While the UK construction market is very much in the doldrums, not all construction-related businesses are created equal.
Landscaping products firm Marshalls (MSLH) continues to demonstrate this situation with impressive interim results - achieved despite the impact of adverse weather conditions in February and March.
As chief executive Martyn Coffey tells Shares ‘when there is snow on the ground, landscaping stops completely’.
The shares rise 10.6% to 467.1p as the company chalks up double-digit increases in revenue, profit and earnings and hikes its interim dividend 18% to 4p.
The company managed to navigate both the huge drop in demand in late winter and the subsequent rapid bounce back with aplomb and notes strong recent trading with revenue up 21% in June and July.
FOCUSED ON THE RIGHT AREAS
Coffey says: ‘If you’re in the UK construction market you need to be in the right areas and fortunately by looking ahead we’ve managed to get that right.’
The company is heavily exposed to pockets of strong demand like housebuilding as well as road and rail infrastructure.
Coffey notes Marshalls’ domestic arm is also benefiting from an elderly clientele who are spending money on their driveways and gardens.
In the future the CEO reckons the company could benefit from the increasing pedestrianisation of cities and he adds the company is looking at M&A to boost its footprint in certain areas like drainage products, protective street furniture and natural stone reserves.
He says there are contingency plans in place for Brexit but notes the company does 95% of its business within the UK and sources most its materials domestically too.
AN EXPERT VIEW
Numis analyst Chris Millington reiterates his ‘add’ recommendation and 500p price target.
He says: ‘Overall, these results show the strong momentum in Marshalls’ business, even despite the inclement weather in the first quarter. Post the upgrade we forecast that Marshalls is trading on a 2019 PE (price to earnings ratio) of 16.1 times with a yield of 3.1% (excluding supplemental payments).
‘We do not think this is demanding for a company with a history of upgrades, a strong balance sheet capable of financing acquisitions and its strong end-market positioning.’
