Marshalls plc (MSLH) Earnings Call Transcript & Summary

Okay, good morning, ladies and gentlemen. And I'd like to welcome you to Marshalls' 2020 results. What I plan to do today is I'll go through the highlights. I'll then hand over to Jack, who is going to talk you through the financial performance. And then we'll come back to really the critical part of obviously the market, talk about our business strategy and give you an update in the various different areas. I'd like to update you on what we're doing on ESG. And at the end, there'll be an opportunity online for you to ask whatever questions you'd like. Obviously, 2020 was a very difficult year. Sales were down some GBP 70 million, about 13%. And as like many companies, obviously, you have to try and survive the effects of COVID. That had a big impact in terms of our profitability, with the profit dropping from some GBP 70 million to some GBP 22.5 million. So that obviously flowed through the business, and Jack will go through the details of that later. And I think the important thing, as a business, we went through the 3 stages, I guess. The first was survival, which we had to get through. I mean, to give you an example: Last April, in a normal month of April, we'd make GBP 6 million profit. We made a GBP 10 million loss, and obviously you're looking forward and trying to contemplate how many months that could run for. So you go through survival. You then from a point of view is in recovery. And we started to see that probably from the middle of the year as volumes start to come back. And now we firmly believe we're in the third part of that, which is the growth part of the strategy. And we're firmly back on with that, which we'll touch on today. If I take the priority. Obviously, when we first opened, it was all about health and safety. The factories and our logistics people have to be safe. We did not want to be spreading COVID. And that was very quickly rolled out to making sure that everybody was able to operate with a 2-meter rule, which still operates today. The company also, for the last 12 months mostly, has worked on a home-based working to minimize the people in offices; and that has had great success. Obviously, the COVID costs us money. When people aren't in work; either because they've had COVID, which has been a minority; or in lots of cases, where they're self isolating because somebody they know in the family has had it, we have to cover that. We have to cover it with additional working, additional hours. And that's been averaging about GBP 400,000 a month, but it's reducing. January and February, we've definitely seen the amount of people off with cases has dropped markedly. We started an experiment with lateral flow testing in one of our factories in Newport. That's been a big success and that's now being rolled out across all sites. So in all of those sites, we'll be doing 2 tests of all of our employees every week. And we have kept throughout this a full national manufacturing logistics capability throughout the crisis. I think operationally, as we said earlier, health and safety has been #1 priority, and that was critical, but also focusing on our customers. Many of our customers worked throughout the COVID closure. And we had to support them because we were the only route of getting product, and that carried on. We had to have a restructuring program, which was completed in the first half of 2020. That increased obviously the efficiency and flexibility of the business. We maintained our focus on innovation and ESG priorities, as we'll talk about later. And we've announced a capital investment program of some GBP 30 million this year, which we'll expand on later. In financial terms, the first 2 months have traded well. We were up 7% in terms of sales on 2020 before COVID hit. The orders are actually even higher than that. And this was despite February, where we saw interruption particularly in the North of the country with the poor weather. We've done the reinstatement of dividends. The recommendation is for a 4.3p, which will be decided at the AGM. And the recovery we saw at the end of last year has carried on into this quarter, which is really important. Debt is under control. And as we've said, we've made the full repayment of furlough, and that is really important for us as a business. We believe that. Furlough is obviously there to support business, but we saw it recover. We've made the repayment. We are then repaying standard pay dividends again, paying obviously 2020. And we're doing that purely out of profits and we're not doing it out of government money, which I think is important. We have a strong balance sheet and obviously a flexible capital structure. And we've taken the opportunity today. With obviously the numbers coming through, the Board feels in a position much more confident about 2021. There's a substantial upgrade in the forecast for '21. And really that's coming on the back of us being concerned that if there was any shutdowns in the first 2 months of the year, but obviously if company has not accepted furlough, it would have hurt us financially like it did last April. So yes, we've been conservative, but we think we're through that. There isn't going to be a construction lockdown. The business is trading very well, which is why we've done the upgrade. So with that, I'd like to hand over to Jack.

Thank you, Martyn. So yes, as we've discussed, revenues were down some GBP 72 million, which was 13%, but it's very much 2020 obviously was a monumental year in terms of COVID and the effects. And it did hit us from a volume perspective, notably in H1. However, we did maintain our pricing margin throughout the year, which we've been able to do in subsequent years. And we've maintained that this year, which I'll go on to show you. As Martyn said, 2020 was a year of a very difficult H1, a strong recovery in H2 and now we are well placed to go forward in 2021. This second slide demonstrates that. You can see quite clearly the red bars are the H2 revenues. And you can see quite clearly that we are at the same levels as in previous years, but in H1 we are significantly down. You can see -- on this daily sales trend, you can see that we've recovered all the way through to being at or above our prior sales levels as we got towards the end of the year. So that's showing that we do have sustainable growth and we're positioned well going forward. On the revenue slides, you can see that, if you look at the left-hand pie, commercial was down 17%. Domestic was down 9%, but international was actually up 7% (sic) [ 16% ]. And Martyn will some about that, but it's some of the investments we've made. On the right-hand slide, you can see that -- the pie chart, you see that 80% is in our big MLP business, which is heavy equipment, dependence on volumes. So as the sales drop as they did in H1, the gearing on the profits will drop too. And that's showing in this slide, where we have a strong decrease in the margin, but if you actually bad -- add back into H2 the furlough that we repaid and that we will not have to repay going forward, our operating margin was actually 12.8%, which is in line with our prior years, which again confirms that we're well placed for sustainable growth going forward. If you then look at the nature of the business, you can see that operational gearing effect. I mean Landscape Products lost 68 -- GBP 67 million of revenue, but actually dropped GBP 44 million of profit; and that's the nature of a heavily geared, equipped business like ourselves. However, very importantly, you can see that in -- even in this [indiscernible] we've managed to maintain a profitable 5.8% margin before the furlough and closer to 13% when you add the furlough back in. Cash flow-wise. Again we generated net cash despite the difficult year, and that's a testament to the excellent management at all levels of Marshalls' business in terms of expenditure and keeping the sales going. Even when lockdown was in full effect, we continued to serve our customers. And that's led us to a strong cash position that we were able to generate revenues, keep the cash flow coming in, pay suppliers. And we've actually ended up with a net debt level not dissimilar to the prior year despite the very difficult trading conditions. Again, that places us very well for going forward. Even during this crisis, yes, we reduced CapEx, but we did continue to invest. You can see there's some GBP 15 million there. We invested in a new brick plant in Maltby. We invested in new products, notably [ bio diverse ] for our commercial range. So you can see we're planning for growth in the future. And despite it being that difficult year, we kept that investment for our sustainable growth growing, which places us very well for 2021 and beyond. You can see that we are positioned for growth. Our liquidity is excellent. Our net debt is only 1.3x. And you can see that on a pre-IFRS basis we're only at GBP 27 million of debt, which again -- and our strong cash generation, we are well placed for growth. We've got no intention to renew the facilities that we took out, the GBP 90 million, and they will fall away in June. This just shows the profile of our debts. And you can see that we've got facilities going out through 2024, again strongly placed for recovery and growth in the future. The strategy remains the same. We will primarily focus on organic growth. In CapEx, we're investing GBP 30 million this year, notably in the new block plant which Martyn will talk about. We have a strong range of NPD going into '21. 8% of our sales in 2020 were from new products, so we continue that investment and that growth. We've repaid the furlough. We've repaid all the taxes. We are in great shape to recommit to our dividend and maintain a 2x going forward, and that's been announced today. We have a very strong pipeline of acquisitions in those targeted areas that we've previously gone to New Build Housing, Water Management. They will be our areas of focus. There will be bolt-on acquisitions. We'd like to do probably one a year for the next 3, 4 years. You can see on the KPIs that, despite the difficult year, we've managed to maintain debtor days, creditor days, inventory at reasonably good levels. And we haven't incurred any debt write-off in 2021 -- 2020, rather. The pension is in good shape. It still maintains a surplus. We haven't had to contribute to it, and we don't anticipate we will in the near term or even the long term. The dividends. We are reinstating the dividend. There will be a final dividend of 4.3p. Our objective is to go at 2x cover throughout the life cycle. And we will continue to adhere to the capital allocation policy that we've had previously, and we are now in that position to maintain that going forward with a reinstated dividend. So in short, the financial position, we've come through 2020 very well, recovered strongly in the second half. And we're now well placed for growth with a solid balance sheet and cash generation in the years to come. With that, I'll hand back to Martyn.

Thank you, Jack. So if we come on to the market. The first point I'd say in terms of the construction market is we are seeing a V-shaped recovery, and we're certainly seeing that in the construction part of obviously what we're involved in. Each part of the business has different recovery rates. And certainly, today, the RMI and the infrastructure are leading the way, with the numbers already coming into sort of 2019 levels or even above. And I'll touch on some of those going forward. If you look at the market. The CPA forecasts now confirm the 12.5% dropoff last year in construction. That actually was significantly worse at one point where we're looking at a much bigger number. And the opposite is true of 2021, which is now showing a 14% recovery, and that was anticipated to be lower. So we've seen the situation improving from the forecasts that were done earlier in the year, and that is obviously all positive. If you look at the different sectors, what you can see here is the RMI, as I said earlier, is obviously strong. And infrastructure, particularly in the next few years, is going to grow. So again making sure Marshalls is focused in the right areas is going to be critical to our success. When I come on to the domestic order books. The domestic order books are at all-time highs. What we're seeing is it's growing effectively from 11 weeks to 13 weeks. And you can see the pie charts here as we've represented them before showing over 20 weeks. We've now actually gone into an even greater depth of that and asking people who've got over 24 weeks work, and that's resulted in actually bringing the total up to 17 weeks. This is obviously a new measurement, but I think it's more accurate going forward. But you can see from the pie charts here that over half of the installers out there have over 20 weeks work, which is phenomenal and showing the very, very strong demand we're seeing in the domestic market currently. The key part of us, we believe, driving this is savings. Obviously, people are spending more time at home, but as you can see from the graph here, you've got -- high and middle income are doing the most savings and the retirees. When you look at that, those are basically Marshalls' customers. They are the people who own the houses, the people who are spending the money. So from that point of view, that's why we think we've seen such a strong demand coming through. It's not coming through from debt. It's coming through obviously from people saving their money. And it's given rise to this what's called a K-shaped recovery, which is quite unusual. What it means is there are some parts of the economy recovering very well, like construction, as we've said earlier, obviously RMI. Some parts have actually stagnated and are sinking, I guess, like if you take travel and obviously hospitality. So we're getting a split between the economy and how that's recovering. And obviously as people spend less money in some areas, like people can't go on holidays and can't go out, then they do have more money to spend in other areas, particularly on their houses and their gardens and spaces. If we look at the housing market. It was interesting. The housing market for us, particularly new build, effectively stopped when COVID hit. Then it started to come back to finish off properties that had reservations. Then it came back completely when the stamp duty holiday -- and now we can see many of the housebuilders have been out in the first few months of this year and saying they're going to have to start building at greater volumes than they were doing actually back in 2019. So we see that housebuilding has been very strong, and obviously this demand that is coming through. And as houses are actually selling, it's giving more opportunity for us to sell our products. The other part of obviously looking at the houses is which houses are being built. As you can see here, the amount of flats is reducing. The amount of houses is increasing, as people want more and more space, particularly outdoor space. And that again is very good for Marshalls. If you look from our strategy. We launched our strategy back in middle of 2019, and it's probably more appropriate now than it was even then. So the 5-year strategy is critical and I thought I'd give an update as to what we're doing in the different parts. Our goal is still to be U.K.'s leading manufacturer of products in the build environment, and we see that as absolutely critical as we increase our portfolio. If we look at it, we've talked before about our specification selling, and specification selling is what differentiates Marshalls from the competition. We try to get on specifications very early. As you can see here, in Battersea we had that specification in 2016; and also in The Strand in 2018. And if you look at the pipeline, at the moment, it's very, very strong with Oxford Street, Battersea, Nine Elms; lots of these products, where we are specified on them as they come out. It doesn't guarantee 100% you get the orders, but it gives you a very, very good chance of winning them. And we are the only company that takes this approach of getting specified so early on. What we've also got, from our point of view, is obviously new products. In the new products, we've brought out a product called Conservation X this last year. And that's made up of 65% recycled material, and what you can do with it is actually make it look like a granite finish. Now granite is in short supply all over the world, so it's the right product at the right time, very cost effective. And we've had great success with that, but there's many, many more products also being launched in the next year or 2, so we again think we are differentiating ourselves from the competition by doing this. Obviously, on operational excellence, Jack mentioned and I said earlier about our investments. The big part of obviously the GBP 30 million investment is going to be GBP 20 million on a dual block plant. It will be the first of its type in the U.K. Now dual block plant means you're operating 2 plants effectively with the same operators. You're getting efficiency, but also we're able to do all of the secondary processes inline. So you can see the picture on the right-hand side here with different finishes of the same block. Today, we do that all off-line at additional cost. So we'll be able to make better products and very cost effectively, so it's a big, big change for the group going forward. Also materials is obviously a critical part of our business. We look often at what we're doing in terms of product, about the amount of cement that we've got in there. How can we remove the cement, particularly with alternative materials which have much better carbon footprints? And we've been doing that with great success. We're also looking at cement-free products. That is well underway. And again, from our R&D capability, we have a mini block plant, so we don't have to do this on production machinery. We can do it in our labs. And again, it gives us a big opportunity. Also our fleet. Our fleet is all being upgraded into what's called Euro 6. The Euro 6 standard means that the truck effectively gives lower emissions and obviously a lower carbon footprint. And all of our trucks will be upgraded to this both already and in the future years, again cutting our carbon footprint. Digital. I think everybody has been affected obviously with COVID and the lockdown; by the amount of digital transformation, changes; the amount of trading people are having to do, we've also seen a big change. Today, we trade through our website so people are able actually to buy. And we're doing that with our merchants so that it again make it easier for people. Also from our point of view, we've seen incredible uptakes in our YouTube videos of how to lay a patio, where we've seen DIY coming back to the fore as people are actually having a go at this. And also from our point of view, if you take Marshalls Civils and Drainage, this is a rebranding, effectively our drainage business. This is the old CPM business, which we've put together with our Marshalls drainage. And we're having great success in 2 fronts really: one, obviously the amount of water we're taking off the surface. If you take in a year, we save the equivalent of 192 Olympic swimming pools worth of material, and that is absolutely critical environmentally. And also, the concrete pipe compares very well against plastic pipes when you look at the carbon footprint of this effectively in the whole life carbon analysis. And we see that as a big opportunity to keep growing that business. Also if you take Marshalls Bricks and Masonry. This is our Edenhall business together with Marshalls recon walling. And again, here what you're seeing is a big, big push on carbon. Obviously, as the market recovers, the brick market is recovering, we believe we can take more and more share in that area. And obviously there's a lot of debate about the carbon footprint of clay, which we've seen this week, as well as concrete. All of our products effectively are done by the Carbon Trust. They're all measured by third parties, who come out and give us the numbers. So we know and are very confident that we still can see a 50% reduction effectively in switching to concrete bricks. And we do that work with the housebuilders; and we help them, obviously from their point of view, in their carbon footprint. So we see the big opportunity still carrying on. Also, in Landscape Protection, we've successfully launched a new product, which is what we call a shallow-mounted bollard. And the big key with a shallow-mounted bollard is to be able to use it obviously on things like bridges where you haven't got the depth to put your standard bollard in. So we're at the moment bidding for all of the different bridges in the U.K. and obviously London, particularly where they are looking at upgrading from the current system which has been sort of leased for the last few years. So again, that's looking positive in the next few years. And a key for us is people. I mean people are obviously what differentiates one company from another. We have now 99 apprentices in Marshalls working in all different parts of the business. And what we've done is get everybody in the business to sign up to what we're calling our code of conduct. So people know what we're trying to do and what we're trying to achieve. Let me talk about obviously ESG. It is very, very important. And it's gaining more interest every year, but I think from Marshalls' point of view this isn't anything new. And as we say, it's sort of set in stone, our sustainability, but this started back in 2000, where we actually started, first of all, ISO 14001. And then we started carbon reporting, but what we've seen is, since 2008, 50% reduction in our carbon footprint, which is absolutely critical. We've along the way picked up things like fair tax and living wage. And it's all built upon the UN Global Compact, and we think that's really important from our point of view. And going forward, we think that's a big differentiator. It's based on 4 of the principles of the Sustainable Development Goals, and in those different ones, we've done 100% of our natural products now will have an ETI index. 100% of the employees, for a long time, have been paid the living wage. 100% of concrete and natural stones products are fully recyclable. As we said earlier, we -- over the last 5 years, effectively the equivalent of 192 Olympic swimming pools. We've replaced some 60% of cement in our block paving. Plastic consumption down by 30%. And 97% of all products are made in U.K. We've also from a climate point of view, as I said, got 30% reduction in last 5 years, 50% since 2008. And with our SBTi targets for 2030, we're looking to reduce scope 1 and 2 greenhouse gas emissions by 40% per tonne of production by 2030. What we've tried to do and make sure that all of the organization understand is what is it we're supporting and what is it we're obviously opposing. And it's really important that everybody understands this and buys into it. Marshalls is obviously made up by its employees. We make sure, as I said, with the code of conduct that everybody understands each of those different areas of what we can do and how that plays a role. And we don't just do it on our own. We actually do it by third-party accreditation. We've had fair tax approval. We've been a living wage employer for many, many years. We have, obviously working with the Carbon Trust, one of the few construction companies who have every product carbon footprint accredited externally. And obviously, as I mentioned earlier, with the science-based target, it's critical here we're using that to make sure that we can have a 40% reduction in our products by 2030, which we see as really important. In summary. As we've obviously said, 2020, very, very difficult year, but I think the key bit is we've come through it. And we've come out of it and we're back on the growth analysis. So we've got financial flexibility, a lot of headroom, as Jack talked about earlier, in facilities and strong cash generation. We've made the full repayment of furlough and obviously all of the taxes, and we think that's absolutely critical from our point of view. The New Build Housing is the area to be in, Road, Rail, through obviously what's been done in the infrastructure. And as I said earlier, the domestic end market is at all-time high, and we believe it's going to stay strong for some time. We've made capital investments to drive the growth. That's important. Focusing on R&D, we've done for a number of years and is a differentiator. The balance sheet is good in terms of acquisitions. We're absolutely interested in Water Management, obviously new build. We see those as really important. And we've said about ESG, it isn't just flavor of the month. It is embedded throughout the business. We've had the 50% reduction. We're looking for the next 40% reduction. And we think we're in a really strong position to keep delivering obviously growth and profit. We said earlier we'll maintain a 2x dividend cover. And that will be supported by supplementary dividends, but obviously the business, as we -- today, as we've gone through, we've got a lot more confidence. That confidence has come from obviously the business trading together with having a shutdown, and that's why we've seen a substantial upgrade in the forecast for '21. And dividends will be paid obviously for last year but also going forward, for this year; and it'll be paid from profits, which we think is absolutely critical. I think the last point I'd like to do as well is acknowledge, obviously we've made in our announcement today, the fact that we start in our succession plan. Jack is going to obviously retire from the company. And I would like personally to thank Jack for his contribution for the last 6.5 years to the success of Marshalls, which I know he's made a big contribution to. So with that, everything being said, I think we'd now like to go to any questions, please. Thank you.

[Operator Instructions] Our first question today comes from Chris Millington from Numis.

A few, if I can, please. The first one I wanted to ask about is kind of behavior of the merchants over the last year and kind of whether or not you've seen any kind of fundamental change there and how they're reacting at the start of this year. Next one is just on the capacity of the business. I know you get asked this a lot, but obviously we've seen quite a lot of reorganization within the group. And obviously you've also got the St Ives plan too over the next couple of years, so I just wondered if you can just give us a feel of that. And then the final one I wanted to ask really is the shape of sales in early 2021 between domestic and public and commercial.

Yes, okay, Chris. Well, the first thing, I think, with the merchants. I mean there has not been significant change, I think, in the merchants in terms of the last 12 months. The national merchants, I would say -- were probably more restructuring took place than, say, in the independents. The independents, from their point of view, really stayed open throughout and have done very well. So I think the merchants have obviously had some challenges in terms of trying to do more click and collect that I think they've been doing a lot of and push towards online. And as I said earlier, I think in the digital challenge going forward that's going to become more of an issue, I guess, from our point of view, yes. So I think that's the first one. So I don't think there's been a significant change from their point of view. The second one was on the capital -- the capacity, I think, you're talking about on the different plants.

It was.

Yes. From our point of view, I mean, the rationalization we did was really in businesses like our mortars and screed, where we took a decision strategically to realign that business. And that's proved to be the right decision and successful. I think in the brick business we've gone to utilizing the more efficient of the factories. And the one area we did obviously make a change with was in our MLP business. It was to close -- or to announce the closure of Falkirk. And because the markets come back stronger, the intention is still to relocate every -- all capacity to our other Scottish factory in Carluke because that's strong demand. We still operate in Falkirk at the moment. So in terms of total capacity, it's actually gone up in the last 12 months because we've opened Maltby. In the longer term, obviously we're putting in a dual block plant. So I think, from a capacity point of view, we believe we've got that covered and we think that's pretty positive. So...

Martyn, just very quickly on St Ives, how much does that add to your block paving capacity?

I mean in block paving we have -- from our point of view, I think it's about 11 block plants. So putting another 2 in, effectively you've got that extra capacity of about, well, nearly 20%. It will actually probably be a little bit more than that because -- obviously because it's new, it's got -- it'll run a little bit faster. And the big opportunity, as I said in -- earlier, is to do with doing all the inline secondary processing. It's been put in, I would say, mostly for efficiency, but obviously will give a capacity. The other benefit we have going forward, because we've got confidence that we can grow our brick business, is obviously any block plant can also make bricks. And that was what Maltby has been brought back, as it can do both bricks and blocks. At the moment, it's just a simple change of a hat.

Sure, sure. Got you. And the last one was just about shape of demand...

I think [indiscernible] -- sorry, yes?

I was saying the last one was just about the shape of demand in early '21.

Yes. So if you take it at the moment, both sectors are positive. The commercial is slightly up. That definitely got disrupted in February by the housebuilders, I think, with the weather. And domestic is strong. I mean this isn't a true domestic season, as you know, but that does all bear well for what we anticipate is coming. And the demand in domestic is very strong.

We now move on to a question from Clyde Lewis from Peel Hunt.

Apologies. I think I might have 4. I'm going to beat Chris by 1. Just 1 on the margins, Martyn. Just in terms of as we look forward, obviously, you delivered a big jump in margins in the second half, but as we think about landscape versus the other businesses, how do you think that gap will evolve over the next couple of years? That was the first one on there. The second was on the housebuilders. Obviously you flagged the sort of split on more houses being built, as opposed to flats. So are you noticing the housebuilders actually looking to upgrade their patios and their sort of -- the offering that they've got on that side to try and draw some customers in? The third one was on installers. Obviously, with sort of -- order books are sort of 20, 24 weeks for a lot of them. What are you trying to do to drive them to increase their capacity? Because obviously that would debottleneck a lot of your domestic sales. And the last one -- apologies. The last one was on, I suppose, local authorities and their appetite for sort of doing pedestrianization schemes. Obviously given the sort of lockdown, have -- has the outlook changed in any way at all? Are you seeing sort of local authorities sort of pausing plans to do that?

Yes, okay, Clyde. The first one: As you saw, the margin certainly recovered in the second half of last year. And we don't see there's any reason why margins won't go back obviously to full levels of where they were and increasing. I mean the story over the last sort of 7 years has been the margins every year have gone forward. COVID obviously knocked a hole in that, but it's very much back on schedule. The things we're doing in 5-year strategy are all aimed at improving margins. I mean, the more you get specified, the more we actually trade digitally, they tend to be in the higher-margin products, so that's good. Your comment about doing landscape and the others. Yes, the businesses we bought were at lower margins than our landscape business, but they're all recovering. And there's no reason why -- most of it is scale, to be honest. It's not the gross margin. It's the fact they don't make as much volume. And we certainly think we can increase the sales, and therefore, we can get those margins up to the standard of the business. And I'm still confident there's no limit on moving those margins forward. I think, with the housebuilders, yes, there's more houses than flats. It's interesting. With the patios, what we're seeing is definitely more interest from the national housebuilders in the front of the house. So trying to upgrade what people are seeing in terms of pavements and making it a more attractive view. I wouldn't say that's completely cracked with the back of the house. It's still being there, fairly basic, but certainly the middle-sized housebuilders are very interested in trying to add to the houses because obviously they're trying to get them more attractive to sell. So I think we're seeing an improvement there. The installers, yes, the latest survey we did show that the actual registered installers are more looking to take on extra crews and train. The interesting one in installer capacity is what we classify as like your general builder, who yes, they do patios, but they also do all forms of building. And what they're seeing is, in the beginning, obviously they were restricted on some of the building trades they could do inside people's houses and the like and got into doing more outside and patios. And obviously you're seeing that big order book of 20 weeks, we hope many of them will stay doing that. So increasing that. And there is this -- and I suppose "never forecast" area, which is the do it yourself, and that is definitely growing. I didn't think that would happen, but people are using YouTube for everything. The local authorities. I'd say that, the one big thing, I think everybody can see at the moment whilst everything is quiet. I mean I've never seen so much roadworks going on all over the country. So I think local authorities are taking the opportunity while traffic is low. They're doing an awful lot of work on pavements, on repairs, and that is all positive. The pedestrianizations, yes, that's carried on. I mean you can see that in the main city centers. I think the challenge that retailers are going to have in the future is there's going to be less sort of out-of-town stores, but they're going to try and make the center more attractive for people to come in to, to shop, to eat. And I think one of the things they will be doing is taking the vehicles off the road, and that seems to be the move that's been going on for some time and I think will actually increase.

[Operator Instructions] We now move on to a question from Aynsley Lammin from Canaccord.

I've got 3. First of all, I just wondered if you could comment on the M&A pipeline. Is there kind of more businesses being offered? What does pricing look like? And secondly, just on the IT, obviously you -- as you say, you've invested like in the kind of digital offer and capability. Any other big projects that you've got kind of underway there? Any big things we should be aware of changes in the kind of pipeline? And then thirdly, just on the working capital moves. The trade debtors seem to have gone up quite a bit. I just wondered. Is there any bit more explanation around the movement there?

Yes. So Aynsley, firstly, on the M&A pipeline, absolutely. We are still committed to bolt-on acquisitions of a similar scale to what we did with CPM and Edenhall, both of which have been very successful. We have a strong pipeline. And there's no doubt that things have taken a lull as meetings haven't been able to take place in person, which are necessary for this type of transaction, but we will pick that up quickly as we come out of lockdown. And there are a -- there is a strong pipeline. We are looking to do at least one of these per annum in the near term, and we'll work hard to achieve that. We're pretty confident about it. It will be in New Build Housing. It will be in water managements, which is very much in line with our strategy. On the IT side, we've taken great steps with digital and progressed with that to the point now that we are servicing our customers online in a meaningful way. However, there's much more to be done, the whole evolution of industry as a whole, but specifically in building materials, it is moving to the cloud rapidly now. Collaboration is taking place at an increasing rate. This is a trend a bit like digital [ is key ]. It can't really be stopped. It's something to be embraced. We will commit to D365 platform for all our operating systems over the next couple of years here. That will allow us to be successfully part of that collaboration and cloud journey, so that will be significant. In fact, that project has started in earnest this year and it will continue over the next 2 to 3 years. So that's exciting. And then on trade debtors, you're quite right. It has increased. It's natural really. You saw that sharp falloff in revenue in H1 and therefore,obviously a decrease in the absolute balance of debtors. In H2, you've seen that strong recovery, that which carries on early into the new year, and that's obviously led to growing sales and the backlog. Normally at the year-end, you will have -- it will be one of your lowest points for trade debtors. That's -- that bow wave has been extended out through the second half of the year such that our trade debtors are at a higher level, but that will come down as the seasonality works its way through this year, underlining the cash generation is very strong. It's close to 100% on a sort of monthly basis.

[Operator Instructions] As there are no further questions in the queue, I'd like to hand the call back over to you, Martyn, for any closing remarks.

Okay. Well, thank you very much for coming on the call today. I think the message from us, hopefully, is very clear. The business went through, like all businesses, COVID with a lot of difficulty last year, which the financial numbers show. We've come through, and we certainly believe we're back in that growth position we are today. I often say that, if the construction market is good, Marshalls will do well. And all the signs are the construction market is what's being supported by the government. It's being supported by people obviously in their own homes, as they've got the money. So I think, looking forward, we are very optimistic about the way the business is going. And that will mean we'll carry on investing in it and carry on in our 5-year plan and give the growth people have got used to for the last 6 or 7 years. So thank you very much for your time.