Rain puts damper on Marshalls as paving group sinks into red

A £21.5m restructuring charge pushed the group to an £11.2m pre-tax loss in 2012, versus £13.7m profits a year earlier.

The Huddersfield-based firm, which supplies products ranging from limestone slabs to steel bollards, cut its workforce by 15 per cent in 2012. Marshalls ended the year with 2,050 staff. That is down from about 2,800 in 2007.

Revenues fell 7.3 per cent to £309.7m from £334.1m a year earlier as the second-wettest year on record wiped £13m from its sales.

Cost-cutting, which included shutting a paving plant in Maltby and a stone walling plant in Derbyshire, knocked £7m from its cost base.

“It’s nice to see the back of 2012,” said chief executive Graham Holden. “The weather was almost compounding what was always going to be quite a difficult background. We acted on it and thankfully that’s finished with.”

Net debt fell 18 per cent to £63.5m and Marshalls maintained its final dividend at 3.5p per share, “reflecting confidence in the future”.

The sector faces another tough year, as public sector work shrinks and consumers remain cautious.

Figures yesterday from official statisticians showed construction output plunged 7.9 per cent in January versus a year earlier, and was down 6.3 per cent on a month earlier, hurt by heavy snowfall.

Between November and January, output fell 10.2 per cent on the same period a year earlier. New work decreased by 12.7 per cent and repair and maintenance fell by 5.3 per cent.

But Marshalls said it expects to beat a market which is forecast to decline by 2.2 per cent this year.

“What we’re seeing is lot of mixed signals,” said Mr Holden. “We do see some negatives, but on the other hand there are positives. There are things that we are doing to improve the business.

“I think flat is as good as it might get.”

Its domestic installers, who fit Marshalls’ products in homes across the country, had 7.8 weeks of work at the end of February, compared with 6.3 weeks a year earlier. That was the best level since February 2008.

Its Belgian subsidiary was launched two years ago, and international sales now account for about five per cent of its work..

It is also seeing improving commercial demand from sectors such as rail, and is working on London’s Crossrail project, a huge tunnel which burrows beneath the capital. Marshalls is also innovating with a new cobble driveway product and natural stone cladding for buildings.

“All these things will help us do a little bit better,” said Mr Holden. “The timing of any upturn remains uncertain. But for now we are confident we can continue to outperform the market.”

Last year was Marshall’s second major wave of cost-cutting since the downturn started in 2008.

It plans to cut about £10m from its stock inventory, and reduced it by £4.9m during the year.

“The scale of what we have done is very significant,” said Mr Holden. “It’s never pleasant for the business but that’s done. What we’ve got is a level of operations which matches the volumes in the market.”

The company added it retains significant market coverage, with 97 per cent of the population within a two-hour drive.

Analysts at Panmure Gordon said: “Record-breaking rainfall clearly had an effect on the business in 2012, but the company’s strong balance sheet and flexible business model enabled it to undertake what now looks like a very sensible production and cost reduction programme; protecting shareholder value.

“This stock is ready and waiting for economic recovery in the UK.”