Landscaping company Marshalls plc (LON:MSLH) said it has received strong sales and order intake at the start of 2017 as it hiked its dividend and reported an increase in full year profit and revenue.
The group, which manufacturers and supplies the construction of pavements, recommended a final dividend of 5.80p, bringing the total dividend for the year to 8.7p, a 24% increase on 2015’s 7.0p. Marshalls also proposed a supplementary dividend of 3.0p, “given the strong performance of the year”.
Pre-tax profit for the year ended 31 December 2016 rose 31% to £46mln, boosted by an increase in operating margins to 12% from 9.7%.
Revenue rose 3% to £396.9mln, driven by a 10% increase in sales to the domestic end market, which account for 31% of group sales.
Sales to the public sector and commercial end market, which represent 64% of group sales, were broadly in line with the prior year. However, Marshalls said it believes it continues to outperform peers and gain market share in this sector.
"The group has again delivered significant profit growth in 2016 with the underlying indicators remaining supportive in Marshalls' main end markets,” said chief executive Martyn Coffey.
“Marshalls has a strong balance sheet and the group's innovative product range and strong market positions mean it is well placed to deliver continued growth and operational profit improvements as it implements its 2020 Strategy. Sales and order intake have been strong in the first couple of months of 2017.”
The group ended the year with net cash of £5.4mln, compared to debt of £11.5mln the prior year. The return on capital employed rose to 23% from 19%.
Its 2020 Strategy includes achieving growth in underlying earnings (EBITDA), improving return on capital employed, further investment in research and development, focus on increasing profitability of smaller UK businesses and targeting selective bolt-on acquisition opportunities.
Panmure Gordon reiterated a 'buy' rating and a target price of 370p, saying its full year results provide a "fantastic reminder why Marshalls is one of our top picks within the construction materials space". The broker raised its fiscal year 2017 pre-tax profit estimate to £49mln from £48mln.
"Yet again it is delivering: market share gains (revenues + 3% FY16 vs flat market), margin expansion (12.0% vs 9.8%), consistent cash generation (£37.2m free cash flow) and rewarding shareholders with ordinary and supplementary dividends (total dividends 11.7p vs 9.0p, including supplementary 3.0p vs 2.0p)," said Panmure analyst Adrian Kearsey.
"Meanwhile the business continues to invest in future growth (product development, capital expenditure programme that is helping drive margins."
Shares jumped 9.24% to 345.52p in afternoon trading.
-- Adds share price reaction, broker comment --