Trading Performance
Marshalls' revenue from continuing operations for the six months ended 30 June 2013 was £157 million (2012: £163 million), a decrease of 4 per cent.
Working conditions in the first quarter, which included the coldest March since 1910, were difficult. However, in quarter two, we have seen an improvement with a positive change in customer sentiment and order intake increasing during May and June. The programme of cost reduction and cash realisation measures, instigated in 2012, continues to deliver positive results.
Sales to the Public Sector and Commercial end market, which represent approximately 63 per cent of Marshalls' sales, were down 6 per cent, on a continuing basis. Sales to the Domestic end market, which represent approximately 32 per cent of Group sales, were down 3 per cent compared with the prior year period. The survey of domestic installers at the end of June 2013 revealed order books at a very encouraging 10.2 weeks (2012: 9.0 weeks) and compares with 8.5 weeks at the end of April 2013 (2012: 7.5 weeks).
Sales in the International business have increased by 12 per cent in the six months ended 30 June 2013 and are now 5 per cent of Group sales. Continued progress is being made in developing the International business and activity levels are encouraging.
The sale of quarries and associated aggregate businesses to Breedon Aggregates England Limited completed on 30 April 2013. For the year ended 31 December 2012 the operating profit generated from the operations at these quarries was £1.1 million, based on annual turnover of £10.0 million, of which £8.8 million came from sales outside the Group. The turnover and operating profit half year 2012 comparatives for the operations sold were £4.4 million and £0.7 million respectively. The cash consideration at completion of £17.5 million should enable the Group to improve comfortably on its target net debt to EBITDA ratio of two times by the end of 2013.
Outlook
The Construction Products Association continues to forecast a reduction in UK market volumes in 2013 of 2.1 per cent with quarter one showing double digit volume declines but then being relatively flat for the remainder of 2013. Growth of 1.9 per cent and 3.9 per cent is forecast for 2014 and 2015 respectively. Consumer confidence remains stable.
Marshalls has increased its financial and operational flexibility and continues to focus on product innovation and service delivery initiatives to drive sales growth in all its markets. There is no change in expectations for the current year and the Group is increasingly well placed to improve trading margins and deliver growth as market conditions improve.
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