Marshalls: 2005 results

9:35 a.m. Fri 10 Mar 2006

Despite a number of acquisitions Marshall’s, a maker of concrete paving stones and other building supplies, to reported flat earnings for the year to December 2005. Operating profit rose only 1% £47.4m (2004: £47m) before works closure costs of £3m.

Acquisitions helped boost turnover by 9.4%, to £359.3m, excluding acquisitions, turnover growth was only 1.3%.

The company reported that market conditions in 2005 ‘were more difficult than they have been for a number of years’, not wholly unexpected given the weakness of the housing market. According to the Construction Products Association, construction output fell by 1.3% in 2005, the first year on year fall since 1994.

The company is clearly suffering from the slow down in the housing market, despite its relatively resilient product mix (paving, walling, summerhouses, greenhouses, garages, water management, kerb, traffic management and street furniture) and its operational efficiency prospects are unlikely to improve significantly until the market turns.

The stock may well outperform the sector, but the continued sluggishness of the housing market dampens the medium term horizon.

The share trades at 325.5p, on a prospective PE (2006 earnings) of 16.9x, at the upper end of the sector range, not cheap, with a yield of 3.9%