Debt down, profits and margins up and a steadily rising return on capital. Hard landscaping specialist Marshalls (MSLH) certainly seems to have gotten its ducks in a row, at least if the half year results are anything to go by.
Shares in the £657 million cap are up 6% at 335.3p as investors take heart from a 48% increase in profit before tax to £20.8 million. The results for the six months to the end of June show a strength in depth that builds on strong comparatives with revenue growing across all divisions while the balance sheet goes from strength to strength.
Group revenue is up 11% at £199.1 million while operating profit has surged 41% to £22 million. Margin growth is another salient feature of the group's operating performance, growing 11.1% in the period.
Although Marshalls has only over the past couple of sets of results used the return on capital employed (ROCE) metric, chief executive Martyn Coffey was able to point to a 50% in ROCE to 15.2% and furthermore, he sees this metric reaching 20% within the next 12 months.
Falling debt gives further credence to the Marshalls investment proposition and as of 30 June, net debt was markedly lower at £32.9 million (June 2014: £50.9 million) with gearing at 17.9%; down from 28.8% a year earlier. The cash generative nature of the business also means that Marshalls has raised its dividend by 13% to 2.25p and earnings per share are up 39%. With two times dividend cover now, investors can likely expect progressive dividend growth to continue.
Looking forward, the group can point to growing markets in an environment where Marshalls is a consistent outperformer. The Construction Products Association's (CPA) Summer Forecast predicts growth in UK market volumes of 4.9% in 2015 and 4.2 per cent in 2016. Coffey clarifies that this amounts to cumulative growth of 17.5% over the next four years.