7 October 2022

Marshalls plc

('Marshalls' or 'Group')

Trading update

This announcement contains inside information

Group revenue for the nine months ended 30 September 2022 was £544 million (2021: £453 million), which represents year-on-year growth of 20 per cent including the benefit of the acquisition of Marley. On a like-for-like basis, Group revenue growth was four per cent. 

The Group's segmental performance followed the trends that we reported at our results for the half year ended 30 June 2022, with the more positive backdrop within Marshalls Building Products and Marley offset by the continuation of tougher trading conditions in Marshalls Landscape Products, which has greater exposure to the discretionary element of private housing RMI.

Marshalls Building Products has seen revenue growth of 22 per cent to £149 million (2021: £123 million) in the nine-month period, with a particularly strong performance from the Bricks & Masonry business.  Demand has remained robust throughout the third quarter, with revenue growth at a similar level to the first half of the year.  Marley delivered revenue of £84 million in the post-acquisition period, which represents growth of nine per cent compared to the corresponding period in 2021.  The business grew in the third quarter, albeit the rate of growth moderated due to a combination of a softer market backdrop and destocking in the distribution channel, however the business continues to trade ahead of our expectations at the time of the acquisition.

Marshalls Landscape Products has continued to face tough trading conditions and reported revenue of £311 million (2021: £330 million) in the nine-month period, which represents a reduction of six percent.  The rate of contraction increased in the third quarter to 16 per cent compared to one per cent at the half year, due to a marked softening of demand for private housing RMI in both the UK and international markets and destocking in the distribution channel.  We have responded by reducing our manufacturing output to manage inventory levels, which has impacted the efficiency of our factories in the short term.  These actions will reduce capacity and costs within our manufacturing network and trading function to ensure alignment with lower levels of demand and this is expected to reduce operating costs by around £10 million per annum from the start of 2023.  In the medium term, we continue to target returning this business to a 15 per cent plus operating margin.

The Group's balance sheet continues to be robust, with pre-IFRS16 net debt to proforma EBITDA expected to be approximately 1.5 times at the year end, and we maintain good headroom against our bank facility and its covenants, which will support investment priorities going forward.

We continue to effectively mitigate cost inflation through price increases.  However, taking into account the combined impact of the accelerated rate of revenue contraction in Marshalls Landscape Products in the third quarter and the reduction in efficiency resulting from lower manufacturing output in this reporting segment, the Board now anticipates that the outturn for the Group as a whole will be slightly below the bottom end of the current range of market expectations*.

*Company compiled market consensus is £98.5 million with a range of £95.1 million to £101.0 million.

Marshalls will host a conference call for investors and analysts at 9am on 7 October 2022 (today).  Please contact MHP Communications via Marshalls@mhpc.com or 020 3128 8666, to receive the conference call details.

Certain information contained in this announcement would have constituted inside information (as defined by Article 7 of Regulation (EU) No 596/2014), as it forms part of domestic law by virtue of the European Union (Withdrawal) Act 2018) ("MAR") prior to its release as part of this announcement and is disclosed in accordance with the Company's obligations under Article 17 of those Regulations.

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About Marshalls plc:

Established in the late 1880s, Marshalls plc is the UK's leading manufacturer of superior natural stone and innovative concrete hard landscaping products, supplying the construction, home improvement and landscape markets.  Marshalls provides the product ranges, design services, technical expertise, innovative ideas and inspiration to transform gardens, drives and public and commercial landscapes. Following the acquisition of Marley, the Group is now also a leader in the manufacture and supply of pitched roofing systems, including clay and concrete tiles, timber battens, roof integrated solar solutions and roofing accessories.

The Group operates its own quarries and manufacturing sites throughout the UK, including a national network of manufacturing and distribution sites, and has operations in Belgium and sales representation in other international markets.  As a major plc, Marshalls is committed to quality in everything it does, including the achievement of high environmental and ethical standards and continual improvement in health and safety performance.

Forward-Looking Statements:

Any statements in this release, to the extent that they are forward-looking, are subject to risk factors associated with, amongst other things, the economic and business circumstances occurring from time to time in the markets in which Marshalls operates. It is believed that the expectations reflected in these statements are reasonable but they may be affected by a wide range of variables which could cause actual results to differ materially from those currently anticipated.  More information about the factors that may affect Marshalls' performance is contained in the Annual Report to shareholders for the year ended 31 December 2021.