Decline In Tile Sales Hits Turnover At CMO Group

CMO Group Plc, the UK's largest online-only retailer of building materials, today announces its Preliminary Results for the year ended 31 December 2023.

CMO's vision is to be the destination of choice for everyone building or improving a house or home in the UK. CMO is disrupting a huge, predominantly offline, market with a digital first proposition through the widest range, specialist expertise, and helpful customer solutions.

CMO has created category authority by offering market-leading choice listing over 130,000 products through its portfolio of specialist SUPERSTORES. This, together with the unique dropship model for delivery, provides an enhanced experience for its digital native customers.

A challenging market and financial performance 

• CMO faced a difficult market backdrop in 2023 which has been well-publicised. In 2023 GfK* reported YoY declines of 14% and 20% in the Builders Merchant and Tiles market, respectively, with the online segment of the Tiles market particularly challenging with a drop of 29% YoY. 
  
  
• Cost-of-living pressures and higher interest rates impacted demand in consumer markets and the UK experienced the wettest 18-months on record which had a particular impact on the domestic construction sector.
  
  
• As a result, total revenue for the year fell 14% to £71.5m, significantly impacted by the fall in the Tiles market.
  
  
• Group revenue up 59% on pre-covid levels of £44.9m.
  
  
• The SUPERSTORES outperformed the market growing share by c.10% H2 v H1.
  
  
• TILES like-for-like sales declined 31%, in line with the market. Tiles market c.20% down on pre-covid levels, but TILES sales +53% vs FY2019.

• Gross profit totalled £14.9m (2022: £16.5m), reflecting a gross margin of 20.8%, (2022:19.8%). 
  
  
• Adjusted EBITDA** was £0.9m (2022: £2.1m).
  
  
• Closing cash at 31 December 2023 was £4.7m (2022: £6.2m) and net debt, being cash less the balance drawn on the revolving credit facility, was £0.6m.  

A more efficient business and progress on strategy

In 2023, CMO overlayed its longer-term strategy with shorter-term strategic priorities and has had significant success:

• Margin growth, a 1% increase in gross product margin achieved.
  
  
• Recovery in the cost of carriage with 56% improvement achieved.
  
  
• Matching headcount to market demand - cost reduction of 18% achieved.
  
  
• GOOD BUILD SUPERSTORE has taken its first orders.
  
  
• PLUMBING SUPERSTORE is gaining traction.
  
  
• LANDSCAPING SUPERSTORE (6000 products) soft launched.

Customers loyal 

• 65% of orders from repeat customers, up from 50% in 2022.
  
  
• Customer acquisition remains balanced between paid and non-paid digital marketing.
  
  
• Average order value declined by 22% primarily impacted by lower order value from new customers. Existing Customer AOV was maintained.
  
  
• Marketable database grew by 18% year on year to almost 300,000 email addresses.
  
  
• Over 40,000 customers rate CMO's service as excellent on Trustpilot.

Current trading and outlook

• The poor weather continued into Q1, and the tiles market continued to show major decline in both online and bricks and mortar segments. Multi-point plan developed to assist recovery of the tile business being implemented by the new management team.
  
  
• Whilst market conditions are expected to remain challenging, the Group is seeing an improving trend and some momentum in Q2 which is anticipated to continue into H2.
  
  
• Improvements seen in AOVs (Average Order Value) from Q1 to Q2 after nine months of suppression indicate consumer confidence is returning to larger RMI projects.
  
  
• Improving sales order trend in Q2:

• As previously reported significant cost reductions have been undertaken to offset the impact of the slower than expected start to the year. This has seen a headcount reduction to 174 at the end of March, a c.15% reduction from the start of the year and more than 30% since the peak.
  
  
• Strategic initiatives delivering improved sales trend with continued focus on improving product margin, maintaining carriage cost recovery, ensuring excellent customer service and reducing refunds, as well as bringing the digital marketing spend down to or below 6%.
  
  
• FY benefit of brand consolidation of JTM and Clickbasin into PLUMBING SUPERSTORE expected in 2024.
  
  
• Launch of 'Super Rewards' and UX optimisations of mobile experience in H2.
  
  
• Development of next store launch in early 2025 as CMO continues to deliver on its mission to bring the widest range to the market.
  
  
• With inflation easing, a reduction in National Insurance and expected falls in interest rates, we anticipate the gradual improvement in consumer confidence to continue and accelerate into H2.
  
  
• The Group remains well financed with cash and available facilities of over £4m at the end of April 2024. In addition, we have made progress with our flexible banking partner to strengthen the Group's available liquidity with the bank facilities and associated covenants renegotiated in January 2024 to meet the Groups future requirements.

Dean Murray, CEO of CMO Group said:

"2023 has been a difficult year for all allied to the housing industry. However, whilst CMO is not immune to this, we have focussed our energies on profitable sales and becoming a better, more efficient business which is primed to take advantage of improvements in market conditions when they materialise which we have seen signs of recently.

We are encouraged that our SUPERSTORES have outperformed the market and that we gained market share in the second half. 

We have a proven business model and continue to deliver on the strategic roadmap set out at the time of our IPO. We remain focussed on successfully navigating what we expect to be another challenging year, but one that is beginning to show some signs of improvement. If that continues, we will benefit and return to growing our sustainable and profitable business."

Source : CMO Group

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