LONDON, UK: CMO Group Plc, the UK’s largest online-only retailer of building materials, announces its intention to seek admission of its shares to trading on AIM, a market of the London Stock Exchange.

CMO Group Plc is disrupting a £27 billion predominantly offline market with a digital first proposition and market leading product choice, supported by high quality customer service and technical expertise.

The Group currently operates seven specialist websites, Roofingsuperstore.co.uk, Drainagesuperstore.co.uk, Insulationsuperstore.co.uk, Doorsuperstore.co.uk, Tileandfloorsuperstore.co.uk, cmotrade.co.uk and Totaltiles.co.uk.

The Company has created category authority by offering market-leading ranges listing over 75,000 products through its seven websites. This unique digital hybrid service model, developed over more than 10 years, combines specialist advice and expertise tailored to category and customer needs online, to service the next generation of digital natives by bridging the gap between traditional bricks and mortar retailers and pureplay digital retailing.

CMO has established trusted partnerships with manufacturers and supply partners across the UK. Its business model is asset light with the majority of products dropshipped directly from the manufacturers to its customers.

Whilst CMO stands to benefit from the long-term structural shifts and behavioural changes triggered by the COVID-19 pandemic, its underlying customer KPIs have remained in line with the strong growth evidenced in repeat business, average order value (‘AOV’) and customer lifetime value.

The Directors believe that there is significant opportunity to continue growing sales organically through a programme of category expansion into new segments, continuous development of its multi-channel marketing strategy to attract and maintain new customers, increased use of artificial intelligence to inform marketing campaigns, personalised customer engagement and increased take-up of its trade offer. This will be supplemented by selective, opportunistic acquisitions that will strengthen existing product categories or provide an entry point for new categories.

Furthermore, the Directors expect Group EBITDA margins to improve as new categories bring higher product margins (as demonstrated by Total Tiles), buying terms improve with scale, fixed costs are better leveraged and manufacturers further embrace the dropship model. cmostores.com will revolutionise the shopping experience of homeowners and tradespeople to become the ‘go to’ digital retailer of building materials, providing market leading product choice, relevant help and advice, and a personalised customer experience.

CMO has seen a strong start to the year with like for like sales growth, for the five months to the end of May 2021, in excess of 30% compared to the previous year and total sales growth including acquisitions in excess of 70% over the same period. Margins and costs remain within expectations and the Directors expect CMO to continue to benefit from the underlying strength of the home improvement market and long-term structural shifts to online.

Admission is expected to take place in early July 2021. Liberum Capital Limited is acting as Nominated Adviser and Sole Bookrunner in relation to the Admission. GCA Altium is acting as Financial Adviser.

Dean Murray, Chief Executive Officer of CMO Group PLC, said: “We are delighted to announce our intention to list on AIM signifying an exciting new chapter in the Group’s long-term development.

“We have enjoyed strong, consistent growth driven by the Group’s successful customer proposition, first mover advantage and scalable digital platform. Our clear and focussed strategy will enable us to continue to capture further profitable share in an under penetrated market as customers increasingly move online. We will support this through targeted category expansion and a multi-channel marketing plan to drive revenue growth and margin enhancement.”

The UK market for building materials and home improvements was estimated to be worth £27 billion in 2019, approximately 50% of which was supplied through general and specialist merchants. Pure online sales accounted for around 4% in 2019 although it is estimated that digital penetration for the industry is around 10% once the online sales of the bricks and mortar operators are included.

The UK building materials and home improvements online penetration rate of 10% compares to 34% for the UK retail market as a whole, demonstrating considerable room for further digital disruption.

Online penetration of the building materials market is lagging approximately 10 years behind the UK retail market as a whole. CMO anticipates that over time the purchase patterns for building materials will follow the same online journey as other retail sectors have, with customers demanding the convenience, product choice and flexibility offered compared to an outdated traditional bricks and mortar retail model.

CMO is disrupting both the DIY retailers market and the trade merchants. Traditional merchants have been slow to transition to online given their heritage and focus on bricks and mortar operations, their business models depending on tiered pricing and their large fixed infrastructure, all of which requires a tighter product range. Some merchants (for example, Wickes, Screwfix and Toolstation) have made progress online but, compared to CMO, they stock relatively narrow product ranges. CMO has been able to grow rapidly by offering a very wide range of products, circa 75,000 products, compared to around 5,000 in a traditional merchant or 9,500 in Wickes (22,000 including online), and also offering technical sales assistance, which is rare at a builder’s merchant and very limited at a DIY retailer.

CMO is an established retailer amongst builders’ merchants, and has a digital footprint that is accelerating faster than traditional players, who have been slow to react to the digital opportunity. As a result, the Group has a 1% share of the UK market and is the UK market’s leading online supplier of building materials.

CMO is, by some margin, the largest online seller of general building materials, being three times larger than the next biggest pure-play online general building materials supplier, Building Materials Nationwide. Other examples of specialist category merchants include Victorian Plumbing and Tile Mountain.

While the entire building materials industry has faced supply chain challenges from manufacturers during the various COVID-19 lockdowns, which impacted availability of products and in turn tempered the Group’s growth through periods of 2020, the Directors believe that there are a number of positive long term benefits of COVID-19 for CMO. The lockdowns imposed in response to the COVID-19 pandemic forced a channel shift, with customers moving increasingly to online purchasing and prompted a reinvigoration of the property market with high sales and mortgage approvals as homeowners relocate and rebalance their work life environments.