Marshalls bucks the gloom in UK construction, Berenberg says

The company’s results on 14 March showed revenue and profit rising despite the gloom elsewhere in the construction sector, the Berenberg team said. They attached a 510p price target to the shares, which were valued at 430p at the time of publication.

The analysts, led by Lushanthan Mahendrarajah, published their note after a teach-in with Marshalls’ chief financial officer Jack Clarke. The session reinforced Marshalls' strengths, they said.

Fewer young people own their own homes than in 1996 but about 80% of those aged over 65s do compared with 60% in 1996. These older consumers have paid off their mortgages and their children have left home, leaving them with money to spend on their homes – and they are Marshalls’ customers, Berenberg said.

On the commercial side of Marshalls’ business, about 40% of spend is on new homes, where business is buoyant, and Marshalls is focused on higher growth regional and local builders, they added.

Marshalls ended 2017 with £24m of net debt, leaving room for investment in growth and acquisitions. It is too big in landscaping to buy more of those businesses and is therefore targeting water management, street furniture and mineral stone.

"Marshalls seems to be positioned in the right areas of the UK construction market and is really making the most of this,” the analysts said. “More broadly, we continue to believe that management has positioned the business exceptionally well in recent years and we back management to do more of the same in the years ahead."