Building materials firm CMO Group warns of lower-than-expected profits as online supplier falls victim to ‘human error’
- The online company said it expects adjusted annual core profit of £2.1m for 2022
- CMO Group saw trade weaken amid tougher economic backdrop
- Based in Plymouth, CMO is the UK’s largest digital-only building materials company.
Building materials supplier CMO Group maintained resilient sales growth last year, but warned profits were likely to fall below forecasts.
The online company said it expects to post annual base profit of £2.1m from £2.2m for 2022, after warning in December that “human error linked to a poor valuation of the shares of its subsidiary Total Tiles would cost around £700,000 in profits.
At the same time, trading is weakening in tougher market conditions as consumers prefer low-margin products.
Earnings: Building materials supplier CMO Group warned in December that ‘human error’ linked to poor stock valuation at its subsidiary Total Tiles would cost around £700,000 in profits
Sales rose a further 9% year-on-year to £83m on the back of higher orders from mass merchandisers, particularly for its plumbing products, in the last two months of the period.
On a like-for-like basis, revenues rose just 2% as inflation and recession fears mounted, but that was still nearly a third above pre-pandemic levels.
As of mid-2020, the volume of building materials purchased digitally has increased since the imposition of temporary trade restrictions on non-essential stores at the start of the pandemic.
Meanwhile, more and more Britons have sought to improve their properties or find more spacious places to live.
This housing renovation boom was further propelled by the introduction of a stamp duty holiday and low interest rates which boosted demand for mortgages.
Successive increases in the Bank of England’s key interest rates and a surge in inflation driven by energy prices over the past year have slowed this expansion, thus slowing orders for building materials.
As a result, CMO Group shares have lost more than three-quarters of their value since listing on the London Stock Exchange in July 2021, while its market capitalization has fallen by around £75m.
The Plymouth-based company said it intended to use proceeds from the IPO to reduce debt and invest by acquiring businesses or improving its lines.
He also wants to disrupt Britain’s dominant bricks-and-mortar building materials sector, which is worth an estimated £27bn and home to stalwarts like Wickes, Travis Perkins and B&Q owner Kingfisher.
Dean Murray, CMO Group Managing Director, said: “Our strategy to disrupt and grow market share continues to drive growth. Despite the macroeconomic and industrial headwinds seen in 2022, CMO saw significant sales growth.
“We will continue to drive penetration into sectors where we have an existing operating force and also seek out new verticals to leverage our differentiated proposition.
He added: “As we look to 2023, despite market conditions that remain challenging, we are confident that we can make further progress.”
Launched as Construction Materials Online in 2008, CMO has become the UK’s largest digital-only building materials company, selling over 100,000 products across its eight specialist websites.