- Interim sales and EBITDA down 13%
- New-build and RMI demand lower
- Five-year plan coming in November
Building products firm Marshalls (MSLH) was initially the worst-performing stock on the FTSE 250 after it released a downbeat six-month trading update showing a slump in both revenue and profits.
After trading down as much as 18p or 5% early on, however, the shares recovered to sit just 3.5p or 1% lower at 336p by mid-morning.
SELF-HELP DOING THE TRICK
The firm blamed weak end-markets and a particularly weak performance in landscape products for a 13% drop in sales to £307 million for the first half to the end of June.
Landscape products include garden walls, paths, paving and driveways and the group pinned the weakness on ‘sustained low levels of new build housing’ as well as a lower spend on RMI (repair, maintenance and improvement).
However, cost and capacity reductions have helped the group limit the impact on operating profits, with EBITDA (earnings before interest, tax, depreciation and amortisation) down 14% at £50.6 million.
Chief executive Matt Pullen believes there is more the group can do to improve its results: ‘While 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.’
He added: ‘We are undertaking a review of the group’s strategy and have identified a number of opportunities to deliver outperformance over the medium term. 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.’
Pullen said he would put forward a new five-year strategy for the group at its capital markets day on 19 November.
EXPERT VIEW
‘Pressures on household budgets, the property market and the prioritising of spending on other areas like holidays have left Marshalls highly exposed, and that’s reflected in these latest results with revenue and profit materially lower,’ commented AJ Bell investment director Russ Mould.
‘New chief executive Matt Pullen has 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,’ added Mould.
DISCLAIMER: Financial services company AJ Bell referenced in this article owns Shares magazine. The author of this article (Ian Conway) and the editor (James Crux) own shares in AJ Bell.
