Marshalls Regulatory News (MSLH)

Trading Performance

Marshalls' revenue for the four months ended 30 April 2009 was in line with management expectations at £103 million (2008: £135 million) from two less working days. Underlying daily sales revenue on a like for like basis, after adjusting for differences in the winter stocking arrangements by distributors, was down 19 per cent against a strong comparative period in 2008.

Current Priorities

As soon as the difficult economic conditions became apparent Marshalls took immediate steps to right-size its operations and cost base to withstand the economic downturn whilst seeking to ensure that it retains sufficient capacity and flexibility to respond quickly to the upturn when it comes. The decisive action taken in 2008 and 2009 has included a reduction in operating capacity, a reduction in the cost base and cash conservation measures.

The permanent closure of four manufacturing sites has reduced capacity by around 21 per cent. The remaining manufacturing plants are well invested, efficient and have the benefit of the Group's recent investment in robotics and automation. These plants are operating at high utilisation levels enabling efficiency gains to be realised and they are also able to increase capacity once markets recover without substantial investment requirements. These plants also provide effective national geographic coverage providing the Group with a real competitive advantage.

The Group has reduced its cost base. Reductions in operating sites have saved fixed costs and in addition the Group has closed its Managed Installations business saving further fixed costs, ceased commissioning of ready to use mortar sites, consolidated Street Furniture and Stone Walling manufacturing and administration and reduced overheads in most functional areas.

The Group has taken decisive action to conserve cash resources. The closure of the operating sites has enabled cash to be released from inventories which are reducing in line with expectations. Capital expenditure plans have been curtailed following a period of significant investment in the business. Lower taxation and pension payments will conserve cash in the short term.

Balance Sheet and Cash Flow

Marshalls' balance sheet reflects the strong management actions taken over recent years and the business is well invested. The Group's borrowings show their normal seasonal increase and amount to £135 million at 30 April 2009 which is benefiting from the effective implementation of the decisions taken to conserve cash. The normal working capital profile is expected to show a reduction in the borrowings throughout the remainder of the calendar year.

Marshalls' has today launched a fully underwritten rights issue to raise £34.2 million (net of expenses). Further details of the rights issue are set out in the accompanying announcement and in the prospectus sent to shareholders. These documents can be found on the Company's website www.marshalls.co.uk. The proposed rights issue will provide a more conservative capital structure for the medium term, provide increased headroom on financial covenants ensuring the retention of the full benefit of existing bank facilities and provide the flexibility to take advantage of opportunities to develop the Group's medium term strategy. 

Group Developments

Our sponsorship of the RHS Chelsea Flower Show is in its third year. This is part of our strategy to continue to build awareness of the Marshalls' brand in both the Domestic market by creating "pull through demand" for our Marshalls Register of Installers and Builders Merchant customers and in the Public Sector and Commercial markets by reinforcing our position as Landscape product specialists. This year at the RHS Chelsea Flower Show we will be creating the "Marshalls Living Street." The garden features a glimpse into the life of an urban street where the design and the community have embraced the theme of creating 'better landscapes' for towns, cities, public spaces and private gardens. 

Outlook

The Public Sector and Commercial market, which represented 59 per cent of Group revenue in 2008, is more subdued following a period of robust activity and the lead indicators predict a decline during the first half of 2009 before levelling out during the second half of the year. In contrast the Domestic market has recently performed more strongly than our expectations with encouraging trading during the important Easter period. Our survey of installer order books at the end of April 2009 were 7.1 weeks (2008: 8.2 weeks) up from 5.6 weeks at the end of February 2009.

We maintain a strong emphasis and priority on cash management and cost reduction. We believe that our market leading position, the strength of our brand, our efficient manufacturing and sourcing, our national distribution network and the decisive actions taken will maximise our short term performance in an uncertain market without prejudicing our longer term prospects. 

Graham Holden

Chief Executive

Marshalls plc

01484 438900

Ian Burrell

Finance Director

Marshalls plc

01484 438900

Jon Coles

Brunswick Group

0207 404 5959

Kate Miller

Brunswick Group

0207 404 5959