REG - Lords Group Trading - Interim Results
07/09/2023 07:00
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RNS Number : 6353L Lords Group Trading PLC 07 September 2023
For immediate release 7 September 2023
Lords Group Trading plc
('Lords', the 'Company' or the 'Group')
Interim Results
Continued momentum with strategic targets well on track
and growth opportunities strong despite challenging market conditions
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 2023
('H1 2023' or the 'Period').
H1 2023 Financial Highlights
· Record H1 Group revenues of £222.6 million (H1 2022: £214.2
million), a 3.9% increase overall or decrease of 4.4% on a like-for-like
('LFL')(1) basis.
· Adjusted EBITDA(2) of £15.1 million (H1 2022: £14.2 million
restated), a 6.1% increase.
· Adjusted EBITDA margin of 6.8% (H1 2022: 6.6%), on track to reach
7.5% medium term target.
· Operating Profit of £8.1m (H1 2022: £7.3 million restated), a
11.6% increase.
· Interim dividend of 0.67 pence per share (H1 2022: 0.67 pence per
share).
· The Board remains confident of delivering our strategic targets
of £500 million revenue by 2024 and improving EBITDA margins to 7.5% in the
medium term.
Percentages are based on underlying, not rounded, figures.
1 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.
(2) 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.
Operational Highlights
· Robust Merchanting division performance:
o Record revenues of £109.4 million (H1 2022: £105.9 million),
representing growth of 3.3% and decrease of 5.1% on a LFL basis.
o Trading decisions focused on delivering enhanced Adjusted EBITDA margins
of 7.7% (H1 2022: 7.3%).
· Plumbing and Heating division ('P&H') delivers solid first
half despite prevailing trading environment:
o Record revenues of £113.2 million (H1 2022: £108.3 million),
representing growth of 4.5% and decrease of 3.8% on a LFL basis.
o Previous industry wide boiler supply issues now resolved, with phasing of
Group inventory levels expected to normalise prior to year end.
o Mr Central Heating branch expansion plans continue with the eleventh
branch opened in Edinburgh ahead of a planned acceleration of 40 new store
openings over the next five years.
· Acquisition pipeline remains active, offering potential for
further market share gains, enhanced profitability and further diversified
revenue streams:
o Chiltern Timber Supplies Limited was acquired on 3 April 2023 on an
initial 3.2x EBITDA multiple, offering the Merchanting division extension of
range and geography. The business is performing in line with the Board's
expectations following successful integration.
o Alloway Timber was acquired on 1 September 2023, adding five branches to
the Lords Merchanting division in complementary locations in the South East of
England. The business was acquired for a total cash outlay of £3.3 million
of which £2.6 million was payable upon completion.
o Management remains focused on further opportunities that are complementary
to Lords' strategy of product range and geographic expansion.
Current Trading and Outlook
· The Group has delivered a resilient performance in H1 2023 and
the Board believes that the Group is currently outperforming the market(3) but
is not immune to persistent macro-economic pressures.
· Since our last market update, persistent high levels of
inflation, increasing interest rates and weaker consumer confidence have
continued to reduce demand in the Group's key end markets of private repairs,
maintenance and improvements (RMI) and new build housing, and consequently
demand for the Group's products.
· Given the continuing challenging backdrop, the Board now
anticipates that demand will remain at current levels throughout the remainder
of H2 2023. Accordingly, the Board expects the Group to deliver full year
revenues of approximately £450 million and Adjusted EBITDA of approximately
£27 million.
· The Board remains confident of delivering its strategic targets
of £500 million revenue by 2024 and EBITDA margins of 7.5% in the medium
term, with the Group's colleague and customer focused proposition enabling
Lords to take market share, as well as being an acquirer of choice in the
market.
(3)The Construction Product Association's (CPA) January forecasts were for a
reduction of 11% and 9% in new build housing and private housing RMI,
respectively, in 2023. The CPA's latest forecasts, published in July, are
for a reduction of 19% and 11% in new build housing and private housing RMI,
respectively, in 2023.
Commenting on the Interim Results, Shanker Patel, Chief Executive Officer of
Lords, commented:
"Lords performed well in the period recording another record half year,
despite tougher market conditions. These results are testament to our
outstanding colleagues and continued execution of our strategy, which when
combined, offer our customers a continually improving proposition.
"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 value
added acquisitions. Our focus on the essential and resilient 'Repair' sector
of RMI positions us more defensively during periods of volatility.
"The Board is still mindful of accumulating short-term macroeconomic
conditions to which the Group is not immune and expects trading conditions to
be more challenging in the second half of the year against strong comparators.
However, we anticipate Lord's agility, entrepreneurialism and strong
positioning will enable the Group to deliver its strategic target of £500
million revenue by 2024 and EBITDA margins of 7.5% in the medium term."
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)
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 / Stephanie 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/) .
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.
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 2023. The Group has performed strongly in the period,
delivering enhanced profitability and continued execution of our growth
strategy.
H1 2023 Overview
The H1 2023 results demonstrate the success of Lords' growth strategy which
continues to be executed by its divisional teams, resulting in a 6.1% increase
in Adjusted EBITDA. These results reflect Lords' colleague and customer
focused proposition which enables continued market share gains.
H1 2023 revenues totalled a record £222.6 million (H1 2022: £214.2 million),
a 3.9% increase with both divisions contributing to the revenue growth -
P&H 4.5%, Merchanting 3.3%. Revenues on a LFL basis decreased by 4.4% in
H1 2023 which we believe continues to outperform the market(3).
The Group delivered Adjusted EBITDA of £15.1 million (H1 2022: £14.2
million) with continued margin enhancement as adjusted EBITDA margins
increased to 6.8% (H1 2022: 6.6%). Margin accretion continues to be
delivered despite overhead inflationary pressures, reflecting disciplined
growth investment.
Strategic Initiatives
Lords has made good progress on its strategic initiatives, which are aimed at
growing our <1% market share through profitable, margin accretive growth
with a revenue target of £500 million in 2024 and 7.5% EBITDA margin in the
medium term. Our strategic growth initiatives are:
1. New branch openings to expand our geographical presence and access
new customers.
2. Product range extension to enhance our customer proposition
enabling a greater share of customer wallet.
3. Digital expansion via our in-house team to generate more customers
and an enhanced customer experience.
4. Acquisitions on a multiple that are accretive and add geography and
product range extension.
These ongoing investments support the execution of our growth strategy, and
the organic initiatives (points 1-3) are within our overall capital
expenditure guidance. Progress on each of these initiatives is reviewed
below:
New branch openings
The Board believes there is opportunity for all of our brands to open new
branches as part of our organic growth strategy. Two brands have an
exceptional opportunity to open new branches, expanding geographical presence
whilst accessing new customers.
Mr Central Heating is our digitally led P&H trade counter business which
has the potential to open up to 40 new stores (from 10 to up to 50) over the
next five years. The eleventh branch recently opened in Edinburgh and
management has identified the additional 39 target markets for future
openings. Mr Central Heating is well placed to deliver this branch rollout
programme, with access to the wider P&H product range and a mature online
proposition. All new Mr Central Heating branches have delivered accretive
EBITDA margins at maturity and exceeded internal return hurdles.
George Lines is the second brand identified for organic expansion, being the
Group's specialist civils merchanting business. Currently operating from
three locations in the South East of England, management has identified seven
further locations for future expansion, which will expand the brand to 10
locations nationwide. The customer proposition is focused on product
expertise, service and availability differentiating George Lines from many of
its competitors and thus forging strong customer relationships. Management
expects the first of the seven new branches to be opened in the next six
months.
Product Range Extension
This strategy is designed to leverage our core competencies while tapping into
emerging opportunities. By introducing new variations, complementary
products, and innovative solutions across product categories, we aim to
capture untapped segments and enhance customer loyalty.
Renewables is an example within the innovation category with customer demand
for energy efficient technologies gaining continual momentum. Our Group is
uniquely placed to serve this market through our distributor, P&H merchant
and general builders merchant platforms. In H1 2023, this product category
including air source heat pumps, controls, under floor heating and air
conditioning delivered 75% revenue growth.
Digital Expansion
We believe our customers benefit from the ability to shift across channels
(online / instore) in their purchasing journey with Lords, and our online
presence offers a powerful customer attraction and retention tool. Our
strategy is to invest in online capability that expands our customer base and
builds loyalty through an enhanced purchasing experience.
We have an in-house digital team that delivers our digital roadmap, ensuring
there is always a strong connection to the customer requirements. In Q1
2023, the lordsbm.co.uk website was upgraded, resulting in a 5x uplift in
conversion rates and with 70% of revenue originating from non-account
customers.
Acquisitions
There is a substantial consolidation opportunity within the UK building
supplies sector to combine independent merchants and distributors. Lords
targets transactions that deliver on our strategy of geographic and range
expansion.
Due to our colleague and customer focused culture, Lords is seen as an
attractive buyer with a proven track record of successful integrations.
Since 2016, the Group has completed 14 acquisitions, of which five have
occurred in the last two years at a blended 4.8x maintainable EBITDA.
Lords has a strong platform for future 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
7 September 2023
Financial Review
Revenue
The Group delivered revenue of £222.6 million in H1 2023 (H1 2022: £214.2
million), representing a total increase of 3.9% or £8.4 million and decline
of 4.4% on a LFL basis. The LFL revenue performance is reflective of
deflation in several core product categories alongside more selective customer
profitability decisions supporting continued margin enhancements. Trading
towards the end of Q2 2023 was more challenging, reflective of the impact of
macroeconomic factors such as persistent, higher inflation and accelerating
interest rates, impacting market conditions.
The Merchanting division contributed revenue of £109.4 million (H1 2022:
£105.9 million) with growth of 3.3% and a decline of 5.1% on a LFL basis.
The P&H division delivered total revenue of £113.2 million (H1 2022:
£108.3 million) with growth of 4.5% and a decline of 3.8% on a LFL basis.
Revenue by division:
H1 2023 H1 2022 % % LFL
£'m £'m growth growth
Merchanting 109.4 105.9 3.3% (5.1%)
Plumbing and Heating 113.2 108.3 4.5% (3.8%)
222.6 214.2 3.9% (4.4%)
Adjusted EBITDA
The Group's Adjusted EBITDA increased by 6.1% to £15.1 million in H1 2023,
compared to £14.2 million in H1 2022. Adjusted EBITDA margin improved to
6.8% (H1 2022: 6.6% restated) which is progressing well against our 7.5%
medium term target.
Merchanting division EBITDA in H1 2023 increased to £8.5 million (H1 2022:
£7.7 million) supported by revenue growth of 3.3%. The Adjusted EBITDA
margin of 7.7% (H1 2022: 7.3%) reflects continued trading decisions around
customer profitability designed to balance product price deflation and
overhead inflation.
The P&H division achieved Adjusted EBITDA of £6.6 million (H1 2022: £6.5
million), with Adjusted EBITDA margin reducing to 5.8% (H1 2022: 6.0%). In a
more challenging market year on year, the division is largely holding onto
margin gains delivered over the last 24 months via a growing mix of higher
margin product ranges.
Adjusted EBITDA by division:
H1 2023 H1 2023 H1 2022 H1 2022
£'m margin £'m margin
Merchanting 8.5 7.7% 7.7 7.3%
Plumbing and Heating 6.6 5.8% 6.5 6.0%
Total Group 15.1 6.8% 14.2 6.6%
Depreciation and amortisation
Depreciation and amortisation increased to £6.6 million (H1 2022: £ 5.8
million restated) in line with acquisitions made in the last twelve months 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(5) for the period of £7.7
million, compared to £8.4 million (restated) in the prior period.
The Group generated a profit before tax for the period of £5.6 million,
compared to £5.8 million (restated) in the prior period. Interest on bank
loans and overdrafts increased to £1.4 million (H1 2022: £0.3 million),
linked to increased net debt and base rates.
(5) Adjusted profit before tax is profit before tax before exceptional items,
share based payments and amortisation of intangible assets.
Earnings per share
The Group reported a statutory profit after tax of £3.9 million (H1 2022:
£4.2 million) (restated) resulting in a basic earnings per share of 2.35
pence compared to 2.53 pence (restated) in H1 2022.
Adjusted basic earnings per share (defined in note 10) decreased to 3.39 pence
in H1 2023 compared to 3.87 pence (restated) in H1 2022.
Prior year adjustment
The December 2022 annual financial statements included a prior year adjustment
to reflect the omission of accounting for put and call options over share
holdings of non-controlling interests. As these adjustments impacted the
prior period to 30 June 2023 comparatives these have been restated. For
further information see note 4.3.
Dividend
The Board is pleased to announce 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.
The interim dividend will be paid on 6 October 2023 to shareholders on the
register at the close of business on 15 September 2023. The Company's
ordinary shares will therefore be marked ex-dividend on 14 September 2023.
Net Cash / Debt
The Group's net debt (defined as borrowings less cash and cash equivalents)
position, moved from a net debt position of £19.4 million at 31 December 2022
to a net debt position of £38.0 million at 30 June 2023.
The net cash / debt movement during the period is linked to three factors
totalling £23.5 million:
1. Deferred consideration payments totalling £4.6 million.
2. Acquisition of Chiltern Timber Supplies Limited £0.7 million (net
of cash acquired) and George Lines freehold £2.2 million initial outlay.
3. P&H division working capital profile as at June 2023 being
reflective of response to historical industry wide boiler supply issues.
With industry wide boiler supply issues now resolved, the P&H division
working capital profile is now expected to normalise back to cash through H2
2023 and in due course.
Cashflow
The Group generated operating cash flow before movements in working capital of
£14.8 million in H1 2023 compared to £13.3 million (restated) in H1 2022.
Cash consumed by operations was £1.3 million (H1 2022 cash generated: £12.8
million) with the P&H stock phasing driving the year on year movement.
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 £8.2 million consumed in H1 2023 verses
£9.0 million (restated) generated in H1 2022.
£0.7 million was used for business acquisitions in H1 2023, relating to the
acquisition of Chiltern Timber Supplies Limited.
Liquidity
At 30 June 2023, the Group had balance sheet liquidity of £57.0 million (30
June 2022 £48.9 million) of which £7.4 million (30 June 2022: £11.6
million) was held in accessible cash and £49.6 million (30 June 2022: £37.3
million) in undrawn but available bank facilities.
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 £4.3 million (H1 2022: £1.9 million).
The most notable investment in the half year being the freehold purchase 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.
Excluding the freehold purchase, the underlying capital expenditure totalled
£2.1 million (H1 2023: £1.9 million) as the Group continues to focus on the
execution of its strategic initiatives to support growth.
Intangible assets rose to £44.6 million (30 June 2022: 43.6 million) as a
result of the Chiltern Timber Supplies Limited acquisition.
Exercised options
On 11 May 2023, 3,021,478 new Ordinary Shares were admitted to trading on AIM
as a result of the exercise of options by Lords colleagues under the Group's
existing Company Share Option Plan. Following admission of the new Ordinary
Shares, the Company's issued Ordinary Share capital comprise 165,532,849
Ordinary Shares.
Post balance sheet events
Acquisition of Alloway Holdings Limited
On 1 September 2023, the Group announced the acquisition of Alloway Holdings
Limited ('Alloway Timber'), an independent family-run merchant operating from
five sites located in the South East of England at Mitcham, Cheam, Byfleet,
Kingston and Putney.
For the year ended 31 December 2022, Alloway Timber delivered £15.9 million
of revenue and c.£(1.0) million of EBITDA. In the medium term, Lords expect
the Alloway Timber branches to reach the margins achieved by the wider
Merchanting division.
The total net vendor consideration is £2.25 million in cash, of which £1.53
million is payable immediately and £0.72 million deferred 12 months from
entry into the sale and purchase agreement, with £0.25 million payable to the
vendor and £0.47 million to HMRC for corporation tax liabilities in Alloway
Timber triggered by the transaction. In addition, the Company will pay down
£1.05 million of Alloway Timber's existing debt, immediately post completion
of the Acquisition. The Acquisition consideration is net of freehold
property disposal of £3.6 million which occurred concurrently with the
Acquisition purchase.
Chris Day
Chief Financial Officer and Chief Operating Officer
7 September 2023
Consolidated Statement of Comprehensive Income
For the six months ended 30 June 2023
30 June 30 June 31 December
2023 2022 2022
Restated*
(unaudited) (unaudited) (audited)
Note £'000 £'000 £'000
Revenue 222,552 214,189 450,020
Cost of sales (177,153) (172,827) (361,237)
Gross profit 45,399 41,362 88,783
Other operating income 349 658 681
Distribution expenses (2,174) (2,274) (4,632)
Administrative expenses (28,517) (25,561) (54,866)
Adjusted EBITDA ** 15,057 14,185 29,966
Share based payments (211) (190) (400)
Exceptional expenses 7 (165) (879) (929)
EBITDA * 14,681 13,116 28,637
Depreciation (1,294) (940) (2,069)
Amortisation (5,274) (4,906) (10,240)
Operating profit 8,113 7,270 16,328
Finance income 99 8 42
Finance expense 8 (2,623) (1,502) (3,572)
Profit before taxation 5,589 5,776 12,798
Taxation 9 (1,699) (1,545) (3,257)
Profit for the year 3,890 4,231 9,541
Other comprehensive income - - -
Total comprehensive income 3,890 4,231 9,541
Total comprehensive income for the year attributable to:
Owners of the parent company 3,839 4,010 9,117
Non-controlling interests 51 221 424
3,890 4,231 9,541
Earnings per share
Basic earnings per share (pence) 10 2.35 2.53 5.68
Diluted earnings per share (pence) 10 2.28 2.32 5.36
(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 2023
30 June 30 June 31 December
2023 2022 2022
Restated*
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Note
Non - Current assets
Intangible assets 11 44,600 43,599 45,331
Property, plant and equipment 12 20,707 14,583 13,647
Right-of-use assets 13 42,301 34,867 38,968
Other receivables 14 337 309 279
Investments 30 85 85
107,975 93,443 98,310
Current assets
Inventories 55,184 45,551 53,177
Trade and other receivables 14 69,029 70,205 71,023
Assets classified as held for sale - - 1,333
Cash and cash equivalents 7,409 11,581 16,038
131,622 127,337 141,571
Total assets 239,597 220,780 239,881
Current liabilities
Trade and other payables 15 (76,205) (86,960) (94,343)
Borrowings 16 (6,334) (9,857) (10,348)
Lease liabilities 17 (9,289) (5,466) (5,496)
Liabilities classified as held for sale - - (675)
Current tax liabilities (2,032) (1,434) (1,700)
Total current liabilities (93,860) (103,717) (112,562)
Non-current liabilities
Trade and other payables 15 (6,847) (5,675) (4,716)
Borrowings 16 (39,080) (22,816) (25,086)
Lease liabilities 17 (37,273) (33,144) (37,024)
Other provisions (1,353) (1,220) (1,283)
Deferred tax (7,085) (7,752) (7,022)
Total non-current liabilities (91,638) (70,607) (75,131)
Total liabilities (185,498) (174,324) (187,693)
Net assets 54,099 46,456 52,188
Equity
Share capital 828 788 813
Share premium 28,293 28,293 28,293
Merger reserve (9,980) (9,980) (9,980)
Share based payment reserve 707 286 497
Retained earnings 32,889 22,521 31,237
Equity attributable to owners of the parent company 52,737 41,908 50,860
Non-controlling interests 1,362 4,548 1,328
Total equity 54,099 46,456 52,188
See note 4.3 for details regarding the restatement.
The above condensed consolidated statement of financial position should be
read in conjunction with the accompanying notes.
Consolidated Statement of Changes in Equity
For the six months ended 30 June 2023
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 2023 813 28,293 (9,980) 497 31,237 50,860 1,328 52,188
Profit for the financial period and total comprehensive income - - - - 3,839 3,839 51 3,890
Share based payments - - - 212 - 212 - 212
Share capital issued 15 - - - - 15 - 15
Put and call options over non-controlling interests - - - - 15 15 - 15
Deferred tax on options - - - (2) - (2) - (2)
Capital repayment - - - - - - (17) (17)
Dividends paid - - - - (2,202) (2,202) - (2,202)
As at 30 June 2023 828 28,293 (9,980) 707 32,889 52,737 1,362 54,099
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 as originally presented 788 28,293 (9,980) 96 27,214 46,411 4,337 50,748
Correction of error (net of tax) - - - - (6,214) (6,214) - (6,214)
Restated total equity at the beginning of the financial year 788 28,293 (9,980) 96 21,000 40,197 4,337 44,534
Profit for the financial period and total comprehensive income - - - - 4,010 4,010 221 4,231
Share based payments - - - 190 - 190 - 190
Put and call options over non-controlling interests - - - - (492) (492) - (492)
Capital reorganisation - - - - (10) (10)
Dividends paid - - - - (1,997) (1,997) - (1,997)
As at 30 June 2022 (restated) 788 28,293 (9,980) 286 22,521 41,908 4,548 46,456
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 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 options - - - - 606 606 606
Deferred tax on options - - - 1 515 516 516
NCI 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
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 2023
30 June 30 June 31 December
2023 2022 2022
Restated*
£'000 £'000 £'000
Cash flows from operating activities
Profit before taxation 5,589 5,776 12,798
Adjusted for:
Depreciation of property, plant and equipment 1,294 940 2,069
Amortisation of intangibles 1,736 1,564 3,317
Amortisation of right-of-use assets 3,538 3,342 6,923
Profit on disposal of property, plant and equipment (27) - (151)
Profit on sale of business (103) - -
Write off of investment 55 - -
Share based payment expense 211 190 400
Finance income (99) (8) (42)
Finance expense 2,623 1,502 3,572
Operating cash flows before movements in working capital 14,817 13,306 28,886
(Increase) in inventories (1,601) (279) (8,438)
Decrease / (Increase) in trade and other receivables 2,108 420 (526)
(Decrease) / Increase in trade and other payables (16,592) (684) 6,918
Cash generated/(consumed) by operations (1,268) 12,763 26,840
Corporation tax paid (1,435) (2,251) (3,679)
Net cash (consumed) / generated by operating activities (2,703) 10,512 23,161
Cash flows from investing activities
Purchase of intangible assets (128) (119) (236)
Business acquisitions (net of cash acquired) (696) (26,854) (26,854)
A.W. Lumb resale creditor paid (see note 19) - (2,707) -
Deferred consideration paid (3,467) (583) (2,683)
Purchase of property, plant and equipment (4,301) (1,924) (3,516)
Proceeds on disposal of property, plant and equipment 264 57 195
Purchase of non-controlling interest of Hevey (1,063) - (2,480)
Cash received on sale of business 805 - -
Interest received 99 8 42
Net cash used in investing activities (8,487) (32,122) (35,532)
Cash flows from financing activities
Principal paid on lease liabilities (3,775) (3,482) (8,395)
Issue of share capital 15 - 25
Dividends (2,202) (1,997) (3,087)
Non-controlling interests cash contribution (17) (10) (10)
Proceeds from borrowings - 57,074 110,976
Repayment of borrowings 9,980 (29,309) (80,450)
Bank interest paid (1,395) (325) (1,306)
Interest on financial liabilities (45) (162) (124)
Net cash inflow / (outflow) from financing activities 2,561 21,789 17,629
Net increase / (decrease) in cash and cash equivalents (8,629) 179 5,258
Cash and cash equivalents at the beginning of the year 16,038 11,402 11,402
Cash and cash equivalents at the end of the year 7,409 11,581 16,660
Cash and cash equivalents 7,409 11,581 16,038
Cash and cash equivalents included in assets held for resale - - 622
Cash and cash equivalents at the end of the year 7,409 11,581 16,660
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 2023
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 2022 (the "Annual Financial Statements")
which was prepared in accordance with 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 2022 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 £95.0 million available to it until 4
April 2026 and on 30 June 2023 had headroom against the facilities of £49.6
million and cash of £7.4 million. Banking covenants are breached if the
last twelve months adjusted EBITDA/interest (interest ratio) falls below 4 or
the lenders leverage ratio exceeds 3.0. On 30 June 2023, the interest ratio
was over 9.3x and the leverage ratio was 1.92x.
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 4 April 2026, 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, 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:
Trade names
Relief from royalty rate Discount rate
Chiltern Timber 3.00% 19.94%
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 5.16% of inventory (H1 2022: 5.6%). Doubling the
provision would increase cost of sales/ reduce the carrying value of inventory
by £2,849,000 in H1 2023 (H1 2022: £2,534,000).
4.3 Correction of error in accounting for option to acquire non-controlling
interest
In October 2017 and April 2021 the Group acquired the 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 at the time.
These errors were corrected in the 31 December 2022 Annual Financial
Statements. The 30 June 202 comparatives have been corrected by restating each
of the affected financial statement line items in the prior period as follows:
Consolidated statement of financial position (extract) 30 June Increase/ (decrease) 30 June 2022 restated
2022
£'000 £'000 £'000
Current trade and other payables (83,622) (3,338) (86,960)
Total current liabilities (100,379) (3,338) (103,717)
Non-current trade and other payables (2,271) (3,404) (5,675)
Total non-current liabilities (67,203) (3,404) (70,607)
Total liabilities (167,582) (6,742) (174,324)
Net assets 53,198 (6,742) 46,456
Retained earnings 29,263 (6,742) 22,521
Total equity 53,198 (6,742) 46,456
Summary of movement in retained earnings 30 June Increase/ (Decrease) 30 June 2022 restated
2022
£'000 £'000 £'000
Retained earnings - 30 June 2021 27,214 (6,214) 21,000
Put and call options over non-controlling interests (443) (49) (492)
Proft for the year 4,489 (479) 4,010
Dividends paid (1,997) - (1,997)
Retained earnings - 30 June 2022 29,263 (6,742) 22,521
Consolidated statement of financial position (extract) 30 June Increase/ (Decrease) 30 June 2022 restated
2022
£'000 £'000 £'000
Exceptional expenses (280) (599) (879)
EBITDA 13,715 (599) 13,116
Operating Profit 7,869 (599) 7,270
Finance expense (1,447) (55) (1,502)
Profit before tax 6,430 (654) 5,776
Taxation (1,720) 175 (1,545)
Profit for the year 4,710 (479) 4,231
Total comprehensive income attributable to:
Owners of the parent company 4489 (479) 4010
Non- Controlling interest 221 - 221
4,710 (479) 4,231
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 31 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 17 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 2023 are as follows:
Plumbing and Merchanting and Total
Heating other services
£'000 £'000 £'000
Revenue 113,167 109,385 222,552
Cost of sales (96,800) (80,353) (177,153)
Gross profit 16,367 29,032 45,399
Other operating income 140 209 349
Distribution costs - (2,174) (2,174)
Administrative expenses (9,898) (18,619) (28,517)
Adjusted EBITDA 6,609 8,448 15,057
Share based payments (73) (138) (211)
Exceptional items (89) (76) (165)
EBITDA 6,447 8,234 14,681
Depreciation (216) (1,078) (1,294)
Amortisation (1,913) (3,361) (5,274)
Operating profit 4,318 3,795 8,113
Finance income 12 87 99
Finance costs (318) (2,305) (2,623)
Profit before taxation 4,012 1,577 5,589
Taxation (835) (864) (1,699)
Profit for operating unit 3,177 713 3,890
Assets and liabilities
Total assets 101,487 138,110 239,597
Total liabilities (53,528) (131,970) (185,498)
Net assets 47,959 6,140 54,099
The segmental results for the six months ended 30 June 2022 are as follows:
Plumbing and Merchanting and
Heating other services Total
(restated*) (restated*)
£'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) (391) (879)
EBITDA 5,962 7,154 13,116
Depreciation (139) (801) (940)
Amortisation (1,754) (3,152) (4,906)
Operating profit 4,069 3,201 7,270
Finance income (22) 30 8
Finance costs (333) (1,169) (1,502)
Profit before taxation 3,714 2,062 5,776
Taxation (752) (793) (1,545)
Profit for operating unit 2,962 1,269 4,231
See note 4.3 for details regarding the restatement.
The segmental results for the year to 31 December 2022 are as follows:
Plumbing and Merchanting Total
Heating
£'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) (4,457) (4,566)
Administrative expenses (19,095) (35,837) (54,932)
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
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
2023 2022 2022
(restated*)
£'000 £'000 £'000
HS2 Compensation - (748) (748)
Put And Call options - 599 -
Profit on sale of business (103) - -
Costs of business combinations 179 754 842
Retention employment costs on acquisitions 89 120 681
National insurance payments - 338 338
Reduction in contingent consideration - (184) (184)
165 879 929
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
company was sold for £805,000 with profit recognised on the sale amounting to
£103,000.
The costs associated with the business combinations detailed in note 19 have
been expensed and disclosed as exceptional items which amount to £179,000.
The Group sometimes includes retention 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 £89,000.
8. Finance costs
30 June 30 June 31 December
2023 2022 2022
(restated*)
£'000 £'000 £'000
Bank loans and overdrafts 1,395 325 1,306
Invoice discounting facilities 45 221 124
Unwinding of deferred consideration and call and put options 84 55 183
Interest on dilapidation provision 26 - 46
Lease liabilities 1,073 901 1,913
2,623 1,502 3,572
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 2023 is
30.40% (2022: 26.75%).
10. Earnings per share
30 June 30 June 31 December
2023 2022 2022
(restated*)
Basic earnings per share
Earnings from continuing activities (pence) 2.35 2.53 5.68
Diluted earnings per share
Earnings from continuing activities (pence) 2.28 2.32 5.36
Weighted average shares for basic earnings per share 163,446,193 158,524,872 160,523,582
Number of dilutive share options 4,636,633 14,635,631 9,552,402
Weighted average number of shares for dilutive earnings per share 168,082,826 173,160,503 170,075,984
Earnings attributable to the equity holders of the parent (£'000) 3,839 4,010 9,117
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
2023 2022 2022
(restated*)
£'000 £'000 £'000
Earnings attributable to the equity holders of the parent 3,839 4,010 9,117
Exceptional items 165 879 929
Share based payments 211 190 400
Amortisation of intangible assets 1,735 1,564 3,317
Less tax impact of adjustments (401) (500) (883)
Adjusted earnings 5,549 6,143 12,880
Adjusted basic earnings per share
Earnings from continuing activities (pence) 3.39 3.87 8.02
Adjusted diluted earnings per share
Earnings from continuing activities (pence) 3.30 3.55 7.57
11. Intangible assets
Customer Trade Goodwill Total
relationships names
Software
£'000 £'000 £'000 £'000 £'000
At 1 January 2023 1,112 25,316 2,607 16,296 45,331
Additions 128 - - - 128
Acquired through business combinations - - 350 527 877
Amortisation charge (102) (1,466) (168) - (1,736)
Closing net book value at 30 June 2023 1,138 23,850 2,789 16,823 44,600
At 30 June 2023
Cost 1,837 33,555 3,741 16,823 55,956
Accumulated amortisation and impairment (699) (9,705) (952) - (11,356)
Net book amount 1,138 23,850 2,789 16,823 44,600
At January 2022
Opening net book value 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 2022
Opening net book value 952 12,454 1,797 7,470 22,673
Additions 236 - - - 236
Reclassification from tangible assets - - - 1,649 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 at 31 December 2022 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
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 2023 6,962 2,542 1,451 832 1,275 585 13,647
Additions 6,280 657 484 244 383 313 8,361
Disposals (229) - - (8) - - (237)
Acquired through business combinations
153 - 38 39 - - 230
Depreciation charge (145) (305) (302) (160) (223) (159) (1,294)
Closing net book value as 30 June 2023
13,021 2,894 1,671 947 1,435 739 20,707
At 30 June 2023
Cost 13,487 6,909 3,095 1,472 3,845 1,571 30,379
Accumulated depreciation and impairment
(466) (4,015) (1,424) (525) (2,410) (832) (9,672)
Net book value 13,021 2,894 1,671 947 1,435 739 20,707
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 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 2022 1,845 3,617 1,306 75 925 282 8,050
Additions 307 1,393 264 548 628 376 3,516
Disposals - - (4) (40) - - (44)
Reclassification to intangible assets - (1,649) - - - - (1,649)
Reclassification - - - 34 (34) - -
Acquired through business combinations 4,979 36 13 537 148 150 5,863
Transferred to disposal group held for sale - (11) - - - (9) (20)
Depreciation charge (169) (844) (128) (322) (392) (214) (2,069)
Closing net book value as 31 December 2022
6,962 2,542 1,451 832 1,275 585 13,647
At 31 December 2022
Cost 7,283 6,252 2,573 1,197 3,462 1,258 22,025
Accumulated depreciation and impairment
(321) (3,710) (1,122) (365) (2,187) (673) (8,378)
Net book value 6,962 2,542 1,451 832 1,275 585 13,647
13. Right of use assets
Leasehold Property Plant and Machinery Motor Total
vehicles
£'000 £'000 £'000 £'000
At 1 January 2023 34,015 2,381 2,572 38,968
Additions 1,630 156 3,466 5,252
Acquired through business combinations 970 - - 970
Lease modifications 1,307 - - 1,307
Disposals (653) - (5) (658)
Amortisation charge (2,311) (363) (864) (3,538)
Closing net book value as at 30 June 2023 34,958 2,174 5,169 42,301
At 31 June 2023
Cost 52,215 6,151 12,365 70,731
Accumulated amortisation and impairment (17,257) (3,977) (7,196) (28,430)
Net book value 34,958 2,174 5,169 42,301
At 1 January 2022 26,516 3,030 3,725 33,271
Additions 6 73 773 852
Acquired through business combinations 3,991 95 - 4,086
Amortisation charge (2,004) (553) (785) (3,342)
Closing net book value as 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 value 28,509 2,645 3,713 34,867
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)
Closing net book value as 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 value 34,015 2,381 2,572 38,968
14. Trade and other receivables
30 June 30 June 31 December
2023 2022 2022
£'000 £'000 £'000
Amounts falling due after one year
Other receivables 337 309 279
337 309 279
Amounts falling due within one year
Trade receivables 56,942 62,066 60,673
Other receivables 7,439 3,394 7,640
Prepayments 4,648 4,745 2,710
69,029 70,205 71,023
15. Trade and other payables
30 June 30 June 31 December
Amounts falling due within one year: 2023 2022 2022
(restated*)
£'000 £'000 £'000
Trade payables 61,319 71,043 72,469
Other taxation and social security 4,002 3,511 3,974
Other payables 3,823 7,633 5,714
Accruals 7,061 4,773 12,186
76,205 86,960 94,343
Amounts falling due after one year:
Other payables 6,847 5,675 4,716
6,847 5,675 4,716
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
2023 2022 2022
£'000 £'000 £'000
Current
Other loans 6,334 9,857 10,348
Total current borrowings 6,334 9,857 10,348
Non-current
Bank loans 39,080 22,816 25,086
Total non-current borrowings 39,080 22,816 25,086
Total borrowings 45,414 32,673 35,434
Loans under invoice financing are included within other loans.
The Group amended its banking facilities on 5 April 2023. The Group's
existing £70 million lending facilities with HSBC, consisting of a £50
million revolving credit facility (RCF) and a £20 million receivables
financing facility (RFF) (together the 'Existing Facilities'), have been
cancelled and repaid pursuant to the Refinancing. Such repayments were
funded by drawings under new £95 million facilities provided by HSBC, NatWest
and BNP Paribas consisting of a £70 million RCF (the 'New RCF') and a £25
million RFF each with an initial three-year term (together, the 'New
Facilities').
The New RCF includes: (i) a £20 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.
17. Lease liabilities
Leasehold Plant and Motor
property Equipment vehicles Total
£'000 £'000 £'000 £'000
At 1 January 2023 37,699 1,945 2,876 42,520
Additions 1,562 156 3,466 5,184
Acquired through business combinations 970 - - 970
Disposals (736) - (5) (741)
Lease modifications 1,331 - - 1,331
Interest expenses 891 44 138 1,073
Lease payments (including interest) (2,604) (426) (745) (3,775)
At 30 June 2023 39,113 1,719 5,730 46,562
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 2022 30,065 2,979 3,588 36,632
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 current and non-current lease liabilities
30 June 30 June 31 December
2023 2022 2022
£'000 £'000 £'000
Current 9,289 5,466 5,496
Non-current 37,273 33,144 37,024
Total 46,562 38,610 42,520
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
Chiltern Timber Supplies Limited
On 3 April 2023 the Group acquired 100% of Chiltern Timber Supplies Limited
('Chiltern Timber'), an independent timber merchant, for a consideration of
£1.65 million of which £1.175 million has been paid on completion and the
balance of £0.475 million is deferred equally over 12, 24 and 36 months on a
contingent basis subject to Chiltern Timber delivering certain earnings
targets. As at completion, Chiltern Timber had excess cash of £0.267
million. Chiltern Timber is a £2.6 million turnover single-site operation
based in Hemel Hempstead. The principal reason for the acquisition was due
to strong growth potential and synergies from Chiltern Timber operating within
the Lords business. The assets and liabilities of the business were
subsequently hived into Carboclass Limited.
The acquired business contributed revenues of £714,000 and a profit before
tax of £35,000 to the consolidated entity for the period from acquisition to
30 June 2023. The following table summarises the fair value of assets
acquired, and liabilities assumed at the acquisition date:
Fair value
£'000
Intangible Asset - Trade Names 350
Property, plant and equipment 230
Right of use assets 970
Inventories 406
Trade and other receivables 172
Cash 746
Trade and other payables (412)
Dilapidation provision (25)
Lease liabilities (970)
Deferred tax liability (131)
Total fair value 1,336
Consideration 1,863
Goodwill 527
The provisional fair values include recognition of an intangible asset
relating to trade names of £350,000, which will be amortised over 14.5 years
on a straight-line basis. The goodwill of £527,000 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 £179,000 and are disclosed within
exceptional expenses in the statement of comprehensive income.
Purchase consideration:
£'000
Cash on completion 1,175
Excess cash 267
Contingent payment 421
Total Consideration 1,863
The contingent consideration of £475,000 has been discounted to a present
value of £421,000 using an interest rate of 6.25%. Contingent consideration
is paid in three equal payments across the next three years.
The net cash expended on the acquisition is as follows:
£'000
Cash paid as consideration on acquisition 1,442
Less cash acquired at acquisition (746)
Net cash movement 696
Figures are provisional until the accounting has been audited.
20. Dividends
A final dividend for 2022 of £2,201,587 was paid to the Registrar on the 30
June 2023 to be distributed to the shareholders. The record date for the
payment of the dividend was 3 May 2023 and it was paid on 27 June 2023.
It is proposed that an interim dividend for 2023 be paid on 6 October 2023 to
shareholders on the register at the close of business on 15 September 2023.
The Company's ordinary shares will therefore be marked ex-dividend on 14
September 2023.
21. Events occurring after the reporting period
On 1 September 2023, the Group announced the acquisition of Alloway Holdings
Limited ('Alloway Timber'), an independent family-run merchant operating from
five sites located in the South East of England at Mitcham, Cheam, Byfleet,
Kingston and Putney.
For year ended 31 December 2022, Alloway Timber delivered £15.9 million of
revenue and c.£(1.0) million of EBITDA. In the medium term, Lords expect
the Alloway Timber branches to reach the margins achieved by the wider
Merchanting division.
The total net vendor consideration is £2.25 million in cash, of which £1.53
million is payable immediately and £0.72 million deferred 12 months from
entry into the sale and purchase agreement, with £0.25 million payable to the
vendor and £0.47 million to HMRC for corporation tax liabilities in Alloway
Timber triggered by the transaction. In addition, the Company will pay down
£1.05 million of Alloway Timber's existing debt, immediately post completion
of the Acquisition. The Acquisition consideration is net of freehold
property disposal of £3.6 million which occurred concurrently with the
Acquisition purchase.
- ENDS -
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