Marshalls H1 revenue growth offset by drop in profitability

(Sharecast News) - Landscaping products manufacturer Marshalls said on Monday that modest revenue growth had been offset by a sharp drop in profitability in H1, as challenging market conditions continued to weigh on its core landscaping division. Marshalls said its diversified portfolio had helped to cushion the blow, but warned that end-market overcapacity and pricing pressures remained key headwinds.

Group revenues rose 4% year-on-year to £319.5m, driven by solid performances in its roofing and building products units. However, adjusted operating profit fell 16% to £28.4m, while adjusted underlying earnings sank 15% to £42.9m. Adjusted pre-tax profits dropped 17% to £22.0m.

Marshalls also said margins came under pressure in its landscaping products unit, where volume growth was offset by a less profitable mix and manufacturing inefficiencies.

Basic earnings per share fell 45% to 3.5p, prompting the group to cut its interim dividend payout, down from 2.6p to 2.2p.

However, Marshalls reaffirmed its revised FY guidance, forecasting adjusted pre-tax profits between £42m and £46m.

Marshalls also highlighted that its 'Transform & Grow' strategy was progressing well, with operational improvements underway and cost savings of £9m expected by 2026.

Chief executive Matt Pullen said: "This performance reflects the benefits of our diversified portfolio, with building and roofing products delivering good revenue and operating profit growth, and landscaping products reporting solid volume growth during the period although at lower profitability.

"Looking ahead, while the macroeconomic outlook remains uncertain and markets are likely to stay subdued in the near term, we are encouraged by the Government's commitment to new housing and infrastructure investment which, together with our 'Transform & Grow' strategy, positions us well for sustainable growth across all our businesses in the medium term."

Reporting by Iain Gilbert at Sharecast.com