TIDMMSLH
RNS Number : 9473X
Marshalls PLC
16 August 2018
Interim results for the half year ended 30 June 2018
Marshalls plc, the specialist Landscape Products group,
announces its half year results
Financial Highlights Half Year ended Half Year Increase
30 June 2018 ended %
30 June 2017
Revenue GBP244.3m GBP219.1m 12
EBITDA GBP41.6m GBP36.7m 13
Operating profit GBP33.5m GBP29.8m 12
Profit before tax GBP32.5m GBP29.1m 12
Basic EPS 13.24p 12.04p 10
Interim dividend 4.00p 3.40p 18
ROCE 20.0% 23.7%
Net (debt) / cash GBP(48.9)m GBP1.2m
Note:
Alternative performance measures are used consistently
throughout this Interim Announcement. These relate to EBITA, EBITDA
and ROCE. For further details of their purpose, definition and
reconciliation to the equivalent statutory measures, see Note
3.
Highlights:
-- Strong revenue growth for the half year despite severe weather impact
-- Operating margins slightly ahead to 13.7% (2017: 13.6%)
-- Recent trading very strong - both June and July revenues up 21%
-- CPM Group Limited performed well in the period and its
integration is on track and well advanced
-- The Group's strong cash generation has continued
-- Net debt of GBP48.9 million (31 December 2017: GBP24.3
million), reflecting the purchase of CPM for GBP41.4 million
-- Payment of GBP21.3 million final and supplementary dividends on 29 June 2018
-- Return on capital employed for the 12 months ended 30 June
2018 continues at circa 20% (31 December 2017 : 20.8%)
The 2020 Strategy continues to deliver long-term sustainable
EBITDA growth, high ROCE and a strengthened brand:
-- Capital expenditure of GBP28 million planned for 2018 to support growth and deliver cost savings of GBP5 million per annum by
2019
-- Research and development expenditure increased to GBP2.2 million (2017: GBP1.7 million) coupled with new product
development and service to drive sales growth
-- Focus on increasing the profitability of the Emerging UK Businesses continues
-- Digital strategy gaining momentum and delivering real benefits across the business
-- Continue to target selective bolt-on acquisition opportunities
-- Maintained a 2 times dividend cover policy, enhanced by supplementary dividends
Commenting on these results, Martyn Coffey, Chief Executive,
said:
"The Group continues to outperform the Construction Products
Association's ("CPA") growth figures, despite ongoing macroeconomic
uncertainty. The CPA's recent Summer Forecast predicts a decrease
in UK market volumes of 0.6 per cent in 2018, followed by an
increase of 2.3 per cent in 2019, while the underlying indicators
in the New Build Housing, Road, Rail and Water Management markets
remains supportive. Recent trading has been very strong with both
June and July revenues up 21 per cent against the prior year
period.
The self help programme to support organic growth is progressing
well and the integration of CPM Group Limited ("CPM") is on track
with post acquisition trading continuing strongly. The Board
believes that Marshalls' innovative product range and strong market
positions mean the Group is well placed to deliver continued future
growth. The Group's focus remains the delivery of long-term
sustainable growth, whilst maintaining a strong balance sheet and a
flexible capital structure.
The Board remains confident of achieving its expectations for
2018."
There will be a presentation for analysts and investors today at
9.00 am with a telephone dial in facility available tel: number +44
(0)330 336 9411 - Access Code: 1478410. Marshalls' Analyst
Presentation will be available for analysts and investors who are
unable to attend the presentation. The presentation can be viewed
on Marshalls' website at www.marshalls.co.uk.
Enquiries:
Martyn Coffey Chief Executive Marshalls plc 01422 314777
Group Finance
Jack Clarke Director Marshalls plc 01422 314777
Andrew Jaques MHP Communications 020 3128 8540
James White
INTERIM MANAGEMENT REPORT
Group Results
Marshalls' revenue for the 6 months ended 30 June 2018 grew by
12 per cent to GBP244.3 million (2017: GBP219.1 million). This
result has been achieved despite the severe weather conditions in
the first 4 months, which resulted in a reduction in sales of
approximately GBP9 million. Recent trading has been strong and the
Group has continued to experience strong order intake. Revenue in
both June and July is up 21 per cent against the prior year period.
Encouragingly, despite wider political and economic uncertainty,
the underlying indicators remain positive in Marshalls' end
markets. The Group's positive cash generation has continued in the
period.
Sales to the Domestic end market, which represented
approximately 31 per cent of Group sales, were significantly
impacted by the severe weather. Despite this, results were in line
with the prior year period reflecting strong growth either side of
the bad weather period. The survey of domestic installers at the
end of June 2018 shows continuing strong order books of 11.3 weeks
(June 2017: 11.9 weeks; February 2018 : 10.8 weeks).
Sales to the Public Sector and Commercial end market, which
represented approximately 64 per cent of Group sales, increased by
19 per cent compared with the prior year period. CPM, which was
acquired in October 2017, has continued to trade strongly and its
integration is in line with our expectations and well advanced. The
Group continues to target those parts of the market where higher
levels of growth are anticipated including New Build Housing, Road,
Rail and Water Management.
Sales in the International business increased by 1 per cent in
the 6 months ended 30 June 2018 and represented 5 per cent of Group
sales. Progress continues to be made to develop our International
business and the Group continues to improve its global
infrastructure, supply chains and routes to market.
Operating profit increased to GBP33.5 million (2017: GBP29.8
million) with operating margins slightly ahead at 13.7 per cent
(2017 : 13.6 per cent). EBITDA improved to GBP41.6 million (2017:
GBP36.7 million).
Group return on capital employed ("ROCE") remained strong and
was 20.0 per cent for the 12 months ended 30 June 2018. This
compares with 20.8 per cent for the year ended 31 December 2017 and
reflects the increase in the pension scheme surplus. ROCE is
defined as EBITA divided by shareholders' funds plus cash / net
debt.
Net financial expenses were GBP1.0 million (2017: GBP0.7
million) and interest was covered 34.0 times (2017: 42.4 times).
The effective tax rate was 19.5 per cent (2017: 18.8 per cent).
Basic EPS was 13.24 pence (2017: 12.04 pence) per share, which
represented an increase of 10 per cent. The Board has declared an
interim dividend of 4.00 pence (2017: 3.40 pence) per share, an
increase of 18 per cent, reflecting the strong cash generation and
the Group's continuing progressive dividend policy.
The Group continues to deliver strong operational cash flows
through the ongoing tight control of inventory and effective
management of working capital. As a consequence of the acquisition
of CPM in October 2017 for GBP41.4 million, including GBP3 million
of CPM debt taken on, the Group reported net debt of GBP48.9
million at 30 June 2018 (30 June 2017: net cash of GBP1.2 million).
The half year end net debt is after the payment of the 2017 final
and supplementary dividends of GBP21.3 million made to shareholders
on 29 June 2018.
Group Strategy
The Group strategy continues to focus on the delivery of
long-term sustainable growth. The strategy is to maintain a strong
balance sheet, a flexible capital structure and a clear capital
allocation policy that drives both long-term growth and shareholder
returns. The Group is continuing to invest in the Marshalls brand
and to prioritise organic capital expenditure projects. We continue
to increase research and development and new product development,
which are delivering an encouraging pipeline of new products. The
focus remains on innovation and new product development, and the
aim is to extend the product range and provide more integrated
solutions to improve the customer experience and so strengthen and
differentiate the Marshalls brand.
The Group's key priority is to deliver improvements in profit
margins across all businesses and end markets through the continued
focus on service, quality, design, innovation and a commitment to
research and development and sustainability, together with
sustainable cost reductions and improvements in operational
efficiency.
Numerous cross-selling opportunities have been identified and
CPM is generating a strong pipeline of new products. Our
acquisition focus remains centred on the Minerals, Protective
Street Furniture, Building Materials and Water Management markets.
We have identified a good pipeline of potential acquisition targets
but remain selective and will not compromise on the investment
criteria and the hurdle rates we have in place.
Marshalls' digital strategy is increasing in momentum across all
Group operations. The strategy combines digital trading, digital
marketing and digital business and is focused on the customer
experience. The strategy puts the interests of stakeholders and the
requirements of customers as the key priority. For example, web and
mobile applications enable customers to model their requirements
and allow full digital access. A new Commercial web platform was
launched in this period and a new Domestic platform will follow
later this year. Our strategic direction is "digital by default",
which seeks to define digital as a core part of the Group's
culture.
Operating Performance
Operating margins increased slightly to 13.7 per cent in the 6
months ended 30 June 2018 (2017: 13.6 per cent). The increased
operating margins in the core Landscape Products business, together
with the positive impact from CPM, were tempered by the
performances of certain of the Emerging UK Businesses and the
impact of restructuring costs. CPM has delivered strong trading
results since the acquisition date and its half year performance is
in line with expectations. Revenue increased by GBP25.3 million and
operating profit by GBP4.8 million in the Landscape Products
business, which serves both the Public Sector and Commercial and
Domestic end markets. The increase in operating margins within the
Landscape Products business reflects the delivery of sustainable
cost reductions and operational efficiency improvements as part of
our 2020 Strategy programmes. The performance of our Emerging UK
Businesses has been mixed during the half year period, with
significant focus on restructuring certain less profitable areas.
The profit is calculated after charging restructuring costs of
GBP0.9 million which have been incurred in the period and are
designed to benefit these businesses going forward. Increasing
profitability in the Emerging UK Businesses remains a key part of
the Group's 2020 Strategy and Street Furniture, Mineral Products
and Premier Mortars remain important growth drivers for the
Group.
In the Domestic end market, the Group continues to drive more
sales through the Marshalls Register of approved domestic
installers. The Marshalls Register is unique and comprises
approximately 1,900 installer teams. The Group is committed to
delivering a consistently high standard of quality, customer
service and marketing support and we remain focused on enhancing
the overall customer experience by extending digitisation and our
commitment to innovation.
In the Public Sector and Commercial end market, Marshalls'
continuing strategy is to offer sustainable integrated solutions to
customers, architects and contractors. The Group's technical and
sales teams remain particularly focused on those market areas where
future demand is considered to be greatest, including New Build
Housing, Road, Rail and Water Management. CPM is now fully part of
the Landscape Products business and numerous cross-selling
opportunities have been identified. CPM has a strong order book and
a healthy pipeline of new products and has recently secured orders
to supply a number of Smart Motorway projects.
The Group continues to focus on innovation and new product
development to drive sales growth. Research and development
expenditure in the 6 months ended 30 June 2018 was GBP2.2 million
(2017: GBP1.7 million). This investment includes project
engineering to enhance manufacturing capabilities, concrete and
other materials technology innovations and extending the new
product pipeline. New product solutions for the Domestic range
include Urbex Riven paving for new housing, together with
additional innovative stone and vitrified paving products. In
Public Sector and Commercial, CPM's Perfect Manhole System and its
Redi-Rock Flood Protection System are important new product
solutions now available to the Group. Revenue from new products in
the core Landscape Products business has continued to grow strongly
and represented 11 per cent of Group sales in the 6 months ended 30
June 2018.
Capital investment in property, plant and equipment in the 6
months ended 30 June 2018 totalled GBP13.5 million (2017: GBP7.9
million) and this compares with depreciation of GBP7.4 million
(2017: GBP6.4 million). The Group's self help investment programme
remains an important part of our 2020 Strategy and total capital
expenditure of GBP28 million is planned in 2018. The aim is to
deliver sustainable cost savings of GBP5 million per annum by 2019.
This detailed plan is on track and includes various projects within
natural stone, block paving and automated material handling. In
addition, further to our acquisition last year, a new factory is
due for completion at CPM's Somerset site in November 2018, at a
cost of GBP5 million, which is expected to increase capacity and
efficiency at the plant.
Balance Sheet and Cash Flow
Net assets at 30 June 2018 were GBP244.6 million (June 2017:
GBP222.6 million).
Cash generation remains strong, although the bad weather in the
first 4 months of the year has pushed out the working capital cycle
in the second quarter. This knock-on impact of the bad weather is
reflected in the reported net cash flows from operating activities,
which were GBP14.0 million (2017: GBP19.2 million) in the 6 months
ended 30 June 2018. The Group continues to focus on maintaining a
strong balance sheet supported by robust capital disciplines, and
strong cash management continues to be a high priority area. The
Group operates tight control over business, operational and
financial procedures, and continues to focus on inventory levels
and the management of capital expenditure and trade
receivables.
The Group's existing bank facilities provide headroom against
available facilities at appropriately conservative levels. On 9
August 2018 we extended our committed facilities by 1 year to 2023
to enhance the maturity profile and also renewed short-term working
capital facilities with RBS. Marshalls maintains a policy of having
significant committed facilities in place with a positive spread of
medium-term maturities. We have significant capacity within our
banking facilities to fund organic investment and selective
"bolt-on" acquisitions.
The balance sheet value of the Group's defined benefit pension
scheme was a surplus of GBP11.5 million at 30 June 2018 (December
2017: GBP4.1 million surplus; June 2017: GBP3.6 million surplus).
The surplus has been determined by the scheme actuary using
assumptions that are considered to be prudent and in line with
current market levels. The increased surplus is largely due to an
increase, during the last 6 months, in the AA corporate bond rate
from 2.50 per cent to 2.60 per cent and this is in line with market
movements. The expected rate of inflation decreased to 2.10 per
cent from 2.15 per cent at 31 December 2017. The balance sheet
value continues to benefit from the high proportion of
liability-driven investments whose performance matches the
liabilities.
Dividend
The Group has a progressive dividend policy with a stated
objective of achieving up to 2 times dividend cover over the
business cycle. The Board has declared an interim dividend of 4.00
pence (June 2017: 3.40 pence) per share, an increase of 18 per
cent, which reflects the Group's strong cash generation. This
dividend will be paid on 5 December 2018 to shareholders on the
register at the close of business on 19 October 2018. The
ex-dividend date will be 18 October 2018.
Risks and Uncertainties
There are a number of potential risks and uncertainties which
could have a material impact on the Group's performance over the
remaining 6 months of the financial year and could cause actual
results to differ materially from expected and historical results.
The Board does not consider that the principal risks and
uncertainties have changed since the publication of the Annual
Report for the year ended 31 December 2017. A detailed explanation
of the risks, and how the Group seeks to mitigate these risks, can
be found on pages 20 to 24 of the 2017 Annual Report, which is
available at
www.marshalls.co.uk/investor/annual-and-interim-reports.
Going concern
As stated in Note 1 of the 2018 Half Year Report, the Directors
are satisfied that the Group has sufficient resources to continue
in operation for the foreseeable future, a period of not less than
12 months from the date of this report. Accordingly, they continue
to adopt the going concern basis in preparing the Half Year
Report.
Outlook
The Group continues to outperform the Construction Products
Association's ("CPA") growth figures, despite ongoing macroeconomic
uncertainty. The CPA's recent Summer Forecast predicts a decrease
in UK market volumes of 0.6 per cent in 2018, followed by an
increase of 2.3 per cent in 2019, while the underlying indicators
in the New Build Housing, Road, Rail and Water Management markets
remain supportive. Recent trading has been very strong with both
June and July revenues up 21 per cent against the prior year
period.
The self help programme to support organic growth is progressing
well and the integration of CPM Group Limited is on track with post
acquisition trading continuing strongly. The Board believes that
Marshalls' innovative product range and strong market positions
mean the Group is well placed to deliver continued future growth.
The Group's focus remains the delivery of long-term sustainable
growth, whilst maintaining a strong balance sheet and a flexible
capital structure.
The Board remains confident of achieving its expectations for
2018.
Martyn Coffey
Chief Executive
Condensed Consolidated Income Statement
for the half year ended 30 June 2018
Half year Year ended
ended June December
2018 2017 2017
Notes GBP'000 GBP'000 GBP'000
Revenue 4 244,340 219,131 430,194
Net operating costs 5 (210,827) (189,299) (376,755)
Operating profit 4 33,513 29,832 53,439
Financial expenses 6 (986) (703) (1,388)
Profit before tax 4 32,527 29,129 52,051
Income tax expense 7 (6,350) (5,477) (9,925)
Profit for the financial
period 26,177 23,652 42,126
Profit for the period
Attributable to:
Equity shareholders of
the Parent 26,158 23,779 42,503
Non-controlling interests 19 (127) (377)
26,177 23,652 42,126
Earnings per share
Basic 8 13.24p 12.04p 21.52p
Diluted 8 13.13p 11.94p 21.37p
Dividend
Pence per share 9 6.80p 5.80p 9.20p
Supplementary 4.00p 3.00p 3.00p
Dividends declared 9 21,344 17,387 24,105
All results relate to continuing operations.
Condensed Consolidated Statement of Comprehensive Income
for the half year ended 30 June 2018
Half year Year ended
ended June December
2018 2017 2017
GBP'000 GBP'000 GBP'000
Profit for the financial period 26,177 23,652 42,126
Other comprehensive income / (expense)
Items that will not be reclassified to
the Income Statement:
Remeasurement of the net defined benefit
liability 7,699 (517) 328
Deferred tax arising (1,309) 88 (56)
Total items that will not be reclassified
to the Income
Statement 6,390 (429) 272
Items that are or may in the future be
reclassified to the Income Statement:
Effective portion of changes in fair
value of cash flow hedges 500 (704) 146
Fair value of cash flow hedges transferred
to the Income Statement (262) (251) (385)
Deferred tax arising (38) 159 35
Exchange difference on retranslation
of foreign currency net
investment 62 135 179
Exchange movements associated with borrowings (84) (412) (638)
Foreign currency translation differences
- non-controlling interests (5) 213 371
Total items that are or may be reclassified
subsequently to
the Income Statement 173 (860) (292)
Other comprehensive income / (expense)
for the period,
net of income tax 6,563 (1,289) (20)
Total comprehensive income for the period 32,740 22,363 42,106
Attributable to:
Equity shareholders of the Parent 32,726 22,277 42,112
Non-controlling interests 14 86 (6)
32,740 22,363 42,106
Condensed Consolidated Balance Sheet
as at 30 June 2018
June December
Notes 2018 2017 2017*
GBP'000 GBP'000 GBP'000
Assets
Non-current assets
Property, plant and equipment 173,662 147,514 169,093
Intangible assets 73,318 40,386 72,060
Trade and other receivables - 208 -
Employee benefits 10 11,498 3,622 4,127
Deferred taxation assets 1,324 2,390 2,775
259,802 194,120 248,055
Current assets
Inventories 84,867 70,380 77,859
Trade and other receivables 94,644 74,295 68,221
Cash and cash equivalents 20,617 26,862 19,845
Derivative financial instruments 654 - 447
200,782 171,537 166,372
Total assets 460,584 365,657 414,427
Liabilities
Current liabilities
Trade and other payables 114,394 96,818 100,173
Corporation tax 8,282 7,555 9,299
Interest-bearing loans and borrowings 34 34 35
Derivative financial instruments - 276 -
122,710 104,683 109,507
Non-current liabilities
Interest-bearing loans and borrowings 69,484 25,669 44,107
Provisions 7,540 - 8,200
Deferred taxation liabilities 16,274 12,669 14,986
93,298 38,338 67,293
Total liabilities 216,008 143,021 176,800
Net assets 244,576 222,636 237,627
Equity
Capital and reserves attributable to equity
shareholders of the Parent
Share capital 49,845 49,845 49,845
Share premium account 22,695 22,695 22,695
Own shares (919) (2,470) (2,359)
Capital redemption reserve 75,394 75,394 75,394
Consolidation reserve (213,067) (213,067) (213,067)
Hedging reserve 586 (206) 386
Retained earnings 308,569 288,894 303,274
Equity attributable to equity shareholders
of the Parent 243,103 221,085 236,168
Non-controlling interests 1,473 1,551 1,459
Total equity 244,576 222,636 237,627
* The comparatives have been restated as a result of a
reassessment of the fair value of assets and liabilities acquired
(Note 11
Condensed Consolidated Cash Flow Statement
for the half year ended 30 June 2018
Half year ended Year ended
June December
2018 2017 2017
GBP'000 GBP'000 GBP'000
Cash flows from operating activities
Profit for the financial period 26,177 23,652 42,126
Income tax expense 6,350 5,477 9,925
Profit before tax 32,527 29,129 52,051
Adjustments for:
Depreciation 7,427 6,438 13,314
Amortisation 717 501 1,142
Gain on sale of property, plant and equipment (954) (870) (948)
Share-based payment expense 534 736 2,382
Financial income and expenses (net) 986 703 1,388
Operating cash flow before changes in
working capital 41,237 36,637 69,329
(Increase) / decrease in trade and other
receivables (26,729) (24,569) 5,334
Increase in inventories (7,045) (1,469) (4,252)
Increase / (decrease) in trade and other
payables 14,830 14,842 (320)
Operational restructuring costs paid (917) - (1,217)
Acquisition costs paid (594) - (193)
Cash generated from operations 20,782 25,441 68,681
Financial expenses paid (707) (513) (911)
Income tax paid (6,057) (5,723) (10,465)
Net cash flow from operating activities 14,018 19,205 57,305
Cash flows from investing activities
Proceeds from sale of property, plant
and equipment 1,571 4,171 3,891
Acquisition of subsidiary undertaking - - (41,227)
Acquisition of property, plant and equipment (13,539) (7,922) (18,895)
Acquisition of intangible assets (557) (794) (1,750)
Net cash flow from investing activities (12,525) (4,545) (57,981)
Cash flows from financing activities
Payments to acquire own shares (1,210) (1,054) (1,068)
Payments in respect of share-based awards (3,683) - -
Net decrease in other debt and finance
leases - - (3,407)
Increase in borrowings 25,500 10,000 28,226
Equity dividends paid (21,344) (17,387) (24,105)
Net cash flow from financing activities (737) (8,441) (354)
Net increase / (decrease) in cash and
cash equivalents 756 6,219 (1,030)
Cash and cash equivalents at the beginning
of the period 19,845 20,681 20,681
Effect of exchange rate fluctuations 16 (38) 194
Cash and cash equivalents at the end
of the period 20,617 26,862 19,845
Condensed Consolidated Statement of Changes in Equity
for the half year ended 30 June 2018
Attributable to equity holders of the Company
Share Capital Consolid- Non-con-
Share premium Own redemption ation Hedging Retained trolling Total
capital account shares reserve reserve reserve earnings Total interests equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Current half
year
At 1 January
2018 49,845 22,695 (2,359) 75,394 (213,067) 386 303,274 236,168 1,459 237,627
Total
comprehensive
income /
(expense)
for the
period
Profit for the
financial
period
attributable
to
equity
shareholders
of
the Parent - - - - - - 26,158 26,158 19 26,177
Other
comprehensive
income /
(expense)
Foreign
currency
translation
differences - - - - - - (22) (22) (5) (27)
Effective
portion
of
changes in
fair
value of
cash flow
hedges - - - - - 500 - 500 - 500
Net change in
fair value of
cash flow
hedges
transferred
to the Income
Statement - - - - - (262) - (262) - (262)
Deferred tax
arising - - - - - (38) - (38) - (38)
Defined
benefit
plan
actuarial
gain - - - - - - 7,699 7,699 - 7,699
Deferred tax
arising - - - - - - (1,309) (1,309) - (1,309)
Total other
comprehensive
income - - - - - 200 6,368 6,568 (5) 6,563
Total
comprehensive
income for
the
period - - - - - 200 32,526 32,726 14 32,740
Transactions
with
owners,
recorded
directly
in equity
Contributions
by and
distributions
to owners
Share-based
payments - - - - - - (3,149) (3,149) - (3,149)
Deferred tax
on
share-based
payments - - - - - - (352) (352) - (352)
Corporation
tax
on share-
based
payments - - - - - - 264 264 - 264
Dividends to
equity
shareholders - - - - - - (21,344) (21,344) - (21,344)
Purchase of
own
shares - - (1,210) - - - - (1,210) - (1,210)
Disposal of
own
shares - - 2,650 - - - (2,650) - - -
Total
contributions
by
and
distributions
to owners - - 1,440 - - - (27,231) (25,791) - (25,791)
Total
transactions
with
owners of the
Company - - 1,440 - - 200 5,295 6,935 14 6,949
At 30 June
2018 49,845 22,695 (919) 75,394 (213,067) 586 308,569 243,103 1,473 244,576
Condensed Consolidated Statement of Changes in Equity
(continued)
for the half year ended 30 June 2018
Attributable to equity holders of the Company
Share Capital Consolid- Non-con-
Share premium Own redemption ation Hedging Retained trolling Total
capital account shares reserve reserve reserve earnings Total interests equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Prior half
year
At 1 January
2017 49,845 22,695 (3,622) 75,394 (213,067) 590 283,821 215,656 1,465 217,121
Total
comprehensive
income /
(expense)
for
the period
Profit for the
financial
period
attributable
to
equity
shareholders
of
the Parent - - - - - - 23,779 23,779 (127) 23,652
Other
comprehensive
income /
(expense)
Foreign
currency
translation
differences - - - - - - (277) (277) 213 (64)
Effective
portion
of
changes in
fair
value of
cash flow
hedges - - - - - (704) - (704) - (704)
Net change in
fair value
of cash flow
hedges
transferred
to the
Income
Statement - - - - - (251) - (251) - (251)
Deferred tax
arising - - - - - 159 - 159 - 159
Defined
benefit
plan
actuarial
loss - - - - - - (517) (517) - (517)
Deferred tax
arising - - - - - - 88 88 - 88
Total other
comprehensive
income /
(expense) - - - - - (796) (706) (1,502) 213 (1,289)
Total
comprehensive
income /
(expense)
for
the period - - - - - (796) 23,073 22,277 86 22,363
Transactions
with
owners,
recorded
directly
in equity
Contributions
by and
distributions
to owners
Share-based
payments - - - - - - 736 736 - 736
Deferred tax
on share-
based
payments - - - - - - 702 702 - 702
Corporation
tax
on share-
based
payments - - - - - - 155 155 - 155
Dividends to
equity
shareholders - - - - - - (17,387) (17,387) - (17,387)
Purchase of
own
shares - - (1,054) - - - - (1,054) - (1,054)
Disposal of
own
shares - - 2,206 - - - (2,206) - - -
Total
contributions
by
and
distributions
to
owners - - 1,152 - - - (18,000) (16,848) - (16,848)
Total
transactions
with
owners of the
Company - - 1,152 - - (796) 5,073 5,429 86 5,515
At 30 June
2017 49,845 22,695 (2,470) 75,394 (213,067) (206) 288,894 221,085 1,551 222,636
Condensed Consolidated Statement of Changes in Equity
(continued)
for the half year ended 30 June 2018
Attributable to equity holders of the Company
Share Capital Consolid- Non-con-
Share premium Own redemption ation Hedging Retained trolling Total
capital account shares reserve reserve reserve earnings Total interests equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Prior year
At 1 January
2017 49,845 22,695 (3,622) 75,394 (213,067) 590 283,821 215,656 1,465 217,121
Total
comprehensive
income /
(expense)
for the
year
Profit for the
financial
period
attributable
to
equity
shareholders
of
the Parent - - - - - - 42,503 42,503 (377) 42,126
Other
comprehensive
income /
(expense)
Foreign
currency
translation
differences - - - - - - (459) (459) 371 (88)
Effective
portion
of
changes in
fair
value of
cash flow
hedges - - - - - 146 - 146 - 146
Net change in
fair value of
cash flow
hedges
transferred
to
the Income
Statement - - - - - (385) - (385) - (385)
Deferred tax
arising - - - - - 35 - 35 - 35
Defined
benefit
plan
actuarial
gain - - - - - - 328 328 - 328
Deferred tax
arising - - - - - - (56) (56) - (56)
Total other
comprehensive
income /
(expense) - - - - - (204) (187) (391) 371 (20)
Total
comprehensive
income /
(expense)
for
the year - - - - - (204) 42,316 42,112 (6) 42,106
Transactions
with
owners,
recorded
directly in
equity
Contributions
by and
distributions
to
owners
Share-based
payments - - - - - - 2,382 2,382 - 2,382
Deferred tax
on
share-based
payments - - - - - - 885 885 - 885
Corporation
tax
on share-
based
payments - - - - - - 306 306 - 306
Dividends to
equity
shareholders - - - - - - (24,105) (24,105) - (24,105)
Purchase of
own
shares - - (1,068) - - - - (1,068) - (1,068)
Disposal of
own
shares - - 2,331 - - - (2,331) - - -
Total
contributions
by
and
distributions
to
owners - - 1,263 - - - (22,863) (21,600) - (21,600)
Total
transactions
with
owners of the
Company - - 1,263 - - (204) 19,453 20,512 (6) 20,506
At 31 December
2017 49,845 22,695 (2,359) 75,394 (213,067) 386 303,274 236,168 1,459 237,627
Notes to the Condensed Consolidated Financial Statements
for the half year ended 30 June 2018
1. Basis of preparation
Marshalls plc (the "Company") is a company domiciled in the
United Kingdom. The Condensed Consolidated Financial Statements of
the Company for the half year ended 30 June 2018 comprise the
Company and its subsidiaries (together referred to as the
"Group").
The Condensed Consolidated Financial Statements have been
prepared in accordance with the Disclosure Guidance and
Transparency Rules of the UK Financial Conduct Authority and the
requirements of IAS 34 "Interim Financial Reporting" as adopted by
the European Union ("EU").
The Condensed Consolidated Financial Statements do not
constitute statutory financial statements and do not include all
the information and disclosures required for full annual financial
statements. The Condensed Consolidated Half Year Financial
Statements were approved by the Board on 16 August 2018. The
Condensed Consolidated Half Year Financial Statements are not
statutory accounts as defined by Section 434 of the Companies Act
2006.
The Condensed Consolidated Financial Statements for the half
year ended 30 June 2018 and the comparative period have not been
audited. The Auditor has carried out a review of the Half Year
Financial Information and its report is set out on page 27.
The financial information for the year ended 31 December 2017
has been extracted from the annual Financial Statements, included
in the Annual Report 2017, which has been filed with the Registrar
of Companies. The report of the Auditor was: (i) unqualified; (ii)
did not include a reference to any matters to which the Auditor
drew attention by way of emphasis without qualifying its report;
and (iii) did not contain a statement under Section 498 (2) and (3)
of the Companies Act 2006.
The annual Financial Statements of the Group are prepared in
accordance with International Financial Reporting Standards
("IFRSs") as adopted by the EU. As required by the Disclosure
Guidance and Transparency Rules of the UK Financial Conduct
Authority and, other than in respect of IFRS 9 and IFRS 15 which
apply from 1 January 2018, the condensed set of Financial
Statements has been prepared applying the accounting policies and
presentation that were applied in the preparation of the Company's
published Consolidated Financial Statements for the year ended 31
December 2017.
The Condensed Consolidated Half Year Financial Statements are
prepared on the historical cost basis except that the following
assets and liabilities are stated at their fair value: derivative
financial instruments and liabilities for cash settled share-based
payments.
The preparation of financial statements in conformity with
adopted IFRSs requires management to make judgements, estimates and
assumptions that affect the application of policies and the
reported amounts of assets and liabilities, income and expenses.
The estimates and associated assumptions are based on historical
experience and various other factors that are believed to be
reasonable under the circumstances, the results of which form the
basis of making the judgements about carrying values of assets and
liabilities that are not readily apparent from other sources.
Actual results may differ from these estimates. In preparing these
Condensed Consolidated Half Year Financial Statements, the
significant judgements made by management in applying the Group's
accounting policies and the key sources of estimation uncertainty
were the same as those that applied to the Consolidated Financial
Statements of the Group for the year ended 31 December 2017.
The estimates and underlying assumptions are reviewed on an
ongoing basis. Revisions to accounting estimates are recognised in
the period in which the estimate is revised if the revision affects
only that period, or in the period of the revision and future
periods if the revision affects both current and future
periods.
Details of the Group's funding position are set out in Note 13
and are subject to normal covenant arrangements. The Group's
on-demand overdraft facility is reviewed on an annual basis and the
current arrangements were renewed and signed on 9 August 2018.
Management believes that there are sufficient unutilised facilities
held which mature after 12 months. The Group's performance is
dependent on economic and market conditions, the outlook for which
is difficult to predict. Based on current expectations, the Group's
cash forecasts continue to meet half year and year end bank
covenants and there is adequate headroom that is not dependent on
facility renewals. After considering relevant uncertainties, the
Directors believe that the Group is well placed to manage its
business risks successfully. Accordingly, they continue to adopt
the going concern basis in preparing the Condensed Consolidated
Half Year Financial Statements.
2. Accounting policies
IFRS 9, "Financial Instruments" and IFRS 15 "Revenue from
Contracts with Customers", have been applied from 1 January 2018.
The application of both Standards has not had a material impact on
the Group's financial reporting. The Group expects to adopt IFRS 16
"Leases", with effect from 1 January 2019. The Group is currently
assessing the impact of IFRS 16, which is expected to have a
significant impact on the consolidated results of the Group. It is
not practicable to provide a reasonable estimate of the financial
effect until the Directors complete the review.
Except as stated below, the accounting policies have been
applied consistently throughout the Group for the purposes of these
Condensed Consolidated Half Year Financial Statements and are also
set out on the Company's website (www.marshalls.co.uk). The
Condensed Consolidated Half Year Financial Statements are presented
in Sterling, rounded to the nearest thousand.
The following new accounting policies have been applied from 1
January 2018.
IFRS 9, "Financial Instruments"
IFRS 9 replaces the provisions of IAS 39 that relate to
recognition, classification and measurement of financial assets and
financial liabilities, de-recognition of financial instruments,
impairment of financial assets and hedge accounting. The adoption
of IFRS 9, "Financial Instruments" from 1 January 2018 resulted in
changes in accounting policies, however, no adjustments were
required to the amounts recognised in the financial statements in
previous periods. The new accounting policies are set out
below.
(a) Classification and measurement
On 1 January 2018, the Group has classified its financial
instruments in the appropriate IFRS 9 categories.
The derivative financial instruments designated as cash flow
hedges and fair value hedges under IAS 39 at 31 December 2017
continue to qualify for hedge accounting under IFRS 9 at 1 January
2018 and are, therefore, treated as continuing hedges.
(b) Impairment of financial assets
The Group has one type of financial asset that is subject to
IFRS 9's new expected credit loss model:
-- trade and other receivables
Trade and other receivables do not contain a significant
financing element and therefore expected credit losses are measured
using the simplified approach permitted by IFRS 9, which requires
expected lifetime losses to be recognised from the initial
recognition of the receivables.
While cash and cash equivalents are also subject to the
impairment requirements of IFRS 9, the identified impairment loss
was immaterial.
There was no IFRS 9 impact on retained earnings at 1 January
2018.
IFRS 15, "Revenue from Contracts with Customers"
IFRS 15 establishes a single comprehensive model for entities to
use in accounting for revenue arising from contracts with
customers. IFRS 15 supersedes the revenue recognition guidance
within IAS 18 "Revenue" and the related interpretations. The Group
adopted IFRS 15 on 1 January 2018. Comparative information has not
been restated as the impact on prior periods is not material.
IFRS 15 provides a single, principles-based, five-step model to
be applied to all sales contracts, based on the transfer of control
of goods and services to customers, and it replaces the separate
model for goods and services of IAS 18 "Revenue".
Revenue represents income derived from contracts for the
provision of goods and services by the Company and its subsidiary
undertakings to customers in exchange for consideration in the
ordinary course of the Group's activities.
Upon approval by the parties to a contract, the contract is
assessed to identify each promise to transfer either a distinct
good or service, or a series of distinct goods or services, that
are substantially the same and have the same pattern of transfer to
the customer. Goods and services are distinct and accounted for as
separate performance obligations in the contract if the customer
can benefit from them either on their own or together with other
resources that are readily available to the customer and they are
separately identifiable in the contract.
The Group's revenues are primarily earned from the sale of goods
and revenue is recognised when the performance obligation in the
contracts with customers is satisfied, typically on delivery of
goods to customers.
At the start of the contract the total transaction price is
estimated as the amount of consideration to which the Group expect
to be entitled in exchange for transferring the promised goods and
services to the customer, excluding sales taxes. Any variable
consideration is included based on the expected value, or most
likely amount, only to the extent that it is highly probable that
there will not be a reversal in the amount of revenue recognised.
Total transaction price is allocated to the performance obligations
identified in the contract in proportion to their relative
standalone selling prices.
3. Alternative performance measures
The Group used alternative performance measures ("APMs") which
are not defined or specified under IFRS. The Group believes that
their APMs, which are not considered to be a substitute for IFRS
measures, provide additional helpful information. APMs are
consistent with how business performance is planned, reported and
assessed internally by management and the Board and provide more
meaningful comparative information.
EBITA and EBITDA
EBITA represents earnings before interest, tax and the
amortisation of intangibles. This is a component of the ROCE
calculation. EBITDA is calculated by adding back depreciation to
EBITA.
June June December Increase
2018 2017 2017
GBP'000 GBP'000 GBP'000 %
EBITDA 41,657 36,771 67,895 13
Depreciation (7,427) (6,438) (13,314)
EBITA 34,230 30,333 54,581
Amortisation of intangible
assets (717) (501) (1,142)
Operating profit 33,513 29,832 53,439 12
ROCE
Reported ROCE is defined as EBITA divided by shareholders funds
plus net debt / (cash).
June June December
2018 2017 2017
GBP'000 GBP'000 GBP'000
EBITA - half year ended 30 June 34,230 30,333 30,333
EBITA - half year ended 31 December 24,248 22,183 24,248
EBITA - year ended 30 June 58,478 52,516 54,581
Shareholders funds 244,576 222,636 237,627
Net debt / (cash) 48,901 (1,159) 24,297
293,477 221,477 261,924
Reported ROCE 20.0% 23.7% 20.8%
4. Segmental analysis
IFRS 8, "Operating Segments" requires operating segments to be
identified on the basis of discrete financial information about
components of the Group that are regularly reviewed by the Group's
Chief Operating Decision Maker ("CODM") to allocate resources to
the segments and to assess their performance. As far as Marshalls
plc is concerned, the CODM is regarded as being the Executive
Directors. The Directors have concluded that the detailed
requirements of IFRS 8 support the reporting of the Group's
Landscape Products business as a reportable segment, which includes
the UK operations of the Marshalls Landscape Products hard
landscaping business, servicing both the UK Domestic and the UK
Public Sector and Commercial end markets. Financial information for
Landscape Products is reported to the Group's CODM for the
assessment of segmental performance and to facilitate resource
allocation.
The Landscape Products reportable segment operates a national
manufacturing plan that is structured around a series of production
units throughout the UK, in conjunction with a single logistics and
distribution operation. A national planning process supports sales
to both of the key end markets, namely the UK Domestic and UK
Public Sector and Commercial end markets, and the operating assets
produce and deliver a range of broadly similar products that are
sold into each of these end markets. Within the Landscape Products
operating segment, the focus is on the one integrated production,
logistics and distribution network supporting both end markets.
Following its acquisition, the CPM business has been included
within the Landscape Products operating segment.
Included in "Other" are the Group's Street Furniture, Mineral
Products, Premier Mortars and International operations, which do
not currently meet the IFRS 8 reporting requirements. The
accounting policies of the Landscape Products operating segment are
the same as the Group's accounting policies. Segment profit
represents the profit earned without allocation of certain central
administration costs that are not capable of allocation. Centrally
administered overhead costs that relate directly to the reportable
segment are included within the segment's results.
Segment revenues and results
Half year ended June Half year ended June Year ended December
2018 2017 2017
Landscape Landscape Landscape
Products Other Total Products Other Total Products Other Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
External
revenue 197,545 48,745 246,290 172,140* 49,408* 221,548 339,655 94,622 434,277
Inter-segment
revenue (105) (1,845) (1,950) (130)* (2,287)* (2,417) (226) (3,857) (4,083)
Total revenue 197,440 46,900 244,340 172,010 47,121 219,131 339,429 90,765 430,194
Segment
operating
profit 35,489 1,010 36,499 31,676* 2,099* 33,775 56,104 1,873 57,977
Unallocated
administration
costs (2,986) (3,943) (4,538)
Operating
profit 33,513 29,832 53,439
Finance
charges
(net) (986) (703) (1,388)
Profit before
tax 32,527 29,129 52,051
Taxation (6,350) (5,477) (9,925)
Profit after
tax 26,177 23,652 42,126
* Following a change to the way in which information is reported
internally, the June 2017 comparative figures have been restated to
ensure consistent classification with the analysis reported for the
half year ended 30 June 2018.
June June December
Segment assets 2018 2017 2017
GBP'000 GBP'000 GBP'000
Fixed assets and inventory:
Landscape Products 200,973 162,369* 182,391
Other 57,556 55,525* 64,561
Total segment fixed assets and
inventory 258,529 217,894 246,952
Unallocated assets 202,055 147,763 167,475**
Consolidated total assets 460,584 365,657 414,427
* Following a change to the way in which information is reported
internally, the June 2017 comparative figures have been restated to
ensure consistent classification with the analysis reported for the
half year ended 30 June 2018.
** The comparatives have been restated as a result of a
reassessment of the fair value of assets and liabilities acquired
(Note 11).
For the purpose of monitoring segment performance and allocating
performance between segments, the Group's CODM monitors the
property, plant and equipment and inventory. Assets used jointly by
reportable segments are not allocated to individual reportable
segments.
Other segment information
Depreciation and amortisation Fixed asset additions
Half year ended Year ended Half year ended Year ended
June December June December
2018 2017 2017 2018 2017 2017
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Landscape Products 5,816 5,111* 10,878 11,376 6,749* 17,041
Other 2,328 1,828* 3,578 713 2,078* 5,445
8,144 6,939 14,456 12,089 8,827 22,486
*Following a change to the way in which information is reported
internally, the June 2017 comparative figures have been restated to
ensure consistent classification with the analysis reported for the
half year ended 30 June 2018.
Geographical destination of revenue
Half year Year ended
ended June December
2018 2017 2017
GBP'000 GBP'000 GBP'000
United Kingdom 230,784 205,670 407,215
Rest of the World 13,556 13,461 22,979
244,340 219,131 430,194
The Group's revenue is subject to seasonal fluctuations
resulting from demand from customers. In particular, demand is
higher in the summer months. The Group manages the seasonal impact
through the use of a seasonal working capital facility.
5. Net operating costs
Half year Year ended
ended June December
2018 2017 2017
GBP'000 GBP'000 GBP'000
Raw materials and consumables 81,871 79,779 151,343
Changes in inventories of finished
goods and work
in progress 6,241 2,019 7,231
Personnel costs 57,633 51,086 100,811
Depreciation 7,427 6,438 13,314
Amortisation of intangible assets 717 501 1,142
Own work capitalised (1,494) (666) (1,919)
Other operating costs 59,483 51,785 106,569
Restructuring costs 917 1,003 1,217
Acquisition costs - - 837
Operating costs 212,795 191,945 380,545
Other operating income (1,014) (1,776) (2,842)
Net gain on asset and property
disposals (954)* (870) (948)
Net operating costs 210,827 189,299 376,755
* This reflects the proceeds of the sale of a domain name and is
net of the associated digital strategy costs.
6. Financial expenses and income
Half year Year ended
ended June December
2018 2017 2017
GBP'000 GBP'000 GBP'000
(a) Financial expenses
Net interest expense on defined
benefit pension
scheme 278 187 377
Interest expense on bank loans,
overdrafts and loan
notes 705 513 1,005
Finance lease interest expense 3 3 6
986 703 1,388
Net interest expense on the defined benefit pension scheme is
disclosed net of Company recharges.
7. Income tax expense
Half year Year ended
ended June December
2018 2017 2017
GBP'000 GBP'000 GBP'000
Current tax expense
Current year 5,624 6,363 11,554
Adjustments for prior years (320) (289) (732)
5,304 6,074 10,822
Deferred taxation expense
Origination and reversal
of temporary
differences:
Current year 998 (478) (797)
Adjustments for prior years 48 (119) (100)
Total tax expense 6,350 5,477 9,925
Year ended
Half year ended June December
2018 2017 2017
% GBP'000 % GBP'000 % GBP'000
Reconciliation of effective
tax rate
Profit before tax 100.0 32,527 100.0 29,129 100.0 52,051
Tax using domestic corporation
tax rate 19.0 6,180 19.3 5,608 19.3 10,020
Impact of capital allowances
in excess of depreciation 0.1 27 0.4 136 0.3 184
Short-term timing differences 1.0 328 1.1 310 1.2 630
Adjustment to tax charge in
prior period (1.0) (320) (1.1) (289) (1.4) (732)
Expenses not deductible for
tax purposes (2.8) (911) 1.1 309 1.4 720
Corporation tax charge for the
year 16.3 5,304 20.8 6,074 20.8 10,822
Impact of capital allowances
in excess of depreciation 0.3 82 (1.9) (545) (1.2) (618)
Short-term timing differences 2.6 860 0.1 30 (0.2) (103)
Pension scheme movements - - 0.1 23 (0.1) (77)
Other items - (3) 1.8 509 1.0 532
Adjustment to tax charge in
prior period 0.1 48 (0.4) (119) (0.2) (100)
Impact of the change in the
rate of corporation tax on deferred
taxation 0.2 59 (1.7) (495) (1.0) (531)
Total tax charge for the year 19.5 6,350 18.8 5,477 19.1 9,925
The net amount of deferred taxation credited to the Consolidated
Statement of Comprehensive Income in the period was GBP1,347,000
debit (30 June 2017: GBP247,000 credit; 31 December 2017: GBP21,000
debit). The effective tax rate used is management's best estimate
of the average annual effective tax rate expected for the full
year, applied to pre-tax income for the 6-month period.
8. Earnings per share
Basic earnings per share of 13.24 pence (30 June 2017: 12.04
pence; 31 December 2017: 21.52 pence) per share is calculated by
dividing the profit attributable to Ordinary Shareholders for the
financial period after adjusting for non-controlling interests of
GBP26,158,000 (30 June 2017: GBP23,779,000; 31 December 2017:
GBP42,503,000) by the weighted average number of shares in issue
during the period of 197,619,775 (30 June 2017: 197,440,624; 31
December 2017: 197,518,109).
Profit attributable to Ordinary Shareholders
Half year Year ended
ended June December
2018 2017 2017
GBP'000 GBP'000 GBP'000
Profit for the financial period 26,177 23,652 42,126
Result attributable to non-controlling interests (19) 127 377
Profit attributable to Ordinary Shareholders 26,158 23,779 42,503
Weighted average number of Ordinary Shares
Half year Year ended
ended June December
2018 2017 2017
Number Number Number
Number of issued Ordinary Shares 199,378,755 199,378,755 199,378,755
Effect of shares transferred into employee
benefit trust (1,758,980) (1,938,131) (1,860,646)
Weighted average number of Ordinary Shares 197,619,775 197,440,624 197,518,109
Diluted earnings per share of 13.13 pence (30 June 2017: 11.94
pence; 31 December 2017: 21.37 pence) per share is calculated by
dividing the profit for the financial period, after adjusting for
non-controlling interests of GBP26,158,000 (30 June 2017:
GBP23,779,000; 31 December 2017: GBP42,503,000), by the weighted
average number of shares in issue during the period of 197,619,775
(30 June 2017: 197,440,624; 31 December 2017: 197,518,109), plus
potentially dilutive shares of 1,609,647 (30 June 2017: 1,722,526;
31 December 2017: 1,384,707), which totals 199,229,422 (30 June
2017: 199,163,150 31 December 2017: 198,902,816).
Weighted average number of Ordinary Shares (diluted)
Half year Year ended
ended June December
2018 2017 2017
Number Number Number
Weighted average number of Ordinary Shares 197,619,775 197,440,624 197,518,109
Dilutive shares 1,609,647 1,722,526 1,384,707
Weighted average number of Ordinary Shares
(diluted) 199,229,422 199,163,150 198,902,816
9. Dividends
After the balance sheet date, the following dividends were
proposed by the Directors. The dividends have not been provided and
there were no income tax consequences.
Pence per qualifying Half year Year ended
share ended June December
2018 2017 2017
GBP'000 GBP'000 GBP'000
2018 interim 4.00 7,905 - -
2017 supplementary 4.00 - - 7,904
2017 final 6.80 - - 13,436
2017 interim 3.40 - 6,718 6,718
7,905 6,718 28,058
The following dividends were approved by the shareholders in the
period:
Pence per qualifying Half year Year ended
share ended June December
2018 2017 2017
GBP'000 GBP'000 GBP'000
2017 supplementary 4.00 7,905 - -
2017 final 6.80 13,439 - -
2017 interim 3.40 - - 6,718
2016 supplementary 3.00 - 5,927 5,927
2016 final 5.80 - 11,460 11,460
21,344 17,387 24,105
The 2017 final dividend of 6.80 pence per qualifying Ordinary
Share alongside a supplementary dividend of 4.00 pence per
qualifying Ordinary Share (total value GBP21,344,000) was paid on
29 June 2018 to shareholders registered at the close of business on
8 June 2018.
The Board has declared an interim dividend of 4.00 pence (June
2017: 3.40 pence) per share. This dividend will be paid on 5
December 2018 to shareholders on the register at the close of
business on 19 October 2018. The ex-dividend date will be 18
October 2018.
10. Employee benefits
The Company sponsors a funded defined pension scheme in the UK
(the "Scheme"). The Scheme is administered within a trust which is
legally separate from the Company. The Trustee Board is appointed
by both the Company and the Scheme's membership and acts in the
interests of the Scheme and all relevant stakeholders, including
the members and the Company. The Trustee is also responsible for
the investment of the Scheme's assets.
The defined benefit section of the Scheme provides pension and
lump sums to members on retirement and to dependants on death. The
defined benefit section closed to future accrual of benefits on 30
June 2006 with then active members becoming entitled to a deferred
pension. Members no longer pay contributions to the defined benefit
section. Company contributions to the defined benefit section after
this date are used to fund any deficit in the Scheme and the
expenses associated with administering the Scheme as determined by
regular actuarial valuations.
The Trustee is required to use prudent assumptions to value the
liabilities and costs of the Scheme whereas the accounting
assumptions must be best estimates.
The defined benefit section of the Scheme poses a number of
risks to the Company, for example longevity risk, investment risk,
interest rate risk, inflation risk and salary risk. The Trustee is
aware of these risks and uses various techniques to control them.
The Trustee has a number of internal control policies, including a
risk register, which are in place to manage and monitor the various
risks it faces. The Trustee's investment strategy incorporates the
use of liability-driven investments ("LDIs") to minimise
sensitivity of the actuarial funding position to movements in
interest rates and inflation rates.
The defined benefit section of the Scheme is subject to regular
actuarial valuations, which are usually carried out every 3 years.
The next actuarial valuation is expected to be carried out with an
effective date of 5 April 2018. These actuarial valuations are
carried out in accordance with the requirements of the Pensions Act
2004 and so include deliberate margins for prudence. This contrasts
with these accounting disclosures which are determined using best
estimate assumptions.
A formal actuarial valuation was carried out as at 5 April 2015.
The results of that valuation have been projected to 30 June 2018
by a qualified independent actuary. The figures in the following
disclosure were measured using the projected unit method.
The amounts recognised in the Consolidated Balance Sheet were as
follows:
June December
2018 2017 2017
GBP'000 GBP'000 GBP'000
Present value of Scheme liabilities (342,992) (353,971) (350,554)
Fair value of Scheme assets 354,490 357,593 354,681
Net amount recognised (before any adjustment
for deferred tax) 11,498 3,622 4,127
The current and past service costs, settlements and
curtailments, together with the net interest expense for the
period, are included in the employee benefits expense in the
Statement of Comprehensive Income. Remeasurements of the net
defined benefit liability are included in other comprehensive
income.
Half year Year ended
ended June December
2018 2017 2017
GBP'000 GBP'000 GBP'000
Service cost:
Net interest expense recognised in the Consolidated
Income Statement 328 137 477
Remeasurements of the net liability:
Return on scheme assets (excluding amount included
in interest
expense) (762) (507) (2,819)
(Gain) / loss arising from changes in financial
assumptions (6,937) 5,565 10,158
Gain arising from changes in demographic assumptions - (3,628) (7,667)
Experience gain - (913) -
(Credit) / charge recorded in other comprehensive
income (7,699) 517 (328)
Total defined benefit (credit) / charge (7,371) 654 149
The principal actuarial assumptions used were:
June December
2018 2017 2017
Liability discount rate 2.60% 2.55% 2.50%
Inflation assumption - RPI 3.10% 3.15% 3.15%
Inflation assumption - CPI 2.10% 2.15% 2.15%
Rate of increase in salaries n/a n/a n/a
Revaluation of deferred pensions 2.10% 2.15% 2.15%
Increases for pensions in payment:
CPI pension increases (maximum 5%
per annum) 2.10% 2.15% 2.15%
CPI pension increases (maximum 5%
per annum,
minimum 3% per annum) 3.20% 3.10% 3.20%
CPI pension increases (maximum 3%
per annum) 1.90% 2.05% 1.95%
Proportion of employees opting for
early retirement 0% 0% 0%
Proportion of employees commuting
pension for cash 50.0% 50% 50.0%
Mortality assumption - before retirement Same as post Same as post Same as post
retirement retirement retirement
Mortality assumption - after retirement S2PMA tables S2PMA tables S2PMA tables
(males)
Loading 105% 105% 105%
Projection basis Year of birth Year of birth Year of birth
CMI_2016 1.0% CMI_2016 1.0% CMI_2016 1.0%
Mortality assumption - after retirement S2PFA tables S2PFA tables S2PFA tables
(females)
Loading 105% 105% 105%
Projection basis Year of birth Year of birth Year of birth
CMI_2016 1.0% CMI_2016 1.0% CMI_2016 1.0%
Future expected lifetime of current
pensioner at age 65:
Male aged 65 at year end 86.2 86.5 86.2
Female aged 65 at year end 88.0 88.4 88.0
Future expected lifetime of future
pensioner at age 65:
Male aged 45 at year end 87.2 87.6 87.2
Female aged 45 at year end 89.2 89.6 89.2
11. Acquisition of subsidiary
On 19 October 2017, Marshalls Mono Limited acquired 100 per cent
of the issued share capital of CPM Group Limited, a precast
concrete manufacturer which specialises in underground water
management solutions.
Initial cash consideration paid to the vendors was GBP26,272,000
and, in addition, a further GBP12,000,000 was paid into an escrow
account in relation to certain ongoing legal and regulatory matters
identified during the course of due diligence carried out prior to
concluding the acquisition. Provisions of GBP11,840,000 were
recorded at the date of acquisition, for the estimated liabilities
arising from concluding these ongoing matters. The Group has a
right of reimbursement of amounts held in an escrow account to the
extent that any liability crystallises in respect of these ongoing
legal and regulatory matters to enable the Group to settle these
liabilities, up to the full value of the GBP12,000,000 held in
escrow and consequently a reimbursement asset of GBP12,000,000 was
recognised within other debtors. To the extent that any liabilities
arising from these ongoing legal and regulatory matters are
resolved at a lower amount than the escrow balances, the excess
balance remaining in escrow is payable to the vendors as additional
consideration.
As required under the terms of the sale and purchase agreement,
a net working capital review was undertaken in the period.
Adjustments were agreed with the vendor which resulted in a
reimbursement of GBP2,163,000 to Marshalls Mono Limited during the
period to 30 June 2018. This amount covered both the required
working capital adjustment and monies that were required to settle
certain of the legal and regulatory matters which crystallised
during the period.
In addition, and as part of the same review required under the
terms of the sale and purchase agreement, an amount of GBP1,419,000
was paid to the vendors from the escrow account during the
period.
As part of the ongoing review of the fair value of assets and
liabilities acquired, adjustments were made to certain accruals and
provisions during the period. These had the effect of increasing
the fair value of the net assets acquired under the acquisition by
GBP1,019,000, which has given rise to a reduction in goodwill of a
similar amount. Goodwill, trade and other payables and provisions
have been restated accordingly in the reported 31 December 2017
balance sheet.
12. Analysis of net debt
1 January Cash flow Other changes 30 June
2018 2018
GBP'000 GBP'000 GBP'000 GBP'000
Cash at bank and in hand 19,845 756 16 20,617
Debt due after 1 year (43,883) (25,443) 70 (69,256)
Finance leases (259) - (3) (262)
(24,297) (24,687) 83 (48,901)
Reconciliation of net cash flow to movement in net debt
Half year ended Year ended
June December
2018 2017 2017
GBP'000 GBP'000 GBP'000
Net increase in cash and cash equivalents 756 6,219 1,925
Cash inflow from increase in debt and lease
financing (25,443) (10,000) (24,819)
On acquisition of subsidiary undertaking - - (6,362)
Effect of exchange rate fluctuations 83 (473) (454)
Movement in net debt in the period (24,604) (4,254) (29,710)
Net (debt) / cash at the beginning of the
period (24,297) 5,413 5,413
Net (debt) / cash at the end of the period (48,901) 1,159 (24,297)
13. Borrowing facilities
The total bank borrowing facilities at 30 June 2018 amounted to
GBP125.0 million (30 June 2017: GBP105.0 million; 31 December 2017:
GBP115.0 million), of which GBP55.7 million (30 June 2017: GBP79.6
million; 31 December 2017: GBP71.1 million) remained
unutilised.
These figures include an additional seasonal working capital
facility of GBP10.0 million available between 1 February and 31
August each year.
The undrawn facilities available at 30 June 2018, in respect of
which all conditions precedent had been met, were as follows:
June December
2018 2017 2017
GBP'000 GBP'000 GBP'000
Committed:
- Expiring in more than 2 years but not more
than 5 years 30,379 54,593 50,617
- Expiring in 1 year or less 365 - 5,500
Uncommitted:
- Expiring in 1 year or less 25,000 25,000 15,000
55,744 79,593 71,117
The total borrowing facilities at 16 August 2018 amounted to
GBP125.0 million. On 9 August 2018, the Group renewed its
short-term working capital facilities of GBP25.0 million and took
out an additional committed facility of GBP20.0 million with a 2023
maturity date. The committed facilities are all revolving credit
facilities with interest charged at variable rates based on LIBOR.
The Group's bank facilities continue to be aligned with the current
strategy to ensure that headroom against available facilities
remains at appropriate levels.
The maturity profile of borrowing facilities is structured to
provide balanced, committed and phased medium-term debt. Following
the recent refinancing of bank facilities, the current facilities
are set out as follows:
Facility Cumulative
facility
GBP'000 GBP'000
Committed facilities:
Q3: 2023 20,000 20,000
Q3: 2022 20,000 40,000
Q3: 2021 20,000 60,000
Q3: 2020 20,000 80,000
Q3: 2019 20,000 100,000
On-demand facilities:
Available all year 15,000 115,000
Seasonal (February to August inclusive) 10,000 125,000
14. Fair values of financial assets and financial
liabilities
A comparison by category of the book values and fair values of
the financial assets and liabilities of the Group at 30 June 2018
is shown below:
June June December
2018 2017 2017*
Book Fair Book Fair Book Fair
amount value amount value amount value
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Trade and other receivables 84,713 84,713 70,217 70,217 62,787 62,787
Cash and cash equivalents 20,617 20,617 26,862 26,862 19,845 19,845
Bank loans (69,256) (70,639) (25,407) (24,322) (43,883) (42,836)
Finance lease liabilities (262) (280) (296) (317) (259) (280)
Trade and other payables (100,260) (100,260) (81,638) (81,638) (94,758) (95,777)
Interest rate swaps,
forward contracts and
fuel hedges 654 654 (276) (276) 447 447
Financial instrument
assets and liabilities
- net (63,794) (10,538) (55,821)
Non-financial instrument
assets and liabilities
- net 308,370 233,174 293,448
244,576 222,636 237,627
* The comparatives have been restated a result of the
reassessment of the Fair Value of asset and liabilities acquired
(Note 11).
Estimation of fair values
The following summarises the major methods and assumptions used
in estimating the fair values of financial instruments reflected in
the table.
(a) Derivatives
Derivative contracts are either marked to market using listed
market prices or by discounting the contractual forward price at
the relevant rate and deducting the current spot rate. For interest
rate swaps broker quotes are used.
(b) Interest-bearing loans and borrowings
Fair value is calculated based on the expected future principal
and interest cash flows discounted at the market rate of interest
at the balance sheet date.
(c) Finance lease liabilities
The fair value is estimated as the present value of future cash
flows, discounted at market interest rates for homogeneous lease
agreements. The estimated fair values reflect changes in interest
rates.
(d) Trade and other receivables / payables
For receivables / payables with a remaining life of less than 1
year, the notional amount is deemed to reflect the fair value. All
other receivables / payables are discounted to determine the fair
value.
(e) Fair value hierarchy
The table below analyses financial instruments, measured at fair
value, into a fair value hierarchy based on the valuation
techniques used to determine fair value.
-- Level 1: quoted prices (unadjusted) in active markets for
identical assets or liabilities.
-- Level 2: inputs other than quoted prices included within
Level 1 that are observable for the asset or liability, either
directly (i.e. as prices) or indirectly (i.e. derived from
prices).
-- Level 3: inputs for the asset or liability that are not based
on observable market data (unobservable inputs).
Level 1 Level 2 Level 3 Total
GBP'000 GBP'000 GBP'000 GBP'000
30 June 2018
Derivative financial assets - 654 - 654
30 June 2017
Derivative financial liabilities - (276) - (276)
31 December 2017
Derivative financial assets - 447 - 447
15. Principal risks and uncertainties
The principal risks and uncertainties that could impact the
Group for the remainder of the current financial year are those
detailed on pages 20 to 24 of the 2017 Annual Report. These cover
the strategic, financial and operational risks and have not changed
during the period.
Strategic risks include those relating to general economic
conditions, Government policy, the actions of customers, suppliers
and competitors, and also weather conditions. Cyber risks within
the wider market is also an increasing risk for the Group and an
area of major focus. The Group also continues to be subject to
various financial risks in relation to access to funding and to the
pension scheme, principally the volatility of the discount (AA
corporate bond) rate, any downturn in the performance of equities
and increases in the longevity of members. The other main financial
risks arising from the Group's financial instruments are liquidity
risk, interest rate risk, credit risk and foreign currency
risk.
External operational risks include the weather, political and
economic conditions, the potential impact of Brexit, the effect of
legislation or other regulatory actions, the actions of
competitors, raw material prices and threats from cyber security,
new business strategies, acquisitions and the integration of
CPM.
The Group continues to monitor all these risks and pursue
policies that take account of, and mitigate, the risks where
possible.
Responsibility Statement
The Directors who held office at the date of approval of these
Financial Statements confirm that to the best of their
knowledge:
-- the Condensed Consolidated Half Year Financial Statements
have been prepared in accordance with IAS 34 "Interim Financial
Reporting" as adopted by the European Union; and
-- the Half Year Management Report includes a fair review of the information required by:
(a) DTR 4.2.7R of the Disclosure Guidance and Transparency Rules, being an indication of important events that have occurred during the half year ended 30 June 2018 and their impact on the Condensed Consolidated Half Year Financial Statements, and a description of the principal risks and uncertainties for the remaining second half of the year; and
(b) DTR 4.2.8R of the Disclosure Guidance and Transparency
Rules, being related party transactions that have taken place in
the half year ended 30 June 2018 and that have materially affected
the financial position or performance of the entity during that
period, and any changes in the related party transactions described
in the last Annual Report that could do so.
The Board
The Directors serving during the half year ended 30 June 2018
were as follows:
Vanda Murray Chair of the Board (appointed 9 May 2018)
Andrew Allner Chair of the Board (retired 9 May 2018)
Janet Ashdown Senior Non-Executive Director
Jack Clarke Group Finance Director
Martyn Coffey Chief Executive
Tim Pile Non-Executive Director
Graham Prothero Non-Executive Director
The responsibilities of the Directors during their period of
service were as set out on pages 44 and 45 of the 2017 Annual
Report.
By order of the Board
Cathy Baxandall
Group Company Secretary
16 August 2018
Cautionary statement
This Half Year Report contains certain forward-looking
statements with respect to the financial condition, results,
operations and business of Marshalls plc. These statements and
forecasts involve risk and uncertainty because they relate to
events and depend upon circumstances that will occur in the future.
There are a number of factors that could cause actual results or
developments to differ materially from those expressed or implied
by these forward-looking statements and forecasts. Nothing in this
Half Year Report should be construed as a profit forecast.
Directors' liability
Neither the Company nor the Directors accept any liability to
any person in relation to this Half Year Report except to the
extent that such liability could arise under English law.
Accordingly, any liability to a person who has demonstrated
reliance on any untrue or misleading statement or omission shall be
determined in accordance with Section 90A of the Financial Services
and Markets Act 2000.
Independent Review Report to Marshalls plc
Introduction
We have been engaged by the Company to review the condensed set
of Financial Statements in the Half Year Financial Report for the 6
months ended 30 June 2018, which comprises the Condensed
Consolidated Income Statement, the Condensed Consolidated Statement
of Comprehensive Income, the Condensed Consolidated Balance Sheet,
the Condensed Consolidated Cash Flow Statement, the Condensed
Consolidated Statement of Changes in Equity and related Notes 1 to
14. We have read the other information contained in the Half Year
Financial Report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the condensed set of Financial Statements.
This report is made solely to the Company in accordance with
International Standard on Review Engagements (UK and Ireland) 2410
"Review of Interim Financial Information Performed by the
Independent Auditor of the Entity" issued by the Auditing Practices
Board. Our work has been undertaken so that we might state to the
Company those matters we are required to state to it in an
independent review report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility
to anyone other than the Company, for our review work, for this
report, or for the conclusions we have formed.
Directors' responsibilities
The Half Year Financial Report is the responsibility of, and has
been approved by, the Directors. The Directors are responsible for
preparing the Half Year Financial Report in accordance with the
Disclosure Guidance and Transparency Rules of the United Kingdom's
Financial Conduct Authority.
As disclosed in Note 1, the annual Financial Statements of the
Group are prepared in accordance with IFRSs as adopted by the
European Union. The condensed set of Financial Statements included
in this Half Year Financial Report has been prepared in accordance
with International Accounting Standard 34 "Interim Financial
Reporting" as adopted by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of Financial Statements in the Half Year
Financial Report based on our review.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity" issued by the Financial Reporting Council for use in
the United Kingdom. A review of Half Year Financial Information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK and Ireland) and consequently does not enable us to
obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do
not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of Financial Statements
in the Half Year Financial Report for the 6 months ended 30 June
2018 is not prepared, in all material respects, in accordance with
International Accounting Standard 34 as adopted by the European
Union and the Disclosure Guidance and Transparency Rules of the
United Kingdom's Financial Conduct Authority.
Deloitte LLP
Statutory Auditor
Manchester, United Kingdom
16 August 2018
Shareholder Information
Financial calendar
Half year results for the year ending Announced 16 August 2018
December 2018
Half year dividend for the year ending Payable 5 December 2018
December 2018
Results for the year ending December Announcement March 2019
2018
Report and accounts for the year ending April 2019
December 2018
Annual General Meeting May 2019
Final dividend for the year ending Payable June 2019
December 2018
Registrars
All administrative enquiries relating to shareholdings should,
in the first instance, be directed to Computershare Investor
Services PLC, PO Box 82, The Pavilions, Bridgwater Road, Bristol
BS99 6ZZ (telephone: 0870 707 1134) and should clearly state the
registered shareholder's name and address.
Dividend mandate
Any shareholder wishing dividends to be paid directly into a
bank or building society should contact the Registrar for a
dividend mandate form. Dividends paid in this way will be paid
through the Bankers' Automated Clearing System ("BACS").
Website
The Group has a website that gives information on the Group and
its products and provides details of significant Group
announcements. The address is www.marshalls.co.uk.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
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