Marshalls remains confident after ‘resilient’ interim performance

Marshalls, the hard landscaping, building and roofing products supplier with operations in Bury and Halifax, published interim figures for the six months to June 30, 2024 today, revealing a drop in revenues, but better pre-tax profits.

Turnover of £306.7m is compared with £3541m the previous year, which it said reflects the sustained low levels of new-build housing and private housing repair, maintenance and improvement spend.

However, pre-tax profits increased from £16.7m in 2023, to £21.5m for the reporting period, helped by decisive actions taken in 2023 to reduce costs and capacity.

Adjusted profit before tax was £26.6m, down from £33.2m.

The group said it has a robust balance sheet with a year-on-year net debt reduction of £28.8m and leverage of 1.8 times adjusted EBITDA.

A dividend of 2.6p per share has been recommended, the same as the previous year.

The group described the results as a “resilient performance in weak end markets, with the impact partially mitigated by decisive management actions and the benefit of our diversification strategy”.

It said its Landscape Products performance is challenging and further self-help actions are being implemented at pace.

The board believes that the full year 2024 outturn will be broadly in line with its previous expectations.

It said it remains cautiously optimistic of a modest recovery in its end markets during the second half of the year, predicated on a progressive improvement in the macro-economic environment.

Chief executive, Matt Pullen, said: “The group has delivered a resilient performance in weak end markets. The result in the first half is encouraging and demonstrates that the strategy of diversification, building on the group’s historic core Landscape Products business, through the acquisition and improvement of less cyclical businesses in recent years, has resulted in a more balanced group.

“In addition, we have maintained our focus on tightly controlling costs and working capital. We are, therefore, pleased to report annualised operating cashflow conversion at 111% and a year-on-year reduction in net debt of £28.8m, which remains a key capital allocation priority.”

He added: “Whilst market conditions affected the Landscape Products result, I have a strong view that the segment’s performance can be substantially improved through a number of self-help measures which we are implementing at pace. I am excited for the segment’s prospects in a market recovery as it will benefit significantly from operational leverage.”

And he revealed a review of the group’s strategy is under way which has identified a number of opportunities to deliver outperformance over the medium term.

He said: “These include attractive sustainability-driven markets across bricks and masonry, water management and energy transition alongside a cyclical recovery in our core landscape and roofing businesses, supported by the new government’s commitment to increase housebuilding significantly.

“We will provide more information on our new five-year strategy at a capital markets event on 19 November 2024.”

He concluded: “We remain cautiously optimistic of a modest improvement in the group’s end markets during the second half of the year predicated on a progressive improvement in the macro-economic environment. Against this backdrop and with the benefit of ongoing management actions, the board believes that profitability and pre-IFRS16 net debt for the full year will be broadly in line with its previous expectations.”

Russ Mould, investment director at Manchester investment platform, AJ Bell, said: “It has been quite the fall from grace for building materials firm Marshalls, which benefited from strong demand during the pandemic as an older demographic with significant disposable income spent heavily on doing up their gardens.

“Combined with a decent stream of business from the new-build housing sector, this propelled both the share price and profits to new highs, but subsequently the company has had the kind of hard landing befitting a manufacturer of paving slabs.

“Pressures on household budgets, the property market and the prioritising of spending on other areas like holidays left Marshalls highly exposed. That’s reflected in these latest results with revenue and profit materially lower.

“It’s now the job of CEO Matt Pullen to sort all of this out. He’s had six months to get his feet under the table and has largely focused on stabilising performance, improving cash flow and paying down debt.

“When the company holds an investor day in November, the market will likely be looking for evidence of a plan by which he can return the group to meaningful growth.”