Marshalls builds for the future despite profits slide

LANDSCAPE products and building materials group Marshalls has posted a “sharp reduction” in sales volumes and believes that the the market remains “uncertain”.

The Huddersfield-based firm, which sponsors the Chelsea Flower Show, revealed in its preliminary results for the year to the end of December 2009 that it has also completed a restructuring.

Its pretax profits for last year fell to £12.1m from £22.5m last time while its revenues dropped to £311.7 from £378.1m in 2008.

On a like-for-like basis, the underlying daily sales revenue for the full year was down 16.1% although it witnessed a “degree of stabilisation” in the second half of 2009. 

Marshalls said that its balance sheet “looks strong” following a £34m rights issue and the redemption of a £20m debenture.

The company has also revealed that a restructuring programme – which saw the closure of four manufacturing sites as well as its ‘landscaping installations’ operations – has resulted in it making cost savings of £11.4m.

Marshalls has introduced ‘greater flexibility’ to cope with the downturn by introducing a temporary “lay off” agreement which can be used when necessary with its employees.

And it now believes that it is in a strong position when the recovery arrives on the back of new products which have been tailored for the education and rail sectors.

Marshalls states that it also intends to invest in other new ranges of products for the future.

Chief executive Graham Holden said: “”The sharp reduction in sales volumes is unprecedented but the group has responded quickly to rightsize the business, yet increase its competitive advantage through selective investment and operational flexibility. 

“There is still uncertainty surrounding the short term outlook for sales volumes, not least because of the impending election.  In addition, the snow in January has led to a slower start to the year and makes it difficult, at this stage, to establish an underlying trend.

“We have responded by building flexibility into the business, whilst retaining sufficient capacity for the medium term so that we can react quickly and effectively to changing market conditions.

“There are signs of recovery in house building and Olympic related demand is increasing as the event comes closer. 

“The group has now received orders of £2m and enquiries of £14m, considerably up from the £1m and £8m respectively 6 months ago.

“In a difficult market we have achieved a resilient performance and are well positioned for an upturn. 

“We are managing the business tightly and have significantly reduced our cost base. 

“Cash generation has been strong.  We are investing selectively in the business to develop new products and new markets and to build on the strong Marshalls brand.”

The company has also announced that Mike Davies will be retiring as non-executive chairman of the board and as a director of the company in May.

He will be succeeded by Andrew Allner who is currently a non-executive director of CSR, Northgate and The Go-Ahead Group.