Marks Electrical makes market share gains, reaches record revenue

Online appliance retailer Marks Electrical Group reported “strong” first half revenue growth of 78% on Thursday, to £37.5m.

The AIM-traded firm said that also represented an increase of 162% over the two-year comparative period, before the Covid-19 pandemic.

It said it was on track with profitability, as its adjusted EBITDA rose to £3.03m from £2.95m year-on-year for the six months ended 30 September, delivering a margin of 8.1%.

The company reported a “continued focus” on working capital management, with strong operating cash conversion of 217%, as it described free cash flow as “excellent” at £5.9m, representing a free cash flow margin of 16%.

Adjusted earnings per share came in at 2.14p, and statutory earnings totalled 1.55p per share.

On the operational front, Marks noted its successful initial public offering and listing on AIM on 5 November.

It reported growth in its major domestic appliances (MDA) market share to 1.5% in the first half, from 1.2% in the 2021 financial year, adding that it was “well-positioned” to achieve higher volumes in the second half.

The company expanded its warehouse facility by 29,000 square feet, improving its layout and efficiency while securing future sales capacity.

Investments in its cost base were also made to drive improvements in marketing, brand awareness and professionalisation of the business.

Modernisation and growth of the vehicle fleet and driver base was made, with an increase of 58% in delivery capacity since March, which the board said improved reliability and offered customers more flexible delivery options, while maintaining the firm’s cost of delivery.

Marks maintained its inventory levels throughout the period, which the directors said demonstrated the strength of its relationships with suppliers and the agility of its business model.

It also noted that it achieved carbon-neutral operations in the first half.

“Notwithstanding the re-opening of physical stores by a number of our competitors, we have continued to gain market share during the first half from 1.2% in the 2021 financial year, to 1.5% in the first half of 2022,” said chief executive officer Mark Smithson.

“We've worked closely with all our suppliers in order to ensure maintained inventory levels during the period, and have successfully coped with the continued surge in demand for our products.

“In a market with supply issues, this demonstrates the strength of our relationships with our suppliers and the agility of our business model in challenging times.”

Smithson said that during the first six months, the company increased its driver headcount and vehicle fleet, “materially increasing” capacity while maintaining its cost of delivery.

“This demonstrates the strength and scalability of our vertically integrated delivery model.

“In order to improve brand awareness, we invested, for the first time ever, in a nationwide TV campaign which led to a strong increase in website traffic and a good return on sales, whilst further promoting the Marks Electrical brand; this activity played a key role in delivering our 78% year-on-year sales growth.”

Mark Smithson said the company’s strong first half performance had continued into the second half, with a record month in October and a “strong continuation” into November.

“This performance demonstrates our high margin and strong cash-generative earnings model, that is both flexible and scalable during what has been, for many online retailers, a very challenging period.”

At 1036 GMT, shares in Marks Electrical Group were up 1.75% at 116p.