Concrete foundations supporting growth
Differentiation is key
Marshalls (L:MSLH) is a B2B supplier of landscaping products with a leading premium brand in both commercial/public sector (two-thirds of revenue) and domestic/residential market segments. Differentiation through product range, customer support and service are key drivers of market position and Marshalls innovates in each of these areas to reinforce its competitive strengths. New and faster-to-install systems, earlier engagement with project specifiers and homeowners and balancing third-party distribution with direct-to-site delivery (using its own vehicle fleet) are all examples of this. Marshalls’ marketing approach targets specifiers, installers and merchants as well as end customers to reinforce brand preference, pulling through products and supporting price and margin. It uses a highly-developed bespoke CRM platform through which identified leads in both market segments are rigorously tracked, maintaining robust margin discipline at project and group levels.
Significant recovery expected, but could be greater
Consensus estimates already factor in a significant profit recovery for Marshalls, with EBIT returning to 2007 levels by 2017 and a 2014-17 EPS CAGR of c 27%. Operational gearing from increasing in volume is an obvious driver here. We note that FY17 revenue estimates are over £50m (or c 14%) above 2007 levels, which suggests more conservative margin expectations. A stronger commercial and pricing environment together with a growing contribution from specialist activities (such as street furniture and mortar) now under the Marshalls brand umbrella could also contribute to margin expansion. Additionally, with a conservatively geared balance sheet, Marshalls could boost growth through complementary acquisitions.
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