Interim Results

RNS Number : 2572B

CMO Group PLC

30 September 2022

 

CMO Group Plc

("CMO" or "the Group")

 Interim Results for the six months ended 30 June 2022 (unaudited)

Continued sales growth and strategic expansion

CMO Group PLC,  the UK's largest online-only retailer of building materials , today announces its Interim results for the 6 months to 30 June 2022. 

During the period, despite a challenging market backdrop, the Group continued to make progress against its previously stated strategic goal; to provide customers with everything they need to build or maintain a home, through a simple, convenient, and supported shopping experience. The Group grew sales in the period under review and sales growth has accelerated since the beginning of H2.

Financial highlights

·	H1 revenue increased by 10% to £41.9m despite ongoing macro pressures
·	Online superstores LFL sales* of 5% (two-year LFL 29%) and Total Tiles LFL at -10% (two-year versus pre-acquisition 17%)
·	Gross profit increased to 8.5m (H1 2021: £7.4m)
·	Adjusted EBITDA** reduced to 1.3m (H1 2021: £2.0m)
·	Profit before tax reduced to £0.4m (H1 2021: £0.5m)
·	Strong financial position: Net cash of £2.7m  together with fund available in the RCF facility provides more than sufficient headroom for continued rapid progress (H1 net debt 2021: -£9.1m)

*Excludes carriage

** Adjusted EBITDA is earnings before interest, tax, depreciation, amortisation, share option expense, acquisition costs and exceptional items and stated on an IFRS basis.

Operational highlights

·	Acquisition of Clickbasin.co.uk driving further expansion into c£800m online plumbing and heating category. JTM Plumbing, acquired in October 2021, has performed in line with expectations and will be integrated into Plumbingsuperstore.co.uk this year
·	Average order value and conversion rates grew by over 20%
·	Marketing costs remain in line with expectations
·	Over 44% of orders from repeat customers
·	Marketable database grew by 24%

Current trading

·	Encouraging progress in the first two months of the second half.  Sales growth accelerated with total sales growth of 13.3% and LFL growth of 2.7% (5% for CMO Superstores and improvement to -3% at Total Tiles against strong prior period comparatives).

Dean Murray, CEO of CMO Group PLC said:

"We are pleased that despite a more challenging marketplace CMO continues to see positive customer demand driving further sales growth which has accelerated since July and the delivery of the strategic objectives set out at the time of the IPO. CMO's uniquely broad product range, dropship model and value proposition remain compelling to a customer base that is more and more value and digitally expectant.

The Board remains mindful of the potential for broader macro-economic impact and will act swiftly to mitigate challenges and is focused on maintaining margins and generating cash. We are confident that the Group's business plan, flexibility and high levels of customer service leave the Group well positioned for growth.

As we enter the second half of the year, we remain vigilant to the market volatility, but continue to see positive sales growth and an improving trend in product margins and we remain confident of our strategic objective of disrupting and digitalising the building materials market.

30 September 2022

Enquiries:
CMO Group PLC	Via Instinctif
Dean Murray, CEO
Jonathan Lamb, CFO
Liberum Capital Limited (Nominated Adviser & Broker)	Tel: [phone]
Andrew Godber
Lauren Kettle
Cara Murphy
Instinctif Partners
Justine Warren	Tel: [phone]
Matthew Smallwood	Tel: [phone]

CMO Group PLC

Interim Results Statement for the six months ended to 30 June 2022

The Group seeks to revolutionise and modernise the experience of homeowners and tradespeople providing customers with everything they need to build or maintain a home, through a simple, convenient, and supported journey. Despite the more challenging economic backdrop during the period, the Group has delivered strong sales growth achieving further progress against all previous comparative periods and developed both strategically and operationally.

The Group's success has been built through having a differentiated model and by disrupting and digitalising the traditional £27bn marketplace, as the UK's leading online only retailer of building materials. Through the Group's e-commerce platform which offers over 100,000 products (many more and much broader choice than a traditional builder's merchant), direct delivery from the manufacturer (dropship model) and competitive pricing, which is not hampered by traditional pricing models, together with a high-quality interactive hybrid service and negative working capital, the Group continues to grow sales and capture the next generation of tradespeople and DIYers who are digitally native.

Results

The Group delivered strong revenue growth of 10% for the six months to 30 June 2022. One-year   LFL* sales of   2 % (Superstores at   5 % and Total Tiles -10%) against particularly strong comparatives. Two-year LFL sales growth was   29 %, and on a three-year basis the Group has delivered revenue growth of over 85% and a 39% increase in market share to just under 1% accentuating the enormous growth opportunity. There was particularly strong performance in Door Superstore (+24% LFL) and our dedicated Trade vertical which saw growth of 45% LFL

Gross profit was £8.5m (20.3%) for the first half, an increase of c.1% compared to H1 2021 £7.4m (19.4%). As previously reported during Q2 the Group experienced a number of short-term pressures on margins, in common with the industry overall. These included higher carriage costs and increased energy costs, albeit the latter is a relatively small cost overall for the business. Commodity cost inflation continued during the period and was particularly apparent in energy rich products such as tiles. We continue to pass through these costs while maintaining gross margin and managing our competitive position. 

Pleasingly, other important metrics have continued to improve, such as customer conversion (CVR) and Average Order Value (AOV) both up 20% during the period on a LFL basis (excluding JTM). Marketing spend has remained in-line with budgeted expectations. 

Adjusted EBITDA was £1.3 million compared to £2m for H1 2021 driven by increased overhead costs including those attributable to the acquired businesses and PLC status.

The flexibility and agility of our model, where each transaction is profitable, meant that swift actions were taken to improve margins. We have increased prices; carriage costs have softened, and we have worked closely with suppliers on their terms to share the cost burden. These actions to focus on margin have not reduced the competitive advantage that the CMO model delivers in terms of pricing and service as demonstrated by continuing LFL sales growth.

R efunds for the group to the end of June have decreased by approximately 10%, with the largest improvement coming in order cancellations due to significantly improved availability versus last year.

*Excludes carriage.

Acquisitions

On 1 June 2022 the Group completed the acquisition of Clickbasin.co.uk for equity consideration of £1.25m funded from the Group's £6m revolving acquisition facility. In addition, the Group paid the final deferred consideration relating to the 2020 acquisition of Total Tiles Limited of c.£3m and the first instalment of the deferred consideration of c.£0.5m for the October 2021 acquisition of JTM Plumbing Limited. 

Balance Sheet and Cash Flow

Our balance sheet remains strong with more than sufficient cash and facilities for continued Group development. The Group is profitable and cash generative and has net cash of £2.7m. Investment in inventory has resulted in increased levels compared to H1 2021 to support margin and service levels as well as reflecting the inclusion of the acquired businesses in the results. We anticipate these elevated stock levels will continue for the foreseeable future, in order to maintain robust product availability and quick delivery times. The total drawn on the £10m RCF at 30 June 2022 was £4.6m all related to acquisitions made. A further £5.4m is available.

Cash inflows from EBITDA and working capital gains of c.£2m together with the £1.5m drawdown from the revolving credit facility were offset by £4.2m of deferred consideration and £0.7m of CAPEX to leave closing cash at £7.3m.

Strategic update

The Group's strategy is to provide its customers either at home or in trade with everything to build or maintain a home through a simple, convenient shopping experience. This it achieves by offering a comprehensive range of building materials through nine specialist, contact supported websites. The plan is to grow these organically and augment through selective acquisition to broaden customer reach and to extend category.

At the time of the IPO, in 2021, the Group operated seven category specific websites: CMO trade, door superstore, drainage superstore, insulation superstore, roofing superstore, tile and floor superstore and Total Tiles.

Since IPO the Group acquired JTM Plumbing merchant in October 2021 for £5.7m and in June 2022 acquired Clickbasin.co.uk, a specialist online bathroom products retailer, for up to £1.25m. These acquisitions gave the Group a foothold in an incremental large market.  Both JTM and Clickbasin have been successfully integrated into the Group and plumbingsuperstore.co.uk launched at the end Q2 and the category is up 7% YTD compared to pre-acquisition period. This has brought the Group's SKU count to over 100,000 compared to 75,000 in H1 2021.

Additional strategic growth projects are on target including brand evolution roll out by end of the year, a homeowner project store in Q4, and development of a new superstore vertical which is due to launch in Spring 2023.

Recent progress - margins restored, growth accelerating since July

The Group has made encouraging progress in the first two months of the second half.  Sales growth accelerated with total sales growth of 13.3% and LFL growth of 2.7% (5% for CMO Superstores and
-3% at Total Tiles against strong prior period comparatives).

LFL Vs 2021	Q1	Q2	Jul/Aug	Cumulative
G roup sales growth	11.8%	7.6%	13.3%	10.5%
1 Year LFL	2.9%	0.2%	2.7%	1.8%
L FL Vs pre-pandemic (2019)	Q1	Q2	Jul/Aug	Cumulative
G roup sales growth	86.2%	90.1%	8 0.7%	86.3%
3 Year LFL	3 1.5%	3 8.9%	31.0%	35.2%

Whilst the inflationary pressures persist, the actions we have taken to focus on product margins and mitigate the impact of increasing carriage costs have meant that we have seen an improving trend in margins.

Outlook - on track for growth

Whilst it is impossible to ignore the macroeconomic headwinds, CMO's unique model will stand it in good stead. Our proposition is compelling to today's trade and home customer. Not only does CMO provide an easy, exceptional value and navigable shopping journey offering a huge range, the Group's dropship delivery also allows for a more efficient and direct service. While the pressures that the Group faces are most likely to continue through H2 and beyond, CMO is encouraged as the marketable database builds, 24% YOY.

The Group remains on track to deliver continued strong sales growth in the second half of the year and will benefit from a full contribution from Clickbasin.co.uk. The management's current expectations for FY22 remain unchanged . We remain focused and confident about delivering the strategic objectives set out at the time of the IPO last year and continue to disrupt the traditional market.

About CMO

Founded in 2008 as Construction Materials Online,  CMO is  the UK's largest online-only retailer of building materials. The Company  is disrupting a 27 billion predominantly offline market with a digital first proposition and market leading product choice, supported by high quality customer service and technical expertise. 

CMO has created category authority by offering market-leading ranges listing over 100,000 products through its eight specialist websites: cmotrade.co.uk, doorsuperstore.co.uk, drainagesuperstore.co.uk, insulationsuperstore.co.uk, jtmplumbing.co.uk, roofingsuperstore.co.uk, tileandfloorsuperstore.co.uk and totaltiles.co.uk.'

It's unique digital hybrid service model, developed over more than 10 years, combines specialist advice and expertise tailored to category and customer needs online, to service the next generation of digital natives by bridging the gap between traditional bricks and mortar retailers and pureplay digital retailing. CMO has established trusted partnerships with manufacturers and supply partners across the UK. Its business model is asset light with the majority of products drop shipped directly from the manufacturers to its customers. CMO's aim is  to revolutionise the shopping experience of homeowners and tradespeople to become the 'go to' digital retailer of building materials, providing market leading product choice, relevant help and advice, and a personalised customer experience.

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.

The information contained within this announcement is deemed by the Group to constitute inside information as stipulated under the Market Abuse Regulation (EU) No. 596/2014 as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018.

Condensed Consolidated Statement of Profit or Loss or Other Comprehensive Income
For the six months ended 30 June 2022 (unaudited)
	6 months ending 30-Jun-22 Unaudited	6 months ending 30-Jun-21 Unaudited	Year ended 31-Dec-21 Audited
	£000	£000	£000
Revenue	41,869	38,195	76,340
Cost of Sales	(33,380)	(30,771)	(60,997)
Gross Profit	8,489	7,424	15,343
	20.3%	19.4%	20.1%
Administrative expenses	(7,985)	(5,975)	(18,611)
Profit / (loss) from operations	503	1,449	(3,268)
Finance income	0	0	0
Finance Expense	(146)	(927)	(1,154)
Profit / (loss) before tax	358	522	(4,422)
Tax	(122)	(144)	66
Profit for the period	236	378	(4,356)
Other Comprehensive income
Total Comprehensive income
Earnings per share for loss attributable to the owners of the parent
Basic (pence)	0.33	0.74	(7.11)
Diluted (pence)	0.33	0.74	(7.11)
EBITDA
EBITDA can be reconciled to the profit before tax as follows
EBITDA	1,254	2,053	3,714
Exceptional costs	(90)	(131)	(5,801)
Depreciation	(250)	(240)	(484)
Amortisation	(411)	(233)	(698)
Finance Income		0	0
Finance expense	(146)	(927)	(1,154)
Profit / (loss) before tax	358	522	(4,422)

Consolidated statement of changes in Equity
For the period ending 30 June 2022
	Share capital	Share premium	Merger Reserve	Share option	Retained earnings	Total
	£000	£000	£000	£000	£000	£000
Balance at 1 January 2021	0	-	-	-	(5,415)	(5,415)
Loss for the year	-	-	-	-	(4,356)	(4,356)
Total comprehensive income for the year	-	-	-	-	(4,356)	(4,356)
Issue of shares	720	25,873	-	-	-	26,593
Creation of merger reserve	-	-	(513)	-	-	(513)
Transfer to / from profit and loss account	-	-	-	(1,317)	1,317	-
Transfer to / from share option reserve	-	-	-	1,737	-	1,737
Total for the year	720	25,873	(513)	420	(3,039)	23,461
Balance as at 31 December 2021	720	25,873	(513)	420	(8,454)	18,046
Balance at 1 January 2022	720	25,873	(513)	420	(8,454)	18,046
Loss for the period					236	236
Total Comprehensive income for the period	-	-	-	-	236	236
Balance as at 30 June 2022	720	25,873	(513)	420	(8,218)	18,282

Consolidated statement of financial position
As at 30 June 2021
	6 months ending 30-Jun-22 Unaudited	6 months ending 30-Jun-21 Unaudited	Year ended 31-Dec-21 Audited
	£000	£000	£000
Assets
Current assets
Inventories	7,137	3,850	5,474
Trade and other receivables	2,593	1,440	2,942
Cash and cash equivalents	7,285	9,064	9,076
Total Current Assets	17,015	14,354	17,492
Non-current assets
Property plant and equipment	1,534	372	1,581
Right of use assets	208	456	337
Goodwill	20,367	16,860	19,413
Other Intangible assets	2,917	1,873	2,692
Deferred tax assets	37	6	129
Total Non-current assets	25,063	19,567	24,152
Total Assets	42,078	33,921	41,644
Liabilities
Current liabilities
Trade and other payables	(18,714)	(19,659)	(19,896)
Loans and borrowings	(3)	(5,935)	(3)
Liease liabilities	(172)	(138)	(311)
Current tax liabilities	(196)	(471)	(160)
Current liabilities	(19,084)	(26,203)	(20,370)
Non-current liabilities
Loans and borrowings	(4,572)	(12,298)	(3,088)
Lease liabilities	(140)	(458)	(140)
Total non-current liabilities	(4,712)	(12,756)	(3,229)
Total liabilities	(23,797)	(38,959)	(23,598)
Net assets / (liabilities)	18,282	(5,038)	18,046
Issues capital and reserves attributable to owners of the parent	18,282	(5,038)	18,046

Consolidated statement of cash flows
	6 months ending 30-Jun-22 Unaudited	6 months ending 30-Jun-21 Unaudited	Year ended 31-Dec-21 Audited
	£000	£000	£000
Cash flow from operating activities
Profit / (loss) for period	236	378	(4,356)
Adjustments for non-cash / non-operating items
Depreciation of property, plant and equipment and right of use asset	250	240	484
Amortisation and impairment of intangible fixed assets	411	233	698
Income tax expense	122	144	(66)
Finance income	0	0	0
Finance expense	146	927	1,154
Share based payment charges			1,317
Changes in operating assets and liabilities
(Increase) / decrease in inventory	(1,663)	(508)	(1,387)
(Increase) / decrease in trade and other receivables	350	(76)	(1,495)
Increase / (decrease in trade and other payables	2,236	2,957	1,795
Cash from operations	2,087	4,295	(1,857)
Net cash from operating activities	2,087	4,295	(1,857)
Cash flows from investing activities
Purchase of intangible fixed assets	(636)	(436)	(603)
Purchase of tangible fixed assets	(74)	(32)	(91)
Cash paid for acquisitions net of cash acquired	(790)	0	(2,187)
Deferred consideration paid	(3,415)
Interest received	0	0	0
	(4,915)	(468)	(2,881)
Net cash used in investing activities
Cash flows from financing activities
Receipts from issue of shares	0	0	26,180
Receipts from borrowings drawn down	1,484	0	3,088
Repayment of borrowings	0	(233)	(3,231)
Repayment of loan notes	0	(351)	(17,748)
Repayment of lease liabilities	(171)	(137)	(341)
Tax paid	(130)	0	0
Interest paid	(146)	(89)	(185)
Net cash from / (used in ) financing activities	1,037	(810)	7,764
Net increase / (decrease) in cash and cash equivalents	(1,791)	3,017	3,026
Cash and cash equivalents at beginning of period	9,076	6,050	6,050
Cash and cash equivalents at end of period	7,285	9,067	9,076

1.  General Information

CMO Group PLC ('the Company' or 'the Group') is a public company limited by shares, incorporated in the United Kingdom under the Companies Act 2006 (registration number 13451589) and registered in England and Wales. The registered office address is Burrington Business Park, Burrington Way, Plymouth, PL5 3LX.

Copies of this interim report may be obtained from the registered address or from the investors section of the company's website at cmogroup.com.

2.  Basis of Preparation

These consolidated interim financial statements of the group of for the six months ended 30 June 2022 were approved by the Board of Directors on 29 September 2022.

They do not include all of the information required for a complete set of IFRS financial statements and should be read in conjunction with the Group's last annual consolidated financial statements for the year ended 31 December 2021. However, selected explanatory notes are included to explain events and transactions that are significant to understanding changes in the Group's financial position and performance since the last annual financial statements. 

The Annual Report and Accounts for the year ended 31 December 2021 was audited and has been filed with the Registrar of Companies.  The independent auditors report on the annual report and accounts for the year ended 31 December 2021 was not qualified and did not contain statements under Section 498 of the Companies Act 2006. 

The financial information for the six months ended 30 June 2022 and 30 June 2021 is unaudited and has not been reviewed by the Company's auditors. 

The condensed consolidated interim financial statements for the six months to 30 June 2022 has been prepared on the basis of the accounting policies expected to be adopted for the year ending 31 December 2022. These are anticipated to be consistent with those set out in the Group's latest annual financial statements for the year ending 31 December 2021 with the exception of where there is a difference between UK GAAP and IFRS. These interims have been prepared in accordance with UK adopted international accounting standards but does not include all of the disclosures that would be required under International Financial Reporting Standards (IFRSs). The interim financial statements are presented in pounds sterling, which is the functional currency of the group. Amounts are rounded to the nearest thousand, unless otherwise stated. 

AIM-quoted companies are not required to comply with IAS 34 Interim Financial Reporting and accordingly the company has taken advantage of this exemption. 

The directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future and thus continue to adopt the going concern basis in preparing these interim financial statements

3.  Significant Accounting Policies

The group has applied the same accounting policies in these interim financial statements as in its 2021 annual financial statements with the exception of where there is a difference between UK GAAP and IFRS. Full disclosure of the transition to IFRS was made in the Group's AIM admission.

4.  Use of judgments and estimates

The significant judgments made by management in applying the Groups accounting policies and key sources of estimation uncertainty for the interim financial statements are the same as those described in the 2021 annual financial statements.

	6 months ending 30-Jun-22 Unaudited	6 months ending 30-Jun-21 Unaudited	Year ended 31-Dec-21 Audited
	£000	£000	£000
Earnings per share are as follows
Earnings from continuous operations
Earnings for the purposes of basic and diluted earnings per share	236	378	(4,356)
profit / (loss) for the period Attributable to the owners of the parent
Number of shares	000	000	000
Weighted average number of ordinary shares - basic earnings calculation	71,970	51,310	61,272
Dilutive potential ordinary shares from share options
Weighted average number of ordinary shares from share options -
diluted calculations	2022	2021	2021
	pence	pence	pence
Basic earnings per share	0.33	0.74	-  7.11
Diluted earnings per share	0.33	0.74	-  7.11

5.  Segmental Analysis

The group currently only report on one performance line being the retail of construction materials.

6.  Income tax

The income tax credit /charge for the period is based on the estimated rate of corporation tax that is likely to be effective for the year to 31 December 2022.

7.  Dividends

No dividends were paid or proposed during the period and no dividend was paid relating to financial year 2021.

Earnings per share (EPS) is calculated by dividing the profit for the year, attributable to ordinary equity holders of the parent, by the weighted average number of ordinary shares outstanding during the year.

Diluted EPS is calculated on the same basis as basic EPS but with a further adjustment to the number of weighted average shares in issue to reflect the effect of all potentially dilutive share options. The number of people in potentially dilutive share options is derived from the number of share options and awards granted to employees and directors where the exercise price is less than the average market price of the Company's ordinary shares during the period. Under IFRS no allowances made for the dilutive impact of share options which reduce a loss per share. The basic and diluted EPS measures are therefore the same.

8. Acquisitions

Business combinations and goodwill
Reconciliation of carrying amount of goodwill
	6 months ending 30-Jun-22 Unaudited	6 months ending 30-Jun-21 Unaudited	Year ended 31-Dec-21 Audited
	£000	£000	£000
Cost
At 1 January	19,413	16,860	16,860
Acquired through business combinations	953		2,553
At 30 June / 31 December	20,367	16,860	19,413

Deferred consideration

On 1 June 2022, the group acquired 100% of the equity instruments of Whiteholme Limited which trades as Clickbasin.co.uk, a UK based business, thereby obtaining control.  The purchase agreement includes a payment on completion and an element of deferred consideration.

The agreement includes an adjustment to the deferred consideration based upon the net assets of Whiteholme Limited. The deferred consideration is payable on agreement of the completion accounts.

Loans and borrowings
		6 months ending 30-Jun-22 Unaudited	6 months ending 30-Jun-21 Unaudited	Year ended 31-Dec-21 Audited
		£000	£000	£000
Loans and borrowings
Senior debt		(4,572)	(3,029)	(3,088)
Loan notes		0	(17,715)	0
		(4,572)	(20,744)	(3,088)

On 1 July 2021, the Company entered into a revolving credit facility agreement with Clydesdale Bank Plc (trading as Yorkshire Bank) in respect of revolving loan facilities in an aggregate amount of 10 million to be made available to the Group (the "Revolving Facility"). The borrowers under the Revolving Facility are the Company, CGL, CMOStores Holdings Limited and Total Tiles. The guarantors under the Revolving Facility are the Company, CGL, cmostores.com Limited and Total Tiles.

The proceeds of the Facility A of the Revolving Facility (which has a limit of 6 million) can be used for financing acquisitions permitted under the Revolving Facility ("Facility A") and the proceeds of Facility B under the Revolving Facility (which has a limit of 4 million) can be used for the general corporate and working capital purposes of the Group ("Facility B"). The final maturity date of the Revolving Facility is six years after the date of the Revolving Facility (the "Termination Date"). Facility A will be reduced by 250,000 on each quarter from 30 June 2023, until it is reduced by 3 million on 30 June 2026.

At 30 June 2022 £4.6m of the facility had been drawn to fund consideration payments for JTM Plumbing Limited and Whiteholme Limited . The table below sets out the draft calculation of goodwill subject to finalisation of the completion accounts.

	Asset carrying values	Fair value adjustment on transition to IFRS
Business combinations
	£	£	£
Fair Value of consideration transferred
Amounts settled in cash	2,235,407		2,235,407
Fair value of deferred consideration	250,000		250,000
Total Consideration	2,485,407	0	2,485,407
Recognised amounts of identifiable net assets
Property Plant and Equipment	9,632		9,632
Intangible assets			0
Total Non current assets	9,632	0	9,632
Inventories	286,167		286,167
Trade and other receivables	1,241,802		1,241,802
Cash and Cash equivalents	223,388		223,388
Total current assets	1,751,356		1,751,356
Trade and other payables	(227,212)		(227,212)
Due > 1yr			0
Deferred tax	(1,830)		(1,830)
Total Liabilities	(229,042)		(229,042)
Net assets acquired	1,531,946	0	1,531,946
Goodwill			953,461

 

END

 

 

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