Marshalls under a cloud as bad weather sees cost cuts

Graham Holden, managing director of the Huddersfield-based company, which employs around 2,300 people, said there may be “a small reduction” in staff.

The landscaping materials firm said in a trading update yesterday its first-half revenue fell by 5 per cent to £167m, down from £177m a year earlier. The weather impact resulted in an estimated reduction in sales in the second quarter of around £10m.

Mr Holden told the Yorkshire Post: “No-one is happy that we’ve lost £10m sales but in overall terms we are still selling £170m. As a country we are in recession and inevitably it is therefore quite challenging and then on top of that you’ve got the weather.”

The firm said it planned to cut expenses and inventories to preserve cash and reduce the impact of lower sales, which would result in a one-off cash charge of £7m. Marshalls also said it would record a separate £12m charge related to asset impairments and asset write-downs.

Mr Holden said: “Inevitably, there are consultations going on that may see a reduction in employment. But it’s relatively small numbers and a small percentage overall.”

He said he could not comment on specific numbers at this stage. Production has been reduced at Marshalls’ natural stone walling business in Derbyshire, added Mr Holden, but he said there would be no works closures in the core business.

Marshalls said: “The group is focusing its sales effort on market sectors where activity is strongest, accelerating cost reduction initiatives whilst continuing to invest selectively for future growth.”

Sales to the domestic end market, for which the quarter was an important trading period, declined 14 per cent compared with the previous year, the group said in its update for the half year. Underlying sales to the public sector and commercial markets, which represent around 64 per cent of Marshalls’ sales, were two per cent below last year but are broadly in line with expectations.

Marshalls said continued progress has been made with its international business, which represents 5 per cent of group revenues. It has a small business in Belgium and exports to Europe.

Mr Holden said: “The weather is a bit of a setback but it’s the fact it’s exceptionally wet that’s the problem.” He added that, generally speaking, the business is “well invested, it’s got a strong balance sheet, the people in the business are doing an excellent job”.

“I think medium term we are confident about the future”, he added. Analysts at Numis Securities said that the update had led to a reduction in its profit forecasts, but it said that “prompt action” by management to cut costs offsets much of the impact and will benefit 2013 to a greater degree.