MKM sees growth continue

The UK’s largest independent builders’ merchant, MKM Building Supplies (Holdings), has posted increased sales and profits in its annual results for the year to September 30 2016.

Revenue, at £284.313m, was 13.2% head of the previous year, with operating profit up 27.2% to £19.9m and pre-tax profit 51.3% ahead at £15.847m.

David Kilburn, Executive Chairman of MKM, said: “We are pleased to announce another strong full-year financial performance, delivering 13% revenue growth over the period to over £284 million, as well as growth in EBITDA and profit before tax.

“Our strong performance was driven by factors including a resilient RMI market against the backdrop of Brexit, together with product range extensions, including the roll-out of kitchen and bathroom showrooms across many of our branches, sensible margin control and good working capital management.

“We continue to benefit from our unique business model, which sees Branch Directors take an equity stake in their branch and a share of profits. This allows us to attract, retain and incentivise the best talent, both financially and through autonomy, which plays out in levels of customer service.”

The Group reports that sales pricing remains competitive but that its greater buying power, continued support from the supply base, and close scrutiny of costs saw operating margins improve by 70 basis points, with the improvement in profitability driven by the higher volumes of business.

Cash management remains a high priority and this is reflected in the cash position of the Group at the year end with an increase in cash balances of £4.6 million.

Just after the end of the financial year end, MKM signed a binding agreement with 3i Group, LDC and Bain Capital Private Equity for the sale of 3i and LDC’s stakes in MKM to Bain Capital. Management have retained a significant shareholding in the business. New branches opened in Galashiels, Sharston, and Crewe, meaning MKM now has 47 branches located across the UK.

Looking forward to 2017, Kiburn said: “The UK builders’ merchant market is anticipated to grow by 12% to £13 billion by 2020. Whilst rising inflation may reduce expectations for growth, we are still seeing strong demand driven by a backlog of RMI and a healthy new build market, supported by Government incentive schemes, continued good availability of mortgage finance and the low interest rate environment.

“We have started to see some cost pressures in the supply chain, but this is largely mitigated by sourcing a relatively large proportion of our products from our high-quality UK supplier base. We have a good track record of managing our margins, a strong balance sheet, and we will continue to invest in expanding our UK branch network, as well as in organic growth opportunities across the existing branch network to meet ongoing demand and deliver continued growth.”