Marks Electrical Group (MRK) released a trading update ahead of its AGM. The company enjoyed strong trading in the first four months of its FY2024 financial year as enhanced delivery options, sustained high service quality levels and more widespread brand awareness helped the company to over 30% sales revenue growth in the period, compared with nearly 14% a year earlier. With further benefits of strong cash conversion – consistent with a proposed 0.66p final FY2023 dividend – we reiterate our fair value of 150p for the shares.
Market share gains remain central to the growth case for MRK, with clear headroom for further regional expansion. Major Domestic Appliances share increased to 3.0% from 2.4% a year earlier with online share growing from 4.5% to 5.7%. Moreover, Consumer Electronics share doubled from 0.3% to 0.6%, with a 0.6% to 1.0% increase in online.
Notably fast growth product categories included televisions (+84%), washer dryers (+83%) and cordless vacuum cleaners (+62%). Next day integrated – i.e. built-in – installations are an important addition to the MRK delivery offering, which appears to have enhanced not only market share but also reputation.
Sustainable cash conversion, driven by efficient working capital management and a focus on costs, supports the case for a robust, sustainable dividend pay-out policy. We forecast further significant dividend increases in the next two financial years.
