#LORD 

2024 was another challenging year for the UK construction sector. Here some projects were cancelled or scaled back due to higher interest rates. Others were ‘put on hold’ heading into the General Election, and then further delayed waiting for the Oct Budget – which itself also managed to undermine business confidence by hiking Employers’ NI.

Little wonder therefore that despite the government’s promise to construct 300k new homes per annum vs 200k currently – there hasn’t yet been any noticeable pickup in activity levels. A consistent theme mentioned this month in corporate trading updates.

Similarly @Lords_GT – a UK builders merchant and heating/plumbing (P&M) distributor – said today that FY’24 revenues had fallen -5.6% to £436m (or -7.0% LFL, split -6.1% H1 & -8.3% H2) vs £463m LY & £449m consensus. 

Reflecting difficult conditions and tough YoY comparatives in its P&H division (-16.6% H2, mostly boilers) - partly offset by encouraging H2 demand from its high margin Merchanting arm (+2.3% H2).

The decline in boiler volumes was primarily caused by homeowners deferring replacement spend and trade destocking - which should ultimately rebalance as the economy heals, augmented by the secular shift towards cleaner energy products, such as air source heat pumps.

Elsewhere, “FY24 adjusted EBITDA is expected to be slightly below expectations of between £23.0m to £23.8m”. With net debt coming in at £32.2m vs £36.3m June’24 & Est £26.9m, after the £3.9m sale & leaseback of freehold property.

Going forward, H1’25 probably won’t see any major uplift though thanks to volatility around the government’s Stamp Duty changes on 1st Apr’25, combined with the introduction of higher Employee NI taxes from 6th April (+£1m Lords).

Nonetheless, investing is a long term game and ‘patience = profits’.
 
Indeed by H2’25, I would hope we’ll start to see a sustained recovery in Lords’ core RMI & new build markets. In the meantime, the company remains profitable and should emerge from this frustrating 3 year hiatus, much fitter, stronger and better placed to accelerate top & bottom line growth.

CEO @shanker_patel24 / Shaker Pater commenting: "Our customer service excellence, highly engaged colleagues and specialist brands have underpinned a resilient performance in 2024. We continue to tightly control costs, to optimise working capital and net debt was reduced by £4.1m in the second half to £32.2m from £36.3m June. As market conditions begin to improve, we are confident that the Group is exceptionally well positioned for operational leverage to improve profitability, with ongoing organic and acquisitive growth."

Finally wrt the numbers, #Lord (Mrkcap £52m at 32p) trades on a ‘trough’ FY25 PER of 12.5x (vs rival Travis Perkins plc at 14x) – and appears to be attractively priced for risk tolerance investors with a 3-5 year view. 
 
 Note: @Lords_GT is a @VOXmarkets  client.