A strong rise in sales to the public sector and commercial markets is driving revenue growth at building materials specialist Marshalls (MSLH). A trading update reveals a 22% rise in revenue to £113 million in the four months to 30 April with shares notching up 2% to 179.8p in response.

The group comments that 'although it is only 19 weeks into the current year, if the positive market conditions continue it is likely that the full-year results will be above current market expectations.'

Investors can point to plenty of growth potential as exemplified by the Construction Products Association's spring forecast which predicts growth of 4.5% in 2014 and 4.8% in 2015.

Public sector and commercial sales now account for about 62% of the Marshalls' overall revenue and turnover for these segments in the period was up 19% on a continuing basis. Marshalls continues to target parts of the market where higher levels of growth are anticipated, such as rail, home, landscape water management and internal natural stone flooring.

Marshalls' domestic end market, which accounts for around 32% of total revenune, also benefitted from rising consumer optimism with sales in this segment jumping 19% from the same period a year earlier. Forward visibility in this area is also growing and the company says a survey of domestic installers at the end of April 2014 revealed order books of 11.5 weeks (2013: 8.5 weeks) and compared with 9.3 weeks at the end of February 2014.

The interims compare more favourably to the same period a year earlier when bad weather in the first quarter impacted revenues, prompting a 9% decline. But even when one strips out the anomalous conditions of 2013, today's results still represent a 10% increase on the first four months of 2012.

The group continues to report strong sales growth in its major end markets and broker consensus puts the company on December 2014 price to earnings ratio of 22 and a dividend yield of 3.2%. The rating is admittedly high which may explain why the shares have struggled to break out of a 175p to 180p trading range since September, despite the wealth of good news from the company.

MSLH - Comparison Line Chart (Actual Values)


Issue Date: 14 May 2014