Marshalls boss defends £535m Marley takeover despite tumbling share price and falling profits
Marshalls boss Martyn Coffey has defended the company’s acquisition of Marley, after the construction and landscaping giant reported a sharp drop in its full-year profits amid investor concerns the deal was overpriced.
The chief executive told Morning Wire that Marshalls would not have been able to take on the company last year unless it had paid the hefty £535m takeover fee – made up of cash, shares and debt in a three-way split.
He argued the deal will reap long-term dividends for the company, even if the economic downturn since the acquisition was confirmed last April made the fee seem increasingly large.
He said: “If you went in now, would you pay that price? You’d say ‘No’, but my answer would be ‘You wouldn’t get to buy it either’. From our point of view, the seller didn’t have to sell. It’s easy to say that now all prices are deflated, but in reality, they would have held on to it.”
Coffey was convinced Marley, which he has previously dubbed the “Marshalls of roofing”, would add significant value to his company, with the FTSE 250 firm describing the deal to investors as “transformational”.
“I think we’ve got a fantastic company. I don’t think we’d have got it if we hadn’t paid the price. We’ve got it and in the long term. I think it’ll turn out to be a fantastic investment,” he explained.
Marley specialises in the manufacturing of pitched roof systems for the construction market and makes almost half of its revenue from concrete roof tiles, plus a further 14 per cent from clay-roof tiles.
The price paid for the firm equates to 10.8 times its earnings before interest, tax, depreciation and amortisation of £49.5m last year.
Marshalls shares continue to tumble
Coffey’s comments follow Marshalls unveiling its full-year results, which exposed plunging profits at the stone and concrete manufacturer.
It announced that while revenues had risen 22 per cent to £719.4m from £589.3m last year, profits had plummeted 46 per cent to £37.2m from £69.3m 12 months prior.
Marshalls hiked its dividend 9.1 per cent, with total take-home for shareholders rising from 14.3p to 15.6p per share.
However, shareholders have been hesitant to embrace Marshall’s expanded offering with the company’s market price dropping 58 per cent over the past 11 months from 678p per share to 284p per share.
Shares are down around two per cent in today’s trading on the London Stock Exchange following the results.
Commenting on the share price, Coffey said: “I don’t personally think that the reason our share price is where it is is because we bought Marley, I think it’s because of the market. The issue with Marley is I think the market hasn’t fully understood. We bought a fantastic company for the long term and it’s making a fantastic contribution and will continue to do so.”
Looking ahead to the rest of the year, he expected the company’s performance to improve as consumers became more confident in the second half of the year.
He said; “I think once preliminary inflation figures start dropping, then you’ll see a change. I think people still have the demand what they wanted to do, and if you take what happened in Covid, pent up demand doesn’t go away. It gets picked up and could come back quite quickly.”