NEWS EXTRA
LORDS’ AIM FOR FURTHER GROWTH
One of the many ways that a merchant can get capital in order to grow is by a public listing. Fiona Russell Horne finds out why Lords Group Trading has done just that.
Lords Group Trading has listed on the AIM market on the London Stock Exchange, raising capital to fund its growth plans. The first day of trading was July 20th and the deal values the group at £150m. Any business worth its salt will occasionally take time out to assess the future strategy, which invariably throws up the threats and potential weaknesses of the business. Shanker Patel, CEO of family- owned builders merchant group Lords Group Trading says that the group’s strategic aim has always been to grow, which is something it has been doing for a number of years. “A few years ago, we realised that the pace of opportunity may not be matched by the pace at which we can reinvest our profits. So, effectively, at some point, our growth would need additional capital.”
Invested profits He points out that, thus far, all of Lords’ considerable growth has been self-funded, through re- investing profits. “It has been the subject of much debate at times within our industry, how have we managed to grow without taking on additional capital or shareholders. Many people thought we probably have high levels of bank debt, but the reality is that we have a well-crafted model of how we structure our finances, and that has got us to where we are today.” Lords Group currently comprises 16 builders merchant branches, under the George Lines, Hevey Building Supplies, MAP and Lords brands, as well as the businesses APP Wholesale, Mr Central Heating, Lords at Home and Weldit. Patel continues: “The issue we faced was: how to grab opportunities that are greater than
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our capacity to consume them? How do you create a business structure that lives up to the value system that we believe in, that is that we are patient in our expectation and measured in our reactions? We are very long-term thinkers, whatever we do has a minimum horizon of 10 years and, invariably the actual business strategy goes far beyond that.” Patel says that the group was faced with a number of options: to continue as now, using bank debt to fund growth, or to try to increase profits sufficiently fast to be able to self-fund the growth opportunities, to bring in an additional financial partner and work with private equity in a minority sense or a majority sense. None of these, he explains, felt the right route for the group, even though funding via private equity is currently a tried and tested method in the merchant industry. “We call our model ‘family equity’ which
Above: L-R, Chris Day CFO, and Shanker Patel CEO
is basically family ownership with professional management,” he says. “In the private equity model, the ultimate aim is a leveraged return in a short period of time, one that would be far short of our
minimum 10-year view. A financial partner who is more comfortable with only taking five-year bets would not be able to co-exist with our longer-term view. The other option, of course, open to any business owner is selling out but very much from day one we have said we are not for sale. We don’t want to sell the business; we don’t
www.buildersmerchantsjournal.net August 2021
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