The way ahead looks paved with improving sales for Marshalls

The Huddersfield-based company said it is well placed to increase trading and deliver growth if market conditions continue to improve.

Marshalls said sales held firm in the 10 months to October 31 at £265m despite a four per cent fall in the weather-hit first half.

Sales to the public and commercial sectors, which represent 62 per cent of revenues, fell two per cent in the 10-month period, while domestic sales, which represent 33 per cent of revenues, remained unchanged.

A survey of domestic installers at the end of October showed order books of 11.0 weeks, up from 8.7 weeks in October last year. It was also up from the 10.2 weeks reported at the end of June.

Marshalls’ new chief executive Martyn Coffey said the installer order book has not been at this high a level, for a sustained period, since 2004 .

“It is encouraging that the statistic has continued to strengthen,” he said.

International sales growth, which makes up five per cent of group sales, increased by 20 per cent in the ten months to October 31.

Mr Coffey said progress is being made in developing the international business and activity levels are encouraging.

“The market volume outlook is now more positive and, although it fell slightly in October 2013, the GfK’s Consumer Confidence index has improved significantly in the last six months.

“The index is now higher than at any time since November 2007,” he said.

The Construction Products Association’s Autumn Forecast predicts a reduction in UK market volumes in 2013 of 0.5 per cent, which reflects an improvement from the 10 per cent reduction in the first quarter of the year following the snow.

The increase in the second half was anticipated following the cold snap so there is no change to expectations for the full year.

The Construction Products Association is forecasting growth of 2.7 per cent for 2014 and then much stronger growth of 4.6 per cent in 2015.

Marshalls said the 2013 interim dividend of 1.75p per share will be paid on December 6 to shareholders registered at the close of business on October 25.

Analyst Gavin Jago said: “Sales to the domestic end markets were flat on the prior year, with the installer order book (now at 11.0 weeks) at its highest sustained level for nine years, which is very encouraging.

“We expect Marshalls to benefit from continued improvement in the UK economy and the high level of operational gearing in its business model. Furthermore, following a flat dividend per share of 5.25p since 2009, we expect the absolute level of the dividend to increase from 2014 onwards.

“Indeed, we believe a 6p dividend could be declared in 2014, representing a yield of around 3.4 per cent. We maintain our ‘hold’ recommendation on the shares.”

Analyst Mark Hughes, at Panmure Gordon, said: “The company continues to see progress after a difficult first four months of 2013 that was hampered by the weather.

“When housing transactions rebound the merchants, distributors and manufacturing companies that have exposure to the sector see an increase in profit growth, albeit with a lag compared to a housebuilder or estate agent.”