Marshalls plc
Trading Update: 13 January 2021
Strong Q4 trading and re-instatement of dividend
Trading performance
Since the Half Year, revenue growth has progressively improved and sales in the most recent months were ahead of the comparative figures for 2019. The key drivers continue to be strong demand in the Domestic end market, a return to more normal levels of trading in the Public Sector and Commercial end market and continued strong growth in the International market. Group revenue for the year ended 31 December 2020 was £469 million (2019: £542 million).
Sales to the Domestic end market were up 9 per cent in the six months ended 31 December 2020 compared to the same period last year. The survey of domestic installers at the end of October 2020 showed a strong order book of 12.8 weeks (October 2019 10.9 weeks). Sales in the Public Sector and Commercial end market for the six months ended 31 December 2020 were 6 per cent down compared with 2019. This compares with the first six months of the year when sales were down 28 per cent. The level of commercial orders in the fourth quarter exceeds the prior year. The Group continues to target those parts of the market where higher levels of growth are anticipated including infrastructure projects in Road, Rail and Water Management. Sales in the International business for the six months ended 31 December 2020 increased by 18 per cent compared with the comparable prior year period, supported by continuing strong sales from Marshalls NV in Belgium.
Reflecting our increasing market confidence, in 2021 we will commence construction of a flagship dual block plant at our St. Ives manufacturing site, which will be the first facility of this nature in the UK. This represents a significant capital investment, of approximately £20 million over three years, which will provide more manufacturing flexibility and efficiencies when fully operational.
The construction sector has remained strong during the last six months and our manufacturing network continues to be fully operational and busy. Our priority is always the safety and well-being of our employees, suppliers and customers, and our health and safety practices continue to be ahead of recommended COVID-19 guidelines.
Balance sheet and liquidity
As at 31 December 2020, the Group had net debt of £27 million, on a pre-IFRS 16 basis (2019: £19 million). This is significantly better than expected and is after both the repayment of £9.4 million of furlough and £11.3 million of deferred VAT in the final quarter of the year, meaning that we have repaid all Government Coronavirus assistance/funding. We continue to monitor cash flows closely. As at 31 December 2020 the Group had total bank facilities of £255 million, of which £230 million are committed. The headroom against these facilities is £228 million (30 June 2020: £201 million).
Dividend re-instatement
The Board has confirmed its intention to re-instate dividend payments, commencing with a final, full year dividend for 2020. Distributions will be in line with the Group's stated objective of dividends covered twice by earnings over the business cycle.
Outlook
Trading continues to improve and order books remain strong. The Board anticipates out-turns for 2020 and 2021 modestly above current expectations. We continue to monitor closely any risk to demand due to the worsening COVID situation in Q1. We are taking appropriate and timely measures to best mitigate any impact.
The Board intends to issue its full year Preliminary Announcement on 11 March 2021.
Although market demand remains uncertain, we remain focused on developing future growth opportunities and delivering the strategic objectives in our 5 year Strategy. Our strategy is underpinned by strong market positions, focused investment plans and an established brand.
Certain information contained in this announcement would have constituted inside information (as defined in the Market Abuse Regulation) prior to its release as part of this announcement and is disclosed in accordance with the Company's obligations under those Regulations.