Marshalls order book swells

Over the last year, some of the biggest gains in the UK stock market have come from domestic companies exposed to the lockdown-induced boom in the home improvement market. Now, as social restrictions start to lift, many investors will be watching closely for signs of cooling demand.

On current evidence, they won’t find them from patio and paving slab supplier Marshalls (MSLH), which generates just under a third of its top line from households. First half sales to DIYers were 17 per cent up on the 2019 comparative, with demand so strong that the order book has climbed to 21.4 weeks. Normally, 12 weeks would be considered healthy, says chief executive Martyn Coffey.

The surge is particularly impressive given rising cost pressures across the business, which Marshalls has passed on to its customers. Most starkly, container rates for shipping sandstone from India have risen 10-fold to $8,000 (£5,900) in 2021 alone, although shortages of raw materials and HGV drivers have created pinch points.

Sensibly, management has responded by raising inflation expectations to between 2.55 and 3.2 per cent, from 2.2 and 2.85 per cent a year ago. But vehicle fleet ownership and fresh efforts to train new drivers both point to proactive cost control and are typical of this well-managed business.  

Short of a sudden slowdown in demand from homeowners or councils, which are doubling down on plans to pedestrianise and regenerate city centres, consensus earnings forecasts of 27.7p per share look beatable. The company is also looking ahead: investments in a £20m concrete block factory in Cornwall and a less carbon-intensive granite-like product are underway while efforts to reduce suppliers’ emissions look prescient. Buy.

Last IC View: Buy, 741p, 11 Mar 2021