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

*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

Current trading

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

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.

Refunds 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).

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.

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.

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

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.

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.