Vox Markets Logo

Lords defies market turbulence with steady growth in FY23

12:32, 15th May 2024
Paul Hill
PMH Capital

It's often said in sport that "offense sells tickets, but defence wins championships." Similarly across the business world, the best companies are able to adapt and grind out results even during the toughest of conditions.

Lords (LORDFollow | LORD - a specialist UK builders merchant and heating/plumbing products distributor - is no different.

Today, the group posted 'in line' 2023 numbers with adjusted EBITDA and EPS coming in at £26.5m (£30.0m LY) and 4.35p (8.0p) respectively on sales +2.8% higher at £462.6m (-1.2% LFL), alongside announcing a 2p dividend (4.1% yield) and closing Dec'23 with net debt (pre IFRS16) of £28.5m (1.6x EBITDA), supported by £15m of freehold property.

So when will there be an pick up in the UK building products industry?

Well, it's difficult to say exactly, given any rebound will depend on interest rates, inflation, the general election, mortgage affordability, and consumer confidence.

That said, my gut feel indicates the sector should begin seeing positive demand trends towards the backend of 2024 - especially as the early signs are favourable after an encouraging spring home selling season (despite the wet weather), positive real wages, and low unemployment.

Plus, for patient investors, this should be a matter of 'when, not if'. Here Lords continues to drive internal efficiencies and cash savings, alongside aligning itself for when the UK economy improves.

Interestingly too, little of this potential upside appears to have been factored into the valuation.

Indeed, the stock presently trades on 2024 EV/EBITDA and PE multiples of 17.8x and 4.7x, compared to rival Travis Perkins at 18.9x and 7.4x. What's more, house broker Cavendish has a 106p/share target price, based on FY24 revenue, adjusted EBITDA, and EPS forecasts of £450m, £23.8m, and 2.7p respectively.

Elsewhere, around 45% of Lords' turnover is generated from the more resilient Repair and Maintenance sector where millions of UK properties need to be upgraded.

Moreover, the firm continues to win new customers, upsell to existing accounts, open new stores, expand online, and enhance its energy efficiency/decarbonisation product range (eg air source heat pumps, etc).

CEO Shanker Patel commenting: "Despite the challenging macroeconomic backdrop, the Group has once again grown its top line and gained market share, while continuing to invest to deliver future growth.

Trading in Q1’24 was impacted by a combination of macro conditions and wet weather. Furthermore, demand in the P&H division was turbulent following the timing adjustment to the government’s Clean Heat Market Mechanism (re Boiler Tax). Despite the uncertain market conditions, Lords is trading in line with market expectations & remains confident in achieving its medium-term EBTIDA margin target of 7.5%."


Follow News & Updates from Lords: Follow | LORD


Disclaimer & Declaration of Interest

The information, investment views and recommendations in this article are provided for general information purposes only. Nothing in this article should be construed as a solicitation to buy or sell any financial product relating to any companies under discussion or to engage in or refrain from doing so or engaging in any other transaction. Any opinions or comments are made to the best of the knowledge and belief of the writer but no responsibility is accepted for actions based on such opinions or comments. Vox Markets may receive payment from companies mentioned for enhanced profiling or publication presence. The writer may or may not hold investments in the companies under discussion.

Recent Articles