REG - Lords Group Trading - Final Results
24/05/2022 07:00
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RNS Number : 5122M Lords Group Trading PLC 24 May 2022
For immediate release 24 May 2022
Lords Group Trading plc
('Lords', the 'Group' or the 'Company')
Final Results
Lords, a leading distributor of building materials in the UK, announces its
annual results for the year ended 31 December 2021 ('FY21' or the 'period').
FY21 FY20 Change (%)
(restated)
Revenue 363.3m 287.6m +26.3%
Gross profit 62.7m 47.2m +32.8%
EBITDA 20.1m 15.4m +31.0%
Adjusted EBITDA((1)) 22.3m 15.9m +40.1%
Adjusted EBITDA margin 6.1% 5.5% +10.9%
Profit before tax 8.0m 3.6m +122.1%
Adjusted Profit before tax ((2)) 10.2m 4.1m +149.0%
Basic earnings per share 3.73p 1.94p +95.3%
Adjusted earnings per share ((3)) 5.48p 3.46p +58.4%
Return On Capital Employed (ROCE) 27.0% 18.8% +8.2%
Dividend per share 1.89p 0.0p
Net cash/(debt) 6.3m (22.9m) +127.5%
Net cash/(debt) less lease liabilities (30.1m) (57.5m) +47.7%
(1)Adjusted EBITDA is calculated in the consolidated statement of
comprehensive income.
(2)Adjusted profit before tax (basic) is defined as profits before tax before
amortisation of goodwill.
(3)Adjusted earnings per share is calculated in note 11.
Financial Highlights
- Strong performance across the Group, with all businesses
demonstrating financial and operational progress
- Record revenues, increasing 26.3% to £363.3 million (FY: £287.6
million) driven by the Group's enhanced customer proposition and continued
deployment of strategic initiatives
- Like-for-like revenue grew by 18.1% and was 20.8% ahead of 2019
showing a swift rebound and acceleration post pandemic
- Strong Adjusted EBITDA up 40.1% to £22.3 million (FY20: £15.9
million restated)
- Adjusted EBITDA margin rising to 6.1% (FY20: 5.5% restated) as the
Group remains focused on delivering further margin expansion across the
business
- Adjusted earnings per share of 5.48 pence, up 58.4% (FY20: 3.46
pence)
- Maiden dividend declared of 1.89 pence per share reflecting the
Group's confidence in delivering consistent and growing shareholder returns
- Successful IPO with admission to AIM on 20 July 2021, raising
gross proceeds of £52.0 million (£30.0 million for the Company and £22.0
million for existing shareholders)
Operational Highlights
- Customer and colleague satisfaction scores remain excellent, at
4.7 out of 5.0 in both instances, reflecting the Group focus on colleague
engagement and customer service
- Further progress with our people, plant and premises organic
growth strategy, including our digital platforms with all eight of our
transactional websites developed and managed in-house
- Digital revenue grew 31% in FY21 and now represents 6.3% of Group
revenue
- Good progress with sustainability programme, as Lords continues to
reduce its environmental footprint, invest in its people, enhance the Group's
health and safety whilst supporting worthwhile projects in its communities
Current Trading and Outlook
- Four acquisitions since year end, enhancing the Group's
geographical presence and offering scope for further growth through extended
product ranges
- Robust pipeline of acquisition opportunities underpins the
inorganic growth potential
- Confident in Lords ability to fulfil objective to be a £500.0
million revenue business by 2024 and to achieve a 1.5% increase in Adjusted
EBITDA margin over the medium term
- Demand in ('RMI') sector focused product offering remain strong,
Merchanting division has continued to deliver growth in line with management
expectation
- Customer demand remained strong across Heating and Plumbing
division ('H&P'). However, APP Wholesale Limited affected by industry wide
boiler supply constraints, impacting division's revenues throughout Q1 2022
- The supply issues are expected to ease moving into H2 2022, and
therefore the Group's revenues continue to trade largely in line with market
expectations and adjusted profit before tax is in line with expectations of
approximately £16.0 million
Shanker Patel, CEO of Lords, commented: "We are delighted to report such a
strong set of maiden full year results where Lords has delivered record
revenue and earnings growth, and demonstrated our ability to deliver against
our strategic and financial objectives set out at IPO. First and foremost, I
would like to thank our colleagues across the UK, who without their fantastic
commitment and support for our vision, these results would not have been
achieved.
"Due to the fragmented nature of the market in which we operate, Lords has a
unique opportunity to deliver both organic and acquisitive growth and we are
excited to successfully demonstrate this today. As we build our size, reach
and product range, we will be able to further enhance our excellent service to
our customers and this underpins our exciting growth strategy. Our industry
has not been immune to the widespread challenges caused by price inflation and
supply issues, the latter of which has recently affected the supply of boilers
in our AAP business. We have taken all the necessary steps to ensure that we
continue to achieve our growth and profit forecasts and with the current
boiler issue, where demand remains strong, we will take every possible action
to protect the strength of our business.
"Progress in the new financial year has continued to be strong, our four new
value accretive acquisitions are performing in line with our expectations and
we look forward with confidence as we aim to deliver sustainable and growing
returns to our shareholders."
Analyst Briefing
There will be a conference call for analysts at 0930hrs today, which will be
hosted by Shanker Patel (CEO) and Chris Day (CFO). Please contact Buchanan
at LGT@buchanan.uk.com (mailto:LGT@buchanan.uk.com) if you would like to
receive details.
The information contained within this announcement is deemed by the Company to
constitute inside information pursuant to Article 7 of EU Regulation 596/2014
as it forms part of UK domestic law by virtue of the European Union
(Withdrawal) Act 2018 as amended. Upon the publication of this announcement,
this inside information is now considered to be in the public domain.
- Ends -
FOR FURTHER ENQUIRIES:
Lords Group Trading plc Via Buchanan
Shanker Patel, Chief Executive Officer Tel: +44 (0) 20 7466 5000
Chris Day, Chief Financial Officer
Cenkos Securities plc (Nominated Adviser and Joint Broker) Tel: +44 (0)20 7397 8900
Ben Jeynes / Max Gould / Dan Hodkinson (Corporate Finance)
Alex Pollen (Sales)
Berenberg (Joint Broker) Tel: +44 (0)20 3207 7800
Matthew Armitt / Richard Bootle / Ciaran Walsh
Buchanan Communications Tel: +44 (0) 20 7466 5000
Henry Harrison-Topham / Stephanie Whitmore/ Kim Looringh-van Beeck / Abby LGT@buchanan.uk.com (mailto:LGT@buchanan.uk.com)
Gilchrist
Notes to editors:
Lords is a specialist distributor of building, plumbing, heating and DIY
goods. The Group principally sells to local tradesmen, small to medium sized
plumbing and heating merchants, construction companies and retails directly to
the general public.
The Group operates through the following two divisions:
· Merchanting: supplies building materials and DIY goods through its
network of merchant businesses and online platform capabilities. It operates
both in the 'light side' (building materials and timber) and 'heavy side'
(civils and landscaping), through 30 locations in the UK.
· Heating and Plumbing: a specialist distributor in the UK of heating and
plumbing products to a UK network of independent merchants, installers and the
general public. The division offers its customers an attractive proposition
through a multi-channel offering. The division operates over 15 locations
enabling nationwide next day delivery service.
Lords was established over 35 years ago as a family business with its first
retail unit in Gerrards Cross, Buckinghamshire. Since then, the Group has
grown to a business operating from 45 sites. Lords aims to become a £500
million turnover building materials distributor group by 2024 as it grows its
national presence.
Lords was admitted to trading on AIM in July 2021 with the ticker LORD.L.
For additional information please visit www.lordsgrouptradingplc.co.uk
(http://www.lordsgrouptradingplc.co.uk/) .
Chairman's statement
This was an excellent year of financial and operational progress for the
Group. We delivered record revenue and earnings growth and made significant
strategic headway alongside the completion of a successful IPO, which saw the
Company's shares admitted to trading on AIM in July 2021. I want to thank
the team and all our colleagues across the Group for their efforts in the
year, which enabled us to achieve these results during an extremely busy
period and against the backdrop of the continued challenges posed by the
pandemic.
Admission to AIM
The share issue that accompanied the IPO was oversubscribed, reflecting the
attraction to investors of our strategy and growth prospects. This was
particularly pleasing given the competition for investor attention in 2021,
which the London Stock Exchange has reported as being the strongest year for
IPO capital raising since 2007. The placing raised gross proceeds of £30.0
million for the Company, giving us a strong balance sheet to pursue our
strategic objectives.
Performance
From a financial perspective, the Group delivered record revenues and profits,
with strong two year like-for-like growth in both divisions with Merchanting
20.4% and Plumbing and Heating 21.0%. This reflects the benefits of our
'People Plant Premises' organic growth strategy, including the rapid expansion
of our ecommerce revenues. The integration of our recently acquired
businesses has also gone well and they provide a robust platform for further
growth, as we invest in them to realise their full potential. The
performance in the year reflects the continued resilience of our sector and in
particular the repairs, maintenance and improvement market ('RMI'), which
generates around 80% of our revenue.
Dividends
In light of this financial performance, the Board declared an interim dividend
of 0.63 pence per share and has recommended a final dividend of 1.26 pence, to
give a total dividend for the year of 1.89 pence per share. As outlined at
IPO, we have adopted a progressive dividend policy and therefore expect to
deliver growth from this base over the coming years.
People and culture
Our people and culture are among the Group's key strengths. Our employee
surveys during the year showed exceptional levels of employee engagement,
which are a credit to the management team and the positive, people-oriented
culture they have nurtured. In turn, this helps us to achieve equally high
levels of customer satisfaction. This obsession with delivering for the
customer and investing to further improve our offer to them is at the heart of
our growth strategy.
We believe that giving employees a feeling of ownership will help to maintain
our strong culture, so all colleagues with continuous service of at least six
months received 2,105 shares in the Company at the IPO. In 2022, we will
seek to offer an all-employee share scheme, so they can participate in the
Group's success as we grow.
Post-IPO, the Group's management team has retained a sizeable shareholding in
the business. This reflects their strong belief in our prospects and ensures
they are highly incentivised to deliver for all shareholders, and our
stakeholders more generally.
Environmental, social and governance (ESG)
We recognise the importance of being a responsible business and meeting the
growing expectations of our stakeholders. There are numerous activities
under way across the Group, with the aim of enhancing the way we support our
people, ensuring high standards of health and safety, minimising our
environmental footprint and benefiting our wider communities. We are
currently working with specialist ESG consultants to formalise our approach
into a detailed five-year strategy, which will help us to focus on the areas
where we can make the most difference and measure our progress.
The Group has long understood the importance of strong governance and has
developed its governance framework over several years, including appointing
independent non-executive directors well ahead of the IPO and adopting the QCA
Corporate Governance Code. The Board is well-balanced, with the right mix of
skills and experience to execute the Group's strategy.
Looking forward
The business has many strengths that give us a competitive advantage across
our markets. We have a highly experienced and knowledgeable management team,
supported by customer-obsessed colleagues achieving excellent levels of
customer satisfaction. The long-term drivers of our market are favourable
and we believe we have the right growth strategy to take further market share,
both organically and inorganically. The Board is therefore confident in its
ability to execute the strategy we set out at IPO and demonstrate further
progress in 2022.
Gary O'Brien
Independent Non-Executive Chairman
23 May 2022
Chief Executive Officer's review
This was a landmark year for Lords and I am proud of all that our team has
achieved. Our performance demonstrated our continued strategic progress,
while our prospects for further growth underpinned the success of our IPO. I
want to thank all my colleagues across the Group for their continued
dedication and hard work during 2021.
Lords has always been a dynamic and entrepreneurial business and we have grown
our national presence and service range rapidly in recent years, in particular
through acquisition. At the same time, the business is based on solid
principles. We always act ethically and professionally, are measured in the
risks we accept and take care to consider our stakeholders, as a business
built on the strength of all of our relationships. By focusing on our
customers, colleagues and suppliers, we create value for our shareholders.
We are continuing to embed sustainability into the way we work, benefiting
our communities and wider society, while helping to reduce our costs.
Performance
We experienced strong revenue growth in the year totalling £363.3 million
(2020: £287.6 million), up 26.3%. On a two-year basis, which looks through
the impact of COVID-19 on 2020 revenues, our like-for-like revenue growth
since 2019 is 20.8%. Revenue in 2021 was ahead of our budget set at the
start of the year, reflecting positive market conditions, leading to an
upgrade of our annual expectations for the year in May 2021, ahead of the IPO.
Both Group divisions, and all the companies within them, performed above
expectations and contributed to this out-performance. Ecommerce sales
continued to grow rapidly and were 31% or £5.3 million higher in 2021, in
line with our strategy to leverage the investment in technology pre-IPO and
grow digital sales as a proportion of Group revenue.
Adjusted EBITDA was £22.3 million (2020: £15.9 million restated),
representing a margin of 6.1%, up 60 basis points on the 5.5% achieved in
2020. We remain focused on margin expansion, driven by our focus on driving
operational improvement, and expect to make further progress in 2022.
Cash flow was robust, with adjusted cash generated by operating activities of
£21.7 million (2020: £15.5 million) while free cash flow was £19.5 million
(2020: £13.7 million). Free cash flow(1) conversion (Free cash flow/
EBITDA) was of 87.4% (2020: 86.2%). Coupled with our strong balance sheet,
which had net cash of £6.3 million at the year end, we have the financial
resources we need to continue to implement our strategy, which has contributed
to further acquisitions post year end.
(1) Free cash flow defined as cashflow from operating activities, less capital
expenditures, exceptional items and interest paid.
Strategy
The organic growth element of our strategy is designed to further improve our
customer offer, by investing in our people, plant and premises. We were
delighted with our progress in 2021, which will continue to benefit us in the
coming year.
Lords' three Ps
People
Our people are a particular focus and this is reflected in our consistently
high engagement scores and employee retention. Over the last twelve months,
we have expanded the team in key areas, to accommodate the growth of our
business. The expansion of Lords also creates opportunities for our
colleagues to take on new roles and we are proud that all of our managing
directors have come up through the business. Enabling our people to grow is
supported by our approach to learning and development, which included starting
an apprenticeship programme in 2021, which we will expand in 2022.
Integrating colleagues who join us through the businesses we acquire is a
priority. We go above and beyond to ensure they settle into the Group and to
offer them opportunities for personal development.
Plant
On the plant side, we are using digital technology to make our customer
experience even better and to make our business more efficient and profitable.
For example, we have invested in an electronic point of sale (EPOS) system
in our Mr Central Heating branches, which allows customers to move seamlessly
between online and instore in their purchasing journey. We are also
implementing new systems to significantly streamline stock management in APP's
warehouses, while further improving the customer experience around deliveries.
Across the industry, customers are increasingly transacting with merchants
both online and in person. To support our digital sales strategy, we have
formed a division-wide team in Merchanting and are further developing several
of our websites, improving the customer journey and giving customers the
confidence to transact online. We have also invested heavily in a team to
follow up web orders with phone calls and emails, keeping customers updated on
their orders while creating opportunities to upsell, which is proving very
effective. The Condell business we acquired during the year has a very
strong web presence, and we have utilised space in one of our existing
premises to create a distribution hub for digital sales to customers in
London.
Premises
We have also been actively investing in premises. This includes relocating
two Plumbing and Heating branches, opening a new branch of Lords Builders
Merchants, to extend our coverage in West London, and starting the complete
refurbishment of our Beaconsfield site.
Acquisitions
During 2021 we acquired three businesses, adding geographical coverage,
product range and new customers to our Merchanting division. All three are
performing in line with our expectations and the integrations are proceeding
to plan, giving us a platform for further growth. Since the end of the year,
we have also acquired a business specialising in roofing materials, which will
allow us to implant branches into existing Merchanting locations, starting
with Beaconsfield. We have also extended our geographical reach into the
North of England with the purchase of A.W. Lumb, a specialist drylining and
insulation distributor to the new build market alongside a general merchant
offering. On 31 March 2022, the Group acquired a Merchanting branch in
Sudbury alongside a DH&P Counters / HRP Trade which are complementary to
the Plumbing and Heating division with regards geography, customer base and
product range. We are excited by the prospects for these businesses and
welcome our new colleagues to the Group. All acquisitions were funded via
existing facilities.
Outlook
We see excellent opportunities to grow our business, both organically and
through acquisition. Our objective is to be a £500 million revenue Group by
2024 and we are confident we will achieve that, while furthering our EBITDA
margin by 1.5% over the medium term. We will continue to invest in our
people, plant and premises and, with our robust pipeline of acquisition
opportunities, to further enhance our geographic, product and channel
diversity.
As announced on 26 April 2022, post year end has seen demand for the Group's
repairs, maintenance and improvement ('RMI') sector focused product offering
remain strong and, notwithstanding inflationary pressures and the current
global macro-economic and geo-political outlook, the Group's Merchanting
division has continued to deliver growth in line with management expectations
during Q1 and the beginning of Q2 2022. Customer demand has also remained
strong across the Group's Heating and Plumbing division ('H&P').
APP Wholesale Limited has not been immune to industry wide boiler supply
constraints on account of boiler component shortages and the limited boiler
supply has had a progressively negative effect on the division's revenues
throughout Q1 2022, with Q1 H&P 2022 division revenues approximately 12.0%
below the same period last year. The supply issues are expected to ease
moving into H2 2022, and therefore the Group's revenues continue to trade
largely in line with market expectations of approximately £438.0 million and
as a result of management actions taken, adjusted profit before tax is in line
with current market expectations of approximately £16.0 million.
Shanker Patel
Chief Executive Officer
23 May 2022
Financial review
The Group delivered an excellent financial performance in 2021, with strong
growth in revenue and profits underpinned by strong cash conversion,
supporting our ability to invest for further growth and to reward shareholders
through dividends.
Supporting our growth strategy through careful capital allocation
The Group has a wide range of potential investment opportunities, both organic
and inorganic. It is therefore important that we take a rigorous approach to
allocating capital between these opportunities. We carefully review the
investment case for each proposal, to ensure the planned returns are
deliverable and that risks have been effectively mitigated, and look for all
investments we make to generate a return on investment of at least 20%.
Successful implementation of this strategy has contributed to our strong and
profitable growth in 2021.
Revenue
Group revenue was £363.3 million in 2021 (2020: £287.6 million),
representing growth of 26.3%. Excluding acquisitions, like-for-like (LFL)
growth was 18.1%.
The impact of the COVID-19 pandemic affected our revenue performance in 2020,
with the result that 2019 provides a more meaningful comparator for revenue
growth. LFL growth between 2019 and 2021 was 20.8%.
The table below shows revenue performance by division:
2021 2020 Two-year
(restated)
£m £m Growth LFL growth LFL growth
Plumbing and Heating 232.8 203.6 14.3% 14.3% 21.0%
Merchanting and other services 130.5 84.0 55.4% 27.6% 20.4%
Total Group 363.3 287.6 26.3% 18.1% 20.8%
Both divisions have demonstrated strong LFL revenue growth over the last two
years.
Gross profit
Gross profit for the year was £62.7 million (2020: £47.2 million), up 32.8%.
The gross profit margin was 17.3% (2020: 16.4%). We expect continued
improvement through pricing and mix initiatives.
Overheads
Overheads, which are defined as distribution costs, administrative expenses
and other operating income before exceptional items and share‑based
payments, increased from £31.3 million (restated) in 2020 to £40.4 million
in 2021. This reflected growth in the business, including acquisitions in
the period. Cost to serve, which is defined as overheads as a percentage of
revenue, increased to 11.1% (2020: 10.9% restated). We continue to focus on
operational leverage and expect further efficiency through scale in due
course.
Depreciation and amortisation
Depreciation and amortisation increased to £9.4 million (2020: £8.5 million
restated), reflecting acquisitions made in 2021 and continued capital
expenditure, as we invest in the Group's people, plant and premises programme.
£5.9 million of the depreciation and amortisation relates to right of use
assets (2020: £5.6 million restated), £2.1 million to intangible assets
(2020: £1.9 million) and £1.4 million to property plant and equipment (2020:
£1.0 million).
Exceptional items
Exceptional costs in 2021 totalled £2.1 million. These comprised costs
associated with our admission to AIM (£1.8 million), the costs incurred in
relation to acquisitions in the year (£0.5 million) less a reduction in
contingent consideration of £0.2 million.
Exceptional items in 2020 totalled a net cost of £0.5 million. This was the
net of exceptional costs of £0.3 million for restructuring and £1.7 million
for deferred remuneration, less Government grants under the Job Retention
Scheme (£1.2 million) and small business retail grants (£0.3 million).
EBITDA and adjusted EBITDA
EBITDA is defined as earnings before interest, tax, depreciation and
amortisation on an IFRS basis.
Adjusted EBITDA, which also excludes the exceptional items set out above and
share-based payments was £22.3 million up 40.1% from £15.9 million
(restated) in 2020. The adjusted EBITDA margin improved to 6.1% (2020: 5.5%
restated). EBITDA for 2021 was £20.1 million (2020: £15.4 million
restated).
The table below shows adjusted EBITDA by division:
2021 2021 2020 2020
restated restated
£m margin £m margin
Plumbing and Heating 10.3 4.4% 9.1 4.5%
Merchanting and other services 12.0 9.2% 6.8 8.1%
Total Group 22.3 6.1% 15.9 5.5%
Interest on bank loans and overdrafts
Interest on bank loans and overdrafts reduced to £0.5 million (2020: £1.0
million), reflecting the reduction in average net debt during the year and
lower cost of capital post IPO.
Profit before tax and adjusted profit before tax
Adjusted profit before tax, which excludes exceptional items and share-based
payments, was £10.2 million (2020: £4.1 million restated). The Group
generated a profit before tax for the year of £8.0 million (2020: £3.6
million restated).
Contingent liabilities
In May 2020, the Group discovered that APP Wholesale Limited had been
receiving cash payments for goods from customers, in contravention of a
regulation related to money laundering. The Group reported this to HMRC and
is seeking an agreed outcome. The breaches occurred over a ten-year period
from August 2010, cumulatively amounting to up to £2,927,635 (which
represents 0.2% of turnover in the same period within APP). The directors
are confident that any potential fine levied would be covered by the
warranties contained in the sale and purchase agreement for APP when the Group
acquired it in December 2019, with regard to any penalties relating to the
period prior to the acquisition.
Prior year adjustment
In October 2021, the Group undertook a review of the property lease accounting
under IFRS 16 included within the admission document for AIM. Several errors
were identified, the most material of which were four leases where step
increases in rentals were a contractual obligation within the lease and should
have been reflected in the valuation of right-of-use assets and the lease
liabilities, but they had not been included.
In addition, one subsidiary hires vehicle on a three-year lease term but which
can be terminated free of charge at any time. The view at the time of the
admission document was that these were short-term leases. A subsequent
review of the leases indicates that while the subsidiary does not have an
obligation to hold the vehicles for a defined period, it usually holds the
majority for a period, of around three years.
The errors have been corrected by restating each of the affected financial
statement line items for the prior period. Full details can be found in note
3.
Cash flow
Adjusted cash generated by operating activities was £21.7 million (2020:
£15.5 million) while free cash flow was £19.5 million (2020: £13.7
million). Free cash flow conversion (Free cash flow/ EBITDA was of 87.4%
(2020: 86.2%).
Admission to AIM
On 20 July 2021, Lords Group Trading plc announced the admission of its entire
issued share capital to trading on the AIM market of the London Stock
Exchange.
Prior to admission and to facilitate the IPO, the Company completed a capital
reorganisation and converted all shares in existence on 30 June 2021 into
125,925,000 new ordinary shares with a nominal value of 0.5 pence.
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 at a price of 95
pence per share. This comprised 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.
Restructuring of financing
On 20 July 2021, the Group used the funds raised in the placing to repay its
loan under the Coronavirus Business Interruption Loan Scheme, its revolving
loan facility, its term loans and invoice financing.
We replaced these facilities with the following 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 (RCF) 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.
The loans are secured by fixed and floating charges over the land, tangible
assets, insurances and shares in subsidiary undertakings.
In March 2022, we agreed with HSBC to increase the facilities, with the RCF
increasing to £50.0 million and the invoice financing facility increasing to
£20.0 million to support our growth plans.
Balance sheet and liquidity
As a result of the Group's cash flows and the proceeds of the placing, we had
net cash of £6.3 million at 31 December 2021 (2020: net debt of £22.9
million). Our cash balance plus the £34.9 million of undrawn facilities
with HSBC gave us liquidity of £46.3 million at the year end.
Right-of-use assets increased by £1.3 million to £33.3 million at the year
end (31 December 2020: £32.0 million restated), while property, plant and
equipment rose by £3.7 million to £8.1 million (31 December 2020: £4.4
million). These movements were primarily the acquisitions of Condell, MAP
and the Nu-Line branch.
Inventory reduced by £1.2 million, from £40.0 million at 31 December 2020 to
£38.8 million at the year end, as the Plumbing and Heating division began to
see the benefits of its investment in a new stock management system.
Trade and other payables were £4.7 million higher at £70.8 million (31
December 2020: £66.1 million), while trade and other receivables rose by
£5.1 million to £57.7 million (31 December 2020: £52.6 million). This was
the result of the acquisitions in the year and the Group's organic growth,
through the ordinary course of business.
Earnings per share and adjusted earnings per share
Basic earnings per share was 3.73 pence. The comparable figure in 2020 was
1.94 pence. Adjusted earnings per share (as defined in note 11) was 5.48
pence (2020: 3.46 pence).
Dividend
The Board has recommended a final dividend of 1.26 pence per share. Combined
with the interim dividend of 0.63 pence per share, this gives a total dividend
for the year of 1.89 pence per share.
The final dividend will be paid on 7 July 2022 to shareholders on the register
at the close of business on 6 June 2022. The Company's ordinary shares will
therefore be marked ex-dividend on 1 June 2022.
Chris Day
Chief Financial Officer
23 May 2022
Consolidated statement of comprehensive income
for the year ended 31 December 2021
2020
2021 (restated)
Note £'000 £'000
Revenue 363,289 287,565
Cost of sales (300,569) (240,382)
Gross profit 62,720 47,183
Other operating income 5 696 436
Distribution expenses (3,536) (2,785)
Administrative expenses (37,576) (28,916)
Adjusted EBITDA(2) 22,304 15,918
Share-based payments (96) -
Exceptional expenses 6 (2,085) (519)
EBITDA(1) 20,123 15,399
Depreciation (1,340) (1,033)
Amortisation (8,021) (7,481)
Operating profit 7 10,762 6,885
Finance income 8 - 2
Finance expense 9 (2,741) (3,276)
Profit before taxation 8,021 3,611
Taxation 10 (2,377) (985)
Profit for the year 5,644 2,626
Other comprehensive income - -
Total comprehensive income 5,644 2,626
Total comprehensive income for the year attributable to:
Owners of the parent company 5,231 2,441
Non-controlling interests 413 185
5,644 2,626
Total comprehensive income for the year attributable to owners of the parent
Continuing operations 5,231 2,441
Discontinuing operations - -
5,231 2,441
Earnings per share for profit from continuing operations attributable to the
ordinary equity holders of the Company:
Basic earning per share (pence) 11 3.73 1.94
Diluted earning per share (pence) 11 3.40 1.77
The results for the year arise solely from continuing activities.
(1) EBITDA is defined as earnings before interest, tax, depreciation and
amortisation.
(2) Adjusted EBITDA is EBITDA but also excluding exceptional items and
share-based payments.
Consolidated statement of financial position
as at 31 December 2021
2020 2019
2021 (restated) (restated)
Note £'000 £'000 £'000
Non-current assets
Intangible assets 22,673 18,198 20,015
Property, plant and equipment 8,050 4,417 5,054
Right-of-use assets 12 33,271 32,087 35,838
Other receivables 304 78 265
Investments 84 4 4
64,382 54,784 61,176
Current assets
Inventories 38,781 40,004 40,679
Trade and other receivables 13 57,744 52,633 44,219
Cash and cash equivalents 11,402 16,342 3,361
107,927 108,979 88,259
Total assets 172,309 163,763 149,435
Current liabilities
Trade and other payables 14 (70,459) (65,674) (58,871)
Borrowings 15 (2,783) (20,738) (21,782)
Lease liabilities 12 (5,114) (4,180) (4,339)
Current tax liabilities (2,014) (1,055) (395)
Total current liabilities (80,370) (91,647) (85,387)
Non-current liabilities
Trade and other payables 14 (3,621) (2,840) (2,107)
Borrowings 15 (2,125) (18,522) (11,016)
Lease liabilities 12 (31,518) (30,373) (33,050)
Other provisions (987) (817) (778)
Deferred tax (2,940) (2,433) (2,662)
Total non-current liabilities (41,191) (54,985) (49,613)
Total liabilities (121,561) (146,632) (135,000)
Net assets 50,748 17,131 14,435
Equity
Share capital 788 19,990 19,990
Share premium 28,293 - -
Merger reserve (9,980) (9,980) (12,480)
Capital redemption reserve - - 2,500
Share-based payment reserve 96 - -
Retained earnings 27,214 3,622 1,181
Equity attributable to owners of the parent company 46,411 13,632 11,191
Non-controlling interests 4,337 3,499 3,244
Total equity 50,748 17,131 14,435
Consolidated statement of changes in equity
for the year ended 31 December 2021
Called up share capital £'000 Share premium £'000 Merger reserve Capital redemption reserve Share-based payments reserve Retained earnings Equity attributable to owners of parent company £'000 Non-controlling interests Total
£'000 £'000 £'000 £'000 £'000 equity
£'000
As at 1 January 2020
19,990 - (12,480) 2,500 - 1,833 11,843 3,244 15,087
Correction of error (net of tax)
- - - - - (652) (652) - (652)
Restated total equity at the beginning of the financial year
19,990 - (12,480) 2,500 - 1,181 11,191 3,244 14,435
Profit for the financial period and total comprehensive income (restated)
- - - - - 2,441 2,441 185 2,626
Reclassification of capital redemption reserve
- - 2,500 (2,500) - - - - -
Capital contribution by non-controlling interests
- - - - - - - 70 70
As at 31 December 2020
19,990 - (9,980) - - 3,622 13,632 3,499 17,131
Called up share capital £'000 Share premium £'000 Merger reserve Capital redemption reserve Share-based payments reserve Retained earnings Equity attributable to owners of parent company £'000 Non-controlling interests Total
£'000 £'000 £'000 £'000 £'000 equity
£'000
As at 1 January 2021 as originally presented
19,990 - (9,980) - - 4,756 14,766 3,499 18,265
Correction of error (net of tax)
- - - - - (1,134) (1,134) - (1,134)
Restated total equity at the beginning of the financial year
19,990 - (9,980) - - 3,622 13,632 3,499 17,131
Profit for the financial period and total comprehensive income
- - - - - 5,231 5,231 413 5,644
Share-based payments
- - - - 96 - 96 - 96
Share capital issued
158 29,842 - - - - 30,000 - 30,000
Costs of capital raise
- (1,549) - - - - (1,549) - (1,549)
Non-controlling interests share of acquisitions
- - - - - - - 425 425
Capital reorganisation
(19,360) - - - - 19,360 - - -
Dividends paid - - - - - (999) (999) - (999)
As at 31 December 2021
788 28,293 (9,980) - 96 27,214 46,411 4,337 50,748
( )
Consolidated statement of cash flows
for the year ended 31 December 2021
2020
2021 (restated)
£'000 £'000
Cash flows from operating activities
Profit before taxation 8,021 3,611
Adjusted for:
Depreciation of property, plant and equipment 1,340 1,033
Amortisation of intangibles 2,087 1,841
Amortisation of right-of-use assets 5,934 5,640
Loss on disposal of property, plant and equipment - 2
Share based payment expense 96 -
Finance income - (2)
Finance expense 2,741 3,276
Operating cash flows before movements in working capital 20,219 15,401
Decrease in inventories 2,837 675
Increase in trade and other receivables (1,791) (8,227)
Increase in trade and other payables 3 7,725
Cash generated by operations 21,268 15,574
Corporation tax paid (1,751) (555)
Net cash generated by operating activities 19,517 15,019
Cash flows from investing activities
Purchase of intangible assets (648) (24)
Business acquisitions (net of cash acquired) (6,225) -
Deferred consideration paid (875) (200)
Purchase of property, plant and equipment (1,297) (418)
Purchase of investments (77) -
Interest received - 2
Net cash used in investing activities (9,122) (640)
Cash flows from financing activities
Principal paid on lease liabilities (6,750) (6,565)
Issue of share capital 30,000 -
Costs of capital raise (1,549) -
Dividends (999) -
Non-controlling interests cash contribution - 70
Proceeds from borrowings 4,908 6,461
Repayment of borrowings (40,081) -
Bank interest paid (529) (1,003)
Interest on financial liabilities (335) (361)
Net cash outflow from financing activities (15,335) (1,398)
Net (decrease) / increase in cash and cash equivalents (4,940) 12,981
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 11,402 16,342
Notes to the financial statements
for the year ended 31 December 2021
1. General information
Lords Group Trading plc (the 'Company') is a listed public company limited by
shares and incorporated and domiciled in England. The address of the
Company's registered office and principal place of business is 2nd Floor
Hanger Green, London, England, W5 3EL. The Company changed its name from
Lords Group Trading Limited during 2021.
The principal activity of the Company together with its subsidiary
undertakings (the 'Group') throughout the period was the distribution of
building materials, heating goods and DIY goods to local tradesmen,
large-scale developers, small and medium construction companies and retail
customers.
The financial statements were authorised for issue, in accordance with a
resolution of directors, on 24 May 2022. The directors have the power to
amend and reissue the financial statements.
2. Accounting policies
2.1 Basis of preparation of financial statements
The financial information in this announcement does not constitute the
Company's statutory accounts for the year ended 31 December 2021, but is
derived from those accounts. This is the first year for which IFRS statutory
financial statements will be prepared for the Company and those for 31
December 2021 will be delivered following the Company's annual general
meeting. The auditors have reported on those accounts: their reports were
unqualified, did not draw attention to any matters by way of emphasis and did
not contain statements under s498 (2) or (3) of the Companies Act 2006.
While the financial information included in this results announcement has been
prepared in accordance with the recognition and measurement criteria of
UK-adopted International Financial Reporting Standards ("IFRS"s), this
announcement does not itself contain sufficient information to comply with
IFRSs. The Company has published full financial statements that comply with
IFRS.
The financial statements have been prepared on a going concern basis under the
historical cost convention unless otherwise specified within these accounting
policies. The financial information is presented in pounds sterling and all
values are rounded to the nearest thousand (£'000), except when otherwise
indicated.
The preparation of financial statements requires the use of certain critical
accounting estimates. It also requires management to exercise its judgement
in the process of applying the Group and Company accounting policies.
2.2 Going concern
At 31 December 2021, the Group had £34.9 million of undrawn facilities and
£11.4 million of cash. The Group has further increased its facilities to
ensure it has the resources to pursue its consolidation strategy as described
in the strategic report. The Group amended its banking facilities on 28
February 2022 and increased its invoice drawdown facility to £20.0 million
and its revolving loan facility to £50.0 million as disclosed in the post
balance sheet events note, note 18. This represents an overall increase in
facilities of £30.0 million over those available at 31 December 2021 and
which are available to the Group until 21 July 2024. Banking covenants are
breached if the last twelve months' adjusted EBITDA / interest (interest
ratio) falls below 5 or the last twelve months' net debt / adjusted EBITDA
exceeds 2.5. At 31 December 2021, the interest ratio was over 21 and there
was no net debt.
Accounting standards require that the foreseeable future covers a period of at
least twelve months from the date of approval of the financial statements,
although they do not specify how far beyond twelve months a board should
consider. The Board has considered cash flow facilities out to an extended
period coinciding with the expiry of the banking facilities on 21 July 2024.
The Group is expected to have at least £27.8 million of headroom over its
facilities at all times until 21 July 2024.
The cash flow forecasts have been stress tested by considering the most likely
risks impacting the Group. These are considered to be growth below forecast,
increased working capital requirements through increased debtors and increased
cost to serve. The Group's cash flow projections indicate covenants on
facilities will not be breached unless, instead of the anticipated growth, the
Group's projected EBITDA falls by £6.7 million, debtors increase by 24%, or
there is an increase in cost to serve of £8.2 million above the base model.
While none of these are likely to occur, the Group has mitigating actions at
its disposal that it can take in downside scenarios, such as delaying capital
expenditure and maintaining a strong credit control function across the Group
supported by credit insurance and restructuring the Group to reduce costs.
Cash flow forecasts are reforecast in the event of a potential acquisition
not already in the forecast. The Group prepares weekly cash flow
projections, daily sales flashes and monthly management accounts compared to
budget with key performance indicators which together will provide an early
warning system to indicate whether any mitigating actions are necessary in any
part of the Group.
In all reasonable scenarios the Group is projected to be compliant with its
banking covenants and therefore the directors are satisfied that the Group has
adequate resources to continue operations for the foreseeable future.
After reviewing the Group and Company's forecasts and risk assessments and
making other enquiries, the Board has formed the judgement at the time of
approving the financial statements that there is a reasonable expectation that
the Group and its subsidiaries have adequate resources to continue in
operational existence until at least 21 July 2024, when the existing banking
facilities expire.
Accordingly, the directors continue to adopt the going concern basis in
preparing the Group and Company financial statements.
3. Correction of error in accounting for leases under IFRS 16
In October 2021, the Group undertook a review of the property lease accounting
under IFRS 16 included within the admission document for AIM. Several errors
were identified, the most material of which were four leases where step
increases in rentals were a contractual obligation within the lease and should
have been reflected in the valuation of right-of-use assets and the lease
liabilities, but they had not been included.
In addition, one subsidiary hires vehicle on a three year lease term but which
can be terminated free of charge at any time. The view at the time of the
admission document was that these were short-term leases. A subsequent
review of the leases indicates that while the subsidiary does not have an
obligation to hold the vehicles for a defined period, it usually holds the
majority for a period, of around three years.
These errors have been corrected by restating each of the affected financial
statement line items for the prior period as follows:
Consolidated statement of financial position (extract) 31 December 2020 Increase/ (decrease) 31 December 2020 (restated) 31 December 2019 Increase/ (decrease) 31 December 2019 (restated)
£'000 £'000 £'000 £'000 £'000 £'000
Right-of-use assets 27,059 5,028 32,087 30,504 5,334 35,838
Current lease liabilities (3,704) (476) (4,180) (3,917) (422) (4,339)
Trade and other payables (66,111) 437 (65,674) (59,316) 445 (58,871)
Non-current lease liabilities (23,912) (6,461) (30,373) (26,813) (6,237) (33,050)
Other provisions (787) (30) (817) (749) (29) (778)
Deferred tax (2,801) 368 (2,433) (2,919) 257 (2,662)
Net assets 18,265 (1,134) 17,131 15,087 (652) 14,435
Retained earnings 4,756 (1,134) 3,622 1,833 (652) 1,181
Total equity 18,265 (1,134) 17,131 15,087 (652) 14,435
31 December 2020 Increase/ (decrease) 31 December 2020 (restated)
Consolidated statement of comprehensive income (extract) £'000 £'000 £'000
Administrative expenses (29,944) 1,028 (28,916)
Adjusted EBITDA 14,890 1,028 15,918
EBITDA 14,371 1,028 15,399
Amortisation (6,238) (1,243) (7,481)
Operating profit 7,100 (215) 6,885
Finance expense (2,898) (378) (3,276)
Profit before taxation 4,204 (593) 3,611
Taxation (1,096) 111 (985)
Profit for the year 3,108 (482) 2,626
Total comprehensive income attributable to:
Owners of the parent company 2,923 (482) 2,441
Non-controlling interests 185 - 185
3,108 (482) 2,626
Basic and diluted earnings per share for the prior year have not been
previously reported.
The correction further affected some of the amounts disclosed in note 7,
Expenses by nature. Amortisation of right-of-use assets increased by
£1,243,000 while short-term and low-value lease rentals decreased by
£810,000. In note 9, Finance expense, lease liability interest has
increased by £378,000.
4. Segmental analysis
The Group has two reporting segments, being the distribution of plumbing and
heating, and the sale and distribution of merchanting and other services.
Total assets and liabilities are provided to the CODM in the Group's internal
management reporting by segment and therefore is split and presented below.
Plumbing and Heating Merchanting Total
2021 £'000 £'000 £'000
Revenue 232,837 130,452 363,289
Cost of sales (206,497) (94,072) (300,569)
Gross profit 26,340 36,380 62,720
Other operating income 186 510 696
Distribution costs (105) (3,431) (3,536)
Administrative expenses (16,123) (21,453) (37,576)
Adjusted EBITDA 10,298 12,006 22,304
Share-based payments (37) (59) (96)
Exceptional items - (2,085) (2,085)
EBITDA 10,261 9,862 20,123
Depreciation (1,124) (216) (1,340)
Amortisation (1,523) (6,498) (8,021)
Operating profit 7,614 3,148 10,762
Finance income - - -
Finance costs (773) (1,968) (2,741)
Profit before taxation 6,841 1,180 8,021
Taxation (1,059) (1,318) (2,377)
Profit / (loss) for operating unit 5,782 (138) 5,644
Assets and liabilities
Total assets 96,080 76,229 172,309
Total liabilities (59,098) (62,463) (121,561)
Net assets 36,982 13,766 50,748
Additions to non-current assets 9,895 7,756 17,651
Plumbing
and Heating Merchanting Total
(restated) (restated) (restated)
2020 £'000 £'000 £'000
Revenue 203,578 83,987 287,565
Cost of sales (180,666) (59,716) (240,382)
Gross profit 22,912 24,271 47,183
Distribution costs (54) (2,731) (2,785)
Administrative expenses (13,897) (15,019) (28,916)
Other operating income 180 256 436
Adjusted EBITDA 9,141 6,777 15,918
Exceptional items (1,346) 827 (519)
EBITDA 7,795 7,604 15,399
Depreciation (162) (871) (1,033)
Amortisation (1,914) (5,567) (7,481)
Operating profit 5,719 1,166 6,885
Finance income - 2 2
Finance costs (1,039) (2,237) (3,276)
Profit / (loss) before taxation 4,680 (1,069) 3,611
Taxation (931) (54) (985)
Profit / (loss) for operating unit 3,749 (1,123) 2,626
Assets and liabilities
Total assets 107,742 56,021 163,763
Total liabilities (74,774) (71,858) (146,632)
Net assets / (liabilities) 32,968 (15,837) 17,131
Additions to non-current assets 1,127 1,222 2,349
5. Other operating income
2021 2020
£'000 £'000
Commission 504 219
Parking income 131 168
Other 61 49
696 436
6. Exceptional items
Exceptional items are presented separately as one-off costs that are unlikely
to reoccur or costs outside normal business trading.
2021 2020
£'000 £'000
Listing costs 1,523 -
Costs of business combinations 514 -
Costs of previous financing expensed 248 -
Restructuring costs - 293
Deferred remuneration liability - 1,707
Reduction in contingent consideration (200) -
Government grants - job retention scheme - (1,221)
Government grants - small business retail grants - (260)
2,085 519
Year ended 31 December 2021
On 20 July 2021, the Group listed on the Alternative Investment Market (AIM).
The costs associated with the listing have been expensed and amounted to
£1,523,000. Associated with the listing, the Group underwent a refinancing.
The costs of the previous financing were being expensed over the term of the
loans. As these were no longer required, the costs associated with the
previous financing arrangements, which amounted to £248,000, were written off
to the income statement with the refinancing.
Transaction costs relating to business combinations amounting to £514,000
were expensed in the year.
A £200,000 contingent consideration assumed on the acquisition of Kings
Langley Building Supplies Limited was not payable and therefore released to
the income statement in the year.
Year ended 31 December 2020
As a result of the coronavirus epidemic the Group underwent a restructuring
programme which resulted in costs of £293,000.
APP Wholesale Limited, a subsidiary undertaking, introduced a management
incentive plan for key employees as a result of the sale of the entire capital
to Lords Group Trading plc in December 2019. As the conditions of the
management incentive plan were not met by the employees until 2020, the cost
was recognised in the year ended 31 December 2020.
The Group received government grants under the job retention scheme and small
business retail grants of £1,221,000 and £260,000 respectively.
7. Expenses by nature
Operating profit is stated after charging / (crediting):
2020
2021 (restated)
£'000 £'000
Depreciation of property, plant and equipment 1,340 1,033
Amortisation of intangible assets 2,087 1,841
Amortisation of right-of-use assets 5,934 5,640
Inventories recognised as an expense 300,569 240,382
Short-term and low-value lease payments 148 168
Foreign exchange gains (14) -
Share-based payments 96 -
Defined contribution costs 424 366
Release of impairment of inventories (142) (2,137)
Loss on disposal of property, plant and equipment - 2
Defined contribution pension plan 424 336
8. Finance income
2021 2020
£'000 £'000
Other interest receivable - 2
- 2
9. Finance expense
2020
2021 (restated)
£'000 £'000
Bank loans and overdrafts 529 1,003
Invoice discounting facilities 376 388
Lease liabilities 1,836 1,885
2,741 3,276
10. Taxation
2020
2021 (restated)
£'000 £'000
Corporation tax
Current tax on profit for the year 2,344 1,521
Adjustments in respect of previous periods 366 (307)
2,710 1,214
Deferred tax
Origination and reversal of timing differences (198) (376)
Adjustments in respect of previous periods (707) 161
Effect of changes in tax rates 572 (14)
(333) (229)
Total tax charge 2,377 985
Factors affecting tax charge for the year
The tax assessed for the year is higher than (2020: higher than) the standard
rate of corporation tax in the UK of 19% (2020: 19%). The difference is
explained below:
2020
2021 (restated)
£'000 £'000
Profit before taxation 8,021 3,611
Profit multiplied by standard rate of corporation tax in the UK of 19% (2020: 1,524 686
19%)
Expenses not deductible 753 429
Adjustments in respect of previous periods (341) (146)
Changes in tax rates 572 (14)
Share-based payments (147) -
Deferred tax not recognised 16 30
Total tax charge for the year 2,377 985
Factors that may affect future tax charges
In March 2021, the Chancellor announced that the tax rate would increase to
25% with effect from 1 April 2023 and the law has been substantively enacted
as at the year end. Deferred taxes at the balance sheet date have been
measured using these enacted tax rates and reflected in these financial
statements.
11. Earnings per share
2021 2020
Basic earnings per share
Earnings from continuing activities (pence) 3.73 1.94
Diluted earnings per share
Earnings from continuing activities (pence) 3.40 1.77
Weighted average shares for basic earnings per share 140,354,443 125,925,000
Number of dilutive share options 13,647,753 12,179,402
Weighted average number of shares for dilutive earnings per share 154,002,196 138,104,402
Earnings attributable to the equity holders of the parent (£'000) 5,231 2,441
Both the basic and diluted earnings per share have been calculated using the
earnings attributable to shareholders of the parent company, Lords Group
Trading plc, of £5,231,000 (2020: earnings of £2,441,000) as the numerator,
meaning no adjustment to profit was necessary in either year. The
comparative earnings per share calculation has used the shares at the time of
listing on 20 July 2021 as the denominator.
The Group has also presented adjusted earnings per share. Adjusted earnings
per share have been calculated using earnings attributable to shareholders of
the parent company, Lords Group Trading PLC, adjusted for the after-tax effect
of exceptional items (see note 6), share based payments and amortisation of
intangible assets as the numerator. The denominator is the shares in issue at
the end of the year for 2021 and at the time of listing for 2020.
2021 2020
£'000 £'000
Earnings attributable to the equity holders of the parent 5,231 2,441
Exceptional items 2,085 519
Share-based payments 96 -
Amortisation of intangible assets 2,087 1,841
Less tax impact of adjustments (811) (448)
Adjusted earnings 8,688 4,353
Closing shares at the end of the year 158,524,872 125,925,000
Closing number of dilutive share options 13,647,753 12,179,402
2021 2020
Adjusted basic earnings per share
Earnings from continuing activities (pence) 5.48 3.46
Adjusted diluted earnings per share
Earnings from continuing activities (pence) 5.05 3.15
12. Leases and right-of-use assets
Nature of leasing activities
The Group leases a number of assets with all lease payments fixed over the
lease term. The Group has property leases, plant and machinery and motor
vehicles in the scope of IFRS 16, including retail branches, warehouses,
lorries and other vehicles.
2020
2021 (restated)
Number of active leases 210 200
Description of payments
2020
2021 (restated)
£'000 £'000
Principal lease payments 6,750 6,565
Interest payments on leases 1,836 1,885
Short-term and low-value lease costs 148 168
8,734 8,618
Short-term and low-value lease costs relates to individual vans which are
rented on a monthly basis by subsidiaries of the Group.
Right-of-use assets
Leasehold Plant and Motor
property machinery vehicles Total
£'000 £'000 £'000 £'000
At 31 December 2019 (restated)
Cost 32,832 5,149 4,252 42,233
Accumulated amortisation and impairment (4,153) (1,095) (1,147) (6,395)
Net book amount 28,679 4,054 3,105 35,838
Year ended 31 December 2020 (restated)
Opening net book value 28,679 4,054 3,105 35,838
Additions 363 684 860 1,907
Disposals - - (18) (18)
Amortisation charge (3,196) (902) (1,542) (5,640)
Closing net book value 25,846 3,836 2,405 32,087
At 31 December 2020 (restated)
Cost 33,195 5,833 5,094 44,122
Accumulated amortisation and impairment (7,349) (1,997) (2,689) (12,035)
Net book value 25,846 3,836 2,405 32,087
Year ended 31 December 2021
Opening net book value 25,846 3,836 2,405 32,087
Additions 906 61 2,618 3,585
Acquired through business combinations 2,080 52 359 2,491
Lease modifications 1,039 9 (3) 1,045
Disposals (3) - - (3)
Amortisation charge (3,352) (928) (1,654) (5,934)
Closing net book value 26,516 3,030 3,725 33,271
At 31 December 2021
Cost 37,217 5,955 8,068 51,240
Accumulated amortisation and impairment (10,701) (2,925) (4,343) (17,969)
Net book value 26,516 3,030 3,725 33,271
Lease liabilities
Leasehold Plant and Motor
property machinery vehicles Total
£'000 £'000 £'000 £'000
At 1 January 2020 (restated) 30,274 4,203 2,912 37,389
Additions 364 682 798 1,844
Interest expenses 1,516 222 147 1,885
Lease payments (including interest) (3,678) (1,211) (1,676) (6,565)
At 31 December 2020 (restated) 28,476 3,896 2,181 34,553
At 1 January 2021 28,476 3,896 2,181 34,553
Additions 841 63 2,619 3,523
Acquired through business combinations 2,080 52 359 2,491
Disposals (71) - - (71)
Lease modifications 1,048 7 (5) 1,050
Interest expenses 1,480 203 153 1,836
Lease payments (including interest) (3,789) (1,242) (1,719) (6,750)
At 31 December 2021 30,065 2,979 3,588 36,632
Reconciliation of minimum lease payments and present value
2020
2021 (restated)
£'000 £'000
Within one year 6,200 6,140
Later than one year and less than five years 19,236 16,895
Later than five years and less than ten years 11,534 8,493
Later than ten years and less than 15 years 8,550 7,489
After 15 years 2,272 2,016
Total including interest cash flows 47,792 41,033
Less interest cash flows (11,160) (6,480)
Total principal cash flows 36,632 34,553
Reconciliation of current and non-current lease liabilities
2020
2021 (restated)
£'000 £'000
Current 5,114 4,180
Non-current 31,518 30,373
Total 36,632 34,553
13. Trade and other receivables
2020
2021 (restated)
£'000 £'000
Amounts falling due after one year
Other receivables 304 78
304 78
Amounts falling due within one year
Trade receivables 50,930 46,962
Related parties - 44
Taxation and social security - 560
Other receivables 5,333 3,264
Prepayments 1,481 1,803
57,744 52,633
14. Trade and other payables
2020
2021 (restated)
£'000 £'000
Amounts falling due within one year
Trade payables 57,991 59,228
Other taxation and social security 4,113 1,682
Other payables 1,931 2,385
Accruals 6,424 2,379
70,459 65,674
2021 2020
£'000 £'000
Amounts falling due in more than one year
Other payables 3,621 2,840
3,621 2,840
Other payables comprise of deferred consideration relating to various
acquisitions. Deferred consideration due after one year is discounted using
discount rates which reflect the relevant costs of financing when material.
The directors consider that the carrying value of trade and other payables
approximates to their fair value.
15. Borrowings
2021 2020
£'000 £'000
Current
Bank loans - 2,388
Other loans 2,783 18,350
Total current borrowings 2,783 20,738
Non-current
Bank loans 2,125 18,522
Total non-current borrowings 2,125 18,522
Total borrowings 4,908 39,260
A maturity analysis of the Group's borrowings is shown below.
2021 2020
£'000 £'000
Less than one year 2,783 20,738
Later than one year and less than five years 2,125 18,522
Total borrowings 4,908 39,260
Total transaction costs were £225,000 at the date of issue and unamortised
transaction costs of £187,000 (2020: £280,000) have been offset against the
bank loans.
Unrestricted access was available at the reporting date to the following lines
of credit:
2021 2020
Total facilities £'000 £'000
Revolving credit facility 30,000 12,500
Term loans - 6,250
CBILS - 15,000
Invoice drawdown facility 10,000 40,000
40,000 73,750
Used at 31 December
Revolving credit facility 2,312 5,910
Term loans - -
CBILS - 15,000
Invoice drawdown facility 2,783 18,349
5,095 39,259
Unused at 31 December
Revolving credit facility 27,688 6,590
Term loans - 6,250
CBILS - -
Invoice drawdown facility 7,217 21,651
34,905 34,491
On 20 July 2021, the CBILS, revolving credit facility, term loans and invoice
financing that existed at 31 December 2020 were repaid with the funds raised
in the restructuring and replaced with the following financing arrangements
from HSBC UK Bank plc:
· an invoice financing facility available for three years of £10 million
attracting an interest rate of SONIA + 1.80%; and
· a revolving credit facility of £30 million repayable after three years
and attracting a base interest rate of SONIA + 2.25% with fixed tiers up to
3.00% based on leverage. The non-utilisation commitment fee is 40% of lender
margin.
The loans are secured by fixed and floating charges over the land, tangible
assets, insurances and shares in subsidiary undertakings.
16. Reconciliation of liabilities arising from financial activities
Current liability Non-current liability Total
Borrowings Lease liability Borrowings Lease liability Borrowings Lease liability
£'000 £'000 £'000 £'000 £'000 £'000
At 1 January 2020 (restated) 21,782 4,339 11,016 33,050 32,798 37,389
Proceeds from borrowings (1,044) - 7,506 - 6,462 -
Principle lease payments - (4,021) - - - (4,021)
New leases - 163 - 744 - 907
Modifications / remeasurement and transfers from current to non-current
- 3,699 - (3,421) - 278
At 31 December 2020 (restated) 20,738 4,180 18,522 30,373 39,260 34,553
At 1 January 2021 (restated) 20,738 4,180 18,522 30,373 39,260 34,553
Acquired through business combinations
821 596 - 1,894 821 2,490
Proceeds from borrowings 1,962 - 2,125 - 4,087 -
Repayment of borrowings (20,738) - (18,522) - (39,260) -
Principle lease payments - (4,359) - - - (4,359)
New leases - 450 - 3,002 - 3,452
Modifications / remeasurement and transfers from current to non-current
- 4,247 - (3,751) - 496
At 31 December 2021 2,783 5,114 2,125 31,518 4,908 36,632
17. Contingent liabilities
The contingent liabilities detailed below are those which could potentially
have a material impact, although their inclusion does not constitute any
admission of wrongdoing or legal liability. The outcome and timing of these
matters is inherently uncertain. Based on the facts currently known, it is
not possible as at 31 December 2021 to predict the outcome of any of these
matters or reliably estimate any financial impact. As such, at the reporting
date no provision has been made for any of these cases within the financial
statements.
In May 2021, the Group Chief Financial Officer wrote to the HMRC Anti-Money
Laundering division to bring to their attention that it had identified a
historic breach of The Money Laundering, Terrorist Financing and Transfer of
Funds (Information on the Payer) Regulations 2017 by A P P Wholesale Limited,
a company that was acquired by Lords Group Trading plc in December 2019. The
Group has identified a number of occasions where cash banked in a single
transaction was in excess of €10,000 or where smaller sums of cash were
banked which could be regarded as linked transactions in breach of the
regulations. The breaches occurred over a ten-year period from August 2010,
cumulatively amounting to up to nearly £3,000,000. The Board is unable to
predict the outcome of this reporting to HMRC and therefore the level of any
potential fines. Our legal advice is that penalties for breaches of the
regulations varies between nominal fines to fines which can equate to the full
amount of the cash sum received in contravention of the regulations, depending
on the level of culpability. The Board is confident that any potential fine
levied would be covered by the warranties contained in the sale and purchase
agreement for A P P Wholesale Limited.
The Group has since conducted training for certain staff members within A P P
Wholesale Limited and has updated and implemented improved systems and
controls which were overseen by the Board and supported by professional
advisers. The Board is confident that the situation has been remedied and
the risks in the business are now being appropriately managed. We continue
to engage and fully co-operate with our regulators in relation to these
matters. At this stage it is not practicable to identify the likely outcome
or estimate the potential financial impact with any certainty.
There has been no correspondence with HMRC since the Group wrote to them in
May 2021.
18. Post-balance sheet events
Advance Roofing Supplies Limited
On 5 January 2022, the Group acquired Advance Roofing Supplies Limited
('Advance Roofing Supplies'), a supplier of roofing materials, for a
consideration of £3.74 million, of which £3.49 million has been paid on
completion and the balance of £0.25 million is payable twelve months after
completion. As at completion, Advance Roofing Supplies had excess cash of
£0.74 million.
Established in 1994, Advance Roofing Supplies specialises in pitched and flat
roofing sales to customers locally and nationally. Advance Roofing Supplies
operated from two locations, Aylesbury in Buckinghamshire and Long Marston in
Hertfordshire. The acquisition of Advance Roofing Supplies will offer
attractive synergies with the Group's Merchanting segment, increasing product
range, and expanding the Group's customer base, particularly in the South East
of England.
For the year ended 31 March 2021, Advance Roofing Supplies generated EBITDA of
£0.6 million on revenues of £6.8 million.
As the acquisition of Advance Roofing Supplies Limited only completed on 5
January 2022, the initial accounting for the acquisition was incomplete at the
time these accounts were authorised for issue. On this basis, no assessment
has yet been performed to determine the fair value of assets and liabilities
and the fair value of the consideration. The Group intends to disclose the
required information within its interim accounts for the period ended 30 June
2022.
Banking facilities
The Group amended its banking facilities on 28 February 2022 and increased its
invoice drawdown facility to £20.0 million and its revolving loan facility to
£50.0 million. This represents an overall increase in facilities of £30.0
million over those available at 31 December 2021. The facilities are
available to the Group until 21 July 2024.
A.W. Lumb
On 28 February 2022, the Group acquired A.W. Lumb through the acquisition of
the entire issued share capital of AWLC Limited ('AWLC') for a total
consideration of £23.1 million (the 'Acquisition'). The Acquisition is in
line with Lords' stated strategy at the time of IPO in July 2021. The
Acquisition is to be immediately earnings accretive.
Total Acquisition consideration of £23.1 million, payable in cash, consists
of £19.5 million due on completion and deferred consideration of £3.6
million payable in equal annual instalments over the next five years.
Consideration is to be funded from Lords' existing cash resources and debt
facilities.
The Acquisition provides the Group with an extension of its product offering
and geographical reach into the North of England. Both key senior management
from A.W. Lumb and its 77 employees will be joining the Group, ensuring
continuity of local knowledge and customer relationships, as well as
continuing the family values core to Lords' success.
Established in 1964 and family owned until a management buyout in 2017, A.W.
Lumb is a leading independent builders merchant operating in the North of
England from depots in Dewsbury and Tamworth. A.W. Lumb has a general
merchanting service, with offerings in building materials, garden landscaping,
timber & joinery, and roofing products. The business also provides a
specialist offering in drylining and insulation to housebuilders. A.W. Lumb's
customers include several well-known housebuilders, civil engineering
contractors, local authorities, plasterers and smaller developers.
In the year to 30 June 2021, AWLC generated revenues of £43.3 million, EBITDA
of £3.9 million and a profit before tax of £3.8 million.
As at 30 June 2021, AWCL had pro forma net assets of £10.1 million, £1.9
million of pro forma net cash and freehold property with a market value of
£4.6 million.
As the acquisition of A.W. Lumb only completed on 28 February 2022, the
initial accounting for the acquisition was incomplete at the time these
accounts were authorised for issue. On this basis, no assessment has yet
been performed to determine the fair value of assets and liabilities and the
fair value of the consideration. The Group intends to disclose the required
information within its interim accounts for the period ended 30 June 2022.
DH&P Plumbing and Heating
On 31 March 2022, the Group acquired a 90% interest in the leading plumbing
and heating businesses, DH&P Trade Counters Holdings Limited and DH&P
HRP Holdings Limited (together 'DH&P'), for a total consideration of £9.3
million.
The remaining 10% interest in DH&P's issued share capital will be retained
equally by the business' current vendors, who will remain in their management
roles with the business.
DH&P Trade Counters Holdings Limited is a leading plumbing and heating
merchant, consisting of five branches located with a strong regional focus in
Ipswich, Chelmsford, Southend, Benfleet and Colchester. The business further
extends the Group's existing plumbing and heating network of nine branches
represented under the Mr Central Heating brand.
The DH&P HRP Holdings Limited business is a national distributor of
plumbing and heating spares servicing 400 customers, whose operations align
strongly with the Group's APP Wholesale division that distributes plumbing and
heating products nationwide to 2,400 customers.
For the year ended 30 July 2021, DH&P generated revenues of £27.6 million
and underlying EBITDA of £2.0 million.
The acquisition consideration was satisfied by an initial £8.93 million cash
payment and a deferred cash element of £357,000 to be paid in twelve months,
on a cash-free, debt-free basis. Simultaneous call and put options over the
remaining 10% of DH&P's issued share capital will be held by the Group and
DH&P's vendors, respectively, which will not be exercisable prior to 31
March 2025 and the price subject to DH&P's EBITDA performance.
As the acquisition of DH&P Plumbing and Heating only completed on 31 March
2022, the initial accounting for the acquisition was incomplete at the time
these accounts were authorised for issue. On this basis, no assessment has
yet been performed to determine the fair value of assets and liabilities and
the fair value of the consideration. The Group intends to disclose the
required information within its interim accounts for the period ended 30 June
2022.
Branch acquisition
On 31 March 2022, the Group acquired a Buildbase branch from Grafton
Merchanting GB Limited, previously part of its timber and building materials
business. The Buildbase branch purchased is a single site located in
Sudbury, Suffolk (the 'Sudbury Branch').
The acquisition offers additional expansion for the Sudbury Branch and the
wider Lords Merchanting segment across product range, acquired customers and
digital presence whilst also further enhancing Hevey's growing East of England
presence.
The total gross consideration payable was £2.2 million. The Sudbury Branch
generated revenues of £5.1 million and adjusted EBITDA of £0.5 million in
the year to 31 December 2021.
As the acquisition of the Sudbury Branch only completed on 31 March 2022, the
initial accounting for the acquisition was incomplete at the time these
accounts were authorised for issue. On this basis, no assessment has yet
been performed to determine the fair value of assets and liabilities and the
fair value of the consideration. The Group intends to disclose the required
information within its interim accounts for the period ended 30 June 2022.
- Ends -
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