Marshalls feeling the benefit of ‘self-help’ measures

Published on Sat Aug 27 06:00:00 BST 2011

LANDSCAPE products group Marshalls said the outlook for household demand is weakening, but added its “self-help” measures have positioned it well to compete in a tough market.

The Huddersfield-based group, which sells products ranging from natural paving stones to anti-terrorist bollards, supplies homeowners as well as public sector and commercial projects.

The group also revealed it is expanding into Western Europe, opening two sites in Belgium to tap a demand for specialist stone and UK products.

Revenues from continuing operations increased nine per cent to £177.2m. Operating profits from continuing operations were up 26 per cent to £13.7m.

Its figures for the first six months of the year were flattered by weaker numbers a year earlier when it was hit by poor weather.

Chief executive Graham Holden said the second half of the year will not show the same growth as comparative numbers get tougher, meaning volumes are likely to be “slightly lower”.

“We’ve simplified and refocused the business and we’re very happy now we’ve got a solid foundation for growth, but we just need a little bit of help from the market,” said Mr Holden. “We can deal with whatever we need to deal with.

“The things we are doing ourselves are delivering a degree of ourperformance of the market.”

Domestic installer books – a key measure of demand from households – stood at seven weeks at the end of June. This was broadly level with April, but down on the 9.1 weeks seen in June 2010. Marshalls said the domestic outlook is “softening”.

However, Mr Holden said he does not see domestic demand for Marshalls’ products collapsing, despite the growing pressure on household incomes from rising energy and food prices.

“We are aiming at a subset of consumers. The overall picture is weak in terms of consumer confidence but people who are in work or have been in their homes a long time and have a lot of savings not earning anything in the bank… it’s a good time for them to install a patio.”

The company added it is seeing continued strength in the commercial sector, offsetting the anticipated weakness in public sector demand from the Government’s austerity cuts.

In recent years it has been developing its “integrated offer” to cross-sell more of its products, such as a rail package including tactile paving, benches, signs and bollards.

Its products have been used in refurbishments of stations including Birmingham New Street, Reading and Aberystwyth.

“With Network Rail, Transport for London and Crossrail, there are large sums of money being spent on rail. We are focusing on where there’s a bit more growth – we’ve got to be really quite specific.

“Supermarkets have all got plans to increase the number of outlets.”

Together, the public and commercial sector, which make up 60 per cent of the group’s business, grew revenues 10 per cent. Of this, price hikes accounted for four per cent and volumes contributed to six per cent of its growth.

Domestic sales, which make up the balance of its sales, grew eight per cent. Price increases were three per cent, with volumes comprising five per cent.

Net debt increased from £66.7m a year earlier to £70.4m. Mr Holden said the group is happy with its debt and gearing of 35.4 per cent.

“We’ve got a degree of financial flexibility. We’ve enormous operational flexibility.

“A few years ago we were being asked why we didn’t have more debt. We’ve got the flexibility to invest if we want to.”

The group has opened a site in Belgium, from where it also hopes to cover Holland and Northern France – a population of 40m. Its overseas sales stand at three per cent, up from one per cent a year ago, and the group is targeting earning five per cent of its sales abroad in 2012 and 10 per cent in 2014.

“We’re looking to sell specialist products. It’s a niche, premium player.”

Marshalls maintained its 1.75p per share dividend. Its shares closed the day unchanged at 97p.

Analysts at Shore Capital said they were encouraged by Marshalls signing Barclays as a fourth banking partner.

They said: “This is further evidence of management’s ability to tackle potential future issues in a proactive manner (management’s ability to react quickly to the changed environment two to three years ago did much to protect the company’s profitability and balance sheet).”

john.collingridge@ypn.co.uk