Marshalls plc
Trading Update: 11 May 2022
Ahead of its Annual General Meeting at 11:00 today, Marshalls plc, a leading manufacturer of products for the build environment, issues a trading update for the first four months of its 2022 financial year
Trading performance
Group revenue for the four months ended 30 April 2022, was up 7 per cent at £201 million against the same period last year, on an equivalent days' basis. During this period, there was one less trading day compared with 2021 and reported sales increased by 5 per cent. This was achieved against a very strong comparator period, which included record seasonal sales volumes in March and April 2021, and was supported by the successful implementation of price increases at the start of 2022.
Revenue in the Public Sector and Commercial end market for the four months ended 30 April 2022 was £137 million and accounted for 68 per cent of Group sales. This represents an increase of 14 per cent compared with the same prior year period on an equivalent days' basis, which reduces to 12 per cent on a reported basis. Sales have been particularly strong in Civils & Drainage and Bricks & Masonry and the strength of the concrete brick performance has been particularly encouraging, with a strong New Build Housing market underpinning this demand. The Group continues to focus on those areas of the market where higher levels of growth are expected, being New Build Housing and infrastructure projects in Road, Rail and Water Management.
Revenue in the Domestic end market, which represented approximately 26 per cent of Group sales was £52 million. This represents a reduction of 8 per cent compared with 2021 on an equivalent days' basis, and 9 per cent on a reported basis. Order books have remained very healthy in a historical context with the survey of domestic installers at the end of April 2022 showing an order book of 19.4 weeks (2021: 17.2 weeks). However, despite end customer demand being strong, there was a reduction in installer capacity in March and April compared to the prior year, largely due to more holidays being taken in 2022 compared to 2021 when the country was in lockdown. The comparative picture is expected to progressively normalise during the remainder of the year.
Sales in the International business for the four months ended 30 April 2022 increased by 3 per cent compared with 2021 and includes Marshalls NV in Belgium, which was also against a very strong comparative result in 2021.
Acquisition of Marley
Marshalls completed the strategically important acquisition of Marley Group plc on 29 April 2022. Marley is a leader in the manufacture and supply of pitched roof systems to the GB construction market and is a market-leading brand. The acquisition strengthens the Group's exposure to the cyclically resilient and growing UK RMI end market, which has a strong medium-term outlook underpinned by attractive structural drivers such as the UK's ageing housing stock. There is a strong cultural alignment with Marshalls with both businesses employing a similar commercial strategy that focuses on generating pull demand from key specifiers and influencers. In addition, there are clear opportunities to leverage Marshalls' operational, manufacturing and sustainability expertise for Marley's business. It will operate as a division within the Group and the integration process is now well underway. Marley has a track record of consistent profit growth and cash generation and has started 2022 strongly, with trading for the first four months of the year ahead of plan and the 2021 comparatives.
Following the acquisition of Marley, the Group has reviewed its reporting segments. The Directors have concluded that, going forward, the Group will report under three separate reporting segments, namely Marshalls Landscape Products, Marshalls Building Products and Marley Roofing Products.
Balance sheet and liquidity
The Group continues to have a strong balance sheet supported by a conservative and flexible capital structure.
The Group had net debt at 30 April 2022 of £86 million (2021: £98 million). On a pre-IFRS 16 basis net debt was £45 million (2021: £52 million). On 3 May 2022, the Group drew down a new four-year term loan of £210 million to support the funding of the acquisition of Marley. In addition to the term loan, the Group has entered into a new committed revolving credit facility of £160 million with a maturity date of four years. On a pro forma basis, the Group expects to maintain a net debt to EBITDA multiple of less than 1.5 times on both a reported and a pre-IFRS 16 basis for 2022. Good headroom is maintained against the new bank facility and its covenants, which will support investment priorities going forward.
Outlook
The Construction Products Association's recent Spring forecast predicts an increase in UK market volumes of 2.8 per cent in 2022 and 2.2 per cent in 2023, which is a modest reduction from the previous Winter forecast and reflects a more uncertain trading environment. The Group continues to operate in an inflationary environment and it remains confident that input cost increases can be passed on through the supply chain.
The Board remains focused on developing future growth opportunities, delivering the strategic objectives set out in the 5-year Strategy and realising the opportunities that the acquisition of Marley will bring to the Group. The Board is confident of achieving its 2022 expectations, which have been increased to include a material contribution from the acquisition of Marley.