I get the feeling (and it's only a hunch) that we will start to see some improvements at Marshalls in the coming months.
Marshalls' revenue for the ten months ended 31 October 2012 was £279 million (2011: £298 million; 2010: £278 million) a decrease of 6 per cent. Current trading continues to be in line with expectations.
Although the group's latest interim statement reports revenue down a further 6% on the ten months ending 31 October 2012 there's one little clue which screams that trading is picking up.
In what is still an uncertain macro economic climate worldwide, Marshalls' message is "Creating our own certainty" in their latest market update.
Only a fool would use such words casually if the underlying message wasn't one of optimism. Marshalls are not fools.
Also, I've noticed that brokers have recently turned from bearish to neutral or buy on Marshalls' stock.
This definitely isn't a time for complacency so I wouldn't be surprised to see a positive trading statement in Marshalls' 04 January 2013 update, saying trading is ahead of expectations.
Domestic orders slightly up
It is pleasing to see that domestic installation orders are ahead on this time last years improving from 7.8 weeks in October 2011 to 8.7 weeks as of October 2012: although one has to bear in mind that severe wet weather during the summer may be creating a false market as orders are merely delayed.
Orders for domestic installations in June 2012 were 9.0 weeks.
Falling off a fiscal cliff
My only concern is that Marshalls remain reliant on 63% of its business from the public sector.
Under normal circumstances one wouldn't be too worried because the public purse has been kind to larger companies in previous years. This time things are slightly different and for once it's not the UK's fault.
Upcoming public spending cuts and increased tax rises in the US are sending the world's largest economy toward what market analysts have dubbed the 'fiscal cliff'.
On the first day of January 2013 - unless congress can agree a solution - the introduction of higher income tax combined with the expiration of tax credits and income tax breaks, as well as massive cuts in the defence budget, will see a shortfall of some €600b in the US economy.
If the full package of increased and reductions is implemented then the US will certainly re-enter recession creating a knock-on effect in the UK and the rest of the world.
I wouldn't be surprised to see the UK government follow suit to a certain extent and I'm sure the US situation is being followed carefully.
The latest austerity measures are needed because the US government, which printed hundreds of billions of extra dollars - known as quantitative easing - and pumped it into the economy - has run out of ammunition.
In effect all that quantitative easing did was brought the US time and now it still has to deal with its underlying economic problems.
I think the US will agree a reduced package with a moderately positive market response but I think it's fair to say that 2013 will remain an austere one for many.
Here's Marshalls full trading update:
Marshalls' revenue for the ten months ended 31 October 2012 was £279 million (2011: £298 million; 2010: £278 million) a decrease of 6 per cent. Current trading continues to be in line with expectations.
Sales to the Public Sector and Commercial end market, which represent approximately 63 per cent of Marshalls' sales, were down 4 per cent and sales to the Domestic end market, which represent approximately 32 per cent of Group sales, were down 13 per cent compared with the prior year period reflecting the record rainfall during the summer months. The Group's International business continues to make progress and is approaching 5 per cent of Group sales.
The survey of domestic installers at the end of October 2012 revealed order books of 8.7 weeks (October 2011: 7.8 weeks) compared with 9.0 weeks in June 2012. Consumer confidence remains reasonably stable albeit at a low level.
Marshalls' targeted growth initiatives continue to deliver encouraging results and the operational restructuring, covered in detail at the half year in August, is being implemented successfully and delivering the expected benefits. The actions being taken are expected to reduce net debt in support of the Group target ratio of two times net debt to EBITDA by the end of 2013.
Dividend
The 2012 interim dividend of 1.75 pence per share, announced on 31 August 2012, will be paid on 7 December 2012 to shareholders registered at the close of business on 26 October 2012.
Outlook
The most recent figures from the Office for National Statistics for the total of Construction Output, for the 8 months to August 2012, indicate a reduction of 8.2 per cent. Against this background, Marshalls is focusing its sales effort on market sectors where activity is strongest, accelerating cost reduction initiatives whilst continuing to invest selectively in a number of growth opportunities. This strategy will provide the Group with greater certainty over its performance in a challenging macro environment. Marshalls retains strong operational and financial flexibility and has the ability to react quickly to changes in market demand.
The next update will be the Trading Update announcement on Friday 4 January 2013.
Hedge fund Toscafund bets UK growth will outpace U.S.
http://www.reuters.com/article/2013/08/21/toscafund-hedgefund-idUSL6N0GH22B20130821?feedType=RSS&feedName=industrialsSector&rpc=43
Posted by: Philip Voice | Aug 23, 2013 at 09:10 AM