REG - Lords Group Trading - FY23 Trading Update

Lords TradingAnnouncement

24/01/2024 07:15

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RNS Number : 6789A  Lords Group Trading PLC  24 January 2024

 

24 January 2024

 

 

Lords Group Trading plc

('Lords', the 'Group' or the 'Company')

 

FY23 Trading Update

 

Lords, a leading distributor of building materials in the UK, is pleased to
provide a trading update for the year ended 31 December 2023 ('FY23' or the
'period') ahead of publication of its FY23 Final Results in May 2024.

 

During the period the Group's trading has again demonstrated Lords' resilience
and capability to deliver its growth strategy amidst the continuing subdued
trading conditions. In the face of these conditions, Lords has made steady
operational progress across both Merchanting and Plumbing & Heating
divisions. Furthermore, seven additional sites across the UK have been added
through acquisitive and organic growth, generating an expected £25 million of
annualised revenues at maturity.

 

As a result, the Group expects to report, subject to audit, FY23 revenue of
£463 million (FY22: £450 million) and FY23 adjusted EBITDA(2) of
approximately £26.6 million (FY22: £30.0 million), in line with current
market expectations(1), and adjusted profit before tax(3) of approximately
£11.0 million (FY22: £17.4 million).

 

Segmental Trading

 

The table below shows total revenue growth and like-for-like for FY23:

 

                                                    Like-for-Like Revenue Growth  Change in Total Revenue

 Division                            Unaudited

                                     FY23 Revenue
                                     FY23 vs. FY22                                FY23 vs. FY22
 Merchanting                         £215m          (6.3)%                        (2.4)%
 Plumbing & Heating ("P&H")          £248m          3.7%                          7.8%
 Group                               £463m          (1.2)%                        2.8%

 

Overall, the Group has experienced further resilient trading across the
business, despite wider market headwinds, resulting in total sales growth of
2.8%.

 

In addition to its organic growth levers, the Group successfully executes a
unique M&A strategy that is focused on creating market share gains,
enhanced profitability and further diversifying revenue streams. Lords targets
specialist, independent businesses that broaden product range or geographic
reach in order to do this.  The Merchanting and P&H markets remain highly
fragmented, offering significant opportunity given Lords' reputation as being
an acquirer of choice in the market.

 

The Group continues to maintain a prudent and considered approach to inorganic
growth and, whilst a pipeline of acquisition opportunities remains live, in
the current environment the Group is committed to balance sheet discipline
which will remain in FY24.

 

Renewables product range extension

Lords has strategically focused on product range extension in the renewables
space in recent years, with strong growth drivers and market dynamics
complementing Lords position in the supply chain.

 

In Q4 2023, the Government confirmed that the widely consulted Clean Heat
Market Mechanism ('CHMM') will commence in Q2 2024.  The CHMM will
incentivise boiler manufacturers and homeowners to accelerate the transition
towards renewable energy sources across the UK housing stock, increasing
demand for renewable products including air source heat pumps.

 

Lords is well placed to benefit from a shift in demand towards air source heat
pumps, enjoying successful and growing trading relationships with six air
source heat pump manufacturers and achieving 60% revenue growth across its
wider renewables range(4) in FY23.

 

Balance sheet

 

As at 31 December 2023, the Group had net debt(5) of £28.5 million (30 June
2023: £38 million), backed by a freehold property portfolio with an estimated
market value of not less than £15 million. The significant reduction in net
debt, ahead of current market expectations(6), reflects the Board's focus
during the period to reduce net debt through a number of successful management
controls and initiatives and through the normalisation of working capital.

 

P&H working capital fully normalised as at 31 December 2023, in line with
previous guidance at the 2023 interim results, following the resolution of the
industry wide boiler supply issues in 2022.

 

Current Trading and Outlook

 

Throughout FY23 Lords has demonstrated resilient organic growth, in a sector
which has seen a challenging period., The Group continues to successfully
apply a number of steps to manage costs and reduce debt.

 

The markets in which we operate in are expected to remain subdued into FY24
and, whilst there are signs of improvement in customer demand, these signals
remain intermittent and price deflation persists.  This has led the Group to
continue to take a prudent approach to FY24 in order to give the market
dynamics appropriate time to recalibrate as economic volatility reduces.

 

Shanker Patel, Chief Executive Officer of Lords, commented:

 

"Like many of our peers it has been a challenging year but the fundamentals of
our business have underpinned a resilient performance that I'm incredibly
proud of.

 

"Our scale and profitability in both Merchanting and Plumbing & Heating
have benefitted from our organic growth levers as we build our geographic
footprint, extend our product range and build our digital sales expertise. We
maintain an ongoing ability to execute earnings enhancing M&A, but balance
sheet discipline remains a core consideration. In that regard it is pleasing
to report net debt reduction ahead of market expectations. As market
conditions improve we are confident that we are exceptionally well positioned
for growth."

 

 

((1)        ) Current consensus analyst forecasts are for FY23
revenues of between £445 million and £450 million, FY23 Adjusted EBITDA of
between £26.2 million and £27.0 million, and Adjusted Profit Before Tax of
between £12.1 million and £13.2 million.

((2)        ) Adjusted EBITDA is EBITDA (defined as earnings before
interest, tax, depreciation and amortisation and, in accordance with IFRS) but
also excluding exceptional items, the impact of an in period change to the
Group's stock provisioning policy and share-based payments.

((3)        ) Adjusted profit before tax is profit before tax before
exceptional items, share based payments and amortisation of intangible assets.

((4)        ) Air Source Heat Pumps, Controls, Under Floor Heating,
Air Con, Electric Boilers

((5)        ) Net debt is defined as borrowings less cash and cash
equivalents.

((6)        ) Current consensus analyst forecasts are for FY23
year-end net debt of between £30.0 million and £32.6 million

 

- Ends -

 

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
via a Regulatory Information Service, this inside information is now
considered to be in the public domain.

 

 

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

 Cavendish Capital Markets Limited (Nominated Adviser and Joint Broker)  Tel: +44 (0)20 7220 0500
 Ben Jeynes / Dan Hodkinson (Corporate Finance)
 Julian Morse / Henry Nicol (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 / Steph Whitmore / Abby Gilchrist  LGT@buchanan.uk.com (mailto: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 31 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 17
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 48 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/) .

 

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