Despite robust trading, Marks Electrical’s profits have halved in six months.
- The company reported a drop in pre-tax profit from £1.6m to £820,000.
- Sales rose by 9.3% to £58.8m, driven by domestic appliances and electronics.
- Average order value fell by 9% as consumers opted for cheaper products.
- Future sales are expected to reach £120m, but cost challenges loom.
Marks Electrical has experienced a significant reduction in profits over the six-month period ending 30 September. Although the business executed strong trading activities, its underlying pre-tax profit declined to £820,000 from £1.6 million reported in the previous year.
The retailer’s sales increased by 9.3%, reaching a total of £58.8 million. This increase was primarily attributed to a rise in volume growth across major domestic appliances and consumer electronics. However, despite this sales growth, the company faced a reduction in its average order value, which dropped by 9% as customers leaned towards non-premium products.
Looking forward, Marks Electrical aims to achieve £120 million in sales with an EBITDA exceeding £4 million. Nevertheless, the company anticipates facing an annual financial burden of £750,000 due to the anticipated rise in national insurance employer contributions starting in April.
Furthermore, Mark Smithson, the chief executive, noted that the first half involved major structural changes, including the departure from Euronics and the introduction of a new ERP system. He emphasised that these investments, although challenging in the short term, were made to enhance the business’s long-term prospects.
Smithson acknowledged the shift in consumer behaviour towards non-premium items, which affected the company’s premium average order value. He mentioned the need to address the impact on distribution costs and indicated a strategic pivot back to the premium-focused model. This strategy, according to Smithson, may slow revenue growth but aims to enhance long-term value and establish Marks Electrical as a leading premium electrical retailer in the UK.
Marks Electrical is focusing on strategic adjustments to balance profit margins and consumer demand for premium products.
