Welcome to the Lords Group Trading PLC investor presentation. Throughout this recorded presentation, investors will be in listen-only mode. Questions are encouraged and can be submitted at any time via the Q&A tab situated on the right-hand corner of your screen. Simply type in your questions and press send. The company may not be in a position to answer every question it receives during the meeting itself. However, the company can review all questions submitted today and publish responses where it's appropriate to do so. Before we begin, I'd like to submit the following poll. I'd now like to hand you over to Shanker Patel, CEO. Good morning, sir.
Good morning. Good morning, everyone, and thank you for taking the time to join us for our H1 2025 results. The theme of our results is that we've made strong continued progress in our strategy. In terms of the highlights of today, we're very pleased that our group revenues have grown by 8.4% in what is a still quite challenging market. In particular, our like-for-like revenues are up 7%. Within our merchanting division, the revenue is up 12.6% with an adjusted EBITDA that's up 8.6%. Really good performance in our merchanting division. In the last six months, we've acquired the UK's largest online construction retailer, CMO, for £1.8 million in June. We've also opened three new merchanting branches to date. In terms of our liquidity in our finances, we completed a sale and leaseback of four operating sites for £13.1 million.
This has allowed us additional liquidity to leverage growth opportunities as the market recovers. Overall, our adjusted EBITDA performance is marginally ahead of the pre-CHMM results of H1 2024. 2025 has come in at £12.1 million adjusted EBITDA against a gross H1 2024 number of £12.6 million. Our net debt has been reduced by £15.4 million to £20.9 million, and that's from June 2024 to £36.3 million. As a business, Lords Group Trading is pleased to announce an interim dividend of £0.32 per share, which is the same as last year. I'll hand over to Stuart, my colleague, the CFO, to go through the financials.
Thank you, Shanker, and good morning, everyone. I'd like to take you through the key highlights of the group's financial performance in the first half of 2025. Our revenue, as Shanker said, was up 8.4% to £232.1 million. We had a strong growth, as you can see, in quite a challenging market, but we haven't seen any great improvement in the repairs, maintenance, and improvements sector, the RMI sector. We're about 80% of our business, trades. Like-for-like sales, as Shanker said, were up 7%, which is very encouraging. I think that compares fairly well to some of our listed competitors who've reported first-half results in the last few days and weeks. If you take our gross profit, that was up 3.6% to £44.8 million. We saw a good growth in our civils, dry lining, and the boiler side.
That has impacted our margin mix a little bit, and we'll talk about that a little bit later. You may remember that in 2024, the government introduced something called the Clean Heat Market Mechanism, which is particularly relevant, or so relevant, to the plumbing and heating sector. That resulted in higher boiler prices in the first half or first quarter of 2024. The industry as a whole, when the government then canceled or deferred the mechanism, decided to refund those high prices in Q2 and Q3 2024. The impact of that on Lords Group Trading was we had an £800,000 better profit or profit benefit in the first half, and that reversed in Q3 in 2024 in the second half. You can see when you look at our EBITDA, we reported £11.6 million last year.
The underlying number for that Clean Heat Market Mechanism impact was £800,000 less, so £11.8 million. We've increased slightly by £300,000 in the first half of 2025 to £12.1 million. You'll see in the bridge on the slide, the benefit of the revenue in profit turned out at £3.6 million. The slightly lower margin or gross margin percentage took away £1.3 million of that. We've done a pretty good job on underlying overheads. You can see our overheads are up by about £2 million. 1.2% of that is acquisitions we've made in the last 12 months and the three branches that Shanker reported that we've opened in the first half. Our underlying overhead increase has been maintained or has been limited to 2%.
That reflects inflationary pressures in terms of property, transport, and the additional costs we're facing and every other business in the UK is facing for employer national insurance and increasing national minimum wage. The impact of the CHMM, as I've mentioned, rolled through into our adjusted operating profit, which was £6.2 million in the first half compared to £7.1 million last year. Our adjusted earnings per share as well, which is £1.35 per share compared to £1.57 last year. Net debt, as Shanker said, has reduced significantly. That's 42% down on the number at the end of June 2024. As Shanker mentioned, the group having strengthened its balance sheet and delivered strongly strategically in the last 12 months with a good merchanting performance in the first half, the board decided to maintain the dividend at £0.32 per share, which is the same as last year.
If I turned around to the merchanting or divisional performance, our merchanting business continued to grow in the same way it grew as we reported in Q4 2024 by double-digit pounds. Its revenue is up by 12.6% to £117.7 million in the first half of 2025. Like-for-like sales, when you strip out the impacted branches, the branch mix or acquisitions was 11.5%, which is obviously very strong. We had a good first half, particularly in civils and dry lining, as I've mentioned. That impacts the margin mix. Gross profit is up by slightly less than the revenue increase, up by 5.7% to £30.4 million. We've managed to maintain a tight grip on our overheads, as you can see there. About half of our increase in overheads, which is about £1 million, came from the new branches that we've opened, as Shanker reported.
We've limited the overhead increase to 2% on a like-for-like basis. The same pressures, as I've mentioned earlier, are impacting our merchanting division. With property gains the same as last year, those came from the sale and leaseback of four merchanting properties in 2025 compared to a credit on the parcel, or at least in 2024. Our adjusted EBITDA was now 8.6% higher at £8.2 million compared to £7.6 million in the first half of 2024. If I turned down to plumbing and heating in 2025 in the first half, you can see our revenues are up by 2.4% overall to £112.2 million. Boiler volumes were up by 6.8% in the first half. We maintained our market share, which is running at around 11%. Within the plumbing and heating division, our wholesale business did pretty well. That's where the boiler volume draws in. That was up 11% half on half.
We had a more challenging time for our list of central heating plumbers merchant brand, and that led to a margin mix impact. Our gross margin percentage was 80 basis points lower in the first half compared to last year. You can see the impact of that on the gross profit at £13.9 million compared to £14.5 million last year. Costs were entirely controlled. You can see a half a million pound increase. A majority of that was the business we acquired in the back end of 2024 after renewables. I'd say the like-for-like interest was limited to 1% in the half, which is a good performance. Adjusted EBITDA, when you compare it to the number adjusted for the Clean Heat Market Mechanism, was £3.9 million compared to £4.2 million CHMM adjusted last year. A resilient performance from our plumbing and heating division in the first half of 2025.
I'd like to take you through the cash flow over the last 12 months, so 12 months ended June 2025. As Shanker mentioned, we reduced net debt by £15.4 million from £36.3 million to £20.9 million over the last year. Within that, our adjusted EBITDA was £21.9 million. We went out to generate a bit of a positive working capital movement of £2.5 million in the last 12 months, which is positive, good news. We've continued to maintain spend on our branch network, and as we said, we've opened three new branches. CapEx is £2.8 million in the period, but very tightly controlled. The rentals on our branch, for detail of branch network, came to £12.5 million in the last 12 months. That gives us an operating cash flow of £9.1 million.
When we compare that to our adjusted operating profit for the last 12 months, it comes to about 97% of cash conversion. We converted 97% of our profit into cash, which I think is a credible result. If we look further to the right on that, on the chart, you can see the sale and leaseback proceeds and net profit, which is about £4 million just over on tax and interests, and about £2.9 million on either current year or last 12 months acquisitions or deferred consideration for previous year acquisitions. Half a million pounds in dividends, and that gives us the £15.4 million reduction in debt that we were referring to. If I then look at the balance sheet, you can see there's a drop in tangible assets where we've done the sale and leaseback over the last 12 months. Five properties sold in leaseback or operating properties.
You see the £20.5 million tangible assets number in 2024 was reduced to £9 million. Working capital, as I said, has been well controlled, but still a little bit more to go, we think, to reduce that in the balance sheet. Turns about £2.2 million to £39.5 million. Our working capital sales ratio has come down accordingly to 8.7% compared to 9% this time last year. As we said, we reduced that by £20.9 million to £20.9 million. Our leverage under the bank calculations comes in at 2.2 times, which is slightly different calculations. It compares to a covenant basis of three and a quarter, so an active hedge from under the leverage covenant for us at the current time. We've run with bank facilities of £75 million. One's a committed revolving credit facility, which is £50 million, and that's commissioned until April 2027.
We have a £25 million invoice discounting or invoice financing facility alongside that. You may recall from the last presentation, we released about £20 million from the RCF in April 2025. We're able to save future commitment fees, as we couldn't actually use that additional arrangement for the facility. Our hedge room at the end of June, which is basically the surface of our facilities over our net debt position, was over £50 million. Plenty of hedge room and plenty of capability to pursue accretive organic opportunities and selective overlay as we have done in the last 12 months. That concludes the balance sheet, and you know how much I'm here to give you an update on our strategy. On this slide, you'll see the strategic progress that we've made in the last 12 months.
To remind those on this call, our strategy is a combination of margin accretive organic growth and highly selective disciplined M&A. On the organic growth front, we've opened three branches, which is going to be adding or has added, sorry, £2.4 million in revenue within the first half. We've continued to enhance our business with new product ranges. In terms of selective M&A, in the last 12 months, we acquired Ultimate Renewables in October 2024. That's a business that is doing extremely well under our leadership with the former management team in place, growing our offering in the renewables heating market. We also acquired CMO in June 2025. In addition to organic growth and M&A, we've also strengthened our management team. In November 2024, we recruited Steve Hollandby as our CEO of Merchanting.
I'm really pleased to announce that we've recruited Matt Webber to be the COO, sorry, of the plumbing and heating division now in December 2025. Our colleague Neil Lake will now take responsibility for Group Business Development, working closely with myself and Stuart in growing our business further. As you can see in the last bullet point, in the last 12 months, we've strengthened our balance sheet by reducing our debt substantially. An update in the merchanting strategy. Strong first half revenue growth at 12.6% in what is a challenging market. A lot of that growth has come through some of our selective brands, in particular George Lines, AW Lumb, and Advanced Roofing. In terms of marketing and brand development, we've opened a new site under George Lines in Maidstone, Kent, or near Maidstone, Kent. That's a one and a half acre site.
AW Lumb opened its third branch in Mansfield, Nottinghamshire. It's a two and a half acre site. We've continued our dual site program of Lords Builders Merchant and Advanced Roofing with a site in Leicester. That was formerly a builders merchant that was owned by a family for over 50 years. We were fortunate enough to be able to take it once they closed their business. We therefore see further opportunities to incrementally add to our brand's geographical footprint. We also see selective M&A opportunities for specialist brands for geographies. On the next slide, I wanted to go through some of the detail on our specialist brands. George Lines is a strong brand that's been in our ownership since 2016.
You see on the left-hand side of the slide the number of branches that we've opened since we've acquired this business: The Ellsbury, Horsham, Ilkeston 2024, and then lately with Maidstone. The business is a specialist civils merchant. It's selling aggregates, concrete, drainage, ducting, and landscaping products more into the commercial and infrastructure markets. It's grown from £13 million revenue and single site to five branches and a £44 million revenue business over that period of time. Our focus is to organically grow this business by extending its branch network whilst maintaining its excellent customer service. Businesses, again, are part of our strategic investments in our three Ps, which you can see in this image on the right-hand side, is our investment in our premises.
The Maidstone branch on the right-hand side is a well-invested branch where we think that that investment will allow us to be able to grow this business to the multi-million pound revenue years to come. We then have another specialist branch, Advanced Roofing, that we acquired in 2022. Soon after we acquired it, we put in a new plant in our Beaconsfield branch. Beaconsfield branch is a large 4.5 acre site. Instantly, we added an additional revenue stream into that branch and allowed us to grow Advanced Roofing in an area where there weren't many roofing merchants. We also moved their old small site in Aylesbury to a co-located site with Lords Builders Merchants and George Lines in Aylesbury. That was done in 2023. You see on the left-hand side the image of the new site, which is co-located with Lords Builders Merchants in Bicester.
As a result of our initiatives, not only has the roofing brand or Advanced Roofing grown via implant, but it's also grown its revenue base from £7 million in 2022 to over £10 million in 2025 when we're ready. Again, a demonstration of us being able to take specialist brands and to grow them. We then move into plumbing and heating and the strategic update there. Key for us is maintaining our market share. Whilst revenue grew by 2.5%, we managed to maintain our share of the boiler market. Boilers currently are still very much in the 80% of all the products that we sell in this division. What we've also done is strengthen the management team in our Mistral Central Heating brand, where we recognize there's tremendous opportunity in that brand.
In order to be able to grab that opportunity, we need to have a dedicated management team that is focusing on the growth of Mistral Central Heating. Our renewable revenues are up by 57% as Ultimate Renewables has started to perform in line with our expectations. That business is earmarked for growth as the renewable markets itself start to grow under government intent of reducing the country's reliance on fossil fuel-based heating systems. We've also strengthened the business by appointing Matt Webber as COO. Matt comes with over 20 years' experience in the P&H industry. He's worked for companies such as Genuit, Adey, and Wolseley. Merchants and manufacturers, again, all of our businesses are reliant on really good supplier relationships, and Matt comes with tremendous relationships, not just with customers, but also suppliers, which is a very key stakeholder to our business.
Our goal in this business is to maximize the efficiency of our wholesale business model. We believe we've got a tremendous opportunity because we have the infrastructure, product-supplier connections, physical locations, and a management team that are experts in their field. Now, as we start to really focus on maximizing the efficiency levels of this business, we will see growth coming through. In addition, we have the opportunity in Air Source Heat Pumps design, supply, and implementation. This is something that we believe will be required, not just only new build, but also as the market for retrofit in renewables starts to take off. We also have the aim to continuously drive non-boiler products and our higher margin, which is a drifting brand. Here's an example of, again, an acquisition in the Clivet Plumbing and Heating division.
This is of Direct Heating and HRP Trade, a business that we acquired for £9.3 million in 2022. HRP Trade is a leading national distributor of plumbing and heating spares. It complements our plumbing and heating wholesale business very well. Same customer base, and spares is intrinsically linked to boilers. It's a very good model that we are using to show how we can be very efficient in distributing products. On the right-hand side, you can see the revenue CAGR. In spite of a very challenging market, this business has grown by 8%. It also has a merchanting business with four branches. We have a petroleum in essence, and these branches are highly aligned with our central heating operation. On the next slide is the digital division that's been created through CMO. CMO is a leading online retailer.
We acquired it in June 2025 for £1.8 million, and that included a free-owned property worth £1.2 million. The business has a last 12 months revenue of £47 million to the end of June 2025. What we realized at the time of acquisition is that some of the issues that it faced were a restricted supply chain due to trading conditions and the removal of credit insurance. We had the opportunity to acquire this business in the process, and since the 6th of June, what we've done is reestablish the supplier base from scratch, where now over 90% product availability is key to their proposition. Their proposition is a dropship model, but 70% of their business is dropship, 30% supplied through their own depots, of which there are two, one in Plymouth and one in Darlington.
On the right-hand side, you'll see all the various storefronts that they have from plumbing all the way to insulation. They have, again, in this a unique model with assisted sales, where customers are encouraged to call if they're unsure about either pricing or product availability or product attributes. A wonderful team in Plymouth who really serve the customer very well in their journey to buying construction materials online. What we've also done is driven down refunds. They were running at around 24% to 21% by the time we acquired the business, and they're currently down to 6%. That compares very well in the market for e-commerce businesses. However, we are still striving to reduce that further. The other thing that we've done at speed is to implement a cost reduction plan, and that is expected to exceed £1 million in 2027.
Our medium-term strategic plan is to recover the business in terms of revenue to its prior run rate. We then want to leverage off the wider group purchasing product range. The group itself prides itself on having excellent customer relationships, and there is a commonality in suppliers between our merchanting and plumbing and heating divisions and our digital division of CMO. We will be working now with our supplier stakeholders to see how we can position all of our various divisions such that we can leverage off each other's ones. It's a digital-first business, so driving efficiency through its cost model is another major part of our strategic plan. We will be using the technology team that we have in CMO to assist us in gaining efficiency models through all of our various divisions.
In summary, I wanted to remind investors of some of the commitments that we made at the time of our IPO in 2021. One commitment we made was that we would like to be a £500 million business by 2024. I'm pleased to say that as it stands, our revenues are expected to exceed £500 million in 2025, a year later than we'd ideally like to have achieved. What is really interesting is when you look at the box on the right-hand side, it shows our compound annual growth rate since 2021 when we listed. That's coming up 12%, comparing very favorably against some of our listed peers, where the CAGR is 2.2%. One of our commitments at IPO is that our business is one where we will be expected to outperform the market.
Our five-year revenue performance clearly demonstrates our ability to outperform the market despite the market since 2022 in particular being extremely challenging. We also see that continuing to drive our margin accretive organic growth can lead to greater profitability in the medium term. The five-year revenue from the three new branches that we've opened this year is projected to exceed £25 million. At a 7% EBITDA margin, this potentially adds £1.8 million to our bottom line. With selective M&A, we have a strong record in value creation in what is still a highly fragmented market. CMO also accelerates our online business model. At the time of IPO, we had an aim of 25% of our revenues being digital. The acquisition of CMO gets us very much close to that stated aim. We're delighted that we've again followed up on that commitment.
In terms of revenues, if we get the CMO up to £500 million revenue at a conservative 5% EBITDA margin, this business could add a £25 million increase to our profitability in the medium term. Before I take questions, I'll just run through our outlook. We are growing. We've grown quite well at 8.4% in H1, despite the highly challenging market. We're continuing to make strategic progress in our business. We're integrating a recently acquired CMO. We've opened three branches, and we continue to seek margin accretive organic growth and selective value-added acquisitions. Those opportunities are still there for us to take, and therefore, management is focused on operational efficiency and capacity to be able to grow our business despite the challenging environment. We're a customer-first business, and we're continuing to focus on excellent customer service.
I think we can see that from some of our revenue growth ahead of our peers. Our focus on empowering colleagues to provide our customers the best experience they can by building materials has really come through in our results. We will focus on good, efficient working capital management. I end with the note that there is still a significantly seasonally adjusted trading period ahead of us, and that bears a debt to be in line with our market expectations. Move over to Q&A.
Shanker, thank you very much for your presentation. Ladies and gentlemen, please do continue to submit your questions. Just find the Q&A tab situated on the top right-hand corner of your screen. While the company takes a few moments to review those questions submitted today, I'd like to remind you that a recording of this presentation, along with a copy of the slides and the published Q&A, can be accessed by our investor dashboard. As you can see, we've received a number of questions throughout today's presentation. Can I please ask you to read out the questions and give responses where appropriate to do so, and I'll pick up from you at the end?
Okay. We've got a question from Stuart D. You've highlighted consolidation opportunities in the fragmented UK market. What type of acquisitions are you prioritizing? We're prioritizing acquisitions that add strategic value to our business. Specialist businesses such as Advanced Roofing and George Lines. Whilst in size, they are smaller, but they do add a higher EBITDA contribution. That's one area that we're prioritizing. The other area we're prioritizing is where we can expand our geographical footprint with synergies. There are areas of the UK where we're underrepresented, but we see that they are adjacent to some of our other locations. We're looking at opportunities in those areas. That's where our focus is. Got another question. How resilient do you see demand across merchanting versus plumbing and heating?
Thank you, Shanker.
We've done really well in merchanting in the first half, as you see from our like-for-like numbers, which are up 11.5%. Plumbing and heating is also fairly resilient. Though we've announced at our final stage that we see the market for gas boilers being fairly resilient over the next four or five years and growing so far. That gives us an opportunity to address our business model to that level of demand. We see that as fairly resilient. Our challenge at the moment is the RMI market and when is it going to come back to levels we've seen in the past, or is it going to come back to levels we've seen in the past? I think we also outlined in our year-end presentation that merchanting volumes are about 20% lower than 2019. It's quite a big opportunity. They're both complementary businesses, really.
If you look at seasonally, plumbing and heating is strong between October and March. Merchanting is less strong, obviously, in the winter months. It works quite well for us from an overall perspective in terms of one offsetting the other.
A question from George T. What is your strategic vision for CMO? Will it remain a standalone e-commerce business, or do you intend to integrate it into the merchanting and P&C divisions?
It is, as we said in the presentation, our digital division. By default, it will be standalone. It is a standalone business. We see tremendous opportunity for that business to grow. It has a differentiated dropship model with really good front-end stores and an ability for us to not only get national coverage, but also sell specialist products that merchants generally won't sell because merchants are predominantly ex-stock businesses.
Where the integration will come is in collaboration on the fact that both, or all three of our divisions, have a digital requirement. Our strategy is that you've got CMO, which is a digital-first business, and you've got the other two divisions, which are a more offline-first business. Digital-first businesses, in particular, CMO will leverage the benefits that come with an offline business and the supply chain capability within those offline businesses. The offline businesses leverage the digital-first approach of CMO such that the offline businesses have greater digital penetration. To give you an idea, we are still way behind in digital adoption within the building materials market. Unlike clothing and many other product sectors, the construction market is still very much well behind in transacting through digital means for sellers.
That's where we see the benefit is that we've got our own in-house digital expertise that can work with all of our various division businesses to enhance their division efficiencies and models. Likewise, we've got deep-rooted supplier relationships and logistics capabilities that CMO can leverage as a digital-first business. A question from Derek C. saying, "How do you see margin trends developing in the second half?" As my colleague here would say, gross margin pays for everything. You've seen a slight reduction in our gross margin in the first half, just mainly because of the mix. Our businesses that are in civils, the dry lining, tend to have lower margin and more direct sales than the delivered, and that impacts our overall margin.
We'd like to see margin going up, and we'll certainly be working and have been working towards gross margin going up, but it's a competitive market out there. That is a challenging time to be in the market, but we expect to see our margin going up a little bit in the second half. As Shanker said, the new digital business CMO tends to have a lower gross margin, slightly than the group average. That will add a slight mixed impact as well.
Derek C., what is your target leverage level?
Typically, the boards are comfortable between sort of one and two times leverage. We're happy to take it higher should the right opportunity arise, and we can demonstrate that we will generate profits and cash to bring it down to that 1.5 to 2 times level. We do find that a little bit challenging, and I think that's where the market tends to sit in terms of leverage. All of our peers are likely to have got significantly higher levels of leverage. The 1.5 to 2 times is fine for us. We're slightly over that at the half year, and we're working on that coming back down a bit. If we do get some of the volumes I've touched on in merchanting, if we can get those back somewhere towards the 2019 levels, it kind of transforms our income statement. We've got quite a strong viewing impact.
If the extra pound of profit onto our pound of revenue adds £0.20 onto the bottom line, we can get a significant benefit from additional volumes.
Peter, do you have international ambitions possibly through M&A?
It is something that we've looked at, but currently, you know, given the challenges, it will be very difficult to justify going abroad whilst there are plenty of opportunities in the UK. Management's focus is clearly on the three divisions, which are UK-centric businesses. Whilst we think we can replicate our model internationally in certain markets, at the moment, we are very much focused on the UK.
Shanker, Stuart, thank you for answering all those questions you can have from investors. Of course, the company can review all questions submitted today, and we'll publish those responses on the InvestmentMeet company platform. Just before redirecting investors to provide you with their feedback, which I know is particularly important to the company, Shanker, could I please just ask you for a few closing comments?
Okay, once again, thank you very much for taking the time to join us today on the presentation of our H1 2025 results. We believe our business is very well positioned. It's made great strategic progress, and as the market recovers, we believe we're very well placed to take advantage of any market recovery. Thank you very much.
Shanker, Stuart, thank you for updating investors today. Can I please ask investors not to close this session, as you'll now be automatically redirected to provide your feedback in order that the management team can better understand your views and expectations? This will only take a few moments to complete, and I'm sure it will be greatly valued by the company. On behalf of the management team of Lords Group Trading PLC, we'd like to thank you for attending today's presentation, and good morning to you all.