31st Jul 2023 12:16
(Alliance News) - Marshalls PLC on Monday announced, in its second profit warning in three months, that its results for 2023 will be lower than previously expected.
Marshalls shares were down 7.3% at 256.00 pence in London on Monday around midday.
Peel Hunt cut its price target to 310p from 380p, but retained its 'buy' rating.
The West Yorkshire, England-based company makes landscape products such as paving stones, as well as building and roofing products. Higher interest rates reduce building construction and repair activity.
On Monday, Marshalls issued its second profit warning in three months, in an unscheduled trading update.
"Marshalls is getting into the nasty habit of issuing profit warnings and true to form along comes another one. High inflation, rising interest rates and weaker consumer confidence have combined to form a toxic cocktail for companies serving the repair, maintenance and improvement sector and new-build housing market," said Laith Khalaf, head of investment analysis at AJ Bell.
Marshalls expects to report revenue of GBP354 million for the six months that ended June 30, up 1.7% from GBP348 million a year before. However, this includes four additional months of contribution from recent acquisition Marley Group PLC. On a like-for-like basis, revenue fell by 13%, Marshalls said.
Marshalls bought pitched roof system manufacturer Marley for GBP535 million in April 2022.
Adjusted pretax profit for the recent half year is estimated at GBP33 million, down from GBP45 million the year before.
Looking ahead, Marshalls said it expects the second half of 2023 to be below its previous expectations, meaning that the full year will follow suite.
"Whilst previously anticipating a recovery in market conditions in the second half of the year, the board is now of the view that an improvement in the second half performance is unlikely given the macro-economic backdrop," Marshalls warned.
Based on this, Shore Capital's Graeme Kyle said its forecasts are now under review and based on management guidance it expects to cut 2023 forecasts by 26% to GBP53 million from GBP72 million previously. In 2022, the company reported adjusted pretax profit of GBP90.4 million.
Also on Monday, Marshalls said it will cut about 250 jobs. This adds to the 150 roles removed in the second half of last year and is expected to result in annualised savings of about GBP9 million, with 40% of this being realised in 2023.
Marshalls also said it is reducing capital expenditure and selling surplus land.
The company had GBP185 million in net debt at the end of June, down from GBP191 million in December and GBP208 million a year ago.
In the longer term, Peel Hunt's Clyde Lewis & Sam Cullen said "management is taking the right actions on the cost base."
"Longer term, the business operates with leading market shares, a strong brand and high barriers to entry in large (if cyclical) markets. All qualities that should appeal to longer term investors," they added.
By Sophie Rose, Alliance News reporter
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