MKM Building Supplies has announced strong annual results for the financial year ended 30 September, 2016, with growth in both revenue and profits.
MKM ended its 2016 financial year with revenue of £284.3m - enjoying 13.2% growth on its 2015 revenues of £251.1m. The business has also enjoyed a 27% growth in its operating profits.
The business put much of this growth down to its unique business model, where branch directors own an equity stake in their branch. This, the company believes, helps to drive high levels of customer service and, allied with MKM's product range extension, has underpinned a sales growth that exceeds the market.
Sales pricing remains competitive but greater buying power, continued excellent support from the supply base, and scrutiny of costs saw operating margins improve by 70 basis points, with the improvement in profitability driven by the higher volumes of business.
Operating profits for the year were £19.9m, compared with £15.6m in 2015. Adjusted EBITDA was £22.4m, up from £16.6m in 2015, and profit before tax was £15.8m compared to £10.5m in 2015.
Post 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, mean MKM now has 47 branches located across the UK.
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 £284m, 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 director's 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.”
On the outlook for 2017, Mr Kilburn commented: "The UK builders' merchant market is anticipated to grow by 12% to £13bn by 2020. While rising inflation may reduce expectations for growth, we are still seeing strong demand driven by a backlog of RMI and a healthy newbuild 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."