Shares in the UK builders merchant Lords Group Trading plunged by more than 15 per cent over the past week ahead of the company releasing a set of lack-lustre half year results on Tuesday.
The London-listed company, which is headquartered in the capital, saw its share price slump to 36.5p in early trades as it revealed its revenue had dipped to £214.2m in the six months ending 30 June, 2024, down from £222.6m in the same period last year.
As a result Lords Group Trading, which owns brands including Advance Roofing Supplies, A W Lumb and Condell Building Supplies, saw its pre-tax profit slip to £1.1m from £5.5m in the first half of 2023.
The company’s CEO Shanker Patel said the government’s decision to delay the launch of the Clean Heat Market Mechanism had disrupted the plumbing and heating market, having a significant knock-on effect on its revenue.
Lords Group Trading said that price increases triggered by the mechanism, which would require manufacturers to meet targets for installing heat pumps, had been passed onto customers in a bid to soften the impact on the company’s bottom-line.
In addition to seeing reduced revenue within the company’s plumbing and heating division, sales were also down in its merchanting arm.
During the six months revenue generated the division dipped to £104.6m, down from £109.4m in the same period last year.
Lords Trading Group remains optimistic
Shanker Patel, CEO of Lords Trading Group, said: “Trading conditions have remained challenging throughout the first half of 2024 with like-for-like revenue 6.1 per cent lower.
“The introduction and subsequent deferral of the Clean Heat Market Mechanism (CHMM) disrupted the plumbing and heating market and we experienced a 15 per cent LFL revenue reduction in the first quarter, but a stronger second quarter resulted in a resilient first half with divisional revenue 3.2 per cent down overall.
“In this challenging market, management has remained focused on optimising capital allocation and operating efficiency, with actions taken on costs expected to deliver annualised overhead savings of £2.6m in FY2025.
“The group’s resilience and strategy of maintaining gross margin is testament to our outstanding colleagues and our focus on excellent customer service.
“The board welcomes the new government’s support for the sector and the recent interest rate reduction which is widely expected to lead to improved conditions for the UK construction market.
“The group’s focus on operational efficiency and working capital management will ensure that we are well positioned for any market recovery.
“In the medium term, the group is well placed in a highly fragmented and essential repair, maintenance and improvement market, to grow the group’s market share organically and through selective, valued-added acquisitions which will become more attractive as the market returns.
“We are encouraged by the growth in renewable product sales and believe this could be an additional near-term growth lever.
“Whilst the outlook for the construction sector is beginning to improve, the board is not expecting any change to trading conditions in the second half of 2024 and, recognising the important autumn season ahead, particularly in plumbing and heating, expect that adjusted EBITDA [earnings before interest, taxes, depreciation and amortisation], will be in line with management expectations.”