TIDMMSLH
RNS Number : 4246J
Marshalls PLC
16 August 2023
Management actions position the Group well for when markets
normalise
Marshalls plc, a leading manufacturer of sustainable solutions
for the built environment, announces its results for the half year
ended 30 June 2023
Highlights
GBPM H1 2023 H1 2022 Change (%)
--------------------------------- ------- ------- ----------
Revenue 354.1 348.4 2%
Adjusted results (Notes 1 and 2)
Adjusted EBITDA 58.8 64.2 (8%)
Adjusted operating profit 41.9 48.0 (13%)
Adjusted profit before tax 33.2 44.6 (26%)
Adjusted basic EPS - pence 10.2 16.4 (38%)
Adjusted proforma ROCE (%) 10.6 13.4 (2.8ppts)
Statutory results
Operating profit 26.8 27.3 (2%)
Profit before tax 16.7 23.9 (30%)
Basic EPS - pence 5.2 7.9 (34%)
Interim dividend - pence 2.6 5.7 (54%)
Net debt 230.0 252.3 9%
Pre-IFRS 16 net debt 184.6 208.2 11%
--------------------------------- ------- ------- ----------
Financial, operational, and strategic highlights
-- Revenue growth of two per cent over 2022 including an additional
four-month contribution from Marley; revenue contracted by 13
per cent on a like-for-like basis
-- Adjusted profit before tax of GBP33.2 million, a reduction of
26 per cent on 2022. Profit before tax on a statutory basis was
GBP16.7 million (H1 2022: GBP23.9 million) including the impact
of adjusting items of GBP16.5 million (H1 2022: GBP20.7 million)
-- Group strategy refreshed and being implemented throughout the
organisation
-- Decisive action taken to streamline manufacturing capacity and
the cost base, resulting in GBP9 million of annualised savings
-- Flexibility maintained in the manufacturing network to respond
rapidly to produce higher volumes when market normalises
-- Net debt of GBP184.6 million (on a pre-IFRS 16 basis) reduced
by GBP23.6 million since June 2022, with leverage of 1.6 times
adjusted EBITDA. Reported net debt of GBP230.0 million (H1 2022:
GBP252.3 million)
-- Syndicated bank facility extended by 12 months to April 2027
further improving security of medium-term funding
-- Exited the Group's Belgian operation allowing the Group to focus
on the UK construction market
Outlook
-- The challenging trading environment is expected to persist in
the second half of the year and into 2024
-- Against this backdrop, the Board will continue to focus on actions
to minimise cost, improve agility and control cash flows alongside
ensuring that the business is well positioned to respond when
the Group's end markets s tart to recover
-- The Board remains confident that these actions, together with
the long-term market growth drivers and a focus on executing
key strategic initiatives, will underpin a material improvement
in profitability when market conditions normalise
Commenting on the results, Martyn Coffey, Chief Executive,
said:
"Market conditions in new house building and private housing RMI
were challenging in the first half of the year, which led to a
material reduction in volumes across all three of our reporting
segments. This resulted in a significant decline in Group
profitability compared to the first half of 2022. We have responded
by taking action to improve our agility, reduce capacity, take cost
out of the business, and manage cash. Regrettably, these actions
necessitated in a reduction of approximately 250 roles across the
organisation. However, we have been careful to ensure that we have
sufficient latent manufacturing capacity that will allow us to
respond quickly when there is an improvement in market
conditions.
Our refreshed strategy is underpinned by our strong market
positions, established brands and focused investment plans to drive
ongoing operational improvement. Notwithstanding short-term
challenges, the Board remains confident that the long-term market
growth drivers and a focus on executing key strategic initiatives,
will underpin a material improvement in profitability when market
conditions normalise."
There will be a live presentation today at 09:00am at the
offices of Peel Hunt for analysts and investors, which will also be
webcast live. The presentation will be available for analysts and
investors who are unable to view the webcast live and can be
accessed on Marshalls' website at www.marshalls.co.uk . Users can
register to access the webcast using the following link:
https://brrmedia.news/marshalls.hy.23
There will also be a telephone dial in facility available Tel:
UK-Wide: +44 (0) 33 0551 0200 and quote password "Marshalls HY
Results" if prompted by the operator.
Notes:
1. The results for the half year ended 30 June 2023 have been
disclosed after adding back adjusting items. These are set out in
note four.
2. This Half Year Financial Report includes alternative
performance measures ('APMs'), which are not defined or specified
under the requirements of International Financial Reporting
Standards. The Board believes that these APMs provide stakeholders
with important additional information on the Group. To support
this, we have included an accounting policy note on APMs in the
notes to this Half Year Financial Report, a glossary setting out
the APMs that we use, how we use them, an explanation of how they
are calculated, and a reconciliation of the APMs to the statutory
results, where relevant. See notes one and 21 for further
details.
Enquiries:
Martyn Coffey Chief Executive Marshalls plc +44 (0)1422 314777
Chief Financial
Justin Lockwood Officer +44 (0)1422 314777
Tim Rowntree MHP Communications +44 (0)20 3128 8540
Charlie Barker +44 (0)20 3128 8147
Introduction
The first half of 2023 has been challenging for the Group. A
weak macro-economic backdrop has impacted the Group's key end
markets, resulting in a reduction in sales volumes, revenues, and
profitability. In response, management has taken decisive action to
improve agility, reduce capacity, take cost out of the business,
and manage cash. These actions have resulted in a leaner business
that is well positioned for when its end markets improve.
Market overview
Following the disposal of the Group's business in Belgium in
April 2023, Marshalls is solely focused on the UK construction
market. The Board estimates that around 40 per cent of the Group's
revenues are derived from new build housing and 40 per cent from
commercial & infrastructure end markets. The remaining revenues
of around 20 per cent are focused on private housing repair,
maintenance and improvement ('RMI') and around 12 percentage points
of this comes from driveway and patio products with the balance of
eight percentage points from less discretionary products.
The UK economy deteriorated progressively during 2022 driven by
significant cost inflation, successive base rate increases and
falling real wages, all of which put unprecedented pressure on
household budgets and reduced demand for new build housing. The
Bank of England has continued its cycle of tightening base rates in
2023 and gilt rates have increased due to concerns about the
persistent high rate of core inflation. As a result of this, the
price of fixed rate mortgages is around double the level of a year
ago putting affordability under pressure and causing a fall in
house prices. Despite these factors, the economy has been more
resilient than originally expected by economic commentators and has
avoided a technical recession to date. It is now expected to report
modest growth for the year as a whole. Consumer confidence has
improved from the low point reported in the second half of 2022,
but it remains weak with the benefit of material reductions in
inflation and energy bills yet to be felt in household budgets. The
prospect of higher mortgage rates when borrowers move onto new
deals is also a factor for concern.
The UK's housebuilders have responded to weaker demand for new
housing, arising from higher mortgage rates, by slowing build
programmes. In addition, subdued consumer confidence has resulted
in a weaker environment for major purchases and this, together with
higher interest rates, has resulted in lower levels of activity in
the private housing RMI market. These challenges in two of our key
end markets have impacted the performance of the business in the
first half of the year. The Construction Products Association
('CPA') reduced its forecast for construction activity during the
first half of the year and its summer forecast anticipates a
contraction in activity of seven per cent in 2023, with reductions
of 19 per cent and 11 per cent in new build housing and private
housing RMI, respectively. The CPA also forecasts that the
construction industry will return to growth of one per cent in 2024
as the macro-economic environment improves.
Looking further ahead, the Board believes that the UK
construction market continues to have attractive medium and
long-term growth prospects driven by the structural deficit in new
housebuilding, an ageing housing stock that requires increased
repair and maintenance, and the need to continue to improve UK
infrastructure. The Group's strategy is underpinned by its strong
market positions, established brands and focused investment plans
to drive ongoing operational improvements.
Group results
The Group reported a two percent increase in revenue including
the benefit of an additional four-month contribution from the
acquisition of Marley, offset by the impact of the weaker
macro-economic environment on market demand.
GBP'm H1 2023 H1 2022 Change (%)
Revenue 354.1 348.4 2%
Adjusted net operating costs (312.2) (300.4) 4%
-------------------------------- ------------- ------- ----------
Adjusted operating profit 41.9 48.0 (13%)
Adjusted financial expenses (8.7) (3.4) 156%
-------------------------------- ------------- ------- ----------
Adjusted profit before taxation 33.2 44.6 (26%)
Adjusted taxation (7.7) (8.6) 10%
-------------------------------- ------------- ------- ----------
Adjusted profit after taxation 25.5 36.0 (29%)
-------------------------------- ------------- ------- ----------
Adjusted EPS - pence 10.2 16.4 (38%)
Interim dividend - pence 2.6 5.7 (54%)
-------------------------------- ------------- ------- ----------
GBP'm H1 2023 H1 2022 Change (%)
Adjusted operating profit 41.9 48.0 (13%)
Adjusting items (15.1) (20.7) (27%)
-------------------------- ------------ ------- ----------
Operating profit 26.8 27.3 (2%)
Finance costs (10.1) (3.4) 197%
-------------------------- ------------ ------- ----------
Profit before taxation 16.7 23.9 (30%)
-------------------------- ------------ ------- ----------
EPS - pence 5.2 7.9 (32%)
-------------------------- ------------ ------- ----------
Group revenue for the six months ended 30 June 2023 was GBP354.1
million (H1 2022: GBP348.4 million) which is two per cent higher
than 2022 and includes the contribution of four additional months
of revenue from Marley. On a like-for-like basis, Group revenue
contracted by 13 per cent, with lower revenues in all reporting
segments and a particularly weak performance from Marshalls
Landscape Products.
Group adjusted operating profit was GBP41.9 million, which is 13
per cent lower than 2022 reflecting the benefit of an additional
four-month contribution from Marley offset by reduction in
profitability in the Group's other reporting segments. Group
adjusted operating margin reduced by 2.0 percentage points to 11.8
per cent (2022: 13.8 per cent) and reflects the benefit of Marley's
structurally higher margins, offset by margin compression due to
weaker volumes and the consequent impact on operational leverage.
Selling price increases have broadly offset input cost inflation
during the first half of the year in a more competitive
marketplace. Management has taken decisive action to improve our
agility, reduce capacity, take cost out of the business, and manage
cash. This necessitated the closure of the Group's factory in
Carluke, a reduction in shifts and capacity in other facilities,
and a reorganisation of the Marshalls commercial team focused on
simplifying the business. Regrettably, these changes are expected
to result in a reduction of approximately 250 roles and will
deliver annualised savings of around GBP9 million, with around 40
per cent of this benefit being delivered in 2023. The Board has
reduced its capital expenditure plans without impacting critical
projects, is executing a programme of surplus land disposals, and
has continued to focus on efficient working capital management in
order to reduce the Group's net debt.
The statutory operating profit is stated after adjusting items
totalling GBP15.1 million as summarised in the following table,
further details are set out at note 4.
GBP'm H1 2023 H1 2022
---------------------------------------------------------- ------- -------
Amortisation of intangible assets arising on acquisitions 5.2 2.1
Restructuring costs and asset impairment charges 9.3 -
Contingent consideration 1.2 -
Disposal of Marshalls NV (0.6) -
Transaction related costs - 14.7
Fair value adjustment to inventory - 3.9
---------------------------------------------------------- ------- -------
Adjusting items within operating profit 15.1 20.7
Adjusting items within financial expenses 1.4 -
---------------------------------------------------------- ------- -------
Adjusting items within profit before taxation 16.5 20.7
---------------------------------------------------------- ------- -------
Adjusting items in 2023 principally comprise the amortisation of
intangible assets arising on the acquisition of subsidiary
undertakings of GBP5.2 million (H1 2022: GBP2.1 million) and
restructuring costs of GBP9.3 million (H1 2022: zero). The
restructuring costs comprise redundancy costs, impairment charges
and other expenses arising from the decisive action taken in the
first half of the year in response to the challenging market
conditions. This includes GBP5.2 million of non-cash charges and
GBP4.1 million of cash costs. The contingent consideration charge
reflects an increase in the expected payments in respect of the
acquisition of Viridian Solar based on the strong performance of
that business. The disposal of Marshalls NV on 13 April 2023
resulted in a profit on disposal of GBP0.6 million. Details of the
adjusting items arising in H1 2022 are set out at note 4.
Net financial expenses were GBP10.1 million (H1 2022: GBP3.4
million) and GBP8.7 million after adding back adjusting items (H1
2022: GBP3.4 million). The expense comprises financing costs
associated with the Group's bank borrowings of GBP7.1 million (H1
2022: GBP2.3 million), IFRS 16 lease interest of GBP1.3 million (H1
2022: GBP1.1 million) and a pension related expense of GBP1.7
million (H1 2022: GBPnil million). The pensions related expense
includes a non-cash, one-off accounting charge of GBP1.4 million
arising from t he Board's decision to augment the benefits of
certain pensioners who would have otherwise suffered hardship due
to a reduction in pension payments following a review to correct
historical benefit issues (see notes 4 and 5 for further details) .
The increase in financial expenses after adding back adjusting
items in the period reflects the impact of a full six months of the
additional debt financing used to part-fund the acquisition of
Marley and the increase in base rates.
Adjusted profit before tax was GBP33.2 million (H1 2022: GBP44.6
million). Statutory profit before tax was GBP16.5 million lower
than the adjusted result at GBP16.7 million (H1 2022: GBP23.9
million), reflecting the impact of the adjusting items. The
adjusted effective tax rate was 23.2 per cent (H1 2022: 19.1 per
cent), which is broadly in-line with the composite UK headline
corporation tax rate for 2023. On a reported basis, the effective
tax rate is 22.8 per cent. Adjusted earnings per share was 10.2
pence (H1 2022: 16.4 pence), which is a 38 per cent reduction
year-on-year reflecting the weaker profitability and the increase
in the headline rate of corporation tax. Reported earnings per
share was 5.2 pence (H1 2022: 7.9 pence), which is lower than the
adjusted number due to the adjusting items and their tax
effect.
Segmental performance
The adjusted operating profit is analysed between the Group's
reporting segments as follows:
GBP'm H1 2023 H1 2022 Change (%)
----------------------------- ---------- ------- ----------
Marshalls Landscape Products 15.4 30.0 (49%)
Marshalls Building Products 8.4 13.0 (35%)
Marley Roofing Products 22.0 8.6 156%
Central costs (3.9) (3.6) 8%
----------------------------- ---------- ------- ----------
Adjusted operating profit 41.9 48.0 (13%)
----------------------------- ---------- ------- ----------
Marshalls Landscape Products
Marshalls Landscape Products, which comprises the Group's
Commercial and Domestic landscape business, Landscape Protection
and the international businesses, delivered revenue of GBP174.1
million (H1 2022: GBP216.9 million), which represents a contraction
of 20 per cent compared to 2022. On a like-for-like basis,
adjusting for the disposal of Marshalls NV which was sold in April
2023, revenue contracted by 18 per cent.
GBP'm H1 2023 H1 2022 Change (%)
--------------------------- ------------- ------- ----------
Revenue 174.1 216.9 (20%)
Segment operating profit 15.4 30.0 (49%)
Segment operating margin % 8.8% 13.8% (5.0ppts)
--------------------------- ------------- ------- ----------
This reporting segment derives around 40 per cent of its
revenues from commercial & infrastructure and approximately 30
per cent from new build housing and 30 per cent from private
housing RMI. Whilst commercial & infrastructure remains robust,
the business has been impacted by lower new build housing and
continued weakness in private housing RMI activity driven by the
discretionary nature of our domestic products, weak consumer
confidence, product price inflation and lower real incomes.
Installer order books at the end of June 2023 increased to 16.7
weeks (February 2023: 14.7 weeks; June 2022: 17.4 weeks), which
remains higher than pre COVID-19 levels and demonstrates continued
demand for professional installations. However, levels of DIY
activity remain subdued. These factors resulted in UK domestic
revenues being down by around 25 percent year-on-year, which is a
continuation of the trends reported from the second quarter of
2022. Revenues of commercially focused products were more robust
with a contraction of eight per cent where a stronger commercial
& infrastructure performance was offset by weakness in new
build housing.
Segment operating profit reduced by GBP14.6 million to GBP15.4
million. This was driven by the combined effect of lower volumes on
gross profit and a reduction in the operational efficiency of the
manufacturing network due to reduced production volumes. In
addition, the market price for Indian sandstone contracted during
the period, due to overstocking in the supply chain and a
normalisation of freight rates, resulting in a combination of
compressed or negative margins that impacted the result by around
GBP2.8 million. Management took further decisive action to reduce
capacity to align to market demand, simplify operating structures
and reduce the cost base. Taken together, these actions reduced net
operating costs by around GBP7.4 million on an annualised basis, of
which around GBP2.7 million is expected to be realised in 2023. The
cost associated with this action has been presented as an adjusting
item (see note 4). The fall in volumes together with the impact of
Indian sandstone pricing resulted in segment operating margins
reducing by 5.0 ppts to 8.8 ppts for the year.
Marshalls Building Products
Marshalls Building Products comprises the Group's Civils and
Drainage, Bricks and Masonry, Mortars and Screeds and Aggregates
businesses. Revenue in this reporting segment reduced by nine per
cent year-on-year to GBP87.2 million.
GBP'm H1 2023 H1 2022 Change (%)
Revenue 87.2 95.9 (9%)
Segment operating profit 8.4 13.0 (35%)
Segment operating margin % 9.6% 13.6% (4.0ppts)
--------------------------- ------------- ------- ----------
This reporting segment generates around 60 per cent of its
revenues from new build housing, around 30 per cent from commercial
& infrastructure, with the balance being derived from private
housing RMI. The exposure of this reporting segment to new build
housing had an impact on its performance during the year. The
strongest performances in the segment were delivered by Bricks and
Masonry and Mortars and Screeds where revenues were broadly in-line
with 2022, which was offset by a weaker performance in Civils and
Drainage and Aggregates where business volumes are more strongly
correlated to new housing starts.
Segment operating profit contracted by GBP4.6 million to GBP8.4
million. This was driven by the impact of lower volumes on both
gross margins and the operational efficiency of the factories due
to reduced production volumes. Management has taken action to
reduce manufacturing capacity through changes to shifts in certain
facilities and removed around GBP1.6 million from the cost base, of
which GBP0.9 million is expected to be realised in 2023. Segment
operating margin reduced by four ppts to 9.6 per cent reflecting
the impact of lower volumes on profitability.
Marley Roofing Products
Revenue for the reporting segment increased by GBP57.2 million
including the four additional months that were consolidated in
2023, however, on a like-for-like basis Marley's revenues were
seven per cent lower than the first half of 2022.
GBP'm H1 2023 H1 2022 Change (%)
Revenue 92.8 35.6 161%
Segment operating profit 22.0 8.6 156%
Segment operating margin % 23.7% 24.2% (0.5ppts)
--------------------------- ------------- ------- ----------
Approximately 40 per cent of Marley's revenues are generated
from new build housing and 40 per cent from commercial &
infrastructure (including public housing RMI) with the balance of
around 20 per cent from private housing RMI. The challenging market
backdrop resulted in a reduction in like-for-like revenues of seven
per cent, with weaker volumes of traditional roofing partially
offset by revenue growth from Viridian Solar, which benefitted from
the trend towards energy efficient solutions in the face of higher
energy prices and the start of the impact of changes to building
regulations.
Segment operating profit in the period was GBP22.0 million,
which was GBP13.4 million higher than the GBP8.6 million included
in the Group results in the first half of 2022. However, this
represents a reduction of 12 per cent compared to the corresponding
period in 2022, which includes four months of operating profit that
were not included in the Group results. This reduction in
profitability was driven by weaker volumes of traditional roofing
products partially offset by growing profitability from Viridian
Solar. In early July, management took action to reduce costs and
capacity by mothballing certain assets to manage working capital
levels. Segment operating margin has remained strong at 23.7%,
representing a year-on-year reduction of 0.5 ppts.
Strategy update
Strategy
The Board has reviewed and refreshed the Group's strategy during
the first half of the year. It expects the refreshed strategy to
ensure that the Group is well positioned for when markets normalise
and to support the delivery of growth ahead of the UK construction
market as structural under investment in the Group's key end
markets is addressed. This strategy and the actions that the Board
has taken to manage the current downturn are expected to support a
recovery of operating margins and ROCE to around 15 per cent when
volumes normalise. The Board targets converting 85 to 90 per cent
of EBITDA into operating cash flow, which will enable a clear focus
on capital allocation priorities.
The Board has defined the following key objectives and is
developing operating strategies in each of its businesses that will
be aligned to deliver them.
1. Obtain and deliver specifications for our products and
systems to grow revenues and profitability.
2. Innovate and optimise products and solutions.
3. Improve our cost effectiveness, capital efficiency and flexibility.
4. Operate in an environment where safety and people are a key priority.
5. Be easy to work with.
To obtain and deliver specifications for our products and
systems to grow revenues and profitability.
The aim is to create pull demand for our products and systems
through securing specifications in order to optimise our market
share and grow our contribution margin.
Landscape Products secures pull demand for its products by
working with specifiers during design phases of commercial
contracts and through the Marshalls Register of domestic installers
and visualisation software for domestic projects. Within Building
Products, the Drainage business generates demand for its end-to-end
integrated water management and retaining wall solutions, with
established partnerships with clients and collaborators alike,
including National Highways, Network Rail and the Environment
Agency. This is underpinned by a design and manufacture system that
is well regarded by civils specifiers. Activity in Bricks &
Masonry is targeted at demand generation from UK house builders who
increasingly recognise the value offered by concrete bricks with
lower embodied carbon. The business also achieves specification
projects for walling solutions in a variety of commercial projects
and applications.
Roofing Products leverages the breadth of its product range to
provide full roof system specifications including tiles, battens,
accessories and increasingly roof-integrated solar, that are
supported by a 15-year warranty. Viridian Solar provides site
layout and solar design services for roof-integrated solar systems
being supplied into new build housing, which secures the
specification of our products.
To innovate and optimise products and solutions.
The aim is to improve our product mix through new product
development and to generate competitive advantage through
innovation in products and solutions, with a particular emphasis on
reducing embodied carbon.
The commissioning of the dual block plant at St Ives is well
underway and it is now producing saleable products. When fully
commissioned, this plant will be able to manufacture a wide range
of innovative paving products with a significantly lower carbon
footprint than imported products. The business is simplifying its
paving product range with the twin aims of refreshing the customer
product proposition and reducing manufacturing and stock holding
complexity. Viridian Solar has launched a new range of more
powerful solar panels that have been well received by our customers
and are introducing a range of solar-system add-ons including EV
chargers and inverters. In addition, the business has launched
ArcBox, an award-winning fire safety enclosure and mounting
brackets for use with pitched and flat roof solar mounting
systems.
The Group's product innovation is underpinned by developments on
products that have a lower embodied carbon: utilising cement
replacement and carbon sequestration techniques. The Group was the
first pre-cast concrete manufacturer in the UK to adopt CarbonCure
Technologies' carbon mineralisation technology that uses waste
CO(2) from other industrial processes to accelerate the carbonation
of concrete, effectively reducing the embodied carbon. This was
successfully trialled during the first half of 2023 in one of our
concrete brick manufacturing sites.
Commercialising our ESG credentials is a key priority for the
business and a cornerstone of this is the introduction of
Environmental Product Declarations ('EPDs'), which are a valuable
tool for making more sustainable choices in construction. They
provide clear and transparent information on the environmental
impact of different products and materials. The Group now has EPDs
for over 80 percent of its standard product portfolio, ensuring
that architects, engineers, and builders are able to specify the
most appropriate products from our ranges. Work is underway to
ensure that EPDs are available for the entire standard product
portfolio by the end of 2023.
To improve our cost effectiveness, capital efficiency and
flexibility.
The aim is to deliver our cost base optimisation programme and
build a more variable cost base that allows the Group to flex
volumes up and down in-line with customer demand. The Group will
also effectively manage capital expenditure to focus on maximising
returns from efficiency and strategic projects alongside optimising
investment in working capital.
Management has executed several restructuring actions in the
first half of the year to reduce our manufacturing capacity and to
simplify the Group, which have delivered annualised cost savings of
approximately GBP9 million. The need to reduce our capacity and
cost base in the short term has been balanced with the flexibility
to increase production rapidly when demand improves. Latent
capacity exists across all reporting segments that can be
reactivated to satisfy materially higher demand than that being
experienced in 2023. Capital expenditure plans in 2023 have been
reduced to focus on maintaining the existing capital base,
investment to implement lower cost mixes for concrete block paving
and completing the dual block plant. Management is also working
with colleagues to develop more flexibility in our labour model,
that will be based on both seasonality of production and unexpected
demand changes.
The operational integration of Marley continues to make progress
under the guidance of the Marshalls' Group team, with continuous
and sustainable improvement being the objective. As previously
reported, attraction of skilled labour, structured performance
management and targeted equipment refurbishment remain the focus
areas. The direction of travel therefore is unchanged, albeit
volume reduction in the marketplace has resulted in short term
prioritisation of cost management. We have now fully embedded the
procurement, technical and safety teams into Group both from a
people and process perspective. Finally, we now have sight of the
ESG requirements for Marley and are currently building plans to
deliver the necessary projects and targets.
To operate in an environment where safety and people are key
priorities.
The Group will continue to focus on ensuring the work
environment is safe for our people. Management will create plans
that foster a culture and environment of diversity, equity,
respect, inclusion, and engagement across the Group.
The Board has always had a clear roadmap of activity regarding
keeping colleagues safe and, in-line with the Group's principles,
we adopt a continuous improvement philosophy in this key area. In
the first half of the year objectives and goals were refreshed and
a renewed strategy was launched with a revamped roadmap. This
ensures we keep things fresh and front of mind when it comes to the
health and safety of the Group's people.
The Board's commitment to invest in our people and hearing their
voice continued in the first half of the year. The Employee Voice
Group continues to work with HR and senior leadership to develop
policy and practice as well as providing strong channels of
feedback. The Group's Code of Conduct was refreshed and roll out
commenced at the beginning of June with associated training.
Management has continued to support apprenticeships and to provide
access to learning and development opportunities.
To be easy to work with.
The aim is to improve the customer experience by simplifying
process and touchpoints, particularly through the use of digital
technologies.
Management continues to focus on executing its digital strategy,
which aims to provide an end-to-end digital offering and to pioneer
digital standards for the industry. This includes shifting
transactions onto electronic trading including its ordering app,
EDI and dropship. Dropship is being used to extend the availability
of product ranges to customers across the board. In addition to
this, visualisation software and paving installer technology have
been developed alongside the dropship offering which will be
launched for installers, merchants, architects and specifiers. This
technology brings customers closer to the Group's products and
allows them and the end consumer to better understand and visualise
how these fit into wider domestic or commercial projects. In
Roofing Products, a digital channel to sell a range of products
including solar and system additions (including inverters and EV
chargers), weatherboard and roofing accessories direct to the end
user, will be launched in the third quarter of the year. Work
continues and remains on track to move the Marshalls ERP system to
the cloud whilst simplifying, digitising and automating processes
through the course of this project.
Disposal of Marshalls NV
The Group successfully completed the disposal of its former
Belgian subsidiary in April 2023, which leaves the Group focused on
the UK construction market. This business contributed revenue of
GBP21 million and a loss before taxation of GBP1.1 million in 2022.
In the period until the disposal on 13 April 2023, the business
generated revenue of GBP5.0 million and a loss before taxation of
GBP0.6 million. The sale resulted in a profit on disposal of GBP0.6
million, which has been reported as an adjusting item (see note
4).
Balance sheet, cash flow and funding
A summary of the Group's capital deployment and net assets is
set out below.
December
GBP'm June 2023 June 2022 2022
Goodwill and intangible assets 556.6 550.9 559.7
Property, plant & equipment and right-of-use
assets 298.6 324.3 303.5
Net working capital 119.7 140.6 109.7
Net pension asset 26.1 43.7 22.4
Deferred tax (89.4) (93.8) (89.4)
Other net balances (1.0) (7.6) (8.2)
--------------------------------------------- ------------- --------- --------
Total capital employed 910.6 958.1 897.7
Pre-IFRS 16 net debt (184.6) (208.2) (190.7)
Leases (45.4) (44.1) (45.9)
--------------------------------------------- ------------- --------- --------
Net assets 680.6 705.8 661.1
--------------------------------------------- ------------- --------- --------
Total capital employed at June 2023 was GBP910.6 million, which
represents an increase of GBP12.9 million compared to the December
2022. This increase principally arises from higher working capital
balances of GBP10.0 million driven by seasonal trading patterns,
although this was more modest than in 2022 (increase of GBP37
million) due to proactive management of inventories and weaker
revenues.
The balance sheet value of the Group's defined benefit pension
scheme was a surplus of GBP26.1 million (June 2022: GBP43.7
million; December 2022: GBP22.4 million). The amount has been
determined by the Scheme's pension adviser. The fair value of the
Scheme assets at June 2023 was GBP245.2 million (June 2022:
GBP306.1 million; December 2022: GBP254.9 million) and the present
value of the Scheme liabilities was GBP219.1 million (June 2022:
GBP262.4 million; December 2022: GBP232.5 million). These changes,
which include the finalisation of certain historical benefit issues
(see note 4), resulted in an actuarial gain, net of deferred
taxation, of GBP4.0 million (H1 2022: GBP13.5 million, December
2022: GBP2.3 million) and this has been recorded in the Condensed
Statement of Comprehensive Income. The Scheme's actuarial valuation
as at 5 April 2021 was a surplus of GBP24.3 million, on a technical
provisions basis, and the Company has agreed with the Trustee that
no cash contributions are payable under the funding plan.
Adjusted return on capital employed ('ROCE') was 10.6 per cent
(H1 2022: 13.4 per cent; FY 2022: 13.3 per cent) on an annualised
basis, with the year-on-year reduction due to the weaker trading
performance. We expect adjusted ROCE to increase in the medium term
to around 15 per cent as volumes recover and we benefit from
operational leverage.
Operating cash flow conversion on an annualised basis at June
2023 was 105 per cent of adjusted EBITDA (June 2022: 60 per cent;
December 2022: 91 per cent) which demonstrates the cash generative
nature of the Group's businesses. The proactive management of
working capital in the first half of the year combined with the
planned reduction in capital expenditure resulted in a reduction in
pre-IFRS16 net debt of GBP6.1 million in the period.
The Group had net debt of GBP230.0 million at June 2023 (June
2022: GBP252.3 million; December 2022: GBP236.6 million), including
GBP45.4 million (June 2022: GBP44.1 million; December 2022: GBP45.9
million) of IFRS 16 lease liabilities. Net debt on a pre-IFRS16
basis was GBP184.6 million with a reduction of GBP23.6 million
since June 2022 (June 2022: GBP208.2 million; December 2022:
GBP190.7 million). The Group extended the term of GBP350 million of
its syndicated debt facility by 12 months to April 2027 during the
first half of the year, further improving the security of its
medium-term debt funding. Net debt to EBITDA was 1.6 times at June
2023 on an adjusted pre-IFRS16 annualised basis (December 2022: 1.4
times). Headroom against the bank facility at June 2023 was
GBP117.5 million and the covenants were comfortably met at this
date.
Dividend
The Group maintains a dividend policy of distributions covered
twice by adjusted earnings . The Board has declared an interim
dividend of 2.6 pence per share, which is 54 per cent lower than
2022 (5.7 pence).This reflects the weaker financial performance of
the business and the application of the Group's dividend policy to
maintain two times cover of adjusted profit after taxation and pay
one third of the expected full year dividend at the interim stage.
The dividend will be paid on 1 December 2023 to shareholders on the
register at the close of business on 20 October 2023. The shares
will be marked ex-dividend on 19 October 2023.
Outlook
The challenging trading environment is expected to persist in
the second half of the year and into 2024. Against this backdrop,
the Board will continue to focus on actions to minimise cost,
improve agility and control cash flows alongside ensuring the
business is well positioned to respond when the Group's end markets
start to recover. The Board remains confident that these actions,
together with the long-term market growth drivers and a focus on
executing its key strategic initiatives, will underpin a material
improvement in profitability when market conditions normalise.
Martyn Coffey
Chief Executive
Condensed consolidated income statement
For the period ended 30 June 2023
Unaudited Unaudited Audited
six months six months Year ended
ended June ended June December
2023 2022 2022
Notes GBP'm GBP'm GBP'm
---------------------------------- ----- ----------- ----------- ------------
Revenue 2 354.1 348.4 719.4
Net operating costs 3 (327.3) (321.1) (671.5)
---------------------------------- ----- ----------- ----------- ------------
Operating profit 2 26.8 27.3 47.9
Net financial expenses 5 (10.1) (3.4) (10.7)
---------------------------------- ----- ----------- ----------- ------------
Profit before tax 16.7 23.9 37.2
Income tax expense 6 (3.8) (6.5) (10.7)
---------------------------------- ----- ----------- ----------- ------------
Profit for the financial period 12.9 17.4 26.5
---------------------------------- ----- ----------- ----------- ------------
Profit for the year attributable
to:
Equity shareholders of the Parent 13.1 17.2 26.8
Non-controlling interests (0.2) 0.2 (0.3)
---------------------------------- ----- ----------- ----------- ------------
Profit for the financial period 12.9 17.4 26.5
---------------------------------- ----- ----------- ----------- ------------
Earnings per share
Basic 7 5.2p 7.9p 11.4p
Diluted 7 5.2p 7.9p 11.3p
---------------------------------- ----- ----------- ----------- ------------
Dividend
Pence per share 8 2.6p 9.6p 15.6p
---------------------------------- ----- ----------- ----------- ------------
A reconciliation of the Group's statutory results to the
adjusted results is set out below.
Unaudited Unaudited Audited
six months six months Year ended
ended June ended June December
2023 2022 2022
Notes GBP'm GBP'm GBP'm
------------------------------------- ----- ----------- ----------- ------------
Operating profit
Operating profit 26.8 27.3 47.9
Adjusting items 4 15.1 20.7 53.2
------------------------------------- ----- ----------- ----------- ------------
Adjusted operating profit 41.9 48.0 101.1
------------------------------------- ----- ----------- ----------- ------------
Profit before tax
Profit before tax 16.7 23.9 37.2
Adjusting items 4 16.5 20.7 53.2
------------------------------------- ----- ----------- ----------- ------------
Adjusted profit before tax 33.2 44.6 90.4
------------------------------------- ----- ----------- ----------- ------------
Profit after tax
Profit for the financial period 12.9 17.4 26.5
Adjusting items (net of tax) 4 12.6 18.6 46.8
------------------------------------- ----- ----------- ----------- ------------
Adjusted profit after tax 25.5 36.0 73.3
------------------------------------- ----- ----------- ----------- ------------
Earnings per share after adding back
adjusting items
Basic 7 10.2p 16.4p 31.3p
Diluted 7 10.1p 16.4p 31.1p
------------------------------------- ----- ----------- ----------- ------------
Condensed consolidated statement of comprehensive income
For the period ended 30 June 2023
Unaudited Unaudited Audited
six months six months Year ended
ended June ended June December
2023 2022 2022
GBP'm GBP'm GBP'm
-------------------------------------------- ----------- ----------- -----------
Profit for the financial year 12.9 17.4 26.5
--------------------------------------------- ----------- ----------- -----------
Other comprehensive income/(expense)
Items that will not be reclassified
to the Income Statement:
Re-measurements of the net defined
benefit surplus 5.4 18.0 (3.1)
Deferred tax arising (1.4) (4.5) 0.8
Total items that will not be reclassified
to the Income Statement 4.0 13.5 (2.3)
--------------------------------------------- ----------- ----------- -----------
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 2.6 2.5 5.7
Fair value of cash flow hedges transferred
to the Income Statement - (1.6) (2.8)
Deferred tax arising (0.5) 0.5 (0.7)
Reclassification on sale of subsidiary (0.6) - -
Exchange difference on retranslation
of foreign currency net investment 0.2 0.3 0.6
Exchange movements associated with
borrowings designated as a hedge against
net investment (0.2) (0.1) (0.3)
Foreign currency translation differences
- non-controlling interests - - -
-------------------------------------------- ----------- ----------- -----------
Total items that are or may be reclassified
to the Income Statement 1.5 1.6 2.5
--------------------------------------------- ----------- ----------- -----------
Other comprehensive income for the
period, net of income tax 5.5 15.1 0.2
--------------------------------------------- ----------- ----------- -----------
Total comprehensive income for the
period 18.4 32.5 26.7
--------------------------------------------- ----------- ----------- -----------
Attributable to:
Equity shareholders of the Parent 18.4 32.3 26.9
Non-controlling interests - 0.2 (0.2)
--------------------------------------------- ----------- ----------- -----------
18.4 32.5 26.7
-------------------------------------------- ----------- ----------- -----------
Condensed consolidated balance sheet
As at 30 June 2023
Audited
Unaudited Unaudited December
June 2023 June 2022 2022
Notes GBP'm GBP'm GBPm
------------------------------------------- ----- ---------- ---------- ---------
Assets
Non-current assets
Goodwill 9 324.4 308.8 322.6
Intangible assets 10 232.2 242.1 237.1
Property, plant and equipment 11 256.4 285.4 266.5
Right-of-use assets 42.2 38.9 37.0
Employee benefits 12 26.1 43.7 22.4
Deferred taxation assets 0.9 2.6 1.3
------------------------------------------- ----- ---------- ---------- ---------
882.2 921.5 886.9
------------------------------------------- ----- ---------- ---------- ---------
Current assets
Inventories 141.6 149.4 138.8
Trade and other receivables 132.3 151.4 123.3
Cash and cash equivalents 65.4 78.3 56.3
Assets classified as held for sale 1.3 - -
Derivative financial instruments 6.4 1.5 3.6
------------------------------------------- ----- ---------- ---------- ---------
347.0 380.6 322.0
------------------------------------------- ----- ---------- ---------- ---------
Total assets 1,229.2 1,302.1 1,208.9
------------------------------------------- ----- ---------- ---------- ---------
Liabilities
Current liabilities
Trade and other payables 154.2 160.2 152.4
Corporation tax 0.6 3.2 2.1
Lease liabilities 13 8.3 8.7 9.8
Provisions 2.9 - 3.0
------------------------------------------- ----- ---------- ---------- ---------
166.0 172.1 167.3
------------------------------------------- ----- ---------- ---------- ---------
Non-current liabilities
Lease liabilities 13 37.1 35.4 36.1
Interest-bearing loans and borrowings 14 250.0 286.5 247.0
Provisions 5.2 5.9 6.7
Deferred taxation liabilities 90.3 96.4 90.7
------------------------------------------- ----- ---------- ---------- ---------
382.6 424.2 380.5
------------------------------------------- ----- ---------- ---------- ---------
Total liabilities 548.6 596.3 547.8
------------------------------------------- ----- ---------- ---------- ---------
Net assets 680.6 705.8 661.1
------------------------------------------- ----- ---------- ---------- ---------
Equity
Capital and reserves attributable
to equity shareholders of the Parent
Called-up share capital 63.2 63.2 63.2
Share premium & merger reserve 341.6 341.6 341.6
Capital redemption reserve & consolidation
reserve (137.7) (137.7) (137.7)
Other reserves 4.1 1.1 2.0
Retained earnings 409.4 436.4 391.2
------------------------------------------- ----- ---------- ---------- ---------
Equity attributable to equity shareholders
of the Parent 680.6 704.6 660.3
Non-controlling interests - 1.2 0.8
Total equity 680.6 705.8 661.1
------------------------------------------- ----- ---------- ---------- ---------
Condensed consolidated cash flow statement
For the period ended 30 June 2023
Unaudited Unaudited Audited
six months six months Year ended
ended June ended June December
2023 2022 2022
Notes GBP'm GBP'm GBP'm
---------------------------------------- ----- ----------- ----------- -----------
Cash generated from operations 17 38.8 12.6 106.8
Financial expenses paid (6.8) (2.8) (9.9)
Income tax paid (8.2) (8.0) (11.6)
---------------------------------------- ----- ----------- ----------- -----------
Net cash flow from operating activities 17 23.8 1.8 85.3
---------------------------------------- ----- ----------- ----------- -----------
Cash flows from investing activities
Acquisition of subsidiary undertaking (3.0) (86.2) (86.2)
Acquisition of property, plant and
equipment (9.2) (7.4) (27.8)
Acquisition of intangible assets (1.2) (0.4) (2.3)
Cash outflow from sale of subsidiary (1.4) - -
Proceeds from sale of property, plant
and equipment 3.7 0.2 1.4
---------------------------------------- ----- ----------- ----------- -----------
Net cash flow from investing activities (11.1) (93.8) (114.9)
---------------------------------------- ----- ----------- ----------- -----------
Cash flows from financing activities
Net proceeds from issue of share
capital - 182.7 182.7
Payments to acquire own shares (0.2) (1.1) (1.1)
Payment in respect of share-based
payment award - (1.2) (1.2)
Repayment of debt on acquisition
of subsidiaries - (292.0) (292.0)
Repayment of borrowings (34.4) (57.7) (97.7)
New loans 37.4 303.0 303.5
Cash payment for the principal portion
of lease liabilities (6.2) (4.9) (11.1)
Equity dividends paid - - (38.7)
---------------------------------------- ----- ----------- ----------- -----------
Net cash flow from financing activities (3.4) 128.8 44.4
---------------------------------------- ----- ----------- ----------- -----------
Net increase/(decrease) in cash and
cash equivalents 9.3 36.8 14.8
Cash and cash equivalents at the
beginning of the
period 56.3 41.2 41.2
Effect of exchange rate fluctuations (0.2) 0.3 0.3
---------------------------------------- ----- ----------- ----------- -----------
Cash and cash equivalents at the
end of the period 65.4 78.3 56.3
---------------------------------------- ----- ----------- ----------- -----------
Condensed consolidated statement of changes in equity
for the half year ended 30 June 2023
Share Capital
premium redemption
& &
Share merger consolidation Other Retained Non-controlling Total
capital reserve reserves reserves* earnings Total interests equity
GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm
-------------------------- -------- -------- -------------- ---------- --------- ----- --------------- -------
At 1 January
2023 63.2 341.6 (137.7) 2.0 391.2 660.3 0.8 661.1
-------------------------- -------- -------- -------------- ---------- --------- ----- --------------- -------
Total comprehensive
income/(expense)
for the
period
Profit for the
financial period - - - - 13.1 13.1 (0.2) 12.9
Other comprehensive
income/(expense)
Foreign currency
translation differences - - - - - - - -
Reclassification
on sale of
subsidiary - - - 0.3 (0.3) - (0.6) (0.6)
Effective portion
of changes
in fair value
of cash flow
hedges - - - 2.6 - 2.6 - 2.6
Net change in
fair value of
cash flow hedges
transferred
to the Income
Statement - - - - - - - -
Deferred tax arising - - - (0.5) - (0.5) - (0.5)
Defined benefit
plan actuarial
gain - - - - 5.4 5.4 - 5.4
Deferred tax arising - - - - (1.4) (1.4) - (1.4)
-------------------------- -------- -------- -------------- ---------- --------- ----- --------------- -------
Total other comprehensive
income/(expense) - - - 2.4 3.7 6.1 (0.6) 5.5
-------------------------- -------- -------- -------------- ---------- --------- ----- --------------- -------
Total comprehensive
income/(expense)
for the
period - - - 2.4 16.8 19.2 (0.8) 18.4
-------------------------- -------- -------- -------------- ---------- --------- ----- --------------- -------
Transactions
with owners
Shares issued - - - - - - - -
Share issue costs - - - - - - - -
Share-based payments - - - - 1.4 1.4 - 1.4
Deferred tax on
share-based payments - - - - (0.1) (0.1) - (0.1)
Corporation tax
on
share-based payments - - - - - - - -
Purchase of own
shares - - - (0.2) - (0.2) - (0.2)
Own shares issued
under
share scheme - - - (0.1) 0.1 - - -
-------------------------- -------- -------- -------------- ---------- --------- ----- --------------- -------
Total contributions
by and
distributions
to owners - - - (0.3) 1.4 1.1 - 1.1
-------------------------- -------- -------- -------------- ---------- --------- ----- --------------- -------
Total transactions
with
owners - - - 2.1 18.2 20.3 (0.8) 19.5
-------------------------- -------- -------- -------------- ---------- --------- ----- --------------- -------
At 30 June 2023 63.2 341.6 (137.7) 4.1 409.4 680.6 - 680.6
-------------------------- -------- -------- -------------- ---------- --------- ----- --------------- -------
Note*: Other reserves include own shares, hedging reserve and
foreign exchange reserve.
Condensed consolidated statement of changes in equity
for the half year ended 30 June 2022
Share Capital
premium redemption
& &
Share merger consolidation Other Retained Non-controlling Total
capital reserve reserves reserves* earnings Total interests equity
GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm
-------------------------- -------- -------- -------------- ---------- --------- ----- --------------- -------
At 1 January
2022 50.0 24.5 (137.7) 0.2 406.3 343.3 1.0 344.3
-------------------------- -------- -------- -------------- ---------- --------- ----- --------------- -------
Total comprehensive
income/(expense)
for the
period
Profit for the
financial period - - - - 17.2 17.2 0.2 17.4
Other comprehensive
income/(expense)
Foreign currency
translation differences - - - 0.2 - 0.2 - 0.2
Effective portion
of changes
in fair value
of cash flow
hedges - - - 2.5 - 2.5 - 2.5
Net change in
fair value of
cash flow hedges
transferred
to the Income
Statement - - - (1.6) - (1.6) - (1.6)
Deferred tax arising - - - 0.5 - 0.5 - 0.5
Defined benefit
plan actuarial
gain - - - - 18.0 18.0 18.0
Deferred tax arising - - - - (4.5) (4.5) - (4.5)
-------------------------- -------- -------- -------------- ---------- --------- ----- --------------- -------
Total other comprehensive
income/(expense) - - - 1.6 13.5 15.1 - 15.1
-------------------------- -------- -------- -------------- ---------- --------- ----- --------------- -------
Total comprehensive
income/(expense)
for the
period - - - 1.6 30.7 32.3 0.2 32.5
-------------------------- -------- -------- -------------- ---------- --------- ----- --------------- -------
Transactions
with owners
Shares issued 13.2 321.8 - - - 335.0 - 335.0
Share issue costs - (4.7) - - - (4.7) - (4.7)
Share-based payments - - - - - - - -
Deferred tax on
share-based payments - - - - (0.3) (0.3) - (0.3)
Corporation tax
on
share-based payments - - - - 0.1 0.1 - 0.1
Purchase of own
shares - - - (1.1) (1.1) - (1.1)
Own shares issued
under
share scheme - - - 0.4 (0.4) - - -
-------------------------- -------- -------- -------------- ---------- --------- ----- --------------- -------
Total contributions
by and
distributions
to owners 13.2 317.1 - (0.7) (0.6) 329.0 - 329.0
-------------------------- -------- -------- -------------- ---------- --------- ----- --------------- -------
Total transactions
with
owners 13.2 317.1 - 0.9 30.1 361.3 0.2 361.5
-------------------------- -------- -------- -------------- ---------- --------- ----- --------------- -------
At 30 June 2022 63.2 341.6 (137.7) 1.1 436.4 704.6 1.2 705.8
-------------------------- -------- -------- -------------- ---------- --------- ----- --------------- -------
Note*: Other reserves include own shares, hedging reserve and
foreign exchange reserve.
Condensed consolidated statement of changes in equity
for the year ended 31 December 2022
Share Capital
premium redemption
& &
Share merger consolidation Other Retained Non-controlling Total
capital reserve reserves reserves* earnings Total interests equity
GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm
------------------------- -------- -------- -------------- ---------- --------- ------ --------------- -------
At 1 January
2022 50.0 24.5 (137.7) 0.2 406.3 343.3 1.0 344.3
------------------------- -------- -------- -------------- ---------- --------- ------ --------------- -------
Total comprehensive
income/(expense)
for the
period
Profit for the
financial period - 26.8 26.8 (0.3) 26.5
Other comprehensive
income/(expense) - - - - - - - -
Foreign currency
translation differences - 0.2 - 0.2 0.1 0.3
Effective portion
of changes
in fair value
of cash flow
hedges - - - 5.7 - 5.7 5.7
Net change in
fair value of
cash flow hedges
transferred
to the Income
Statement - - - (2.8) - (2.8) (2.8)
Deferred tax arising - - - (0.7) - (0.7) (0.7)
Defined benefit
plan actuarial
loss - - - - (3.1) (3.1) (3.1)
Deferred tax arising - - - - 0.8 0.8 0.8
------------------------- -------- -------- -------------- ---------- --------- ------ --------------- -------
Total other comprehensive
income/(expense) - - - 2.4 (2.3) 0.1 0.1 0.2
------------------------- -------- -------- -------------- ---------- --------- ------ --------------- -------
Total comprehensive
income/(expense)
for the
period - - - 2.4 24.5 26.9 (0.2) 26.7
------------------------- -------- -------- -------------- ---------- --------- ------ --------------- -------
Transactions
with owners
Shares issued 13.2 321.8 - - 335.0 - 335.0
Share issue costs - (4.7) - (4.7) - (4.7)
Share-based payments - - - - - - - -
Deferred tax on
share-based payments - - - - (0.6) (0.6) - (0.6)
Corporation tax
on
share-based payments - - - - 0.1 0.1 - 0.1
Dividends to equity
shareholders (38.7) (38.7) - (38.7)
Purchase of own
shares - - - (1.0) - (1.0) - (1.0)
Own shares issued
under
share scheme - - - 0.4 (0.4) - - -
------------------------- -------- -------- -------------- ---------- --------- ------ --------------- -------
Total contributions
and
distributions
to owners 13.2 317.1 - (0.6) (39.6) 290.1 - 290.1
------------------------- -------- -------- -------------- ---------- --------- ------ --------------- -------
Total transactions
with
owners 13.2 317.1 - 1.8 (15.1) 317.0 (0.2) 316.8
------------------------- -------- -------- -------------- ---------- --------- ------ --------------- -------
At 31 December
2022 63.2 341.6 (137.7) 2.0 391.2 660.3 0.8 661.1
------------------------- -------- -------- -------------- ---------- --------- ------ --------------- -------
Note*: Other reserves include own shares, hedging reserve and
foreign exchange reserve.
Notes to the condensed consolidated financial statements
For the six months year ended 30 June 2023
1. Basis of preparation
These unaudited condensed consolidated interim financial
statements for the six months ended 30 June 2023 have been prepared
in accordance with the Disclosure and Transparency Rules ('DTR') of
the Financial Conduct Authority and with IAS 34 'Interim Financial
Reporting' as adopted by the United Kingdom. These condensed
consolidated interim financial statements should be read in
conjunction with the Annual Report and Accounts ('the Annual
Report') for the year ended 31 December 2022, which have been
prepared in accordance with United Kingdom adopted international
accounting standards and International Financial Reporting
Standards ('IFRS') as issued by the International Accounting
Standards Board ('IASB'). These condensed consolidated interim
financial statements were approved for release on 16 August
2023.
These condensed consolidated interim financial statements do not
comprise statutory accounts within the meaning of Section 434 of
the Companies Act 2006. The Annual Report for the year ended 31
December 2022 were approved by the Board on 15 March 2023 and
delivered to the Registrar of Companies. The Annual Report
contained an unqualified audit report and did not include an
emphasis of matter paragraph or any statement under Section 498 of
the Companies Act 2006. The Annual Report is available on the
Group's website ( www.marshalls.co.uk ).
The accounting policies applied to prepare these condensed
consolidated interim financial statements are consistent with those
applied in the most recent Annual Report for the year ended 31
December 2022.
The Group operates a formal risk management process, the details
of which are set out on page 66 of the Annual Report for the year
ended 31 December 2022. The risks assessed in preparing these
condensed consolidated interim financial statements are consistent
with those set out on pages 69 to 75 of the Annual Report and an
update on those risks is set out at note 22 of this report.
Going concern
In assessing the appropriateness of the adopting the going
concern basis in the preparation of this Half Year Financial
Report, the Board has considered the Group's financial forecasts
and its principal risks for a period of at least 12 months from the
date of this report. The forecasts included projected profit and
loss, balance sheet, cash flows, headroom against debt facilities
and covenant compliance. As noted above, the Group's principal
risks are set out in the 2022 Annual Report and Accounts and an
update is included in this report.
The financial forecasts have been stress tested in downside
scenarios to assess the impact on future profitability, cash flows,
funding requirements and covenant compliance. The scenarios
comprise a more severe economic downturn (which represents the
Group's most significant risk) than that included in the base case
forecast, and a reverse stress test on our financial forecasts to
assess the extent to which an economic downturn would need to
impact on revenues in order to breach a covenant. This showed that
revenue would need to deteriorate significantly from the financial
forecast and the Directors have a reasonable expectation that it is
unlikely to deteriorate to this extent.
Details of the Group's funding position are set out in note 14.
The Group arranged a four-year syndicated bank facility in April
2022 and exercised a one-year extension option in June 2023, which
extended GBP350 million of funding to April 2027. At 30 June 2023,
GBP117.5 million of the facility was undrawn (June 2022: GBP80.2
million undrawn), which is broadly in-line with December 2022
(GBP120.1 million undrawn) despite the Group's seasonal increase in
working capital requirements. There are two financial covenants in
the bank facility that are tested on a semi-annual basis and the
Group maintains good cover against these with pre-IFRS 16 net debt
to EBITDA of 1.6 times (covenant maximum of three times) and
interest cover of 7.8 times (covenant minimum of three times).
Taking these factors into account, the Board has the reasonable
expectation that the Group has adequate resources to continue in
operation for the foreseeable future and for this reason, the Board
has adopted the going concern basis in preparing this Half Year
Financial Report.
Alternative performance measures and adjusting items
The Group uses alternative performance measures ("APMs") which
are not defined or specified under IFRS. The Group believes that
these 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
additional comparative information. A glossary setting out the APMs
that the Board use, how they are used, an explanation of how they
are calculated, and a reconciliation of the APMs to the statutory
results, where relevant is set out at note 21.
Adjusting items are items that are unusual because of their
size, nature or incidence and which the Directors consider should
be disclosed separately to enable a full understanding of the
Group's results and to demonstrate the Group's capacity to deliver
dividends to shareholders. The adjusted results should not be
regarded as a complete picture of the Group's financial
performance, which is presented in the total results. Details of
the adjusting items are disclosed in note four and note 21.
Critical accounting judgements and key sources of estimation
uncertainty
The preparation of consolidated financial statements requires
the Group to make estimates and judgements that affect the
application of policies and reported accounts. Critical judgements
represent key decisions made by the Board in the application of the
Group accounting policies. Where a significant risk of materially
different outcomes exists due to the Board's assumptions or sources
of estimation uncertainty, this will represent a critical
accounting estimate. Estimates and judgements are continually
evaluated and are based on historical experience and other factors,
including expectations of future events that are believed to be
reasonable under the circumstances. Actual results may differ from
these estimates. The estimates and judgements which have a
significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities are discussed below.
Critical accounting judgements
The following critical accounting judgements has been made in
the preparation of the consolidated financial statements:
-- As noted above, adjusting items have been highlighted separately
due to their size, nature or incidence to provide a full understanding
of the Group's results and to demonstrate the Group's capacity
to deliver dividends to shareholders. The determination of whether
items merit treatment as an adjusting item is a matter of judgement.
Note four sets out details of the adjusting items.
Sources of estimation uncertainty
The Directors consider the following to be key sources of
estimation uncertainty:
-- In arriving at the accounting value of the Group's defined benefit
pension scheme, key assumptions have to be made in respect of
factors including discount rates and inflation rates. These are
determined on the basis of advice received from a qualified actuary.
These estimates may be different to the actual outcomes. See
further information in note 12.
-- The carrying value of goodwill is reviewed on an annual basis
in accordance with IAS36. This review requires the use of cash
flow projections based on a financial forecast that are discounted
at an appropriate market-based discount rate. The assumption
on the market-based discount rate is determined based on the
advice of the Group's financial advisor. The actual cash flows
generated by the business may be different to the estimates included
in the forecasts. See further information in note nine.
2. 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. The CODM at Marshalls
is the Board. The Group reports under three reporting segments,
namely Marshalls Landscape Products, Marshalls Building Products
and Marley Roofing Products. Marshalls Landscape Products comprises
the Group's Public Sector and Commercial and Domestic landscape
business, Landscape Protection and the International businesses.
Marshalls Building Products comprises the Group's Civil and
Drainage, Bricks and Masonry, Mortars and Screeds and Aggregate
businesses.
Segment revenues and operating profit
Unaudited Unaudited Audited
six months six months year ended
ended June ended June December
2023 2022 2022
GBP'm GBP'm GBP'm
----------------------------- ----------- ----------- -----------
Revenue
Landscape Products 174.1 216.9 394.1
Building Products 87.2 95.9 193.1
Roofing Products 92.8 35.6 132.2
----------------------------- ----------- ----------- -----------
Revenue 354.1 348.4 719.4
----------------------------- ----------- ----------- -----------
Operating profit
Landscape Products 15.4 30.0 45.3
Building Products 8.4 13.0 26.8
Roofing Products 22.0 8.6 34.4
Central costs (3.9) (3.6) (5.4)
----------------------------- ----------- ----------- -----------
Segment operating profit 41.9 48.0 101.1
Adjusting items (see note 4) (15.1) (20.7) (53.2)
----------------------------- ----------- ----------- -----------
Reported operating profit 26.8 27.3 47.9
----------------------------- ----------- ----------- -----------
The Group has two customers which each contributed more than 10
per cent of total revenue in the current and prior year. The
accounting policies of the three operating segments 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 assets
Audited
Unaudited Unaudited December
June 2023 June 2022 2022
GBP'm GBP'm GBP'm
------------------- ---------- ---------- ---------
Segment assets
Landscape Products 243.9 277.2 260.5
Building Products 152.9 153.8 148.4
Roofing Products 600.0 593.6 593.1
Unallocated assets 232.4 277.5 206.9
------------------- ---------- ---------- ---------
Total 1,229.2 1,302.1 1,208.9
------------------- ---------- ---------- ---------
For the purpose of monitoring segment performance and allocating
resources between segments, the Group's CODM monitors the property,
plant and equipment, right-of-use assets, intangible assets and
inventory. Assets used jointly by reportable segments are not
allocated to individual reportable segments.
Capital additions
Unaudited Unaudited Audited
six months six months year ended
ended June ended June December
2023 2022 2022
GBP'm GBP'm GBP'm
------------------- ----------- ----------- -----------
Capital additions
Landscape Products 12.0 14.0 37.1
Building Products 3.1 2.2 4.6
Roofing Products 4.5 0.5 2.0
Total 19.6 16.7 43.7
------------------- ----------- ----------- -----------
Capital additions comprise property, plant and equipment (GBP7.7
million), right-of-use assets (GBP10.7 million) and intangible
assets (GBP1.2 million).
Depreciation and amortisation
Unaudited Unaudited Audited
six months six months year ended
ended June ended June December
2023 2022 2022
GBP'm GBP'm GBP'm
-------------------------------------- ----------- ----------- -----------
Depreciation and amortisation
Landscape Products 10.1 10.6 22.3
Building Products 4.7 5.3 8.8
Roofing Products 2.1 0.4 3.8
-------------------------------------- ----------- ----------- -----------
Segment depreciation and amortisation 16.9 16.3 34.9
Adjusting items 5.2 2.1 7.4
-------------------------------------- ----------- ----------- -----------
Depreciation and amortisation 22.1 18.4 42.3
-------------------------------------- ----------- ----------- -----------
Depreciation and amortisation includes GBP5.2 million of
amortisation of intangible assets arising from the purchase price
allocation exercises (six months ended June 2022: GBP2.1 million;
year ended December 2022: GBP 7.4 million) comprising GBP0.1
million (six months ended June 2022: GBP0.1 million; year ended
December 2022: GBP0.1 million) in Landscape Products, GBP0.6
million in Building Products (six months ended June 2022: GBP0.6
million; year ended December 2022: GBP1.1 million) and GBP4.5
million in Roofing Products (six months ended June 2022: GBP1.4
million; year ended December 2022: GBP6.2 million). The
amortisation has been treated as an adjusting item (note 4).
Geographical destination of revenue
Unaudited Unaudited Audited
six months six months year ended
ended June ended June December
2023 2022 2022
GBP'm GBP'm GBP'm
--------------- ----------- ----------- -----------
United Kingdom 344.3 328.8 687.9
Rest of World 9.8 19.6 31.5
--------------- ----------- ----------- -----------
354.1 348.4 719.4
--------------- ----------- ----------- -----------
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 its revolving credit facility.
3. Net operating costs
Unaudited Unaudited Audited
six months six months year ended
ended June ended June December
2023 2022 2022
GBP'm GBP'm GBP'm
----------------------------------------- ----------- ----------- -----------
Raw materials and consumables 128.2 153.5 267.3
Changes in inventories of finished goods
and work in progress (3.4) (20.5) 6.6
Personnel costs 78.3 74.9 155.5
Depreciation of property, plant and
equipment 10.9 10.1 21.8
Depreciation of right-of-use assets 5.1 5.3 11.3
Amortisation of intangible assets 0.9 0.9 1.8
Own work capitalised (1.3) (1.7) (3.1)
Other operating costs 95.7 78.9 159.8
Redundancy and other costs - 0.5 0.5
----------------------------------------- ----------- ----------- -----------
Operating costs 314.4 301.9 621.5
Other operating income (1.5) (1.1) (2.0)
Net gain on asset and property disposals (0.7) (0.4) (1.2)
----------------------------------------- ----------- ----------- -----------
Net operating costs before adjusting
items 312.2 300.4 618.3
Adjusting items (note 4) 15.1 20.7 53.2
----------------------------------------- ----------- ----------- -----------
Total net operating costs 327.3 321.1 671.5
----------------------------------------- ----------- ----------- -----------
4. Adjusting items
Unaudited Unaudited Audited
six months six months year ended
ended June ended June December
2023 2022 2022
GBP'm GBP'm GBP'm
-------------------------------------------- ----------- ----------- -----------
Amortisation of intangible assets arising
on acquisitions 5.2 2.1 7.4
Redundancy and other closure costs 4.5 - 4.1
Impairment of property, plant and equipment 4.8 - 8.8
Contingent consideration 1.2 - 3.9
Disposal / impairment of assets in Belgian
subsidiary (0.6) - 10.2
Transaction related costs - 14.7 14.9
Unwind of inventory fair value adjustment - 3.9 3.9
-------------------------------------------- ----------- ----------- -----------
Total adjusting items within operating
profit 15.1 20.7 53.2
Adjusting item in interest expense 1.4 - -
-------------------------------------------- ----------- ----------- -----------
Total adjusting items before taxation 16.5 20.7 53.2
Current tax on adjusting items (note
6) (1.0) (0.8) (1.6)
Deferred tax on adjusting items (note
6) (2.9) (1.3) (4.8)
-------------------------------------------- ----------- ----------- -----------
Total adjusting items after taxation 12.6 18.6 46.8
-------------------------------------------- ----------- ----------- -----------
-- Amortisation of intangible assets arising on acquisitions is
principally in respect of values recognised for the Marley brand
and its customer relationships.
-- Redundancy and other closure costs arose during major restructuring
exercises conducted in the first half of 2023 and the second
half of 2022 when the Group took steps to reduce manufacturing
capacity and the cost base in response to a reduction in market
demand.
-- The impairment of property, plant and equipment arose in connection
with the major restructuring exercises noted above.
-- The additional contingent consideration relates to the reassessment
of the amounts that will become payable to vendors arising in
relation to Marley's acquisition of Viridian Solar Limited in
2021.
-- On 14 April 2023, the Group's interest in the former Belgian
subsidiary was sold for a nominal consideration. This consideration
was higher than the net carrying value on this date which resulted
in a non-recurring profit of GBP0.6 million. In 2022 following
a downturn in the business' performance, the assets were impaired
to fair value which was higher than the value in use. This was
based on the Directors' assessment and consideration of observable
market information. The impairment charge comprised property,
plant and equipment (GBP1.1 million), intangible assets (GBP0.7
million), right-of-use assets (GBP3.4 million) and inventory
(GBP5.0 million).
-- In 2022, transaction related costs relating to the acquisition
of Marley Group plc. These comprise the fees charged by professional
advisors.
-- In 2022, the unwind of the inventory fair value adjustment relates
to the fair value uplift of the inventory as part of the Marley
acquisition that has subsequently been sold. This item has been
shown as an adjusting item to align with the internal reporting
and to present a margin consistent with that which would have
been reported in the absence of a recent acquisition transaction.
-- The adjusting item in interest expense of GBP1.4 million is a
non-cash technical accounting charge arising from the resolution
of certain historical benefit issues. An allowance of GBP6.5
million was included in the net pension scheme asset at December
2022 and following the resolution of the benefit issues, this
has been reduced to GBP5.5 million. This net reduction of GBP1.0
million comprised a profit and loss account charge of GBP1.4
million arising from the decision by the Board to not reduce
pensions to payment to certain pensioners who were receiving
payments that are too high and GBP2.4 million credit to the cond
ensed statement of comprehensive income relating to adjustments
to estimates. Further information on the accounting for the retirement
benefit asset is set out at note 12.
5. Financial expenses
Unaudited Unaudited Audited
six months six months year ended
ended June ended June December
2023 2022 2022
GBP'm GBP'm GBP'm
---------------------------------------- ----------- ----------- -----------
Net interest expense on defined benefit
pension scheme 0.3 - 0.1
Net interest expense on bank loans 7.1 2.3 8.2
Interest expense of lease liabilities 1.3 1.1 2.4
---------------------------------------- ----------- ----------- -----------
8.7 3.4 10.7
Additional interest expense in defined
benefit pension scheme 1.4 - -
---------------------------------------- ----------- ----------- -----------
Financial expenses 10.1 3.4 10.7
---------------------------------------- ----------- ----------- -------------
Net interest expense on the defined benefit pension scheme is
disclosed net of Company recharges for scheme administration. The
additional technical interest expense in respect of the defined
benefit pension scheme arose from the resolution of certain
historical issues, is non-cash and non-recurring. The Board decided
to augment the benefits of certain pensioners who would have
otherwise suffered hardship due to a reduction in pension payments
following a review to correct the historical benefit issues. This
has augmentation charge has been accounted for as an adjusting item
(see note 4).
6. Income tax expense
Unaudited Unaudited Audited
six months six months year ended
ended June ended June December
2023 2022 2022
GBP'm GBP'm GBP'm
-------------------------------------- ----------- ----------- -----------
Current tax expense
Current year 7.0 6.5 11.6
Adjustments for prior years (0.2) (0.4) (0.6)
-------------------------------------- ----------- ----------- -----------
6.8 6.1 11.0
Deferred taxation expense
Origination and reversal of temporary
differences:
Current year (3.0) 1.6 0.8
Adjustments for prior years - (1.2) (1.1)
-------------------------------------- ----------- ----------- -----------
Total tax expense 3.8 6.5 10.7
Current tax on adjusting items (note
4) 1.0 0.8 1.6
Deferred tax on adjusting items (note
4) 2.9 1.3 4.8
-------------------------------------- ----------- ----------- -----------
Total tax expenses after adding back
adjusting items 7.7 8.6 17.1
-------------------------------------- ----------- ----------- -------------
7. Earnings per share
Basic earnings per share from total operations of 5.2 pence (six
months ended June 2022: 7.9 pence; year ended December 2022: 11.4
pence) per share is calculated by dividing the profit attributable
to Ordinary Shareholders for the financial year, after adjusting
for non-controlling interests, of GBP13.1 million (six months ended
June 2022: GBP17.2 million; year ended December 2022: GBP26.8
million) by the weighted average number of shares in issue during
the period of 252,788,981 (six months ended June 2022: 217,846,900;
year ended December 2022: 235,388,001).
Basic earnings per share after adding back adjusting items of
10.2 pence (six months ended June 2022: 16.4 pence; year ended
December 2022: 31.3 pence) per share is calculated by dividing the
adjusted profit attributable to Ordinary Shareholders for the
financial year, after adjusting for non-controlling interests, of
GBP25.7 million (six months ended June 2022: GBP35.8 million; year
ended December 2022: GBP73.6 million) by the weighted average
number of shares in issue during the period of 252,788,981 (six
months ended June 2022: 217,846,900; year ended December 2022:
235,388,001).
Profit attributable to Ordinary Shareholders
Unaudited Unaudited Audited
six months six months year ended
ended June ended June December
2023 2022 2022
GBP'm GBP'm GBP'm
--------------------------------------------- ----------- ----------- -----------
Profit before adding back adjusting
items 25.5 36.0 73.3
Adjusting items (12.6) (18.6) (46.8)
--------------------------------------------- ----------- ----------- -----------
Profit for the financial year 12.9 17.4 26.5
Profit attributable to non-controlling
interests 0.2 (0.2) 0.3
--------------------------------------------- ----------- ----------- -----------
Profit attributable to Ordinary Shareholders 13.1 17.2 26.8
--------------------------------------------- ----------- ----------- -------------
Weighted average number of Ordinary Shares
Unaudited Unaudited Audited
six months six months year ended
ended June ended June December
2023 2022 2022
Number Number Number
------------------------------------------- ----------- ------------ ------------
Number of issued Ordinary Shares 252,968,728 252,735,330 252,968,728
Effect of shares issued during the period - (34,970,453) (17,299,649)
Effect of shares transferred into Employee
Benefit Trust (179,747) (97,977) (281,078)
------------------------------------------- ----------- ------------ ------------
Weighted average number of Ordinary
Shares at the end of the year 252,788,981 217,846,900 235,388,001
------------------------------------------- ----------- ------------ --------------
Diluted earnings per share before adjusting items of 5.2 pence
(30 June 2022: 7.9 pence, 31 December 2022: 11.3 pence) per share
is calculated by dividing the profit for the financial period,
after adjusting for non-controlling interests of GBP13.1 million
(30 June 2022: 17.2 million, 31 December 2022: GBP26.8 million), by
the weighted average number of shares in issue during the period of
252,788,981 (30 June 2022: 217,846,900, 31 December 2022:
235,388,001), plus potentially dilutive shares of 1,100,908 (30
June 2022: 788,660, 31 December 2022: 1,213,042), which totals
253,889,889 (30 June 2022: 218,635,560; 31 December 2022:
236,601,043).
Diluted earnings per share before adjusting items of 10.1 pence
(30 June 2022: 16.4 pence; 31 December 2022: 31.1 pence) per share
is calculated by dividing the profit for the financial period,
after adjusting for non-controlling interests of GBP25.7 million
(30 June 2022: GBP35.8 million; 31 December 2022: GBP73.6 million),
by the weighted average number of shares in issue during the period
of 252,788,981 (30 June 2022: 217,846,900; 31 December 2022:
235,388,001), plus potentially dilutive shares of 1,100,908 (30
June 2022: 788,660; 31 December 2022: 1,213,042), which totals
253,889,889 (30 June 2022: 218,635,560; 31 December 2022:
236,601,043).
Weighted average number of Ordinary Shares (diluted)
Unaudited Unaudited Audited
six months six months year ended
ended June ended June December
2023 2022 2022
Number Number Number
------------------------------------ ----------- ----------- -----------
Weighted average number of Ordinary
Shares 252,788,981 217,846,900 235,388,001
Potentially dilutive shares 1,100,908 788,660 1,213,042
------------------------------------ ----------- ----------- -----------
Weighted average number of Ordinary
Shares (diluted) 253,889,889 218,635,560 236,601,043
------------------------------------ ----------- ----------- -------------
8. Dividends
The Board has declared an interim dividend for 2023 of 2.6 pence
per qualifying Ordinary Share amounting to GBP6.6 million, to be
paid on 01 December 2023 to shareholders registered at the close of
business on 20 October 2023. The shares will be marked ex-dividend
on 19 October 2023.
9. Goodwill
Audited
Unaudited Unaudited December
June 2023 June 2022 2022
GBP'm GBP'm GBP'm
----------------------------------------- ---------- ---------- ---------
Net book value at start of period 322.6 78.5 78.5
Acquisition of a subsidiary - 230.3 244.1
Adjustments to purchase price allocation
(see note 19) 1.8 - -
----------------------------------------- ---------- ---------- ---------
Net book value at end of period 324.4 308.8 322.6
----------------------------------------- ---------- ---------- -----------
All goodwill has arisen from business combinations. The carrying
amount of goodwill is allocated across cash generating units
("CGUs") and these CGUs are independent sources of income streams
and represent the lowest level within the Group at which the
associated goodwill is monitored for management purposes. The
recoverable amount of the CGUs has been determined from a
value-in-use calculation using cash flow projections based on a
combination of individual financial five-year forecasts, containing
assumptions for revenue growth and operational gearing, and
perpetuity at appropriate long term growth rates of 2.4 per cent.
The long-term growth rate assumption reflects the long-term average
growth rate for the UK economy. The cash flow forecasts are
discounted back to present value using a market-based discount rate
to arrive at a value-in-use. The pre-tax discount rate used to
calculate the value-in-use was 16.2 per cent (June 2022: 14.3 per
cent).
The Directors have reviewed the recoverable amounts of the CGUs,
and considered possible impacts that might arise from a range of
uncertainties, including the ongoing challenges in the construction
industry and the costs of climate change. The post-tax discount
rate is 9.4 per cent (pre-tax 16.2 per cent). The Group has two
material CGUs, Marshalls (the landscaping and building products
businesses) and Marley. The recoverable amount is compared to
carrying value of non-current assets of the CGU (and directly
attributable deferred taxation) including goodwill. This review did
not indicate any impairment of the carrying amount of the
non-current assets in either CGU.
Marley was acquired in 2022 and consequently the impairment
review is more sensitive to changes in assumptions than the
Marshalls CGU. Applying a sensitivity to the Marley assessment,
based on a higher post-tax discount rate of 10 per cent, results in
headroom of GBP52 million. The breakeven point arising from a
higher discount rate that would indicate an impairment would occur
at a post-tax rate of 10.7 per cent. The compound annual growth
rate ('CAGR') in the Marley five-year forecast is 11.7 per cent,
which has been estimated by the directors based on past performance
of the cash-generating unit and their expectations of market
developments and opportunities. The directors estimate that a
decrease in the CAGR to 6.3 per cent would reduce the headroom in
the Marley GCU to nil based on a post-tax discount rate of 9.4 per
cent (the breakeven CAGR being 9.0 per cent based on a 10 per cent
post-tax discount rate).
10. Intangible assets
Audited
Unaudited Unaudited December
June 2023 June 2022 2022
GBP'm GBP'm GBP'm
---------------------------------- ---------- ---------- ---------
Net book value at start of period 237.1 16.5 16.5
Acquisition of a subsidiary - 228.2 228.2
Additions 1.2 0.4 2.2
Amortisation (6.1) (3.0) (9.1)
Impairment - - (0.7)
---------------------------------- ---------- ---------- ---------
Net book value at end of period 232.2 242.1 237.1
---------------------------------- ---------- ---------- -----------
Amortisation includes GBP5.2 million (six months ended June
2022: GBP2.1 million; year ended December 2022: GBP7.4 million)
relating to intangible assets arising on acquisitions that is
accounted for as an adjusting item (see note 4). The impairment in
the year ended December 2022 represents the assets being written
down to fair value less cost to sell of GBP0.7 million in relation
to the Group's Belgian subsidiary (see note 4). Included in
software additions is GBP0.8 million (six months ended June 2022:
GBP1.0 million; year ended December 2022: GBP1.8 million) of own
work capitalised.
11. Property, plant and equipment
Audited
Unaudited Unaudited December
June 2023 June 2022 2022
GBP'm GBP'm GBP'm
---------------------------------- ---------- ---------- ---------
Net book value at start of period 266.5 173.9 173.9
Acquisition of a subsidiary - 111.3 96.2
Additions 7.7 10.5 28.4
Depreciation (10.9) (10.1) (21.8)
Impairment (4.8) - (9.9)
Other movements (2.1) (0.2) (0.3)
---------------------------------- ---------- ---------- ---------
Net book value at end of period 256.4 285.4 266.5
---------------------------------- ---------- ---------- -----------
Impairment in the half year ended June 2023 represents the
assets being written down to fair value less cost to sell of GBP4.8
million (year ended December 2022: GBP8.8 million) in relation to
major restructuring exercises at certain facilities in the Group's
network. In addition, in the year ended December 2022, a GBP1.1
million impairment charge was recorded in relation to the Group's
Belgian subsidiary (see note 4).
12. Retirement benefit asset
The amounts recognised in the balance sheet in respect of the
defined benefit asset are as follows:
Audited
Unaudited Unaudited December
June 2023 June 2022 2022
GBP'm GBP'm GBP'm
--------------------------------------- ---------- ---------- ---------
Present value of Scheme liabilities (219.1) (262.4) (232.5)
Fair value of Scheme assets 245.2 306.1 254.9
--------------------------------------- ---------- ---------- ---------
Net amount recognised (before deferred
tax) 26.1 43.7 22.4
--------------------------------------- ---------- ---------- ---------
The Company sponsors a funded defined benefit 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 interest 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 the 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 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 three
years. The next actuarial valuation is being carried out with an
effective date of 5 April 2024. 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. The last formal actuarial valuation was
carried out as at 5 April 2021 which resulted in a surplus of
GBP24.3 million, on a technical provisions basis. The Company has
agreed with the Trustee that no cash contributions are payable
under the funding plan.
The charge recognised in the income statement in respect of the
Scheme is included in financial expenses and totalled GBP1.7
million for the six months ended June 2023 (six months ended June
2022: GBPnil million; year ended December 2022: GBP0.1 million).
Net interest expense on the defined benefit pension scheme is
disclosed net of Company recharges for scheme administration. In
the six months ended 30 June 2023, this expense included a one-off,
non-cash, technical accounting charge of GBP1.4 million relating to
the resolution of a review into historical benefit issues. This
charge has been accounted for as an adjusting item, see notes 4 and
5 for further details.
13. Lease liabilities
Audited
Unaudited Unaudited December
June 2023 June 2022 2022
GBP'm GBP'm GBP'm
----------------------------------------- ---------- ---------- ---------
Analysed as:
Amounts due for settlement within twelve
months 8.3 8.7 9.8
Amounts due for settlement after twelve
months 37.1 35.4 36.1
----------------------------------------- ---------- ---------- ---------
45.4 44.1 45.9
----------------------------------------- ---------- ---------- ---------
The Group does not face a significant liquidity risk with regard
to its lease liabilities. The interest expense on lease liabilities
amounted to GBP1.3 million (six months ended June 2022: GBP1.1
million; year ended December 2022: GBP2.4 million). Lease
liabilities are calculated at the present value of the lease
payments that are not paid at the commencement date. For the half
year ended 30 June 2023, the average effective borrowing rate was
3.5 per cent (June 2022: 3.3 per cent, December 2022: 3.4 per
cent). Interest rates are fixed at the contract date. All leases
are on a fixed repayment basis and no arrangements have been
entered into for contingent rental payments.
The total cash outflow in relation to leases amounts to GBP7.5
million (six months ended June 2022: GBP6.0 million; year ended
December 2022: GBP13.5 million). The total cash outflow in relation
to short-term and low value leases was GBP3.9 million (six months
to June 2022: GBP3.5 million; year ended December 2022: GBP7.0
million).
14. Interest bearing loans and borrowings
Audited
Unaudited Unaudited December
June 2023 June 2022 2022
GBP'm GBP'm GBP'm
------------------------ ---------- ---------- ---------
Analysed as:
Current liabilities - - -
Non-current liabilities 250.0 286.5 247.0
------------------------ ---------- ---------- ---------
250.0 286.5 247.0
------------------------ ---------- ---------- -----------
Interest bearing loans and borrowings are stated net of
unamortised debt arrangement fees of GBP2.5 million (June 2022:
GBP3.3 million; December 2022: GBP2.9 million).
The total syndicated bank facility at June 2023 was GBP370.0
million (June 2022: GBP370.0 million; December 2022: GBP370.0
million), of which GBP117.5 million (June 2022: GBP80.2 million;
December 2022: GBP120.1 million) remained unutilised. The undrawn
facility available at June 2023 expires between two and five
years.
The Group's committed bank facilities are charged at variable
rates based on SONIA plus a margin. The Group's bank facility
continues to be aligned with the current strategy to ensure that
headroom against the available facility remains at appropriate
levels and are structured to provide committed medium-term
debt.
Marshalls is party to a reverse factoring finance arrangement
between a third-party UK bank and one of the Group's key customers.
The principal relationship is between the customer and its partner
bank. The agreement enables Marshalls to benefit from additional
credit against approved invoices and, in practice, this provides a
facility of up to GBP15 million which the Group utilises
periodically in order to help manage its short-term funding
requirements. The credit risk is retained by the customer and
Marshalls pays a finance charge upon utilisation.
15. Analysis of net debt
Audited
Unaudited Unaudited December
June 2023 June 2022 2022
GBP'm GBP'm GBP'm
------------------------- ---------- ---------- ---------
Cash at bank and in hand 65.4 78.3 56.3
Debt due within 1 year - - -
Debt due after 1 year (250.0) (286.5) (247.0)
Lease liabilities (45.4) (44.1) (45.9)
------------------------- ---------- ---------- ---------
(230.0) (252.3) (236.6)
------------------------- ---------- ---------- -----------
16. Reconciliation of net cash flow to movement in net debt
Unaudited Unaudited Audited
six months six months year ended
ended June ended June December
2023 2022 2022
GBP'm GBP'm GBP'm
---------------------------------------------- ----------- ----------- -----------
Net increase / (decrease) in cash equivalents 10.6 2.7 (19.3)
Cash (inflow) / outflow from movement
in bank borrowings (3.0) 46.6 86.2
On acquisition of subsidiary undertakings - (259.5) (259.5)
On disposal of subsidiary undertakings (1.4) - -
Cash outflow from lease repayments 6.2 4.9 11.1
New leases entered into (11.0) (6.0) (14.0)
Lease liability terminated on disposal
of subsidiary undertaking 5.3
Effect of exchange rate fluctuations (0.1) 0.1 -
---------------------------------------------- ----------- ----------- -----------
Movement in net debt in the period 6.6 (211.2) (195.5)
Net debt at beginning of the period (236.6) (41.1) (41.1)
---------------------------------------------- ----------- ----------- -----------
Net debt at end of the period (230.0) (252.3) (236.6)
---------------------------------------------- ----------- ----------- -----------
17. Reconciliation of profit after taxation to cash generated from operating activities
Unaudited Unaudited Audited
six months six months year ended
ended June ended June December
2023 2022 2022
Notes GBP'm GBP'm GBP'm
---------------------------------------- ----- ----------- ----------- -----------
Profit after taxation 12.9 17.4 26.5
Income tax expense on continuing
operations 6 7.7 8.6 17.1
Income tax credit on adjusting items 6 (3.9) (2.1) (6.4)
---------------------------------------- ----- ----------- ----------- -----------
Profit before tax 16.7 23.9 37.2
Adjustments for:
Depreciation of property, plant
and equipment 11 10.9 10.1 21.8
Asset impairments 4 4.8 - 14.0
Depreciation of right-of-use assets 5.1 5.3 11.3
Amortisation 0.9 0.9 1.8
Adjusting items 4 10.3 20.7 39.2
Gain on sale of property, plant
and equipment (0.7) (0.4) (1.2)
Equity settled share-based payments 1.4 0.8 1.3
Financial income and expenses (net) 5 10.1 3.4 10.7
---------------------------------------- ----- ----------- ----------- -----------
Operating cash flow before changes
in working capital 59.5 64.7 136.1
(Increase)/decrease in trade and
other receivables (16.3) (6.3) 22.9
Increase in inventories (6.7) (18.6) (14.0)
Increase/(decrease) in trade and
other payables 3.9 (12.2) (20.8)
Adjusting items paid (1.6) (15.0) (17.4)
---------------------------------------- ----- ----------- ----------- -----------
Cash generated from operations 38.8 12.6 106.8
Financial expenses paid (6.8) (2.8) (9.9)
Income tax paid (8.2) (8.0) (11.6)
---------------------------------------- ----- ----------- ----------- -----------
Net cash flow from operating activities 23.8 1.8 85.3
---------------------------------------- ----- ----------- ----------- -----------
18. 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 2023
is shown below:
Book value Fair value
Unaudited Unaudited Audited Unaudited Unaudited Audited
six months six months year ended six months six months year ended
ended June ended June December ended June ended June December
2023 2022 2022 2023 2022 2022
GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
Trade and other receivables 122.3 136.8 113.5 122.3 136.8 113.5
Cash and cash equivalents 65.4 78.2 56.3 65.4 78.2 56.3
Bank loans (250.0) (286.5) (247.0) (243.2) (276.9) (259.2)
Trade payables, other payables
and
provisions (135.0) (134.1) (136.5) (135.0) (134.1) (136.5)
Derivatives 6.4 1.5 3.7 6.4 1.5 3.7
Contingent consideration (7.6) (4.9) (8.9) (7.6) (4.9) (8.9)
-------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
Financial instrument assets
and
liabilities - net (198.5) (209.0) (218.9)
Non-financial instrument assets
and
liabilities - net 879.1 914.8 880.0
-------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
Net assets 680.6 705.8 661.1
-------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
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. Other than contingent consideration, which uses a level
three basis, all use level two valuation techniques.
(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) Trade and other receivables/payables
For receivables/payables with a remaining life of less than one
year, the notional amount is deemed to reflect the fair value. All
other receivables/payables are discounted to determine the fair
value.
(d) Contingent consideration
The contingent consideration has been calculated based on the
Group's expectation of what it will pay in relation to the
post-acquisition performance of the acquired entities.
(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'm GBP'm GBP'm GBP'm
------------------------------- -------- -------- -------- --------
June 2023
Derivative financial assets - 6.4 - 6.4
Contingent consideration - - (7.6) (7.6)
------------------------------- -------- -------- -------- --------
- 6.4 (7.6) 1.2
------------------------------- -------- -------- -------- --------
June 2022
Derivative financial assets - 1.5 - 1.5
Contingent consideration - (4.9) (4.9)
------------------------------- -------- -------- -------- --------
- 1.5 (4.9) (3.4)
------------------------------- -------- -------- -------- --------
December 2022
Derivative financial assets - 3.7 - 3.7
Contingent consideration - - (8.9) (8.9)
------------------------------ -------- -------- -------- --------
- 3.7 (8.9) (5.2)
------------------------------ -------- -------- -------- --------
19. Acquisition of subsidiary
On 29 April 2022 Marshalls Group Limited acquired 100 per cent
of the issued share capital of Marley Group plc, a leader in the
manufacture and supply of pitched roofing systems to the UK
construction market. Marley Group plc operates within the UK and is
registered in England and Wales.
The Group concluded its review of the fair value of assets and
liabilities acquired, and final adjustments were made to the
provision assessment that was disclosed in the 2022 Annual Report
in note 25 on page 182. These increased the provisions for deferred
tax and contingent consideration together with an increase in
goodwill of GBP1.8 million.
20. Disposal of subsidiary
On 13 April 2023, the Group sold its interest in Marshalls NV,
its former Belgian subsidiary, for a nominal sum. The sale resulted
in a profit on disposal of GBP0.6 million, which has been accounted
for as an adjusting item (see note 4). This business contributed
revenue of GBP21 million and a loss before taxation of GBP1.1
million in 2022. In the period until the disposal on 13 April 2023,
the business generated revenue of GBP5.0 million and a loss before
taxation of GBP0.6 million.
21. Alternative performance measures
The APMs set out by the Group together with an explanation of
how they are calculated and why the Board use them is set out
below.
APM Definition and purpose
------------------------ ------------------------------------------------------------------
Adjusted operating These performance measures are all calculated using the
profit, adjusted profit relevant statutory measure and are stated after adding
before tax, adjusted back adjusting items. The Group's accounting policy on
profit after tax and adjusting items is set out in note 1, basis of preparation.
adjusted earnings per The Directors assess the performance of the Group using
share these measures including when considering dividend payments.
------------------------ ------------------------------------------------------------------
EBITA and adjusted EBITA is earnings before interest, taxation and amortisation
EBITA and provides users with further information about the
profitability of the business before financing costs,
taxation, and amortisation. Adjusted EBITA is stated after
adding back adjusting items.
------------------------ ------------------------------------------------------------------
EBITDA and adjusted EBITDA is earnings before interest, taxation, depreciation,
EBITDA and amortisation and provides users with further information
about the profitability of the business before financing
costs, taxation, and non-cash charges. Adjusted EBITDA
is EBITDA stated after adding back adjusting items. It
provides users with additional information about the performance
of the Group.
------------------------ ------------------------------------------------------------------
Adjusted pre-IFRS16 Adjusted pre-IFRS16 EBITDA is earnings before interest,
EBITDA taxation, depreciation (but not right-of-use asset depreciation),
amortisation and after adding back adjusting items and
profit or losses on the sale of property, plant and equipment
and is used to assess compliance with the Group's banking
covenants.
------------------------ ------------------------------------------------------------------
Like-for-like revenue Like-for-like revenue growth is revenue growth generated
growth by the Group that includes revenue for acquired businesses
and excludes revenue for businesses that have been sold
for the corresponding periods in the prior year. This
provides users of the financial statements with an understanding
about revenue growth that is not impacted by acquisitions
or disposals.
------------------------ ------------------------------------------------------------------
Net debt Net debt comprises cash at bank and in hand, bank loans
and lease liabilities. It shows the overall net indebtedness
of the Group.
------------------------ ------------------------------------------------------------------
Pre-IFRS16 net debt Net debt comprises cash at bank and in hand and bank loans.
It shows the overall net indebtedness of the Group excluding
leases and is used in assessing compliance with the Group's
banking covenants.
------------------------ ------------------------------------------------------------------
Pre-IFRS16 net debt This is calculated by dividing pre-IFRS16 net debt by
leverage adjusted pre-IFRS16 EBITDA (on an annualised basis) to
provide a measure of leverage. It is used in assessing
compliance with the Group's banking covenants.
------------------------ ------------------------------------------------------------------
Adjusted return on Adjusted return on capital employed is calculated as adjusted
capital employed EBITA (on annualised basis) divided by shareholders' funds
plus net debt at the period end. It is designed to give
further information about the returns being generated
by the Group as a proportion of capital employed.
------------------------ ------------------------------------------------------------------
Adjusted operating This measure is net cash flow from operating activities
cash flow stated after adding back adjusting items paid, net financial
expenses paid, and taxation paid. It is used to calculate
the ratio of adjusted operating cash flow to adjusted
EBITDA.
------------------------ ------------------------------------------------------------------
Operating cash flow Operating cash flow conversion is calculated by dividing
conversion adjusted operating cash flow by adjusted EBITDA (both
on an annualised basis). Adjusted operating cash flow
is calculated by adding back adjusting items paid, net
financial expenses paid, and taxation paid. It illustrates
the rate of conversion of profitability into cash flow.
------------------------ ------------------------------------------------------------------
Reconciliations of IFRS reported income statement measures to
income statement APMs is set out in the following three tables. A
number of the APMs were stated on a proforma basis in 2022 to
include the relevant information for Marley for the period between
1 January 2022 and 28 April 2022 in order to show the measure as if
the business had been owned by the Group for the whole of 2022. A
reconciliation of operating profit to adjusted proforma pre-IFRS16
EBITDA is set out below.
Unaudited Unaudited Audited
six months six months year ended
ended June ended June December
2023 2022 2022
GBP'm GBP'm GBP'm
----------------------------------------------- ----------- ----------- -----------
Operating profit 26.8 27.3 47.9
Adjusting items (note 4) 15.1 20.7 53.2
----------------------------------------------- ----------- ----------- -----------
Adjusted operating profit 41.9 48.0 101.1
Amortisation (excluding amortisation
of intangible assets arising on acquisitions) 0.9 0.9 1.8
----------------------------------------------- ----------- ----------- -----------
Adjusted EBITA 42.8 48.9 102.9
Depreciation 16.0 15.4 33.1
----------------------------------------------- ----------- ----------- -----------
Adjusted EBITDA 58.8 64.3 136.0
Marley pre-acquisition EBITDA - 18.1 18.1
Profit on sale of property, plant and
equipment (0.7) (0.4) (1.2)
Right-of-use asset charges (6.2) (4.6) (11.1)
----------------------------------------------- ----------- ----------- -----------
Adjusted proforma pre-IFRS16 EBITDA 51.9 77.4 141.8
----------------------------------------------- ----------- ----------- -------------
A reconciliation of operating profit to adjusted EBITDA is set
out below.
Unaudited Unaudited Audited
six months six months year ended
ended June ended June December
2023 2022 2022
GBP'm GBP'm GBP'm
----------------------------------------------- ----------- ----------- -----------
Operating profit 26.8 27.3 47.9
Depreciation and amortisation 22.1 18.4 42.3
----------------------------------------------- ----------- ----------- -----------
Reported EBITDA 48.9 45.7 90.2
Adjusting items (excluding amortisation
of intangible assets arising on acquisitions) 9.9 18.6 45.8
----------------------------------------------- ----------- ----------- -----------
Adjusted EBITDA 58.8 64.3 136.0
----------------------------------------------- ----------- ----------- -------------
A reconciliation of operating profit to adjusted proforma EBITA
is set out below.
Unaudited Unaudited Audited
six months six months year ended
ended June ended June December
2023 2022 2022
GBP'm GBP'm GBP'm
----------------------------------------------- ----------- ----------- -----------
Operating profit 26.8 27.3 47.9
Amortisation 6.1 3.0 9.2
----------------------------------------------- ----------- ----------- -----------
EBITA 32.9 30.3 57.1
Adjusting items (excluding amortisation
of intangible assets arising on acquisitions) 9.9 18.6 45.8
----------------------------------------------- ----------- ----------- -----------
Adjusted EBITA 42.8 48.9 102.9
Marley pre-acquisition EBITA - 16.4 16.4
----------------------------------------------- ----------- ----------- -----------
Adjusted proforma EBITA 42.8 65.3 119.3
----------------------------------------------- ----------- ----------- -------------
Disclosures required under IFRS are referred to as on a reported
basis. Disclosures referred after adding back adjusting items basis
are restated and are used to provide additional information and a
more detailed understanding of the Group's results. Certain
measures are reported on an annualised basis to show the preceding
12-month period where seasonality can impact on the measure.
Like-for-like revenue growth
Unaudited Unaudited
six months six months
ended June ended June Change
2023 2022 %
GBP'm GBP'm
----------------------------- ----------- ----------- --------
Marshalls Landscape Products 174.1 211.3 (17.6)
Marshalls Building Products 87.2 95.9 (9.1)
Marley Roofing Products 92.8 99.9 (7.1)
----------------------------- ----------- ----------- --------
Like-for-like revenue 354.1 407.1 (13.0)
----------------------------- ----------- ----------- ----------
The Group sold its Belgian subsidiary on 13 April 2023 and
therefore Marshalls Landscape Products revenue in the first six
months of 2022 has been restated to exclude GBP5.5 million of
revenue generated by that subsidiary between 14 April and 30 June
2022. Marley revenue in 2022 has been restated to include GBP64.3
million of revenue for the pre-acquisition period from 1 January
2022 to 28 April 2022. No adjustments have been to Marshalls
Building Products revenue.
Net debt
Net debt comprises cash at bank and in hand, bank loans and
leasing liabilities. An analysis of net debt is provided in note
15. Net debt on a pre-IFRS 16 basis has been disclosed to provide
additional information and to align with reporting required for the
Group's banking covenants. Net debt on both a reported basis and on
a pre-IFRS 16 basis is set out below:
Unaudited Unaudited Audited
six months six months year ended
ended June ended June December
2023 2022 2022
GBP'm GBP'm GBP'm
------------------------------- ----------- ----------- -----------
Net debt on a reported basis 230.0 252.3 236.6
IFRS 16 leases (45.4) (44.1) (45.9)
------------------------------- ----------- ----------- -----------
Net debt on a pre-IFRS16 basis 184.6 208.2 190.7
------------------------------- ----------- ----------- -------------
Pre-IFRS16 net debt leverage
Pre-IFRS16 net debt leverage is defined as pre-IFRS16 net debt
divided by adjusted pre-IFRS16 EBITDA (on an annualised basis).
Unaudited Unaudited Unaudited
six months six months 12 months Audited year
ended June ended December ended June ended December
2023 2022 2023 2022
GBP'm GBP'm GBP'm GBPm
----------------------------- ----------- --------------- ----------- ---------------
Adjusted pre-IFRS16 EBITDA 51.9 64.5 116.4 141.8
Pre-IFRS16 net debt 184.6 190.7 184.6 190.7
----------------------------- ----------- --------------- ----------- ---------------
Pre-IFRS16 net debt leverage - - 1.6 1.4
----------------------------- ----------- --------------- ----------- -----------------
The adjusted pre- IFRS16 EBITDA for December 2022 has been
prepared on a proforma basis.
Return on capital employed ('ROCE')
ROCE is defined as EBITA (on an annualised basis) divided by
shareholders' funds plus net debt.
Unaudited Unaudited Unaudited
six months six months 12 months Audited year
ended June ended December ended June ended December
2023 2022 2023 2022
GBP'm GBP'm GBP'm GBPm
-------------------- ----------- --------------- ----------- ---------------
Adjusted EBITA 42.8 54.0 96.8 119.2
-------------------- ----------- --------------- ----------- ---------------
Shareholders' funds - - 680.6 661.1
Net debt - - 230.0 236.6
-------------------- ----------- --------------- ----------- ---------------
Capital employed - - 910.6 897.7
-------------------- ----------- --------------- ----------- ---------------
ROCE - - 10.6% 13.3%
-------------------- ----------- --------------- ----------- -----------------
Operating cash flow conversion
Operating cash flow conversion is the ratio of adjusted
operating cash flow to adjusted EBITDA (on an annualised basis) and
is calculated as set out below:
Unaudited Unaudited Unaudited
six months six months 12 months Audited year
ended June ended December ended June ended December
2023 2022 2023 2022
GBP'm GBP'm GBP'm GBPm
------------------------------- ----------- --------------- ----------- ---------------
Net cash flow from operating
activities 23.8 83.5 107.3 85.3
Adjusting items paid 1.6 2.4 4.0 17.4
Net financial expenses
paid 6.8 7.1 13.9 9.9
Taxation paid 8.2 3.6 11.8 11.6
------------------------------- ----------- --------------- ----------- ---------------
Adjusted operating cash
flow 40.4 96.6 137.0 124.2
------------------------------- ----------- --------------- ----------- ---------------
Adjusted EBITDA 58.8 71.7 130.5 136.0
------------------------------- ----------- --------------- ----------- ---------------
Operating cash flow conversion - - 105% 91%
------------------------------- ----------- --------------- ----------- -----------------
22. Principal risks and uncertainties
Risk management is the responsibility of the Marshalls plc Board
and is a key factor in the delivery of the Group's strategic
objectives. The Board establishes the culture of effective risk
management and is responsible for maintaining appropriate systems
and controls. The Board sets the risk appetite and determines the
policies and procedures that are put in place to mitigate exposure
to risks. The Board plays a central role in the Group's Risk Review
process, which covers emerging risks and incorporates scenario
planning and detailed stress testing.
There continue to be external risks and significant volatility
in UK and world markets with high and persistent levels of cost
inflation and an uncertain outlook. In an addition to the
macro-economic environment, the key risks for the Group are cyber
security, competitor activity and an increased focus in climate
change and other ESG related issues. In all these cases, specific
assessments continue to be reviewed, certain new operating
procedures have been implemented and mitigating controls continue
to be reviewed as appropriate. A summary of these risks is set out
below.
-- Macro-economic uncertainty - The Group is dependent on the level
of activity in its end markets. Accordingly, it is susceptible
to economic downturn, the impact of Government policy, changes
in interest rates, the increasing impact of wider geo-political
factors (including the conflict in Ukraine) and volatility in
world markets. The Group closely monitors trends and lead indicators,
invests in market research and is an active member of the Construction
Products Association. The Group's resilience and flexibility
in response to macro-economic uncertainty has been a major focus
during the period and action has been taken to reduce capacity
and costs in the challenging macro-environment.
-- Cyber security - the risk of a cyber security attack continues
to increase with more incidents being reported in UK businesses.
In response, we have appointed a dedicated Head of Cyber Security
and have a risk-based approach to the continued development of
our cyber security controls.
-- Competitor activity - Whilst the Group has recovered input price
inflation in its selling prices, this has become more challenging
due to weaker demand levels resulting in heightened competition
for volumes in the marketplace. In order to protect profitability,
the Group is focusing on reducing its cost base and simplifying
processes with the aim of being easier to deal with whilst continuing
to invest in its brands, specification selling and new product
development.
-- Climate change and other ESG issues - to ensure the effective
management of all relevant risks and opportunities. The Group
remains committed to full transparency for all stakeholders and
the Group's sustainability objectives remain core to the Group's
business model and strategy. The Group employs experienced, dedicated
staff to support our ESG agenda.
The other principal risks and uncertainties that could impact
the business for the remainder of the current financial year are
those set out in the 2022 Annual Report and Accounts on pages 69 to
75. These cover the strategic, financial and operational risks and
have not changed significantly during the period. Strategic risks
include those relating to the ongoing Government policy, general
economic conditions, the actions of customers, suppliers and
competitors, and weather conditions. The Group also continues to be
subject to various financial risks in relation 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 cyber security and
information technology, the effect of legislation or other
regulatory actions and new business strategies.
The Group continues to monitor all these risks and pursue
policies that take account of, and mitigate, the risks where
possible.
Responsibility Statement
The following statement is given by each of the directors,
namely Vanda Murray OBE, Chair; Simon Bourne, Chief Operating
Officer; Angela Bromfield, Non-executive Director; Martyn Coffey,
Chief Executive; Avis Darzins, Non-Executive Director; Diana
Houghton, Non-executive Director; Justin Lockwood, Chief Financial
Officer; and Graham Prothero, Senior Non-executive Director.
The Directors confirm 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 contained in UK adopted IFRS, give a true and fair view of
the assets, liabilities, financial position and profit and loss
account of the issuer as required by DTR 4.2.4R
-- The Half Year Report includes a fair review of the information
required under DTR 4.2.7R (indication of important events during
the six months and description of the principal risks and uncertainties
for the remaining six months of the year); and
-- The Half Year Report includes a fair review of the information
required by DTR 4.2.8 (disclosure related parties' transactions
and changes therein).
Board members
As at 30 June 2023, the Group's Board members were as
follows:
Vanda Murray OBE Chair
Simon Bourne Chief Operating Officer
Angela Bromfield Non-Executive Director
Martyn Coffey Chief Executive
Avis Darzins Non-Executive Director
Diana Houghton Non-Executive Director
Justin Lockwood Chief Financial Officer
Graham Prothero Senior Non-Executive Director
The responsibilities of the Directors during their period of
service were as set out on pages 133 and 134 of the 2022 Annual
Report.
By order of the Board
Shiv Sibal
Group Company Secretary
16 August 2023
Independent Review Report to Marshalls plc
Conclusion
We have been engaged by the Company to review the condensed set
of Financial Statements in the Half Year Financial Report for the
six months ended 30 June 2023 which comprises the Income Statement,
the Balance Sheet, the Statement of Changes in Equity, the Cash
Flow Statement and related notes 1 to 22.
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 six months ended 30 June
2023 is not prepared, in all material respects, in accordance with
United Kingdom adopted International Accounting Standard 34 and the
Disclosure Guidance and Transparency Rules of the United Kingdom's
Financial Conduct Authority.
Basis for Conclusion
We conducted our review in accordance with International
Standard on Review Engagements (UK) 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 (ISRE (UK) 2410). A review of interim 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 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.
As disclosed in note 1, the annual Financial Statements of the
Group are prepared in accordance with United Kingdom adopted
International Accounting Standards. The condensed set of Financial
Statements included in this Half-Year Financial Report has been
prepared in accordance with United Kingdom adopted International
Accounting Standard 34, "Interim Financial Reporting".
Conclusion Relating to Going Concern
Based on our review procedures, which are less extensive than
those performed in an audit as described in the Basis for
Conclusion section of this report, nothing has come to our
attention to suggest that the Directors have inappropriately
adopted the going concern basis of accounting or that the Directors
have identified material uncertainties relating to going concern
that are not appropriately disclosed.
This conclusion is based on the review procedures performed in
accordance with ISRE (UK) 2410; however future events or conditions
may cause the entity to cease to continue as a going concern.
Responsibilities of 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.
In preparing the Half-Year Financial Report, the Directors are
responsible for assessing the Group's ability to continue as a
going concern, disclosing as applicable, matters related to going
concern and using the going concern basis of accounting unless the
Directors either intend to liquidate the company or to cease
operations, or have no realistic alternative but to do so.
Auditor's Responsibilities for the review of the financial
information
In reviewing the Half-Year Financial Report, we are responsible
for expressing to the Group a conclusion on the condensed set of
Financial Statements in the Half-Year Financial Report. Our
conclusion, including our Conclusion Relating to Going Concern, are
based on procedures that are less extensive than audit procedures,
as described in the Basis for Conclusion paragraph of this
report.
Use of our report
This report is made solely to the Company in accordance with
ISRE (UK) 2410. 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.
Deloitte LLP
Statutory Auditor
Leeds, United Kingdom
16 August 2023
Shareholder Information
Financial calendar
Half year results for the year ending
December 2023 Announced 16 August 2023
Interim dividend for the year ending
December 2023 Payable 1 December 2023
Results for the year ending December
2023 Announcement March 2024
Report and accounts for the year ending
December 2023 April 2024
Annual General Meeting May 2024
--------------------------------------- ------------------------
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 Registrars 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 .
Cautionary Statement
This Preliminary Results announcement 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
announcement should be construed as a profit forecast.
Directors' Liability
Neither the Company nor the Directors accept any liability to
any person in relation to the contents of this Preliminary Results
announcement except to the extent that such liability arises 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 Market Act 2020.
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Marshalls (LSE:MSLH)
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Marshalls (LSE:MSLH)
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