- One-off costs weigh on profits
- Acquisitions underpin revenue growth
For investors, CMO Group’s (CMO) entry onto the Aim last July has provided a similar experience as many addictive substances – an initial, dizzying high has been followed by a lingering low. The company’s shares debuted at 132p and jumped in value by two-thirds to 220p within their first month but have been gradually sinking since and now trade below their listing price. Some of that malaise can be blamed on the supply chain disruption that continues to hound importers.
The company was founded in 2008 to sell building products online through websites such as doorsuperstore.co.uk, insulationsuperstore.co.uk and roofingsuperstore.co.uk. Its IPO prospectus hailed its ‘asset-light’ business model – 83 per cent of the products it sold are shipped directly from the manufacturer, with the remaining 17 per cent dispatched from its Plymouth warehouse.
In normal times such low overheads are a boon but given the “considerable challenges in supply and nationwide distribution” last year, an operating profit of £1.48mn in 2020 reversed into a loss of £3.27mn. A £2.94mn one-off payroll charge and £1.77mn of expenses – both related to its listing – weighed on its fortunes.
Top-line growth of 46 per cent was helped by a full-year’s contribution from Total Tiles, which brought in £16.5mn of revenue following its acquisition in December 2020. A further £1.7mn came from plumbing business JTM, acquired in September.
Year-on-year sales growth slowed to 13 per cent in the first quarter, though, as the outlook for the home improvement market worsens. Given that supply chain shortages show few signs of easing, CMO’s valuation of over 60 times broker Liberum’s forecast earnings of 2.1p a share still looks a bit rich. Sell.
Last IC View: na
| CMO GROUP (CMO) | ||||
| ORD PRICE: | 127p | MARKET VALUE: | £91mn | |
| TOUCH: | 125p-130p | 12-MONTH HIGH: | 220p | LOW: 124p |
| DIVIDEND YIELD: | nil | PE RATIO: | na | |
| NET ASSET VALUE: | 25p* | NET CASH: | £5.53mn | |
| Year to 31 Dec | Turnover (£mn) | Pre-tax profit (£mn) | Earnings per share (p) | Dividend per share (p) |
| 2018 ** | 38.6 | -1.76 | -3.00 | n/a |
| 2019 ** | 45.0 | -2.21 | -3.00 | n/a |
| 2020 | 52.4 | -0.39 | -1.49 | nil |
| 2021 | 76.3 | -4.42 | -7.11 | nil |
| % change | +46 | - | - | - |
| Ex-div: | - | |||
| Payment: | - | |||
| *Includes intangible assets of 31p a share **Results for CMOStores Group Ltd | ||||
