Marshalls Plc (GB:MSLH) issued a warning statement today, stating that full-year profits would be slightly lower than expected.
The news pushed the company’s shares further down by around 17%, having fallen by 56% so far this year.
The company, which is a manufacturer of landscaping, building, and roofing products, saw a decline in the demand for home improvement projects as the cost-of-living crisis has gripped the nation.
The company’s landscaping division was hit the hardest, as it faces tough trading conditions with revenue down by 6% to £311 million in the nine-month period. This is mainly due to falling demand as customers tightened budgets in the last three months.
The company lowered its manufacturing output to keep it in sync with the lower demand. This will help in reducing its operating costs by around £10 million annually from 2023.
The company’s building products segment saw a 22% growth in revenues of £149 million, driven by brick and masonry businesses.
Marshalls overall expects its profits to be slightly lower than the current expected range of £95.1 to £101.1 million.
Russ Mould, investment director at AJ Bell, said, “As a paving stone specialist, Marshalls enjoyed booming sales, also helped by plenty of activity among its corporate customers. Part of this sales momentum has now disappeared.”
He added, “’Its landscaping products business is heavily exposed to repair, maintenance, and improvement trends in the private housing market, and demand is dropping.”
Marshalls’ stock forecast
According to TipRanks’ analyst consensus, Marshalls’ stock has a Hold rating. The MSLH target price is 380p, which implies an upside potential of 52.6%.
Conclusion
Even with strong revenue growth in its building products division, overall, the company is expecting lower profits.
However, the company also mentioned that its balance sheet remains strong, which hopefully provides enough scope to navigate through these tough times and make further investments.
