The information contained within this announcement is deemed by the Company to constitute inside information pursuant to Article 7 of EU Regulation 596/2014 as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018 as amended. Upon the publication of this announcement, this inside information is now considered to be in the public domain.

Lords Group Trading plc

('Lords', the 'Group' or the 'Company')

Final Results

Another year of positive strategic progress underpinned by strong financial performance

Lords, a leading distributor of building materials in the UK, is pleased to announce its annual results for the year ended 31 December 2022 ('FY22' or the 'year').

^* Based on underlying, not rounded, figures.

Financial Highlights

·   Record performance, with Group revenues up 23.9% to £450.0 million (FY21: £363.3 million) and on track to reach £500.0 million revenue target by 2024

·   Adjusted EBITDA¹ up 34.4% to £30.0 million (FY21: £22.3 million), representing a margin of 6.7% (FY21: 6.1%) and on track to reach 7.5% medium-term target

·   Adjusted basic earnings per share² up 31.5% to 8.02 pence (FY21: 6.1 pence restated)

·   Cashflow generated by operations of £26.8 million (FY21: £21.1 million restated), contributing to free cashflow³ generation of £19.1 million (FY21: £19.9 million restated)

·   Net debt⁴ at 31 December 2022 of £19.4 million (31 December 2021: £6.5 million net cash), reflecting cash cost of acquisitions in the year and leaving headroom for value-added acquisitions

·   Total dividend for the year up 5.8% to 2.0 pence per share (FY21: 1.89 pence per share)

Operational Highlights

·   Merchanting division delivered record revenues up 69.2% to £220.8 million (FY21: £130.5 million), with strong like-for-like revenue growth of 17.4%

·   Merchanting performance reflects the Group's ambition to be the 'local leader' in its markets, delivered by empowered and highly engaged management teams, alongside successful implementation of the Group's growth strategy

·   Plumbing & Heating ('P&H') division revenues down 1.5% to £229.3 million (FY21: £232.8 million), 9.1% lower on a like-for-like⁶ basis

·   P&H performance was resilient given industry-wide boiler component shortages, which eased throughout H2-22, and benefitted from management actions, including higher margin energy efficient product range, which improved divisional EBITDA margins to 6.0% (FY21: 4.4%)

·   Continued to expand existing brands and grow the customer base, opening two new branches during 2022, as well as an Advance Roofing Supplies implant in the Group's Beaconsfield branch

·   Four completed acquisitions in the year, on a blended multiple of 4.8x Adjusted EBITDA, supporting the Group's strategy of product range and geographic expansion

·   Acquisitions are EBITDA margin and earnings accretive and all are performing in line with or ahead of expectations, following successful integration

·   ESG progress delivered in FY22 including the development of Lords' ESG strategy, recruitment of the Group's first ESG manager and launch of the Lords Group Foundation.

Current Trading and Outlook

Whilst macroeconomic uncertainty remains, we believe that our end market exposure, improved product range, continuing market share gains and management actions to improve margins mean that we continue to expect a full year performance in line with market expectations.

Since the year end, the Group agreed to purchase the freehold of George Lines' Heathrow site for £6.3 million and disposed of the non-core Lords at Home homewares subsidiary for £0.8 million. On 31 March 2023, the Group acquired Chiltern Timber Supplies Limited for a total consideration of up to £1.65 million on a net cash free/debt free basis. Furthermore, on 5 April 2023, the Group refinanced its existing lending facilities securing enhanced facilities provided by HSBC, NatWest and BNP Paribas on an initial three-year term.

The Board remains confident in Lords' ability to fulfil its IPO target to become a £500.0 million revenue business by 2024 with an EBITDA margin of 7.5% in the medium term.

The Company also announces that Dawn Moore, Non-Executive Director, intends to step down as a director of the Group immediately following the Company's 2023 Annual General Meeting to focus on expanding executive responsibilities. The Board would like to thank Dawn for her considerable contribution to the Group prior to and since IPO.

Shanker Patel, CEO of Lords, commented: "This was an excellent year for the Group, as we continued to deliver on our IPO commitments and successfully grew the business in a tough trading environment. I am proud of our progress and want to thank our teams for their magnificent job in ensuring customers receive the standard of service they value so highly.

"We entered 2023 in a strong financial position, which has enabled us to continue to invest in our 3Ps, as we pursue organic and acquisition-led growth opportunities. We are focused on the potential challenges to our business, notably the impact on household balance sheets from inflation, increased energy costs and interest rates. We are responding through our ongoing expansion into new geographical markets and product lines, and by implementing our ESG strategy, a key part of which is to enhance our energy efficiency.

"With a 1% share of a large market and facility headroom available, we also have considerable scope to take share through further acquisitions that expand our geographical presence and product range. With around 40% of UK builders merchants still independently run, we have considerable scope for further consolidation and therefore see good opportunities to continue our track record of growth."

Notes

¹ Adjusted EBITDA is EBITDA (defined as earnings before interest, tax, depreciation and amortisation but also excluding exceptional items and share-based payments.

² Earnings attributable to shareholders of Lords Group Trading plc adjusted for exceptional items, share based payments and amortisation of intangible assets divided by the weighted average number of shares in issue in the year

³ Defined as cash generated by operating activities plus exceptional items less capital expenditure, taxation and interest paid.

⁴ Net debt is defined as borrowings less cash and cash equivalents.

⁵ Adjusted Profit before tax (basic) is defined as profits before tax before exceptional items, share based payments and amortisation of intangible assets.

⁶ Like-for-like sales is a measure of growth in sales, adjusted for new, divested and acquired locations such that the periods over which the sales are being compared are consistent.

Analyst Briefing

There will be an 'in person' meeting for analysts at 0900hrs today at Buchanan's offices, which will be hosted by Shanker Patel (CEO) and Chris Day (CFO and COO). Please contact Buchanan at LGT@buchanan.uk.com if you would like to attend.

- Ends -

FOR FURTHER ENQUIRIES:

Notes to editors:

Lords is a specialist distributor of building, plumbing, heating and DIY goods.  The Group principally sells to local tradesmen, small to medium sized plumbing and heating merchants, construction companies and retails directly to the general public.  The Group operates through the following two divisions:

·   Merchanting: supplies building materials and DIY goods through its network of merchant businesses and online platform capabilities.  It operates both in the 'light side' (building materials and timber) and 'heavy side' (civils and landscaping), through 26 locations in the UK.

·   Plumbing and Heating: a specialist distributor in the UK of plumbing and heating products to a UK network of independent merchants, installers and the general public. The division offers its customers an attractive proposition through a multi-channel offering.  The division operates over 16 locations enabling nationwide next day delivery service.

Lords was established over 35 years ago as a family business with its first retail unit in Gerrards Cross, Buckinghamshire.  Since then, the Group has grown to a business operating from 42 sites.  Lords aims to become a £500 million turnover building materials distributor group by 2024 as it grows its national presence.

Lords was admitted to trading on AIM in July 2021 with the ticker LORD.L.  For additional information please visit www.lordsgrouptradingplc.co.uk.

Chairman's statement

I am pleased to report that the Group has delivered a record performance, showing the success of our growth strategy and the strengths of our management team.

Lords has continued to successfully navigate the difficult economic backdrop.  Following Brexit and Covid-related challenges of recent years, 2022 saw the economy challenged by increasing inflationary pressures, rising interest rates and considerable political and geopolitical uncertainty.  Through all this, the Group has grown its revenues, profits and margins.  This is a credit to our management's strategic vision, the quality of its execution and its ability to take action to address the issues we have faced.

Performance

Our markets have remained resilient despite the challenging backdrop.  Around 78% of our revenue comes from the repairs, maintenance and improvement (RMI) market, where the majority of the products we sell are essential purchases, rather than discretionary.

We have continued to expand our geographic footprint, broaden our product range and drive revenues in both divisions.  This enabled Merchanting to deliver above-market like-for-like revenue growth of 17.4%.  Plumbing and Heating ('P&H') saw like-for-like revenues fall by 9.1% given the industry-wide boiler component shortage, which meant we were unable to fulfil customer demand for these products.  Despite this fall in like-for-like revenue it was pleasing that our actions, which included extending the product range into energy efficiency technology, ensured we were able to materially increase P&H's profits and margin in 2022.

The acquisitions in the year were an excellent strategic fit and have further enhanced our platform for organic growth in the coming years.  All the acquired businesses have performed in line with or ahead of expectations and we are delighted to welcome our new colleagues to the Group.

Dividends

At IPO we adopted a progressive dividend policy and this is reflected in our payout for FY22.  Having paid an interim dividend of 0.67 pence per share in October 2022, we have proposed a final dividend of 1.33 pence per share, to give a total for the year of 2.00 pence.  This represents growth of 5.8% on the 1.89 pence paid in respect of 2021.  The final dividend will be paid on 18 May 2023, to shareholders on the register at the close of business on 21 April 2023.

People and culture

Our 'unique selling point' has always been our people.  Their enthusiasm and loyalty has been fundamental to our progress and making sure we continue to deliver the high levels of customer service on which this business is built.  Our regular engagement surveys show that employee engagement remains strong, and this is testament to our people-oriented culture and the feeling that we are, at heart, a family business.  It is important to us that we support our people wherever we can and in addition to the 2022 annual pay increase, we awarded a £500 payment to colleagues to reflect the cost of living crisis.

Dawn Moore, who has worked as a Non-Executive Director of the Group since 2020, has confirmed her intention to step-down as a director of the Company following the 2023 AGM to focus on expanding executive responsibilities.  The Board would like to take this opportunity to thank Dawn and acknowledge her considerable contribution to the Board as well as her input and counsel in further strengthening the Group's culture. We wish her well in her future.

Environmental, social and governance (ESG)

Our approach to ESG issues has been a key focus for us this year.  We have done considerable work to develop our ESG strategy during 2022, with the support of expert consultants.  On the 'E' aspect of ESG, we have worked closely with H&B, our buying group, sharing our ESG workstreams to enable best practice across the membership.  With more than 110 companies in the buying group, all will be able to benefit from the work we have done, improving their own ESG performance.

Responsibility for ESG ultimately rests with the Board and we have defined accountabilities all the way through the business.  This has included recruiting our first ESG Manager, who is also responsible for our Lords Group Foundation.  The Foundation aims to build stronger communities by supporting projects in the areas around our branches.

As we further develop our ESG approach, we will be defining key performance indicators and targets to measure our progress.  Our intention is to incorporate these into bonus schemes, to incentivise performance across the Group.

From a corporate governance perspective, we have continued to embed our structures and processes, and conducted our first evaluation of the Board and its committees. The outcomes were highly positive.  To support our growth ambitions, we have considered the development plans for our executive directors.  Since the end of the year, this has seen Chris Day take on operational responsibilities in Merchanting in addition to the CFO role, which over time will free up Shanker Patel to focus on strategy.

Looking forward

During 2022, the Board conducted its annual review of the Group's strategy.  We concluded that it remains appropriate and that continued successful execution will enable us to capture the significant growth opportunities we see in front of us.

We are mindful of the uncertain macroeconomic environment and the impact it could have on the sector in the short term.  However, we have demonstrated our ability to grow the business through organic investment and acquisition, and we are therefore confident that we will fulfil our IPO objectives of becoming a £500 million revenue business by 2024 and generating an EBITDA margin of 7.5% in the medium term.

Gary O'Brien

Independent Non-Executive Chairman

2 May 2023

Chief Executive Officer's review

This was an excellent year for the Group, as we continued to deliver on our IPO commitments and successfully grew the business in a tough trading environment.  I am proud of our progress and want to thank our teams for their magnificent job in ensuring customers receive the standard of service they value so highly.

Performance

Our revenue reached a new high in FY22 at £450.0 million, an increase of 23.9% (FY21: £363.3 million).  Like-for-like revenue rose modestly, reflecting Merchanting's very strong performance (+17.4%) and the impact of boiler component shortages in P&H (-9.1%), as the Chairman has explained in his statement.  P&H was resilient in difficult circumstances and our actions to extend the product range, as discussed further below, and adjust our pricing structure, helped it to deliver strong profit and margin growth.  Our digital revenues continue to increase rapidly and were up 90.2% in Merchanting, meaning they now account for 2.5% of the division's revenue.  Total ecommerce revenues were £2.6 million higher in FY22.

Adjusted EBITDA was £30.0 million, up 34.4% (FY21: £22.3 million), with the margin increasing by 60 basis points to 6.7% (FY21: 6.1%), despite substantial product and overhead cost inflation.  We remain focused on further increasing our EBITDA margin towards our 7.5% target, through operational leverage, product range extensions, expanding our digital channels, optimising our site network and further accretive acquisitions.

Our cash flow was excellent, with adjusted cash generated by operating activities (cash generated by operating items plus exceptional items less taxation) of £24.1 million (FY21: £21.9 million adjusted), while free cash flow⁷  was £19.1 million (FY21: £19.9 million adjusted).  We convert a high percentage of our profit into cash, which allows us to continually reinvest in our 3Ps - people, plant and premises.  Free cash flow⁷ conversion (free cash flow/EBITDA) was 66.9% (FY21: 89.1% restated), reflecting the opportunity we have for disciplined capital investment in our 3Ps to deliver further growth.  In FY22 the Group invested £3.5 million in capital investment including refurbishing our Beaconsfield branch and opening two new branches.

The Group has a robust and prudent balance sheet, with year-end net debt of £19.4 million (31 December 2021: £6.5 million net cash), reflecting our acquisitions in the year.  We have significant headroom in our £70.0 million of debt facilities, as well as £16.0 million of accessible cash at the year end, and we will continue to carefully manage our balance sheet in the coming year.

⁷ Free cash defined as cash generated by operating activities plus exceptional items less capital expenditure, taxation and interest paid.

Strategy

Our strategy is to expand our geographical presence via new branches, broaden our product range and increase our digital capabilities.  This is underpinned by our organic investment in our 3Ps and by our approach to acquisitions.  We had a successful year on all fronts in 2022.  In addition, we spent considerable time during the year formulating our new ESG strategy, which will help us to further improve our operations and benefit stakeholders.

Expanding our geographical presence

We have opportunities to expand several of our brands by opening new locations in response to customer demand.  During the year, we added a third location for George Lines and the tenth branch for Mr Central Heating, the first of 40 new sites we are planning for this brand in the next five years.  Our acquisitions also gave us broader geographical coverage and we have opened a third branch for one of these brands, Advance Roofing Supplies, as an implant within our Beaconsfield site.

Broadening our product range

Expanding our product range helps us to capture a greater share of customers' wallets and enhance our service by giving them a greater choice.  In P&H we extended its range during the year into higher-margin products that support decarbonisation, such as air source heat pumps and underfloor heating.  We also benefitted from our combined acquisition of HRP Trade and Direct Heating, which expanded our product offering further and gave us relationships with new suppliers.

In Merchanting, Advance Roofing Supplies has given us a significant roofing materials offer for the first time and is highly complementary with the rest of our product range.  A.W. Lumb also extends our range to include specialisms in drylining and insulation for the new build market.

Investing in our digital capabilities

Digital plays an important part in our strategy, allowing us to acquire new customers and achieve higher margins across a broader range of products.  We can also use the insights we gain, such as customer locations, to inform our brand expansion plans.  In 2022, we benefitted from investment in our in-house expertise in the prior year, which we are leveraging across the Group to advance our digital capabilities across multiple brands.

Our 3Ps - People, Plant and Premises

As the Chairman has discussed in his statement, our people are a key source of advantage for us.  We work hard to ensure they are engaged, feel valued and are fairly rewarded for their efforts.  This is reflected in our continued high engagement scores.  Enabling people to grow within the business is important and we were particularly pleased to see a record number of internal promotions this year.  We have also had many talented people join us through our acquisitions.

Plant includes technology to improve our efficiency and offer even better customer service, and we have continued to invest during the year, such as the warehouse management system we have rolled out in P&H.  More generally, our plant is well invested and the average age of our delivery fleet is less than five years.

We continued to invest in our premises in FY22.  In addition to the branches we opened (see above), we completed the rebuilding of our Beaconsfield branch, moved Advance Roofing Supplies' Aylesbury branch to our multi-brand facility (Lords Builders Merchants, George Lines, Advance Roofing) in Aylesbury and started to relocate the Glasgow branch of Mr Central Heating, to support its growth and improve the customer and colleague experience.

Enhancing our business through acquisitions

The businesses we acquired in 2022 are performing well and contributed £74.3 million to our FY22 revenues.  We are an attractive buyer for independent businesses looking for a responsible custodian, and our colleague and customer‑focused approach resonates strongly with vendors.  We are also highly disciplined in allocating capital, paying a blended 4.8x EBITDA for our acquisitions in FY22.

Outlook

We enter 2023 in a strong financial position, which will enable us to continue to invest in our 3Ps, as we pursue organic and acquisition-led growth opportunities.

We are focused on the challenges to our business, notably the impact on the trading environment of reduced housing transactions, and the impact on household balance sheets from inflation, increased energy costs and rising interest rates.  We are responding through our ongoing expansion into new geographical markets and product lines, and by implementing our ESG strategy, a key part of which is to enhance our energy efficiency.

As a relatively small player with a 1% share of a large market, we also have considerable scope to take share through further acquisitions that expand our geographical presence and product range.  With around 40% of UK builders merchants still independently run, we have considerable scope for further consolidation. We therefore see good opportunities to continue our track record of growth.

Shanker Patel

Chief Executive Officer

2 May 2023

Financial review

Revenue

Group revenue was £450.0 million in 2022 (FY21: £363.3 million), representing growth of 23.9%.  Like-for-like (LFL) revenue growth, which excludes acquisitions and new locations, was 0.2%.  Acquisitions contributed revenue of £74.3 million in FY22.

Depreciation and amortisation

Depreciation and amortisation increased to £12.3 million (FY21: £9.4 million). £6.9 million of the depreciation and amortisation relates to right-of-use assets (FY21: £5.9 million), £3.3 million to intangible assets (FY21: £2.1 million) and £2.1 million to property, plant and equipment (FY21: £1.3 million), reflecting our continued investment in growth opportunities.

Capital allocation

The Group has a wide range of organic and inorganic investment opportunities, which are well defined and attainable in the delivery of our revenue and EBITDA margin targets.  We take a rigorous approach to allocating capital to these opportunities and target a return on investment of at least 20%.  We carefully review the investment case for each proposal and ensure the planned returns are deliverable and that we have effectively mitigated the risks.  The success of this approach was an important driver of our FY22 performance.

Exceptional items

Exceptional costs in FY22 totalled a net £0.9 million.  A breakdown can be found in note 5 to the financial statements, with the largest component being diligence costs associated with acquisitions.  The exceptional costs were partially offset by compensation received for business disruption at our Park Royal branch, due to the HS2 infrastructure project in the immediate area surrounding the branch.

Exceptional items in FY21 totalled £2.5 million (restated).  These comprised costs associated with our admission to AIM and the costs incurred in relation to acquisitions in the year, less a reduction in contingent consideration.

Profitability

Reported EBITDA for FY22 was £28.6 million (FY21: £19.7 million restated).  Adjusted EBITDA, which also excludes the exceptional items set out above and share-based payments, was £30.0 million, up 34.4% from £22.3 million in 2021.  The adjusted EBITDA margin improved to 6.7% (2021: 6.1%).

Overall, the adjusted EBITDA margin increased by 0.6% to 6.7% in FY22, with the improvement in the margin achieved through P&H margin growth driven by higher-margin products and increased Merchanting segmental mix.  These two factors offset a reduction in Merchanting, as a result of management's decision to pass through product price inflation in an orderly manner.

P&H delivered a strong adjusted EBITDA margin of 6.0%, representing a 1.6 percentage point improvement in FY22.  This was achieved via extended product range initiatives, including our Renewables range, which attract higher margins alongside lower cost to serve when supplied to existing customers.

The table below shows adjusted EBITDA by division:

Net finance costs

Net finance costs were £3.6 million (FY21: £2.8 million restated) with the increase mainly due to increased debt levels following the four 2022 acquisitions.  The interest expense associated with the Group's leases was £1.9 million (FY21: £1.8 million).

Profit before tax and adjusted profit before tax

Adjusted profit before tax, which excludes exceptional items, share‑based payments and amortisation of intangible assets, was £17.4 million (FY21: £12.2 million restated).  The Group generated profit before tax for the year of £12.8 million (FY21: £7.5 million restated).

Prior year adjustment

In October 2017 and April 2021 the Group acquired majority shares in Hevey Building Supplies Limited and Condell Limited respectively.  In both instances a put and call agreement was put in place with the non-controlling interest for the acquisition of the remaining shares.  The options were not accounted for by the Group.

These errors have been corrected by restating each of the affected financial statements line items for the prior periods as at 31 December 2020 and 31 December 2021 respectively and as such have been corrected via a prior year restatement.  The adjustments are non-cash in nature with no impact on adjusted EBITDA. Full details are contained in note 3.3.

Earnings per share and adjusted earnings per share

Basic earnings per share was 5.68 pence (FY21: 3.39 pence restated).  Adjusted earnings per share (as defined in note 11) was 8.02 pence (FY21: 6.10 pence restated).

Dividend

The Board has recommended a final dividend of 1.33 pence per share.  Combined with the interim dividend of 0.67 pence per share, this gives a total dividend for the year of 2.0 pence per share (FY21: 1.89 pence).

Cash flow

Adjusted cash generated by operating activities was £24.1 million (FY21: £21.9 million restated) while free cash flow was £19.1 million (FY21: £19.9 million restated).  Free cash flow conversion, which is free cash flow as a percentage of EBITDA, was 66.9% (FY21: 89.1% restated).  The decline compared to the prior year was due to the planned increase in capital investments of £3.5 million (FY21: £1.3 million), as discussed below.

The Group used £26.9 million for business acquisitions in 2022, relating to the purchase of Advance Roofing Supplies, A.W. Lumb, DH&P and Buildbase Sudbury.  In addition, in October 2022 we exercised the option to acquire the 25% minority interest in our Hevey Building Supplies subsidiary for £6.2 million, with 40% paid on completion and the remainder due in seven equal quarterly instalments over the next two years.

Liquidity and debt facilities

The Group had two financing facilities with HSBC totalling £70.0 million.  In March 2022, we agreed with HSBC to enlarge our facilities to support our growth plans, with the RCF increasing to £50.0 million (from £30.0 million) and the invoice financing facility increasing to £20.0 million (from £10.0 million).

At 31 December 2022, the Group had net debt (defined as borrowings less cash and cash equivalents, and before recognising lease liabilities) of £19.4 million (FY21: net cash of £6.5 million).  The movement primarily reflects the cash cost of the acquisitions during the year.  The Group therefore had ample headroom of £34.6 million (31 December 2021: £35.1 million) within its debt facilities at the year end, and a further £16.0 million of accessible cash (31 December 2021: £11.4 million).

Net cash / debt

The Group's net cash / debt position, before recognising lease liabilities, transitioned from net cash of £6.5 million at 31 December 2021 to a net debt position of £19.4 million at 31 December 2022; including non-contingent deferred consideration payable within twelve months, this rises to £23.3 million in respect of the Group's acquisition of APP Wholesale, Hevey Building Supplies and Advance Roofing.

The Group used £26.9 million for business acquisitions in 2022, which alongside the 25% minority interest purchase in our Hevey Building Supplies subsidiary, covers the full movement in net cash / debt in FY22.

The Group's policy is to maintain its credit rating status while investing in organic developments and acquisition opportunities that are expected to generate attractive returns and maintain a progressive dividend policy.

Working capital⁸

Inventory increased by £14.4 million to £53.2 million at the year end, largely due to P&H inventory returning to more normal levels, as the boiler shortage eased towards the end of the year, and the impact of price inflation on inventory.

Current trade and other payables were £21.4 million higher at £94.3 million (31 December 2021: £72.9 million restated), while current trade and other receivables rose by £13.3 million to £71.0 million (31 December 2021: £57.7 million).  These movements reflect the Group's organic growth and the acquisitions in the year, with working capital increasing to 9.2% of revenue (FY21: 8.7%) due to the inventory increase discussed above.

⁸ Working capital is defined as trade receivables and inventories less trade payables.

Capital expenditure and investment in intangible assets

We maintained capital discipline during the year, with capital expenditure on plant, property and equipment of £3.5 million (FY21: £1.3 million).  Notable investments included the transformational refurbishment of the Beaconsfield branch, the new branches for Mr Central Heating in West Bromwich and George Lines in Horsham, and further additions to our fleet.

Intangible assets rose to £45.3 million (31 December 2021: £22.7 million) as a result of the acquisitions during FY22.

Non-current liabilities

Trade and other payables relate to deferred consideration liabilities.  The liability has reduced by £3.2 million as at 31 December 2022 to £4.7 million (31 December 2021: £7.9 million) reflecting those liabilities falling due in 2023 relating to the acquisitions of APP Wholesale Ltd, Hevey Building Supplies Ltd and Condell Ltd.

IFRS 16 Leases

Leases that are recorded on the balance sheet principally relate to properties, cars and distribution vehicles. IFRS 16 increased EBITDA by £7.3 million and the finance (interest) expense by £1.9 million in the year.

The right-of-use asset in the balance sheet at 31 December 2022 was £39.0 million (31 December 2021: £33.3 million).  The increase is driven mainly by the inclusion of a 100 year long leasehold plus leases acquired through the 2022 acquisitions.

IFRS 16 does not alter the Group's overall cash flows or the economic effect of the leases to which it is a party.  Similarly, Lords' banking covenants are measured on a pre-IFRS basis.

Post balance sheet events

Since the end of FY22, we have:

·   Agreed to purchase the freehold of George Lines' Heathrow site for £6.3 million, with £2.2 million paid on signing and the remainder due to be paid by 5 July 2024.  The Group will continue to lease the site until completion, which is the date on which the remaining consideration is paid, and with any rental payments before that date being deducted from the final consideration.

·   Disposed of the non-core Lords at Home homewares subsidiary for £0.8 million.  During the year ended 31 December 2022, Lords at Home generated £3.0 million in revenue and contributed £0.08 million of EBITDA.  The sale supports our focus on our core markets of building, plumbing, heating and DIY goods.

·   On 31 March 2023 the Group acquired Chiltern Timber Supplies Limited ('Chiltern Timber') for a total consideration of up to £1.65 million on a net cash free/debt free basis. The consideration payable is £1.175 million on signing and up to a further £0.475 million deferred equally over 12, 24 and 36 months on a contingent basis subject to Chiltern Timber delivering certain earnings targets.

·   The Group amended its banking facilities on 5 April 2023. The Group's existing £70.0 million lending facilities with HSBC, consisting of a £50.0 million revolving credit facility ('RCF') and a £20.0 million receivables financing facility ('RFF') (together the "Existing Facilities"), have been cancelled and repaid pursuant to the Refinancing with such repayment being funded by drawings under new £95.0 million facilities provided by HSBC, NatWest and BNP Paribas consisting of a £70.0 million RCF (the "New RCF") and a £25.0 million RFF each with an initial three-year term (together, the "New Facilities").

The New RCF includes: (i) a £20.0 million uncommitted accordion option which would, subject to lender approval, allow the Group to increase the New RCF facility limit if required, and (ii) two uncommitted extension options of one year each which would, subject to lender approval, extend the tenor of the New RCF to four years and five years if exercised.  The New Facilities are on improved commercial terms compared to the Existing Facilities and are expected to result in material interest cost savings for the Group over the three-year term of the facilities.

·   Dawn Moore, Non-Executive Director, has advised the Board that she intends to step down as a director of the Group immediately following the Company's 2023 Annual General Meeting to focus on expanding executive responsibilities.

Chris Day

Chief Financial Officer and Chief Operating Officer

2 May 2023

Consolidated statement of comprehensive income

for the year ended 31 December 2022

¹ See note 3.3 for details regarding the restatement.

² Adjusted EBITDA is EBITDA but also excluding exceptional items and share-based payments.

³ EBITDA is defined as earnings before interest, tax, depreciation and amortisation.

The results for the year arise solely from continuing activities.

Consolidated statement of financial position

as at 31 December 2022

¹ See note 3.3 for details regarding the restatement.