LORD Lords Group Trading Plc

TIDMLORD

RNS Number : 6789A

Lords Group Trading PLC

24 January 2024

24 January 2024

Lords Group Trading plc

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

FY23 Trading Update

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

During the period the Group's trading has again demonstrated Lords' resilience and capability to deliver its growth strategy amidst the continuing subdued trading conditions. In the face of these conditions, Lords has made steady operational progress across both Merchanting and Plumbing & Heating divisions. Furthermore, seven additional sites across the UK have been added through acquisitive and organic growth, generating an expected GBP25 million of annualised revenues at maturity.

As a result, the Group expects to report, subject to audit, FY23 revenue of GBP463 million (FY22: GBP450 million) and FY23 adjusted EBITDA(2) of approximately GBP26.6 million (FY22: GBP30.0 million), in line with current market expectations(1) , and adjusted profit before tax(3) of approximately GBP11.0 million (FY22: GBP17.4 million).

Segmental Trading

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

 
                                         Like-for-Like    Change in Total 
                                         Revenue Growth       Revenue 
                                       ---------------- 
                         Unaudited       FY23 vs. FY22     FY23 vs. FY22 
 Division               FY23 Revenue 
                                       ----------------  ---------------- 
 Merchanting              GBP215m           (6.3)%            (2.4)% 
                      ---------------  ----------------  ---------------- 
 Plumbing & Heating 
  ("P&H")                 GBP248m            3.7%              7.8% 
                      ---------------  ----------------  ---------------- 
 Group                    GBP463m           (1.2)%             2.8% 
                      ---------------  ----------------  ---------------- 
 

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

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

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

Renewables product range extension

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

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

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

Balance sheet

As at 31 December 2023, the Group had net debt(5) of GBP28.5 million (30 June 2023: GBP38 million), backed by a freehold property portfolio with an estimated market value of not less than GBP15 million . The significant reduction in net debt, ahead of current market expectations(6) , reflects the Board's focus during the period to reduce net debt through a number of successful management controls and initiatives and through the normalisation of working capital.

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

Current Trading and Outlook

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

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

Shanker Patel, Chief Executive Officer of Lords, commented:

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

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

(1) Current consensus analyst forecasts are for FY23 revenues of between GBP445 million and GBP450 million, FY23 Adjusted EBITDA of between GBP26.2 million and GBP27.0 million, and Adjusted Profit Before Tax of between GBP12.1 million and GBP13.2 million.

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

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

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

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

(6) Current consensus analyst forecasts are for FY23 year-end net debt of between GBP30.0 million and GBP32.6 million

- Ends -

The information contained within this announcement is deemed by the Company to constitute inside information pursuant to Article 7 of EU Regulation 596/2014 as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018 as amended. Upon the publication of this announcement via a Regulatory Information Service, this inside information is now considered to be in the public domain.

FOR FURTHER ENQUIRIES:

 
 Lords Group Trading plc                                Via Buchanan 
 Shanker Patel, Chief Executive Officer         Tel: +44 (0) 20 7466 
                                                                5000 
 Chris Day, Chief Financial Officer and 
  Chief Operating Officer 
 
 Cavendish Capital Markets Limited (Nominated    Tel: +44 (0)20 7220 
  Adviser and Joint Broker)                                     0500 
 Ben Jeynes / 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 / Steph 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 .

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