TIDMLORD
RNS Number : 1797Y
Lords Group Trading PLC
03 May 2023
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, this inside information is
now considered to be in the public domain.
For immediate release 3 May 2023
Lords Group Trading plc
('Lords', the 'Group' or the 'Company')
Final Results
Another year of positive strategic progress underpinned by
strong financial performance
Lords, a leading distributor of building materials in the UK, is
pleased to announce its annual results for the year ended 31
December 2022 ('FY22' or the 'year').
FY21 Change*
FY22 (restated) (%)
------------------------------------- ---------- ---------- -------
Revenue GBP450.0m GBP363.3m +23.9%
Adjusted EBITDA(1) GBP30.0m GBP22.3m +34.4%
Adjusted EBITDA margin 6.7% 6.1% +0.6%
EBITDA GBP28.6m GBP19.7m +45.4%
Profit before tax GBP12.8m GBP7.5m +69.6%
Adjusted Profit before tax(5) GBP17.4m GBP12.2m +42.4%
Basic earnings per share 5.68p 3.39p +67.6%
Adjusted basic earnings per share(2) 8.02p 6.1p +31.5%
Dividend per share 2.0p 1.89p +5.8%
Net (debt)/cash(4) GBP(19.4)m GBP6.5m
------------------------------------- ---------- ---------- -------
(*) Based on underlying, not rounded, figures.
Financial Highlights
-- Record performance, with Group revenues up 23.9% to GBP450.0
million (FY21: GBP363.3 million) and on track to reach GBP500.0
million revenue target by 2024
-- Adjusted EBITDA(1) up 34.4% to GBP30.0 million (FY21: GBP22.3
million), representing a margin of 6.7% (FY21: 6.1%) and on track
to reach 7.5% medium-term target
-- Adjusted basic earnings per share(2) up 31.5% to 8.02 pence (FY21: 6.1 pence restated)
-- Cashflow generated by operations of GBP26.8 million (FY21:
GBP21.1 million restated), contributing to free cashflow(3)
generation of GBP19.1 million (FY21: GBP19.9 million restated)
-- Net debt(4) at 31 December 2022 of GBP19.4 million (31
December 2021: GBP6.5 million net cash), reflecting cash cost of
acquisitions in the year and leaving headroom for value-added
acquisitions
-- Total dividend for the year up 5.8% to 2.0 pence per share (FY21: 1.89 pence per share)
Operational Highlights
-- Merchanting division delivered record revenues up 69.2% to
GBP220.8 million (FY21: GBP130.5 million), with strong
like-for-like revenue growth of 17.4%
-- Merchanting performance reflects the Group's ambition to be
the 'local leader' in its markets, delivered by empowered and
highly engaged management teams, alongside successful
implementation of the Group's growth strategy
-- Plumbing & Heating ('P&H') division revenues down
1.5% to GBP229.3 million (FY21: GBP232.8 million), 9.1% lower on a
like-for-like(6) basis
-- P&H performance was resilient given industry-wide boiler
component shortages, which eased throughout H2-22, and benefitted
from management actions, including higher margin energy efficient
product range, which improved divisional EBITDA margins to 6.0%
(FY21: 4.4%)
-- Continued to expand existing brands and grow the customer
base, opening two new branches during 2022, as well as an Advance
Roofing Supplies implant in the Group's Beaconsfield branch
-- Four completed acquisitions in the year, on a blended
multiple of 4.8x Adjusted EBITDA, supporting the Group's strategy
of product range and geographic expansion
-- Acquisitions are EBITDA margin and earnings accretive and all
are performing in line with or ahead of expectations, following
successful integration
-- ESG progress delivered in FY22 including the development of
Lords' ESG strategy, recruitment of the Group's first ESG manager
and launch of the Lords Group Foundation.
Current Trading and Outlook
Whilst macroeconomic uncertainty remains, we believe that our
end market exposure, improved product range, continuing market
share gains and management actions to improve margins mean that we
continue to expect a full year performance in line with market
expectations.
Since the year end, the Group agreed to purchase the freehold of
George Lines' Heathrow site for GBP6.3 million and disposed of the
non-core Lords at Home homewares subsidiary for GBP0.8 million. On
31 March 2023, the Group acquired Chiltern Timber Supplies Limited
for a total consideration of up to GBP1.65 million on a net cash
free/debt free basis. Furthermore, on 5 April 2023, the Group
refinanced its existing lending facilities securing enhanced
facilities provided by HSBC, NatWest and BNP Paribas on an initial
three-year term.
The Board remains confident in Lords' ability to fulfil its IPO
target to become a GBP500.0 million revenue business by 2024 with
an EBITDA margin of 7.5% in the medium term.
The Company also announces that Dawn Moore, Non-Executive
Director, intends to step down as a director of the Group
immediately following the Company's 2023 Annual General Meeting to
focus on expanding executive responsibilities. The Board would like
to thank Dawn for her considerable contribution to the Group prior
to and since IPO.
Shanker Patel, CEO of Lords, commented : "This was an excellent
year for the Group, as we continued to deliver on our IPO
commitments and successfully grew the business in a tough trading
environment. I am proud of our progress and want to thank our teams
for their magnificent job in ensuring customers receive the
standard of service they value so highly.
"We entered 2023 in a strong financial position, which has
enabled us to continue to invest in our 3Ps, as we pursue organic
and acquisition-led growth opportunities. We are focused on the
potential challenges to our business, notably the impact on
household balance sheets from inflation, increased energy costs and
interest rates. We are responding through our ongoing expansion
into new geographical markets and product lines, and by
implementing our ESG strategy, a key part of which is to enhance
our energy efficiency.
"With a 1% share of a large market and facility headroom
available, we also have considerable scope to take share through
further acquisitions that expand our geographical presence and
product range. With around 40% of UK builders merchants still
independently run, we have considerable scope for further
consolidation and therefore see good opportunities to continue our
track record of growth."
Notes
(1) Adjusted EBITDA is EBITDA (defined as earnings before
interest, tax, depreciation and amortisation but also excluding
exceptional items and share-based payments.
(2) Earnings attributable to shareholders of Lords Group Trading
plc adjusted for exceptional items, share based payments and
amortisation of intangible assets divided by the weighted average
number of shares in issue in the year
(3) Defined as cash generated by operating activities plus
exceptional items less capital expenditure, taxation and interest
paid.
(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.
Analyst Briefing
There will be an 'in person' meeting for analysts at 0900hrs
today at Buchanan's offices, which will be hosted by Shanker Patel
(CEO) and Chris Day (CFO and COO). Please contact Buchanan at
LGT@buchanan.uk.com if you would like to attend.
- Ends -
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 8900
and Joint Broker)
Ben Jeynes / Max Gould / Dan Hodkinson
(Corporate Finance)
Alex Pollen (Sales)
Berenberg (Joint Broker) Tel: +44 (0)20 3207 7800
Matthew Armitt / Richard Bootle / Detlir
Elezi
Buchanan Communications Tel: +44 (0) 20 7466 5000
Henry Harrison-Topham / Jamie Hooper 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 26 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 16 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 42
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.
Chairman's statement
I am pleased to report that the Group has delivered a record
performance, showing the success of our growth strategy and the
strengths of our management team.
Lords has continued to successfully navigate the difficult
economic backdrop. Following Brexit and Covid-related challenges of
recent years, 2022 saw the economy challenged by increasing
inflationary pressures, rising interest rates and considerable
political and geopolitical uncertainty. Through all this, the Group
has grown its revenues, profits and margins. This is a credit to
our management's strategic vision, the quality of its execution and
its ability to take action to address the issues we have faced.
Performance
Our markets have remained resilient despite the challenging
backdrop. Around 78% of our revenue comes from the repairs,
maintenance and improvement (RMI) market, where the majority of the
products we sell are essential purchases, rather than
discretionary.
We have continued to expand our geographic footprint, broaden
our product range and drive revenues in both divisions. This
enabled Merchanting to deliver above-market like-for-like revenue
growth of 17.4%. Plumbing and Heating ('P&H') saw like-for-like
revenues fall by 9.1% given the industry-wide boiler component
shortage, which meant we were unable to fulfil customer demand for
these products. Despite this fall in like-for-like revenue it was
pleasing that our actions, which included extending the product
range into energy efficiency technology, ensured we were able to
materially increase P&H's profits and margin in 2022.
The acquisitions in the year were an excellent strategic fit and
have further enhanced our platform for organic growth in the coming
years. All the acquired businesses have performed in line with or
ahead of expectations and we are delighted to welcome our new
colleagues to the Group.
Dividends
At IPO we adopted a progressive dividend policy and this is
reflected in our payout for FY22. Having paid an interim dividend
of 0.67 pence per share in October 2022, we have proposed a final
dividend of 1.33 pence per share, to give a total for the year of
2.00 pence. This represents growth of 5.8% on the 1.89 pence paid
in respect of 2021. The final dividend will be paid on 18 May 2023,
to shareholders on the register at the close of business on 21
April 2023.
People and culture
Our 'unique selling point' has always been our people. Their
enthusiasm and loyalty has been fundamental to our progress and
making sure we continue to deliver the high levels of customer
service on which this business is built. Our regular engagement
surveys show that employee engagement remains strong, and this is
testament to our people-oriented culture and the feeling that we
are, at heart, a family business. It is important to us that we
support our people wherever we can and in addition to the 2022
annual pay increase, we awarded a GBP500 payment to colleagues to
reflect the cost of living crisis.
Dawn Moore, who has worked as a Non-Executive Director of the
Group since 2020, has confirmed her intention to step-down as a
director of the Company following the 2023 AGM to focus on
expanding executive responsibilities. The Board would like to take
this opportunity to thank Dawn and acknowledge her considerable
contribution to the Board as well as her input and counsel in
further strengthening the Group's culture. We wish her well in her
future.
Environmental, social and governance (ESG)
Our approach to ESG issues has been a key focus for us this
year. We have done considerable work to develop our ESG strategy
during 2022, with the support of expert consultants. On the 'E'
aspect of ESG, we have worked closely with H&B, our buying
group, sharing our ESG workstreams to enable best practice across
the membership. With more than 110 companies in the buying group,
all will be able to benefit from the work we have done, improving
their own ESG performance.
Responsibility for ESG ultimately rests with the Board and we
have defined accountabilities all the way through the business.
This has included recruiting our first ESG Manager, who is also
responsible for our Lords Group Foundation. The Foundation aims to
build stronger communities by supporting projects in the areas
around our branches.
As we further develop our ESG approach, we will be defining key
performance indicators and targets to measure our progress. Our
intention is to incorporate these into bonus schemes, to
incentivise performance across the Group.
From a corporate governance perspective, we have continued to
embed our structures and processes, and conducted our first
evaluation of the Board and its committees. The outcomes were
highly positive. To support our growth ambitions, we have
considered the development plans for our executive directors. Since
the end of the year, this has seen Chris Day take on operational
responsibilities in Merchanting in addition to the CFO role, which
over time will free up Shanker Patel to focus on strategy.
Looking forward
During 2022, the Board conducted its annual review of the
Group's strategy. We concluded that it remains appropriate and that
continued successful execution will enable us to capture the
significant growth opportunities we see in front of us.
We are mindful of the uncertain macroeconomic environment and
the impact it could have on the sector in the short term. However,
we have demonstrated our ability to grow the business through
organic investment and acquisition, and we are therefore confident
that we will fulfil our IPO objectives of becoming a GBP500 million
revenue business by 2024 and generating an EBITDA margin of 7.5% in
the medium term.
Gary O'Brien
Independent Non-Executive Chairman
2 May 2023
Chief Executive Officer's review
This was an excellent year for the Group, as we continued to
deliver on our IPO commitments and successfully grew the business
in a tough trading environment. I am proud of our progress and want
to thank our teams for their magnificent job in ensuring customers
receive the standard of service they value so highly.
Performance
Our revenue reached a new high in FY22 at GBP450.0 million, an
increase of 23.9% (FY21: GBP363.3 million). Like-for-like revenue
rose modestly, reflecting Merchanting's very strong performance
(+17.4%) and the impact of boiler component shortages in P&H
(-9.1%), as the Chairman has explained in his statement. P&H
was resilient in difficult circumstances and our actions to extend
the product range, as discussed further below, and adjust our
pricing structure, helped it to deliver strong profit and margin
growth. Our digital revenues continue to increase rapidly and were
up 90.2% in Merchanting, meaning they now account for 2.5% of the
division's revenue. Total ecommerce revenues were GBP2.6 million
higher in FY22.
Adjusted EBITDA was GBP30.0 million, up 34.4% (FY21: GBP22.3
million), with the margin increasing by 60 basis points to 6.7%
(FY21: 6.1%), despite substantial product and overhead cost
inflation. We remain focused on further increasing our EBITDA
margin towards our 7.5% target, through operational leverage,
product range extensions, expanding our digital channels,
optimising our site network and further accretive acquisitions.
Our cash flow was excellent, with adjusted cash generated by
operating activities (cash generated by operating items plus
exceptional items less taxation) of GBP24.1 million (FY21: GBP21.9
million adjusted), while free cash flow(7) was GBP19.1 million
(FY21: GBP19.9 million adjusted). We convert a high percentage of
our profit into cash, which allows us to continually reinvest in
our 3Ps - people, plant and premises. Free cash flow(7) conversion
(free cash flow/EBITDA) was 66.9% (FY21: 89.1% restated),
reflecting the opportunity we have for disciplined capital
investment in our 3Ps to deliver further growth. In FY22 the Group
invested GBP3.5 million in capital investment including
refurbishing our Beaconsfield branch and opening two new
branches.
The Group has a robust and prudent balance sheet, with year-end
net debt of GBP19.4 million (31 December 2021: GBP6.5 million net
cash), reflecting our acquisitions in the year. We have significant
headroom in our GBP70.0 million of debt facilities, as well as
GBP16.0 million of accessible cash at the year end, and we will
continue to carefully manage our balance sheet in the coming
year.
(7) Free cash defined as cash generated by operating activities
plus exceptional items less capital expenditure, taxation and
interest paid.
Strategy
Our strategy is to expand our geographical presence via new
branches, broaden our product range and increase our digital
capabilities. This is underpinned by our organic investment in our
3Ps and by our approach to acquisitions. We had a successful year
on all fronts in 2022. In addition, we spent considerable time
during the year formulating our new ESG strategy, which will help
us to further improve our operations and benefit stakeholders.
Expanding our geographical presence
We have opportunities to expand several of our brands by opening
new locations in response to customer demand. During the year, we
added a third location for George Lines and the tenth branch for Mr
Central Heating, the first of 40 new sites we are planning for this
brand in the next five years. Our acquisitions also gave us broader
geographical coverage and we have opened a third branch for one of
these brands, Advance Roofing Supplies, as an implant within our
Beaconsfield site.
Broadening our product range
Expanding our product range helps us to capture a greater share
of customers' wallets and enhance our service by giving them a
greater choice. In P&H we extended its range during the year
into higher-margin products that support decarbonisation, such as
air source heat pumps and underfloor heating. We also benefitted
from our combined acquisition of HRP Trade and Direct Heating,
which expanded our product offering further and gave us
relationships with new suppliers.
In Merchanting, Advance Roofing Supplies has given us a
significant roofing materials offer for the first time and is
highly complementary with the rest of our product range. A.W. Lumb
also extends our range to include specialisms in drylining and
insulation for the new build market.
Investing in our digital capabilities
Digital plays an important part in our strategy, allowing us to
acquire new customers and achieve higher margins across a broader
range of products. We can also use the insights we gain, such as
customer locations, to inform our brand expansion plans. In 2022,
we benefitted from investment in our in-house expertise in the
prior year, which we are leveraging across the Group to advance our
digital capabilities across multiple brands.
Our 3Ps - People, Plant and Premises
As the Chairman has discussed in his statement, our people are a
key source of advantage for us. We work hard to ensure they are
engaged, feel valued and are fairly rewarded for their efforts.
This is reflected in our continued high engagement scores. Enabling
people to grow within the business is important and we were
particularly pleased to see a record number of internal promotions
this year. We have also had many talented people join us through
our acquisitions.
Plant includes technology to improve our efficiency and offer
even better customer service, and we have continued to invest
during the year, such as the warehouse management system we have
rolled out in P&H. More generally, our plant is well invested
and the average age of our delivery fleet is less than five
years.
We continued to invest in our premises in FY22. In addition to
the branches we opened (see above), we completed the rebuilding of
our Beaconsfield branch, moved Advance Roofing Supplies' Aylesbury
branch to our multi-brand facility (Lords Builders Merchants,
George Lines, Advance Roofing) in Aylesbury and started to relocate
the Glasgow branch of Mr Central Heating, to support its growth and
improve the customer and colleague experience.
Enhancing our business through acquisitions
The businesses we acquired in 2022 are performing well and
contributed GBP74.3 million to our FY22 revenues. We are an
attractive buyer for independent businesses looking for a
responsible custodian, and our colleague and customer -- focused
approach resonates strongly with vendors. We are also highly
disciplined in allocating capital, paying a blended 4.8x EBITDA for
our acquisitions in FY22.
Outlook
We enter 2023 in a strong financial position, which will enable
us to continue to invest in our 3Ps, as we pursue organic and
acquisition-led growth opportunities.
We are focused on the challenges to our business, notably the
impact on the trading environment of reduced housing transactions,
and the impact on household balance sheets from inflation,
increased energy costs and rising interest rates. We are responding
through our ongoing expansion into new geographical markets and
product lines, and by implementing our ESG strategy, a key part of
which is to enhance our energy efficiency.
As a relatively small player with a 1% share of a large market,
we also have considerable scope to take share through further
acquisitions that expand our geographical presence and product
range. With around 40% of UK builders merchants still independently
run, we have considerable scope for further consolidation. We
therefore see good opportunities to continue our track record of
growth.
Shanker Patel
Chief Executive Officer
2 May 2023
Financial review
Revenue
Group revenue was GBP450.0 million in 2022 (FY21: GBP363.3
million), representing growth of 23.9%. Like-for-like (LFL) revenue
growth, which excludes acquisitions and new locations, was 0.2%.
Acquisitions contributed revenue of GBP74.3 million in FY22.
Depreciation and amortisation
Depreciation and amortisation increased to GBP12.3 million
(FY21: GBP9.4 million). GBP6.9 million of the depreciation and
amortisation relates to right-of-use assets (FY21: GBP5.9 million),
GBP3.3 million to intangible assets (FY21: GBP2.1 million) and
GBP2.1 million to property, plant and equipment (FY21: GBP1.3
million), reflecting our continued investment in growth
opportunities.
Capital allocation
The Group has a wide range of organic and inorganic investment
opportunities, which are well defined and attainable in the
delivery of our revenue and EBITDA margin targets. We take a
rigorous approach to allocating capital to these opportunities and
target a return on investment of at least 20%. We carefully review
the investment case for each proposal and ensure the planned
returns are deliverable and that we have effectively mitigated the
risks. The success of this approach was an important driver of our
FY22 performance.
Exceptional items
Exceptional costs in FY22 totalled a net GBP0.9 million. A
breakdown can be found in note 5 to the financial statements, with
the largest component being diligence costs associated with
acquisitions. The exceptional costs were partially offset by
compensation received for business disruption at our Park Royal
branch, due to the HS2 infrastructure project in the immediate area
surrounding the branch.
Exceptional items in FY21 totalled GBP2.5 million (restated).
These comprised costs associated with our admission to AIM and the
costs incurred in relation to acquisitions in the year, less a
reduction in contingent consideration.
Profitability
Reported EBITDA for FY22 was GBP28.6 million (FY21: GBP19.7
million restated). Adjusted EBITDA, which also excludes the
exceptional items set out above and share-based payments, was
GBP30.0 million, up 34.4% from GBP22.3 million in 2021. The
adjusted EBITDA margin improved to 6.7% (2021: 6.1%).
Overall, the adjusted EBITDA margin increased by 0.6% to 6.7% in
FY22, with the improvement in the margin achieved through P&H
margin growth driven by higher-margin products and increased
Merchanting segmental mix. These two factors offset a reduction in
Merchanting, as a result of management's decision to pass through
product price inflation in an orderly manner.
P&H delivered a strong adjusted EBITDA margin of 6.0%,
representing a 1.6 percentage point improvement in FY22. This was
achieved via extended product range initiatives, including our
Renewables range, which attract higher margins alongside lower cost
to serve when supplied to existing customers.
The table below shows adjusted EBITDA by division:
FY22 FY21
-------------- --------------
GBPm Margin GBPm Margin
-------------------------------- ----- ------- ----- -------
Plumbing and Heating 13.8 6.0% 10.3 4.4%
-------------------------------- ----- ------- ----- -------
Merchanting and other services 16.1 7.3% 12.0 9.2%
-------------------------------- ----- ------- ----- -------
Total Group 30.0 6.7% 22.3 6.1%
-------------------------------- ----- ------- ----- -------
Net finance costs
Net finance costs were GBP3.6 million (FY21: GBP2.8 million
restated) with the increase mainly due to increased debt levels
following the four 2022 acquisitions. The interest expense
associated with the Group's leases was GBP1.9 million (FY21: GBP1.8
million).
Profit before tax and adjusted profit before tax
Adjusted profit before tax, which excludes exceptional items,
share -- based payments and amortisation of intangible assets, was
GBP17.4 million (FY21: GBP12.2 million restated). The Group
generated profit before tax for the year of GBP12.8 million (FY21:
GBP7.5 million restated).
Prior year adjustment
In October 2017 and April 2021 the Group acquired 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.
These errors have been corrected by restating each of the
affected financial statements line items for the prior periods as
at 31 December 2020 and 31 December 2021 respectively and as such
have been corrected via a prior year restatement. The adjustments
are non-cash in nature with no impact on adjusted EBITDA. Full
details are contained in note 3.3.
Earnings per share and adjusted earnings per share
Basic earnings per share was 5.68 pence (FY21: 3.39 pence
restated). Adjusted earnings per share (as defined in note 11) was
8.02 pence (FY21: 6.10 pence restated).
Dividend
The Board has recommended a final dividend of 1.33 pence per
share. Combined with the interim dividend of 0.67 pence per share,
this gives a total dividend for the year of 2.0 pence per share
(FY21: 1.89 pence).
Cash flow
Adjusted cash generated by operating activities was GBP24.1
million (FY21: GBP21.9 million restated) while free cash flow was
GBP19.1 million (FY21: GBP19.9 million restated). Free cash flow
conversion, which is free cash flow as a percentage of EBITDA, was
66.9% (FY21: 89.1% restated). The decline compared to the prior
year was due to the planned increase in capital investments of
GBP3.5 million (FY21: GBP1.3 million), as discussed below.
The Group used GBP26.9 million for business acquisitions in
2022, relating to the purchase of Advance Roofing Supplies, A.W.
Lumb, DH&P and Buildbase Sudbury. In addition, in October 2022
we exercised the option to acquire the 25% minority interest in our
Hevey Building Supplies subsidiary for GBP6.2 million, with 40%
paid on completion and the remainder due in seven equal quarterly
instalments over the next two years.
Liquidity and debt facilities
The Group had two financing facilities with HSBC totalling
GBP70.0 million. In March 2022, we agreed with HSBC to enlarge our
facilities to support our growth plans, with the RCF increasing to
GBP50.0 million (from GBP30.0 million) and the invoice financing
facility increasing to GBP20.0 million (from GBP10.0 million).
At 31 December 2022, the Group had net debt (defined as
borrowings less cash and cash equivalents, and before recognising
lease liabilities) of GBP19.4 million (FY21: net cash of GBP6.5
million). The movement primarily reflects the cash cost of the
acquisitions during the year. The Group therefore had ample
headroom of GBP34.6 million (31 December 2021: GBP35.1 million)
within its debt facilities at the year end, and a further GBP16.0
million of accessible cash (31 December 2021: GBP11.4 million).
Net cash / debt
The Group's net cash / debt position, before recognising lease
liabilities, transitioned from net cash of GBP6.5 million at 31
December 2021 to a net debt position of GBP19.4 million at 31
December 2022; including non-contingent deferred consideration
payable within twelve months, this rises to GBP23.3 million in
respect of the Group's acquisition of APP Wholesale, Hevey Building
Supplies and Advance Roofing.
The Group used GBP26.9 million for business acquisitions in
2022, which alongside the 25% minority interest purchase in our
Hevey Building Supplies subsidiary, covers the full movement in net
cash / debt in FY22.
The Group's policy is to maintain its credit rating status while
investing in organic developments and acquisition opportunities
that are expected to generate attractive returns and maintain a
progressive dividend policy.
Working capital(8)
Inventory increased by GBP14.4 million to GBP53.2 million at the
year end, largely due to P&H inventory returning to more normal
levels, as the boiler shortage eased towards the end of the year,
and the impact of price inflation on inventory.
Current trade and other payables were GBP21.4 million higher at
GBP94.3 million (31 December 2021: GBP72.9 million restated), while
current trade and other receivables rose by GBP13.3 million to
GBP71.0 million (31 December 2021: GBP57.7 million). These
movements reflect the Group's organic growth and the acquisitions
in the year, with working capital increasing to 9.2% of revenue
(FY21: 8.7%) due to the inventory increase discussed above.
(8) Working capital is defined as trade receivables and
inventories less trade payables.
Capital expenditure and investment in intangible assets
We maintained capital discipline during the year, with capital
expenditure on plant, property and equipment of GBP3.5 million
(FY21: GBP1.3 million). Notable investments included the
transformational refurbishment of the Beaconsfield branch, the new
branches for Mr Central Heating in West Bromwich and George Lines
in Horsham, and further additions to our fleet.
Intangible assets rose to GBP45.3 million (31 December 2021:
GBP22.7 million) as a result of the acquisitions during FY22.
Non-current liabilities
Trade and other payables relate to deferred consideration
liabilities. The liability has reduced by GBP3.2 million as at 31
December 2022 to GBP4.7 million (31 December 2021: GBP7.9 million)
reflecting those liabilities falling due in 2023 relating to the
acquisitions of APP Wholesale Ltd, Hevey Building Supplies Ltd and
Condell Ltd.
IFRS 16 Leases
Leases that are recorded on the balance sheet principally relate
to properties, cars and distribution vehicles. IFRS 16 increased
EBITDA by GBP7.3 million and the finance (interest) expense by
GBP1.9 million in the year.
The right-of-use asset in the balance sheet at 31 December 2022
was GBP39.0 million (31 December 2021: GBP33.3 million). The
increase is driven mainly by the inclusion of a 100 year long
leasehold plus leases acquired through the 2022 acquisitions.
IFRS 16 does not alter the Group's overall cash flows or the
economic effect of the leases to which it is a party. Similarly,
Lords' banking covenants are measured on a pre-IFRS basis.
Post balance sheet events
Since the end of FY22, we have:
-- Agreed to purchase the freehold 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.
-- Disposed of the non-core Lords at Home homewares subsidiary
for GBP0.8 million. During the year ended 31 December 2022, Lords
at Home generated GBP3.0 million in revenue and contributed GBP0.08
million of EBITDA. The sale supports our focus on our core markets
of building, plumbing, heating and DIY goods.
-- On 31 March 2023 the Group acquired Chiltern Timber Supplies
Limited ('Chiltern Timber') for a total consideration of up to
GBP1.65 million on a net cash free/debt free basis. The
consideration payable is GBP1.175 million on signing and up to a
further GBP0.475 million deferred equally over 12, 24 and 36 months
on a contingent basis subject to Chiltern Timber delivering certain
earnings targets.
-- The Group amended its banking facilities on 5 April 2023. The
Group's existing GBP70.0 million lending facilities with HSBC,
consisting of a GBP50.0 million revolving credit facility ('RCF')
and a GBP20.0 million receivables financing facility ('RFF')
(together the "Existing Facilities"), have been cancelled and
repaid pursuant to the Refinancing with such repayment being funded
by drawings under new GBP95.0 million facilities provided by HSBC,
NatWest and BNP Paribas consisting of a GBP70.0 million RCF (the
"New RCF") and a GBP25.0 million RFF each with an initial
three-year term (together, the "New Facilities").
The New RCF includes: (i) a GBP20.0 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.
-- Dawn Moore, Non-Executive Director, has advised the Board
that she intends to step down as a director of the Group
immediately following the Company's 2023 Annual General Meeting to
focus on expanding executive responsibilities.
Chris Day
Chief Financial Officer and Chief Operating Officer
2 May 2023
Consolidated statement of comprehensive income
for the year ended 31 December 2022
2021
2022 (restated(1)
)
Note GBP'000 GBP'000
--------------------------------------------------------- ---- --------- ------------
Revenue 450,020 363,289
Cost of sales (361,237) (300,569)
--------------------------------------------------------- ---- --------- ------------
Gross profit 88,783 62,720
Other operating income 681 696
Distribution expenses (4,632) (3,536)
Administrative expenses (54,866) (37,576)
--------------------------------------------------------- ---- --------- ------------
Adjusted EBITDA(2) 29,966 22,304
Share-based payments (400) (96)
Exceptional items 5 (929) (2,517)
--------------------------------------------------------- ---- --------- ------------
EBITDA(3) 28,637 19,691
Depreciation (2,069) (1,340)
Amortisation (10,240) (8,021)
--------------------------------------------------------- ---- --------- ------------
Operating profit 7 16,328 10,330
Finance income 8 42 -
Finance expense 9 (3,572) (2,783)
--------------------------------------------------------- ---- --------- ------------
Profit before taxation 12,798 7,547
Taxation 10 (3,257) (2,377)
--------------------------------------------------------- ---- --------- ------------
Profit for the year 9,541 5,170
Other comprehensive income - -
--------------------------------------------------------- ---- --------- ------------
Total comprehensive income 9,541 5,170
--------------------------------------------------------- ---- --------- ------------
Total comprehensive income for the year attributable to:
Owners of the parent company 9,117 4,757
Non-controlling interests 424 413
--------------------------------------------------------- ---- --------- ------------
9,541 5,170
--------------------------------------------------------- ---- --------- ------------
Earnings per share
Basic earning per share (pence) 11 5.68 3.39
Diluted earning per share (pence) 11 5.36 3.09
--------------------------------------------------------- ---- --------- ------------
(1) See note 3.3 for details regarding the restatement.
(2) Adjusted EBITDA is EBITDA but also excluding exceptional
items and share-based payments.
(3) EBITDA is defined as earnings before interest, tax,
depreciation and amortisation.
The results for the year arise solely from continuing
activities.
Consolidated statement of financial position
as at 31 December 2022
2021 2020
2022 (restated(1) (restated(1)
) )
Note GBP'000 GBP'000 GBP'000
---------------------------------------------------- ---- --------- ------------ ------------
Non-current assets
Intangible assets 12 45,331 22,673 18,198
Property, plant and equipment 13,647 8,050 4,417
Right-of-use assets 13 38,968 33,271 32,087
Other receivables 279 304 78
Investments 85 84 4
---------------------------------------------------- ---- --------- ------------ ------------
98,310 64,382 54,784
---------------------------------------------------- ---- --------- ------------ ------------
Current assets
Inventories 53,177 38,781 40,004
Trade and other receivables 71,023 57,744 52,633
Assets classified as held for sale 1,333 - -
Cash and cash equivalents 16,038 11,402 16,342
---------------------------------------------------- ---- --------- ------------ ------------
141,571 107,927 108,979
---------------------------------------------------- ---- --------- ------------ ------------
Total assets 239,881 172,309 163,763
---------------------------------------------------- ---- --------- ------------ ------------
Current liabilities
Trade and other payables (94,343) (72,901) (65,674)
Borrowings (10,348) (2,783) (20,738)
Lease liabilities 13 (5,496) (5,114) (4,180)
Liabilities classified as held for sale (675) - -
Current tax liabilities (1,700) (2,014) (1,055)
---------------------------------------------------- ---- --------- ------------ ------------
Total current liabilities (112,562) (82,812) (91,647)
---------------------------------------------------- ---- --------- ------------ ------------
Non-current liabilities
Trade and other payables (4,716) (7,866) (7,251)
Borrowings (25,086) (2,125) (18,522)
Lease liabilities 13 (37,024) (31,518) (30,373)
Other provisions (1,283) (987) (817)
Deferred tax (7,022) (2,940) (2,433)
---------------------------------------------------- ---- --------- ------------ ------------
Total non-current liabilities (75,131) (45,436) (59,396)
Total liabilities (187,693) (128,248) (151,043)
---------------------------------------------------- ---- --------- ------------ ------------
Net assets 52,188 44,061 12,720
---------------------------------------------------- ---- --------- ------------ ------------
Equity
Share capital 813 788 19,990
Share premium 28,293 28,293 -
Merger reserve (9,980) (9,980) (9,980)
Share-based payment reserve 497 96 -
Retained earnings 31,237 20,527 (789)
---------------------------------------------------- ---- --------- ------------ ------------
Equity attributable to owners of the parent company 50,860 39,724 9,221
Non-controlling interests 1,328 4,337 3,499
---------------------------------------------------- ---- --------- ------------ ------------
Total equity 52,188 44,061 12,720
---------------------------------------------------- ---- --------- ------------ ------------
(1) See note 3.3 for details regarding the restatement.
Consolidated statement of changes in equity
for the year ended 31 December 2022
Equity
attributable
to owner
Share-based of Non-
Called up Share Merger payments Retained parent Controlling Total
share 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) - 3,622 13,632 3,499 17,131
-------------------------- ------------- ------- ------- ----------- -------- ------------ ----------- -------
Correction of error (net
of tax) - - - - (4,411) (4,411) - (4,411)
-------------------------- ------------- ------- ------- ----------- -------- ------------ ----------- -------
Restated total equity at
the beginning of the
financial year(1) 19,990 - (9,980) - (789) 9,221 3,499 12,720
-------------------------- ------------- ------- ------- ----------- -------- ------------ ----------- -------
Profit for the financial
period and total
comprehensive income - - - - 4,757 4,757 413 5,170
-------------------------- ------------- ------- ------- ----------- -------- ------------ ----------- -------
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)
Put and call options over
non-controlling interests - - - - (1,802) (1,802) - (1,802)
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 20,527 39,724 4,337 44,061
-------------------------- ------------- ------- ------- ----------- -------- ------------ ----------- -------
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 on options - - - - 606 606 - 606
Deferred tax on options - - - 1 515 516 - 516
Non-controlling interests
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
-------------------------- ------------- ------- ------- ----------- -------- ------------ ----------- -------
(1) See note 3.3 for details regarding the restatement.
Consolidated statement of cash flows
for the year ended 31 December 2022
2021
2022 (restated(1)
)
GBP'000 GBP'000
------------------------------------------------------------- -------- ------------
Cash flows from operating activities
Profit before taxation 12,798 7,547
Adjusted for:
Depreciation of property, plant and equipment 2,069 1,340
Amortisation of intangibles 3,317 2,087
Amortisation of right-of-use assets 6,923 5,934
Profit on disposal of property, plant and equipment (151) -
Share-based payment expense 400 96
Finance income (42) -
Finance expense 3,572 2,783
------------------------------------------------------------- -------- ------------
Operating cash flows before movements in working capital 28,886 19,787
(Increase) / decrease in inventories (8,438) 2,837
Increase in trade and other receivables (526) (1,791)
Increase in trade and other payables 6,918 265
------------------------------------------------------------- -------- ------------
Cash generated by operations 26,840 21,098
Corporation tax paid (3,679) (1,751)
------------------------------------------------------------- -------- ------------
Net cash generated by operating activities 23,161 19,347
------------------------------------------------------------- -------- ------------
Cash flows from investing activities
Purchase of intangible assets (236) (648)
Business acquisitions (net of cash acquired) (26,854) (6,225)
Deferred consideration paid (2,683) (875)
Purchase of property, plant and equipment (3,516) (1,297)
Proceeds on disposal of property, plant and equipment 195 -
Purchase of investments - (77)
Purchase of non-controlling interest of Hevey (2,480) -
Interest received 42 -
------------------------------------------------------------- -------- ------------
Net cash used in investing activities (35,532) (9,122)
------------------------------------------------------------- -------- ------------
Cash flows from financing activities
Principal paid on lease liabilities (8,395) (6,750)
Issue of share capital 25 30,000
Costs of capital raise - (1,549)
Dividends (3,087) (999)
Capital repayment to non-controlling interests (10) -
Proceeds from borrowings 110,976 4,908
Repayment of borrowings (80,450) (40,081)
Bank interest paid (1,306) (529)
Interest on financial liabilities (124) (165)
------------------------------------------------------------- -------- ------------
Net cash inflow / (outflow) from financing activities 17,629 (15,165)
------------------------------------------------------------- -------- ------------
Net increase / (decrease) in cash and cash equivalents 5,258 (4,940)
Cash and cash equivalents at the beginning of the year 11,402 16,342
------------------------------------------------------------- -------- ------------
Cash and cash equivalents at the end of the year 16,660 11,402
------------------------------------------------------------- -------- ------------
Cash and cash equivalents 16,038 11,402
Cash and cash equivalents included in assets held for resale 622 -
------------------------------------------------------------- -------- ------------
Cash and cash equivalents at the end of the year 16,660 11,402
------------------------------------------------------------- -------- ------------
(1) See note 3.3 for details regarding the restatement.
Notes to the financial statements
for the year ended 31 December 2022
1. General information
Lords Group Trading plc (the 'Company') is a public company
limited by shares, listed on AIM and incorporated and domiciled in
England. The address of the Company's registered office and
principal place of business is 2nd Floor Hanger Green, London,
England, W5 3EL.
The principal activity of the Company together with its
subsidiary undertakings (the 'Group') throughout the period is the
distribution of building materials, heating goods and DIY goods to
local tradesmen, large scale developers, small and medium
construction companies and retail customers.
The financial statements were authorised for issue, in
accordance with a resolution of directors, on 2 May 2023. The
directors have the power to amend and reissue the financial
statements.
2. Accounting policies
2.1 Basis of preparation of financial statements
Whilst the financial information included in this preliminary
results' announcement has been prepared in accordance with the
recognition and measurement requirements of UK-adopted
International Accounting Standards this announcement does not
itself contain sufficient information to comply with UK-adopted
International Accounting Standards and does not constitute
statutory accounts for the purposes of section 434 of the Companies
Act 2006.
The principal accounting policies used in preparing this
preliminary results announcement are those that the Company has
adopted for its statutory accounts for the year ended 31 December
2022 and are unchanged from those previously disclosed in the
Group's Annual Report and Accounts for the year ended 31 December
2021.
Statutory accounts for 2021 have been delivered to the Registrar
of Companies and those for 2022 will be delivered in due course.
The Company's auditors RSM UK LLP, have reported on the 2022
accounts; their report was unqualified, did not draw attention to
any matters by way of emphasis without qualifying their report and
did not contain statements under s498 (2) or (3) Companies Act
2006. The 2021 audit report was unqualified, did not draw attention
to any matters by way of emphasis without qualifying their report
and did not contain statements under s498 (2) or (3) Companies Act
2006.
Full financial statements for the year ended 31 December 2022
will be posted and made available to shareholders in due
course.
The financial statements have been prepared on a going concern
basis under the historical cost convention unless otherwise
specified within these accounting policies. The financial
information is presented in pounds sterling and all values are
rounded to the nearest thousand (GBP'000), except when otherwise
indicated.
The preparation of financial statements requires the use of
certain critical accounting estimates. It also requires management
to exercise its judgement in the process of applying the Group and
Company accounting policies. The areas involving a higher degree of
judgement or complexity, or areas where assumptions and estimates
are significant to the financial statements, are disclosed in note
3.
2.2 Going concern
At 31 December 2022, the Group had GBP34.4 million of undrawn
facilities as disclosed in note 25 and GBP16.0 million of cash.
Banking covenants are breached if the last twelve months' adjusted
EBITDA / interest (interest ratio) falls below 5 or the last twelve
months' net debt / adjusted EBITDA exceeds 2.5. At 31 December
2022, the interest ratio was over 14.5 and the last twelve months'
net debt / adjusted EBITDA ratio was 1.6.
Accounting standards require that the foreseeable future covers
a period of at least twelve months from the date of approval of the
financial statements, although they do not specify how far beyond
twelve months a board should consider. The Board has considered
cash flow facilities out to an extended period coinciding with the
expiry of the banking facilities on 21 July 2024. The Group is
expected to have at least GBP24.8 million of headroom over its
facilities at all times until 21 July 2024.
The cash flow forecasts have been stress tested by considering
the most likely risks impacting the Group. These are considered to
be growth below forecast, increased working capital requirements
through increased debtors and an increase in interest base rate.
The Group's cash flow projections indicate covenants on facilities
will not be breached unless, instead of the anticipated growth, the
Group's projected EBITDA falls by GBP3.1 million, or debtors
increase by 15.0% above the base model, or the Bank of England base
rate increases to 9.5%. While none of these are likely to occur,
the Group has mitigating actions at its disposal that it can take
in downside scenarios, such as delaying capital expenditure and
maintaining a strong credit control function across the Group
supported by credit insurance and restructuring the Group to reduce
costs.
Cash flow forecasts are reforecast in the event of a potential
acquisition not already in the forecast. The Group prepares weekly
cash flow projections, daily sales flashes and monthly management
accounts compared to budget with key performance indicators which
together will provide an early warning system to indicate whether
any mitigating actions are necessary in any part of the Group.
In all reasonable scenarios the Group is projected to be
compliant with its banking covenants and therefore the directors
are satisfied that the Group has adequate resources to continue
operations for the foreseeable future.
On 5 April 2023 the Group has increased its facilities by a
further GBP25 million with an initial three year term. For further
details see note 16, post balance sheet events. The increased and
extended facilities have not been considered in the above but will
only increase the Group's resilience.
After reviewing the Group and Company's forecasts and risk
assessments and making other enquiries, the Board has formed the
judgement at the time of approving the financial statements that
there is a reasonable expectation that the Group and its
subsidiaries have adequate resources to continue in operational
existence until at least 21 July 2024, when the existing banking
facilities expire.
Accordingly, the directors continue to adopt the going concern
basis in preparing the Group and Company financial statements.
2.3 New accounting standards, interpretations or amendments
adopted by the Group
The Group has not early adopted any other standard,
interpretation or amendment that has been issued but is not
effective. The Group applies for the first time the following new
standards applicable for the year ended 31 December 2022:
Amendments to IFRS standards applicable for year ended 31
December 2022:
Amendments to standards
-- Amendments to IFRS 3 Business Combinations.
-- Amendments to IAS 16 Property, Plant and Equipment.
-- Amendments to IAS 37 Provisions, Contingent Liabilities and Contingent Assets.
-- Annual Improvements 2018-2020.
-- Amendments to IFRS 16 Leases: Covid-19-Related Rent Concessions beyond 30 June 2021.
By adopting the above, there has been no material impact on the
financial statements.
International Financial Reporting Standards in issue but not yet
effective
At the date of authorisation of these financial statements, the
Group has not applied the following revised IFRS standards that
have been issued but were not effective for the year ended 31
December 2022:
-- amendments to IAS 12 Deferred Tax related to Assets and
Liabilities arising from a Single Transaction;
-- amendments to IAS 8 Accounting policies, Changes in
Accounting Estimates and Errors: Definition of Accounting
Estimates; and
-- amendments to IAS 1 Presentation of Financial Statements and
IFRS Practice Statement 2: Disclosure of Accounting policies.
The directors do not expect that the adoption of the standards
listed above will have a material impact on the financial
statements of the Group.
3. Critical accounting judgements, estimates and errors
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.
3.1 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, we
consult relevant professional experts and reassess our 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 we do not provide for their
outcome but instead include further disclosures outlining the
matters within our contingent liabilities note.
Assessment of who has the risk and reward of ownership of
non-controlling interests with put and call options
A key area of judgement applied in the preparation of these
financial statements is determining whether the risk and rewards of
ownership resides with the non-controlling interests or the Group
when an acquisition has put and call options.
Where the pricing is at a variable price, the Group assesses the
risk and rewards reside with the non -- controlling interests
(NCI). This is because the exposure to any increase or decrease in
the value of the business resides with the NCI, as they will either
retain the investment indefinitely (if neither party exercises) or
they can recover the fair value of the business through the
exercise price.
Where the exercise price is a fixed amount (or an amount that
varies only for the passage of time), then the risks and rewards
reside with the Group. This is because once the put and call become
exercisable, one party will be incentivised to exit because they
benefit from doing so.
In the case of the acquisition of Direct Plumbing and Heating
the Group acquired a 90% holding of the companies and has a put and
call policy over the remaining 10%. The purchase price is based on
a formula that approximates market value. There is also a service
agreement which impacts 50% of the price paid for the shares but as
the price paid is still variable the Group assesses the risk and
rewards remain with the non-controlling interest.
In October 2017, the Group acquired a 75% interest in Hevey
Building Supplies Limited with put and call interests over the
remaining 25%. The purchase price of the options was at market
value. There was also a service agreement which was in addition to
and not affecting the purchase price of the option. The Group
assesses that risk and reward remained with the non-controlling
interest.
In April 2021, the Group acquired a 75% interest in Condell
Limited with put and call interests over the remaining 25%. The
purchase price of the options was at market value and there was no
service contract. The Group assesses that risk and reward remained
with the non-controlling interest.
As no liability had been recorded for the options of Hevey or
Condell in prior years, a prior adjustment has been made and the
accounting is included in note 3.3.
3.2 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 2.45% to 5.31% 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. The Group
performed a sensitivity analysis on the incremental borrowing rate
and identified that if the incremental borrowing rate increased to
8%, for all assets, there would be a reduction in the carrying
amount of the right-of-use asset at 31 December 2022 of
GBP4,081,000 (2021: GBP3,484,000) and there would be a subsequent
decrease in the lease liability of GBP3,730,000 (2021:
GBP3,213,000). If the incremental borrowing rate decreased to 3%,
for all assets, there would be an increase in the carrying amount
of the right-of-use asset at 31 December 2022 of GBP5,455,000
(2021: GBP4,902,000) and there would be a subsequent increase in
the lease liability of GBP4,805,000 (2021: GBP4,140,000).
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 reassessed 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 note 12 for the carrying values of the assets and
details on the key assumptions made.
Inventories
The Group carries significant levels of inventory and key
judgements 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
reassess the adequacy and accuracy of the inventory provision. In
arriving at their conclusion, the directors consider inventory
ageing and turn analysis. The inventory provision is 3.8% of
inventory (2021: 5.9%). Doubling the provision would increase cost
of sales / reduce the carrying value of inventory by GBP1,997,000
in 2022 (2021: GBP2,304,000).
Fair value of intangible assets
The fair value of customer relationship assets and trade names
separately acquired through business combinations involves 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, EBIT and discount rates. Estimated
attrition rates are net of growth rates for the existing customer
base. The relief from royalty rate is the value that would be
obtained by licensing trade names out to a third party, as a
percentage of sales. See note 12 for the carrying value of the
assets.
The assumptions applied by the directors in respect of the
business combinations are as follows:
Trade names
-----------------
Customer EBIT as Relief
a from
attrition % of revenue Discount royalty Discount
rate rate rate rate
--------------------------------- --------- ------------ -------- ------- --------
Advance Roofing Supplies Limited 2.0% 8.0% 13.0% 0.3% 13.0%
A.W. Lumb 2.8% 5.5% 11.2% 0.3% 11.2%
DH&P Plumbing and Heating 9.1% 6.5% 12.8% 0.3% 12.8%
Sudbury branch acquisition 3.0% 9.2% 12.8% - -
--------------------------------- --------- ------------ -------- ------- --------
3.3 Correction of error in accounting for option to acquire
minority interest
In October 2017 and April 2021 the Group acquired a majority
share 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. In addition Hevey Building Services Limited put in place a
services agreement with deferred remuneration after five years
attached to service and growth targets. The services agreement was
not accounted for by the group.
These errors have been corrected by restating each of the
affected financial statements line items for the prior periods as
at 31 December 2020 and 31 December 2021 respectively and as such
have been corrected via a prior year restatement.
31 December
31 December Increase 2020
/
2020 (decrease) restated
Consolidated statement of financial position (extract) GBP'000 GBP'000 GBP'000
------------------------------------------------------- ----------- ---------- -----------
Non-current trade and other payables 2,840 4,411 7,251
Total non-current liabilities 54,985 4,411 59,396
Total liabilities 146,632 4,411 151,043
Net assets 17,131 (4,411) 12,720
Retained earnings 3,622 (4,411) (789)
Total equity 17,131 (4,411) 12,720
------------------------------------------------------- ----------- ---------- -----------
31 December
31 December Increase 2021
/
2021 (decrease) restated
Consolidated statement of financial position (extract) GBP'000 GBP'000 GBP'000
------------------------------------------------------- ----------- ---------- -----------
Current trade and other payables 70,459 2,442 72,901
Total current liabilities 80,370 2,442 82,812
Non-current trade and other payables 3,621 4,245 7,866
Total non-current liabilities 41,191 4,245 45,436
Total liabilities 121,561 6,687 128,248
Net assets 50,748 (6,687) 44,061
Retained earnings 27,214 (6,687) 20,527
Total equity 50,748 (6,687) 44,061
------------------------------------------------------- ----------- ---------- -----------
31 December
31 December Increase 2021
/
2021 (decrease) restated
Summary of movement in retained earnings GBP'000 GBP'000 GBP'000
---------------------------------------------------- ----------- ---------- -----------
Retained earnings - 31 December 2020 3,622 (4,411) (789)
Put and call options over non-controlling interests - (1,802) (1,802)
Profit for the year 5,231 (474) 4,757
Capital reorganisation 19,360 - 19,360
Dividends paid (999) - (999)
---------------------------------------------------- ----------- ---------- -----------
Retained earnings - 31 December 2021 27,214 (6,687) 20,527
---------------------------------------------------- ----------- ---------- -----------
31 December
31 December Increase 2021
/
2021 (decrease) restated
Consolidated statement of comprehensive income (extract) GBP'000 GBP'000 GBP'000
--------------------------------------------------------- ----------- ---------- -----------
Exceptional expenses (2,085) (432) (2,517)
EBITDA 20,123 (432) 19,691
Operating profit 10,762 (432) 10,330
Finance expense (2,741) (42) (2,783)
Profit before tax 8,021 (474) 7,547
Taxation (2,377) - (2,377)
--------------------------------------------------------- ----------- ---------- -----------
Profit for the year 5,644 (474) 5,170
--------------------------------------------------------- ----------- ---------- -----------
31 December
31 December Increase/ 2021
2021 (Decrease) restated
Total comprehensive income attributable to: GBP'000 GBP'000 GBP'000
-------------------------------------------- ----------- ---------- -----------
Owners of the parent company 5,231 (474) 4,757
Non-controlling interest 413 - 413
-------------------------------------------- ----------- ---------- -----------
5,644 (474) 5,170
-------------------------------------------- ----------- ---------- -----------
Earnings per share
Basic earnings per share (pence) 3.73 (0.34) 3.39
Diluted earnings per share (pence) 3.40 (0.31) 3.09
-------------------------------------------- ----------- ---------- -----------
The restatement also affected note 5 Exceptional items,
increasing the charge by GBP432,000, and note 9 Finance expense,
increasing the charge by GBP42,000.
4. Segmental analysis
The Group has two reporting segments, being the distribution of
plumbing and heating, and the sale and distribution of merchanting
and other services. Total assets and liabilities are provided to
the chief operating decision-maker in the Group's internal
management reporting by segment
Plumbing
and
Heating Merchanting Total
2022 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) (4,523) (4,632)
Administrative expenses (19,095) (35,771) (54,866)
----------------------------------- ------------ ------------ ------------
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
----------------------------------- ------------ ------------ ------------
Heating Merchanting Total
(Restated(1) (Restated(1) (Restated(1)
) ) )
2021 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 - (2,517) (2,517)
----------------------------------- ------------ ------------ ------------
EBITDA 10,261 9,430 19,691
Depreciation (1,124) (216) (1,340)
Amortisation (1,523) (6,498) (8,021)
----------------------------------- ------------ ------------ ------------
Operating profit 7,614 2,716 10,330
Finance income - - -
Finance costs (773) (2,010) (2,783)
----------------------------------- ------------ ------------ ------------
Profit before taxation 6,841 706 7,547
Taxation (1,059) (1,318) (2,377)
----------------------------------- ------------ ------------ ------------
Profit / (loss) for operating unit 5,782 (612) 5,170
----------------------------------- ------------ ------------ ------------
Assets and liabilities
Total assets 96,080 76,229 172,309
Total liabilities (59,098) (69,150) (128,248)
----------------------------------- ------------ ------------ ------------
Net assets 36,982 7,079 44,061
----------------------------------- ------------ ------------ ------------
Additions to non-current assets 9,895 7,756 17,651
----------------------------------- ------------ ------------ ------------
(1) See note 3.3 for details regarding the restatement.
5. Exceptional items
Exceptional items are presented separately as one-off costs that
are unlikely to reoccur or costs outside normal business
trading.
2021
2022 (restated(1)
)
GBP'000 GBP'000
-------------------------------------------- ------- ------------
HS2 compensation (748) -
Listing costs - 1,523
Costs of previous financing expensed - 248
Costs of business combinations 842 514
Retentions employment costs on acquisitions 681 432
National insurance payments 338 -
Reduction in contingent consideration (184) (200)
-------------------------------------------- ------- ------------
929 2,517
-------------------------------------------- ------- ------------
(1) See note 3.3 for details regarding the restatement.
Year ended 31 December 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 costs associated with the business combinations detailed in
note 19 have been expensed and disclosed as exceptional items which
amount to GBP842,000. The Group sometimes includes retentions
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 GBP681,000.
On migrating to a new payroll system in 2016, 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 promptly notified HMRC of the error upon
discovery in 2022 and has agreed and paid a full and final payment
of GBP338,000 to cover all national insurance due.
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 GBP188,000 is due in
April 2023 if EBITDA targets are achieved.
Year ended 31 December 2021
On 20 July 2021, the Group listed on the Alternative Investment
Market (AIM). The costs associated with the listing have been
expensed and amounted to GBP1,523,000. Associated with the listing,
the Group underwent a refinancing. The costs of the previous
financing were being expensed over the term of the loans. As these
were no longer required, the costs associated with the previous
financing arrangements, which amounted to GBP248,000, were written
off to the income statement with the refinancing.
Transaction costs relating to business combinations amounting to
GBP514,000 were expensed in the year.
The Group sometimes includes retentions 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 GBP432,000.
A GBP200,000 contingent consideration assumed on the acquisition
of Kings Langley Building Supplies Limited was not payable and
therefore released to the income statement in the year.
6. Employee benefit expenses
Staff costs of continuing operations, including directors'
remuneration, were as follows:
2022 2021
GBP'000 GBP'000
--------------------------- ------- -------
Wages and salaries 31,298 22,833
Social security costs 3,050 2,313
Defined contribution costs 697 424
Share-based payments 400 96
--------------------------- ------- -------
35,445 25,666
--------------------------- ------- -------
The average monthly number of employees of continuing
operations, including the directors, during the year were as
follows:
2022 2021
No. No.
-------------------------------- ---- ----
Management and administration 110 82
Sales, retail and manufacturing 770 556
-------------------------------- ---- ----
880 638
-------------------------------- ---- ----
7. Expenses by nature
Operating profit is stated after charging / (crediting):
2022 2021
GBP'000 GBP'000
---------------------------------------------------- ------- -------
Depreciation of property, plant and equipment 2,069 1,340
Amortisation of intangible assets 3,317 2,087
Amortisation of right-of-use assets 6,923 5,934
Inventories recognised as an expense 361,237 300,569
Short-term and low-value lease payments 142 148
Foreign exchange gains (6) (14)
Share-based payments 400 96
Release of impairment of inventories (307) (142)
Profit on disposal of property, plant and equipment (151) -
Defined contribution pension plan 697 424
---------------------------------------------------- ------- -------
8. Finance income
2022 2021
GBP'000 GBP'000
------------------------- ------- -------
Bank interest receivable 42 -
------------------------- ------- -------
42 -
------------------------- ------- -------
9. Finance expense
2021
2022 (restated(1)
)
GBP'000 GBP'000
------------------------------------------------------------- ------- ------------
Bank loans and overdrafts 1,306 529
Invoice discounting facilities 124 165
Unwinding of deferred consideration and call and put options 183 212
Interest on dilapidation provision 46 41
Lease liabilities 1,913 1,836
------------------------------------------------------------- ------- ------------
3,572 2,783
------------------------------------------------------------- ------- ------------
(1) See note 3.3 for details regarding the restatement.
10. Taxation
2021
2022 (restated(1)
)
GBP'000 GBP'000
-------------------------------------------------- ------- ------------
Corporation tax
Current tax on profit for the year 3,883 2,344
Adjustments in respect of previous periods 87 366
-------------------------------------------------- ------- ------------
3,970 2,710
-------------------------------------------------- ------- ------------
Deferred tax
Originating and reversal of temporary differences (762) (198)
Adjustments in respect of previous periods 46 (707)
Effect of changes in tax rates 3 572
-------------------------------------------------- ------- ------------
(713) (333)
-------------------------------------------------- ------- ------------
Total tax charge 3,257 2,377
-------------------------------------------------- ------- ------------
(1) See note 3.3 for details regarding the restatement.
Factors affecting tax charge for the year
The tax assessed for the year is higher than (2021: higher than)
the standard rate of corporation tax in the UK of 19% (2021: 19%).
The difference is explained below:
2021
2022 (restated(1)
)
GBP'000 GBP'000
----------------------------------------------------------------------------------- ------- ------------
Profit before taxation 12,798 7,547
----------------------------------------------------------------------------------- ------- ------------
Profit multiplied by standard rate of corporation tax in the UK of 19% (2021: 19%) 2,432 1,434
Adjustments in respect of previous periods 133 (341)
Expenses not deductible 660 843
Income not deductible (148) -
Changes in tax rates 3 572
Deferred tax not recognised 107 16
Share-based payments 70 (147)
----------------------------------------------------------------------------------- ------- ------------
Total tax charge for the year 3,257 2,377
----------------------------------------------------------------------------------- ------- ------------
(1) See note 3.3 for details regarding the restatement.
Factors that may affect future tax charges
In March 2021, the Chancellor announced that the tax rate would
increase to 25% with effect from 1 April 2023 and the law has been
substantively enacted as the year end. Deferred taxes at the
balance sheet date have been measured using these enacted tax rates
and reflected in these financial statements.
11. Earnings per share
2021
2022 (restated(1)
)
-------------------------------------------------------------------- ----------- ------------
Basic earnings per share
Earnings from continuing activities (pence) 5.68 3.39
Diluted earnings per share
Earnings from continuing activities (pence) 5.36 3.09
-------------------------------------------------------------------- ----------- ------------
Weighted average shares for basic earning per share 160,523,582 140,354,443
Number of dilutive share options 9,552,402 13,647,753
Weighted average number of shares for dilutive earnings per share 170,075,984 154,002,196
Earnings attributable to the equity holders of the parent (GBP'000) 9,117 4,757
-------------------------------------------------------------------- ----------- ------------
Both the basic and diluted earnings per share have been
calculated using the earnings attributable to shareholders of the
parent company, Lords Group Trading plc, of GBP9,117,000 (2021:
earnings of GBP4,757,000) as the numerator, meaning no adjustment
to profit was necessary in either year.
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 5), share-based payments and amortisation of intangible
assets.
2021
2022 (restated(1)
)
GBP'000 GBP'000
---------------------------------------------------------- ----------- ------------
Earnings attributable to the equity holders of the parent 9,117 4,757
Exceptional items 929 2,517
Share-based payments 400 96
Amortisation of intangible assets 3,317 2,087
Less tax impact of adjustments (883) (893)
---------------------------------------------------------- ----------- ------------
Adjusted earnings 12,880 8,564
---------------------------------------------------------- ----------- ------------
Weighted average shares for basic earnings per share 160,523,582 140,354,443
Number of dilutive share options 9,552,402 13,647,753
---------------------------------------------------------- ----------- ------------
2022 2021
---------------------------------------------------------- ----------- ------------
Adjusted basic earnings per share
Earnings from continuing activities (pence) 8.02 6.10
---------------------------------------------------------- ----------- ------------
Adjusted diluted earnings per share
Earnings from continuing activities (pence) 7.57 5.56
---------------------------------------------------------- ----------- ------------
(1) See note 3.3 for details regarding the restatement.
12. Intangible assets
Customer
Software relationships Trade names Goodwill Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------------- -------- ------------- ----------- -------- -------
Year ended 31 December 2021
Opening net book value 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 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
---------------------------------------- -------- ------------- ----------- -------- -------
Year ended 31 December 2022
Opening net book value 952 12,454 1,797 7,470 22,673
Additions 236 - - - 236
Reclassification from tangible assets - - - 1,649(1) 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 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
---------------------------------------- -------- ------------- ----------- -------- -------
(1.) The acquisition of Condell included a long leasehold which
was originally classified as a freehold. This has been reclassified
under IFRS 16 and the reduction in tangible assets increases
goodwill on acquisition. This has not had a material impact on net
assets at the acquisition date or at 31 December 2021 and no prior
year restatement has been made for this.
The software intangible assets include the inventory management
system of a subsidiary undertaking which was created by an external
development firm for the subsidiary's specific requirements. The
asset is carried at GBP126,208 (2021: GBP151,449) and has a
remaining amortisation period of six years (2021: seven years). In
addition, another subsidiary company implemented an ERP and stock
management system with a carrying value at year end of GBP557,148
(2021: GBP621,841) and with a remaining amortisation period of
seven years (2021: eight years). There are no other individually
material intangible assets.
Goodwill is systematically tested for impairment at each balance
sheet date. The Group has no assets with indefinite lives, other
than goodwill. No intangible assets were identified by management
which needed to be impaired.
Cash-generating unit (CGU) assessment
The Group tests the carrying amount of goodwill annually for
impairment or more frequently if there are indications that their
carrying value might be impaired. The carrying amounts of other
intangible assets are reviewed for impairment if there is an
indication of impairment. Impairment is calculated by comparing the
carrying amounts to the value-in-use derived from discounted cash
flow projections for each CGU to which the intangible assets are
allocated. A CGU is deemed to be the branch or group of branches
acquired at the time of a business combination. The carrying amount
of goodwill is allocated across multiple cash-generating units and
the amount allocated to each unit is not significant in comparison
with the entity's total carrying amount of goodwill.
The breakdown of the net book value of intangible assets by
operating segment is:
2022 2021
GBP'000 GBP'000
--------------------- ------- -------
Merchanting 33,104 15,981
Plumbing and Heating 12,227 6,692
--------------------- ------- -------
45,331 22,673
--------------------- ------- -------
The total recoverable amount in relation to these CGUs at 31
December 2022 was GBP279,409,000 (2021: GBP185,440,000). The
value-in-use calculations are based on five-year management
forecasts with a terminal growth rate applied thereafter,
representing management's estimate of the long-term growth rate of
the sector served by the CGUs. The recoverable amounts in both 2022
and 2021 were in excess of the carry value of goodwill and so no
goodwill was impaired, or any part of the CGU disposed of.
The key assumptions, which are equally applicable to each CGU,
in the cash flow projections used to support the carrying amount of
goodwill were as follows:
Plumbing
and
Heating Merchanting
----------------------- -------- -----------
Five-year sales growth 4.8% - 1.5% -
11.3% 5.8%
Terminal sales growth 2.0% 2.0%
Discount rate 11.5% 11.5%
----------------------- -------- -----------
Sensitivity analysis
A reasonable change in a key assumption would not cause the
carrying value of either CGU to exceed its recoverable amount; the
table below shows the amount of headroom and the revised
assumptions required to eliminate the headroom in full at 31
December 2022. The headroom relates to the excess of the
recoverable amount over the carrying value of the goodwill,
intangible assets and other applicable net assets of the CGUs.
Plumbing
and
Heating Merchanting
------------------------------------ --------- -----------
Recoverable amount of CGU (GBP'000) 141,676 130,319
Current headroom (GBP'000) 94,504 66,393
Five-year sales growth <0% <0%(1)
Terminal sales growth <0% <0%(1)
Discount rate 13% - 39% 18% - 28%
------------------------------------ --------- -----------
(1) Two CGUs within the Merchanting division are more sensitive
than this and breakeven occurs with five-year sales growth limited
to 1-2%. The recoverable amount of the CGUs is GBP26,309,000 (2021:
GBP9,123,000) and the base headroom is GBP7,717,000 (2021:
GBP1,022,000).
13. Leases and right-of-use assets
Nature of leasing activities
The Group leases a number of assets with all lease payments
fixed over the lease term. The Group has property leases, plant and
machinery and motor vehicles in the scope of IFRS 16, including
retail branches, warehouses, lorries and other vehicles.
2022 2021
------------------------ ---- ----
Number of active leases 240 210
------------------------ ---- ----
Description of payments
2022 2021
GBP'000 GBP'000
------------------------------------- ------- -------
Principal lease payments 8,395 6,750
Interest on dilapidation provision 46 41
Interest payments on leases 1,913 1,836
Short-term and low-value lease costs 142 148
------------------------------------- ------- -------
10,496 8,775
------------------------------------- ------- -------
Short-term and low-value lease costs relates to individual vans
which are rented on a monthly basis by subsidiaries of the
Group.
Right-of-use assets
Leasehold Plant and Motor
property machinery vehicles Total
GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------------- --------- --------- -------- --------
At 31 December 2020
Cost 33,195 5,833 5,094 44,122
Accumulated amortisation and impairment (7,349) (1,997) (2,689) (12,035)
---------------------------------------- --------- --------- -------- --------
At 1 January 2021 25,846 3,836 2,405 32,087
---------------------------------------- --------- --------- -------- --------
Year ended 31 December 2021
Opening net book value 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 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
---------------------------------------- --------- --------- -------- --------
Year ended 31 December 2022
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)
---------------------------------------- --------- --------- -------- --------
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 amount 34,015 2,381 2,572 38,968
---------------------------------------- --------- --------- -------- --------
Lease liabilities
Leasehold Plant and Motor
property machinery vehicles Total
GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------------- --------- --------- -------- -------
At 1 January 2021 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
--------------------------------------- --------- --------- -------- -------
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 minimum lease payments and present value
2022 2021
GBP'000 GBP'000
---------------------------------------------- -------- --------
Within one year 5,963 6,200
Later than one year and less than five years 19,415 19,236
Later than five years and less than ten years 14,670 11,534
Later than ten years and less than 15 years 8,955 8,550
After 15 years 6,550 2,272
---------------------------------------------- -------- --------
Total including interest cash flows 55,553 47,792
---------------------------------------------- -------- --------
Less interest cash flows (13,033) (11,160)
---------------------------------------------- -------- --------
Total principal cash flows 42,520 36,632
---------------------------------------------- -------- --------
Reconciliation of current and non-current lease liabilities
2022 2021
GBP'000 GBP'000
------------ ------- -------
Current 5,496 5,114
Non-current 37,024 31,518
------------ ------- -------
Total 42,520 36,632
------------ ------- -------
14. 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 as at 31 December
2022 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 APP 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 ten-year
period from August 2010, cumulatively amounting to up to nearly
GBP3,000,000. The Board is unable to predict the outcome of this
reporting to HMRC and therefore the level of any potential fines.
Our 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 will be significantly less
than the maximum that could be imposed by HMRC and therefore would
be covered by the warranties contained in the sale and purchase
agreement for APP Wholesale Limited.
The Group has since conducted training for certain staff members
within APP Wholesale Limited and has updated and implemented
improved systems and controls which were overseen by the Board and
supported by professional advisers. The Board is 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.
15. Related party transactions
Parent entity
Lords Group Trading plc is the parent entity.
Transactions with related parties
Gempoint 2000 Limited, a company of which Shanker Patel is also
a director, owns properties leased by operating branches of the
Group. In total, the Group paid Gempoint GBP963,000 in lease
payments (2021: GBP892,000). At 31 December 2022, the Group owed
Gempoint GBP187,000 (2021: GBP164,000).
The Group directors received dividends in the year from the
Company as follows.
2022 2021
GBP'000 GBP'000
---------------- ------- -------
Shanker Patel 1,028 290
Chris Day 11 -
Gary O'Brien 3 1
Andrew Harrison 1 -
---------------- ------- -------
The following transactions occurred between Group companies and
companies that are not wholly owned within the Group:
Condell Limited paid management fees of GBP320,000 (2021:
GBP291,000), and at 31 December 2022 owed GBP252,000 (2021:
GBP591,000) to wholly owned Group companies. Condell made purchases
of GBP224,000 (2021: GBP153,000) and sales of GBP701,000 (2021:
GBP274,000) from wholly owned Group companies and was owed a net
balance of GBP89,000 (2021: GBP39,000) on these transactions.
Weldit LLP paid management fees of GBP22,500 (2021: GBP18,000),
interest of GBP19,000 (2021: GBP26,322) and made purchases of
GBPnil (2021: GBPnil) to wholly owned Group companies. At 31
December 2022, Weldit LLP owed GBP710,000 (2021: GBP737,000) to
wholly owned Group companies.
Hevey Building Supplies was not wholly owned until 22 October
2022 when the non-controlling interest was acquired and Hevey
Building Supplies became wholly owned. Transactions up to 22
October 2022 were as follows:
Hevey Building Supplies Limited paid management fees in the
period to 31 October 2022 of GBP150,000 (2021: GBP108,000) and
interest of GBPnil (2021: GBP50,000) to wholly owned Group
companies. At 31 December 2021, Hevey Building Supplies Limited
owed GBP51,000.
16. Post balance sheet events
Purchase of Heathrow branch of George Lines Civils &
Landscaping Merchants
On 12 January 2023, the Group entered into binding agreements in
respect of the purchase of the freehold property from which the
Heathrow branch of George Lines Civils & Landscaping Merchants
operates (the 'Property') from the original vendor of George
Lines.
The Property, which is situated close to Heathrow airport and
covers an area of 1.52 acres including 5,570 square feet of covered
storage, is considered by Lords to be prime industrial real estate
from which the Heathrow branch of George Lines Civils &
Landscaping Merchants is intending to continue to operate for the
foreseeable future. The branch has been operating out of the site
for more than 40 years.
Maximum consideration for the purchase of the Property is
GBP6.26 million in cash, of which GBP2.2 million has been paid by
the Group. The balance of the consideration is to be paid by the
Group prior to 5 July 2024. Transfer of the title of the Property
to the Group will occur upon completion, being the date on which
the remaining consideration is paid, and the Group will continue to
lease the Property until completion occurs, with any rental
payments paid prior to completion deducted from the final
consideration.
Sale of Lords at Home Ltd
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 subsidiary, which has 31 employees, was
considered non-core to the Group's principal focus of building,
plumbing, heating and DIY goods, and its sale will allow the Group
to further focus on core areas of the Lords business.
The cash consideration for the sale of the Lords at Home
business was GBP805,000 payable in full on completion. During the
year ended 31 December 2022, Lords at Home generated GBP3.0 million
in revenue and contributed GBP80,000 of EBITDA.
Chiltern Timber Supplies Limited
On 31 March 2023 the Group acquired Chiltern Timber Supplies
Limited ('Chiltern Timber') for a total consideration of up to
GBP1.65 million on a net cash free/debt free basis. The
consideration payable is GBP1.175 million on signing and up to a
further GBP0.475 million deferred equally over 12, 24 and 36 months
on a contingent basis subject to Chiltern Timber delivering certain
earnings targets.
Established in 2013, Chiltern Timber is an independent timber
merchant operating from a modern single site in Hemel Hempstead,
Hertfordshire. The business specialises in providing hardwoods,
special timber sections, timber landscaping products and veneered
sheet material. The business also operates a modern milling
facility, allowing it to offer a differentiated service to that of
its competitors.
Refinancing Group Lending Facilities
The Group amended its banking facilities on 5 April 2023. The
Group's existing GBP70.0 million lending facilities with HSBC,
consisting of a GBP50.0 million revolving credit facility ('RCF')
and a GBP20.0 million receivables financing facility ('RFF')
(together the "Existing Facilities"), have been cancelled and
repaid pursuant to the Refinancing with such repayment being funded
by drawings under new GBP95.0 million facilities provided by HSBC,
NatWest and BNP Paribas consisting of a GBP70.0 million RCF (the
"New RCF") and a GBP25.0 million RFF each with an initial
three-year term (together, the "New Facilities").
The New RCF includes: (i) a GBP20.0 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.
Resignation of Dawn Moore
Dawn Moore, Non-Executive Director, has advised the Board she
intends to step down as a director of the Group immediately
following the Company's 2023 Annual General Meeting to focus on
expanding executive responsibilities.
- Ends -
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
RNS may use your IP address to confirm compliance with the terms
and conditions, to analyse how you engage with the information
contained in this communication, and to share such analysis on an
anonymised basis with others as part of our commercial services.
For further information about how RNS and the London Stock Exchange
use the personal data you provide us, please see our Privacy
Policy.
END
FR NKBBQABKDBPK
(END) Dow Jones Newswires
May 03, 2023 02:00 ET (06:00 GMT)
Lords Group Trading (LSE:LORD)
過去 株価チャート
から 4 2024 まで 5 2024
Lords Group Trading (LSE:LORD)
過去 株価チャート
から 5 2023 まで 5 2024
