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A FTSE 250 winner that keeps delivering
By Graeme Evans | Thu, 17th August 2017 - 15:07
Marshalls (MSLH) continues to be one of the star performers of the London stockmarket in 2017, with half-year results triggering a fresh flurry of buying interest.
The landscaping and paving products company surged another 5% to match the record share price, at 422.8p, achieved by the FTSE 250 (MCX) stock in June.
It marks a further turnaround in fortunes for the Yorkshire-based company, which plummeted 39% to 200p immediately after the EU referendum and only stood at 291p at the start of this year.
The improvement has rewarded the faith of chief executive Martyn Coffey, who bought 10,000 shares at 212p last summer. He's pocketed a cool £20,000 worth of profit thus far.
Coffey reported profits up 16% to £29.1 million in results on Thursday, with revenues ahead 8% to £219.1 million and earnings per share (EPS) up 16% to 12.04p.
He said sales to the domestic market continued to grow strongly, increasing by 17% compared with a year earlier and now accounting for 34% of all business. Encouragingly, domestic installers are reporting order books of 11.9 weeks.
Sales to the Public Sector and Commercial end market, which represents approximately 60% group sales, increased by 3% as Marshalls continues to target the new build housing, water management and rail sectors.
Panmure Gordon's Adrian Kearsey said what impressed him most about the results was the margin expansion, which widened to 13.6% from 12.8%. He said part of the reason for this was operational gearing, but also noted an increasing contribution from new products.
Kearsey added: "As Marshalls continues to launch innovative products onto the market, we anticipate the blended group margin will trend higher. In addition, Marshalls continues to increase the capital intensity of the business and is progressing well with its strategy 2020 initiatives."
Kearsey has re-iterated his buy rating on the stock, which he believes has the potential to improve further to 445p.
He noted that the forward price/earnings (PE) multiple of 18.2 times is now in line with the 10-year average: "With sales enjoying a good tailwind, and given the operational leverage, we anticipate there is scope for the rating to move moderately higher."
Marshalls declared an interim dividend of 3.40p, an increase of 17% that reflects strong cash generation. The group's dividend policy is to achieve up to two times dividend cover over the business cycle.
The company has been supplying natural stone and concrete products to the construction, home improvement and landscape markets since the 1890s.
This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.