Marshalls feels benefit of self-help

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LANDSCAPE products group Marshalls said it continues to outperform a weak market, growing annual sales and profits.

The firm said its growth was down to self-help measures: expanding abroad, increasing its penetration among households and targeting rare pockets of spending in UK housing, rail and retail.

Huddersfield-based group, which makes products ranging from natural stone paving to security bollards, posted pre-tax profits up 32 per cent to £13.7m in 2011. Revenues increased eight per cent to £334.1m.

“It’s all down to us,” said chief executive Graham Holden. “The macro backdrop is tough but the critical thing I’m emphasising to our business is that these are the conditions against which we are working and it’s up to us to make a difference.”

Construction products firms are wading through a depressed market, as households postpone spending in the face of economic uncertainty, rising unemployment and flat wages. Meanwhile, Government austerity cuts are squeezing budgets and projects at local authorities and other public sector bodies.

Industry body the Construction Products Association (CSA) only expects the UK market to pick up in 2014, when it hopes to see a 3.8 per cent increase in work.

But the CSA sees total work across the sector slumping 5.2 per cent this year, and only being mildly positive in 2013.

Marshalls said it is putting more work through its southern factories, where the downturn has been less savage, to “minimise distribution distance and reduce costs.” This meant an increase in staffing levels in its southern plants, but “standard” staffing in the north.

“The market is stronger in the south east,” said Mr Holden. “The impact of the recession has not been as marked in the south east.

“It’s balancing the production to be closer to the market.

“But there’s a lot of good things going on (in the north). Leeds particularly has a lot of good projects; things that were put on hold are now coming on to the agenda.”

The group said commercial work is expected to improve from “historically low levels”, but public sector work is starting to weaken as current projects finish.

Marshalls’ work on the Olympics totalled £10m and has largely concluded. Mr Holden said there will also be opportunities once the Games have finished, including reconfiguring roads and modifying the athletes’ village.

Sales from Marshalls’ public sector and commercial-end markets, which account for 64 per cent of total revenue, increased nine per cent in 2011, boosted by price and volume hikes. Sales to households account for 36 per cent of revenues and rose seven per cent – four per cent from price hikes and three per cent due to volume. Mr Holden added he is confident housebuilding will continue to increase from a low level, despite York-based Persimmon recently committing to return £1.9bn to shareholders over the next decade.

Analysts suspect this could result in a shallower rate of construction growth. “I’m confident that if they do not build them, then others will,” he said.

Marshalls’ bought a Belgium business last year, from where it also hopes to also supply Holland, Northern France and Germany. It is targeting a population of 40m with natural stone and paving products. Marshalls spent £8m on the venture during the year and it contributed £8.9m to turnover.

“It’s an exciting opportunity for us,” said Mr Holden. “We’re a very small part of a very big market.” The group also hopes to grow its business in Western Europe, the Middle East and Asia as a “niche premium player”. It has already worked on products such as Disneyland in Hong Kong and an F1 park in Abu Dhabi.

“It’s things that are unique and different, not the mainstream,” said Mr Holden. “Some of the security products have a market which is very much worldwide.”

Total international revenues rose to 3.6 per cent of group sales or £11.7m, from about one per cent in 2010. The group is targeting earning five per cent of its sales abroad in 2012 and 10 per cent in 2014.

It recommended a final dividend of 3.5p per share, flat on a year ago, but said it is committed to a “progressive” dividend policy.