Profits at growing online white goods retailer Marks Electrical dipped over the last six months due to a combination of factors including higher distribution costs and spending on its own installation service. But the business said it expected pressures to ease over the coming months, with a strong Christmas trading period expected to contribute to profits.
The Leicester-headquartered business said statutory profits after tax were £873,000 for the half year to September 30 – compared to £1.74 million a year earlier. Profits for the whole of the previous financial year – including the important 2022 Christmas period –had been £5.16 million.
The latest figures came on the back of half year sales of £53.9 million, up from £43.15 million a year before. A trading update said the business had seen continued double-digit sales growth in October and a strong start to November setting it up well for the peak December period and to achieve its full year targets.
In the last six months, Marks said its share of the major domestic appliances market had grown from 2.4 per cent to 2.9 per cent, while its share of the online sector had done even better – growing from 4.5 per cent to 5.4 per cent. Its share of the consumer electronics market was also up at 0.5 per cent.
It said it had seen strong performance across all major product categories with particularly high growth in televisions (where sales were up 71 per cent), washer-dryers (up 74 per cent) and American fridge-freezers (up 36 per cent).
In recent months it has also invested in a new Marks Electrical Academy, setting up a purpose-built training facility where drivers and installers are trained in integrated, gas, electrical and freestanding connections and appliance installations.
Chief executive Mark Smithson, who founded the business in 1987, and listed it on the AIM stock exchange in 2021, said as well as seeing a big jump in sales, they had made changes that would “enhance the customer experience”.
He said: “This relentless focus on operational excellence and customer service has enabled us to continue to gain share in a very competitive market, growing our share in the first half from 2.4 per cent to 2.9 per cent of the overall MDA market and from 4.5 per cent to 5.4 per cent in the online segment.
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“Our strategic decision to add in-house installation services to our offering has strengthened the group’s premium service proposition, alongside the creation of our own ME Academy training facility.
“These additions, whilst margin dilutive in the short term, will enable the group to deliver long-term value creation and position us as the UK’s leading premium electrical retailer.
“Despite the first half margin pressure, which occurred within distribution costs, we continued to remain disciplined on marketing costs, maintained our focus on overhead cost control and are continuing to gain market share profitably, a key differentiator of our growth strategy.
“Our market-leading customer service and next day delivery, combined with in-house installation expertise through our vertically integrated operating model, provides a compelling and unique offering that sets us apart from the competition.
“As momentum builds going into the peak trading period, with continued double-digit revenue growth in October and a strong start to November, our focus on operational excellence and customer service, combined with our strong net cash position, provides us with a robust platform to improve profitability in the second half and achieve our full year targets.”