Home improvement market revamps Marshalls balance sheet

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  • Sales to domestic customers exceed public sector and commercial markets
  • The new housing and infrastructure markets, an axis of growth

The fact that many of us stepped out into the wide, wide world again last year didn’t hurt the fortunes of Marshall’s (MSLH). The company hailed “sustainable” market conditions as sales surged above pre-pandemic levels, although higher costs meant margins have yet to fully recover.

The “abnormally high” levels of household income that people have accumulated during the pandemic have resulted in far more spending on driveways and gardens. The Marshalls National Division has seen the fastest growth, up 30% year-on-year to £167m, or 28% of the total.

Work for public sector and commercial clients, which account for two-thirds of sales, was up 26% year-on-year and 4% above pre-pandemic levels. Within this market, it focuses on new housing construction and infrastructure work where “future demand is expected to be highest.”

Higher costs were a downside as raw materials, shipping and labor costs increased – the latter to cover more overtime as the company faced labor shortages work. Supply chain challenges also meant it had to spend more on inventory but less on capital expenditure as it delayed planned projects.

However, his overall cash levels have declined, mainly because he has paid off more than £120million in borrowings. Net debt at the end of the year stood at £41.1m, up from £75.6m a year earlier. Adjusted return on capital employed jumped to 20.6% from 8.2%.

Broker Shore Capital expects earnings per share to rise 14% to 33.3p. The stock is currently trading at 20 times that level, which isn’t prohibitive based on its recent history, but doesn’t appear to offer huge upside potential barring acquisitions or other significant events. Hold.

Last seen IC: Hold, 716p, Jan 19, 2022

MARSHALLS (MSLH)
ORDER PRICE: 660p MARKET VALUE: £1.3 billion
TOUCH: 658-660p TOP OF 12 MONTHS: 857p LOW: 541p
DIVIDEND YIELD: 2.2% P/E RATIO: 23
NET ASSET VALUE: 172p* NET DEBT: 12%
Year at December 31 Turnover (£million) Profit before tax (millions of pounds sterling) Earnings per share (p) Dividend per share (p)
2017 430 52.1 21.5 12.2
2018 491 62.9 26.3 14.8
2019 542 69.9 29.4 16.7
2020 469 4.70 8.60 4:30
2021 589 69.3 28.6 14.3
% cash +26 +1374 +233 +233
Ex div: June 9
Payment: 1 Jul
*Includes intangibles of £95 million or 47 pence per share
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