TIDMLORD
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 GBP222.6 million (H1 2022:
GBP214.2 million), a 3.9% increase overall or decrease of 4.4% on a
like-for-like ('LFL')(1) basis.
-- Adjusted EBITDA(2) of GBP15.1 million (H1 2022: GBP14.2 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 GBP8.1m (H1 2022: GBP7.3 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 GBP500 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 GBP109.4 million (H1 2022: GBP105.9
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 GBP113.2 million (H1 2022: GBP108.3
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 GBP3.3 million of which GBP2.6 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 GBP450 million and
Adjusted EBITDA of approximately GBP27 million.
-- The Board remains confident of delivering its strategic
targets of GBP500 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 GBP500 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 Tel: +44 (0)20 7397
and Joint Broker) 8900
Ben Jeynes / Max Gould / Dan Hodkinson (Corporate
Finance)
Julian Morse / Henry Nicol (Sales)
Berenberg (Joint Broker) Tel: +44 (0)20 3207
Matthew Armitt / Richard Bootle / Detlir 7800
Elezi
Buchanan Communications Tel: +44 (0) 20 7466
5000
Henry Harrison-Topham / Stephanie Whitmore LGT@buchanan.uk.com
/ Abby 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 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 GBP500 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 .
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 GBP222.6 million (H1 2022:
GBP214.2 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 GBP15.1 million (H1 2022:
GBP14.2 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 GBP500 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 GBP500 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 GBP222.6 million in H1 2023 (H1
2022: GBP214.2 million), representing a total increase of 3.9% or
GBP8.4 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 GBP109.4 million
(H1 2022: GBP105.9 million) with growth of 3.3% and a decline of
5.1% on a LFL basis. The P&H division delivered total revenue
of GBP113.2 million (H1 2022: GBP108.3 million) with growth of 4.5%
and a decline of 3.8% on a LFL basis.
Revenue by division:
H1 2023 H1 2022 % % LFL
GBP'm GBP'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 GBP15.1 million
in H1 2023, compared to GBP14.2 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 GBP8.5
million (H1 2022: GBP7.7 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 GBP6.6 million
(H1 2022: GBP6.5 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
GBP'm margin GBP'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 GBP6.6 million (H1
2022: GBP 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 GBP7.7 million, compared to GBP8.4 million (restated) in the
prior period.
The Group generated a profit before tax for the period of GBP5.6
million, compared to GBP5.8 million (restated) in the prior period.
Interest on bank loans and overdrafts increased to GBP1.4 million
(H1 2022: GBP0.3 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 GBP3.9
million (H1 2022: GBP4.2 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 GBP19.4
million at 31 December 2022 to a net debt position of GBP38.0
million at 30 June 2023.
The net cash / debt movement during the period is linked to
three factors totalling GBP23.5 million:
1. Deferred consideration payments totalling GBP4.6 million.
2. Acquisition of Chiltern Timber Supplies Limited GBP0.7
million (net of cash acquired) and George Lines freehold GBP2.2
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 GBP14.8 million in H1 2023 compared to GBP13.3
million (restated) in H1 2022. Cash consumed by operations was
GBP1.3 million (H1 2022 cash generated: GBP12.8 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
GBP8.2 million consumed in H1 2023 verses GBP9.0 million (restated)
generated in H1 2022.
GBP0.7 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
GBP57.0 million (30 June 2022 GBP48.9 million) of which GBP7.4
million (30 June 2022: GBP11.6 million) was held in accessible cash
and GBP49.6 million (30 June 2022: GBP37.3 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 GBP4.3 million
(H1 2022: GBP1.9 million).
The most notable investment in the half year being the freehold
purchase of George Lines' Heathrow site for GBP6.3 million, with
GBP2.2 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 GBP2.1 million (H1 2023: GBP1.9 million) as
the Group continues to focus on the execution of its strategic
initiatives to support growth.
Intangible assets rose to GBP44.6 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
GBP15.9 million of revenue and c.GBP(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 GBP2.25 million in cash,
of which GBP1.53 million is payable immediately and GBP0.72 million
deferred 12 months from entry into the sale and purchase agreement,
with GBP0.25 million payable to the vendor and GBP0.47 million to
HMRC for corporation tax liabilities in Alloway Timber triggered by
the transaction. In addition, the Company will pay down GBP1.05
million of Alloway Timber's existing debt, immediately post
completion of the Acquisition. The Acquisition consideration is net
of freehold property disposal of GBP3.6 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 31 December
30 June
2023 2022 2022
Restated*
(unaudited) (unaudited) (audited)
Note GBP'000 GBP'000 GBP'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)
GBP'000 GBP'000 GBP'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
Share Merger Share Retained Equity Non-controlling Total
Called premium reserve based earnings attributable Interests equity
up share payments to owner
capital reserve of parent
company
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'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 Share Merger Share Retained Equity Non Total
up share premium reserve based earnings attributable controlling equity
capital payments to owner Interests
reserve of parent
company
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'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 Share Merger Share Retained Equity Non-controlling Total
up premium reserve based earnings attributable Interests equity
share payments to owner
capital reserve of parent
company
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'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 31 December
30 June
2023 2022 2022
Restated*
GBP'000 GBP'000 GBP'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 - (2,707) -
note 19)
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 (GBP), 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 GBP95.0 million available to
it until 4 April 2026 and on 30 June 2023 had headroom against the
facilities of GBP49.6 million and cash of GBP7.4 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 Discount
royalty rate 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 GBP2,849,000 in H1
2023 (H1 2022: GBP2,534,000).
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 30 June Increase/ 30 June
of financial position 2022 (decrease) 2022 restated
(extract)
GBP'000 GBP'000 GBP'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 30 June Increase/ 30 June
in retained earnings 2022 (Decrease) 2022 restated
GBP'000 GBP'000 GBP'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 30 June Increase/ 30 June
of financial position 2022 (Decrease) 2022 restated
(extract)
GBP'000 GBP'000 GBP'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 Merchanting Total
and and
Heating other services
GBP'000 GBP'000 GBP'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 Merchanting
and and
Heating other services Total
(restated*) (restated*)
GBP'000 GBP'000 GBP'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
GBP'000 GBP'000 GBP'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*)
GBP'000 GBP'000 GBP'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 GBP805,000 with
profit recognised on the sale amounting to GBP103,000.
The costs associated with the business combinations detailed in
note 19 have been expensed and disclosed as exceptional items which
amount to GBP179,000. 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 GBP89,000.
8. Finance costs
30 June 30 June 31 December
2023 2022 2022
(restated*)
GBP'000 GBP'000 GBP'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 (GBP'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*)
GBP'000 GBP'000 GBP'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
GBP'000 GBP'000 GBP'000 GBP'000 GBP'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 Land and Plant Motor Fixtures, Office Total
and building and Machinery vehicles fittings equipment
buildings leasehold and equipment
freehold improvements
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'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 Plant and Motor Total
Property Machinery vehicles
GBP'000 GBP'000 GBP'000 GBP'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
GBP'000 GBP'000 GBP'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*)
GBP'000 GBP'000 GBP'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
GBP'000 GBP'000 GBP'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 GBP70 million lending facilities with HSBC,
consisting of a GBP50 million revolving credit facility (RCF) and a
GBP20 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
GBP95 million facilities provided by HSBC, NatWest and BNP Paribas
consisting of a GBP70 million RCF (the 'New RCF') and a GBP25
million RFF each with an initial three-year term (together, the
'New Facilities').
The New RCF includes: (i) a GBP20 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
GBP'000 GBP'000 GBP'000 GBP'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
GBP'000 GBP'000 GBP'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 EUR10,000 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
GBP3.0 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 GBP1.65 million of which GBP1.175
million has been paid on completion and the balance of GBP0.475
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 GBP0.267 million. Chiltern Timber is a GBP2.6 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 GBP714,000 and a
profit before tax of GBP35,000 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
GBP'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 GBP350,000, which will be
amortised over 14.5 years on a straight-line basis. The goodwill of
GBP527,000 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 GBP179,000 and are disclosed within
exceptional expenses in the statement of comprehensive income.
Purchase consideration:
GBP'000
Cash on completion 1,175
Excess cash 267
Contingent payment 421
Total Consideration 1,863
--------------------- --------
The contingent consideration of GBP475,000 has been discounted
to a present value of GBP421,000 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:
GBP'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 GBP2,201,587 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
GBP15.9 million of revenue and c.GBP(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 GBP2.25 million in cash,
of which GBP1.53 million is payable immediately and GBP0.72 million
deferred 12 months from entry into the sale and purchase agreement,
with GBP0.25 million payable to the vendor and GBP0.47 million to
HMRC for corporation tax liabilities in Alloway Timber triggered by
the transaction. In addition, the Company will pay down GBP1.05
million of Alloway Timber's existing debt, immediately post
completion of the Acquisition. The Acquisition consideration is net
of freehold property disposal of GBP3.6 million which occurred
concurrently with the Acquisition purchase.
- ENDS -
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END
IR FLFFAADIRIIV
(END) Dow Jones Newswires
September 07, 2023 02:00 ET (06:00 GMT)
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