The market reaction to Marshalls’ first-half results seemed a little unjust on Monday as shares in the building supplies group dropped despite profit increasing.
Marshalls delivered higher first-half profit and raised its dividend despite flat revenue, as cost savings and sharper execution triumphed over subdued demand across much of the building products market.
Nonetheless, the market took a cautious approach as shares slipped 2% on what looks like profit-taking following a winning streak heading into results.
The manufacturer said revenue was broadly unchanged at £317.8m in the six months to 30 June, but adjusted operating profit rose 8.1% to £30.7m and adjusted pre-tax profit climbed 13.2% to £24.9m.
“Revenue edged down 0.5% to £317.8 million as subdued demand, especially in new build housing, continued to bite,” explained Adam Vettese, market analyst for etoro.
“However, adjusted pre-tax profit rose a solid 13% and earnings per share climbed around 14%, driven by cost savings and lower finance costs. The key landscaping division delivered better profitability thanks to its performance improvement plan, pricing discipline and market-share gains, even if volumes were softer. Full-year guidance was maintained and the interim dividend lifted.”
The landscaping division remains on track to deliver £11m of annualised cost savings by the end of the year.
Roofing also held up well, with Marley gaining share in a competitive concrete tile market and Viridian Solar growing revenue 7% as tighter building regulations took hold.
Building products were more mixed: mortars and screeds proved resilient, but weak new-build housing demand weighed on bricks and masonry, as well as on water management, though the latter is being repositioned for infrastructure-led growth tied to the water companies’ AMP8 investment programme.
The company is not assuming any material market recovery in the second half but left its full-year profit expectations unchanged, pointing to continued self-help actions and financial discipline. This soggy outlook may have weighed on the Marshalls share price on Monday.