 demonstrate the success of our strategy which has been executed by our management team and colleagues, supported by favourable market conditions.  We continue to focus on strategic growth opportunities and creating a great experience for our colleagues and customers, which has always been Lords’ strength.

Our colleagues have remained resolutely determined to give our customers the best experience buying building materials despite the disruption caused by the ongoing pandemic.  As a Group, teamwork and agility has enabled Lords to navigate the pressures on availability, inflation and resource.  The success of our approach has been recognised by our customers with our 4.7 out of 5.0 customer service score being maintained through H1 2021, a testament to our customer service philosophy and to our valued colleagues.

The Group delivered adjusted EBITDA of £10.5 million which represents a H1 record with continued margin enhancement as EBITDA margins improved to 5.9% (H1 2020: 5.2%).

Cash conversion remains strong with cash generated from operations of £8.7 million (H1 2020: £12.1 million) supported by continued strong working capital management.  This approach allows the Group to continue to invest in acquisitions and organic growth opportunities that deliver customer proposition enhancements and sustainable returns.  The comparator with 2020 reflects the Group’s response to the pandemic, with working capital having normalised in H2 2020.

Group Strategy

Our strategy remains focused on the substantial consolidation opportunity in our markets alongside product range extension and digital innovation.  We remain focused on the Repair, Maintenance and Improvements (“RMI”) market which complements our service and digital led propositions.

In March, the Group announced the 100% share purchase of MAP Building & Engineering Supplies Ltd (“MAP”) which is complementary to our Midlands division, Hevey Building Supplies Limited, with regards to geography, customers and product range.  MAP serves numerous large conurbations from its location in Ilkeston, Derbyshire and will benefit from the Group’s focus on extended product range, technology and business development in years to come.

In April, the Group announced the 75% share purchase of Condell Limited which operates from sites in Sutton and Horsham.  The business is complimentary to Lords Builders Merchants through its geographical fit, product range and digital focus.

In addition, and following the period end, the Group acquired the business and assets of the Malton Road, London W10 branch of Nu-line Builders Merchants Limited in August 2021, further enhancing Lords’ strong London presence.

It is anticipated that upstream supply chain pressure will continue to some extent over the coming months, predominantly within our Merchanting division.  We are confident that our partnership approach with suppliers and large well stocked premises will continue to minimise the impact on our customers.

We are committed to minimising the impact of our business on the environment. In our own operations, the focus areas are reducing energy consumption and carbon emissions, in the broader building supplies sector we see collaboration with stakeholders as an opportunity to reduce waste through recycling and careful waste management.  In the first half, Boiler Box was launched by our Plumbing and Heating division offering the market a structured recycling solution for the 1.2 million boilers replaced each year in the UK.  Through proof of concept, Boiler Box is recycling in excess of 95% of every boiler (measured by weight) processed at our dedicated recycling centre in Erith.  The service is offered through our Mr Central Heating website and branches to installers and homeowners.  To further advance our environmental initiatives, the Group became a member of the newly formed Builders Merchant Federation Sustainability Forum which launched in June this year.

Digital remains a strategic priority for the Group, with 50% of customers transacting across channels with Group brands. We continue to invest in our digital capabilities through our dedicated in-house teams including the opening of our 8th transactional website.  Year on year, digital sales grew in H1 2020 by 41.9%.

The overall outlook for Lords remains positive given the strength of our diversified portfolio model, macro trends, investment pipeline and strong balance sheet.

 

Shanker Patel
Chief Executive Officer

28 September 2021

 

 

Financial Review

Revenue and Gross Margin

The Group delivered revenue of £179.0 million in the first six months of 2021 (H1 2020: £124.0 million), representing a total increase of 44.4% (£55.0 million).  When the impact of acquisitions is excluded from revenue, like for like ("LFL") revenue was up 36.9% and 20.2% on a two year LFL basis.

The comparator versus H1 2020 is distorted by the initial impact of COVID-19 in Q2 2020, however the Group’s two year LFL performance is exceptionally strong and reflects the Group performance more appropriately.

Revenue by division:

 H1 2021
£’000
H1 2020
£’000
% Growth % LFL
Growth
% 2yr LFL
Growth
Plumbing and heating 117,889 85,359 38.1% 38.1% 23.5%
Merchanting and other services 61,077 38,635 58.1% 34.7% 13.0%
Total Group 178,966 123,994 44.3% 36.9% 20.2%

 

Gross Profit margins reduced to 16.4% (H1 2020: 16.8%) with the prior year figure inflated due to extended COVID-19 sales disruption in the lower margin Plumbing & Heating division in Q2 2020.

Overhead expenses

Overheads increased from £14.4 million in H1 2020 to £18.8 million in H1 2021 as a result of sales growth and acquisitions in H1 2021.  The Group’s key performance indicator remains cost to serve* which improved to 10.5% (H1 2020: 11.6%).  The Group continues to focus on operational leverage and expect further efficiency through scale in due course.

 H1 2021
£’000
H1 2020
£’000
Revenue (£’000) 178,966 123,994
Overheads (£’000) 18,801 14,372
Cost to serve* 10.5% 11.6%

*Cost to serve is defined as distribution costs, administrative expenses and other operating income as a percentage of revenue

Depreciation and amortisation

Depreciation and amortisation has increased to £3.7 million (H1 2020: £3.6 million) in line with acquisitions made in 2021 and in addition to continued capital expenditure investment in the Group’s three P’s (People, Plant, Premises) programme.

EBITDA

The Group’s Adjusted EBITDA increased by 62% to £10.5 million in H1 2021, compared to £6.5 million in the same period last year.  Adjusted EBITDA as a percentage of turnover improved to 5.9% (H1 2020: 5.2%).

Adjusted EBITDA by division:

 H1 2021
£’000
H1 2021
Margin
H1 2020
£’000
H1 2020
Margin
Plumbing and heating 4,605 3.9% 3,290 3.9%
Merchanting and other services 5,926 9.7% 3,212 8.3%
Total Group 10,531 5.9% 6,502 5.2%

 

*Adjusted EBITDA is defined as earnings before interest, tax, depreciation, amortisation, exceptional and acquisition costs on an IFRS basis and therefore prior to lease liability payments during the period in accordance with IFRS 16.

Profit before tax

The Group generated a profit before tax for the period of £4.5 million, compared to £0.3 million loss in the prior period.  Interest on bank loans and overdrafts reduced to £0.4 million (H1 2020: £0.5 million) as net debt reduced by £8.6 million.

Earnings per share

Basic earnings per share was 2.1 pence based on the number of shares immediately after listing on AIM.  The comparable figure in H1 2020 was a loss per share of 0.2 pence.

Dividend

The Board proposes a maiden interim dividend for the period of 0.63 pence per ordinary share.  This is in line with the guidance provided in the Group’s AIM Admission Document, which indicated that it was the Board’s intention to commence a progressive dividend policy following Admission.

It is proposed that the maiden interim dividend be paid on 1 November 2021 to shareholders on the register at the close of business on 8 October 2021.  The Company’s ordinary shares will therefore be marked ex-dividend on 7 October 2021.

Cashflow

The Group generated operating cash flow before movements in working capital of £9.5 million in H1-2021 compared to £4.9 million in H1 2020.  Cash generated from operations was £8.7 million (H1 2020: £12.1 million) and this was used for business acquisitions of £5.8 million and repayment of loan and lease liabilities of £11.4 million, which left cash at £5.1 million down from £16.3 million at 31 December 2020.  Prior year comparators are distorted by COVID-19 working capital levers which were deployed in Q2 2020.

Balance Sheet and Liquidity

The net bank debt position (defined as cash less borrowings) at 30 June 2021 was £25.6 million, up from £22.9 million at 31 December 2020.  This position reflects the pre-IPO balance sheet position.

Intangible assets rose to £23.0 million (31 December 2020: £18.2 million) as a result of acquisitions.

Post balance sheet events

Admission to the AIM

On 20 July 2021 Lords Group Trading plc announced admission of its entire issued share capital to trading on the AIM market of the London Stock Exchange.  In conjunction with Admission, gross proceeds of £52.0 million were successfully raised by way of an oversubscribed placing with institutional investors of 54,736,839 new and existing ordinary shares of 0.5 pence each at a price of 95 pence per share, comprising a primary placing to raise £30.0 million (before expenses) for the Company and a secondary placing to raise £22.0 million (before expenses) for certain existing shareholders.

Capital reorganisation

By 20 July 2021, Lords Group Trading plc had completed a capital reorganisation and converted all shares in existence on 30 June 2021 into 125,925,000 new ordinary shares with nominal value of 0.5 pence.  Details of the capital reorganisation are disclosed in notes 17 and 20.  The reorganisation was completed to facilitate the IPO.

Restructuring of financing

On 20 July 2021 the CBILS, revolving loan facility, term loans and invoice financing that existed at 30 June 2021 were repaid with the funds raised in the AIM listing and replaced with following financing arrangements from HSBC UK Bank plc:

  1. An invoice financing facility of £10.0 million attracting an interest rate of 1.80%.
  2. A revolving credit facility of £30.0 million repayable after three years and attracting a base interest rate of 2.25% with fixed tiers up to 3.00% based on leverage.
  3. The loans are secured by fixed and floating charges over the land, tangible assets, insurances and shares in subsidiary undertakings.

    Acquisition of the business and assets of Nu-Line Builders Merchants Limited Malton Road branch

    On 31 August 2021 Lords acquired the business and assets of the Malton Road, London W10 branch of Nu-line Builders Merchants Limited for a consideration of £600,000.  Under the Transaction, the Group had the Malton Road property leases assigned to it and took on circa 25 of Nu-Line’s employees (the “Malton Branch”).

    For the year to 31 March 2021, the Malton Branch in its acquired form, achieved revenues of £5.8 million and an EBITDA of £0.2 million, and would be expected to generate revenues of £8.0 million and EBITDA of £0.8 million under Lords' ownership in FY 2022.

     

     

    Chris Day
    Chief Financial Officer

    28 September 2021

     

     

    Consolidated Statement of Comprehensive Income
    For the six months ended 30 June 2021

       
    6 months
    ending
     6 months
    ending
       30 June  30 June
       2021  2020
     Note  £'000  £'000
       (unaudited)  (unaudited)
    Revenue   178,966  123,994
    Cost of sales   (149,634)  (103,120)
    Gross profit   29,332  20,874
          
    Distribution costs   (1,661)  (1,333)
    Administrative expenses   (17,752)  (13,699)
    Other operating income   612  660
    Adjusted EBITDA **   10,531  6,502
    Exceptional items 6  (1,057)  (1,707)
    EBITDA *   9,474  4,795
    Depreciation   (656)  (518)
    Amortisation   (3,090)  (3,097)
    Operating profit   5,728  1,180
    Finance income   4  6
    Finance costs 7  (1,276)  (1,497)
    Profit/ (loss) before taxation   4,456  (311)
    Taxation 8  (973)  81
    Profit / (loss) for the six-month period   3,483  (230)
    Other comprehensive income   -  -
    Total comprehensive income   3,483  (230)
          
    Profit / (loss) for the six-month period attributable to:      
    Owners of the parent company   3,248  (321)
    Non-controlling interests   235  91
          
       3,483  (230)

     

    Earnings per share for profit from continuing operations attributable to the ordinary equity holders of the company:      
    Basic earnings per share (pence) 9  N/A  N/A
    Diluted earnings per share (pence) 9  N/A  N/A

     

    *EBITDA is defined as earnings before interest, tax depreciation and amortisation and, in accordance with IFRS, prior to lease liability payments during the period.

    **Adjusted EBITDA is EBITDA but also excluding exceptional items.

    The above condensed consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.

     
     

    Consolidated Statement of Financial Position
    As at 30 June 2021

     

      
    30 June
     31 December
      2021  2020
      £'000  £'000
     Note (unaudited)   
    Fixed assets     
    Intangible assets 10 23,009  18,198
    Property, plant, and equipment 11 8,138  4,417
    Right-of-use asset 12 25,862  27,059
    Other receivables 13 34  78
    Investments  112  4
      57,155  49,756
    Current assets     
    Inventories  39,006  40,004
    Trade and other receivables 13 53,010  52,633
    Cash and cash equivalents  5,105  16,342
      97,121  108,979
         
    Total assets  154,276  158,735
    Current liabilities     
    Trade and other payables 14 (66,127)  (66,111)
    Borrowings 15 (18,210)  (20,738)
    Lease liabilities 16 (3,524)  (3,704)
    Current tax liabilities  (1,570)  (1,055)
    Total current liabilities  (89,431)  (91,608)
         
    Non-current liabilities     
    Trade and other payables 14 (2,792)  (2,840)
    Borrowings 15 (12,460)  (18,522)
    Lease liabilities 16 (23,073)  (23,912)
    Deferred tax  (3,526)  (2,801)
    Provisions  (808)  (787)
    Total non-current liabilities  (42,659)  (48,862)
         
    Total liabilities  (132,090)  (140,470)
    Net assets  22,186  18,265
         
    Capital and reserves     
    Share capital 17 630  19,990
    Merger reserve  (9,980)  (9,980)
    Retained earnings  27,364  4,756
    Equity attributable to owners of the parent company  18,014  14,766
    Non-controlling interests  4,172  3,499
    Total equity  22,186  18,265

    The above condensed consolidated statement of comprehensive financial position should be read in conjunction with the accompanying notes.

     

     

    Consolidated Statement of Changes in Equity
    For the six months ended 30 June 2021

     
    Called up
    share
    capital
    Capital
    redemption
    reserve
    Merger
    reserve
    Retained
    earnings
    Equity
    attributable
    to owner of
    parent
    company
    Non-Controlling
    Interests
    Total
    equity
     £'000 £'000 £'000 £'000 £'000 £'000 £'000
            
    (unaudited)        
    As at 1 January 2020 19,990 2,500 (12,480) 1,833 11,843 3,244 15,087
    Reclassification of capital redemption reserve - (2,500) 2,500 - - - -
    Profit for the financial period and total comprehensive income - - - (321) (321) 91 (230)
    Capital contribution by non-controlling interests - - - - - 70 70
    As at 30 June 2020 19,990 - (9,980) 1,512 11,522 3,405 14,927
            
     Called up
    share
    capital
    Capital
    redemption
    reserve
    Merger
    reserve
    Retained
    earnings
    Equity
    attributable
    to owner of
    parent
    company
    Non-controlling
    Interests
    Total
    equity
     £'000 £'000 £'000 £'000 £'000 £'000 £'000
    (unaudited)        
    As at 1 January 2021 19,990 - (9,980) 4,756 14,766 3,499 18,265
    Profit for the financial period and total comprehensive income - - - 3,248 3,248 235 3,483
    NCI share of acquisitions - - - - - 438 438
    Capital reorganisation (19,360) - - 19,360 - - -
    As at 30 June 2021 630 - (9,980) 27,364 18,014 4,172 22,186

    The above condensed consolidated statement of changes in equity should be read in conjunction with the accompanying notes.

     

     

    Consolidated Statement of Cash Flows
    For the six months ended 30 June 2021

     6 months ending  6 months ending
     30 June  30 June
     2021  2020
     £'000  £'000
     (unaudited)  (unaudited)
    Cash flows from operating activities    
    Profit / (loss) before taxation 4,456  (311)
    Adjusted for:    
      Depreciation of property, plant, and equipment 656  518
      Amortisation of intangibles 987  926
      Amortisation of right-of-use assets 2,103  2,171
      Loss on disposal of property, plant, and equipment -  3
    Movement in provisions 21  132
      Finance income (4)  (6)
      Finance expense 1,276  1,497
    Operating cash flows before movements in working capital 9,495  4,930
    Decrease in inventories 2,379  6,328
    Decrease in trade and other receivables 3,244  9,560
    Decrease in trade and other payables (6,374)  (8,695)
    Cash generated by operations 8,744  12,123
        
    Corporation tax paid (559)  (747)
    Net cash generated by operating activities 8,185  11,376
       
    Cash flows from investing activities    
    Purchase of intangible assets -  (29)
    Business acquisitions (net of cash acquired) (5,792)  -
    Purchase of property, plant, and equipment (839)  (425)
    Purchase of investments (105)  -
    Interest received 4  6
    Net cash used in investing activities (6,732)  (448)
       
    Cash flows from financing activities    
    Principal paid on lease liabilities (2,004)  (1,703)
    Interest paid on lease liabilities (709)  (775)
    Receipts from borrowings -  15,000
    Repayment of borrowings (9,410)  (16,005)
    Bank interest paid (416)  (527)
    Non-controlling interest cash contribution -  70
    Interest on financial liabilities (151)  (194)
    Net cash outflow from financing activities (12,690)  (4,134)
       
    Net (decrease) / increase in cash and cash equivalents (11,237)  6,794
    Cash and cash equivalents at the beginning of the period 16,342  3,361
    Effect of foreign exchange rates -  -
    Cash and cash equivalents at the end of the period 5,105  10,155
         

    The above condensed consolidated statement of changes of cash flows should be read in conjunction with the accompanying notes.

    Notes

    Notes to the Financial Statements are available in the printable PDF version