CMO Group PLC (CMO ), the UK’s leading online-only building materials retailer, has issued a full-year update for the period ending 31 December 2023, reflecting the economic headwinds affecting the construction sector. Despite resilient demand, a shift towards smaller consumer projects has led to lower average order values in Q4, diverging from traditional seasonal patterns. The Group anticipates full-year sales to be roughly £71.5 million, down from £83.1 million in 2022. More notably, the full-year adjusted EBITDA is expected to be around £1 million, a fall from £2.1 million the previous year and below the guidance.
CMO holds cash reserves of approximately £4.3 million and reports a net debt of £1 million at year-end. The Group has also been proactive in working with banking partners to bolster liquidity and is prioritizing profitable sales and liquidity improvements.
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CMO Group PLC’s profit warning is a clear sign of the challenges faced by the construction sector, especially within the RMI segment, which has been particularly vulnerable to the economic climate. The reduction in average order values underscores a trend towards caution in consumer spending on home improvement amidst economic uncertainty.
The Group’s efforts to mitigate these challenges through strategic priorities, such as improving product margins and controlling carriage costs, have seen some success. The increase in gross product margins and carriage recovery is a testament to the Group’s operational focus. Additionally, the market share growth reported for its SUPERSTORES and the launch of the LANDSCAPING SUPERSTORE are bright spots in an otherwise difficult year. However, the drop in adjusted EBITDA is a cause for concern and suggests that despite operational efficiencies, the Group is not immune to the broader economic pressures on the industry. The well-financed position, with a solid cash reserve and manageable net debt, provides some buffer against the downturn.
CEO Dean Murray’s cautious yet confident outlook for FY24 indicates a belief in the company’s business model and strategy to navigate through economic turbulence. CMO’s commitment to disrupting the traditional market and leveraging its vertically integrated websites may well position it for recovery as the economic landscape stabilizes.
Investors should note the profit warning as a sign of the times for the construction sector and weigh the potential of CMO’s strategic initiatives against the backdrop of persistent macroeconomic challenges. The Group’s ability to maintain profitability and progress in the coming fiscal year will be crucial for investor confidence. The full-year results in May will provide further insights into the company’s resilience and the efficacy of its strategic measures.