10th Sep 2024 12:19
(Alliance News) - Analysts believe Lords Group Trading PLC is in good stead for when market conditions do improve, after the building materials distributor reported on a tough first-half.
Lords said revenue in the half-year ended June 30 fell 3.8% on-year to GBP214.2 million from GBP222.6 million a year prior.
Pretax profit slumped 80% on-year to GBP1.1 million from GBP5.6 million.
"Trading conditions have remained challenging throughout the first half of 2024 with like-for-like revenue 6.1% lower," Chief Executive Officer Shanker Patel said.
"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 GBP2.6 million in 2025."
Lords lowered its interim dividend by 52% to 0.32 pence per share from 0.67p.
The CEO welcomed UK government support for the sector, and said a recent interest rate cut could see fortunes in the construction economy pick up.
However, Patel said Lords is not "expecting any change to trading conditions in the second half of 2024".
Further beyond that, however, Lords has been tipped to succeed.
Berenberg judges the firm to be "well positioned for recovery".
"As with most other companies in the domestic construction sector, Lords has highlighted that current market conditions remain subdued and that financial delivery clearly remains geared into a recovery in UK construction market volumes. We expect these conditions to continue in 2024, with lower market volumes offset by some self-help/initiatives, along with some limited price deflation. Thereafter, we believe that there should be considerable operational leverage into a UK recovery when it comes, we believe with every 5% recovery in volumes contributing GBP4 million to adjusted earnings before interest and tax versus a base 2024 level of GBP12.7 million," Berenberg analysts said.
"We expect careful management of the balance sheet through the downturn; however, thereafter, we continue to believe that there is a substantial consolidation opportunity ahead."
Berenberg has a 'buy' rating for the stock.
Looking to 2025, analysts at Cavendish predict 3.3% revenue growth for the firm, which it believes will be a "moderate recovery in the context of the building materials industry".
"Furthermore, we believe that Lords has good opportunities to reaccelerate its growth trajectory through further expansion of the product catalogue, ongoing growth in existing lines such as lower carbon plumbing & heating products, and opportunities to expand the branch network organically and potentially by selective acquisitions," Cavendish added.
Lords shares were 6.3% lower at 36.56 pence each on early Tuesday afternoon in London.
By Eric Cunha, Alliance News news editor
Comments and questions to [email protected]
Copyright 2024 Alliance News Ltd. All Rights Reserved.
Related Shares:
Lords Grp Tr