Soggy outlook at Marshalls

Miserable weather in the second quarter of the year has put a real dampener on sales at hard landscaping products provider Marshalls.

Marshalls' revenue for the first six months of 2012 of £167m was 5% lower than last year's first half revenue of £177m. The weather impact has resulted in an estimated reduction in sales in the second quarter of around £10m, equivalent to 6 days' installations.

The group said underlying sales to the public sector and commercial end market, which represent just under two-thirds of Marshalls' revenues, were down 2% year-on-year but were more or less in line with expectations. It was in the domestic end market where rain stopped pay in the second quarter - an important trading period for the firm. Sales to the domestic end market were down 14% on the corresponding period, with the only consolation being that this has resulted in a backlog building up in the installer order book.

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up

Overseas, where the weather is behaving itself a bit better, sales now represent 5% of group revenues. Due to the group's £8m in Belgium net debt at the end of June had increased to £84m from £74m the year before, in line with budget expectations. Marshalls recently implemented a restructuring which, though it led to a one-off cash charge of £7m, is expected to generate savings of £4m a year; the second half of the year should see around £1m of those savings start to trickle through.

In addition, the group's cash conservation initiatives are expected to reduce cash outflow by £7m, which will reduce net debt compared with the firm's original expectations. There will also be a charge for asset impairments and asset write downs of up to £12m.

The above actions have been taken in response to the Construction Products Association Spring Forecast, which points to a 2.9% reduction in UK construction output in 2012 with similar volumes in 2013. "Recent data shows that output has weakened further which is why the above actions are being taken. The Construction Products Association forecasts show growth resuming in 2014," the statement from Marshalls revealed.

That, as much as the sales figures, probably accounts for the adverse market reaction to the update, with the shares down by 7.125p to 79.75p in the morning session. However, the group said it took some encouragement from a survey of domestic installers at the end of June 2012 which revealed order books of 9.0 weeks (2011: 7.0 weeks) compared with 7.5 weeks at the end of April 2012 (2011: 7.1 weeks).

JH