REG - Lords Group Trading - Final Results
03/05/2023 07:00
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RNS Number : 1797Y Lords Group Trading PLC 03 May 2023
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.
For immediate release 3 May 2023
Lords Group Trading plc
('Lords', the 'Group' or the 'Company')
Final Results
Another year of positive strategic progress underpinned by strong financial
performance
Lords, a leading distributor of building materials in the UK, is pleased to
announce its annual results for the year ended 31 December 2022 ('FY22' or the
'year').
FY21 Change*
FY22 (restated) (%)
Revenue £450.0m £363.3m +23.9%
Adjusted EBITDA(1) £30.0m £22.3m +34.4%
Adjusted EBITDA margin 6.7% 6.1% +0.6%
EBITDA £28.6m £19.7m +45.4%
Profit before tax £12.8m £7.5m +69.6%
Adjusted Profit before tax(5) £17.4m £12.2m +42.4%
Basic earnings per share 5.68p 3.39p +67.6%
Adjusted basic earnings per share(2) 8.02p 6.1p +31.5%
Dividend per share 2.0p 1.89p +5.8%
Net (debt)/cash(4) £(19.4)m £6.5m
(*) Based on underlying, not rounded, figures.
Financial Highlights
· Record performance, with Group revenues up 23.9% to £450.0 million
(FY21: £363.3 million) and on track to reach £500.0 million revenue target
by 2024
· Adjusted EBITDA(1) up 34.4% to £30.0 million (FY21: £22.3 million),
representing a margin of 6.7% (FY21: 6.1%) and on track to reach 7.5%
medium-term target
· Adjusted basic earnings per share(2) up 31.5% to 8.02 pence (FY21: 6.1
pence restated)
· Cashflow generated by operations of £26.8 million (FY21: £21.1
million restated), contributing to free cashflow(3) generation of £19.1
million (FY21: £19.9 million restated)
· Net debt(4) at 31 December 2022 of £19.4 million (31 December 2021:
£6.5 million net cash), reflecting cash cost of acquisitions in the year and
leaving headroom for value-added acquisitions
· Total dividend for the year up 5.8% to 2.0 pence per share (FY21: 1.89
pence per share)
Operational Highlights
· Merchanting division delivered record revenues up 69.2% to £220.8
million (FY21: £130.5 million), with strong like-for-like revenue growth of
17.4%
· Merchanting performance reflects the Group's ambition to be the 'local
leader' in its markets, delivered by empowered and highly engaged management
teams, alongside successful implementation of the Group's growth strategy
· Plumbing & Heating ('P&H') division revenues down 1.5% to
£229.3 million (FY21: £232.8 million), 9.1% lower on a like-for-like(6)
basis
· P&H performance was resilient given industry-wide boiler component
shortages, which eased throughout H2-22, and benefitted from management
actions, including higher margin energy efficient product range, which
improved divisional EBITDA margins to 6.0% (FY21: 4.4%)
· Continued to expand existing brands and grow the customer base, opening
two new branches during 2022, as well as an Advance Roofing Supplies implant
in the Group's Beaconsfield branch
· Four completed acquisitions in the year, on a blended multiple of 4.8x
Adjusted EBITDA, supporting the Group's strategy of product range and
geographic expansion
· Acquisitions are EBITDA margin and earnings accretive and all are
performing in line with or ahead of expectations, following successful
integration
· ESG progress delivered in FY22 including the development of Lords' ESG
strategy, recruitment of the Group's first ESG manager and launch of the Lords
Group Foundation.
Current Trading and Outlook
Whilst macroeconomic uncertainty remains, we believe that our end market
exposure, improved product range, continuing market share gains and management
actions to improve margins mean that we continue to expect a full year
performance in line with market expectations.
Since the year end, the Group agreed to purchase the freehold of George Lines'
Heathrow site for £6.3 million and disposed of the non-core Lords at Home
homewares subsidiary for £0.8 million. On 31 March 2023, the Group acquired
Chiltern Timber Supplies Limited for a total consideration of up to £1.65
million on a net cash free/debt free basis. Furthermore, on 5 April 2023, the
Group refinanced its existing lending facilities securing enhanced facilities
provided by HSBC, NatWest and BNP Paribas on an initial three-year term.
The Board remains confident in Lords' ability to fulfil its IPO target to
become a £500.0 million revenue business by 2024 with an EBITDA margin of
7.5% in the medium term.
The Company also announces that Dawn Moore, Non-Executive Director, intends to
step down as a director of the Group immediately following the Company's 2023
Annual General Meeting to focus on expanding executive responsibilities. The
Board would like to thank Dawn for her considerable contribution to the Group
prior to and since IPO.
Shanker Patel, CEO of Lords, commented: "This was an excellent year for the
Group, as we continued to deliver on our IPO commitments and successfully grew
the business in a tough trading environment. I am proud of our progress and
want to thank our teams for their magnificent job in ensuring customers
receive the standard of service they value so highly.
"We entered 2023 in a strong financial position, which has enabled us to
continue to invest in our 3Ps, as we pursue organic and acquisition-led growth
opportunities. We are focused on the potential challenges to our business,
notably the impact on household balance sheets from inflation, increased
energy costs and interest rates. We are responding through our ongoing
expansion into new geographical markets and product lines, and by implementing
our ESG strategy, a key part of which is to enhance our energy efficiency.
"With a 1% share of a large market and facility headroom available, we also
have considerable scope to take share through further acquisitions that expand
our geographical presence and product range. With around 40% of UK builders
merchants still independently run, we have considerable scope for further
consolidation and therefore see good opportunities to continue our track
record of growth."
Notes
(1) Adjusted EBITDA is EBITDA (defined as earnings before interest, tax,
depreciation and amortisation but also excluding exceptional items and
share-based payments.
(2) Earnings attributable to shareholders of Lords Group Trading plc adjusted
for exceptional items, share based payments and amortisation of intangible
assets divided by the weighted average number of shares in issue in the year
(3) Defined as cash generated by operating activities plus exceptional items
less capital expenditure, taxation and interest paid.
(4) Net debt is defined as borrowings less cash and cash equivalents.
(5) Adjusted Profit before tax (basic) is defined as profits before tax before
exceptional items, share based payments and amortisation of intangible assets.
(6) Like-for-like sales is a measure of growth in sales, adjusted for new,
divested and acquired locations such that the periods over which the sales are
being compared are consistent.
Analyst Briefing
There will be an 'in person' meeting for analysts at 0900hrs today at
Buchanan's offices, which will be hosted by Shanker Patel (CEO) and Chris Day
(CFO and COO). Please contact Buchanan at LGT@buchanan.uk.com if you would
like to attend.
- 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 and Chief Operating 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 / Detlir Elezi
Buchanan Communications Tel: +44 (0) 20 7466 5000
Henry Harrison-Topham / Jamie Hooper / Abby Gilchrist LGT@buchanan.uk.com
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 26 locations in the UK.
· Plumbing and Heating: a specialist distributor in the UK of plumbing
and heating 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 16
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 42 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.
Chairman's statement
I am pleased to report that the Group has delivered a record performance,
showing the success of our growth strategy and the strengths of our management
team.
Lords has continued to successfully navigate the difficult economic backdrop.
Following Brexit and Covid-related challenges of recent years, 2022 saw the
economy challenged by increasing inflationary pressures, rising interest rates
and considerable political and geopolitical uncertainty. Through all this,
the Group has grown its revenues, profits and margins. This is a credit to
our management's strategic vision, the quality of its execution and its
ability to take action to address the issues we have faced.
Performance
Our markets have remained resilient despite the challenging backdrop. Around
78% of our revenue comes from the repairs, maintenance and improvement (RMI)
market, where the majority of the products we sell are essential purchases,
rather than discretionary.
We have continued to expand our geographic footprint, broaden our product
range and drive revenues in both divisions. This enabled Merchanting to
deliver above-market like-for-like revenue growth of 17.4%. Plumbing and
Heating ('P&H') saw like-for-like revenues fall by 9.1% given the
industry-wide boiler component shortage, which meant we were unable to fulfil
customer demand for these products. Despite this fall in like-for-like
revenue it was pleasing that our actions, which included extending the product
range into energy efficiency technology, ensured we were able to materially
increase P&H's profits and margin in 2022.
The acquisitions in the year were an excellent strategic fit and have further
enhanced our platform for organic growth in the coming years. All the
acquired businesses have performed in line with or ahead of expectations and
we are delighted to welcome our new colleagues to the Group.
Dividends
At IPO we adopted a progressive dividend policy and this is reflected in our
payout for FY22. Having paid an interim dividend of 0.67 pence per share in
October 2022, we have proposed a final dividend of 1.33 pence per share, to
give a total for the year of 2.00 pence. This represents growth of 5.8% on
the 1.89 pence paid in respect of 2021. The final dividend will be paid on
18 May 2023, to shareholders on the register at the close of business on 21
April 2023.
People and culture
Our 'unique selling point' has always been our people. Their enthusiasm and
loyalty has been fundamental to our progress and making sure we continue to
deliver the high levels of customer service on which this business is built.
Our regular engagement surveys show that employee engagement remains strong,
and this is testament to our people-oriented culture and the feeling that we
are, at heart, a family business. It is important to us that we support our
people wherever we can and in addition to the 2022 annual pay increase, we
awarded a £500 payment to colleagues to reflect the cost of living crisis.
Dawn Moore, who has worked as a Non-Executive Director of the Group since
2020, has confirmed her intention to step-down as a director of the Company
following the 2023 AGM to focus on expanding executive responsibilities. The
Board would like to take this opportunity to thank Dawn and acknowledge her
considerable contribution to the Board as well as her input and counsel in
further strengthening the Group's culture. We wish her well in her future.
Environmental, social and governance (ESG)
Our approach to ESG issues has been a key focus for us this year. We have
done considerable work to develop our ESG strategy during 2022, with the
support of expert consultants. On the 'E' aspect of ESG, we have worked
closely with H&B, our buying group, sharing our ESG workstreams to enable
best practice across the membership. With more than 110 companies in the
buying group, all will be able to benefit from the work we have done,
improving their own ESG performance.
Responsibility for ESG ultimately rests with the Board and we have defined
accountabilities all the way through the business. This has included
recruiting our first ESG Manager, who is also responsible for our Lords Group
Foundation. The Foundation aims to build stronger communities by supporting
projects in the areas around our branches.
As we further develop our ESG approach, we will be defining key performance
indicators and targets to measure our progress. Our intention is to
incorporate these into bonus schemes, to incentivise performance across the
Group.
From a corporate governance perspective, we have continued to embed our
structures and processes, and conducted our first evaluation of the Board and
its committees. The outcomes were highly positive. To support our growth
ambitions, we have considered the development plans for our executive
directors. Since the end of the year, this has seen Chris Day take on
operational responsibilities in Merchanting in addition to the CFO role, which
over time will free up Shanker Patel to focus on strategy.
Looking forward
During 2022, the Board conducted its annual review of the Group's strategy.
We concluded that it remains appropriate and that continued successful
execution will enable us to capture the significant growth opportunities we
see in front of us.
We are mindful of the uncertain macroeconomic environment and the impact it
could have on the sector in the short term. However, we have demonstrated
our ability to grow the business through organic investment and acquisition,
and we are therefore confident that we will fulfil our IPO objectives of
becoming a £500 million revenue business by 2024 and generating an EBITDA
margin of 7.5% in the medium term.
Gary O'Brien
Independent Non-Executive Chairman
2 May 2023
Chief Executive Officer's review
This was an excellent year for the Group, as we continued to deliver on our
IPO commitments and successfully grew the business in a tough trading
environment. I am proud of our progress and want to thank our teams for
their magnificent job in ensuring customers receive the standard of service
they value so highly.
Performance
Our revenue reached a new high in FY22 at £450.0 million, an increase of
23.9% (FY21: £363.3 million). Like-for-like revenue rose modestly,
reflecting Merchanting's very strong performance (+17.4%) and the impact of
boiler component shortages in P&H (-9.1%), as the Chairman has explained
in his statement. P&H was resilient in difficult circumstances and our
actions to extend the product range, as discussed further below, and adjust
our pricing structure, helped it to deliver strong profit and margin growth.
Our digital revenues continue to increase rapidly and were up 90.2% in
Merchanting, meaning they now account for 2.5% of the division's revenue.
Total ecommerce revenues were £2.6 million higher in FY22.
Adjusted EBITDA was £30.0 million, up 34.4% (FY21: £22.3 million), with the
margin increasing by 60 basis points to 6.7% (FY21: 6.1%), despite substantial
product and overhead cost inflation. We remain focused on further increasing
our EBITDA margin towards our 7.5% target, through operational leverage,
product range extensions, expanding our digital channels, optimising our site
network and further accretive acquisitions.
Our cash flow was excellent, with adjusted cash generated by operating
activities (cash generated by operating items plus exceptional items less
taxation) of £24.1 million (FY21: £21.9 million adjusted), while free cash
flow(7) was £19.1 million (FY21: £19.9 million adjusted). We convert a
high percentage of our profit into cash, which allows us to continually
reinvest in our 3Ps - people, plant and premises. Free cash flow(7)
conversion (free cash flow/EBITDA) was 66.9% (FY21: 89.1% restated),
reflecting the opportunity we have for disciplined capital investment in our
3Ps to deliver further growth. In FY22 the Group invested £3.5 million in
capital investment including refurbishing our Beaconsfield branch and opening
two new branches.
The Group has a robust and prudent balance sheet, with year-end net debt of
£19.4 million (31 December 2021: £6.5 million net cash), reflecting our
acquisitions in the year. We have significant headroom in our £70.0 million
of debt facilities, as well as £16.0 million of accessible cash at the year
end, and we will continue to carefully manage our balance sheet in the coming
year.
(7) Free cash defined as cash generated by operating activities plus
exceptional items less capital expenditure, taxation and interest paid.
Strategy
Our strategy is to expand our geographical presence via new branches, broaden
our product range and increase our digital capabilities. This is underpinned
by our organic investment in our 3Ps and by our approach to acquisitions. We
had a successful year on all fronts in 2022. In addition, we spent
considerable time during the year formulating our new ESG strategy, which will
help us to further improve our operations and benefit stakeholders.
Expanding our geographical presence
We have opportunities to expand several of our brands by opening new locations
in response to customer demand. During the year, we added a third location
for George Lines and the tenth branch for Mr Central Heating, the first of 40
new sites we are planning for this brand in the next five years. Our
acquisitions also gave us broader geographical coverage and we have opened a
third branch for one of these brands, Advance Roofing Supplies, as an implant
within our Beaconsfield site.
Broadening our product range
Expanding our product range helps us to capture a greater share of customers'
wallets and enhance our service by giving them a greater choice. In P&H
we extended its range during the year into higher-margin products that support
decarbonisation, such as air source heat pumps and underfloor heating. We
also benefitted from our combined acquisition of HRP Trade and Direct Heating,
which expanded our product offering further and gave us relationships with new
suppliers.
In Merchanting, Advance Roofing Supplies has given us a significant roofing
materials offer for the first time and is highly complementary with the rest
of our product range. A.W. Lumb also extends our range to include
specialisms in drylining and insulation for the new build market.
Investing in our digital capabilities
Digital plays an important part in our strategy, allowing us to acquire new
customers and achieve higher margins across a broader range of products. We
can also use the insights we gain, such as customer locations, to inform our
brand expansion plans. In 2022, we benefitted from investment in our
in-house expertise in the prior year, which we are leveraging across the Group
to advance our digital capabilities across multiple brands.
Our 3Ps - People, Plant and Premises
As the Chairman has discussed in his statement, our people are a key source of
advantage for us. We work hard to ensure they are engaged, feel valued and
are fairly rewarded for their efforts. This is reflected in our continued
high engagement scores. Enabling people to grow within the business is
important and we were particularly pleased to see a record number of internal
promotions this year. We have also had many talented people join us through
our acquisitions.
Plant includes technology to improve our efficiency and offer even better
customer service, and we have continued to invest during the year, such as the
warehouse management system we have rolled out in P&H. More generally,
our plant is well invested and the average age of our delivery fleet is less
than five years.
We continued to invest in our premises in FY22. In addition to the branches
we opened (see above), we completed the rebuilding of our Beaconsfield branch,
moved Advance Roofing Supplies' Aylesbury branch to our multi-brand facility
(Lords Builders Merchants, George Lines, Advance Roofing) in Aylesbury and
started to relocate the Glasgow branch of Mr Central Heating, to support its
growth and improve the customer and colleague experience.
Enhancing our business through acquisitions
The businesses we acquired in 2022 are performing well and contributed £74.3
million to our FY22 revenues. We are an attractive buyer for independent
businesses looking for a responsible custodian, and our colleague and
customer‑focused approach resonates strongly with vendors. We are also
highly disciplined in allocating capital, paying a blended 4.8x EBITDA for our
acquisitions in FY22.
Outlook
We enter 2023 in a strong financial position, which will enable us to continue
to invest in our 3Ps, as we pursue organic and acquisition-led growth
opportunities.
We are focused on the challenges to our business, notably the impact on the
trading environment of reduced housing transactions, and the impact on
household balance sheets from inflation, increased energy costs and rising
interest rates. We are responding through our ongoing expansion into new
geographical markets and product lines, and by implementing our ESG strategy,
a key part of which is to enhance our energy efficiency.
As a relatively small player with a 1% share of a large market, we also have
considerable scope to take share through further acquisitions that expand our
geographical presence and product range. With around 40% of UK builders
merchants still independently run, we have considerable scope for further
consolidation. We therefore see good opportunities to continue our track
record of growth.
Shanker Patel
Chief Executive Officer
2 May 2023
Financial review
Revenue
Group revenue was £450.0 million in 2022 (FY21: £363.3 million),
representing growth of 23.9%. Like-for-like (LFL) revenue growth, which
excludes acquisitions and new locations, was 0.2%. Acquisitions contributed
revenue of £74.3 million in FY22.
Depreciation and amortisation
Depreciation and amortisation increased to £12.3 million (FY21: £9.4
million). £6.9 million of the depreciation and amortisation relates to
right-of-use assets (FY21: £5.9 million), £3.3 million to intangible assets
(FY21: £2.1 million) and £2.1 million to property, plant and equipment
(FY21: £1.3 million), reflecting our continued investment in growth
opportunities.
Capital allocation
The Group has a wide range of organic and inorganic investment opportunities,
which are well defined and attainable in the delivery of our revenue and
EBITDA margin targets. We take a rigorous approach to allocating capital to
these opportunities and target a return on investment of at least 20%. We
carefully review the investment case for each proposal and ensure the planned
returns are deliverable and that we have effectively mitigated the risks.
The success of this approach was an important driver of our FY22
performance.
Exceptional items
Exceptional costs in FY22 totalled a net £0.9 million. A breakdown can be
found in note 5 to the financial statements, with the largest component being
diligence costs associated with acquisitions. The exceptional costs were
partially offset by compensation received for business disruption at our Park
Royal branch, due to the HS2 infrastructure project in the immediate area
surrounding the branch.
Exceptional items in FY21 totalled £2.5 million (restated). These comprised
costs associated with our admission to AIM and the costs incurred in relation
to acquisitions in the year, less a reduction in contingent consideration.
Profitability
Reported EBITDA for FY22 was £28.6 million (FY21: £19.7 million restated).
Adjusted EBITDA, which also excludes the exceptional items set out above and
share-based payments, was £30.0 million, up 34.4% from £22.3 million in
2021. The adjusted EBITDA margin improved to 6.7% (2021: 6.1%).
Overall, the adjusted EBITDA margin increased by 0.6% to 6.7% in FY22, with
the improvement in the margin achieved through P&H margin growth driven by
higher-margin products and increased Merchanting segmental mix. These two
factors offset a reduction in Merchanting, as a result of management's
decision to pass through product price inflation in an orderly manner.
P&H delivered a strong adjusted EBITDA margin of 6.0%, representing a 1.6
percentage point improvement in FY22. This was achieved via extended product
range initiatives, including our Renewables range, which attract higher
margins alongside lower cost to serve when supplied to existing customers.
The table below shows adjusted EBITDA by division:
FY22 FY21
£m Margin £m Margin
Plumbing and Heating 13.8 6.0% 10.3 4.4%
Merchanting and other services 16.1 7.3% 12.0 9.2%
Total Group 30.0 6.7% 22.3 6.1%
Net finance costs
Net finance costs were £3.6 million (FY21: £2.8 million restated) with the
increase mainly due to increased debt levels following the four 2022
acquisitions. The interest expense associated with the Group's leases was
£1.9 million (FY21: £1.8 million).
Profit before tax and adjusted profit before tax
Adjusted profit before tax, which excludes exceptional items, share‑based
payments and amortisation of intangible assets, was £17.4 million (FY21:
£12.2 million restated). The Group generated profit before tax for the year
of £12.8 million (FY21: £7.5 million restated).
Prior year adjustment
In October 2017 and April 2021 the Group acquired majority shares in Hevey
Building Supplies Limited and Condell Limited respectively. In both
instances a put and call agreement was put in place with the non-controlling
interest for the acquisition of the remaining shares. The options were not
accounted for by the Group.
These errors have been corrected by restating each of the affected financial
statements line items for the prior periods as at 31 December 2020 and 31
December 2021 respectively and as such have been corrected via a prior year
restatement. The adjustments are non-cash in nature with no impact on
adjusted EBITDA. Full details are contained in note 3.3.
Earnings per share and adjusted earnings per share
Basic earnings per share was 5.68 pence (FY21: 3.39 pence restated).
Adjusted earnings per share (as defined in note 11) was 8.02 pence (FY21:
6.10 pence restated).
Dividend
The Board has recommended a final dividend of 1.33 pence per share. Combined
with the interim dividend of 0.67 pence per share, this gives a total dividend
for the year of 2.0 pence per share (FY21: 1.89 pence).
Cash flow
Adjusted cash generated by operating activities was £24.1 million (FY21:
£21.9 million restated) while free cash flow was £19.1 million (FY21: £19.9
million restated). Free cash flow conversion, which is free cash flow as a
percentage of EBITDA, was 66.9% (FY21: 89.1% restated). The decline compared
to the prior year was due to the planned increase in capital investments of
£3.5 million (FY21: £1.3 million), as discussed below.
The Group used £26.9 million for business acquisitions in 2022, relating to
the purchase of Advance Roofing Supplies, A.W. Lumb, DH&P and Buildbase
Sudbury. In addition, in October 2022 we exercised the option to acquire the
25% minority interest in our Hevey Building Supplies subsidiary for £6.2
million, with 40% paid on completion and the remainder due in seven equal
quarterly instalments over the next two years.
Liquidity and debt facilities
The Group had two financing facilities with HSBC totalling £70.0 million.
In March 2022, we agreed with HSBC to enlarge our facilities to support our
growth plans, with the RCF increasing to £50.0 million (from £30.0 million)
and the invoice financing facility increasing to £20.0 million (from £10.0
million).
At 31 December 2022, the Group had net debt (defined as borrowings less cash
and cash equivalents, and before recognising lease liabilities) of £19.4
million (FY21: net cash of £6.5 million). The movement primarily reflects
the cash cost of the acquisitions during the year. The Group therefore had
ample headroom of £34.6 million (31 December 2021: £35.1 million) within its
debt facilities at the year end, and a further £16.0 million of accessible
cash (31 December 2021: £11.4 million).
Net cash / debt
The Group's net cash / debt position, before recognising lease liabilities,
transitioned from net cash of £6.5 million at 31 December 2021 to a net debt
position of £19.4 million at 31 December 2022; including non-contingent
deferred consideration payable within twelve months, this rises to £23.3
million in respect of the Group's acquisition of APP Wholesale, Hevey Building
Supplies and Advance Roofing.
The Group used £26.9 million for business acquisitions in 2022, which
alongside the 25% minority interest purchase in our Hevey Building Supplies
subsidiary, covers the full movement in net cash / debt in FY22.
The Group's policy is to maintain its credit rating status while investing in
organic developments and acquisition opportunities that are expected to
generate attractive returns and maintain a progressive dividend policy.
Working capital(8)
Inventory increased by £14.4 million to £53.2 million at the year end,
largely due to P&H inventory returning to more normal levels, as the
boiler shortage eased towards the end of the year, and the impact of price
inflation on inventory.
Current trade and other payables were £21.4 million higher at £94.3 million
(31 December 2021: £72.9 million restated), while current trade and other
receivables rose by £13.3 million to £71.0 million (31 December 2021: £57.7
million). These movements reflect the Group's organic growth and the
acquisitions in the year, with working capital increasing to 9.2% of revenue
(FY21: 8.7%) due to the inventory increase discussed above.
(8) Working capital is defined as trade receivables and inventories less trade
payables.
Capital expenditure and investment in intangible assets
We maintained capital discipline during the year, with capital expenditure on
plant, property and equipment of £3.5 million (FY21: £1.3 million).
Notable investments included the transformational refurbishment of the
Beaconsfield branch, the new branches for Mr Central Heating in West Bromwich
and George Lines in Horsham, and further additions to our fleet.
Intangible assets rose to £45.3 million (31 December 2021: £22.7 million) as
a result of the acquisitions during FY22.
Non-current liabilities
Trade and other payables relate to deferred consideration liabilities. The
liability has reduced by £3.2 million as at 31 December 2022 to £4.7 million
(31 December 2021: £7.9 million) reflecting those liabilities falling due in
2023 relating to the acquisitions of APP Wholesale Ltd, Hevey Building
Supplies Ltd and Condell Ltd.
IFRS 16 Leases
Leases that are recorded on the balance sheet principally relate to
properties, cars and distribution vehicles. IFRS 16 increased EBITDA by £7.3
million and the finance (interest) expense by £1.9 million in the year.
The right-of-use asset in the balance sheet at 31 December 2022 was £39.0
million (31 December 2021: £33.3 million). The increase is driven mainly by
the inclusion of a 100 year long leasehold plus leases acquired through the
2022 acquisitions.
IFRS 16 does not alter the Group's overall cash flows or the economic effect
of the leases to which it is a party. Similarly, Lords' banking covenants
are measured on a pre-IFRS basis.
Post balance sheet events
Since the end of FY22, we have:
· Agreed to purchase the freehold of George Lines' Heathrow site for
£6.3 million, with £2.2 million paid on signing and the remainder due to be
paid by 5 July 2024. The Group will continue to lease the site until
completion, which is the date on which the remaining consideration is paid,
and with any rental payments before that date being deducted from the final
consideration.
· Disposed of the non-core Lords at Home homewares subsidiary for £0.8
million. During the year ended 31 December 2022, Lords at Home generated
£3.0 million in revenue and contributed £0.08 million of EBITDA. The sale
supports our focus on our core markets of building, plumbing, heating and DIY
goods.
· On 31 March 2023 the Group acquired Chiltern Timber Supplies Limited
('Chiltern Timber') for a total consideration of up to £1.65 million on a net
cash free/debt free basis. The consideration payable is £1.175 million on
signing and up to a further £0.475 million deferred equally over 12, 24 and
36 months on a contingent basis subject to Chiltern Timber delivering certain
earnings targets.
· The Group amended its banking facilities on 5 April 2023. The Group's
existing £70.0 million lending facilities with HSBC, consisting of a £50.0
million revolving credit facility ('RCF') and a £20.0 million receivables
financing facility ('RFF') (together the "Existing Facilities"), have been
cancelled and repaid pursuant to the Refinancing with such repayment being
funded by drawings under new £95.0 million facilities provided by HSBC,
NatWest and BNP Paribas consisting of a £70.0 million RCF (the "New RCF") and
a £25.0 million RFF each with an initial three-year term (together, the "New
Facilities").
The New RCF includes: (i) a £20.0 million uncommitted accordion option which
would, subject to lender approval, allow the Group to increase the New RCF
facility limit if required, and (ii) two uncommitted extension options of one
year each which would, subject to lender approval, extend the tenor of the New
RCF to four years and five years if exercised. The New Facilities are on
improved commercial terms compared to the Existing Facilities and are expected
to result in material interest cost savings for the Group over the three-year
term of the facilities.
· Dawn Moore, Non-Executive Director, has advised the Board that she
intends to step down as a director of the Group immediately following the
Company's 2023 Annual General Meeting to focus on expanding executive
responsibilities.
Chris Day
Chief Financial Officer and Chief Operating Officer
2 May 2023
Consolidated statement of comprehensive income
for the year ended 31 December 2022
2021
2022 (restated(1))
Note £'000 £'000
Revenue 450,020 363,289
Cost of sales (361,237) (300,569)
Gross profit 88,783 62,720
Other operating income 681 696
Distribution expenses (4,632) (3,536)
Administrative expenses (54,866) (37,576)
Adjusted EBITDA(2) 29,966 22,304
Share-based payments (400) (96)
Exceptional items 5 (929) (2,517)
EBITDA(3) 28,637 19,691
Depreciation (2,069) (1,340)
Amortisation (10,240) (8,021)
Operating profit 7 16,328 10,330
Finance income 8 42 -
Finance expense 9 (3,572) (2,783)
Profit before taxation 12,798 7,547
Taxation 10 (3,257) (2,377)
Profit for the year 9,541 5,170
Other comprehensive income - -
Total comprehensive income 9,541 5,170
Total comprehensive income for the year attributable to:
Owners of the parent company 9,117 4,757
Non-controlling interests 424 413
9,541 5,170
Earnings per share
Basic earning per share (pence) 11 5.68 3.39
Diluted earning per share (pence) 11 5.36 3.09
(1) See note 3.3 for details regarding the restatement.
(2) Adjusted EBITDA is EBITDA but also excluding exceptional items and
share-based payments.
(3) EBITDA is defined as earnings before interest, tax, depreciation and
amortisation.
The results for the year arise solely from continuing activities.
Consolidated statement of financial position
as at 31 December 2022
2021 2020
2022 (restated(1)) (restated(1))
Note £'000 £'000 £'000
Non-current assets
Intangible assets 12 45,331 22,673 18,198
Property, plant and equipment 13,647 8,050 4,417
Right-of-use assets 13 38,968 33,271 32,087
Other receivables 279 304 78
Investments 85 84 4
98,310 64,382 54,784
Current assets
Inventories 53,177 38,781 40,004
Trade and other receivables 71,023 57,744 52,633
Assets classified as held for sale 1,333 - -
Cash and cash equivalents 16,038 11,402 16,342
141,571 107,927 108,979
Total assets 239,881 172,309 163,763
Current liabilities
Trade and other payables (94,343) (72,901) (65,674)
Borrowings (10,348) (2,783) (20,738)
Lease liabilities 13 (5,496) (5,114) (4,180)
Liabilities classified as held for sale (675) - -
Current tax liabilities (1,700) (2,014) (1,055)
Total current liabilities (112,562) (82,812) (91,647)
Non-current liabilities
Trade and other payables (4,716) (7,866) (7,251)
Borrowings (25,086) (2,125) (18,522)
Lease liabilities 13 (37,024) (31,518) (30,373)
Other provisions (1,283) (987) (817)
Deferred tax (7,022) (2,940) (2,433)
Total non-current liabilities (75,131) (45,436) (59,396)
Total liabilities (187,693) (128,248) (151,043)
Net assets 52,188 44,061 12,720
Equity
Share capital 813 788 19,990
Share premium 28,293 28,293 -
Merger reserve (9,980) (9,980) (9,980)
Share-based payment reserve 497 96 -
Retained earnings 31,237 20,527 (789)
Equity attributable to owners of the parent company 50,860 39,724 9,221
Non-controlling interests 1,328 4,337 3,499
Total equity 52,188 44,061 12,720
(1) See note 3.3 for details regarding the restatement.
Consolidated statement of changes in equity
for the year ended 31 December 2022
Equity
attributable
Share-based to owner of Non-
Called up Share Merger payments Retained parent Controlling Total
share capital premium reserve reserve earnings company interests equity
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
As at 1 January 2021 as originally presented 19,990 - (9,980) - 3,622 13,632 3,499 17,131
Correction of error (net of tax) - - - - (4,411) (4,411) - (4,411)
Restated total equity at the beginning of the financial year(1) 19,990 - (9,980) - (789) 9,221 3,499 12,720
Profit for the financial period and total comprehensive income - - - - 4,757 4,757 413 5,170
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)
Put and call options over non-controlling interests - - - - (1,802) (1,802) - (1,802)
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 20,527 39,724 4,337 44,061
As at 1 January 2022 as originally presented 788 28,293 (9,980) 96 27,214 46,411 4,337 50,748
Correction of error (net of tax) - - - - (6,687) (6,687) - (6,687)
Restated total equity at the beginning of the financial year 788 28,293 (9,980) 96 20,527 39,724 4,337 44,061
Profit for the financial period and total comprehensive income - - - - 9,117 9,117 424 9,541
Share-based payments - - - 400 - 400 - 400
Share capital issued 25 - - - - 25 - 25
Put and call options over non-controlling interests - - - - (609) (609) - (609)
Corporation tax on options - - - - 606 606 - 606
Deferred tax on options - - - 1 515 516 - 516
Non-controlling interests share of acquisitions - - - - - - 745 745
Acquisition of non-controlling interest - - - - 4,168 4,168 (4,168) -
Capital repayment - - - - - - (10) (10)
Dividends paid - - - - (3,087) (3,087) - (3,087)
As at 31 December 2022 813 28,293 (9,980) 497 31,237 50,860 1,328 52,188
(1) See note 3.3 for details regarding the restatement.
Consolidated statement of cash flows
for the year ended 31 December 2022
2021
2022 (restated(1))
£'000 £'000
Cash flows from operating activities
Profit before taxation 12,798 7,547
Adjusted for:
Depreciation of property, plant and equipment 2,069 1,340
Amortisation of intangibles 3,317 2,087
Amortisation of right-of-use assets 6,923 5,934
Profit on disposal of property, plant and equipment (151) -
Share-based payment expense 400 96
Finance income (42) -
Finance expense 3,572 2,783
Operating cash flows before movements in working capital 28,886 19,787
(Increase) / decrease in inventories (8,438) 2,837
Increase in trade and other receivables (526) (1,791)
Increase in trade and other payables 6,918 265
Cash generated by operations 26,840 21,098
Corporation tax paid (3,679) (1,751)
Net cash generated by operating activities 23,161 19,347
Cash flows from investing activities
Purchase of intangible assets (236) (648)
Business acquisitions (net of cash acquired) (26,854) (6,225)
Deferred consideration paid (2,683) (875)
Purchase of property, plant and equipment (3,516) (1,297)
Proceeds on disposal of property, plant and equipment 195 -
Purchase of investments - (77)
Purchase of non-controlling interest of Hevey (2,480) -
Interest received 42 -
Net cash used in investing activities (35,532) (9,122)
Cash flows from financing activities
Principal paid on lease liabilities (8,395) (6,750)
Issue of share capital 25 30,000
Costs of capital raise - (1,549)
Dividends (3,087) (999)
Capital repayment to non-controlling interests (10) -
Proceeds from borrowings 110,976 4,908
Repayment of borrowings (80,450) (40,081)
Bank interest paid (1,306) (529)
Interest on financial liabilities (124) (165)
Net cash inflow / (outflow) from financing activities 17,629 (15,165)
Net increase / (decrease) in cash and cash equivalents 5,258 (4,940)
Cash and cash equivalents at the beginning of the year 11,402 16,342
Cash and cash equivalents at the end of the year 16,660 11,402
Cash and cash equivalents 16,038 11,402
Cash and cash equivalents included in assets held for resale 622 -
Cash and cash equivalents at the end of the year 16,660 11,402
(1) See note 3.3 for details regarding the restatement.
Notes to the financial statements
for the year ended 31 December 2022
1. General information
Lords Group Trading plc (the 'Company') is a public company limited by shares,
listed on AIM 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 principal activity of the Company together with its subsidiary
undertakings (the 'Group') throughout the period is 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 2 May 2023. The directors have the power to
amend and reissue the financial statements.
2. Accounting policies
2.1 Basis of preparation of financial statements
Whilst the financial information included in this preliminary results'
announcement has been prepared in accordance with the recognition and
measurement requirements of UK-adopted International Accounting
Standards this announcement does not itself contain sufficient information to
comply with UK-adopted International Accounting Standards and does not
constitute statutory accounts for the purposes of section 434 of the Companies
Act 2006.
The principal accounting policies used in preparing this preliminary results
announcement are those that the Company has adopted for its statutory accounts
for the year ended 31 December 2022 and are unchanged from those previously
disclosed in the Group's Annual Report and Accounts for the year ended 31
December 2021.
Statutory accounts for 2021 have been delivered to the Registrar of Companies
and those for 2022 will be delivered in due course. The Company's auditors RSM
UK LLP, have reported on the 2022 accounts; their report was unqualified, did
not draw attention to any matters by way of emphasis without qualifying their
report and did not contain statements under s498 (2) or (3) Companies Act
2006. The 2021 audit report was unqualified, did not draw attention to any
matters by way of emphasis without qualifying their report and did not contain
statements under s498 (2) or (3) Companies Act 2006.
Full financial statements for the year ended 31 December 2022 will be posted
and made available to shareholders in due course.
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. The areas
involving a higher degree of judgement or complexity, or areas where
assumptions and estimates are significant to the financial statements, are
disclosed in note 3.
2.2 Going concern
At 31 December 2022, the Group had £34.4 million of undrawn facilities as
disclosed in note 25 and £16.0 million of cash. 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 2022, the interest ratio was over 14.5 and the
last twelve months' net debt / adjusted EBITDA ratio was 1.6.
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 £24.8 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 an
increase in interest base rate. 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 £3.1 million, or
debtors increase by 15.0% above the base model, or the Bank of England base
rate increases to 9.5%. 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.
On 5 April 2023 the Group has increased its facilities by a further £25
million with an initial three year term. For further details see note 16,
post balance sheet events. The increased and extended facilities have not
been considered in the above but will only increase the Group's resilience.
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.
2.3 New accounting standards, interpretations or amendments adopted by the
Group
The Group has not early adopted any other standard, interpretation or
amendment that has been issued but is not effective. The Group applies for
the first time the following new standards applicable for the year ended 31
December 2022:
Amendments to IFRS standards applicable for year ended 31 December 2022:
Amendments to standards
· Amendments to IFRS 3 Business Combinations.
· Amendments to IAS 16 Property, Plant and Equipment.
· Amendments to IAS 37 Provisions, Contingent Liabilities and Contingent
Assets.
· Annual Improvements 2018-2020.
· Amendments to IFRS 16 Leases: Covid-19-Related Rent Concessions beyond
30 June 2021.
By adopting the above, there has been no material impact on the financial
statements.
International Financial Reporting Standards in issue but not yet effective
At the date of authorisation of these financial statements, the Group has not
applied the following revised IFRS standards that have been issued but were
not effective for the year ended 31 December 2022:
· amendments to IAS 12 Deferred Tax related to Assets and Liabilities
arising from a Single Transaction;
· amendments to IAS 8 Accounting policies, Changes in Accounting
Estimates and Errors: Definition of Accounting Estimates; and
· amendments to IAS 1 Presentation of Financial Statements and IFRS
Practice Statement 2: Disclosure of Accounting policies.
The directors do not expect that the adoption of the standards listed above
will have a material impact on the financial statements of the Group.
3. Critical accounting judgements, estimates and errors
Estimates and judgements are continually evaluated and are based on historical
experience and other factors, including expectations of future events that are
believed to be reasonable under the circumstances.
3.1 Key accounting judgements
Recognition of legal and regulatory provisions
A key area of judgement applied in the preparation of these financial
statements is determining whether a present obligation exists and, where one
does, in estimating the probability, timing and amount of any outflows. In
determining whether a provision needs to be made and whether it can be
reliably estimated, we consult relevant professional experts and reassess our
judgements on an ongoing basis as facts change. In the early stages of legal
and regulatory matters, it is often not possible to reliably estimate the
outcome and in these cases we do not provide for their outcome but instead
include further disclosures outlining the matters within our contingent
liabilities note.
Assessment of who has the risk and reward of ownership of non-controlling
interests with put and call options
A key area of judgement applied in the preparation of these financial
statements is determining whether the risk and rewards of ownership resides
with the non-controlling interests or the Group when an acquisition has put
and call options.
Where the pricing is at a variable price, the Group assesses the risk and
rewards reside with the non‑controlling interests (NCI). This is because
the exposure to any increase or decrease in the value of the business resides
with the NCI, as they will either retain the investment indefinitely (if
neither party exercises) or they can recover the fair value of the business
through the exercise price.
Where the exercise price is a fixed amount (or an amount that varies only for
the passage of time), then the risks and rewards reside with the Group. This
is because once the put and call become exercisable, one party will be
incentivised to exit because they benefit from doing so.
In the case of the acquisition of Direct Plumbing and Heating the Group
acquired a 90% holding of the companies and has a put and call policy over the
remaining 10%. The purchase price is based on a formula that approximates
market value. There is also a service agreement which impacts 50% of the
price paid for the shares but as the price paid is still variable the Group
assesses the risk and rewards remain with the non-controlling interest.
In October 2017, the Group acquired a 75% interest in Hevey Building Supplies
Limited with put and call interests over the remaining 25%. The purchase
price of the options was at market value. There was also a service agreement
which was in addition to and not affecting the purchase price of the option.
The Group assesses that risk and reward remained with the non-controlling
interest.
In April 2021, the Group acquired a 75% interest in Condell Limited with put
and call interests over the remaining 25%. The purchase price of the options
was at market value and there was no service contract. The Group assesses
that risk and reward remained with the non-controlling interest.
As no liability had been recorded for the options of Hevey or Condell in prior
years, a prior adjustment has been made and the accounting is included in note
3.3.
3.2 Key accounting estimates and assumptions
The Group makes estimates and assumptions concerning the future. The
resulting accounting estimates will, by definition, seldom equal the related
actual results. The estimates and assumptions that have a significant risk
of causing a material adjustment to the carrying amounts of assets and
liabilities within the next financial year are addressed below.
Lease liabilities
The Group makes judgements to estimate the incremental borrowing rate used to
measure lease liabilities based on expected third-party financing costs when
the interest rate implicit in the lease cannot be readily determined. A
Group incremental borrowing rate has been applied for all subsidiary leases
because the Group has central borrowings.
The Group has adopted a range from 2.45% to 5.31% as its incremental borrowing
rate, being the rate that the individual lessee would have to pay to borrow
the funds necessary to obtain an asset of similar value to the right-of-use
asset in a similar economic environment with similar terms, security and
conditions. The incremental borrowing rate has been determined by using a
synthetic credit rating for the Group which is used to obtain market data on
debt instruments for companies with the same credit rating and adjusted for
the lease term and type of asset. The Group performed a sensitivity analysis
on the incremental borrowing rate and identified that if the incremental
borrowing rate increased to 8%, for all assets, there would be a reduction in
the carrying amount of the right-of-use asset at 31 December 2022 of
£4,081,000 (2021: £3,484,000) and there would be a subsequent decrease in
the lease liability of £3,730,000 (2021: £3,213,000). If the incremental
borrowing rate decreased to 3%, for all assets, there would be an increase in
the carrying amount of the right-of-use asset at 31 December 2022 of
£5,455,000 (2021: £4,902,000) and there would be a subsequent increase in
the lease liability of £4,805,000 (2021: £4,140,000).
In addition, the Group provides for dilapidations on the leaseholds at rates
it estimates as appropriate to cover the anticipated dilapidation cost over
the term of the lease; these are included within the lease liability
calculation.
Useful economic lives of intangible and tangible assets
Annual amortisation and depreciation charge for intangible and tangible assets
is sensitive to changes in the estimated useful economic lives and residual
values of the assets. The useful economic lives and residual values are
reassessed annually. They are amended when necessary to reflect current
estimates, based on cash-generating unit performance, technological advances,
future investments, economic utilisation and the physical condition of the
assets. See note 12 for the carrying values of the assets and details on the
key assumptions made.
Inventories
The Group carries significant levels of inventory and key judgements are made
by management in estimating the level of provisioning required for slow-moving
inventory. Provision estimates are forward looking and are formed using a
combination of factors including historical experience, management's knowledge
of the industry, Group discounting and sales pricing. Management use a
number of internally generated reports to monitor and continually reassess the
adequacy and accuracy of the inventory provision. In arriving at their
conclusion, the directors consider inventory ageing and turn analysis. The
inventory provision is 3.8% of inventory (2021: 5.9%). Doubling the
provision would increase cost of sales / reduce the carrying value of
inventory by £1,997,000 in 2022 (2021: £2,304,000).
Fair value of intangible assets
The fair value of customer relationship assets and trade names separately
acquired through business combinations involves the use of valuation
techniques and the estimation of future cash flows to be generated over
several years. The estimation of the future cash flows requires a
combination of assumptions including assumptions for customer attrition rate,
EBIT and discount rates. Estimated attrition rates are net of growth rates
for the existing customer base. The relief from royalty rate is the value
that would be obtained by licensing trade names out to a third party, as a
percentage of sales. See note 12 for the carrying value of the assets.
The assumptions applied by the directors in respect of the business
combinations are as follows:
Trade names
Customer EBIT as a Relief from
attrition rate % of revenue Discount rate royalty rate Discount rate
Advance Roofing Supplies Limited 2.0% 8.0% 13.0% 0.3% 13.0%
A.W. Lumb 2.8% 5.5% 11.2% 0.3% 11.2%
DH&P Plumbing and Heating 9.1% 6.5% 12.8% 0.3% 12.8%
Sudbury branch acquisition 3.0% 9.2% 12.8% - -
3.3 Correction of error in accounting for option to acquire minority interest
In October 2017 and April 2021 the Group acquired a majority share in Hevey
Building Supplies Limited and Condell Limited respectively. In both
instances, a put and call agreement was put in place with the non-controlling
interest for the acquisition of the remaining shares. The options were not
accounted for by the Group. In addition Hevey Building Services Limited put
in place a services agreement with deferred remuneration after five years
attached to service and growth targets. The services agreement was not
accounted for by the group.
These errors have been corrected by restating each of the affected financial
statements line items for the prior periods as at 31 December 2020 and 31
December 2021 respectively and as such have been corrected via a prior year
restatement.
31 December
31 December Increase / 2020
2020 (decrease) restated
Consolidated statement of financial position (extract) £'000 £'000 £'000
Non-current trade and other payables 2,840 4,411 7,251
Total non-current liabilities 54,985 4,411 59,396
Total liabilities 146,632 4,411 151,043
Net assets 17,131 (4,411) 12,720
Retained earnings 3,622 (4,411) (789)
Total equity 17,131 (4,411) 12,720
31 December
31 December Increase / 2021
2021 (decrease) restated
Consolidated statement of financial position (extract) £'000 £'000 £'000
Current trade and other payables 70,459 2,442 72,901
Total current liabilities 80,370 2,442 82,812
Non-current trade and other payables 3,621 4,245 7,866
Total non-current liabilities 41,191 4,245 45,436
Total liabilities 121,561 6,687 128,248
Net assets 50,748 (6,687) 44,061
Retained earnings 27,214 (6,687) 20,527
Total equity 50,748 (6,687) 44,061
31 December
31 December Increase / 2021
2021 (decrease) restated
Summary of movement in retained earnings £'000 £'000 £'000
Retained earnings - 31 December 2020 3,622 (4,411) (789)
Put and call options over non-controlling interests - (1,802) (1,802)
Profit for the year 5,231 (474) 4,757
Capital reorganisation 19,360 - 19,360
Dividends paid (999) - (999)
Retained earnings - 31 December 2021 27,214 (6,687) 20,527
31 December
31 December Increase / 2021
2021 (decrease) restated
Consolidated statement of comprehensive income (extract) £'000 £'000 £'000
Exceptional expenses (2,085) (432) (2,517)
EBITDA 20,123 (432) 19,691
Operating profit 10,762 (432) 10,330
Finance expense (2,741) (42) (2,783)
Profit before tax 8,021 (474) 7,547
Taxation (2,377) - (2,377)
Profit for the year 5,644 (474) 5,170
31 December
31 December Increase/ 2021
2021 (Decrease) restated
Total comprehensive income attributable to: £'000 £'000 £'000
Owners of the parent company 5,231 (474) 4,757
Non-controlling interest 413 - 413
5,644 (474) 5,170
Earnings per share
Basic earnings per share (pence) 3.73 (0.34) 3.39
Diluted earnings per share (pence) 3.40 (0.31) 3.09
The restatement also affected note 5 Exceptional items, increasing the charge
by £432,000, and note 9 Finance expense, increasing the charge by £42,000.
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 chief operating
decision-maker in the Group's internal management reporting by segment
Plumbing and
Heating Merchanting Total
2022 £'000 £'000 £'000
Revenue 229,264 220,756 450,020
Cost of sales (196,471) (164,766) (361,237)
Gross profit 32,793 55,990 88,783
Other operating income 257 424 681
Distribution costs (109) (4,523) (4,632)
Administrative expenses (19,095) (35,771) (54,866)
Adjusted EBITDA 13,846 16,120 29,966
Share-based payments (136) (264) (400)
Exceptional items - (929) (929)
EBITDA 13,710 14,927 28,637
Depreciation (305) (1,764) (2,069)
Amortisation (2,442) (7,798) (10,240)
Operating profit 10,963 5,365 16,328
Finance income - 42 42
Finance costs (679) (2,893) (3,572)
Profit before taxation 10,284 2,514 12,798
Taxation (2,583) (674) (3,257)
Profit for operating unit 7,701 1,840 9,541
Assets and liabilities
Total assets 106,599 133,282 239,881
Total liabilities (70,462) (117,231) (187,693)
Net assets 36,137 16,051 52,188
Additions to non-current assets 10,420 35,495 45,915
Heating Merchanting Total
(Restated(1)) (Restated(1)) (Restated(1))
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 - (2,517) (2,517)
EBITDA 10,261 9,430 19,691
Depreciation (1,124) (216) (1,340)
Amortisation (1,523) (6,498) (8,021)
Operating profit 7,614 2,716 10,330
Finance income - - -
Finance costs (773) (2,010) (2,783)
Profit before taxation 6,841 706 7,547
Taxation (1,059) (1,318) (2,377)
Profit / (loss) for operating unit 5,782 (612) 5,170
Assets and liabilities
Total assets 96,080 76,229 172,309
Total liabilities (59,098) (69,150) (128,248)
Net assets 36,982 7,079 44,061
Additions to non-current assets 9,895 7,756 17,651
(1) See note 3.3 for details regarding the restatement.
5. Exceptional items
Exceptional items are presented separately as one-off costs that are unlikely
to reoccur or costs outside normal business trading.
2021
2022 (restated(1))
£'000 £'000
HS2 compensation (748) -
Listing costs - 1,523
Costs of previous financing expensed - 248
Costs of business combinations 842 514
Retentions employment costs on acquisitions 681 432
National insurance payments 338 -
Reduction in contingent consideration (184) (200)
929 2,517
(1) See note 3.3 for details regarding the restatement.
Year ended 31 December 2022
The Group received compensation from HS2 for business disruption that has
occurred to the Lords Builders Merchants Park Royal branch of £748,000.
The costs associated with the business combinations detailed in note 19 have
been expensed and disclosed as exceptional items which amount to £842,000.
The Group sometimes includes retentions payments on its acquisitions for key
staff. The cost of these retentions is expensed over the period that it
relates to. The costs in the year were £681,000.
On migrating to a new payroll system in 2016, two of the Group's subsidiary
entities determined that there has been an error in the calculation of
employer and employee national insurance over the last four years such that
there was an under-payment of national insurance. The Group promptly
notified HMRC of the error upon discovery in 2022 and has agreed and paid a
full and final payment of £338,000 to cover all national insurance due.
The first instalment of the contingent consideration for Condell Limited was
due in April 2022. Condell did not meet the agreed EBITDA target for the
first payment to be triggered. The present value of the contingent liability
of £184,000 has been released to the income statement within exceptional
items. The remaining deferred consideration with a present value of
£188,000 is due in April 2023 if EBITDA targets are achieved.
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.
The Group sometimes includes retentions payments on its acquisitions for key
staff. The cost of these retentions is expensed over the period that it
relates to. The costs in the year were £432,000.
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.
6. Employee benefit expenses
Staff costs of continuing operations, including directors' remuneration, were
as follows:
2022 2021
£'000 £'000
Wages and salaries 31,298 22,833
Social security costs 3,050 2,313
Defined contribution costs 697 424
Share-based payments 400 96
35,445 25,666
The average monthly number of employees of continuing operations, including
the directors, during the year were as follows:
2022 2021
No. No.
Management and administration 110 82
Sales, retail and manufacturing 770 556
880 638
7. Expenses by nature
Operating profit is stated after charging / (crediting):
2022 2021
£'000 £'000
Depreciation of property, plant and equipment 2,069 1,340
Amortisation of intangible assets 3,317 2,087
Amortisation of right-of-use assets 6,923 5,934
Inventories recognised as an expense 361,237 300,569
Short-term and low-value lease payments 142 148
Foreign exchange gains (6) (14)
Share-based payments 400 96
Release of impairment of inventories (307) (142)
Profit on disposal of property, plant and equipment (151) -
Defined contribution pension plan 697 424
8. Finance income
2022 2021
£'000 £'000
Bank interest receivable 42 -
42 -
9. Finance expense
2021
2022 (restated(1))
£'000 £'000
Bank loans and overdrafts 1,306 529
Invoice discounting facilities 124 165
Unwinding of deferred consideration and call and put options 183 212
Interest on dilapidation provision 46 41
Lease liabilities 1,913 1,836
3,572 2,783
(1) See note 3.3 for details regarding the
restatement.
10. Taxation
2021
2022 (restated(1))
£'000 £'000
Corporation tax
Current tax on profit for the year 3,883 2,344
Adjustments in respect of previous periods 87 366
3,970 2,710
Deferred tax
Originating and reversal of temporary differences (762) (198)
Adjustments in respect of previous periods 46 (707)
Effect of changes in tax rates 3 572
(713) (333)
Total tax charge 3,257 2,377
(1) See note 3.3 for details regarding the restatement.
Factors affecting tax charge for the year
The tax assessed for the year is higher than (2021: higher than) the standard
rate of corporation tax in the UK of 19% (2021: 19%). The difference is
explained below:
2021
2022 (restated(1))
£'000 £'000
Profit before taxation 12,798 7,547
Profit multiplied by standard rate of corporation tax in the UK of 19% (2021: 2,432 1,434
19%)
Adjustments in respect of previous periods 133 (341)
Expenses not deductible 660 843
Income not deductible (148) -
Changes in tax rates 3 572
Deferred tax not recognised 107 16
Share-based payments 70 (147)
Total tax charge for the year 3,257 2,377
(1) See note 3.3 for details regarding the restatement.
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 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
2022 (restated(1))
Basic earnings per share
Earnings from continuing activities (pence) 5.68 3.39
Diluted earnings per share
Earnings from continuing activities (pence) 5.36 3.09
Weighted average shares for basic earning per share 160,523,582 140,354,443
Number of dilutive share options 9,552,402 13,647,753
Weighted average number of shares for dilutive earnings per share 170,075,984 154,002,196
Earnings attributable to the equity holders of the parent (£'000) 9,117 4,757
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 £9,117,000 (2021: earnings of £4,757,000) as the numerator,
meaning no adjustment to profit was necessary in either year.
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 5), share-based payments and amortisation of
intangible assets.
2021
2022 (restated(1))
£'000 £'000
Earnings attributable to the equity holders of the parent 9,117 4,757
Exceptional items 929 2,517
Share-based payments 400 96
Amortisation of intangible assets 3,317 2,087
Less tax impact of adjustments (883) (893)
Adjusted earnings 12,880 8,564
Weighted average shares for basic earnings per share 160,523,582 140,354,443
Number of dilutive share options 9,552,402 13,647,753
2022 2021
Adjusted basic earnings per share
Earnings from continuing activities (pence) 8.02 6.10
Adjusted diluted earnings per share
Earnings from continuing activities (pence) 7.57 5.56
(1) See note 3.3 for details regarding the restatement.
12. Intangible assets
Customer
Software relationships Trade names Goodwill Total
£'000 £'000 £'000 £'000 £'000
Year ended 31 December 2021
Opening net book value 401 10,837 1,717 5,243 18,198
Additions 648 - - - 648
Reclassification from tangible assets 18 - - - 18
Acquired through business combinations 17 3,336 316 2,227 5,896
Amortisation charge (132) (1,719) (236) - (2,087)
Closing net book value 952 12,454 1,797 7,470 22,673
At 31 December 2021
Cost 1,333 17,906 2,267 7,470 28,976
Accumulated amortisation and impairment (381) (5,452) (470) - (6,303)
Net book amount 952 12,454 1,797 7,470 22,673
Year ended 31 December 2022
Opening net book value 952 12,454 1,797 7,470 22,673
Additions 236 - - - 236
Reclassification from tangible assets - - - 1,649(1) 1,649
Acquired through business combinations 140 15,649 1,124 7,177 24,090
Amortisation charge (216) (2,787) (314) - (3,317)
Closing net book value 1,112 25,316 2,607 16,296 45,331
At 31 December 2022
Cost 1,709 33,555 3,391 16,296 54,951
Accumulated amortisation and impairment (597) (8,239) (784) - (9,620)
Net book amount 1,112 25,316 2,607 16,296 45,331
(1.) The acquisition of Condell included a long leasehold which was originally
classified as a freehold. This has been reclassified under IFRS 16 and the
reduction in tangible assets increases goodwill on acquisition. This has not
had a material impact on net assets at the acquisition date or at 31 December
2021 and no prior year restatement has been made for this.
The software intangible assets include the inventory management system of a
subsidiary undertaking which was created by an external development firm for
the subsidiary's specific requirements. The asset is carried at £126,208
(2021: £151,449) and has a remaining amortisation period of six years (2021:
seven years). In addition, another subsidiary company implemented an ERP and
stock management system with a carrying value at year end of £557,148 (2021:
£621,841) and with a remaining amortisation period of seven years (2021:
eight years). There are no other individually material intangible assets.
Goodwill is systematically tested for impairment at each balance sheet date.
The Group has no assets with indefinite lives, other than goodwill. No
intangible assets were identified by management which needed to be impaired.
Cash-generating unit (CGU) assessment
The Group tests the carrying amount of goodwill annually for impairment or
more frequently if there are indications that their carrying value might be
impaired. The carrying amounts of other intangible assets are reviewed for
impairment if there is an indication of impairment. Impairment is calculated
by comparing the carrying amounts to the value-in-use derived from discounted
cash flow projections for each CGU to which the intangible assets are
allocated. A CGU is deemed to be the branch or group of branches acquired at
the time of a business combination. The carrying amount of goodwill is
allocated across multiple cash-generating units and the amount allocated to
each unit is not significant in comparison with the entity's total carrying
amount of goodwill.
The breakdown of the net book value of intangible assets by operating segment
is:
2022 2021
£'000 £'000
Merchanting 33,104 15,981
Plumbing and Heating 12,227 6,692
45,331 22,673
The total recoverable amount in relation to these CGUs at 31 December 2022 was
£279,409,000 (2021: £185,440,000). The value-in-use calculations are based
on five-year management forecasts with a terminal growth rate applied
thereafter, representing management's estimate of the long-term growth rate of
the sector served by the CGUs. The recoverable amounts in both 2022 and 2021
were in excess of the carry value of goodwill and so no goodwill was impaired,
or any part of the CGU disposed of.
The key assumptions, which are equally applicable to each CGU, in the cash
flow projections used to support the carrying amount of goodwill were as
follows:
Plumbing and
Heating Merchanting
Five-year sales growth 4.8% - 11.3% 1.5% - 5.8%
Terminal sales growth 2.0% 2.0%
Discount rate 11.5% 11.5%
Sensitivity analysis
A reasonable change in a key assumption would not cause the carrying value of
either CGU to exceed its recoverable amount; the table below shows the amount
of headroom and the revised assumptions required to eliminate the headroom in
full at 31 December 2022. The headroom relates to the excess of the
recoverable amount over the carrying value of the goodwill, intangible assets
and other applicable net assets of the CGUs.
Plumbing and
Heating Merchanting
Recoverable amount of CGU (£'000) 141,676 130,319
Current headroom (£'000) 94,504 66,393
Five-year sales growth <0% <0%¹
Terminal sales growth <0% <0%(1)
Discount rate 13% - 39% 18% - 28%
(1) Two CGUs within the Merchanting division are more sensitive than this and
breakeven occurs with five-year sales growth limited to 1-2%. The
recoverable amount of the CGUs is £26,309,000 (2021: £9,123,000) and the
base headroom is £7,717,000 (2021: £1,022,000).
13. 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.
2022 2021
Number of active leases 240 210
Description of payments
2022 2021
£'000 £'000
Principal lease payments 8,395 6,750
Interest on dilapidation provision 46 41
Interest payments on leases 1,913 1,836
Short-term and low-value lease costs 142 148
10,496 8,775
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 2020
Cost 33,195 5,833 5,094 44,122
Accumulated amortisation and impairment (7,349) (1,997) (2,689) (12,035)
At 1 January 2021 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 amount 26,516 3,030 3,725 33,271
Year ended 31 December 2022
At 1 January 2022 26,516 3,030 3,725 33,271
Additions 7,346 40 738 8,124
Acquired through business combinations 3,988 - 98 4,086
Lease modifications 410 - - 410
Amortisation charge (4,245) (689) (1,989) (6,923)
At 31 December 2022 34,015 2,381 2,572 38,968
At 31 December 2022
Cost 48,961 5,995 8,904 63,860
Accumulated amortisation and impairment (14,946) (3,614) (6,332) (24,892)
Net book amount 34,015 2,381 2,572 38,968
Lease liabilities
Leasehold Plant and Motor
property machinery vehicles Total
£'000 £'000 £'000 £'000
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
30,065 2,979 3,588 36,632
At 1 January 2022
Additions 7,302 39 738 8,079
Acquired through business combinations 3,783 - 98 3,881
Lease modifications 410 - - 410
Interest expenses 1,602 167 144 1,913
Lease payments (including interest) (5,463) (1,240) (1,692) (8,395)
At 31 December 2022 37,699 1,945 2,876 42,520
Reconciliation of minimum lease payments and present value
2022 2021
£'000 £'000
Within one year 5,963 6,200
Later than one year and less than five years 19,415 19,236
Later than five years and less than ten years 14,670 11,534
Later than ten years and less than 15 years 8,955 8,550
After 15 years 6,550 2,272
Total including interest cash flows 55,553 47,792
Less interest cash flows (13,033) (11,160)
Total principal cash flows 42,520 36,632
Reconciliation of current and non-current lease liabilities
2022 2021
£'000 £'000
Current 5,496 5,114
Non-current 37,024 31,518
Total 42,520 36,632
14. 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 2022 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 APP 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 will be significantly less than the maximum that could be imposed by
HMRC and therefore would be covered by the warranties contained in the sale
and purchase agreement for APP Wholesale Limited.
The Group has since conducted training for certain staff members within APP
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.
15. Related party transactions
Parent entity
Lords Group Trading plc is the parent entity.
Transactions with related parties
Gempoint 2000 Limited, a company of which Shanker Patel is also a director,
owns properties leased by operating branches of the Group. In total, the
Group paid Gempoint £963,000 in lease payments (2021: £892,000). At 31
December 2022, the Group owed Gempoint £187,000 (2021: £164,000).
The Group directors received dividends in the year from the Company as
follows.
2022 2021
£'000 £'000
Shanker Patel 1,028 290
Chris Day 11 -
Gary O'Brien 3 1
Andrew Harrison 1 -
The following transactions occurred between Group companies and companies that
are not wholly owned within the Group:
Condell Limited paid management fees of £320,000 (2021: £291,000), and at 31
December 2022 owed £252,000 (2021: £591,000) to wholly owned Group
companies. Condell made purchases of £224,000 (2021: £153,000) and sales of
£701,000 (2021: £274,000) from wholly owned Group companies and was owed a
net balance of £89,000 (2021: £39,000) on these transactions.
Weldit LLP paid management fees of £22,500 (2021: £18,000), interest of
£19,000 (2021: £26,322) and made purchases of £nil (2021: £nil) to wholly
owned Group companies. At 31 December 2022, Weldit LLP owed £710,000 (2021:
£737,000) to wholly owned Group companies.
Hevey Building Supplies was not wholly owned until 22 October 2022 when the
non-controlling interest was acquired and Hevey Building Supplies became
wholly owned. Transactions up to 22 October 2022 were as follows:
Hevey Building Supplies Limited paid management fees in the period to 31
October 2022 of £150,000 (2021: £108,000) and interest of £nil (2021:
£50,000) to wholly owned Group companies. At 31 December 2021, Hevey Building
Supplies Limited owed £51,000.
16. Post balance sheet events
Purchase of Heathrow branch of George Lines Civils & Landscaping Merchants
On 12 January 2023, the Group entered into binding agreements in respect of
the purchase of the freehold property from which the Heathrow branch of George
Lines Civils & Landscaping Merchants operates (the 'Property') from the
original vendor of George Lines.
The Property, which is situated close to Heathrow airport and covers an area
of 1.52 acres including 5,570 square feet of covered storage, is considered by
Lords to be prime industrial real estate from which the Heathrow branch of
George Lines Civils & Landscaping Merchants is intending to continue to
operate for the foreseeable future. The branch has been operating out of the
site for more than 40 years.
Maximum consideration for the purchase of the Property is £6.26 million in
cash, of which £2.2 million has been paid by the Group. The balance of the
consideration is to be paid by the Group prior to 5 July 2024. Transfer of the
title of the Property to the Group will occur upon completion, being the date
on which the remaining consideration is paid, and the Group will continue to
lease the Property until completion occurs, with any rental payments paid
prior to completion deducted from the final consideration.
Sale of Lords at Home Ltd
On 2 February 2023, the Group sold its wholly owned subsidiary undertaking,
Lords at Home Ltd ('Lords at Home') including the Lords at Home brand. The
subsidiary, which has 31 employees, was considered non-core to the Group's
principal focus of building, plumbing, heating and DIY goods, and its sale
will allow the Group to further focus on core areas of the Lords business.
The cash consideration for the sale of the Lords at Home business was
£805,000 payable in full on completion. During the year ended 31 December
2022, Lords at Home generated £3.0 million in revenue and contributed
£80,000 of EBITDA.
Chiltern Timber Supplies Limited
On 31 March 2023 the Group acquired Chiltern Timber Supplies Limited
('Chiltern Timber') for a total consideration of up to £1.65 million on a net
cash free/debt free basis. The consideration payable is £1.175 million on
signing and up to a further £0.475 million deferred equally over 12, 24 and
36 months on a contingent basis subject to Chiltern Timber delivering certain
earnings targets.
Established in 2013, Chiltern Timber is an independent timber merchant
operating from a modern single site in Hemel Hempstead, Hertfordshire. The
business specialises in providing hardwoods, special timber sections, timber
landscaping products and veneered sheet material. The business also operates
a modern milling facility, allowing it to offer a differentiated service to
that of its competitors.
Refinancing Group Lending Facilities
The Group amended its banking facilities on 5 April 2023. The Group's existing
£70.0 million lending facilities with HSBC, consisting of a £50.0 million
revolving credit facility ('RCF') and a £20.0 million receivables financing
facility ('RFF') (together the "Existing Facilities"), have been cancelled and
repaid pursuant to the Refinancing with such repayment being funded by
drawings under new £95.0 million facilities provided by HSBC, NatWest and BNP
Paribas consisting of a £70.0 million RCF (the "New RCF") and a £25.0
million RFF each with an initial three-year term (together, the "New
Facilities").
The New RCF includes: (i) a £20.0 million uncommitted accordion option which
would, subject to lender approval, allow the Group to increase the New RCF
facility limit if required, and (ii) two uncommitted extension options of one
year each which would, subject to lender approval, extend the tenor of the New
RCF to four years and five years if exercised.
The New Facilities are on improved commercial terms compared to the Existing
Facilities and are expected to result in material interest cost savings for
the Group over the three-year term of the facilities.
Resignation of Dawn Moore
Dawn Moore, Non-Executive Director, has advised the Board she intends to step
down as a director of the Group immediately following the Company's 2023
Annual General Meeting to focus on expanding executive responsibilities.
- Ends -
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