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RNS Number : 5625Q CMO Group PLC 31 May 2024
CMO Group Plc
("CMO" or "the Group")
Preliminary Results for the year ended 31 December 2023
CMO Group Plc, the UK's largest online-only retailer of building materials,
today announces its Preliminary Results for the year ended 31 December 2023.
CMO's vision is to be the destination of choice for everyone building or
improving a house or home in the UK. CMO is disrupting a huge, predominantly
offline, market with a digital first proposition through the widest range,
specialist expertise, and helpful customer solutions.
CMO has created category authority by offering market-leading choice listing
over 130,000 products through its portfolio of specialist SUPERSTORES. This,
together with the unique dropship model for delivery, provides an enhanced
experience for its digital native customers.
A challenging market and financial performance
· CMO faced a difficult market backdrop in 2023 which has been
well-publicised. In 2023 GfK* reported YoY declines of 14% and 20% in the
Builders Merchant and Tiles market, respectively, with the online segment of
the Tiles market particularly challenging with a drop of 29% YoY.
· Cost-of-living pressures and higher interest rates impacted demand in
consumer markets and the UK experienced the wettest 18-months on record which
had a particular impact on the domestic construction sector.
· As a result, total revenue for the year fell 14% to £71.5m,
significantly impacted by the fall in the Tiles market.
· Group revenue up 59% on pre-covid levels of £44.9m.
· The SUPERSTORES outperformed the market growing share by c.10% H2 v
H1.
· TILES like-for-like sales declined 31%, in line with the market.
Tiles market c.20% down on pre-covid levels, but TILES sales +53% vs FY2019.
Revenue Building Plumbing Tiles Total
2023 (£m) 53.0 7.3 11.2 71.5
2022 (£m) 59.1 8.0 16.0 83.1
-10% -9% -31% -14%
· Gross profit totalled £14.9m (2022: £16.5m), reflecting a gross
margin of 20.8%, (2022:19.8%).
· Adjusted EBITDA** was £0.9m (2022: £2.1m).
· Closing cash at 31 December 2023 was £4.7m (2022: £6.2m) and net
debt, being cash less the balance drawn on the revolving credit facility, was
£0.6m.
A more efficient business and progress on strategy
In 2023, CMO overlayed its longer-term strategy with shorter-term strategic
priorities and has had significant success:
· Margin growth, a 1% increase in gross product margin achieved.
· Recovery in the cost of carriage with 56% improvement achieved.
· Matching headcount to market demand - cost reduction of 18% achieved.
· GOOD BUILD SUPERSTORE has taken its first orders.
· PLUMBING SUPERSTORE is gaining traction.
· LANDSCAPING SUPERSTORE (6000 products) soft launched.
Customers loyal
· 65% of orders from repeat customers, up from 50% in 2022.
· Customer acquisition remains balanced between paid and non-paid
digital marketing.
· Average order value declined by 22% primarily impacted by lower order
value from new customers. Existing Customer AOV was maintained.
· Marketable database grew by 18% year on year to almost 300,000 email
addresses.
· Over 40,000 customers rate CMO's service as excellent on Trustpilot.
Current trading and outlook
· The poor weather continued into Q1, and the tiles market continued to
show major decline in both online and bricks and mortar segments. Multi-point
plan developed to assist recovery of the tile business being implemented by
the new management team.
· Whilst market conditions are expected to remain challenging, the
Group is seeing an improving trend and some momentum in Q2 which is
anticipated to continue into H2.
· Improvements seen in AOVs (Average Order Value) from Q1 to Q2 after
nine months of suppression indicate consumer confidence is returning to larger
RMI projects.
· Improving sales order trend in Q2:
Consolidated P&L - like-for-like sales orders performance
Channel Q1 LFL Q2 to date LFL
Building (12.7%) (4.9%)
Plumbing (17.4%) (2.1%)
Tiles (39.3%) (24.3%)
Total (18.2%) (7.9%)
· As previously reported significant cost reductions have been
undertaken to offset the impact of the slower than expected start to the year.
This has seen a headcount reduction to 174 at the end of March, a c.15%
reduction from the start of the year and more than 30% since the peak.
· Strategic initiatives delivering improved sales trend with continued
focus on improving product margin, maintaining carriage cost recovery,
ensuring excellent customer service and reducing refunds, as well as bringing
the digital marketing spend down to or below 6%.
· FY benefit of brand consolidation of JTM and Clickbasin into PLUMBING
SUPERSTORE expected in 2024.
· Launch of 'Super Rewards' and UX optimisations of mobile experience
in H2.
· Development of next store launch in early 2025 as CMO continues to
deliver on its mission to bring the widest range to the market.
· With inflation easing, a reduction in National Insurance and expected
falls in interest rates, we anticipate the gradual improvement in consumer
confidence to continue and accelerate into H2.
· The Group remains well financed with cash and available facilities of
over £4m at the end of April 2024. In addition, we have made progress with
our flexible banking partner to strengthen the Group's available liquidity
with the bank facilities and associated covenants renegotiated in January 2024
to meet the Groups future requirements.
Dean Murray, CEO of CMO Group said:
"2023 has been a difficult year for all allied to the housing industry.
However, whilst CMO is not immune to this, we have focussed our energies on
profitable sales and becoming a better, more efficient business which is
primed to take advantage of improvements in market conditions when they
materialise which we have seen signs of recently.
We are encouraged that our SUPERSTORES have outperformed the market and that
we gained market share in the second half.
We have a proven business model and continue to deliver on the strategic
roadmap set out at the time of our IPO. We remain focussed on successfully
navigating what we expect to be another challenging year, but one that is
beginning to show some signs of improvement. If that continues, we will
benefit and return to growing our sustainable and profitable business."
31 May 2024
Enquiries:
CMO Group PLC Via Instinctif
Dean Murray, CEO
Jonathan Lamb, CFO
Liberum Capital Limited (Nominated Adviser & Broker) Tel: +44 20 3100 2000
Andrew Godber
Satbir Kler
Instinctif Partners
Justine Warren Tel: +44 20 7457 2010
Matthew Smallwood Tel: +44 20 7457 2005
Joe Quinlan Tel: +44 20 7866 7856
*GfK (an NIQ company): https://www.gfk.com/about-gfk
(https://www.gfk.com/about-gfk)
**Adjusted EBITDA is defined as earnings before interest; tax; depreciation
and amortisation; foreign exchange; share option expenses; restructuring,
redundancy and non-recurring payroll expenses; integration of acquisitions
into the superstore environment; one off infrastructure costs; acquisitions
expenses; and certain professional fees and expenses.
Chairman's Statement
2023
The well-publicised market challenges of 2022 have continued into 2023
compounded by new disruptive forces. The onset of war in Gaza and the related
problems for shipping in the Red Sea and Suez Canal, together with the UK's
macro-economic inflationary pressures as much driven by the Ukraine conflict
and the unwinding of COVID coupled with Brexit, have all exacerbated the
impact on disposable income.
These issues have had a significant impact on the construction and building
industry leading to declines in new works and reductions in mortgage approvals
which as a direct driver of the repair maintenance and improvement (RMI)
market has made 2023 a year of challenge for CMO. At the top line revenue
reduced by 14%, with the more discretionary categories such as tiles
continuing to be the most affected.
Despite these challenges and the revenue position achieved, CMO's tile
business has performed in line with the tile category and the SUPERSTORES have
outperformed the sector, demonstrated by growth in their share of the Builders
Merchants market. This growth once again demonstrates the effectiveness of the
business model, proving that the mission to bring the widest category and
product choice, backed by product expertise and helpful customer service to
market through a range of specialist ecommerce propositions remains attractive
to customers.
Strategy
CMO continues to progress the long-term strategy to provide customers with
everything they need to build or maintain homes through a seamless and
dedicated ecommerce experience.
However, the ongoing challenging market conditions necessitated further
agility from the team and at the commencement of 2023 the operational focus
turned to five strategic priorities to protect profit and cash. CMO has been
successful in progressing the majority of them achieving growth in the gross
product margin percentage, recovery in the cost of carriage, matching
headcount to market demand, and delivering successful integration of JTM
Plumbing into the new PLUMBING SUPERSTORE specialist vertical. This has led to
a more efficient operation and provided further penetration into the c.£1.6bn
online plumbing, heating, and bathrooms category. This with the relentless
focus on profit rather than non-value accretive sales has proven to be a
prudent and effective strategy for this period.
The belief in the model and strategy is unwavering and CMO has continued to
deliver to the published strategic roadmap. Early 2023 saw the launch of the
fledging consumer focussed horizontal GOOD BUILD SUPERSTORE and more recently
the specialist vertical LANDSCAPING SUPERSTORE. CMO will continue to extend
the customer base through effective, mainly digital marketing strategies and
enhance the product offering and service through listening to customers and
effecting change to deliver an even better service.
Our vision for a better world
The Board takes its governance responsibilities very seriously, the approach
to which is set out in the Corporate Governance section of our Annual Report.
CMO recognises that responsibilities are wide-ranging, and the team work to
continuously evolve and improve governance towards the best practices required
of a larger business.
The Board, alongside the wider team and other stakeholders,
remains determined that the Group plays its part in addressing environmental
and social challenges as our position as a leader in our field rightly
demands. We continue with our programme of using science-based targets to
reduce our greenhouse gas (GHG) footprint and are actively seeking ways to
help customers choose more sustainable products.
More detail on our approach to these matters can be found in the
Environmental, Social and Governance (ESG) section of our Annual Report.
Senior management, team, and Directorate changes
The Board comprises an experienced and skilled group of individuals and they
continue to face some of the most difficult market challenges in recent times
and navigate them effectively. Against this backdrop I congratulate the
management team for their absolute rigour on delivery of the 2023 operational
pillars. CMO is a better business primed to take advantage of economic upturn
when it happens.
CMO takes great pride in its people and seeks to develop each person to their
full potential. I am pleased to report that ours are talented, dedicated, and
critical to our future success. On behalf of the whole Board, I thank them for
their hard work particularly during these tough market conditions.
After nearly 40 years in industry and five years with the Company, Sue Packer,
Chief Operating Officer, retired at the end of March 2024 and stepped down
from the Board on 8 February 2024. Commercial Director Callum Tasker has been
appointed to the Board as Chief Commercial Officer.
Mike Fell, Co-Founder of Key Capital Partners ("Key Capital"), the Company's
largest shareholder replaced James Excell as Key Capital's representative on
the Board on the 8 February 2024. Mike Fell co-founded a private equity firm
Key Capital 17 years ago and was part of the original team that invested in
CMO. He holds a number of other directorships of investee companies which will
bring wide experience to CMO.
The Board wishes to express deep gratitude to Sue and James for their
contribution to the Company.
Outlook
Despite having a disruptive business model, CMO has not been able to overcome
the widespread macro-economic and geopolitical challenges which have impacted
the construction industry as a whole and the disposable income of our
customers. Whilst cost inflation is abating and there are downward movements
in interest rates, predicting the year ahead is no easier than it was last
year, suffice to say that we are not anticipating rapid economic recovery.
CMO is well funded and has a strong balance sheet and a proven business model.
The focus remains on successfully navigating the tough market conditions and
if needs be making the necessary hard decisions to protect the business and
shareholder interests for the future. The actions taken in 2023, we believe,
will build a growing, sustainable, profitable business that will thrive when
conditions allow.
Ken Ford
Chairman
Chief Executive Officer's review
Market overview
Since floating the Business on AIM in July 2021, we have not enjoyed normal
market conditions for any length of time and faced both supply and demand
challenges and had to contend with substantially increased cost base against a
backdrop of volatile consumer confidence and declining disposable income. The
challenges faced have been onerous, but whilst we are not immune to such
challenges, the strength of our proposition is allowing us to navigate through
what we hope to be the worst of it with our business in good shape and primed
for when the economy improves.
In 2023, GfK* reported declines in the Builders Merchant market of 14%, 20%
declines in the Tiles market, with the online segment even further challenged
with a drop of 29% YoY.
Results
2023 2022
Revenue £71.5m £83.1m
Gross profit £14.9 £16.5m
(Loss)/ Profit Before Tax (£2.3m) £0.2m
EPS (2.55p) 0.51p
Net (debt)/ cash (£0.6m) £1.4m
Adjusted EBITDA** £0.9m £2.1m
**Adjusted EBITDA is defined as earnings before interest; tax; depreciation
and amortisation; foreign exchange; share option expenses; restructuring,
redundancy and non-recurring payroll expenses; integration of acquisitions
into the superstore environment; one off infrastructure costs; acquisitions
expenses; and certain professional fees and expenses.
Strategic initiatives
Faced with this environment, we have overlayed our longer-term strategy with
five shorter-term strategic priorities designed to support profit and protect
cash. Success against these priorities was reported at the half year and was
tangible, with a 1 percentage point increase in gross product margin, a
substantial 56% improvement in carriage recovery and an overhead efficiency
programme that has seen certain costs reduce by 18%.
Operations
Revenue at both the SUPERSTORES and Tiles on a like-for-like basis were down
on prior year -9% and -35% respectively.
A sound performance in SUPERSTORES against the margin and carriage priorities
mitigated most of the sales deficit to leave gross margin after carriage costs
unchanged year-on-year at c. £10.4m, and whilst the tiles business shrank, we
traded broadly in line with the pureplay market.
A change in base of the market share calculation through our market data
providers blurs year on year comparison but the data indicates we achieved a
10% increase in market share in the SUPERSTORES H2 v H1. This we consider a
very credible achievement and testament to the hard choices we made throughout
the year.
We have made progress with the brand consolidation integrating the
acquisitions JTM Plumbing into PLUMBING SUPERSTORE and we continue to progress
our strategy to provide everything you need to build and improve a home
through developing the vertical propositions, fine tuning our segmentation,
and improving our offer across existing verticals which will benefit from
brand and digital marketing benefits over time.
*GfK (an NIQ company): https://www.gfk.com/about-gfk
(https://www.gfk.com/about-gfk)
Implementing our strategy
The CMO strategy has historically been successful in growing the business and
has again allowed us to gain market share. This strategy remains unchanged: To
provide our customers the confidence they need to build and improve homes
through the widest range, specialist expertise, and helpful customer
solutions. We recognise that our customers prefer to shop through specialist
stores offering sound advice and our strategy is to continue adding specialist
stores, either organically or through acquisition.
It is fundamentally important in a multi-site retail environment that
customers know who they are shopping with and the rebrand rolled out between
December 2022 and January 2023, has had impressive results. Repeat customers
now account for 65% of revenue up from 50% prior to rebranding, and all
measures of customer engagement showed clear improvement post rebranding.
We've seen the marketable database grow by 18% YoY to almost 300,000 email
addresses with click through rates on email as an indicator of brand
engagement increasing by 80%.
With cost-of-living challenges impacting consumer confidence we saw a general
decline on Average Order Value (AOV), primarily from new customers with AOV
declining 22% compared to 2022. Encouragingly AOV from repeat customers
remained flat YoY and was 54% more than our new customers. Conversion Rate
(CVR) was flat YoY.
Delivered in early 2023, phase 1 of our dedicated project based horizontal the
GOOD BUILD SUPERSORE soft launched. This site provides homeowners with project
led content that seeks to take a DIYer from project inspiration to product
confidence and act as a referral channel to the SUPERSTORES. Whist the store
has seen its first orders we recognise that certain changes in consumer
behaviour indicate that time to purchase is drawing out as credit becomes more
expensive and projects get put on hold. We are therefore focussed on
developing the commercial aspects of the site to create a tighter relationship
between inspiration and product basket and we anticipate a phase 2 and phase 3
development cycle.
2023 has seen PLUMBING SUPERSTORE gaining traction. JTM Plumbing has now been
fully integrated and is beginning to benefit from consolidation synergies
including utilising a single platform reducing operational costs and more
targeted and efficient marketing focussed on a single entity. After the
inevitable period of disrupted sales as search engines realign to the new
site, PLUMBING SUPERSTORE is enjoying the strongest conversion rates across
the Group and providing us access to a growing online category worth an
estimated £1.6bn. All Click Basin products have also now been listed on
PLUMBING SUPERSTORE and are trading well which continues to demonstrate the
strength of the model, team, and our technology.
It remains CMO's intention to deliver on our promise of a fully supported
shopping experience for homeowners and tradespeople alike, and to maintain our
position as a major disruptor in the market.
I am also pleased that we have soft launched LANDSCAPING SUPERSTORE with over
6000 products at the very end of 2023 and brings our complement of SUPERSTORES
to nine. Creating specialist verticals gives us category authority to
dominate internet search and awareness.
CMO continues to pursue an active acquisition pipeline to speed up the
achievement of its strategic goal but recognises the need for cautious cash
investment until the current economic climate improves.
Primed to deliver
CMO is a better, more efficient business than it was a year ago as we
fine-tune both our strategy and operations. With the prevailing market
conditions, we will remain focussed on achieving profitable sales rather than
driving volume. Our primary focus remains on maintaining and building margin
both at the product level and after carriage, improving our refund control,
driving conversion, continuing to become even more efficient on carriage costs
and managing better our stockturn.
The tile market has been extremely difficult for some time now, but we have
largely performed in line with the market. We have recruited a new management
team who are tasked with improving this vertical's performance. They have
carried out an exhaustive and thorough review covering every aspect and
analysed trends for the future to ensure we have a broad range of the most
attractive products for customers to acquire. A multi-point plan has been
developed and is being implemented over the course of 2024, a key feature of
which is to improve margin and conversion in this category.
Across the business we continually review pricing across all products to be
competitive within each market and seek to constantly improve and evolve our
online experience, range, and service proposition to ensure we continue to
deliver on our strategic defined mission.
We are seeking further efficiencies exploring how we deliver multiple orders
to the same customer in one consignment which we see as the next paradigm
shift to enhance our dropship model. We expect to see a benefit in warehousing
costs and greatly improved customer experience that will continue to see us
disrupt the market.
Strong balance sheet
We have a strong balance sheet with ample liquidity to fund the business. The
year-end cash position is £4.7m and, including unutilised bank facilities, we
have available funds of £7.7m. We are controlling costs tightly and managing
cash effectively.
People and culture
CMO remains extremely grateful to its loyal workforce which has continued to
perform with energy and agility in pursuit of CMO's strategy and goal to
disrupt its market. The protracted period of economic challenge and change we
discussed last year has shown no signs of abating, yet the team continuously
rises to meet the next challenge with optimism and ingenuity.
Culture is defined and set by the people in the business and is being promoted
through facilitated training sessions for the wider management team which have
seen excellent participation and engagement.
The speed at which we were able to restructure the operational management team
early in 2024 on the announcement by our COO of her retirement is testament to
CMO's culture of positivity, empowerment, and promotion from within.
The goal of share ownership throughout the business has been augmented during
2023 by a further distribution of options under the CSOP scheme launched in
2021.
Directorate changes
Our Chief Operating Officer, Sue Packer retired from CMO at the end of March
2024 which we announced to the market and our shareholders on 8 February 2024.
Sue has been an instrumental part of the team that has made CMO into the
Company it is today. I, personally, will miss her knowledge and experience,
but also wish her the happiest of retirements.
I am delighted that Callum Tasker has taken the role of Chief Commercial
Officer post and joined the Board. The Board will benefit from his industry
experience and long-term knowledge of CMO. We could not have a better
replacement for Sue in Callum, who has worked with and alongside her for the
past five years. This will provide a seamless succession.
We are also delighted that Mike Fell joined the Board replacing James Excell
as Key Capital Partner's representative. We will benefit from his
broad experience and counsel, and many thanks to James who has provided
invaluable support and advice in his role as non-executive director.
The Board wishes to express deep gratitude to Sue and James for their
contribution to the Company. In Sue's case, particularly her part in driving
and delivering upon the Company's growth strategy and in James's for his
advice and counsel.
Looking to the future
It's clear that the year ahead will continue to be difficult, but CMO will
continue to progress and deliver on its shorter-term strategic imperatives:
increasing margins; constantly monitoring the cost base and processes for
further efficiencies; bedding in and incrementally improving the carriage
improvements already made; and further consolidation of the acquisitions for
brand promotion as well as synergistic purposes.
Our main focus will be to deliver on our strategy by growing organically
whilst monitoring the market for exceptional value opportunities that will
deliver incremental value to our existing categories or provide the foundation
for new.
As we enter a new financial year, the board is confident that CMO's strategy
will see it confidently through the year ahead, with the continuous addition
of new products, new stores and technical innovation will prime it back into
growth when market conditions improve. We have a strong relationship with our
supportive banking partners and have renegotiated our bank facilities and
covenants to ensure we have a robust financial platform to support delivery of
our strategic goals.
Dean Murray
Chief Executive Officer
Chief Financial Officer Review
Overview
Total revenue for the year reduced by 14% to £71.5m driven mainly by
challenging market conditions particularly in tiles and the cost-of-living
pressures reducing demand in consumer markets. Gross profit totalled £14.9m
(2022: £16.5m) which represented a gross margin of 20.8%, a 0.9% improvement
compared with 2022 when gross margin totalled 19.9%. Adjusted EBITDA was £0.9
(2022: £2.1m), as defined on page 4.
31 Dec 31 Dec
2023 2022
£m £m
Revenue 71.5 83.1
Cost of sales (56.6) (66.6)
Gross profit 14.9 16.5
Gross Margin 20.8% 19.8%
Administrative expenses (16.6) (15.9)
Operating (loss)/ profit (1.7) 0.6
Finance income 0.0 0.0
Finance expense (0.6) (0.4)
(Loss)/ profit before taxation (2.3) 0.2
Closing cash at 31 December 2023 was £4.7m (2022: £6.2m) and net debt, being
cash less the balance drawn on the revolving credit facility, was £0.6m
(2022: net cash £1.4m).
Revenue
Group sales for 2023 were £71.5m (2022: £83.1) reflecting particularly
challenging market conditions in tiles where revenue fell 31% against a
backdrop of a decline in online market volume of 29%. Building and plumbing
reported market share gains while reporting reduced sales.
Revenue Building Plumbing Tiles Total
2023 53.0 7.3 11.2 71.5
2022 59.0 8.1 16.0 83.1
-10% -9% -31% -14%
We adapted our strategy to prevailing market conditions to ensure a focus on
margin at the expense of sales where necessary to manage risk, including
actively declining trade sales where credit insurance was not available. This
strategy included a focus on recovery of carriage costs to protect against
margin dilution in a competitive market as well as prioritising variable and
overhead cost efficiency.
Gross profit
Gross margin has benefitted from this approach gaining 1% to 20.8% compared to
2022 (19.8%) despite sales declines in some higher margin verticals. Net
carriage costs have reduced 56% in 2023 compared to 2022 demonstrating the
success of this ongoing initiative.
Variable costs and overheads
Variable costs have reduced in the period reflecting lower activity levels and
a focus on cost efficiencies. In the face of increasing cost per click
dynamics we modified out approach to digital marketing during the year to
focus on session quality and target high intent traffic. This has driven
operational improvements and enabled costs for 2023 to be maintained in line
with 2022.
Overhead efficiency has also been a key component of our response to the
challenging market conditions and remains a core focus. We have enhanced the
ecommerce infrastructure, launched new SUPERSTORES and had a full year of
trade for Clickbasin (acquired June 2022) during the period. However,
despite inflation peaking at over 10% in the first quarter and remaining a
significant contributor to increasing costs, we have taken action to manage
costs, including headcount reductions. Administrative expenses have increased
slightly to £16.6m (2022: £15.9m) of which fixed overhead costs, including
payroll, infrastructure, legal and professional fee have remained consistent
with 2022 at £6m (2022: £6m).
EBITDA
The Group generated Adjusted EBITDA of £0.9m (2022: £2.1m) for the year.
Adjusted EBITDA is defined by management as earnings before: interest; tax;
depreciation and amortisation; foreign exchange; share option expenses;
restructuring, redundancy and non-recurring payroll expenses; integration of
acquisitions into the superstore environment; one off infrastructure costs;
acquisitions expenses; and certain professional fees and expenses. In respect
of the Adjusted EBITDA calculation cost adjustments have been identified and
defined by management.
The calculation of Adjusted EBITDA is based on the following data:
31 Dec 31 Dec
2023 2022
£ £
Net (loss)/ profit attributable to equity holders of the parent (1,834,798) 366,978
Add back:
Taxation (492,963) (191,951)
Interest 641,353 452,781
Depreciation and impairment of property, plant and equipment, and right of use 644,386 719,057
assets
Amortisation and impairment of intangible fixed assets 1,228,526 1,088,650
Foreign exchange 24,102 108,026
EBITDA 210,606 2,543,541
Share options expenses 108,977 (286,118)
Costs in respect of superstore integration 552,115 -
Professional fees and similar costs 53,031 -
Change in deferred consideration - (458,648)
Non-recurring payroll and similar costs - 98,944
Costs incurred directly related to acquisitions - 156,349
Adjusted EBITDA 924,729 2,054,068
Earnings Per Share
Basic earnings per share ("EPS") is calculated based on the weighted average
number of shares in issue. The table below shows the impact on EPS (''Adjusted
EPS'') of earnings before: interest; tax; depreciation and amortisation;
foreign exchange; share option expenses; restructuring, redundancy and
non-recurring payroll expenses; integration of acquisitions into the
superstore environment; one off infrastructure costs; acquisitions expenses;
and certain professional fees and expenses. Diluted EPS is calculated by
adjusting the weighted average number of ordinary shares outstanding to assume
conversion of all dilutive potential ordinary shares. The Company being loss
making in the current period would mean that any exercise would be
anti-dilutive.
The calculation of the basic and diluted earnings per share is based on the
following data:
31 Dec 31 Dec
2023 2022
Earnings £ £
Net (loss)/ profit attributable to equity holders of the parent for the (1,834,798) 366,978
purpose of basic earnings per share calculation
Effect of dilutive potential ordinary shares - -
Earnings for the purposes of diluted earnings per share (1,834,798) 366,978
Add back:
Share options expenses 108,977 -
Costs in respect of superstore integration 552,115 -
Professional fees and similar costs 53,031 -
Non-recurring payroll and similar costs - 73,586
Costs incurred directly related to acquisitions - 156,349
Adjusted earnings (1,120,675) 596,913
Number of shares
Weighted average number of ordinary shares for the purposes of basic earnings 71,969,697 71,969,697
per share
Effect of dilutive potential ordinary shares 216,970 216,970
Weighted average number of ordinary shares for the purposes of diluted 72,186,667 72,186,667
earnings per share
Earnings per share from continuing operations attributable to owners of the Pence Pence
parent:
Basic (2.55) 0.51
Diluted (2.55) 0.51
Adjusted basic earnings per share (1.56) 0.83
Adjusted diluted earnings per share (1.56) 0.83
Taxation
The charge for taxation was £nil (2022: £nil) due to the availability of
brought forward losses. A tax credit has been recognised in the year of
£492,963 (2022: £191.951) in respect of a deferred tax asset. The forecasted
taxable profits of the Group support the carrying value of the deferred tax
assets.
Cash flow and net debt
Cash has reduced from £6.2m at 31 December 2022 to £4.7m at 31 December
2023. Operating cash inflow of £2.3m was reduced by payment of the final
instalment of deferred consideration across all acquisitions of £1.7m. This
was partially offset by: additional drawdown on the acquisition loan facility
of £0.5m; interest (£0.6m) predominantly relating to the revolving credit
facility; and capital expenditure of £1.4m which includes development costs
for the ecommerce platform, integration and migration costs and performance
enhancements. Bank facility utilisation has increased £0.5m following payment
of the final tranches of deferred consideration for JTM Plumbing Limited and
Clickbasin.
Bank facilities
The Group held a revolving bank loan credit facility (''RCF'') with Clydesdale
Bank plc as at 31 December 2023. The facilities with Clydesdale Bank totalled
£9,250,000 of which £5,250,000 relates to financing permitted acquisitions
and £4,000,000 relates to working capital. At 31 December 2023 the Group and
Company have drawn down from the RCF Acquisition Facility only. This facility
is denominated in pounds sterling with a nominal interest rate of 3.85% plus
Bank of England base rate, and the final instalment due on the acquisition
facility is 30 June 2026, and the working capital facility 30 June 2027. The
carrying amount at the year-end of amounts drawn down were £5,250,000 (2022:
£4,787,678). As at the 31 December 2023 the Group was not subject to any
external covenant or capital management tests, while its banking facilities
were being renegotiated.
In January 2024 the Group renegotiated its banking facilities which include a
revolving credit facility for acquisition purposes of up to £5,250,000 and a
revolving credit facility for working capital purposes of £3,000,000. The
Group will be subject to banking covenants on the renegotiated facilities,
with the new covenants including a minimum EBITDA target, a de minimis cash
balance and capital expenditure control, and the final instalment due on the
acquisition facility is 30 June 2026, and the working capital facility 30 June
2027.
Interest and financing costs
Interest costs have increased to £0.6m for 2023 (2022: £0.5m) reflecting the
impact of increases in the base rate on the interest rate the group pays on
its bank facility.
Statement of financial position
Net assets of the Group totalled £16.4m (2022: £18.1m) and can be summarised
as follows:
31 Dec 31 Dec
2023 2022
£m £m
Non-current assets 26.9 25.3
Inventories 5.1 5.5
Trade and other receivables 2.0 2.7
Cash and cash equivalents 4.7 6.2
Trade and other payables (15.8) (16.6)
Loans and borrowing (5.3) (4.8)
Lease liabilities (1.2) (0.2)
16.4 18.1
Non-current assets have increased reflecting changes to lease terms on
existing properties and creating updated right of use assets and liabilities.
Inventory levels are the result of active management to reduce the volume of
stock held following the elevated stock holdings in 2022 that were required to
support supply chain frailties, lower activity levels and the benefit to stock
holding of the drop ship model. Trade receivables have reduced as we have
extended less credit as part of our risk management focus. Other receivables
include balances to be collected relating to volume rebate agreements. Cash
and bank facility movements are set out in the cash flow and net debt section
above. Trade and other payables reflect settlement in the year of deferred
consideration balances, volume related reduction in deferred income and a
temporary pause in the Groups VAT payments, as requested by HMRC, as it worked
to put a VAT Group in place. This has recently been established and we now
expect the position to normalise over the coming periods.
Jonathan Lamb
Chief Financial Officer
Cautionary Statement
Certain statements in this trading update are forward-looking. Although the
Group believes that the expectations reflected in these forward-looking
statements are reasonable, we can give no assurance that these expectations
will prove to have been correct. Because these statements contain risks and
uncertainties, actual results may differ materially from those expressed or
implied by these forward-looking statements. We undertake no obligation to
update any forward-looking statements, whether as a result of new information,
future events or otherwise.
Consolidated Statement of Total Comprehensive Income
FOR THE YEAR ENDED 31 DECEMBER 2023
31 Dec 31 Dec
2023 2022
£ £
Revenue 71,503,861 83,072,635
Cost of sales (56,584,272) (66,530,988)
Gross profit 14,919,589 16,541,647
Administrative expenses (16,605,997) (15,913,839)
Operating (loss)/ profit (1,686,408) 627,808
Finance income 230 436
Finance expense (641,583) (453,217)
(Loss)/ profit before taxation (2,327,761) 175,027
Taxation 492,963 191,951
(Loss)/ Profit for the year attributable to owners of the parent (1,834,798) 366,978
Other comprehensive income for year - -
Total comprehensive (loss)/ profit for the year attributable to owners of the (1,834,798) 366,978
parent
Earnings per share from continuing operations attributable to owners of the Pence Pence
parent:
Basic (2.55) 0.51
Diluted (2.55) 0.51
Adjusted basic earnings per share (1.56) 0.83
Adjusted diluted earnings per share (1.56) 0.83
Consolidated Statement of Financial Position
AS AT 31 DECEMBER 2023
31 Dec 31 Dec
2023 2022
£ £
Assets
Non-current assets
Goodwill 20,445,122 20,445,122
Other intangible assets 3,085,999 2,967,848
Property, plant, and equipment 1,416,296 1,451,461
Right-of-use-assets 1,108,591 119,490
Deferred tax assets 817,412 324,449
Total non-current assets 26,873,420 25,308,370
Current assets
Inventories 5,062,859 5,454,126
Trade and other receivables 1,951,295 2,731,988
Cash and cash equivalents 4,680,883 6,209,910
Total current assets 11,695,037 14,396,024
Total assets 38,568,457 39,704,394
Liabilities
Current liabilities
Trade and other payables (15,781,101) (16,579,099)
Lease borrowings (2,217) (859)
Lease liabilities (498,694) (210,140)
Total current liabilities (16,282,012) (16,790,098)
Non-current liabilities
Loans and borrowings (5,250,000) (4,787,678)
Lease liabilities (635,648) -
Total non-current liabilities (5,885,648) (4,787,678)
Total liabilities (22,167,660) (21,577,776)
Net assets 16,400,797 18,126,618
Equity
Share capital 719,697 719,697
Share premium 25,873,451 25,873,451
Merger reserve (513,000) (513,000)
Share option reserve 242,607 133,630
Retained deficit (9,921,958) (8,087,160)
Total equity attributable to owners of the parent 16,400,797 18,126,618
Consolidated Statement of Changes in Equity
FOR THE YEAR ENDED 31 DECEMBER 2023
Share Share Premium Merger Reserve Share Option Reserve Retained Deficit Total
Capital
£ £ £ £ £ £
As at 1 January 2022 719,697 25,873,451 (513,000) 419,748 (8,454,138) 18,045,758
Profit for the year - - - - 366,978 366,978
Total comprehensive profit for the year - - - - 366,978 366,978
Transactions with owners
Share-based payment adjustments - - - (286,118) - (286,118)
Total transactions with owners (286,118) - (286,118)
As at 31 December 2022 719,697 25,873,451 (513,000) 133,630 (8,087,160) 18,126,618
As at 1 January 2023 719,697 25,873,451 (513,000) 133,630 (8,087,160) 18,126,618
Loss for the year - - - - (1,834,798) (1,834,798)
Total comprehensive loss for the year - - - - (1,834,798) (1,834,798)
Transactions with owners
Share-based payment adjustments - - - 108,977 - 108,977
Total transactions with owners 108,977 - 108,977
As at 31 December 2023 719,697 25,873,451 (513,000) 242,607 (9,921,958) 16,400,797
Consolidated Statement of Cash Flow
FOR THE YEAR ENDED 31 DECEMBER 2023
31 Dec 31 Dec
2023 2022
£ £
Cash flows from operating activities 2,340,194 2,443,251
Investing activities
Payments to acquire intangible fixed assets (1,366,389) (1,277,763)
Payments to acquire tangible fixed assets (49,866) (68,893)
Cash outflow on business combination (1,697,301)) (4,661,217)
Net cash used in investing activities (3,113,556) (6,007,873)
Financing activities
Receipts from borrowings draw downs 462,322 1,699,536
Repayment of lease liabilities (576,404) (547,731)
Interest paid on lease liabilities (95,946) (66,062)
Interest paid (545,637) (387,155)
Net cash generated from financing activities (755,665) 698,588
Net decrease in cash and cash equivalents (1,529,027) (2,866,034)
Cash and cash equivalents at beginning of year 6,209,910 9,075,944
Cash and cash equivalents at end of year 4,680,883 6,209,910
Notes to the Financial Statements
Year Ended 31 December 2023
1. Summary of significant accounting policies
a. General information and basis of preparation of the financial
statements
CMO Group Plc ("the Company") is a public company limited by shares
incorporated and domiciled in the United Kingdom. Its registered address is
Burrington Business Park, Burrington Way, Plymouth, United Kingdom, PL5 3LX.
CMO Group PLC was incorporated on 11 June 2021 and began trading on 23 June
2021.
The principal activity of the Group is the provision of construction materials
through the Group's websites, with a digital-first proposition and
market-leading product choice, supported by high-quality customer service and
technical expertise.
The financial information is presented in pound sterling which is the
functional currency of the group. Monetary amounts in the financial
information are rounded to the nearest £1
The financial information contained within this preliminary announcement for
the years to 31 December 2023 and 31 December 2022 does not comprise statutory
financial statements within the meaning of section 435 of the Companies Act
2006. The financial statements for the year ended 31 December 2022 have been
delivered to the Registrar of Companies and those for the year ended 31
December 2023 will be delivered following the Company's Annual General
Meeting. The auditors have reported on the 2022 and 2023 financial statements;
their reports were unqualified, did not included a reference to any matters to
which the auditors drew attention by way of emphasis without qualifying the
report and did not contain a statement under Section 498 (2) or (3) of the
Companies Act 2006.
The preliminary announcement has been prepared in accordance with UK-adopted
International Financial Reporting Standards ("IFRS") including standards and
interpretations issued by the International Accounting Standards Board. Whilst
the financial information included in this preliminary announcement has been
prepared in accordance with IFRS, this announcement does not itself contain
sufficient information to comply with IFRS.
The consolidated financial information has been prepared on a going concern
basis. The Group generated Adjusted EBITDA (see note 6) of £0.9m for the year
compared to £2.1m in 2022.
The directors are continuing to identify acquisitions as well as focussing on
the continuation of the organic growth experienced in recent years. The
directors expect growth in gross profits and operating profits in 2024.
The Group has net current liabilities of £4,586,975 (2022: £2,394,074) at
the year end, however this was expected by the directors whilst the Group
continues to reinvest in growth. The secured rolling cashflow facility to
support future growth plans provides headroom to ensure that there are
sufficient cash resources to enable the Group to meet all liabilities as they
fall due. The Group has revolving credit facilities with Clydesdale Bank plc
which, at 31 December 2023 includes £5,250,000 which can be used for
financing permitted acquisitions. In addition, the Group has access to an
additional revolving credit loan facility of £3,000,000 which can be used for
working capital. The amount drawn on the acquisition facility at the year-end
is £5,250,000 (2022: 4,787,678).
The directors are confident that the measures they have available will result
in sufficient working capital and cash flows to continue in operational
existence. Taking these matters in consideration, the Directors continue to
adopt the going concern basis of accounting in the preparation of the
financial statements. In January 2024 the Group renegotiated its banking
facilities which includes a RCF for acquisition purposes of up to £5.3m and a
RCF for working capital purposes of £3m. The final instalment due on the
acquisition facility is 30 June 2026, and the working capital facility 2027.
2. Profit for the year
(Loss)/ profit for the year has been arrived at after charging (crediting):
31 Dec 31 Dec
2023 2022
£ £
Depreciation of owned property, plant and equipment, and other leases 95,645 206,978
Depreciation expense on right-of-use assets (note 14) 548,741 512,080
Amortisation of intangible assets (note 16) 1,228,526 1,088,650
Acquisition and other costs - 156,349
Foreign exchange loss 24,102 108,026
Wages and salaries (note 9) 6,966,835 6,435,439
Social security 669,563 640,123
Cost of defined contribution scheme 167,919 132,450
Costs in respect of superstore integration 552,115 -
Professional fees and other costs 53,031 -
Share-based payment charge/ (gain) 108,977 (286,118)
Non-recurring payroll costs (note 9) - 73,586
3. Cash and cash equivalents
For the purposes of the statement of cash flows, cash, and cash equivalents
include cash on hand and in banks and investments in money market instruments.
Cash and cash equivalents at the end of the financial year as shown in the
statement of cash flows can be reconciled to the related items in the
statement of financial position as follows:
Group
31 Dec 31 Dec
2023 2022
£ £
Cash and cash balances 4,680,883 6,209,910
4. Loans, borrowing, and other payables
Group
31 Dec 31 Dec
2023 2022
£ £
Non-current
Bank borrowings 5,250,000 4,787,678
5,250,000 4,787,678
Group
31 Dec 31 Dec
2023 2022
£ £
Current
Hire purchase contracts 2,217 859
2,217 859
5. Share capital
31 Dec 2023 31 Dec 2022
No. £ No. £
Ordinary shares of £0.01 each 71,969,697 719,697 71,969,697 719,697
There were no share issues in the year ended 31 December 2023 (2022: Nil).
6. The calculation of the basic and diluted earnings per share is based on the following:
31 Dec 31 Dec
2023 2022
Earnings £ £
Net (loss)/ profit attributable to equity holders of the parent for the (1,834,798) 366,978
purpose of basic earnings per share calculation
Effect of dilutive potential ordinary shares - -
Earnings for the purposes of diluted earnings per share (1,834,798) 366,978
Add back:
Share options expenses 108,977 -
Costs in respect of superstore integration 552,115 -
Professional fees and similar costs 53,031 -
Change in deferred consideration - -
Non-recurring payroll and similar costs - 73,586
Costs incurred directly related to acquisitions - 156,349
Adjusted earnings (1,120,675) 596,913
Number of shares
Weighted average number of ordinary shares for the purposes of basic earnings 71,969,697 71,969,697
per share
Effect of dilutive potential ordinary shares - 216,970
Weighted average number of ordinary shares for the purposes of diluted 72,186,667 72,186,667
earnings per share
7. Changes in liabilities arising from financing activities
At January 2023 Financing cash flows New leases and adjustments At December 2023
£ £ Interest £ £
£
Long-term borrowings 4,787,678 (83,315) 545,637 - 5,250,000
Other lease liabilities 859 1,358 - - 2,217
Lease liabilities 210,140 (672,350) 95,946 1,500,606 1,134,342
Total liabilities from financing activities 4,998,677 (754,307) 641,583 1,500,606 6,386,559
At January 2022 Financing cash flows New leases and adjustments At December 2022
£ £ Interest £ £
£
Long-term borrowings 3,088,142 1,312,381 387,155 - 4,787,678
Other lease liabilities 2,839 (1,980) - - 859
Lease liabilities 451,691 (613,793) 66,062 306,180 210,140
Total liabilities from financing activities 3,542,672 696,608 453,217 306,180 4,998,677
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