Shares of Marshalls plc, the Elland, West Yorkshire-based stone and landscaping firm, fell as much as 8% on Monday after it said its results in the second half of the year “will be markedly weaker than the first half” and that it expects to deliver results for the full year “lower than its previous expectations.”
Marshalls reported “persistent weakness” in new build housing and private housing repair, maintenance and improvement (RMI) — key end markets for the group — and warned on the effects of “sustained high levels of inflation, increasing interest rates and weak consumer confidence.”
The company also said it expects to cut 250 jobs in addition to around 150 jobs that were cut in the second half of 2022.
Marshalls shares fell about 8% to £2.54. The shares are down almost 50% for the past 12 months, reducing the stock market value of the company to about £640 million.
In a trading update for the six months to June 30, 2023, Marshalls said: “The board expects to report group revenue for the six months ended 30 June 2023 of £354 million (H1 2022: £348 million), which is two per cent higher than the corresponding period in 2022 and includes the contribution of four additional months of revenue from Marley.
“On a like-for-like basis, group revenue contracted by 13 per cent. Adjusted profit before taxation for the half year is expected to be around £33 million (H1 2022: £45 million), subject to auditor review.
“This result has been delivered against the backdrop of challenging market conditions with persistent weakness in new build housing and private housing RMI, which are key end markets for the group.
“The sustained high levels of inflation, increasing interest rates and weak consumer confidence means that the board anticipates the Group’s performance in the second half will be below its previous expectations …
“The board has taken decisive action in responding to the challenging trading conditions, by implementing a number of measures to align capacity and costs with demand, with a strong focus on managing cash.
“This has resulted in the closure of the group’s factory in Carluke, a reduction in shifts and capacity in other facilities, and a restructuring of the Marshalls commercial team.
“Regrettably, these changes are expected to result in a reduction of approximately 250 roles in addition to around 150 roles that were removed in the second half of 2022.
“These actions are expected to deliver annualised savings of approximately £9 million, with around 40 per cent of this benefit being realised in 2023.
“The board has reduced its capital expenditure plans without impacting critical projects, is executing a programme of surplus land disposals, and has continued to focus on efficient working capital management in order to reduce the group’s net debt.
“We have balanced the need to reduce our capacity and cost base in the short term while retaining the flexibility to increase production when demand recovers.
“The group has latent capacity across all its businesses that can satisfy materially higher demand than that being experienced in 2023.”
In its outlook, Marshalls said: “The board remains confident that the group is well placed to deliver profitable long-term growth when market conditions improve and continues to focus on executing its key strategic initiatives.
“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.
“In addition, the board has chosen to reduce production volumes with a negative impact on operational efficiency in order to manage working capital.
“Taking these factors together, and in the absence of a recovery in demand in the group’s end markets, the board believes that the result in the second half will be markedly weaker than the first half, and consequently expects to deliver a result for the full year that is lower than its previous expectations.”