Marshalls Warns of Profit Fall Even as Marley Revenue Grows

MARSHALLS plc has posted a 20% increase in annual revenue for the 9 months ended 30 September 2022 after the acquisition of Marley, to reach £544 million – up the from the previous year’s turnover of £453 million.

However, excluding Marley’s turnover, on a like-for-like basis, Marshall Group revenue growth was 4% – brought down by the performance of its Landscape Products division.

The company says the slowing of revenue growth is due to a “marked softening of demand” for private housing RMI in both the UK and international markets and destocking in the distribution channel.

Marshalls has responded by reducing its manufacturing output to manage stock levels, which has impacted its factories’ efficiency – leading to a profit warning for the year.

Marley Revenue

Marley delivered revenue of £84 million in the post-acquisition period, which represents growth of 9% compared to the corresponding period in 2021. While Marley continued to grow in the third quarter, the rate of growth slowed. This was due to a combination of a softer market backdrop and destocking in the distribution channel, Marshalls reports. However, the business continues to trade ahead of expectations at the time of the acquisition, Marshalls adds.

The Group’s segmental performance followed the trends reported in half year results to June 2022. The more positive backdrop of sales in Marshalls Building Products and Marley were offset by the continuation of tougher trading conditions in Marshalls Landscape Products, which, the company says, has greater exposure to the discretionary element of private housing RMI.

Marshalls Building Products has seen revenue growth of 22% to £149m in the 9 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.

Marshalls Landscape Products has continued to face tough trading conditions and reported revenue of £311m, down 6% on 2021’s figure of £330m, in the 9 months to September 2022. The rate of contraction increased in Q3 to 16% compared to 1% 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, the company says.

Marshalls Warns of Profit Fall

Marshalls has reduced manufacturing output to manage stock inventory levels, affecting the efficiency of its factories in the short term. The reductions in output are expected to reduce operating costs by around £10m per year from the start of 2023. In the medium term, Marshalls is targeting a 15% operating margin.

Marshalls state: “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.”

The projected range was expected to be between £95.1 million to £101.0 million.

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