31 July 2023
Marshalls plc
(‘Marshalls’ or ‘Group’)
Trading Update
Marshalls plc, a leading manufacturer of products for the built environment, provides the following trading update for the six months to 30 June 2023, ahead of the release of its interim results on 16 August 2023.
The Board expects to report Group revenue for the six months ended 30 June 2023 of £354 million (H1 2022: £348 million), which is two per cent higher than the corresponding period in 2022 and includes the contribution of four additional months of revenue from Marley. On a like-for-like basis, Group revenue contracted by 13 per cent. Adjusted profit before taxation for the half year is expected to be around £33 million (H1 2022: £45 million), subject to auditor review.
This result has been delivered against the backdrop of challenging market conditions with persistent weakness in new build housing and private housing RMI, which are key end markets for the Group. The sustained high levels of inflation, increasing interest rates and weak consumer confidence means that the Board anticipates the Group’s performance in the second half will be below its previous expectations.
Divisional trading performance
Marshalls Landscape Products has continued to experience tough market conditions due to its exposure to new build housing and the more discretionary elements of private housing RMI. Revenue for the period was £174 million (H1 2022: £217 million), which represents a reduction of 20 per cent compared to 2022. On a like-for-like basis, after adjusting for the disposal of Marshalls NV in April 2023, revenues contracted by 18 per cent.
Marshalls Building Products delivered a more resilient performance, supported by demand for bricks, masonry and mortars, offset by weaker volumes in drainage and aggregates, which are correlated to the lower number of new housing starts. Revenue for the period was £87 million (H1 2022: £96 million), which represents a contraction of nine per cent compared to 2022.
Marley Roofing Products saw mixed demand across its product offering. Viridian delivered further growth in integrated solar revenues supported by changes in building regulations, which was offset by a weaker performance in roofing, due to lower volumes of new build housing. Revenue for the period was £93 million, which represents a contraction of seven per cent compared to 2022 on a like-for-like basis.
Management actions
The Board has taken decisive action in responding to the challenging trading conditions, by implementing a number of measures to align capacity and costs with demand, with a strong focus on managing cash. This has resulted in the closure of the Group’s factory in Carluke, a reduction in shifts and capacity in other facilities, and a restructuring of the Marshalls commercial team. Regrettably, these changes are expected to result in a reduction of approximately 250 roles in addition to around 150 roles that were removed in the second half of 2022. These actions are expected to deliver annualised savings of approximately £9 million, with around 40 per cent of this benefit being realised in 2023. The Board has reduced its capital expenditure plans without impacting critical projects, is executing a programme of surplus land disposals, and has continued to focus on efficient working capital management in order to reduce the Group’s net debt.
We have balanced the need to reduce our capacity and cost base in the short term while retaining the flexibility to increase production when demand recovers. The Group has latent capacity across all its businesses that can satisfy materially higher demand than that being experienced in 2023.
Balance sheet and liquidity
The Group’s balance sheet remains robust, with pre-IFRS16 net debt of approximately £185 million at the end of June (June 2022: £208 million; December 2022: £191 million) reflecting the cash generative nature of the business and management’s focus on working capital. The Board’s ongoing priority is to reduce leverage utilising free cash flow generated by the Group.
Outlook
The Board remains confident that the Group is well placed to deliver profitable long-term growth when market conditions improve and continues to focus on executing its key strategic initiatives.
Whilst previously anticipating a recovery in market conditions in the second half of the year, the Board is now of the view that an improvement in the second half performance is unlikely given the macro-economic backdrop. In addition, the Board has chosen to reduce production volumes with a negative impact on operational efficiency in order to manage working capital. Taking these factors together, and in the absence of a recovery in demand in the Group’s end markets, the Board believes that the result in the second half will be markedly weaker than the first half, and consequently expects to deliver a result for the full year that is lower than its previous expectations.
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.
Enquiries:
| Martyn CoffeyJustin Lockwood | Chief ExecutiveChief Financial Officer | Marshalls plc | +44 (0)1422 314777 |
| Tim Rowntree | MHP Communications | +44 (0)20 3128 8540 | |
| Charlie Barker | +44 (0)20 3128 8147 |