Marks Electrical

Financial overview 

• Group sales increased 16.9% to £114.3m in FY2023, up from £97.8m in FY2022
• Gross profit rose 8.6% to £29.0m in FY2023, but gross margin dipped slightly to 25.4%
• Group pre-tax profit in FY2023 declined to £0.6m, from £6.4m the year before, with margin reducing to 0.5%
• For the latest financial results, click here

Since its IPO in FY2021, the group has transitioned from Companies House reporting to annual reports on its corporate website. As a result, measures from previous years may differ from those in FY2021, FY2022 and FY2023.

Marks Electrical generates revenue by selling directly to consumers through its website and head office showroom as well as telesales.

In FY2022, online accounted for 75% of total sales, down from 80% the year before, with telesales contributing the remaining 25% (20% in FY2021). This figure will be updated for FY2023 when the annual report is published but Retail Navigator expects online as a share of total sales  remained broadly flat year on year.

The group is entirely focused on its UK operations.

Moving ahead of the £100m mark for the first time, Marks Electrical’s hailed a 16.9% uptick in group sales to £114.3m in the year to 31 March 2024 (FY2023), from £97.8m the year before.

The previous year sales had soared by 21.5% - a strong performance despite persistent inflation and rising interest rates.

Gross profit for FY2023 came in at £29.0m, up from £26.7m the previous year, although margin decreased from 27.3% to 25.4%. The retailer attributed the decline to consumers trading down to less premium products where its “rebate structures were not as favourable”.

The previous year, gross margin had been impacted by increased fuel costs, distribution wages, and interchange charges.

Marks Electrical’s statutory pre-tax profit slumped to £0.6m in FY2023, compared to £6.4m in FY2022, bringing pre-tax profit margin down to 0.5% from 6.5% the year before. Profitability was impacted by lower trading profitability as well as costs from replacing the retailer’s legacy enterprise resourcing planning system with Microsoft Dynamics 365.

According to the group’s analysis of GfK Market Intelligence sales tracking data in Major Domestic Appliances (MDA) and Consumer Electronics (CE), Marks Electrical saw market share gains in FY2023.

Its MDA market share came in at 2.8% in FY2023, up from 2.5% in FY2022, while CE market share edged up from 0.3% to 0.5%.

Talking about the results for the 2023 financial year, CEO Mark Smithson said: “During what was a more challenging year for the group, in an environment where consumers remained highly price-conscious, we continued to make good strategic progress across multiple fronts as a business.”

He added: ”I am proud of the ongoing commitment and dedication of our entire team of customer-focused colleagues. Over the past year we invested in our operations and systems to position the business for long-term success, navigated a tradedown in customer buying preferences, managed the inflation increases impacting our cost base and continued to make a profit. Having doubled revenue since IPO, we’ve also managed to grow our market share profitably, and thanks to our disciplined approach to capital allocation, we’ve consistently returned a dividend to our shareholders, whilst retaining a net cash position. Our strategy and approach leaves us very well positioned for a market recovery when it occurs.”

He also said: “Whilst I continue to be personally frustrated about our margin progression during the year, I remain confident in our long-term growth prospects, and continue to be impressed by our ability to deliver market share gains profitably, against a fiercely competitive backdrop, whilst maintaining the highest levels of customer service standards in the industry. The first three months of FY25 [FY2024] have been encouraging and we have been pleased to see a return to double-digit growth during the period, providing us with a robust platform to continue driving profitable market share gains, and ultimately enabling the Group to deliver long-term value creation and become the UK’s leading premium electrical retailer.”

Marks Electrical has “successfully transitioned” away from the Euronics buying group and is set on building relationships with manufacturers as an individual retailer.

Ecommerce sales performance 

The group’s online sales increased by 13.9% in FY2022, reaching £73.4m, compared to £64.4m in FY2021.

The retailer’s annual report for FY2023 revealed that online contributed a 75% share of total sales for the second-year running, which means they grew by some 16.8% year on year to around £85.7m.

 Employees 

Employee data for FY2023 will be updated when Marks Electrical publishes its annual report.

Marks Electrical employed 228 staff across the group in FY2022. 

Sales per group employee averaged at nearly £430,000 during the year, while the staff cost to sales ratio rose marginally to 9.7%. 

Current financial year

H1 FY2024

Marks Electrical revenue increased 9.3% year on year to £58.8m in the six months to 30 September 2024 (H1 FY2024) driven by robust volume growth.

Smithson described the half as “a period of significant change for the business” during which it implemented a new ERP system and left the Euronics buying group, establishing new trading relationships with over 50 brand partners.

It reported 13% volume growth in the MDA category in the half and over 90% volume growth in CE.

Adjusted EBITDA came in at £2.0m in H1 FY2024, compared to £2.3m in the same period the previous year, with a profit margin of 3.4%.

The retailer expects to achieve revenue of around £120m in the full 2024 financial year. It commented: “Going forward, we will actively return to our historically successful premium focus in order to deliver an uplift in margin performance. We recognise this may have medium-term implications on the speed of our revenue growth, but our objective is to drive a sustainable margin recovery from the levels seen in H1-25 [H1 FY2024].”

Smithson said: “The first half has included two of the largest structural changes the business has seen, the departure from Euronics and the implementation of our new ERP system, but despite these, we continued to remain profitable and cash generative and grew revenue by 9.3% to £58.8m.

“These investments, while involving short-term challenges, have been made to position the business for long-term success. They will ensure that Marks Electrical is well placed to benefit when broader market sentiment picks up and will give us even greater vertical integration, visibility and control, enabling us to deliver growth, returns and value for all our stakeholders.”

He added: “As the consumer has continued to trade-down, we have evolved our business to meet those needs, perhaps leaning too much into non-premium products, which has led to erosion in our premium average order value. The knock-on implications of this on our distribution costs are something that we need to actively address moving forward by pivoting back to our historically premium focussed operating model.

“Whilst this pivot back to premium is likely to have an impact on the speed of our revenue growth, we are focussed on continuing to execute our strategy of driving profitable market share gains, ultimately enabling the group to deliver long-term value creation and become the UK’s leading premium electrical retailer.”

Forecast  

Reporting on the early stages of the 2024 financial year, Marks Electrical noted strong trading in April, May and June, with double-digit revenue growth and momentum picking up following the weaker January to March trading period. The retailer said its performance gave it optimism for the year ahead.

On announcing its results for the first half, Marks Electrical said it expects revenue to come in at some £120m in the full 2024 financial year.

Retail Navigator forecasts a positive outlook for Marks Electrical, anticipating that total sales will edge ahead of the £170m mark by 2028.