Marshalls Plc · LSE:MSLH
Marshalls — H1 2023 Earnings Presentation
40 slides from Marshalls's earnings presentation, Aug 16, 2023
Slide 1: 2023 Half Year Results Review and Outlook
Marshalls plc 2023 Half Year Results Review and Outlook Management actions position the Group well for when markets normalise 16 August 2023
Slide 2: Agenda
Agenda ▪ Highlights ▪ Key challenges and management response ▪ Financial performance ▪ Strategy Find out more online www.marshalls.co.uk ▪ Summary and outlook Find us on Facebook ▪ Questions and answers MarshallsGroup Follow us on Twitter @MarshallsGroup Find us on LinkedIn Marshalls Find us on YouT
Slide 3: Highlights
Highlights Marshalls
Slide 4: Management actions position the Group well for when markets normalise
MANAGEMENT ACTIONS POSITION THE GROUP WELL FOR WHEN MARKETS NORMALISE Highlights Management actions position the Group well for when markets normalise Weak market backdrop impacts on demand and the financial results ▪ Financial results in short term impacted by weak market backdrop ▪ Action taken to
Slide 5: Financial highlights
MANAGEMENT ACTIONS POSITION THE GROUP WELL FOR WHEN MARKETS NORMALISE Highlights Financial highlights Contribution of Marley contributed to record performance despite significant challenges Revenue Adjusted operating profit Adjusted PBT £354.1m £41.9m £33.2m 2% 13% 26% Adjusted basic EPS Interim div
Slide 6: Key challenges and management response
Key challenges and management response
Slide 7: 2023 challenges
MANAGEMENT ACTIONS POSITION THE GROUP WELL FOR WHEN MARKETS NORMALISE 2023 challenges Weak market backdrop impacts demand and the financial results ▪ Macro-economic environment deteriorated through H1 2023 ▪ Persistent core inflation increased expectations of the interest rate cycle peak ▪ Swap rate
Slide 8: Management actions
MANAGEMENT ACTIONS POSITION THE GROUP WELL FOR WHEN MARKETS NORMALISE Management actions Decisive action taken in response to challenging market backdrop ▪ Reduction in capacity whilst maintaining ability to supply a stronger market in the medium-term – Factory closure at Carluke – Mothballing clay
Slide 9: Structural under-investment in construction expected to drive medium-term outperformance
MANAGEMENT ACTIONS POSITION THE GROUP WELL FOR WHEN MARKETS NORMALISE Structural under-investment in construction expected to drive medium-term market outperformance House building volumes compared to government targets Age profile of UK housing stock 65% of the UK’s houses built pre-1974 Significan
Slide 10: Group well positioned for when markets normalise
MANAGEMENT ACTIONS POSITION THE GROUP WELL FOR WHEN MARKETS NORMALISE Group well positioned for when markets normalise Managing through the downturn and protecting medium-term capacity ▪ 2023 sales volumes forecast to be c.30 per cent below 2019 ▪ Reduction in capacity mainly temporary – mothballed
Slide 11: Return of sales volumes has potential to double PBT
MANAGEMENT ACTIONS POSITION THE GROUP WELL FOR WHEN MARKETS NORMALISE Group well positioned for when markets normalise Return of sales volumes to c.10 per cent below 2019 has potential to double PBT ▪ 2023 consensus performance impacted significantly by Illustrative Consensus Illustration weak marke
Slide 12: Ingredients in place to drive significant shareholder returns
MANAGEMENT ACTIONS POSITION THE GROUP WELL FOR WHEN MARKETS NORMALISE Ingredients in place to drive significant shareholder returns Our key strategic goals define our medium-term targets Execution of strategic goals delivers sustainable profit ▪ Group growth ahead of the market as structural under-
Slide 13: Financial performance
err Financial performance Marshalls
Slide 14: Group revenue
MANAGEMENT ACTIONS POSITION THE GROUP WELL FOR WHEN MARKETS NORMALISE Group revenue Revenue growth of two per cent, like-for-like revenue contracted by 13 per cent ▪ Group revenue growth of 2 per cent including an additional 4 months of Marley ▪ On a like-for-like basis, Group revenue contracted by
Slide 15: Group adjusted operating profit
MANAGEMENT ACTIONS POSITION THE GROUP WELL FOR WHEN MARKETS NORMALISE Group adjusted operating profit Contraction in adjusted operating profit driven by weaker market demand and reduced manufacturing efficiency ▪ Adjusted operating profit stated after adding back adjusting items of £15.1 million, of
Slide 16: Marshalls Landscape Products
MANAGEMENT ACTIONS POSITION THE GROUP WELL FOR WHEN MARKETS NORMALISE Marshalls Landscape Products Lower demand from new build housing and private housing RMI impacts volumes and profitability • Volumes adversely impacted by weak demand from new build housing and private housing RMI with commercial
Slide 17: Marshalls Building Products
MANAGEMENT ACTIONS POSITION THE GROUP WELL FOR WHEN MARKETS NORMALISE Marshalls Building Products Weak new build housing activity reduced volumes and profitability ▪ Challenging trading conditions driven by weakness in new build housing reduced demand 2023 £’m Change ▪ Revenue contracted by 9 per ce
Slide 18: Marley Roofing Products
MANAGEMENT ACTIONS POSITION THE GROUP WELL FOR WHEN MARKETS NORMALISE Marley Roofing Products Viridian Solar revenue growth partially offset weaker traditional roofing performance ▪ Challenging trading conditions particularly in new build housing resulted in 7 per cent contraction in revenues 2023 £
Slide 19: Adjusted profit before taxation and earnings per share
MANAGEMENT ACTIONS POSITION THE GROUP WELL FOR WHEN MARKETS NORMALISE Adjusted profit before taxation and earnings per share Profitability impacted by weak construction market ▪ Adjusted operating profit was £41.9 million, representing year-on-year contraction of 13% per cent 2023 £’m Change ▪ Highe
Slide 20: Cash flow
MANAGEMENT ACTIONS POSITION THE GROUP WELL FOR WHEN MARKETS NORMALISE Cash flow Strong management of cash delivers reduction in net debt ▪ Strong cash conversion with 105 per cent of adjusted EBITDA 2023 £’m 2022 £’m Change flowing into adjusted operating cash flow in the LTM due to strong managemen
Slide 21: Funding and liquidity
MANAGEMENT ACTIONS POSITION THE GROUP WELL FOR WHEN MARKETS NORMALISE Funding and liquidity Extension of medium-term funding, significant liquidity and covenant headroom ▪ £350 million of the Group's syndicated bank facility extended to April 2027, further securing medium-term funding ▪ Net debt at
Slide 22: Ongoing capital discipline
MANAGEMENT ACTIONS POSITION THE GROUP WELL FOR WHEN MARKETS NORMALISE Ongoing capital discipline Good control of working capital; medium-term target to rebuild ROCE to c.15 per cent; progressive deleveraging 2023 Change ▪ Continued focus on maintaining capital discipline through active working capit
Slide 23: Capital allocation policy
MANAGEMENT ACTIONS POSITION THE GROUP WELL FOR WHEN MARKETS NORMALISE Capital allocation policy Clear and unchanged policy 1 2 3 4 5 Organic growth R&D and new product Ordinary dividends Balance sheet Selective acquisitions development deleveraging Capital investment Continued focus Maintaining Targ
Slide 24: Strategy
Strategy Marshalls
Slide 25: Our Purpose and Strategic Goal
MANAGEMENT ACTIONS POSITION THE GROUP WELL FOR WHEN MARKETS NORMALISE Our Purpose and Strategic Goal Our Purpose To create better places Our Strategic Goal To be the UK’s leading manufacturer of sustainable solutions for the built environment Marshalls plc 2023 Half Year Results Review and Outlook 2
Slide 26: Group key strategic objectives
MANAGEMENT ACTIONS POSITION THE GROUP WELL FOR WHEN MARKETS NORMALISE Group key strategic objectives Obtain and deliver Innovate and Improve our cost Operate in an Be easy specifications for products optimise products effectiveness, capital environment where safety to work with and solutions to grow
Slide 27: Obtain and deliver specifications for our products and systems
MANAGEMENT ACTIONS POSITION THE GROUP WELL FOR WHEN MARKETS NORMALISE Obtain and deliver specifications for our products and systems to grow revenues and profitability Secure specifications to create demand for our products and systems to optimise market share Building Products seeks to Roofing Prod
Slide 28: See Video link here
See Video link here Marshalls plc 2023 Half Year Results Review and Outlook 28
Slide 29: Innovate and optimise our products and solutions
MANAGEMENT ACTIONS POSITION THE GROUP WELL FOR WHEN MARKETS NORMALISE Innovate and optimise our products and solutions New product development to improve our product mix and generate competitive advantage through innovation, with an emphasis on reducing embodied carbon Commercialised ESG Dual block
Slide 30: Improve our cost effectiveness, capital efficiency and flexibility
MANAGEMENT ACTIONS POSITION THE GROUP WELL FOR WHEN MARKETS NORMALISE Improve our cost effectiveness, capital efficiency and flexibility To deliver cost base optimisation and flexibility, maximise returns from efficiency and strategic capex and optimise investment in working capital Restructuring re
Slide 31: Operate in an environment where safety and people are key priorities
MANAGEMENT ACTIONS POSITION THE GROUP WELL FOR WHEN MARKETS NORMALISE Operate in an environment where safety and people are key priorities We will continue to ensure the work environment is safe and foster a culture and environment of diversity, equity, respect, inclusion and engagement Clear roadma
Slide 32: Be easy to work with
MANAGEMENT ACTIONS POSITION THE GROUP WELL FOR WHEN MARKETS NORMALISE Be easy to work with Improve the customer experience by simplifying process and touchpoints, particularly through technology Shifting transactions to EDI, Migrating Introducing a digital channel Rolling out visualisation ordering
Slide 33: Summary and outlook
Summary and outlook Marshalls
Slide 34: Summary and outlook
MANAGEMENT ACTIONS POSITION THE GROUP WELL FOR WHEN MARKETS NORMALISE Summary and outlook Challenging market conditions, decisive management action taken, well positioned for when markets normalise ▪ Weaker market demand and volumes adversely impacted financial performance in H1 ▪ Decisive managemen
Slide 35: Question & Answers
Question & Answers Q A 35
Slide 36: Appendices
Appendices 36
Slide 37: Results summary
MANAGEMENT ACTIONS POSITION THE GROUP WELL FOR WHEN MARKETS NORMALISE Results summary Weak construction market results in reduced demand and contraction in profitability Change 2023 2022 % Revenue £354.1m £348.4m 2% Adjusted results Adjusted EBITDA £58.8m £64.2m (8%) Adjusted operating profit £41.9m
Slide 38: Adjusted profit before taxation and earnings per share
MANAGEMENT ACTIONS POSITION THE GROUP WELL FOR WHEN MARKETS NORMALISE Adjusted profit before taxation and earnings per share Bridge of reported result to adjusted result 2023 2023 2023 2022 2022 2022 £’m Reported Adjusting Adjusted Reported Adjusting Adjusted Operating profit 26.8 15.1 41.9 27.3 20.
Slide 39: Adjusting items charged to profit before taxation
MANAGEMENT ACTIONS POSITION THE GROUP WELL FOR WHEN MARKETS NORMALISE Adjusting items charged to profit before taxation 2023 2022 £’m £’m 1. Amortisation of acquired intangible assets 5.2 2.1 2. Restructuring charges 9.3 - 3. Additional contingent consideration 1.2 - 4. Disposal of Marshalls NV (0.6
Slide 40: Disclaimer
MANAGEMENT ACTIONS POSITION THE GROUP WELL FOR WHEN MARKETS NORMALISE Disclaimer ▪ For the purposes of the following disclaimer, references to this “presentation” shall be deemed to include references to the presenters’ speeches, the question and answer session and any other related verbal or writte