MKM: Continuing Investment Delivers Market Outperformance

MKM Building Supplies (MKM), the UK’s fastest growing independent builder’s merchant, is pleased to announce full year results for the year ended 30 September 2024.

Highlights:

• Outperforming the market with 6.4% increase in annual revenues to £986m (2023: £927m)

• Market outperformance underpinned by:
  • Branch network growth 
  • High customer service rating
  • Breadth of product availability and range
  • Local branch autonomy, knowledge and expertise

• 11 additional branches added during the year – taking the total to 132:

o  8 greenfield new branch sites

o  2 branches added as part of Oceanair acquisition

o  1 MKM branch acquired 

• Expanded customer offer, with:

o  Acquisition of Oceanair - enhancing the heating, ventilation & air conditioning offer, including air source heat pumps

o  Acquisition of Tradeshake - offering legal contracting services to customers

o  Growth in the hire business, with 3 additional instore openings, bringing total to 17 

• Profits of £77m (2023: £88m), reflecting market conditions and immature branches 

Kate Tinsley, CEO of M.K.M Building Supplies Limited, said:

“MKM had a strong 2024, significantly outperforming the sector and growing revenues, despite a tough market. We added 11 new branches and kept our focus on great customer service and product availability.

The market seems to be stabilising with lower interest rates and better consumer spending, leading to more property transactions and mortgage approvals. We're in a good position to benefit from these positive trends and are excited about the year ahead”.

Introduction:

M.K.M Building Supplies Limited (MKM) again performed well during the year. This was supported by prior investment in new branch openings, the opening of additional branches and the Company’s continued focus on customer service and its local offer. This was achieved despite challenging market conditions, over recent years.

MKM is well positioned to benefit from any improvement in the market, based on continued investment in the business and new branch openings. Ongoing investment consistently supports the business and customer offer, despite short-term market challenges.

With interest rates starting to come down, there are early indications of some improvement in the market. This is reflected in property transactions data, as well as in the public statements of other companies in the sector. It is also positive to see government commitment and support for the sector, with initiatives aimed at increasing the build of new homes.

Operations:

The Company added a further 11 branches during the year, bringing the total to 132. Branch openings included 8 greenfield sites and 3 acquisitions. This included the acquisition of Oceanair, a specialist distributor of heating, ventilation & air conditioning products, including air source heat pumps, with 2 branches. The remaining single branch, which was of a local bathroom provider, was purchased to enter a market area.

The Company’s unique business model means that new branch openings remain largely centred around finding and working with the right local people. This approach is in keeping with offering a service that meets local customer’s needs and incentivising the local team to maximise the offer and opportunity in their area.

Over the last three years there has been an acceleration in the pace of new branch openings, with 48 having been added. That increase has helped positioned MKM as one of the largest within the building merchanting sector, with a national presence across the country. The Company believes there remains opportunity to materially further increase the network.

That scale benefits the wider business, including through buying power, with associated cost advantage and improved product availability. It also adds to the cross over of ideas and best practice, across the branch network and Central Support.

The customer offer benefitted from growth in the hire business and the acquisitions of Oceanair and Tradeshake during the year. The hire business saw three additional instore openings, bringing the number of branches with this offer to 17. Oceanair adds to the growing air source heat pump and wider heating offer and Tradeshake allows tradespeople to create simple contracts with their customers via an ‘app’.

The market for air source heat pumps is growing and will continue to accelerate. The driver for that market is currently new builds, on the back of regulation. The market for established properties is also expected to grow on the back of financial incentives, such as the boiler upgrade scheme, as the government seeks to reduce UK emissions.

The Investment in Oceanair will help the Company attract and incentivise talent in this growing market, as well as offer customer training, which will support market roll out, business development and its customer offer. This is in-line with MKM’s drive to deliver high levels of customer service, at a local level, and sits well with its established training programmes.

Market:

There are early signs that the market is beginning to improve, after almost two years of challenging conditions, on the back of higher interest rates and reduced consumer confidence. These early signs include higher mortgage approvals, an improvement in the number of property transactions and some signs of property inflation. Property inflation adds to consumer confidence that an investment in their property will be reflected in its value.

The economic picture is also increasingly supportive, with interest rates starting to come down and consumer confidence beginning to return, post the cost-of-living crisis. The government’s wider narrative and actions in support of the property market are also welcome. This includes easing the planning process and encouraging the development of new residential property.

Finance:

The Company saw revenue grow during the year to £986m (2023: £927m), on the back of expanding the number of branches, via greenfield sites and acquisition. This included the addition of 11 branches in 2024, which comes on the back of 18 additions during 2023, 12 additions during 2022 and 18 additions in 2021.

The Company was able to maintain its gross margin during 2024, despite pricing pressure, as competitors reacted to slower market conditions. Key reasons for this where customer service, product availability, competitive buying and local expertise and autonomy.

Product price deflation was a feature throughout the year although moderating in the last quarter. Headcount increased, in-line with branch expansion, allowing the Company to retain key talent and maintain service levels. Capacity within the business will allow it to better realise growth from any improvement in market conditions and deliver improved operating margins.

Company profit in 2024 was £77m (2023: £88m), reflecting market conditions during the period and the greater proportion of immature branches, which require time to bed down and become established.

Sustainability:

The Company continues to recognise the importance of climate change and aims to progressively reduce emissions. As part of that, MKM reports against the TCFD framework and has appointed a head of ESG and governance to help it align with its sustainability objectives.

Initiatives undertaken include introducing REGO certified renewable electricity for all new branches and at supplier renewal, the procurement of zero-emissions forklift trucks and the installation of solar LED lighting and EV charging. The Company is also trailing the use of compressed gas vehicles and battery powered cranes, eliminating the need for vehicles to run their engines during deliveries.

Outlook:

MKM is well positioned to benefit from any improvement in the building materials market, having maintained sufficient capacity to support growth, while maintaining high levels of service. The Company is also well placed to continue to outperform in the current market, despite carrying higher capacity, as demonstrated over the last 18 months.

Initial positive signs of improvements in the market are welcome and we remain encouraged by the constructive narrative from the government and indications that consumer spending on discretionary items more generally is beginning to improve.

The Company will continue to focus on customer service and tailoring its offer to local needs, while building out its branch network. MKM is therefore cautiously optimistic about the year ahead, underpinned by the strength of its offer, customer service and green shoots in the market.

Source : MKM

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