TIDMLORD
RNS Number : 3483Y
Lords Group Trading PLC
06 September 2022
For immediate release 6 September 2022
Lords Group Trading plc
("Lords" or the "Group")
Interim Results
Continued product, geographic and margin expansion; targets set
at IPO well on track
Lords (AIM:LORD), a leading distributor of building materials in
the UK, today announces its unaudited Interim Results for the six
months ended 30 June 2022 ("H1 2022" or the "period").
Financial Highlights
-- Record H1 Group revenues of GBP214.2 million (H1 2021: GBP179.0 million), a 19.7% increase
-- H1 2022 Adjusted EBITDA(1) of GBP14.2 million (H1 2021:
GBP11.2 million restated), a 27.1% increase
-- H1 2022 Adjusted EBITDA margin of 6.6% (H1 2021: 6.2%), on
track to reach 7.5% medium term target
-- H1 2022 cashflow generated by operations of GBP12.8 million (H1 2021: GBP9.6 million)
-- H1 2022 free cashflow(2) generation of GBP8.7 million (H1 2021: GBP8.4 million)
-- Proposed interim dividend of 0.67 pence per share (H1 2021: 0.63 pence per share)
-- Adjusted H1 2022 basic earnings per share(3) of 3.87 pence
(H1 2021: 3.71 pence restated), an increase of 4.3%
-- Net debt(4) at 30 June 2022 of GBP21.1 million (June 2021: GBP25.6 million)
-- Trading continues in line with market expectations for FY22,
being revenue of GBP435.0 million, adjusted EBITDA of GBP26.0
million and adjusted profit before tax(5) of GBP16.0 million
Operational Highlights
-- Merchanting division has continued to perform strongly, with
record revenues of GBP105.9 million (H1 2021: GBP61.1 million),
representing growth of 73.4% and 14.5% on a like-for-like(6)
basis
o Driven by the division's continued focus on 'local leader'
reputation via empowered, highly engaged management teams across
its 30 locations
-- Plumbing and Heating division ("P&H") has demonstrated resilient performance with increased profitability and margin, and customer demand remaining strong during the period, delivering Adjusted EBITDA increase of 10.6% in H1 2022 to GBP6.5 million (H1 2021: GBP5.9 million) notwithstanding industry wide boiler component shortage impacting revenues
o Boiler component shortages resulted in like-for-like revenue
of (12.5)% and (8.2)% including the H1 2022 acquisition of DH&P
Plumbing and Heating
o H1 2022 management actions, including shifting sales mix
towards higher margin energy efficiency product ranges, has
mitigated the impact of shortages
o Management continues to expect the boiler component shortage
to ease during H2 2022
-- Group digital revenues grew by 4.8% on a like-for-like(6)
basis with customers benefiting from the ability to shift across
channels (online / instore) in their purchasing journey with
Lords
o Merchanting digital revenues growing by 133.1% on a
like-for-like basis, equivalent to 3.4% of divisional revenue (H1
2021: 2.2%)
-- Four completed acquisitions in the Period
o Acquisitions were acquired on a blended 4.6x multiple of
Adjusted EBITDA
o Acquisitions are EBITDA margin accretive
o Each transaction is complementary to Lords' strategy of
product range and geographic expansion
o All continue to perform in line with the Board's expectations
following successful integration
-- Product range extension continuing to expand customer base
and share of existing customer wallet
o New ranges to support the decarbonisation of the UK housing
stock and energy price impact, including heating controls, air
source heat pumps and underfloor heating within the P&H
division
-- Customer base growth via expansion of existing brands
continues to progress with three new locations secured in H1
2022
Current Trading and Outlook
-- Lords continues to see positive customer demand across the
Group's product offering and the Board considers that the Group's
organic growth strategy of product range extension and new
locations will continue to secure new customers alongside a greater
share of existing customer wallet
-- The Board remains vigilant of the potential for broader
macro-economic volatility, however is confident that the Group's
business plan, adaptability and high levels of customer service
leave the Group well positioned for continued outperformance
-- Lords well on track to deliver IPO target of GBP500 million
revenue in 2024, as well as 7.5% EBITDA margin in the medium
term
(1) Adjusted EBITDA is EBITDA (defined as earnings before
interest, tax, depreciation and amortisation and, in accordance
with IFRS) but also excluding exceptional items and share-based
payments.
(2) Defined as cash generated by operating activities less
capital expenditure, exceptional items, share based payments and
interest paid.
(3) Earnings attributable to equity holders of the profit
adjusted for exceptional items, share based payments and
amortisation of intangible assets divided by closing shares in
issue.
(4) Net debt is defined as borrowings less cash and cash
equivalents.
(5) Adjusted Profit before tax (basic) is defined as profits
before tax before exceptional items, share based payments and
amortisation of intangible assets.
(6) Like-for-like sales is a measure of growth in sales,
adjusted for new, divested and acquired locations such that the
periods over which the sales are being compared are consistent.
Commenting on the Interim Results, Shanker Patel, Chief
Executive Officer of Lords, commented:
"We can only deliver these results due to our colleagues'
outstanding dedication and commitment to our customers, their
superior product knowledge and focus on exceptional service, all of
which are visible throughout our H1 2022 results which have
delivered record H1 revenue.
"The Group has continued to accelerate the delivery of its
strategic plan, reflected in our financial performance in the half
year which reaffirm delivery of our strategic targets of GBP500m
revenue by 2024 and 7.5% EBITDA margin in the medium term. We have
a substantial opportunity to grow the Group's current < 1%
market share through attracting new customers, a greater share of
existing customer wallet, product range extension, new geographies,
digital capability and valued added acquisitions.
"In the Group's first twelve months as a listed company, we have
delivered all our IPO commitments and believe our strategy will
continue to deliver outperformance. The strength of these results
and confidence in the outlook supports our declaration of an
interim dividend to shareholders of 0.67 pence per share. Our
agility and entrepreneurialism allow the Group to manage challenges
and seize opportunities and our H1 2022 results are testament to
this mentality."
This announcement contains inside information.
FOR FURTHER ENQUIRIES:
Lords Group Trading plc Via Buchanan
Shanker Patel, Chief Executive Officer Tel: +44 (0) 20 7466
5000
Chris Day, Chief Financial Officer
Cenkos Securities plc (Nominated Adviser Tel: +44 (0)20 7397
and Joint Broker) 8900
Ben Jeynes / Max Gould / Dan Hodkinson (Corporate
Finance)
Alex Pollen (Sales)
Berenberg (Joint Broker) Tel: +44 (0)20 3207
Matthew Armitt / Richard Bootle / Ciaran 7800
Walsh
Buchanan Communications Tel: +44 (0) 20 7466
5000
Henry Harrison-Topham / Stephanie Whitmore LGT@buchanan.uk.com
/ Kim Looringh-van Beeck / 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 30 locations in the UK.
-- Plumbing and Heating: a specialist distributor in the UK of
plumbing and heating products to a UK network of independent
merchants, installers and the general public. The division offers
its customers an attractive proposition through a multi-channel
offering. The division operates over 15 locations enabling
nationwide next day delivery service.
Lords was established over 35 years ago as a family business
with its first retail unit in Gerrards Cross, Buckinghamshire.
Since then, the Group has grown to a business operating from 45
sites. Lords aims to become a 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 .
Chief Executive Officer's Review
On behalf of the Board, I am pleased to introduce our Interim
Results for the six months to 30 June 2022. The Group has performed
strongly in the period, delivering enhanced profitability and
multiple strategic milestones.
H1 2022 Overview
The H1 2022 results demonstrate the success of Lords' growth
strategy which continues to be executed by its divisional teams.
The Group prioritises its colleagues and customers and believes by
providing these stakeholders with a great experience, market share
gains will continue to be realised.
H1 2022 revenues totalled a record GBP214.2 million (H1 2021:
GBP179.0 million), a 19.7% increase. The Merchanting division
delivered particularly strong sales growth of 73.4% and 14.5% on a
like-for-like basis.
The Group delivered adjusted EBITDA of GBP14.2 million (H1 2022:
GBP11.2 million) with continued margin enhancement as adjusted
EBITDA margins rose to 6.6% (H1 2021: 6.2% restated). During the
period, the Plumbing and Heating division (P&H) faced the
challenge of an industry wide boiler supply shortage however,
through management-initiated controls, the sales volume impact was
mitigated and adjusted EBITDA of GBP6.5 million (H1 2021: GBP5.9
million) was delivered, with adjusted EBITDA margin improving to
6.0% (H1 2021: 5.0%).
Cash conversion remains strong with cash generated from
operations of GBP12.8 million (H1 2021: GBP9.6 million) supported
by continued strong working capital management.
Group Strategy
The Group's strategic focus is to invest in organic growth
levers that deliver accretive margins alongside a selective and
disciplined M&A strategy and in acquiring businesses that
produce a high return on investment and offer the Group product
range and geographic expansion. Lords remains focused on the
repair, maintenance and improvement ("RMI") sector which benefits
from robust demand (particularly the Group's P&H division which
sells "essential" replacement products through Heating repairs) and
strong fundamentals in the medium to long term.
During H1 2022, the Group acquired four businesses at an
attractive blended 4.6x Adjusted EBITDA. Each transaction is
complementary to Lords' strategy of product range and geographic
expansion, is EBITDA margin accretive and has been integrated
smoothly and trading in line with expectations.
The Board continues to see digital as a strategic growth lever
via the Group's eight transactional websites which provide a
further channel for customers in their purchasing journey. Digital
capability coupled with the Group's store estate allows the
acquisition of new customers and enhanced margins across a broader
range of products to be achieved. The investment made in the
digital merchanting team in FY21 is reflected in the strong sales
momentum in H1 2022, with digital sales increasing by 133.1% to
3.4% of divisional revenue (H1 2021: 2.2%).
Product range extension allows the Group's brands to secure a
greater share of their customers wallet, whilst also attracting new
customers. During H1 2022 the Group has added ranges to support the
decarbonisation of the UK housing stock, including heating
controls, air source heat pumps and underfloor heating within its
P&H division. These ranges are complementary product ranges for
the Group's existing customer base with a focus on energy
efficiency in the home to meet increasing customer demand.
The Group is also pursuing new locations for its brands that
offer EBITDA margin accretion. During H1 2022, the Group has
delivered the following additional locations for existing
brands:
-- Advance Roofing Supplies, an acquisition completed in Q1
2022, has now opened a third branch as an implant into the Lords
Builders Merchants Beaconsfield site, offering customers a logical
product range extension and increasing the returns on that
site;
-- George Lines, the Group's specialist civils merchant brand,
has expanded by opening a third location in Horsham; and
-- Mr Central Heating, our leading multi-channel P&H brand
supplying the installer and end user customer segments, is due to
open its tenth branch in West Bromwich in Q3 2022.
Lords has a strong platform for growth with less than 1% market
share and multiple growth levers to pursue. We remain confident of
delivering our strategic targets of GBP500 million revenue by 2024
and improving EBITDA margins to 7.5% in the medium term.
Shanker Patel
Chief Executive Officer
6 September 2022
Financial Review
Revenue
The Group delivered revenue of GBP214.2 million in H1 2022 (H1
2021: GBP179.0 million), representing a total increase of 19.7% or
GBP35.2 million. When the impact of acquisitions is excluded from
revenue, like for like ("LFL") revenue was down 3.3%, stemming from
the reduction of revenues in the Plumbing and Heating division
(P&H) due to the previously announced industry wide boiler
shortages.
The Merchanting division contributed revenue of GBP105.9 million
(H1 2021: GBP61.1 million) with growth of 73.4% and like-for-like
sales of 14.5%. New acquisitions in the Merchanting division (four
completed since July 2021) and new branches contributed sales
growth of GBP28.1 million with the like-for-like growth achieved
through price and volume initiatives.
The P&H division delivered total revenue of GBP108.3 million
(H1 2021: GBP117.9 million) with growth declining by 8.2% and
like-for-like growth down by 12.5%. Previously communicated
industry wide boiler component shortages led the revenue decline
despite customer demand remaining strong. Management actions and
alongside the P&H strategy of extended product range have
partially offset the revenue decline and improved margins with
notable success in energy efficiency technology which saw a 64%
revenue increase in H1 2022.
Revenue by division:
H1 2022 H1 2021 % % LFL
GBP'm GBP'm growth growth
Plumbing and Heating 108.3 117.9 (8.2%) (12.5%)
Merchanting and other
services 105.9 61.1 73.4% 14.5%
214.2 179.0 19.7% (3.3%)
Adjusted EBITDA
The Group's Adjusted EBITDA increased by 27.1% to GBP14.2
million in H1 2022, compared to GBP11.2 million in H1 2021.
Adjusted EBITDA margin improved to 6.6% (H1 2021: 6.2%
restated).
Merchanting division EBITDA in H1 2022 increased to GBP7.7
million (H1 2021: GBP5.3 million) led by revenue growth of 73.4%
reflective of price, volume and acquisitions. The division's
strategy of expanded product range, new locations, digital and
empowered local leadership continues to deliver enhanced
profitability. Adjusted EBITDA margin of 7.3% (H1 2021: 8.7%) is
aligned to management expectations, attributed to customer mix and
a lag in cost inflation recovery for certain customer segments.
During H1 2022, the P&H division faced the challenge of an
industry wide boiler supply shortage however the Group's active
management controls mitigated the sales volume impact and the
division achieved adjusted EBITDA of GBP6.5 million (H1 2021:
GBP5.9 million), with adjusted EBITDA margin improving to 6.0% (H1
2021: 5.0%).
Adjusted EBITDA by division:
H1 2022 H1 2022 H1 2021 H1 2021
GBP'm margin GBP'm margin
(Restated) (Restated)
Plumbing and Heating 6.5 6.0% 5.9 5.0%
Merchanting and other services 7.7 7.3% 5.3 8.7%
Total Group 14.2 6.6% 11.2 6.2%
Depreciation and amortisation
Depreciation and amortisation increased to GBP5.8 million (H1
2021: GBP 4.4 million restated) in line with acquisitions made in
the last two years and in addition to continued capital expenditure
investment in the Group's three P's (People, Plant, Premises)
strategy.
Profit before tax
The Group generated Adjusted Profit before tax (basic) for the
period of GBP8.5 million, compared to GBP6.2 million (restated) in
the prior period.
The Group generated a profit before tax for the period of GBP6.4
million, compared to GBP4.2 million (restated) in the prior period.
Interest on bank loans and overdrafts reduced to GBP0.3 million (H1
2021: GBP0.4 million) as net debt reduced by GBP4.4 million (H1
2022 vs H1 2021) and the Group benefited from reduced financing
costs post IPO.
Earnings per share
Basic earnings per share increased to 2.83 pence in H1 2022
compared to 2.40 pence (restated) in H1 2021.
Adjusted basic earnings per share increased to 3.87 pence in H1
2022 compared to 3.71 pence (restated) in H1 2021.
Prior year adjustment
The December 2021 annual financial statements included a prior
year adjustment to reflect several errors that were identified when
the Group reviewed its accounting for IFRS 16, in October 2021. As
these adjustments impacted the prior period to 30 June 2021
comparatives these have been restated. For further information see
note 4.3.
Dividend
The Board proposes an interim dividend for the period of 0.67
pence per ordinary share. This is in line with market expectations
at the time of the Group's IPO and is in line with the Board's
intention of a progressive dividend policy.
It is proposed that the interim dividend be paid on 7 October
2022 to shareholders on the register at the close of business on 16
September 2022. The Company's ordinary shares will therefore be
marked ex-dividend on 15 September 2022.
Cashflow
The Group generated operating cash flow before movements in
working capital of GBP13.9 million in H1 2022 compared to GBP10.4
million (restated) in H1 2021. Cash generated by operations was
GBP12.8 million (H1 2021: GBP9.6 million).
Free cashflow (defined as cash generated by operating activities
less capital expenditure, exceptional items, share based payments
and interest paid) is the Group's primary cashflow metric with
GBP8.7 million generated in H1 2022 verses GBP8.4 million in H1
2021.
GBP26.9 million was used for business acquisitions in H1 2022,
relating to the acquisition of Advance Roofing Supplies, A.W. Lumb,
DH&P and Buildbase Sudbury.
Net Cash / Debt
The Group's net cash / debt position, before recognising lease
liabilities moved from a net cash position of GBP6.5 million at 31
December 2021 to a net debt position of GBP21.1 million at 30 June
2022.
The net cash / debt position movement is the result of GBP26.9
million of business acquisitions in H1 2022, relating to the
acquisition of Advance Roofing Supplies, A.W. Lumb, DH&P and
Buildbase Sudbury.
Liquidity
At 30 June 2022, the Group had balance sheet liquidity of
GBP48.9 million of which GBP11.6 million (31 December 2021: GBP11.4
million) was held in accessible cash and GBP37.3 million (31
December 2021: GBP35.1 million) in undrawn bank facilities.
The Group's key financing objective continues to be to ensure
that it has the necessary liquidity and resources to support the
short, medium and long-term funding requirements of the business.
These resources together with strong cash flow from operations
provide good liquidity and the capacity to fund investment in
working capital, routine capital expenditure and growth activity
including acquisitions.
Capital Expenditure and Investment in Intangible Assets
The Group maintained disciplined control over the allocation of
capital, and capital expenditure for the period was GBP1.9 million
(H1 2021: GBP0.8 million). The most notable investment in the half
year being the transformation refurbishment of the Lords Builders
Merchants Beaconsfield branch with GBP0.6 million invested in the
period.
Intangible assets rose to GBP43.6 million (31 December 2021:
23.0 million) as a result of the four acquisitions during H1
2022.
Post balance sheet events
Exercised options
On 1 July 2022, 3,986,499 new ordinary shares were admitted to
trading on AIM as a result of the exercise of options under the
Group's existing Company Share Option Plan. Following admission of
the new ordinary shares, the Company's issued ordinary share
capital comprise 162,511,371 ordinary shares.
Chris Day
Chief Financial Officer
6 September 2022
Consolidated Statement of Comprehensive Income
For the six months ended 30 June 2022
30 June 30 June 31 December
2022 2021 2021
(Restated)
(unaudited) (unaudited) (audited)
Note GBP'000 GBP'000 GBP'000
Revenue 214,189 178,966 363,289
Cost of sales (172,827) (149,634) (300,569)
------------ ------------ ------------
Gross profit 41,362 29,332 62,720
Other operating income 658 612 696
Distribution expenses (2,274) (1,661) (3,536)
Administrative expenses (25,561) (17,124) (37,576)
Adjusted EBITDA (2) 14,185 11,159 22,304
Share based payments 6 (190) - (96)
Exceptional expenses 7 (280) (1,057) (2,085)
EBITDA (1) 13,715 10,102 20,123
Depreciation (940) (656) (1,340)
Amortisation (4,906) (3,788) (8,021)
------------ ------------ ------------
Operating profit 7,869 5,658 10,762
Finance income 8 4 -
Finance expense 8 (1,447) (1,491) (2,741)
------------ ------------ ------------
Profit before taxation 6,430 4,171 8,021
Taxation 9 (1,720) (919) (2,377)
------------ ------------ ------------
Profit for the year 4,710 3,252 5,644
============ ============ ============
Other comprehensive income - - -
------------ ------------ ------------
Total comprehensive income 4,710 3,252 5,644
------------ ------------ ------------
Total comprehensive income
for the year attributable
to:
Owners of the parent company 4,489 3,017 5,231
Non-controlling interests 221 235 413
------------ ------------ ------------
4,710 3,252 5,644
------------ ------------ ------------
Earnings per share for profit
from continuing operations
attributable to the ordinary
equity holders of the company:
Basic earnings per share
(pence) 10 2.83 2.40 3.73
Diluted earnings per share
(pence) 10 2.59 2.18 3.40
(1) EBITDA is defined as earnings before interest, tax,
depreciation and amortisation and, in accordance with IFRS.
(2) Adjusted EBITDA is EBITDA but also excluding exceptional
items and share-based payments.
See note 4.3 for details regarding the restatement.
The above condensed consolidated statement of comprehensive
income should be read in conjunction with the accompanying
notes.
Consolidated Statement of Financial Position
As at 30 June 2022
30 June 30 June 31 December
2022 2021 2021
Restated*
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Note
Non-current assets
Intangible assets 11 43,599 23,009 22,673
Property, plant and equipment 12 14,583 8,138 8,050
Right-of-use assets 13 34,867 32,127 33,271
Other receivables 14 309 34 304
Investments 85 112 84
------------ ------------ ------------
93,443 63,420 64,382
Current assets
Inventories 45,551 39,006 38,781
Trade and other receivables 14 70,205 53,010 57,744
Cash and cash equivalents 11,581 5,105 11,402
------------ ------------ ------------
127,337 97,121 107,927
Total assets 220,780 160,541 172,309
Current liabilities
Trade and other payables 15 (83,622) (65,638) (70,459)
Borrowings 16 (9,857) (18,210) (2,783)
Lease liabilities 17 (5,466) (4,478) (5,114)
Current tax liabilities (1,434) (1,570) (2,014)
------------ ------------ ------------
Total current liabilities (100,379) (89,896) (80,370)
Non-current liabilities
Trade and other payables 15 (2,271) (2,787) (3,621)
Borrowings 16 (22,816) (12,460) (2,125)
Lease liabilities 17 (33,144) (30,562) (31,518)
Other provisions (1,220) (871) (987)
Deferred tax (7,752) (3,158) (2,940)
------------ ------------ ------------
Total non-current liabilities (67,203) (49,838) (41,191)
Total liabilities (167,582) (139,734) (121,561)
------------ ------------ ------------
Net assets 53,198 20,807 50,748
============ ============ ============
Equity
Share capital 788 630 788
Share premium 28,293 - 28,293
Merger reserve (9,980) (9,980) (9,980)
Share based payment reserve 286 - 96
Retained earnings 29,263 25,999 27,214
------------ ------------ ------------
Equity attributable to owners
of the parent company 48,650 16,649 46,411
Non-controlling interests 4,548 4,158 4,337
------------ ------------ ------------
Total equity 53,198 20,807 50,748
============ ============ ============
See note 4.3 for details regarding the restatement.
The above condensed consolidated statement of comprehensive
financial position should be read in conjunction with the
accompanying notes.
Consolidated Statement of Changes in Equity
For the six months ended 30 June 2022
Equity
Share attributable
Called up based to owner of
share Share Merger payments Retained parent Non Controlling Total
capital premium reserve reserve earnings company Interests Equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
As at 1 January
2022 788 28,293 (9,980) 96 27,214 46,411 4,337 50,748
---------- --------- --------- ---------- ---------- ------------- ---------------- --------
Profit for the
financial
period
and total
comprehensive
income
(restated) - - - - 4,489 4,489 221 4,710
---------- --------- --------- ---------- ---------- ------------- ---------------- --------
Share based
payments - - - 190 - 190 - 190
DH&P Call and
put options
(see
note 19) - - - - (443) (443) - (443)
Capital
reduction by
non controlling
interests - - - - - - (10) (10)
Dividend payable - - - - (1,997) (1,997) - (1,997)
---------- --------- --------- ---------- ---------- ------------- ---------------- --------
As at 30 June
2022 788 28,293 (9,980) 286 29,263 48,650 4,548 53,198
========== ========= ========= ========== ========== ============= ================ ========
Equity
Share attributable
Called up based to owner of
share Share Merger payments Retained parent Non-controlling Total
capital premium reserve reserve earnings company Interests equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
As at 1 January
2021 as
originally
presented 19,990 - (9,980) - 4,756 14,766 3,499 18,265
Correction of
error (net of
tax) - - - - (1,134) (1,134) - (1,134)
---------- --------- --------- ---------- ---------- ------------- ---------------- --------
Restated total
equity as
included
in December
2021 Annual
Financial
Statements 19,990 - (9,980) - 3,622 13,632 3,499 17,131
---------- --------- --------- ---------- ---------- ------------- ---------------- --------
Profit for the
financial
period
and total
comprehensive
income - - - - 3,017 3,017 235 3,252
---------- --------- --------- ---------- ---------- ------------- ---------------- --------
Non-controlling
interests share
of acquisitions - - - - - - 424 424
Capital
reorganisation (19,360) - - - 19,360 - -
As at 30 June
2021 (restated) 630 - (9,980) - 25,999 16,649 4,158 20,807
Equity
Share attributable
Called up based to owner of
share Share Merger payments Retained parent Non-controlling Total
capital premium reserve reserve earnings company Interests equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
As at 1 January
2021 as
originally
presented 19,990 - (9,980) - 4,756 14,766 3,499 18,265
Correction of
error (net of
tax) - - - - (1,134) (1,134) - (1,134)
Restated total
equity as
included
in December
2021 Annual
Financial
Statements 19,990 - (9,980) - 3,622 13,632 3,499 17,131
Profit for the
financial
period
and total
comprehensive
income - - - - 5,231 5,231 413 5,644
Share based
payments - - - 96 - 96 - 96
Share capital
issued 158 29,842 - - - 30,000 - 30,000
Costs of capital
raise - (1,549) - - - (1,549) - (1,549)
Non-controlling
interests share
of acquisitions - - - - - - 425 425
Capital
reorganisation (19,360) - - - 19,360 - - -
Dividends paid - - - - (999) (999) - (999)
As at 31
December 2021 788 28,293 (9,980) 96 27,214 46,411 4,337 50,748
See note 4.3 for details regarding the restatement.
The above condensed consolidated statement of changes in equity
should be read in conjunction with the accompanying notes.
Consolidated Statement of Cash Flows
For the six months ended 30 June 2022
30 June 30 June 31 December
2022 2021 2021
(Restated)
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Cash flows from operating activities
Profit before taxation 6,430 4,171 8,021
Adjusted for:
Depreciation of property, plant
and equipment 940 656 1,340
Amortisation of intangibles 1,564 987 2,087
Amortisation of right-of-use
assets 3,342 2,801 5,934
Loss on disposal of property, - 250 -
plant and equipment
Share based payment expense 190 - 96
Finance income (8) (4) -
Finance expense 1,447 1,491 2,741
------------ ------------ ------------
Operating cash flows before
movements in working capital 13,905 10,352 20,219
Decrease in inventories (279) 2,379 2,837
Increase in trade and other receivables 420 3,129 (1,791)
(Decrease) / increase in trade
and other payables (1,283) (6,305) 3
------------ ------------ ------------
Cash generated by operations 12,763 9,555 21,268
Corporation tax paid (2,251) (507) (1,751)
------------ ------------ ------------
Net cash generated by operating
activities 10,512 9,048 19,517
------------ ------------ ------------
Cash flows from investing activities
Purchase of intangible assets (119) (18) (648)
Business acquisitions (net of
cash acquired) (26,854) (5,792) (6,225)
A.W. Lumb resale creditor (see (2,707) - -
note 19)
Deferred consideration paid (583) (143) (875)
Purchase of property, plant and
equipment (1,924) (828) (1,297)
Proceeds on disposal of property, 57
plant and equipment - -
Purchase of investments - (105) (77)
Interest received 8 4 -
------------ ------------ ------------
Net cash used in investing activities (32,122) (6,882) (9,122)
------------ ------------ ------------
Cash flows from financing activities
Lease payments (3,482) (3,214) (6,750)
Issue of share capital - - 30,000
Costs of capital raise - - (1,549)
Dividends (1,997) - (999)
Non-controlling interests repayment (10) - -
Proceeds from borrowings 57,074 - 4,908
Repayment of borrowings (29,309) (9,411) (40,081)
Bank interest paid (325) (416) (529)
Interest on financial liabilities (162) (362) (335)
------------ ------------ ------------
Net cash outflow from financing
activities 21,789 (13,403) (15,335)
------------ ------------ ------------
Net (decrease) / increase in
cash and cash equivalents 179 (11,237) (4,940)
Cash and cash equivalents at
the beginning of the period 11,402 16,342 16,342
Effect of foreign exchange rates - - -
------------ ------------ ------------
Cash and cash equivalents at
the end of the period 11,581 5,105 11,402
============ ============ ============
See note 4.3 for details regarding the restatement.
The above condensed consolidated statement of changes of cash
flows should be read in conjunction with the accompanying
notes.
Notes to the financial statements
for the six months ended 30 June 2022
1. General information
Lords Group Trading PLC is a public limited company incorporated
in England and Wales. The registered office is 2(nd) Floor 12-15
Hanger Green, London W5 3EL. Lords is a specialist distributor of
building, plumbing, heating and DIY goods. The Group principally
sells to local tradesmen, small to medium sized plumbing and
heating merchants, construction companies and retails directly to
the general public.
2. Basis of preparation
The Half Year Financial Statements have been prepared in
accordance with IAS 34 "Half Year Financial Reporting" as contained
in UK-adopted International Accounting Standards. These Half Year
Financial Statements do not comprise statutory accounts within the
meaning of section 434 of the Companies Act 2006. Accordingly this
report should be read in conjunction with the annual report for the
year ended 31 December 2021 (the "Annual Financial Statements")
which was prepared in accordance UK-adopted International
Accounting Standards.
The Annual Financial Statements constitute statutory accounts as
defined in section 434 of the Companies Act 2006 and a copy of
these statutory accounts has been delivered to the Registrar of
Companies. The auditor's report on the Annual Financial Statements
was not qualified, did not include a reference to any matters to
which the auditors drew attention by way of emphasis without
qualifying the report and did not contain statements under section
498(2) or (3) of the Companies Act 2006. The accounting policies
adopted in the preparation of the Half Year Financial Statements
are consistent with those used to prepare the Group's consolidated
financial statements for the year ended 31 December 2021 and the
corresponding Half Year reporting period.
The Half Year Financial Statements have been prepared on a going
concern basis, under the historical cost convention.
These interim financial statements are presented in Pound
sterling (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 GBP70.0 million available to
it until 21 July 2024 and on 30 June 2022 had headroom against the
facilities of GBP37.3 million and cash of GBP11.6 million. Banking
covenants are breached if the last twelve months adjusted
EBITDA/interest (interest ratio) falls below 5 or the lenders
leverage ratio exceeds 2.5. On 30 June 2022, the interest ratio was
over 33 and the leverage ratio was 1.31.
After reviewing the Group's forecasts and risk assessments and
making other enquiries, the Board has formed the judgement at the
time of approving the interim financial statements that there is a
reasonable expectation that the Group and subsidiaries have
adequate resources to continue in operational existence until at
least 21 July 2024, when the existing banking facilities
expire.
Taxation
Taxes on income in the interim periods are accrued using the tax
rate that would be applicable to expected total annual profit or
loss.
4 Critical accounting judgements and estimates and errors
The preparation of financial information in compliance with
UK-adopted International Accounting Standards requires the use of
certain critical accounting estimates. It also requires Group
management to exercise judgement and use assumptions in applying
the Group's accounting policies. The resulting accounting estimates
calculated using these judgements and assumptions will, by
definition, seldom equal the related actual results but are based
on historical experience and expectations of future events.
Management believe that the estimates utilised in preparing the
financial information are reasonable.
Key accounting estimates and judgements
Estimates and judgements are continually evaluated and are based
on historical experience and other factors, including expectations
of future events that are believed to be reasonable under the
circumstances.
In preparing the condensed interim financial statements, the
Board considers both quantitative and qualitative factors in
forming its judgements, and related disclosures, and are mindful of
the need to best serve the interests of its stakeholders and to
avoid unnecessary clutter borne of the disclosure of immaterial
items. In making this assessment the Board considers the nature of
each item, as well as its size, in assessing whether any disclosure
omissions or misstatements could influence the decisions of users
of the condensed interim financial statements.
4.1 Key accounting judgements
Recognition of legal and regulatory provisions
A key area of judgement applied in the preparation of these
financial statements is determining whether a present obligation
exists and where one does, in estimating the probability, timing
and amount of any outflows. In determining whether a provision
needs to be made and whether it can be reliably estimated, the
Group consults relevant professional experts and reassess the
Group's judgements on an ongoing basis as facts change. In the
early stages of legal and regulatory matters, it is often not
possible to reliably estimate the outcome and in these cases the
Group does not provide for their outcome but instead include
further disclosures outlining the matters within its contingent
liabilities note. See note 18 for contingent liabilities.
4.2 Key accounting estimates and assumptions
The Group makes estimates and assumptions concerning the future.
The resulting accounting estimates will, by definition, seldom
equal the related actual results. The estimates and assumptions
that have a significant risk of causing a material adjustment to
the carrying amounts of assets and liabilities within the next
financial year are addressed below.
Lease Liabilities
The Group makes judgements to estimate the incremental borrowing
rate used to measure lease liabilities based on expected third
party financing costs when the interest rate implicit in the lease
cannot be readily determined. A group incremental borrowing rate
has been applied for all subsidiary leases because the Group has
central borrowings.
The Group has adopted a range from 2.25 per cent to 5.50 per
cent as its incremental borrowing rate, being the rate that the
individual lessee would have to pay to borrow the funds necessary
to obtain an asset of similar value to the right- of-use asset in a
similar economic environment with similar terms, security, and
conditions. The incremental borrowing rate has been determined by
using a synthetic credit rating for the Group which is used to
obtain market data on debt instruments for companies with the same
credit rating and adjusted for the lease term and type of
asset.
In addition, the Group provides for dilapidations on the
leaseholds at rates it estimates as appropriate to cover the
anticipated dilapidation cost over the term of the lease, these are
included within the lease liability calculation.
Useful economic lives of intangible and tangible assets
Annual amortisation and depreciation charge for intangible and
tangible assets is sensitive to changes in the estimated useful
economic lives and residual values of the assets. The useful
economic lives and residual values are re--assessed annually. They
are amended when necessary to reflect current estimates, based on
cash generating unit performance, technological advances, future
investments, economic utilisation and the physical condition of the
assets. See notes 11 and 12 for the carrying values of the assets
and note 19 for details of new intangible assets acquired through
business combinations.
Fair value of intangible assets
The fair value of customer relationship assets and trade name
separately acquired through business combinations involved the use
of valuation techniques and the estimation of future cash flows to
be generated over several years. The estimation of the future cash
flows requires a combination of assumptions including assumptions
for customer attrition rate, sales growth, EBIT and discount rates.
The relief from royalty rate is the value that would be obtained by
licencing trade names out to a third party, as a percentage of
sales. See note 11 for the carrying value of the asset.
The assumptions applied by the directors in respect of the
business combinations recorded in note 19 are as follows:
Customer relationships Trade names
--------------------------------- --------------------
EBIT Relief
Customer as a from
attrition % of Discount royalty Discount
rate revenue rate rate rate
Advance Roofing
Limited 2.0% 7.96% 13.00% 0.25% 13.00%
A. W.
Lumb 2.8% 5.53% 11.20% 0.25% 11.20%
Direct Heating 9.1% 6.49% 12.79% 0.25% 12.79%
Sudbury Branch 3.0% 9.22% 12.79% - -
Inventories
The Group carries significant levels of inventory and key
judgments are made by management in estimating the level of
provisioning required for slow moving inventory. Provision
estimates are forward looking and are formed using a combination of
factors including historical experience, management's knowledge of
the industry, group discounting and sales pricing. Management use a
number of internally generated reports to monitor and continually
re-assess the adequacy and accuracy of the inventory provision. In
arriving at its conclusion, the Directors consider inventory ageing
and turn analysis. The inventory provision is 5.6% of inventory (H1
2021: 5.9%). Doubling the provision would increase cost of sales/
reduce the carrying value of inventory by GBP2,534,000 in H1 2022
(H1 2021: GBP2,309,000).
4.3 Correction of error in accounting for leases under IFRS
16
In October 2021 the Group undertook a review of the property
lease accounting under IFRS 16 included within the admission
document for AIM. Several errors were identified the most material
of which were 4 leases where step increases in rentals were a
contractual obligation within the lease and should have been
reflected in the valuation of right of use assets and the lease
liabilities, but they had not been included.
In addition, one subsidiary hires vehicle on an undefined rental
period and the view at the time of the admission document was that
these were short term leases. A subsequent review of the leases
indicated that while the subsidiary does not have an obligation to
hold the vehicles for a defined period it usually holds the
majority for a period of around three years. The Group has now
formed the judgement that around 90 vehicles should be regarded as
long-term leases with a life of three years.
These errors were corrected in the 31 December 2021 Annual
Financial Statements. The 30 June 2021 comparatives have been
corrected by restating each of the affected financial statement
line items for the prior period as follows:
Consolidated statement of financial
position (extract)
30 June Increase/ 30 June
2021 (Decrease) 2021 (Restated)
GBP'000 GBP'000 GBP'000
Right-of-use assets 25,862 6,265 32,127
Current trade and other payables (66,127) 489 (65,638)
Current lease liabilities (3,524) (954) (4,478)
Non-current trade and other payables (2,792) 5 (2,787)
Non current lease liabilities (23,073) (7,489) (30,562)
Other provisions (808) (63) (871)
Deferred tax (3,526) 368 (3,158)
Net assets 22,186 (1,379) 20,807
========= ============ =================
Retained earnings 27,364 (1,365) 25,999
Non-controlling interests 4,172 (14) 4,158
Total equity 22,186 (1,379) 20,807
========= ============ =================
Consolidated statement of comprehensive
income (extract)
30 June Increase/ 30 June
2021 (Decrease) 2021 (Restated)
GBP'000 GBP'000 GBP'000
Administrative expenses (17,752) 628 (17,124)
Adjusted EBITDA 10,531 628 11,159
EBITDA 9,474 628 10,102
Amortisation (3,090) (698) (3,788)
Operating profit 5,728 (70) 5,658
Finance expense (1,276) (215) (1,491)
Profit before taxation 4,456 (285) 4,171
Taxation (973) 54 (919)
Profit for the year 3,483 (231) 3,252
========= ============ =================
Total comprehensive income attributable
to:
Owners of the parent company 3,248 (231) 3,017
3,483 (231) 3,252
========= ============ =================
5 Segmental Reporting
The Group operates through the following two divisions:
-- Merchanting: supplies building materials and DIY goods
through its network of merchant businesses and online platform
capabilities. It operates both in the 'light side' (building
materials and timber) and 'heavy side' (civils and landscaping),
through 30 locations in the UK.
-- Heating and Plumbing: a specialist distributor in the UK of
heating and plumbing products to a UK network of independent
merchants, installers and the general public. The division offers
its customers an attractive proposition through a multi-channel
offering. The division operates over fifteen locations enabling
nationwide next day delivery service.
Operating segments are reported in a manner consistent with the
internal reporting provided to the Chief Operating Decision Maker
(CODM) which is considered to be the Group Board.
All of the Group's revenue was generated from the sale of goods
in the UK for both periods. No one customer makes up 10% or more of
revenue in any period.
The segmental results for the six months ended 30 June 2022 are
as follows:
Plumbing Merchanting
and and Total
Heating other services
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) 208 (280)
EBITDA 5,962 7,753 13,715
Depreciation (139) (801) (940)
Amortisation (1,754) (3,152) (4,906)
Operating profit 4,069 3,800 7,869
Finance income (22) 30 8
Finance costs (333) (1,114) (1,447)
Profit before taxation 3,714 2,716 6,430
Taxation (752) (968) (1,720)
Profit for operating unit 2,962 1,748 4,710
========= =============== ==========
The segmental results for the six months ended 30 June 2021 are
as follows:
Plumbing
and Merchanting Total
Heating
(Restated) (Restated) (Restated)
GBP'000 GBP'000 GBP'000
Revenue 117,889 61,077 178,966
Cost of sales (105,143) (44,491) (149,634)
----------- ------------ -----------
Gross profit 12,746 16,586 29,332
Other operating income 98 514 612
Distribution costs (36) (1,625) (1,661)
Administrative expenses (6,943) (10,181) (17,124)
----------- ------------ -----------
Adjusted EBITDA 5,865 5,294 11,159
Share based payments - - -
Exceptional items - (1,057) (1,057)
----------- ------------ -----------
EBITDA 5,865 4,237 10,102
Depreciation (78) (578) (656)
Amortisation (1,377) (2,411) (3,788)
----------- ------------ -----------
Operating profit 4,410 1,248 5,658
Finance income - 4 4
Finance costs (463) (1,028) (1,491)
----------- ------------ -----------
Profit before taxation 3,947 224 4,171
Taxation (485) (434) (919)
----------- ------------ -----------
Profit / (loss) for operating
unit 3,462 (210) 3,252
=========== ============ ===========
See note 4.3 for details regarding the restatement.
The segmental results for the year to 31 December 2021 are as
follows:
Plumbing
and Merchanting Total
Heating
GBP'000 GBP'000 GBP'000
Revenue 232,837 130,452 363,289
Cost of sales (206,497) (94,072) (300,569)
---------- ------------ ----------
Gross profit 26,340 36,380 62,720
Other operating income 186 510 696
Distribution costs (105) (3,431) (3,536)
Administrative expenses (16,123) (21,453) (37,576)
---------- ------------ ----------
Adjusted EBITDA 10,298 12,006 22,304
Share based payments (37) (59) (96)
Exceptional items - (2,085) (2,085)
---------- ------------ ----------
EBITDA 10,261 9,862 20,123
Depreciation (162) (1,178) (1,340)
Amortisation (2,485) (5,536) (8,021)
---------- ------------ ----------
Operating profit 7,614 3,148 10,762
Finance income - - -
Finance costs (773) (1,968) (2,741)
---------- ------------ ----------
Profit before taxation 6,841 1,180 8,021
Taxation (1,059) (1,318) (2,377)
---------- ------------ ----------
Profit / (loss) for operating
unit 5,782 (138) 5,644
========== ============ ==========
6. Share based payments
Share based payments relate to the fair value, at the date of
the grant, of share-based payments to the directors and employees
which are expensed in the profit and loss on a straight-line basis
over the vesting period, with the corresponding credit going to the
share-based payment reserve.
7. Exceptional items
30 June 30 June 31 December
2022 2021 2021
GBP'000 GBP'000 GBP'000
HS2 Compulsory purchase order compensation (748) - -
Listing costs - 568 1,523
Costs of business combinations 754 489 514
Retention bonus accruals for business 120
combinations - -
Reduction in contingent consideration (184) - -
Underpayment of NI due 338 - -
Costs of previous financing expensed - - 248
Reduction in contingent consideration - - (200)
-------- -------- ------------
280 1,057 2,085
======== ======== ============
The costs associated with the business combinations detailed in
note 19 have been expensed and disclosed as exceptional items which
amount to GBP754,000. As part of the acquisition of A.W. Lumb
retention bonuses of GBP1,800,000 over a five-year period were
offered to key staff. The costs of these bonuses are being accrued
over the retention period and amount to GBP120,000 for the period
ended June 2022.
The Group received compensation from HS2 for business disruption
that has occurred to the Lords Builders Merchants Park Royal branch
of GBP748,000.
The first instalment of the contingent consideration for Condell
Limited was due in April 2022. Condell did not meet the agreed
EBITDA target for the first payment to be triggered. The present
value of the contingent liability of GBP184,000 has been released
to the income statement within exceptional items. The remaining
deferred consideration with a present value of GBP184,000 is due in
April 2023 if EBITDA targets are achieved.
On migrating to a new payroll system two of the Group's
subsidiary entities determined that there has been an error in the
calculation of employer and employee national insurance over the
last four years such that there was an under payment of national
insurance. The Group notified HMRC of the error and has agreed and
paid a full and final payment of GBP338,000 to cover all national
insurance due.
8. Finance costs
30 June 30 June 31 December
(Restated)
2022 2021 2021
GBP'000 GBP'000 GBP'000
Bank loans and overdrafts 325 416 529
Invoice discounting facilities 221 154 376
Lease liabilities 901 921 1,836
1,447 1,491 2,741
======== =========== ============
See note 4.3 for details regarding the restatement.
9. Taxation
Tax expense is recognised based on management's estimate of the
weighted average effective annual income tax rate expected for the
full financial year. The estimated average annual rate for the year
ended 31 December 2022 is 26.75% (2021: 22.0%).
10. Earnings per share
30 June 30 June 31 December
2022 2021 2021
(Restated)
Basic earnings per share
Earnings from continuing activities
(pence) 2.83 2.40 3.73
Diluted earnings per share
Earnings from continuing activities
(pence) 2.59 2.18 3.40
Weighted average shares for basic
earning per share 158,524,872 125,925,000 140,354,443
Number of dilutive share options 14,635,631 12,179,402 13,647,753
------------ ------------ ------------
Weighted average number of shares
for dilutive earnings per share 173,160,503 138,104,402 154,002,196
============ ============ ============
Earnings attributable to the equity
holders of the parent (GBP'000) 4,489 3,017 5,231
See note 4.3 for details regarding the restatement.
The Group has also presented adjusted earnings per share.
Adjusted earnings per share have been calculated using earnings
attributable to shareholders of the parent company, Lords Group
trading PLC, adjusted for the after-tax effect of exceptional items
(see note 7), share based payments and amortisation of intangible
assets as the numerator.
30 June 30 June 31 December
2022 2021 2021
GBP'000 GBP'000 GBP'000
Earnings attributable to the equity
holders of the parent 4,489 3,017 5,231
Exceptional items 280 1,057 2,085
Share based payments 190 - 96
Amortisation of intangible assets 1,564 987 2,087
Less tax impact of adjustments (386) (388) (811)
------------ ------------ ------------
Adjusted earnings 6,137 4,673 8,688
============ ============ ============
Closing shares at the end of the
year 158,524,872 125,925,000 158,524,872
Closing number of dilutive share
options 14,635,631 12,179,402 13,647,753
------------ ------------ ------------
Weighted average number of shares
for dilutive earnings per share 173,160,503 138,104,402 172,172,625
============ ============ ============
Adjusted basic earnings per share
Earnings from continuing activities
(pence) 3.87 3.71 5.48
Adjusted diluted earnings per share
Earnings from continuing activities
(pence) 3.54 3.38 5.05
11. Intangible assets
Customer Trade
Software relationships names Goodwill Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 January 2022 952 12,454 1,797 7,470 22,673
Additions 119 - - - 119
Acquired through business
combinations 140 15,743 1,124 5,364 22,371
Amortisation charge (103) (1,306) (155) - (1,564)
--------- --------------- -------- --------- --------
Closing net book value at
30 June 2022 1,108 26,891 2,766 12,834 43,599
========= =============== ======== ========= ========
At 30 June 2022
Cost 1,661 33,649 3,392 12,834 51,536
Accumulated amortisation
and impairment (553) (6,758) (626) - (7,937)
--------- --------------- -------- --------- --------
Net book amount 1,108 26,891 2,766 12,834 43,599
========= =============== ======== ========= ========
At 1 January 2021 401 10,837 1,717 5,243 18,198
Acquired through business
combinations 17 3,270 316 2,195 5,798
Amortisation charge (48) (824) (115) - (987)
--------- --------------- -------- --------- --------
Closing net book value at
30 June 2021 370 13,283 1,918 7,438 23,009
========= =============== ======== ========= ========
At 30 June 2021
Cost 667 17,840 2,267 7,438 28,212
Accumulated amortisation
and impairment (297) (4,557) (349) - (5,203)
Net book amount 370 13,283 1,918 7,438 23,009
========= =============== ======== ========= ========
At 1 January 2021 401 10,837 1,717 5,243 18,198
Additions 648 - - - 648
Reclassification from tangible
assets 18 - - - 18
Acquired through business
combinations 17 3,336 316 2,227 5,896
Amortisation charge (132) (1,719) (236) - (2,087)
Closing net book value at
31 December 2021 952 12,454 1,797 7,470 22,673
========= =============== ======== ========= ========
At 31 December 2021
Cost 1,333 17,906 2,267 7,470 28,976
Accumulated amortisation
and impairment (381) (5,452) (470) - (6,303)
--------- --------------- -------- --------- --------
Net book amount 952 12,454 1,797 7,470 22,673
========= =============== ======== ========= ========
See note 4.3 for details regarding the restatement.
12. Property, plant, and equipment
Land and
Land building Fixtures,
and buildings leasehold Plant Motor fittings Office
freehold improvements and Machinery vehicles and equipment equipment Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 January
2022 1,845 3,617 1,306 75 925 282 8,050
Additions 59 923 84 504 160 194 1,924
Disposals - - - (57) - - (57)
Acquired through
business
combinations 4,721 40 69 540 136 100 5,606
Depreciation
charge (66) (422) (79) (88) (190) (95) (940)
-------------- -------------- -------------- ---------- --------------- ----------- --------
Closing net book
value as at 30
June 2022 6,559 4,158 1,380 974 1,031 481 14,583
============== ============== ============== ========== =============== =========== ========
At 30 June 2022
Cost 6,777 7,446 2,453 1,105 3,016 1,035 21,832
Accumulated
depreciation
and impairment (218) (3,288) (1,073) (131) (1,985) (554) (7,249)
-------------- -------------- -------------- ---------- --------------- ----------- --------
Net book value 6,559 4,158 1,380 974 1,031 481 14,583
============== ============== ============== ========== =============== =========== ========
At 1 January
2021 687 1,853 503 63 1,193 118 4,417
Additions - 170 268 - 311 90 839
Acquired through
business
combinations 842 1,961 645 - 81 9 3,538
Depreciation
charge (19) (270) (139) (27) (163) (38) (656)
-------------- -------------- -------------- ---------- --------------- ----------- --------
Closing net book
value as at 30
June 2021 1,510 3,714 1,277 36 1,422 179 8,138
============== ============== ============== ========== =============== =========== ========
At 30 June 2021
Cost 1,638 6,209 2,302 86 2,985 543 13,763
Accumulated
depreciation
and impairment (128) (2,495) (1,025) (50) (1,563) (364) (5,625)
-------------- -------------- -------------- ---------- --------------- ----------- --------
Net book amount
value 1,510 3,714 1,277 36 1,422 179 8,138
============== ============== ============== ========== =============== =========== ========
At 1 January
2021 687 1,853 503 63 1,193 118 4,417
Additions - 537 222 16 296 266 1,337
Disposals - - - (40) - - (40)
Reclassification
to intangible
assets - - - - - (18) (18)
Reclassification
acquired through
business
combinations - 270 - - (270) - -
Acquired through
business
combinations 1,201 1,598 689 56 101 49 3,694
Depreciation
charge (43) (641) (108) (20) (395) (133) (1,340)
-------------- -------------- -------------- ---------- --------------- ----------- --------
Closing net book
value as at 31
December 2021 1,845 3,617 1,306 75 925 282 8,050
============== ============== ============== ========== =============== =========== ========
At 31 December
2021
Cost 1,997 6,483 2,300 118 2,720 741 14,359
Accumulated
depreciation
and impairment (152) (2,866) (994) (43) (1,795) (459) (6,309)
-------------- -------------- -------------- ---------- --------------- ----------- --------
Net book amount
value 1,845 3,617 1,306 75 925 282 8,050
============== ============== ============== ========== =============== =========== ========
13. Right of use assets
Leasehold Plant and Motor
Property Machinery vehicles Total
GBP'000 GBP'000 GBP'000 GBP'000
At 1 January 2022 26,516 3,030 3,725 33,271
Acquired through business
combinations 3,991 95 - 4,086
Additions 6 73 773 852
Amortisation charge (2,004) (553) (785) (3,342)
Closing net book value at
30 June 2022 28,509 2,645 3,713 34,867
========== =========== ========== =========
At 30 June 2022
Cost 41,214 6,123 8,841 56,178
Accumulated amortisation and
impairment (12,705) (3,478) (5,128) (21,311)
Net book amount 28,509 2,645 3,713 34,867
========== =========== ========== =========
At 1 January 2021 (restated) 25,846 3,836 2,405 32,087
Acquired through business
combinations 694 - 356 1,050
Additions 981 - 881 1,862
Lease modifications 179 - - 179
Disposals (250) - - (250)
Amortisation charge (1,566) (469) (766) (2,801)
---------- ----------- ---------- ---------
Closing net book value at
30 June 2021 (restated) 25,884 3,367 2,876 32,127
========== =========== ========== =========
At 30 June 2021 (restated)
Cost 34,799 5,833 6,331 46,963
Accumulated amortisation and
impairment (8,915) (2,466) (3,455) (14,836)
Net book amount 25,884 3,367 2,876 32,127
========== =========== ========== =========
At 1 January 2021 (restated) 25,846 3,836 2,405 32,087
Additions 906 61 2,618 3,585
Acquired through business
combinations 2,080 52 359 2,491
Lease modifications 1,039 9 (3) 1,045
Disposals (3) - - (3)
Amortisation charge (3,352) (928) (1,654) (5,934)
Closing net book value at
30 December 2021 26,516 3,030 3,725 33,271
========== =========== ========== =========
At 31 December 2021
Cost 37,217 5,955 8,068 51,240
Accumulated amortisation and
impairment (10,701) (2,925) (4,343) (17,969)
Net book amount 26,516 3,030 3,725 33,271
========== =========== ========== =========
See note 4.3 for details regarding the restatement.
14. Trade and other receivables
30 June 30 June 31 December
2022 2021 2021
(Restated)
GBP'000 GBP'000 GBP'000
Amounts falling due after one year
Other receivables 309 34 304
309 34 304
Amounts falling due within one
year
Trade receivables 62,066 46,249 50,930
Other receivables 3,394 2,597 5,333
Prepayments 4,745 4,164 1,481
70,205 53,010 57,744
Supplier rebates receivable within trade receivables and
prepayments in June 2021 have been reclassified as other
receivables to be consistent with the classification in later
periods.
15. Trade and other payables
30 June 30 June 31 December
2022 2021 2021
(restated)
GBP'000 GBP'000 GBP'000
Amounts falling due within one
year:
Trade payables 71,043 56,676 57,991
Other taxation and social security 3,511 2,261 4,113
Other payables 4,295 3,472 1,931
Accruals 4,773 3,229 6,424
83,622 65,638 70,459
Amounts falling due after one year:
Other payables 2,271 2,787 3,621
2,271 2,787 3,621
Amounts falling due after one year represent deferred payments
for acquisitions.
See note 4.3 for details regarding the restatement.
16. Borrowings
30 June 30 June 31 December
2022 2021 2021
Current GBP'000 GBP'000 GBP'000
Bank loans - 7,292 -
Other loans 9,857 10,918 2,783
Total current borrowings 9,857 18,210 2,783
Non current
Bank loans 22,816 12,460 2,125
Total non current borrowings 22,816 12,460 2,125
Total borrowings 32,673 30,670 4,908
Loans under invoice financing are included within other
loans.
The borrowings of GBP30.7 million as of 30 June 2021 reduced to
GBP4.9 million as of 31 December 2021 due to refinancing out the
debt from the share raise when the Group listed on the AIM.
Borrowings have subsequently increased in H1 2022 due to the
business combinations disclosed within note 19.
The Group amended its banking facilities on 28 February 2022 and
increased its invoice drawdown facility to GBP20.0 million and its
revolving loan facility to GBP50.0 million.
17. Lease liabilities
Plant
Leasehold and Motor
property Equipment vehicles Total
GBP'000 GBP'000 GBP'000 GBP'000
At 1 January 2022 30,065 2,979 3,588 36,632
Additions - 50 628 678
Acquired through business
combinations 3,786 95 - 3,881
Interest expenses 759 54 88 901
Lease payments (including
interest) (2,256) (395) (831) (3,482)
At 30 June 2022 32,354 2,783 3,473 38,610
At 1 January 2021 (restated) 28,476 3,896 2,181 34,553
Acquired through business
combinations 645 - 37 682
Additions 861 - 1,237 2,098
Interest expenses 745 108 68 921
Lease payments (including
interest) (1,760) (632) (822) (3,214)
At 30 June 2021 (restated) 28,967 3,372 2,701 35,040
At 1 January 2021 (restated) 28,476 3,896 2,181 34,553
Additions 841 63 2,619 3,523
Acquired through business
combinations 2,080 52 359 2,491
Disposals (71) - - (71)
Lease modifications 1,048 7 (5) 1,050
Interest expenses 1,480 203 153 1,836
Lease payments (including
interest) (3,789) (1,242) (1,719) (6,750)
At 31 December 2021 30,065 2,979 3,588 36,632
See note 4.3 for details regarding the restatement.
Reconciliation of current and non-current lease liabilities
30 June 30 June 31 December
2022 2021 2021
GBP'000 GBP'000 GBP'000
Current 5,466 4,478 5,114
Non -current 33,144 30,562 31,518
Total 38,610 35,040 36,632
18. Contingencies
Contingent liabilities
The contingent liabilities detailed below are those which could
potentially have a material impact, although their inclusion does
not constitute any admission of wrongdoing or legal liability. The
outcome and timing of these matters is inherently uncertain. Based
on the facts currently known, it is not possible at the moment to
predict the outcome of any of these matters or reliably estimate
any financial impact. As such, at the reporting date no provision
has been made for any of these cases within the financial
statements.
In May 2021, the Group Chief Financial Officer wrote to the HMRC
Anti Money Laundering division to bring to their attention that it
had identified a historic breach of The Money Laundering, Terrorist
Financing and Transfer of Funds (Information on the Payer)
Regulations 2017 by A P P Wholesale Limited, a company that was
acquired by Lords Group Trading PLC in December 2019. The Group has
identified a number of occasions where cash banked in a single
transaction was in excess of 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
Advance Roofing Supplies Limited
On 5 January 2022 the Group acquired 100% of Advance Roofing
Supplies Limited ("Advance Roofing Supplies"), a supplier of
roofing materials, for a consideration of GBP3.9 million of which
GBP3.6 million has been paid on completion and the balance of
GBP0.25 million is payable twelve months after completion. As at
completion, Advance Roofing Supplies had excess cash of GBP0.82
million. Advance Roofing Supplies is a GBP7.5 million turnover
dual-site operation based in Tring and Aylesbury. The principal
reason for the acquisition was to acquire the customer base of
Advance Roofing Supplies. The assets and liabilities of the
business were subsequently hived into Carboclass Limited.
The acquired business contributed revenues of GBP3,763,000 and a
profit before tax of GBP310,000 to the consolidated entity for the
period from acquisition to 30 June 2022. The following table
summarises the fair value of assets acquired, and liabilities
assumed at the acquisition date:
Fair
value
GBP'000
Intangible Asset - Customer Relationships 1,868
Intangible Asset - Trade Names 121
Property, plant and equipment 379
Right of use assets 582
Inventories 980
Trade and other receivables 776
Cash 822
Trade and other payables (1,260)
Dilapidation provision (63)
Lease liabilities (534)
Deferred tax liability (504)
Total provisional fair value 3,167
------------------------------------------- --------
Consideration 3,877
--------
Goodwill 710
------------------------------------------- --------
The provisional fair values include recognition of an intangible
asset relating to customer relations of GBP1,868,000 and trade
names of GBP121,000, which will be amortised over 13 years on a
straight-line basis. The goodwill of GBP710,000 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
GBP129,000 and are disclosed within exceptional expenses in the
statement of comprehensive income.
Purchase consideration:
GBP'000
Cash 3,627
Deferred Consideration 250
Total Consideration 3,877
------------------------ --------
The net cash expended on the acquisition is as follows:
GBP'000
Cash paid as consideration on acquisition 3,627
Less cash acquired at acquisition (822)
Net cash movement 2,805
------------------------------------------- --------
The deferred consideration of GBP250,000 has not been discounted
as it is all due within one year. Figures are provisional until the
accounting has been audited.
A.W. Lumb
On 28 February 2022 the Group acquired A.W. Lumb through the
acquisition of the entire issued share capital of AWLC Limited
('AWLC') for a total consideration of GBP21.3 million. Total
acquisition consideration of GBP21.3 million, payable in cash,
consists of GBP19.7 million due on completion and deferred
consideration of GBP1.7 million payable in equal annual instalments
over the next five years. Consideration is to be funded from Lords'
existing cash resources and debt facilities. As at completion, A.W.
Lumb had excess cash of GBP5.7m. A.W. Lumb is a GBP44.5 million
turnover dual-site operation in Dewsbury and Tamworth. The
principal reason for the acquisition was to acquire the customer
base of A.W. Lumb. The acquisition also included a contingent
employment related payment of GBP1.8 million to certain employees.
This cost is being charged to the income statement over the life of
the employment period of five years. The contingent employment
related consideration is payable if targets are met.
The acquired business contributed revenues of GBP18,363,000 and
a profit before tax of GBP2,030,000 to the consolidated entity for
the period from acquisition to 30 June 2022. If the acquisition had
occurred on 1 January 2021, the contributions until 30 June 2022
would have been revenues of GBP26,201,000 and profit before tax of
GBP2,376,000. The following table summarises the fair value of
assets acquired, and liabilities assumed at the acquisition
date:
Fair
value
GBP'000
Intangible Asset - Customer Relationships 9,521
Intangible Asset - Trade Names 698
Investments 1
Property, plant and equipment 4,917
Right of use assets 95
Inventories 2,221
Trade and other receivables 7,187
Cash 5,656
Trade and other payables (6,116)
Provisions (2,707)
Lease liabilities (95)
Deferred tax liability (3,027)
Total provisional fair value 18,351
------------------------------------------- --------
Consideration 21,346
--------
Goodwill 2,995
------------------------------------------- --------
The provisional fair values include recognition of an intangible
asset relating to customer relations of GBP9,521,000 and trade
names of GBP698,000, which will be amortised over 13 years on a
straight-line basis. The goodwill of GBP2,995,000 comprises the
potential value of additional new customers which is not separately
recognised. Deferred tax has been calculated on the value of the
intangible assets acquired at a corporation tax rate substantially
enacted at the acquisition date. Acquisition cost totalled
GBP418,000 are disclosed within exceptional expenses in the
statement of comprehensive income.
AWLC had a resale creditor of GBP2,707,000 which was triggered
by the business combination and paid in the period to 30 June
2022.
Purchase consideration:
GBP'000
Cash on completion 19,688
Deferred Consideration 1,658
Total Consideration 21,346
------------------------ --------
The net cash expended on the acquisition is as follows:
GBP'000
Cash paid as consideration on acquisition 19,688
Less cash acquired at acquisition (5,656)
Net cash movement 14,032
------------------------------------------- --------
Figures are provisional until the accounting has been
audited.
DH&P Plumbing and Heating
On 31 March 2022 the Group acquired a 90% interest in the
leading plumbing and heating businesses, DH&P Trade Counters
Holdings Limited and DH&P HRP Holdings Limited (together
'DH&P'), for a total consideration of GBP9.3 million. The
acquisition consideration was satisfied by an initial GBP8.9
million cash payment and a deferred cash element of GBP357,000 to
be paid in 12 months. As at completion, DH&P had excess cash of
GBP0.6 million. The remaining 10% interest in DH&P's issued
share capital has been retained by the business' current vendors,
who will remain in their management roles with the business.
Simultaneous call and put options over the remaining 10% of
DH&P's issued share capital will be held by the Group and
DH&P's vendors, respectively, which will not be exercisable
prior to 31 March 2025 and the price subject to DH&P's EBITDA
performance. As it is almost certain that one or other party will
exercise the options no non-controlling interests have been
recognised. DH&P is a GBP27.6 million turnover leading plumbing
heating distributor and merchant, consisting of one national
distribution centre in Chelmsford and five branches with a strong
regional focus in Ipswich, Chelmsford, Southend, Benfleet and
Colchester. The principal reason for the acquisition was to acquire
the customer base of DH&P.
The acquired business contributed revenues of GBP7,302,000 and a
profit before tax of GBP358,000 to the consolidated entity for the
period from acquisition to 30 June 2022. If the acquisition had
occurred on 1 January 2021, the contributions until 30 June 2022
would have been revenues of GBP15,239,000 and profit before tax of
GBP999,000. The following table summarises the fair value of assets
acquired, and liabilities assumed at the acquisition date:
Fair
Value
GBP'000
Intangible Asset - Customer Relationships 3,488
Intangible Asset - Trade Names 305
Software 140
Property, plant and equipment 253
Right of use assets 1,919
Inventories 2,784
Trade and other receivables 4,557
Cash 628
Trade and other payables (3,376)
Lease liabilities (1,828)
Dilapidation provision (90)
Deferred tax liability (1,019)
Total provisional fair value 7,761
------------------------------------------- ---------
Consideration 9,248
------------------------------------------- ---------
Goodwill 1,487
------------------------------------------- ---------
The provisional fair values include recognition of an intangible
asset relating to customer relations of GBP3,488,000 and trade
names of GBP305,000, which will be amortised over 13 years on a
straight-line basis. The goodwill of GBP1,487,000 comprises the
potential value of additional new customers which is not separately
recognised. Deferred tax has been calculated on the value of the
intangible assets acquired at a corporation tax rate substantially
enacted at the acquisition date. Acquisition cost totalled
GBP144,000 are disclosed within exceptional expenses in the
statement of comprehensive income.
Purchase consideration:
GBP'000
Cash 8,891
Deferred Consideration 357
Total Consideration 9,248
------------------------ --------
The net cash expended on the acquisition is as follows:
GBP'000
Cash paid as consideration on acquisition 8,891
Less cash acquired at acquisition (628)
Net cash movement 8,263
------------------------------------------- --------
The simultaneous call and put options over the remaining 10% of
DH&P's issued share capital have a fair value of GBP443,000.
The value has been recognised against retained earnings in the
statement of financial position.
Figures are provisional until the accounting has been
audited.
Branch acquisition
On 31 March 2022 the group acquired a Buildbase branch, from
Grafton Merchanting GB Limited, previously part of its timber and
building materials business. The Buildbase branch purchased is a
single site located in Sudbury, Suffolk (the 'Sudbury Branch'). The
total gross consideration payable was GBP1.8 million. The Sudbury
Branch generated revenues of GBP5.1 million in the year to 31
December 2021. The principal reason for the acquisition was to
acquire the customer base of the branch. The assets and liabilities
of the business have been hived into Hevey Building Supplies
Limited.
The acquired business contributed revenues of GBP894,000 and a
loss before tax of GBP44,000 to the consolidated entity for the
period from acquisition to 30 June 2022. The Group has no reliable
information about the performance of the branch in the period prior
to acquisition. The following table summarises the fair value of
assets acquired, and liabilities assumed at the acquisition
date:
Fair
value
GBP'000
Intangible Asset - Customer Relationships 866
Property, plant and equipment 57
Right of use assets 1,490
Inventories 506
Trade and other receivables 366
Lease liabilities (1,424)
Dilapidation provision (66)
Deferred tax liability (213)
Total provisional fair value 1,582
-------------------------------------------- --------
Consideration 1,754
Goodwill 172
-------------------------------------------- --------
The provisional fair values include recognition of an intangible
asset relating to customer relations of GBP866,000, which will be
amortised over 13 years on a straight-line basis. The goodwill of
GBP172,000 comprises the potential value of additional new
customers which is not separately recognised. Deferred tax has been
calculated on the value of the intangible assets acquired at a
corporation tax rate substantially enacted at the acquisition date.
Acquisition cost totalled GBP64,000 are disclosed within
exceptional expenses in the statement of comprehensive income.
Purchase consideration:
GBP'000
Cash paid as consideration on acquisition 1,754
Less cash acquired at acquisition -
Net cash movement 1,754
-------------------------------------------- --------
The net cash expended on the acquisition is as follows:
Consideration GBP'000
Cash 1,754
Deferred Consideration -
Total Consideration 1,754
------------------------- --------
Figures are provisional until the accounting has been
audited.
20. Dividends
A final dividend for 2021 of GBP1,997,000 was paid to the
Registrar on the 30 June 2022 to be distributed to the
shareholders. The record date for the payment of the dividend was 6
June 2022 and it was paid on 7 July 2022.
It is proposed that an interim dividend for 2022 be paid on 7
October 2022 to shareholders on the register at the close of
business on 16 September 2022. The Company's ordinary shares will
therefore be marked ex-dividend on 15 September 2022.
21. Events occurring after the reporting period
Exercised options
On 1 July 2022, 3,986,499 new Ordinary Shares were admitted to
trading on AIM as a result of the exercise of options under the
Group's existing Company Share Option Plan. Following admission of
the new Ordinary Shares, the Company's issued ordinary share
capital comprise 162,511,371 Ordinary Shares.
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END
IR FFFLIAEIEIIF
(END) Dow Jones Newswires
September 06, 2022 02:00 ET (06:00 GMT)
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