REG - Lords Group Trading - Interim Results
06/09/2022 07:00
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RNS Number : 3483Y Lords Group Trading PLC 06 September 2022
For immediate release 6 September 2022
Lords Group Trading plc
("Lords" or the "Group")
Interim Results
Continued product, geographic and margin expansion; targets set at IPO well on
track
Lords (AIM:LORD), a leading distributor of building materials in the UK, today
announces its unaudited Interim Results for the six months ended 30 June 2022
("H1 2022" or the "period").
Financial Highlights
· Record H1 Group revenues of £214.2 million (H1 2021: £179.0
million), a 19.7% increase
· H1 2022 Adjusted EBITDA(1) of £14.2 million (H1 2021: £11.2
million restated), a 27.1% increase
· H1 2022 Adjusted EBITDA margin of 6.6% (H1 2021: 6.2%), on track
to reach 7.5% medium term target
· H1 2022 cashflow generated by operations of £12.8 million (H1
2021: £9.6 million)
· H1 2022 free cashflow(2) generation of £8.7 million (H1 2021:
£8.4 million)
· Proposed interim dividend of 0.67 pence per share (H1 2021: 0.63
pence per share)
· Adjusted H1 2022 basic earnings per share(3) of 3.87 pence (H1
2021: 3.71 pence restated), an increase of 4.3%
· Net debt(4) at 30 June 2022 of £21.1 million (June 2021: £25.6
million)
· Trading continues in line with market expectations for FY22,
being revenue of £435.0 million, adjusted EBITDA of £26.0 million and
adjusted profit before tax(5) of £16.0 million
Operational Highlights
· Merchanting division has continued to perform strongly, with
record revenues of £105.9 million (H1 2021: £61.1 million), representing
growth of 73.4% and 14.5% on a like-for-like(6) basis
o Driven by the division's continued focus on 'local leader' reputation via
empowered, highly engaged management teams across its 30 locations
· Plumbing and Heating division ("P&H") has demonstrated
resilient performance with increased profitability and margin, and customer
demand remaining strong during the period, delivering Adjusted EBITDA increase
of 10.6% in H1 2022 to £6.5 million (H1 2021: £5.9 million) notwithstanding
industry wide boiler component shortage impacting revenues
o Boiler component shortages resulted in like-for-like revenue of (12.5)%
and (8.2)% including the H1 2022 acquisition of DH&P Plumbing and Heating
o H1 2022 management actions, including shifting sales mix towards higher
margin energy efficiency product ranges, has mitigated the impact of shortages
o Management continues to expect the boiler component shortage to ease
during H2 2022
· Group digital revenues grew by 4.8% on a like-for-like(6) basis
with customers benefiting from the ability to shift across channels (online /
instore) in their purchasing journey with Lords
o Merchanting digital revenues growing by 133.1% on a like-for-like basis,
equivalent to 3.4% of divisional revenue (H1 2021: 2.2%)
· Four completed acquisitions in the Period
o Acquisitions were acquired on a blended 4.6x multiple of Adjusted EBITDA
o Acquisitions are EBITDA margin accretive
o Each transaction is complementary to Lords' strategy of product range and
geographic expansion
o All continue to perform in line with the Board's expectations following
successful integration
· Product range extension continuing to expand customer base and
share of existing customer wallet
o New ranges to support the decarbonisation of the UK housing stock and
energy price impact, including heating controls, air source heat pumps and
underfloor heating within the P&H division
· Customer base growth via expansion of existing brands continues
to progress with three new locations secured in H1 2022
Current Trading and Outlook
· Lords continues to see positive customer demand across the
Group's product offering and the Board considers that the Group's organic
growth strategy of product range extension and new locations will continue to
secure new customers alongside a greater share of existing customer wallet
· The Board remains vigilant of the potential for broader
macro-economic volatility, however is confident that the Group's business
plan, adaptability and high levels of customer service leave the Group well
positioned for continued outperformance
· Lords well on track to deliver IPO target of £500 million
revenue in 2024, as well as 7.5% EBITDA margin in the medium term
( )
(1) Adjusted EBITDA is EBITDA (defined as earnings before interest, tax,
depreciation and amortisation and, in accordance with IFRS) but also excluding
exceptional items and share-based payments.
(2) Defined as cash generated by operating activities less capital
expenditure, exceptional items, share based payments and interest paid.
(3) Earnings attributable to equity holders of the profit adjusted for
exceptional items, share based payments and amortisation of intangible assets
divided by closing shares in issue.
(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.
Commenting on the Interim Results, Shanker Patel, Chief Executive Officer of
Lords, commented:
"We can only deliver these results due to our colleagues' outstanding
dedication and commitment to our customers, their superior product knowledge
and focus on exceptional service, all of which are visible throughout our H1
2022 results which have delivered record H1 revenue.
"The Group has continued to accelerate the delivery of its strategic plan,
reflected in our financial performance in the half year which reaffirm
delivery of our strategic targets of £500m revenue by 2024 and 7.5% EBITDA
margin in the medium term. We have a substantial opportunity to grow the
Group's current < 1% market share through attracting new customers, a
greater share of existing customer wallet, product range extension, new
geographies, digital capability and valued added acquisitions.
"In the Group's first twelve months as a listed company, we have delivered all
our IPO commitments and believe our strategy will continue to deliver
outperformance. The strength of these results and confidence in the outlook
supports our declaration of an interim dividend to shareholders of 0.67 pence
per share. Our agility and entrepreneurialism allow the Group to manage
challenges and seize opportunities and our H1 2022 results are testament to
this mentality."
This announcement contains inside information.
FOR FURTHER ENQUIRIES:
Lords Group Trading plc Via Buchanan
Shanker Patel, Chief Executive Officer Tel: +44 (0) 20 7466 5000
Chris Day, Chief Financial Officer
Cenkos Securities plc (Nominated Adviser and Joint Broker) Tel: +44 (0)20 7397 8900
Ben Jeynes / Max Gould / Dan Hodkinson (Corporate Finance)
Alex Pollen (Sales)
Berenberg (Joint Broker) Tel: +44 (0)20 3207 7800
Matthew Armitt / Richard Bootle / Ciaran Walsh
Buchanan Communications Tel: +44 (0) 20 7466 5000
Henry Harrison-Topham / Stephanie Whitmore / Kim Looringh-van Beeck / Abby LGT@buchanan.uk.com (mailto:LGT@buchanan.uk.com)
Gilchrist
Notes to editors:
Lords is a specialist distributor of building, plumbing, heating and DIY
goods. The Group principally sells to local tradesmen, small to medium sized
plumbing and heating merchants, construction companies and retails directly to
the general public.
The Group operates through the following two divisions:
· Merchanting: supplies building materials and DIY goods through its
network of merchant businesses and online platform capabilities. It operates
both in the 'light side' (building materials and timber) and 'heavy side'
(civils and landscaping), through 30 locations in the UK.
· 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 15
locations enabling nationwide next day delivery service.
Lords was established over 35 years ago as a family business with its first
retail unit in Gerrards Cross, Buckinghamshire. Since then, the Group has
grown to a business operating from 45 sites. Lords aims to become a £500
million turnover building materials distributor group by 2024 as it grows its
national presence.
Lords was admitted to trading on AIM in July 2021 with the ticker LORD.L.
For additional information please visit www.lordsgrouptradingplc.co.uk
(http://www.lordsgrouptradingplc.co.uk/) .
Chief Executive Officer's Review
On behalf of the Board, I am pleased to introduce our Interim Results for the
six months to 30 June 2022. The Group has performed strongly in the period,
delivering enhanced profitability and multiple strategic milestones.
H1 2022 Overview
The H1 2022 results demonstrate the success of Lords' growth strategy which
continues to be executed by its divisional teams. The Group prioritises its
colleagues and customers and believes by providing these stakeholders with a
great experience, market share gains will continue to be realised.
H1 2022 revenues totalled a record £214.2 million (H1 2021: £179.0 million),
a 19.7% increase. The Merchanting division delivered particularly strong
sales growth of 73.4% and 14.5% on a like-for-like basis.
The Group delivered adjusted EBITDA of £14.2 million (H1 2022: £11.2
million) with continued margin enhancement as adjusted EBITDA margins rose to
6.6% (H1 2021: 6.2% restated). During the period, the Plumbing and Heating
division (P&H) faced the challenge of an industry wide boiler supply
shortage however, through management-initiated controls, the sales volume
impact was mitigated and adjusted EBITDA of £6.5 million (H1 2021: £5.9
million) was delivered, with adjusted EBITDA margin improving to 6.0% (H1
2021: 5.0%).
Cash conversion remains strong with cash generated from operations of £12.8
million (H1 2021: £9.6 million) supported by continued strong working capital
management.
Group Strategy
The Group's strategic focus is to invest in organic growth levers that deliver
accretive margins alongside a selective and disciplined M&A strategy and
in acquiring businesses that produce a high return on investment and offer the
Group product range and geographic expansion. Lords remains focused on the
repair, maintenance and improvement ("RMI") sector which benefits from robust
demand (particularly the Group's P&H division which sells "essential"
replacement products through Heating repairs) and strong fundamentals in the
medium to long term.
During H1 2022, the Group acquired four businesses at an attractive blended
4.6x Adjusted EBITDA. Each transaction is complementary to Lords' strategy
of product range and geographic expansion, is EBITDA margin accretive and has
been integrated smoothly and trading in line with expectations.
The Board continues to see digital as a strategic growth lever via the Group's
eight transactional websites which provide a further channel for customers in
their purchasing journey. Digital capability coupled with the Group's store
estate allows the acquisition of new customers and enhanced margins across a
broader range of products to be achieved. The investment made in the digital
merchanting team in FY21 is reflected in the strong sales momentum in H1 2022,
with digital sales increasing by 133.1% to 3.4% of divisional revenue (H1
2021: 2.2%).
Product range extension allows the Group's brands to secure a greater share of
their customers wallet, whilst also attracting new customers. During H1 2022
the Group has added ranges to support the decarbonisation of the UK housing
stock, including heating controls, air source heat pumps and underfloor
heating within its P&H division. These ranges are complementary product
ranges for the Group's existing customer base with a focus on energy
efficiency in the home to meet increasing customer demand.
The Group is also pursuing new locations for its brands that offer EBITDA
margin accretion. During H1 2022, the Group has delivered the following
additional locations for existing brands:
· Advance Roofing Supplies, an acquisition completed in Q1 2022,
has now opened a third branch as an implant into the Lords Builders Merchants
Beaconsfield site, offering customers a logical product range extension and
increasing the returns on that site;
· George Lines, the Group's specialist civils merchant brand, has
expanded by opening a third location in Horsham; and
· Mr Central Heating, our leading multi-channel P&H brand
supplying the installer and end user customer segments, is due to open its
tenth branch in West Bromwich in Q3 2022.
Lords has a strong platform for growth with less than 1% market share and
multiple growth levers to pursue. We remain confident of delivering our
strategic targets of £500 million revenue by 2024 and improving EBITDA
margins to 7.5% in the medium term.
Shanker Patel
Chief Executive Officer
6 September 2022
Financial Review
Revenue
The Group delivered revenue of £214.2 million in H1 2022 (H1 2021: £179.0
million), representing a total increase of 19.7% or £35.2 million. When the
impact of acquisitions is excluded from revenue, like for like ("LFL") revenue
was down 3.3%, stemming from the reduction of revenues in the Plumbing and
Heating division (P&H) due to the previously announced industry wide
boiler shortages.
The Merchanting division contributed revenue of £105.9 million (H1 2021:
£61.1 million) with growth of 73.4% and like-for-like sales of 14.5%. New
acquisitions in the Merchanting division (four completed since July 2021) and
new branches contributed sales growth of £28.1 million with the like-for-like
growth achieved through price and volume initiatives.
The P&H division delivered total revenue of £108.3 million (H1 2021:
£117.9 million) with growth declining by 8.2% and like-for-like growth down
by 12.5%. Previously communicated industry wide boiler component shortages
led the revenue decline despite customer demand remaining strong. Management
actions and alongside the P&H strategy of extended product range have
partially offset the revenue decline and improved margins with notable success
in energy efficiency technology which saw a 64% revenue increase in H1 2022.
Revenue by division:
H1 2022 H1 2021 % % LFL
£'m £'m growth growth
Plumbing and Heating 108.3 117.9 (8.2%) (12.5%)
Merchanting and other services 105.9 61.1 73.4% 14.5%
214.2 179.0 19.7% (3.3%)
Adjusted EBITDA
The Group's Adjusted EBITDA increased by 27.1% to £14.2 million in H1 2022,
compared to £11.2 million in H1 2021. Adjusted EBITDA margin improved to
6.6% (H1 2021: 6.2% restated).
Merchanting division EBITDA in H1 2022 increased to £7.7 million (H1 2021:
£5.3 million) led by revenue growth of 73.4% reflective of price, volume and
acquisitions. The division's strategy of expanded product range, new
locations, digital and empowered local leadership continues to deliver
enhanced profitability. Adjusted EBITDA margin of 7.3% (H1 2021: 8.7%) is
aligned to management expectations, attributed to customer mix and a lag in
cost inflation recovery for certain customer segments.
During H1 2022, the P&H division faced the challenge of an industry wide
boiler supply shortage however the Group's active management controls
mitigated the sales volume impact and the division achieved adjusted EBITDA of
£6.5 million (H1 2021: £5.9 million), with adjusted EBITDA margin improving
to 6.0% (H1 2021: 5.0%).
Adjusted EBITDA by division:
H1 2022 H1 2022 H1 2021 H1 2021
£'m margin £'m margin
(Restated) (Restated)
Plumbing and Heating 6.5 6.0% 5.9 5.0%
Merchanting and other services 7.7 7.3% 5.3 8.7%
Total Group 14.2 6.6% 11.2 6.2%
Depreciation and amortisation
Depreciation and amortisation increased to £5.8 million (H1 2021: £ 4.4
million restated) in line with acquisitions made in the last two years and in
addition to continued capital expenditure investment in the Group's three P's
(People, Plant, Premises) strategy.
Profit before tax
The Group generated Adjusted Profit before tax (basic) for the period of £8.5
million, compared to £6.2 million (restated) in the prior period.
The Group generated a profit before tax for the period of £6.4 million,
compared to £4.2 million (restated) in the prior period. Interest on bank
loans and overdrafts reduced to £0.3 million (H1 2021: £0.4 million) as net
debt reduced by £4.4 million (H1 2022 vs H1 2021) and the Group benefited
from reduced financing costs post IPO.
Earnings per share
Basic earnings per share increased to 2.83 pence in H1 2022 compared to 2.40
pence (restated) in H1 2021.
Adjusted basic earnings per share increased to 3.87 pence in H1 2022 compared
to 3.71 pence (restated) in H1 2021.
Prior year adjustment
The December 2021 annual financial statements included a prior year adjustment
to reflect several errors that were identified when the Group reviewed its
accounting for IFRS 16, in October 2021. As these adjustments impacted the
prior period to 30 June 2021 comparatives these have been restated. For
further information see note 4.3.
Dividend
The Board proposes an interim dividend for the period of 0.67 pence per
ordinary share. This is in line with market expectations at the time of the
Group's IPO and is in line with the Board's intention of a progressive
dividend policy.
It is proposed that the interim dividend be paid on 7 October 2022 to
shareholders on the register at the close of business on 16 September 2022.
The Company's ordinary shares will therefore be marked ex-dividend on 15
September 2022.
Cashflow
The Group generated operating cash flow before movements in working capital of
£13.9 million in H1 2022 compared to £10.4 million (restated) in H1 2021.
Cash generated by operations was £12.8 million (H1 2021: £9.6 million).
Free cashflow (defined as cash generated by operating activities less capital
expenditure, exceptional items, share based payments and interest paid) is the
Group's primary cashflow metric with £8.7 million generated in H1 2022 verses
£8.4 million in H1 2021.
£26.9 million was used for business acquisitions in H1 2022, relating to the
acquisition of Advance Roofing Supplies, A.W. Lumb, DH&P and Buildbase
Sudbury.
Net Cash / Debt
The Group's net cash / debt position, before recognising lease liabilities
moved from a net cash position of £6.5 million at 31 December 2021 to a net
debt position of £21.1 million at 30 June 2022.
The net cash / debt position movement is the result of £26.9 million of
business acquisitions in H1 2022, relating to the acquisition of Advance
Roofing Supplies, A.W. Lumb, DH&P and Buildbase Sudbury.
Liquidity
At 30 June 2022, the Group had balance sheet liquidity of £48.9 million of
which £11.6 million (31 December 2021: £11.4 million) was held in accessible
cash and £37.3 million (31 December 2021: £35.1 million) in undrawn bank
facilities.
The Group's key financing objective continues to be to ensure that it has the
necessary liquidity and resources to support the short, medium and long-term
funding requirements of the business. These resources together with strong
cash flow from operations provide good liquidity and the capacity to fund
investment in working capital, routine capital expenditure and growth activity
including acquisitions.
Capital Expenditure and Investment in Intangible Assets
The Group maintained disciplined control over the allocation of capital, and
capital expenditure for the period was £1.9 million (H1 2021: £0.8 million).
The most notable investment in the half year being the transformation
refurbishment of the Lords Builders Merchants Beaconsfield branch with £0.6
million invested in the period.
Intangible assets rose to £43.6 million (31 December 2021: 23.0 million) as a
result of the four acquisitions during H1 2022.
Post balance sheet events
Exercised options
On 1 July 2022, 3,986,499 new ordinary shares were admitted to trading on AIM
as a result of the exercise of options under the Group's existing Company
Share Option Plan. Following admission of the new ordinary shares, the
Company's issued ordinary share capital comprise 162,511,371 ordinary shares.
Chris Day
Chief Financial Officer
6 September 2022
Consolidated Statement of Comprehensive Income
For the six months ended 30 June 2022
30 June 30 June 31 December
2022 2021 2021
(Restated)
(unaudited) (unaudited) (audited)
Note £'000 £'000 £'000
Revenue 214,189 178,966 363,289
Cost of sales (172,827) (149,634) (300,569)
Gross profit 41,362 29,332 62,720
Other operating income 658 612 696
Distribution expenses (2,274) (1,661) (3,536)
Administrative expenses (25,561) (17,124) (37,576)
Adjusted EBITDA (2) 14,185 11,159 22,304
Share based payments 6 (190) - (96)
Exceptional expenses 7 (280) (1,057) (2,085)
EBITDA (1) 13,715 10,102 20,123
Depreciation (940) (656) (1,340)
Amortisation (4,906) (3,788) (8,021)
Operating profit 7,869 5,658 10,762
Finance income 8 4 -
Finance expense 8 (1,447) (1,491) (2,741)
Profit before taxation 6,430 4,171 8,021
Taxation 9 (1,720) (919) (2,377)
Profit for the year 4,710 3,252 5,644
Other comprehensive income - - -
Total comprehensive income 4,710 3,252 5,644
Total comprehensive income for the year attributable to:
Owners of the parent company 4,489 3,017 5,231
Non-controlling interests 221 235 413
4,710 3,252 5,644
Earnings per share for profit from continuing operations attributable to the
ordinary equity holders of the company:
Basic earnings per share (pence) 10 2.83 2.40 3.73
Diluted earnings per share (pence) 10 2.59 2.18 3.40
(1) EBITDA is defined as earnings before interest, tax, depreciation and
amortisation and, in accordance with IFRS.
(2) Adjusted EBITDA is EBITDA but also excluding exceptional items and
share-based payments.
See note 4.3 for details regarding the restatement.
The above condensed consolidated statement of comprehensive income should be
read in conjunction with the accompanying notes.
Consolidated Statement of Financial Position
As at 30 June 2022
30 June 30 June 31 December
2022 2021 2021
Restated*
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Note
Non-current assets
Intangible assets 11 43,599 23,009 22,673
Property, plant and equipment 12 14,583 8,138 8,050
Right-of-use assets 13 34,867 32,127 33,271
Other receivables 14 309 34 304
Investments 85 112 84
93,443 63,420 64,382
Current assets
Inventories 45,551 39,006 38,781
Trade and other receivables 14 70,205 53,010 57,744
Cash and cash equivalents 11,581 5,105 11,402
127,337 97,121 107,927
Total assets 220,780 160,541 172,309
Current liabilities
Trade and other payables 15 (83,622) (65,638) (70,459)
Borrowings 16 (9,857) (18,210) (2,783)
Lease liabilities 17 (5,466) (4,478) (5,114)
Current tax liabilities (1,434) (1,570) (2,014)
Total current liabilities (100,379) (89,896) (80,370)
Non-current liabilities
Trade and other payables 15 (2,271) (2,787) (3,621)
Borrowings 16 (22,816) (12,460) (2,125)
Lease liabilities 17 (33,144) (30,562) (31,518)
Other provisions (1,220) (871) (987)
Deferred tax (7,752) (3,158) (2,940)
Total non-current liabilities (67,203) (49,838) (41,191)
Total liabilities (167,582) (139,734) (121,561)
Net assets 53,198 20,807 50,748
Equity
Share capital 788 630 788
Share premium 28,293 - 28,293
Merger reserve (9,980) (9,980) (9,980)
Share based payment reserve 286 - 96
Retained earnings 29,263 25,999 27,214
Equity attributable to owners of the parent company 48,650 16,649 46,411
Non-controlling interests 4,548 4,158 4,337
Total equity 53,198 20,807 50,748
See note 4.3 for details regarding the restatement.
The above condensed consolidated statement of comprehensive financial position
should be read in conjunction with the accompanying notes.
Consolidated Statement of Changes in Equity
For the six months ended 30 June 2022
Called up share capital Share premium Merger reserve Share based payments reserve Retained earnings Equity attributable to owner of parent company Non Controlling Interests Total Equity
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
As at 1 January 2022 788 28,293 (9,980) 96 27,214 46,411 4,337 50,748
Profit for the financial period and total comprehensive income (restated) - - - - 4,489 4,489 221 4,710
Share based payments - - - 190 - 190 - 190
DH&P Call and put options (see note 19) - - - - (443) (443) - (443)
Capital reduction by non controlling interests - - - - - - (10) (10)
Dividend payable - - - - (1,997) (1,997) - (1,997)
As at 30 June 2022 788 28,293 (9,980) 286 29,263 48,650 4,548 53,198
Called up share capital Share premium Merger reserve Share based payments reserve Retained earnings Equity attributable to owner of parent company Non-controlling Total equity
Interests
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
As at 1 January 2021 as originally presented 19,990 - (9,980) - 4,756 14,766 3,499 18,265
Correction of error (net of tax) - - - - (1,134) (1,134) - (1,134)
Restated total equity as included in December 2021 Annual Financial Statements 19,990 - (9,980) - 3,622 13,632 3,499 17,131
Profit for the financial period and total comprehensive income - - - - 3,017 3,017 235 3,252
Non-controlling interests share of acquisitions - - - - - - 424 424
Capital reorganisation (19,360) - - - 19,360 - -
As at 30 June 2021 (restated) 630 - (9,980) - 25,999 16,649 4,158 20,807
Called up share capital Share premium Merger reserve Share based payments reserve Retained earnings Equity attributable to owner of parent company Non-controlling Total equity
Interests
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
As at 1 January 2021 as originally presented 19,990 - (9,980) - 4,756 14,766 3,499 18,265
Correction of error (net of tax) - - - - (1,134) (1,134) - (1,134)
Restated total equity as included in December 2021 Annual Financial Statements 19,990 - (9,980) - 3,622 13,632 3,499 17,131
Profit for the financial period and total comprehensive income - - - - 5,231 5,231 413 5,644
Share based payments - - - 96 - 96 - 96
Share capital issued 158 29,842 - - - 30,000 - 30,000
Costs of capital raise - (1,549) - - - (1,549) - (1,549)
Non-controlling interests share of acquisitions - - - - - - 425 425
Capital reorganisation (19,360) - - - 19,360 - - -
Dividends paid - - - - (999) (999) - (999)
As at 31 December 2021 788 28,293 (9,980) 96 27,214 46,411 4,337 50,748
See note 4.3 for details regarding the restatement.
The above condensed consolidated statement of changes in equity should be read
in conjunction with the accompanying notes.
Consolidated Statement of Cash Flows
For the six months ended 30 June 2022
30 June 30 June 31 December
2022 2021 2021
(Restated)
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Cash flows from operating activities
Profit before taxation 6,430 4,171 8,021
Adjusted for:
Depreciation of property, plant and equipment 940 656 1,340
Amortisation of intangibles 1,564 987 2,087
Amortisation of right-of-use assets 3,342 2,801 5,934
Loss on disposal of property, plant and equipment - 250 -
Share based payment expense 190 - 96
Finance income (8) (4) -
Finance expense 1,447 1,491 2,741
Operating cash flows before movements in working capital 13,905 10,352 20,219
Decrease in inventories (279) 2,379 2,837
Increase in trade and other receivables 420 3,129 (1,791)
(Decrease) / increase in trade and other payables (1,283) (6,305) 3
Cash generated by operations 12,763 9,555 21,268
Corporation tax paid (2,251) (507) (1,751)
Net cash generated by operating activities 10,512 9,048 19,517
Cash flows from investing activities
Purchase of intangible assets (119) (18) (648)
Business acquisitions (net of cash acquired) (26,854) (5,792) (6,225)
A.W. Lumb resale creditor (see note 19) (2,707) - -
Deferred consideration paid (583) (143) (875)
Purchase of property, plant and equipment (1,924) (828) (1,297)
Proceeds on disposal of property, plant and equipment 57 - -
Purchase of investments - (105) (77)
Interest received 8 4 -
Net cash used in investing activities (32,122) (6,882) (9,122)
Cash flows from financing activities
Lease payments (3,482) (3,214) (6,750)
Issue of share capital - - 30,000
Costs of capital raise - - (1,549)
Dividends (1,997) - (999)
Non-controlling interests repayment (10) - -
Proceeds from borrowings 57,074 - 4,908
Repayment of borrowings (29,309) (9,411) (40,081)
Bank interest paid (325) (416) (529)
Interest on financial liabilities (162) (362) (335)
Net cash outflow from financing activities 21,789 (13,403) (15,335)
Net (decrease) / increase in cash and cash equivalents 179 (11,237) (4,940)
Cash and cash equivalents at the beginning of the period 11,402 16,342 16,342
Effect of foreign exchange rates - - -
Cash and cash equivalents at the end of the period 11,581 5,105 11,402
See note 4.3 for details regarding the restatement.
The above condensed consolidated statement of changes of cash flows should be
read in conjunction with the accompanying notes.
Notes to the financial statements
for the six months ended 30 June 2022
1. General information
Lords Group Trading PLC is a public limited company incorporated in England
and Wales. The registered office is 2(nd) Floor 12-15 Hanger Green, London
W5 3EL. 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.
2. Basis of preparation
The Half Year Financial Statements have been prepared in accordance with IAS
34 "Half Year Financial Reporting" as contained in UK-adopted International
Accounting Standards. These Half Year Financial Statements do not comprise
statutory accounts within the meaning of section 434 of the Companies Act
2006. Accordingly this report should be read in conjunction with the annual
report for the year ended 31 December 2021 (the "Annual Financial Statements")
which was prepared in accordance UK-adopted International Accounting
Standards.
The Annual Financial Statements constitute statutory accounts as defined in
section 434 of the Companies Act 2006 and a copy of these statutory accounts
has been delivered to the Registrar of Companies. The auditor's report on
the Annual Financial Statements was not qualified, did not include a reference
to any matters to which the auditors drew attention by way of emphasis without
qualifying the report and did not contain statements under section 498(2) or
(3) of the Companies Act 2006. The accounting policies adopted in the
preparation of the Half Year Financial Statements are consistent with those
used to prepare the Group's consolidated financial statements for the year
ended 31 December 2021 and the corresponding Half Year reporting period.
The Half Year Financial Statements have been prepared on a going concern
basis, under the historical cost convention.
These interim financial statements are presented in Pound sterling (£), which
is also the functional currency of the Company. These interim financial
statements have been approved by the Board of Directors.
3 Accounting policies
Going concern
The Group is well funded with strong support from stakeholders. The Group
operates strong cashflow management and forecasting enabling cash receipts and
payments to be balanced in accordance with trading levels. The Board of
Directors has completed a rigorous review of the Group's going concern
assessment and its cashflow liquidity which included:
· The Group's cash flow forecasts and revenue projections for all
subsidiaries;
· Reasonably possible changes in trading performance, including a
number of downside scenarios;
· Reviewing the committed facilities available to the Group and the
covenants thereon; and,
· Reviewing the Group's policy towards liquidity and cash flow
management.
The Group has banking facilities of £70.0 million available to it until 21
July 2024 and on 30 June 2022 had headroom against the facilities of £37.3
million and cash of £11.6 million. Banking covenants are breached if the
last twelve months adjusted EBITDA/interest (interest ratio) falls below 5 or
the lenders leverage ratio exceeds 2.5. On 30 June 2022, the interest ratio
was over 33 and the leverage ratio was 1.31.
After reviewing the Group's forecasts and risk assessments and making other
enquiries, the Board has formed the judgement at the time of approving the
interim financial statements that there is a reasonable expectation that the
Group and subsidiaries have adequate resources to continue in operational
existence until at least 21 July 2024, when the existing banking facilities
expire.
Taxation
Taxes on income in the interim periods are accrued using the tax rate that
would be applicable to expected total annual profit or loss.
4 Critical accounting judgements and estimates and errors
The preparation of financial information in compliance with UK-adopted
International Accounting Standards requires the use of certain critical
accounting estimates. It also requires Group management to exercise
judgement and use assumptions in applying the Group's accounting policies.
The resulting accounting estimates calculated using these judgements and
assumptions will, by definition, seldom equal the related actual results but
are based on historical experience and expectations of future events.
Management believe that the estimates utilised in preparing the financial
information are reasonable.
Key accounting estimates and judgements
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.
In preparing the condensed interim financial statements, the Board considers
both quantitative and qualitative factors in forming its judgements, and
related disclosures, and are mindful of the need to best serve the interests
of its stakeholders and to avoid unnecessary clutter borne of the disclosure
of immaterial items. In making this assessment the Board considers the
nature of each item, as well as its size, in assessing whether any disclosure
omissions or misstatements could influence the decisions of users of the
condensed interim financial statements.
4.1 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, the Group consults relevant professional experts and
reassess the Group's 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 the Group does not provide
for their outcome but instead include further disclosures outlining the
matters within its contingent liabilities note. See note 18 for contingent
liabilities.
4.2 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 2.25 per cent to 5.50 per cent 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.
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
re‑assessed 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 notes 11 and 12 for the carrying values of the assets and note
19 for details of new intangible assets acquired through business
combinations.
Fair value of intangible assets
The fair value of customer relationship assets and trade name separately
acquired through business combinations involved 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,
sales growth, EBIT and discount rates. The relief from royalty rate is the
value that would be obtained by licencing trade names out to a third party, as
a percentage of sales. See note 11 for the carrying value of the asset.
The assumptions applied by the directors in respect of the business
combinations recorded in note 19 are as follows:
Customer relationships Trade names
Customer attrition rate EBIT as a % of revenue Discount rate Relief from royalty rate Discount rate
Advance Roofing Limited 2.0% 7.96% 13.00% 0.25% 13.00%
A. W. Lumb 2.8% 5.53% 11.20% 0.25% 11.20%
Direct Heating 9.1% 6.49% 12.79% 0.25% 12.79%
Sudbury Branch 3.0% 9.22% 12.79% - -
Inventories
The Group carries significant levels of inventory and key judgments 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 re-assess
the adequacy and accuracy of the inventory provision. In arriving at its
conclusion, the Directors consider inventory ageing and turn analysis. The
inventory provision is 5.6% of inventory (H1 2021: 5.9%). Doubling the
provision would increase cost of sales/ reduce the carrying value of inventory
by £2,534,000 in H1 2022 (H1 2021: £2,309,000).
4.3 Correction of error in accounting for leases under IFRS 16
In October 2021 the Group undertook a review of the property lease accounting
under IFRS 16 included within the admission document for AIM. Several errors
were identified the most material of which were 4 leases where step increases
in rentals were a contractual obligation within the lease and should have been
reflected in the valuation of right of use assets and the lease liabilities,
but they had not been included.
In addition, one subsidiary hires vehicle on an undefined rental period and
the view at the time of the admission document was that these were short term
leases. A subsequent review of the leases indicated that while the
subsidiary does not have an obligation to hold the vehicles for a defined
period it usually holds the majority for a period of around three years. The
Group has now formed the judgement that around 90 vehicles should be regarded
as long-term leases with a life of three years.
These errors were corrected in the 31 December 2021 Annual Financial
Statements. The 30 June 2021 comparatives have been corrected by restating
each of the affected financial statement line items for the prior period as
follows:
Consolidated statement of financial position (extract)
30 June 2021 Increase/ (Decrease) 30 June 2021 (Restated)
£'000 £'000 £'000
Right-of-use assets 25,862 6,265 32,127
Current trade and other payables (66,127) 489 (65,638)
Current lease liabilities (3,524) (954) (4,478)
Non-current trade and other payables (2,792) 5 (2,787)
Non current lease liabilities (23,073) (7,489) (30,562)
Other provisions (808) (63) (871)
Deferred tax (3,526) 368 (3,158)
Net assets 22,186 (1,379) 20,807
Retained earnings 27,364 (1,365) 25,999
Non-controlling interests 4,172 (14) 4,158
Total equity 22,186 (1,379) 20,807
Consolidated statement of comprehensive income (extract)
30 June 2021 Increase/ (Decrease) 30 June 2021 (Restated)
£'000 £'000 £'000
Administrative expenses (17,752) 628 (17,124)
Adjusted EBITDA 10,531 628 11,159
EBITDA 9,474 628 10,102
Amortisation (3,090) (698) (3,788)
Operating profit 5,728 (70) 5,658
Finance expense (1,276) (215) (1,491)
Profit before taxation 4,456 (285) 4,171
Taxation (973) 54 (919)
Profit for the year 3,483 (231) 3,252
Total comprehensive income attributable to:
Owners of the parent company 3,248 (231) 3,017
3,483 (231) 3,252
5 Segmental Reporting
The Group operates through the following two divisions:
· Merchanting: supplies building materials and DIY goods through
its network of merchant businesses and online platform capabilities. It
operates both in the 'light side' (building materials and timber) and 'heavy
side' (civils and landscaping), through 30 locations in the UK.
· Heating and Plumbing: a specialist distributor in the UK of
heating and plumbing products to a UK network of independent merchants,
installers and the general public. The division offers its customers an
attractive proposition through a multi-channel offering. The division
operates over fifteen locations enabling nationwide next day delivery service.
Operating segments are reported in a manner consistent with the internal
reporting provided to the Chief Operating Decision Maker (CODM) which is
considered to be the Group Board.
All of the Group's revenue was generated from the sale of goods in the UK for
both periods. No one customer makes up 10% or more of revenue in any period.
The segmental results for the six months ended 30 June 2022 are as follows:
Plumbing and Merchanting and Total
Heating other services
£'000 £'000 £'000
Revenue 108,275 105,914 214,189
Cost of sales (93,669) (79,158) (172,827)
Gross profit 14,606 26,756 41,362
Other operating income 172 486 658
Distribution costs (59) (2,215) (2,274)
Administrative expenses (8,231) (17,330) (25,561)
Adjusted EBITDA 6,488 7,697 14,185
Share based payments (38) (152) (190)
Exceptional items (488) 208 (280)
EBITDA 5,962 7,753 13,715
Depreciation (139) (801) (940)
Amortisation (1,754) (3,152) (4,906)
Operating profit 4,069 3,800 7,869
Finance income (22) 30 8
Finance costs (333) (1,114) (1,447)
Profit before taxation 3,714 2,716 6,430
Taxation (752) (968) (1,720)
Profit for operating unit 2,962 1,748 4,710
The segmental results for the six months ended 30 June 2021 are as follows:
Plumbing and Merchanting Total
Heating
(Restated) (Restated) (Restated)
£'000 £'000 £'000
Revenue 117,889 61,077 178,966
Cost of sales (105,143) (44,491) (149,634)
Gross profit 12,746 16,586 29,332
Other operating income 98 514 612
Distribution costs (36) (1,625) (1,661)
Administrative expenses (6,943) (10,181) (17,124)
Adjusted EBITDA 5,865 5,294 11,159
Share based payments - - -
Exceptional items - (1,057) (1,057)
EBITDA 5,865 4,237 10,102
Depreciation (78) (578) (656)
Amortisation (1,377) (2,411) (3,788)
Operating profit 4,410 1,248 5,658
Finance income - 4 4
Finance costs (463) (1,028) (1,491)
Profit before taxation 3,947 224 4,171
Taxation (485) (434) (919)
Profit / (loss) for operating unit 3,462 (210) 3,252
See note 4.3 for details regarding the restatement.
The segmental results for the year to 31 December 2021 are as follows:
Plumbing and Merchanting Total
Heating
£'000 £'000 £'000
Revenue 232,837 130,452 363,289
Cost of sales (206,497) (94,072) (300,569)
Gross profit 26,340 36,380 62,720
Other operating income 186 510 696
Distribution costs (105) (3,431) (3,536)
Administrative expenses (16,123) (21,453) (37,576)
Adjusted EBITDA 10,298 12,006 22,304
Share based payments (37) (59) (96)
Exceptional items - (2,085) (2,085)
EBITDA 10,261 9,862 20,123
Depreciation (162) (1,178) (1,340)
Amortisation (2,485) (5,536) (8,021)
Operating profit 7,614 3,148 10,762
Finance income - - -
Finance costs (773) (1,968) (2,741)
Profit before taxation 6,841 1,180 8,021
Taxation (1,059) (1,318) (2,377)
Profit / (loss) for operating unit 5,782 (138) 5,644
6. Share based payments
Share based payments relate to the fair value, at the date of the grant, of
share-based payments to the directors and employees which are expensed in the
profit and loss on a straight-line basis over the vesting period, with the
corresponding credit going to the share-based payment reserve.
7. Exceptional items
30 June 30 June 31 December
2022 2021 2021
£'000 £'000 £'000
HS2 Compulsory purchase order compensation (748) - -
Listing costs - 568 1,523
Costs of business combinations 754 489 514
Retention bonus accruals for business combinations 120 - -
Reduction in contingent consideration (184) - -
Underpayment of NI due 338 - -
Costs of previous financing expensed - - 248
Reduction in contingent consideration - - (200)
280 1,057 2,085
The costs associated with the business combinations detailed in note 19 have
been expensed and disclosed as exceptional items which amount to £754,000.
As part of the acquisition of A.W. Lumb retention bonuses of £1,800,000
over a five-year period were offered to key staff. The costs of these
bonuses are being accrued over the retention period and amount to £120,000
for the period ended June 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 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
£184,000 is due in April 2023 if EBITDA targets are achieved.
On migrating to a new payroll system 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 notified HMRC of the error
and has agreed and paid a full and final payment of £338,000 to cover all
national insurance due.
8. Finance costs
30 June 30 June 31 December
(Restated)
2022 2021 2021
£'000 £'000 £'000
Bank loans and overdrafts 325 416 529
Invoice discounting facilities 221 154 376
Lease liabilities 901 921 1,836
1,447 1,491 2,741
See note 4.3 for details regarding the restatement.
9. Taxation
Tax expense is recognised based on management's estimate of the weighted
average effective annual income tax rate expected for the full financial year.
The estimated average annual rate for the year ended 31 December 2022 is
26.75% (2021: 22.0%).
10. Earnings per share
30 June 30 June 31 December
2022 2021 2021
(Restated)
Basic earnings per share
Earnings from continuing activities (pence) 2.83 2.40 3.73
Diluted earnings per share
Earnings from continuing activities (pence) 2.59 2.18 3.40
Weighted average shares for basic earning per share 158,524,872 125,925,000 140,354,443
Number of dilutive share options 14,635,631 12,179,402 13,647,753
Weighted average number of shares for dilutive earnings per share 173,160,503 138,104,402 154,002,196
Earnings attributable to the equity holders of the parent (£'000) 4,489 3,017 5,231
See note 4.3 for details regarding the restatement.
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 7), share based payments and amortisation of
intangible assets as the numerator.
30 June 30 June 31 December
2022 2021 2021
£'000 £'000 £'000
Earnings attributable to the equity holders of the parent 4,489 3,017 5,231
Exceptional items 280 1,057 2,085
Share based payments 190 - 96
Amortisation of intangible assets 1,564 987 2,087
Less tax impact of adjustments (386) (388) (811)
Adjusted earnings 6,137 4,673 8,688
Closing shares at the end of the year 158,524,872 125,925,000 158,524,872
Closing number of dilutive share options 14,635,631 12,179,402 13,647,753
Weighted average number of shares for dilutive earnings per share 173,160,503 138,104,402 172,172,625
Adjusted basic earnings per share
Earnings from continuing activities (pence) 3.87 3.71 5.48
Adjusted diluted earnings per share
Earnings from continuing activities (pence) 3.54 3.38 5.05
11. Intangible assets
Customer relationships Trade names Goodwill Total
Software
£'000 £'000 £'000 £'000 £'000
At 1 January 2022 952 12,454 1,797 7,470 22,673
Additions 119 - - - 119
Acquired through business combinations 140 15,743 1,124 5,364 22,371
Amortisation charge (103) (1,306) (155) - (1,564)
Closing net book value at 30 June 2022 1,108 26,891 2,766 12,834 43,599
At 30 June 2022
Cost 1,661 33,649 3,392 12,834 51,536
Accumulated amortisation and impairment (553) (6,758) (626) - (7,937)
Net book amount 1,108 26,891 2,766 12,834 43,599
At 1 January 2021 401 10,837 1,717 5,243 18,198
Acquired through business combinations 17 3,270 316 2,195 5,798
Amortisation charge (48) (824) (115) - (987)
Closing net book value at 30 June 2021 370 13,283 1,918 7,438 23,009
At 30 June 2021
Cost 667 17,840 2,267 7,438 28,212
Accumulated amortisation and impairment (297) (4,557) (349) - (5,203)
Net book amount 370 13,283 1,918 7,438 23,009
At 1 January 2021 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 at 31 December 2021 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
See note 4.3 for details regarding the restatement.
12. Property, plant, and equipment
Land and buildings freehold Land and building leasehold improvements Plant and Machinery Motor vehicles Fixtures, fittings and equipment Office equipment Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000
At 1 January 2022 1,845 3,617 1,306 75 925 282 8,050
Additions 59 923 84 504 160 194 1,924
Disposals - - - (57) - - (57)
Acquired through business combinations 4,721 40 69 540 136 100 5,606
Depreciation charge (66) (422) (79) (88) (190) (95) (940)
Closing net book value as at 30 June 2022 6,559 4,158 1,380 974 1,031 481 14,583
At 30 June 2022
Cost 6,777 7,446 2,453 1,105 3,016 1,035 21,832
Accumulated depreciation and impairment (218) (3,288) (1,073) (131) (1,985) (554) (7,249)
Net book value 6,559 4,158 1,380 974 1,031 481 14,583
At 1 January 2021 687 1,853 503 63 1,193 118 4,417
Additions - 170 268 - 311 90 839
Acquired through business combinations 842 1,961 645 - 81 9 3,538
Depreciation charge (19) (270) (139) (27) (163) (38) (656)
Closing net book value as at 30 June 2021 1,510 3,714 1,277 36 1,422 179 8,138
At 30 June 2021
Cost 1,638 6,209 2,302 86 2,985 543 13,763
Accumulated depreciation and impairment (128) (2,495) (1,025) (50) (1,563) (364) (5,625)
Net book amount value 1,510 3,714 1,277 36 1,422 179 8,138
At 1 January 2021 687 1,853 503 63 1,193 118 4,417
Additions - 537 222 16 296 266 1,337
Disposals - - - (40) - - (40)
Reclassification to intangible assets - - - - - (18) (18)
Reclassification acquired through business combinations - 270 - - (270) - -
Acquired through business combinations 1,201 1,598 689 56 101 49 3,694
Depreciation charge (43) (641) (108) (20) (395) (133) (1,340)
Closing net book value as at 31 December 2021 1,845 3,617 1,306 75 925 282 8,050
At 31 December 2021
Cost 1,997 6,483 2,300 118 2,720 741 14,359
Accumulated depreciation and impairment (152) (2,866) (994) (43) (1,795) (459) (6,309)
Net book amount value 1,845 3,617 1,306 75 925 282 8,050
13. Right of use assets
Leasehold Property Plant and Machinery Motor vehicles Total
£'000 £'000 £'000 £'000
At 1 January 2022 26,516 3,030 3,725 33,271
Acquired through business combinations 3,991 95 - 4,086
Additions 6 73 773 852
Amortisation charge (2,004) (553) (785) (3,342)
Closing net book value at 30 June 2022 28,509 2,645 3,713 34,867
At 30 June 2022
Cost 41,214 6,123 8,841 56,178
Accumulated amortisation and impairment (12,705) (3,478) (5,128) (21,311)
Net book amount 28,509 2,645 3,713 34,867
At 1 January 2021 (restated) 25,846 3,836 2,405 32,087
Acquired through business combinations 694 - 356 1,050
Additions 981 - 881 1,862
Lease modifications 179 - - 179
Disposals (250) - - (250)
Amortisation charge (1,566) (469) (766) (2,801)
Closing net book value at 30 June 2021 (restated) 25,884 3,367 2,876 32,127
At 30 June 2021 (restated)
Cost 34,799 5,833 6,331 46,963
Accumulated amortisation and impairment (8,915) (2,466) (3,455) (14,836)
Net book amount 25,884 3,367 2,876 32,127
At 1 January 2021 (restated) 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 at 30 December 2021 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
See note 4.3 for details regarding the restatement.
14. Trade and other receivables
30 June 30 June 31 December
2022 2021 2021
(Restated)
£'000 £'000 £'000
Amounts falling due after one year
Other receivables 309 34 304
309 34 304
Amounts falling due within one year
Trade receivables 62,066 46,249 50,930
Other receivables 3,394 2,597 5,333
Prepayments 4,745 4,164 1,481
70,205 53,010 57,744
Supplier rebates receivable within trade receivables and prepayments in June
2021 have been reclassified as other receivables to be consistent with the
classification in later periods.
15. Trade and other payables
30 June 30 June 31 December
2022 2021 2021
(restated)
£'000 £'000 £'000
Amounts falling due within one year:
Trade payables 71,043 56,676 57,991
Other taxation and social security 3,511 2,261 4,113
Other payables 4,295 3,472 1,931
Accruals 4,773 3,229 6,424
83,622 65,638 70,459
Amounts falling due after one year:
Other payables 2,271 2,787 3,621
2,271 2,787 3,621
Amounts falling due after one year represent deferred payments for
acquisitions.
See note 4.3 for details regarding the restatement.
16. Borrowings
30 June 30 June 31 December
2022 2021 2021
Current £'000 £'000 £'000
Bank loans - 7,292 -
Other loans 9,857 10,918 2,783
Total current borrowings 9,857 18,210 2,783
Non current
Bank loans 22,816 12,460 2,125
Total non current borrowings 22,816 12,460 2,125
Total borrowings 32,673 30,670 4,908
Loans under invoice financing are included within other loans.
The borrowings of £30.7 million as of 30 June 2021 reduced to £4.9 million
as of 31 December 2021 due to refinancing out the debt from the share raise
when the Group listed on the AIM. Borrowings have subsequently increased in
H1 2022 due to the business combinations disclosed within note 19.
The Group amended its banking facilities on 28 February 2022 and increased its
invoice drawdown facility to £20.0 million and its revolving loan facility to
£50.0 million.
17. Lease liabilities
Leasehold Plant and Motor
property Equipment vehicles Total
£'000 £'000 £'000 £'000
At 1 January 2022 30,065 2,979 3,588 36,632
Additions - 50 628 678
Acquired through business combinations 3,786 95 - 3,881
Interest expenses 759 54 88 901
Lease payments (including interest) (2,256) (395) (831) (3,482)
At 30 June 2022 32,354 2,783 3,473 38,610
At 1 January 2021 (restated) 28,476 3,896 2,181 34,553
Acquired through business combinations 645 - 37 682
Additions 861 - 1,237 2,098
Interest expenses 745 108 68 921
Lease payments (including interest) (1,760) (632) (822) (3,214)
At 30 June 2021 (restated) 28,967 3,372 2,701 35,040
At 1 January 2021 (restated) 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
See note 4.3 for details regarding the restatement.
Reconciliation of current and non-current lease liabilities
30 June 30 June 31 December
2022 2021 2021
£'000 £'000 £'000
Current 5,466 4,478 5,114
Non -current 33,144 30,562 31,518
Total 38,610 35,040 36,632
18. Contingencies
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 at the moment to predict the outcome of any of these matters or
reliably estimate any financial impact. As such, at the reporting date no
provision has been made for any of these cases within the financial
statements.
In May 2021, the Group Chief Financial Officer wrote to the HMRC Anti Money
Laundering division to bring to their attention that it had identified a
historic breach of The Money Laundering, Terrorist Financing and Transfer of
Funds (Information on the Payer) Regulations 2017 by A P P Wholesale Limited,
a company that was acquired by Lords Group Trading PLC in December 2019. The
Group has identified a number of occasions where cash banked in a single
transaction was in excess of €10,000 or where smaller sums of cash were
banked which could be regarded as linked transactions in breach of the
regulations. The breaches occurred over a 10-year period from August 2010,
cumulatively amounting to up to nearly £3.0 million. The Board is unable to
predict the outcome of this reporting to HMRC and therefore the level of any
potential fines. The Group's legal advice is that penalties for breaches of
the regulations varies between nominal fines to fines which can equate to the
full amount of the cash sum received in contravention of the regulations
depending on the level of culpability. The Board is confident that any
potential fine levied would be covered by the warranties contained in the sale
and purchase agreement for A P P Wholesale Limited.
The Group has since conducted training for certain staff members within A P P
Wholesale Limited and has updated and implemented improved systems and
controls which was overseen by the Board and supported by professional
advisors. The Board are 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.
19. Business Combinations
Advance Roofing Supplies Limited
On 5 January 2022 the Group acquired 100% of Advance Roofing Supplies Limited
("Advance Roofing Supplies"), a supplier of roofing materials, for a
consideration of £3.9 million of which £3.6 million has been paid on
completion and the balance of £0.25 million is payable twelve months after
completion. As at completion, Advance Roofing Supplies had excess cash of
£0.82 million. Advance Roofing Supplies is a £7.5 million turnover
dual-site operation based in Tring and Aylesbury. The principal reason for
the acquisition was to acquire the customer base of Advance Roofing Supplies.
The assets and liabilities of the business were subsequently hived into
Carboclass Limited.
The acquired business contributed revenues of £3,763,000 and a profit before
tax of £310,000 to the consolidated entity for the period from acquisition to
30 June 2022. The following table summarises the fair value of assets
acquired, and liabilities assumed at the acquisition date:
Fair
value
£'000
Intangible Asset - Customer Relationships 1,868
Intangible Asset - Trade Names 121
Property, plant and equipment 379
Right of use assets 582
Inventories 980
Trade and other receivables 776
Cash 822
Trade and other payables (1,260)
Dilapidation provision (63)
Lease liabilities (534)
Deferred tax liability (504)
Total provisional fair value 3,167
Consideration 3,877
Goodwill 710
The provisional fair values include recognition of an intangible asset
relating to customer relations of £1,868,000 and trade names of £121,000,
which will be amortised over 13 years on a straight-line basis. The goodwill
of £710,000 comprises the potential value of additional new customers which
is not separately recognised. Deferred tax has been calculated on the value
of the intangible assets acquired at a corporation tax rate substantially
enacted at the acquisition date. Acquisition costs totalled £129,000 and
are disclosed within exceptional expenses in the statement of comprehensive
income.
Purchase consideration:
£'000
Cash 3,627
Deferred Consideration 250
Total Consideration 3,877
The net cash expended on the acquisition is as follows:
£'000
Cash paid as consideration on acquisition 3,627
Less cash acquired at acquisition (822)
Net cash movement 2,805
The deferred consideration of £250,000 has not been discounted as it is all
due within one year. Figures are provisional until the accounting has been
audited.
A.W. Lumb
On 28 February 2022 the Group acquired A.W. Lumb through the acquisition of
the entire issued share capital of AWLC Limited ('AWLC') for a total
consideration of £21.3 million. Total acquisition consideration of £21.3
million, payable in cash, consists of £19.7 million due on completion and
deferred consideration of £1.7 million payable in equal annual instalments
over the next five years. Consideration is to be funded from Lords' existing
cash resources and debt facilities. As at completion, A.W. Lumb had excess
cash of £5.7m. A.W. Lumb is a £44.5 million turnover dual-site operation in
Dewsbury and Tamworth. The principal reason for the acquisition was to
acquire the customer base of A.W. Lumb. The acquisition also included a
contingent employment related payment of £1.8 million to certain employees.
This cost is being charged to the income statement over the life of the
employment period of five years. The contingent employment related
consideration is payable if targets are met.
The acquired business contributed revenues of £18,363,000 and a profit before
tax of £2,030,000 to the consolidated entity for the period from acquisition
to 30 June 2022. If the acquisition had occurred on 1 January 2021, the
contributions until 30 June 2022 would have been revenues of £26,201,000 and
profit before tax of £2,376,000. The following table summarises the fair
value of assets acquired, and liabilities assumed at the acquisition date:
Fair value
£'000
Intangible Asset - Customer Relationships 9,521
Intangible Asset - Trade Names 698
Investments 1
Property, plant and equipment 4,917
Right of use assets 95
Inventories 2,221
Trade and other receivables 7,187
Cash 5,656
Trade and other payables (6,116)
Provisions (2,707)
Lease liabilities (95)
Deferred tax liability (3,027)
Total provisional fair value 18,351
Consideration 21,346
Goodwill 2,995
The provisional fair values include recognition of an intangible asset
relating to customer relations of £9,521,000 and trade names of £698,000,
which will be amortised over 13 years on a straight-line basis. The goodwill
of £2,995,000 comprises the potential value of additional new customers which
is not separately recognised. Deferred tax has been calculated on the value
of the intangible assets acquired at a corporation tax rate substantially
enacted at the acquisition date. Acquisition cost totalled £418,000 are
disclosed within exceptional expenses in the statement of comprehensive
income.
AWLC had a resale creditor of £2,707,000 which was triggered by the business
combination and paid in the period to 30 June 2022.
Purchase consideration:
£'000
Cash on completion 19,688
Deferred Consideration 1,658
Total Consideration 21,346
The net cash expended on the acquisition is as follows:
£'000
Cash paid as consideration on acquisition 19,688
Less cash acquired at acquisition (5,656)
Net cash movement 14,032
Figures are provisional until the accounting has been audited.
DH&P Plumbing and Heating
On 31 March 2022 the Group acquired a 90% interest in the leading plumbing and
heating businesses, DH&P Trade Counters Holdings Limited and DH&P HRP
Holdings Limited (together 'DH&P'), for a total consideration of £9.3
million. The acquisition consideration was satisfied by an initial £8.9
million cash payment and a deferred cash element of £357,000 to be paid in 12
months. As at completion, DH&P had excess cash of £0.6 million. The
remaining 10% interest in DH&P's issued share capital has been retained by
the business' current vendors, who will remain in their management roles with
the business. Simultaneous call and put options over the remaining 10% of
DH&P's issued share capital will be held by the Group and DH&P's
vendors, respectively, which will not be exercisable prior to 31 March 2025
and the price subject to DH&P's EBITDA performance. As it is almost
certain that one or other party will exercise the options no non-controlling
interests have been recognised. DH&P is a £27.6 million turnover leading
plumbing heating distributor and merchant, consisting of one national
distribution centre in Chelmsford and five branches with a strong regional
focus in Ipswich, Chelmsford, Southend, Benfleet and Colchester. The
principal reason for the acquisition was to acquire the customer base of
DH&P.
The acquired business contributed revenues of £7,302,000 and a profit before
tax of £358,000 to the consolidated entity for the period from acquisition to
30 June 2022. If the acquisition had occurred on 1 January 2021, the
contributions until 30 June 2022 would have been revenues of £15,239,000 and
profit before tax of £999,000. The following table summarises the fair
value of assets acquired, and liabilities assumed at the acquisition date:
Fair
Value
£'000
Intangible Asset - Customer Relationships 3,488
Intangible Asset - Trade Names 305
Software 140
Property, plant and equipment 253
Right of use assets 1,919
Inventories 2,784
Trade and other receivables 4,557
Cash 628
Trade and other payables (3,376)
Lease liabilities (1,828)
Dilapidation provision (90)
Deferred tax liability (1,019)
Total provisional fair value 7,761
Consideration 9,248
Goodwill 1,487
The provisional fair values include recognition of an intangible asset
relating to customer relations of £3,488,000 and trade names of £305,000,
which will be amortised over 13 years on a straight-line basis. The goodwill
of £1,487,000 comprises the potential value of additional new customers which
is not separately recognised. Deferred tax has been calculated on the value
of the intangible assets acquired at a corporation tax rate substantially
enacted at the acquisition date. Acquisition cost totalled £144,000 are
disclosed within exceptional expenses in the statement of comprehensive
income.
Purchase consideration:
£'000
Cash 8,891
Deferred Consideration 357
Total Consideration 9,248
The net cash expended on the acquisition is as follows:
£'000
Cash paid as consideration on acquisition 8,891
Less cash acquired at acquisition (628)
Net cash movement 8,263
The simultaneous call and put options over the remaining 10% of DH&P's
issued share capital have a fair value of £443,000. The value has been
recognised against retained earnings in the statement of financial position.
Figures are provisional until the accounting has been audited.
Branch acquisition
On 31 March 2022 the group acquired a Buildbase branch, from Grafton
Merchanting GB Limited, previously part of its timber and building materials
business. The Buildbase branch purchased is a single site located in
Sudbury, Suffolk (the 'Sudbury Branch'). The total gross consideration payable
was £1.8 million. The Sudbury Branch generated revenues of £5.1 million in
the year to 31 December 2021. The principal reason for the acquisition was
to acquire the customer base of the branch. The assets and liabilities of the
business have been hived into Hevey Building Supplies Limited.
The acquired business contributed revenues of £894,000 and a loss before tax
of £44,000 to the consolidated entity for the period from acquisition to 30
June 2022. The Group has no reliable information about the performance of
the branch in the period prior to acquisition. The following table
summarises the fair value of assets acquired, and liabilities assumed at the
acquisition date:
Fair value
£'000
Intangible Asset - Customer Relationships 866
Property, plant and equipment 57
Right of use assets 1,490
Inventories 506
Trade and other receivables 366
Lease liabilities (1,424)
Dilapidation provision (66)
Deferred tax liability (213)
Total provisional fair value 1,582
Consideration 1,754
Goodwill 172
The provisional fair values include recognition of an intangible asset
relating to customer relations of £866,000, which will be amortised over 13
years on a straight-line basis. The goodwill of £172,000 comprises the
potential value of additional new customers which is not separately
recognised. Deferred tax has been calculated on the value of the intangible
assets acquired at a corporation tax rate substantially enacted at the
acquisition date. Acquisition cost totalled £64,000 are disclosed within
exceptional expenses in the statement of comprehensive income.
Purchase consideration:
£'000
Cash paid as consideration on acquisition 1,754
Less cash acquired at acquisition -
Net cash movement 1,754
The net cash expended on the acquisition is as follows:
Consideration £'000
Cash 1,754
Deferred Consideration -
Total Consideration 1,754
Figures are provisional until the accounting has been audited.
20. Dividends
A final dividend for 2021 of £1,997,000 was paid to the Registrar on the 30
June 2022 to be distributed to the shareholders. The record date for the
payment of the dividend was 6 June 2022 and it was paid on 7 July 2022.
It is proposed that an interim dividend for 2022 be paid on 7 October 2022 to
shareholders on the register at the close of business on 16 September 2022.
The Company's ordinary shares will therefore be marked ex-dividend on 15
September 2022.
21. Events occurring after the reporting period
Exercised options
On 1 July 2022, 3,986,499 new Ordinary Shares were admitted to trading on AIM
as a result of the exercise of options under the Group's existing Company
Share Option Plan. Following admission of the new Ordinary Shares, the
Company's issued ordinary share capital comprise 162,511,371 Ordinary Shares.
- ENDS -
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