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Marshalls PLC  -  MSLH   

Half-year Report

Released 07:00 17-Aug-2017

RNS Number : 2023O
Marshalls PLC
17 August 2017
 

Interim results for the half year ended 30 June 2017

 

Marshalls plc, the specialist Landscape Products group, announces its half year results

 

Financial Highlights

Half Year ended

30 June 2017

Half Year ended

30 June 2016

Increase

%





Revenue

£219.1m

£202.4m

8

EBITDA

£36.7m

£32.4m

13

Operating profit

£29.8m

£26.0m

15

Profit before tax

£29.1m

£25.1m

16





Basic EPS

12.04p

10.36p

16





Interim dividend

3.40p

2.90p

17





ROCE

23.7%

19.9%

↑ 380

basis points

Net cash / (debt)

£1.2m

(£8.8m)


 

Highlights:

Revenue up 8% to £219.1 million (2016: £202.4 million)

EBITDA up 13% to £36.7 million (2016: £32.4 million)

Continued improvement in operating margins to 13.6% (2016: 12.8%)

Profit before tax up 16% to £29.1 million (2016: £25.1 million)

Strong operating cash flow with sustainable working capital improvements

Return on capital employed for the 12 months ended 30 June 2017 up 19% (380 basis points) to 23.7% (2016: 19.9%)

EPS up 16% to 12.04 pence (2016: 10.36 pence)

Interim dividend increased by 17% to 3.40 pence (2016: 2.90 pence) per share

Net cash of £1.2 million, after payment of £17.4 million final and supplementary dividend (30 June 2016: £8.8 million net debt)

The Board remains confident of delivering its expectations for 2017



The 2020 Strategy remains on track:

EBITDA growth continues alongside improved ROCE and strengthened brand

Self help programme well advanced

Organic capital investment continues

Research and development expenditure increased in the period

Smaller UK Businesses in line with expectations

Focus on innovation and new product development driving sales growth, particularly in Commercial

Digital strategy driving real benefits across the business

Acquisition targets continue to be pursued

 

Commenting on these results, Martyn Coffey, Chief Executive, said:

 

"The Construction Products Association's ("CPA") recent Summer Forecast predicts growth in UK market volumes of 1.9 per cent in 2017, which represents a slight improvement on their Spring Forecast. The Group continues to outperform the CPA growth figures and the underlying short to medium term market indicators remain supportive.  The CPA's 2018 forecast has recently been reduced, which reflects the continuing wider economic uncertainty.

 

The Group continues to invest in product innovation and service delivery initiatives and is well placed to drive through further sustainable improvements in operational efficiency gains. The Board believes that Marshalls' innovative product range and strong market positions will continue to support growth and operational profit improvements during the delivery of the 2020 Strategy and will drive future shareholder returns. The Group's focus remains the delivery of the growth initiatives set out in the 2020 Strategy, whilst maintaining a strong balance sheet and a flexible capital structure.

 

The Board remains confident of achieving its expectations for 2017."

 

There will be a presentation for analysts and investors today at 9.00 am with a telephone dial in facility available tel: number +44 (0)330 336 9411 - Access Code: 1815633.  Marshalls' Analyst Presentation will be available for analysts and investors who are unable to attend the presentation. The presentation can be viewed on Marshalls' website at www.marshalls.co.uk.

 

 

  Enquiries:

Martyn Coffey

Chief Executive

Marshalls plc

01422 314777

Jack Clarke

 

Finance Director

Marshalls plc

01422 314777

Andrew Jaques


MHP Communications

020 3128 8540

James White




 

 

INTERIM MANAGEMENT REPORT

 

Group Results

 

Marshalls' revenue for the 6 months ended 30 June 2017 grew by 8 per cent to £219.1 million (2016: £202.4 million). The Group has continued to experience strong order intake with the underlying indicators remaining positive in Marshalls' end markets. The Group's positive cash generation has continued.

 

Sales to the Domestic end market continued to grow particularly strongly and increased by 17 per cent compared with the prior year period. Domestic sales now represent approximately 34 per cent of Group sales. The survey of domestic installers at the end of June 2017 revealed continuing strong order books of 11.9 weeks (June 2016: 11.7 weeks).

 

Sales to the Public Sector and Commercial end market, which represent approximately 60 per cent of Group sales, increased by 3 per cent compared with the prior year period. The Group continues to target those parts of the market where higher levels of growth are anticipated including New Build Housing, Water Management and Rail.

 

Sales in the International business increased by 25 per cent in the 6 months ended 30 June 2017 and represent 6 per cent of Group sales. Revenue increased in all our main International markets with the new sales office in Dubai having a positive impact on sales and order generation in the Middle East. Ongoing progress is being made to develop our International business and the Group continues to improve its global infrastructure, supply chains and routes to market.

 

Operating profit increased to £29.8 million (2016: £26.0 million) and EBITDA improved to £36.7 million (2016: £32.4 million).

 

Group return on capital employed ("ROCE") was 23.7 per cent for the 12 months ended 30 June 2017, which represents an increase of 380 basis points compared with the prior year. ROCE is defined as EBITA divided by shareholders' funds plus cash / net debt.

 

Net financial expenses were £0.7 million (2016: £0.8 million) and interest was covered 42.4 times (2016: 31.4 times).  The effective tax rate was 18.8 per cent (2016: 19.1 per cent).

 

Basic EPS was 12.04 pence (2016: 10.36 pence) per share. The interim dividend will be 3.40 pence (2016: 2.90 pence) per share, an increase of 17 per cent, reflecting the strong cash generation and the Group's continuing strategy of maintaining a progressive dividend policy.

 

The Group continues to deliver strong operational cash flows through the ongoing tight control of inventory and effective management of working capital. Significant cash generation has seen the Group move to a net cash position of £1.2 million at 30 June 2017. This cash position compares with net debt of £8.8 million at 30 June 2016 and is after the payment of the 2016 final and supplementary dividends of £17.4 million made to shareholders on 30 June 2016. The equivalent dividends for the prior period were paid on 8 July 2016.  The intention is to normalise this payment being made during the first half of the year going forward.  Consequently, the net cash position at 30 June 2017 represents a like-for-like improvement of £27.4 million, compared with the prior year.

 

2020 Strategy

 

Good progress continues to be made delivering the growth objectives of the 2020 Strategy and increasing the Group's ROCE. The Group is continuing to invest in the Marshalls brand and to prioritise organic capital expenditure projects.  We continue to increase research and development and new product development which are delivering an encouraging pipeline of new products. The 2020 Strategy remains driven by a focus on innovation and new product development, and the aim is to extend the product range and provide more integrated solutions to improve the customer experience and differentiate the Marshalls brand.

 

Our strategy looks to maintain a strong balance sheet, a flexible capital structure and a clear capital allocation policy that both drives growth and rewards shareholders. Our acquisition focus remains centred on Minerals and the protective Street Furniture and Water Management markets. We have identified a good pipeline of potential acquisition targets but remain selective and will not compromise on the investment criteria and the hurdle rates we have in place.  

 

The Group's key priority is to deliver improvements in profit margins across all businesses and end markets through the continued focus on service, quality, design, innovation and a commitment to research and development and sustainability, with the ultimate aim of driving through sustainable cost reductions and improvements in operational efficiency.

 

Marshalls' digital strategy is increasing in its importance across all Group operations. The strategy combines digital trading, digital marketing and digital business and is focused on the customer experience and the key touchpoints therein.  Web and mobile applications increasingly allow the customer to model their requirements, allow digital access to the registered installer base and allow real-time visibility of stock. The Marshalls Premier Mortars "Ordering App" is a good example of how our digital strategy is driving growth through changing technology and working practices.

 

Operating Performance

 

Operating margins increased to 13.6 per cent in the 6 months ended 30 June 2017 (2016: 12.8 per cent), representing an improvement of 6.3 per cent year on year and reflecting improved operational efficiency in line with our 2020 Strategy.

 

Revenue increased by £15.8 million and operating profit by £3.4 million in the Landscape Products business, which serves both the Public Sector and Commercial and Domestic end markets. The increase in operating margins within the Landscape Products business is due to the delivery of sustainable cost reductions and operational efficiency improvements in line with our 2020 Strategy. Revenue in the Smaller UK Businesses for the 6 months ended 30 June 2017 decreased by £1.8 million compared with the prior period, primarily due to specific short-term issues in part of the Minerals business. However, despite the decrease in revenue, operating profit in the Smaller UK Businesses increased by 5 per cent. Increasing profitability in the Smaller UK Businesses is a key part of the 2020 Strategy and Street Furniture, Mineral Products and Stone Cladding remain important growth drivers for the Group.

 

In the Domestic end market, the Group continues to drive more sales through the Marshalls Register of approved domestic installers. The number of installer teams continues to grow and is now approximately 2,000. The Group remains committed to improving the product mix and to achieving a consistently high standard of quality, customer service and marketing support. The new rules regarding pension fund release continue to support growth in the Domestic end market with the total value of cash release from pensions continuing to grow. The average individual cash withdrawal from pension funds is around £9,000. The average cost of an installed driveway or patio is between £5,000 and £6,000 and this remains a popular use of pensions release funds.

 

In the Public Sector and Commercial end market, Marshalls' continuing strategy is to enhance its market leading position as a landscape products specialist. The Group's experienced technical and sales teams continue to promote a full range of integrated products and sustainable solutions to customers, architects and contractors. Commercial market confidence indicators have continued to improve over the last 12 months and the ABI's hard landscape lead indicator shows demand increasing over the next year. This indicator consolidates planning information for all the sub-sectors requiring hard landscaping. On average, there is a 12-month lag between contracts being awarded and the landscape products being required, so this provides 12-month advance information on likely future demand. The ABI continues to highlight Transport, Residential and Landscaping as the leading growth areas, which is firmly in line with the key focus areas of the Group's 2020 Strategy.

 

As a key part of the 2020 Strategy, the Group continues to focus on innovation and new product development to drive sales growth. Research and development expenditure in the 6 months ended 30 June 2017 was £1.7 million (2016: £1.6 million). Investment in research and development includes project engineering to enhance manufacturing capabilities, concrete and other materials technology innovations and extending the new product pipeline. Keypave and Urbex are 2 examples of recent successful new product solutions for the New Build Housing sector. Revenue from new products in the core Landscape Products business continues to strengthen and represented 14 per cent of Group sales in the 6 months ended 30 June 2017.

 

The Group's previously announced self help capital investment programme is an important part of our 2020 Strategy and will incur additional capital expenditure of £15 million over the next 3 years. The 2017 financial year is the first year of this enhanced investment, which is expected to deliver sustainable cost savings of £5 million per annum by 2019.  The detailed plan is on track and progressing well. The programme includes various projects within natural stone, block paving and automated material handling. Capital investment in property, plant and equipment in the 6 months ended 30 June 2017 totalled £7.9 million (2016: £5.8 million) and this compares with depreciation of £6.4 million (2016: £5.9 million).

 

Balance Sheet and Cash Flow

 

Net assets at 30 June 2017 were £222.6 million (June 2016: £204.9 million).

 

In the 6 months ended 30 June 2017 net cash flows from operating activities were £19.2 million (2016: £9.3 million). This strong cash generation delivered a net cash position of £18.6 million at 30 June 2017, before the dividend payments referred to above, and a reported post dividend net cash balance of £1.2 million (June 2016: £8.8 million net debt). The Group continues to focus on maintaining a strong balance sheet supported by robust capital disciplines. Strong cash management continues to be a high priority area. The Group operates tight control over business, operational and financial procedures, and continues to focus on inventory levels and the management of capital expenditure and trade receivables.

 

The Group's existing bank facilities ensure headroom against available facilities remains at appropriately conservative levels. Our committed facilities are currently in the process of being extended by 1 year to 2022 to enhance the maturity profile and, on 1 August 2017, the Group also renewed its short-term working capital facilities with RBS. Marshalls maintains a policy of having significant committed facilities in place with a positive spread of medium-term maturities. We have also secured additional facilities with our banking partners which would be available to fund "bolt-on" acquisitions.

 

The balance sheet value of the Group's defined benefit pension scheme was a surplus of £3.6 million at 30 June 2017 (December 2016: £4.3 million surplus; June 2016: £7.9 million surplus).  The surplus has been determined by the Scheme actuary using assumptions that are considered to be prudent and in line with current market levels.  During the last 6 months, the AA corporate bond rate reduced from 2.65 per cent to 2.55 per cent, in line with market movements. The expected rate of inflation reduced to 2.15 per cent from 2.20 per cent at 31 December 2016. The balance sheet value continues to benefit from the high proportion of liability-driven investments whose performance matches the liabilities.

 

The Group has established a new defined contribution pension scheme within a Master Trust operated by Aviva / Friends Life. The new Marshalls Retirement and Savings Plan was launched on 1 April 2017 and the transition process is now complete. This will provide a much improved pension proposition for the majority of Group employees.

 

Dividend

 

The Group has a progressive dividend policy with a stated objective of achieving up to 2 times dividend cover over the business cycle.  The Board has declared an interim dividend of 3.40 pence (June 2016: 2.90 pence) per share, an increase of 17 per cent, which reflects the Group's strong cash generation.  This dividend will be paid on 6 December 2017 to shareholders on the register at the close of business on 20 October 2017.  The ex-dividend date will be 19 October 2017.

 

Risks and Uncertainties

 

There are a number of potential risks and uncertainties which could have a material impact on the Group's performance over the remaining 6 months of the financial year and could cause actual results to differ materially from expected and historical results. The Board does not consider that the principal risks and uncertainties have changed since the publication of the Annual Report for the year ended 31 December 2016. A detailed explanation of the risks, and how the Group seeks to mitigate these risks, can be found on pages 20 to 24 of the 2016 Annual Report which is available at www.marshalls.co.uk/investor/annual-and-interim-reports.

 

Going concern

 

As stated in Note 1 of the 2017 Half Year Report, the Directors are satisfied that the Group has sufficient resources to continue in operation for the foreseeable future, a period of not less than 12 months from the date of this report. Accordingly, they continue to adopt the going concern basis in preparing the Half Year Report.

 

Outlook

 

The Construction Products Association's ("CPA") recent Summer Forecast predicts growth in UK market volumes of 1.9 per cent in 2017, which represents a slight improvement on their Spring Forecast. The Group continues to outperform the CPA growth figures and the underlying short to medium term market indicators remain supportive.  The CPA's 2018 forecast has recently been reduced, which reflects the continuing wider economic uncertainty.

 

The Group continues to invest in product innovation and service delivery initiatives and is well placed to drive through further sustainable improvements in operational efficiency gains. The Board believes that Marshalls' innovative product range and strong market positions will continue to support growth and operational profit improvements during the delivery of the 2020 Strategy and will drive future shareholder returns. The Group's focus remains the delivery of the growth initiatives set out in the 2020 Strategy, whilst maintaining a strong balance sheet and a flexible capital structure.

 

The Board remains confident of achieving its expectations for 2017.

 

Martyn Coffey

Chief Executive

 



 

Marshalls plc

Condensed Consolidated Income Statement

for the half year ended 30 June 2017

 



                     Half year

                     ended June

Year ended

December



2017

2016

2016


Notes

£'000

£'000

£'000

Revenue

2

219,131

202,371

396,922






Net operating costs

3

(189,299)

(176,402)

(349,283)



              

              

              

Operating profit

2

29,832

25,969

47,639

Financial expenses

4

(703)

(826)

(1,594)

Financial income

4

-

-

1



              

              

              

Profit before tax

2

29,129

25,143

46,046

Income tax expense

5

(5,477)

(4,812)

(8,539)



              

              

              

Profit for the financial period


23,652

20,331

37,507



              

              

              

Profit for the period





Attributable to:





  Equity shareholders of the Parent


23,779

20,411

37,350

  Non-controlling interests


(127)

(80)

157



              

              

              



23,652

20,331

37,507



              

              

              

Earnings per share





Basic

6

12.04p

10.36p

18.95p



              

              

              

Diluted

6

11.94p

10.22p

18.61p



               

               

              

Dividend





     Pence per share

7

5.80p

4.75p

7.65p

     Supplementary


3.00p

2.00p

2.00p



              

              

              

     Dividends declared

7

17,387

13,314

19,034



              

              

              

 

All results relate to continuing operations.

 

 

Marshalls plc

Condensed Consolidated Statement of Comprehensive Income

for the half year ended 30 June 2017

 


                Half year

                ended June

Year ended

December


2017

£'000

2016

£'000

2016

£'000





Profit for the financial period

23,652

20,331

37,507


              

              

              

Other comprehensive (expense) / income




Items that will not be reclassified to the Income Statement:




Remeasurement of the net defined benefit liability

(517)

4,759

1,394

Deferred tax arising

88

(857)

(237)


              

              

              

Total items that will not be reclassified to the Income

  Statement

(429)

3,902

1,157

 

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

(704)

412

1,123

Fair value of cash flow hedges transferred to the Income      Statement

(251)

1,220

1,681

Deferred tax arising

159

(327)

(561)

Exchange difference on retranslation of foreign currency net

investment

135

2,275

2,729

Exchange movements associated with borrowings

 (412)

(2,158)

(2,641)

Foreign currency translation differences - non-controlling interests

213

137

169


              

              

              

Total items that are or may be reclassified subsequently to

the Income Statement

(860)

1,559

2,500


              

              

              

Other comprehensive (expense) / income for the period,

net of income tax

(1,289)

5,461

3,657


              

              

              

Total comprehensive income for the period

22,363

25,792

41,164


              

              

              

Attributable to:




  Equity shareholders of the Parent

22,277

25,735

40,838

  Non-controlling interests

86

57

326


              

              

              


22,363

25,792

41,164


              

              

              

 

Marshalls plc

Condensed Consolidated Balance Sheet

as at 30 June 2017

 




      June

December

 


Notes


2017

£'000

2016

£'000

2016

£'000

 

Assets






 

Non-current assets






 

Property, plant and equipment



147,514

147,736

146,995

 

Intangible assets



40,386

40,091

40,093

 

Trade and other receivables



208

415

208

 

Employee benefits

8


3,622

7,892

4,276

 

Deferred taxation assets



2,390

1,364

1,821

 




             

             

              

 

194,120

197,498

193,393

 




              

              

              

 

Current assets






 

Inventories



70,380

67,448

68,713

 

Trade and other receivables



74,295

65,847

49,010

 

Cash and cash equivalents



26,862

25,631

20,681

 

Assets classified as held for sale



-

2,519

624

 

Derivative financial instruments



-

-

657

 




              

              

             

 




171,537

161,445

139,685

 




              

              

             

 

Total assets



365,657

358,943

333,078

 




              

              

             

 

Liabilities






 

Current liabilities






 

Trade and other payables



96,818

98,071

79,646

 

Corporation tax



7,555

6,887

7,388

 

Interest-bearing loans and borrowings



34

33

34

 

Derivative financial instruments



276

515

-

 




              

              

            

 




104,683

105,506

87,068

 




              

              

             

 

Non-current liabilities






 

Interest-bearing loans and borrowings



25,669

34,425

15,234

 

Deferred taxation liabilities



12,669

14,142

13,655

 




              

              

              

 




38,338

48,567

28,889

 




              

              

              

 

Total liabilities



143,021

154,073

115,957

 




              

              

              

 

Net assets



222,636

204,870

217,121

 




              

              

             

 

Equity






 

Capital and reserves attributable to equity shareholders of the Parent





Share capital



49,845

49,845

49,845

 

Share premium account



22,695

22,695

22,695

 

Own shares



(2,470)

(3,664)

(3,622)

 

Capital redemption reserve



75,394

75,394

75,394

 

Consolidation reserve



(213,067)

(213,067)

(213,067)

 

Hedging reserve



(206)

(348)

590

 

Retained earnings



288,894

272,819

283,821

 




              

              

             

 

Equity attributable to equity shareholders of the Parent



221,085

203,674

215,656

 

Non-controlling interests



1,551

1,196

1,465

 




              

              

             

 

Total equity



222,636

204,870

217,121

 




              

              

             

 

 

Marshalls plc

Condensed Consolidated Cash Flow Statement

for the half year ended 30 June 2017

 


                      Half year ended

                     June


Year ended

December


2017

£'000


2016

£'000


2016

£'000

Cash flows from operating activities












Profit for the financial period

23,652


20,331


37,507

Income tax expense

5,477


4,812


8,539


             


             


              

Profit before tax

29,129


25,143


46,046

Adjustments for:






Depreciation

6,438


5,916


12,146

Amortisation

501


496


1,009

Gain on sale of property, plant and equipment

(870)


(86)


(609)

Equity settled share-based expenses

736


629


2,884

Financial income and expenses (net)

703


826


1,593


            


            


              

Operating cash flow before changes in working capital

 

36,637


32,924


63,069

Increase in trade and other receivables

(24,569)


(21,120)


(4,602)

Increase in inventories

(1,469)


(1,308)


(2,419)

Increase in trade and other payables

14,842


3,098


1,868

Operational restructuring costs paid

-


-


(476)


             


             


              

Cash generated from operations

25,441


13,594


57,440

Financial expenses paid

(513)


(579)


(940)

Income tax paid

(5,723)


(3,665)


(7,107)


             


             


              

Net cash flow from operating activities

19,205


9,350


49,393


             


             


              

Cash flows from investing activities






Proceeds from sale of property, plant and equipment

4,171


490


3,839

Financial income received

-


-


1

Acquisition of property, plant and equipment

(7,922)


(5,764)


(12,939)

Acquisition of intangible assets

(794)


(419)


(934)


             


             


              

Net cash flow from investing activities

(4,545)


(5,693)


(10,033)


             


             


              

Cash flows from financing activities






Payments to acquire own shares

(1,054)


(1,175)


(1,175)

Decrease in other debt and finance leases

-


-


(40)

Increase / (decrease) in borrowings

10,000


(1,997)


(23,791)

Equity dividends paid

(17,387)


-


(19,034)


              


              


              

Net cash flow from financing activities

(8,441)


(3,172)


(44,040)


              


              


               

Net increase / (decrease) in cash and cash equivalents

6,219


485


(4,680)

Cash and cash equivalents at the beginning of the period

20,681


24,990


24,990

Effect of exchange rate fluctuations

(38)


156


371


               


               


               

Cash and cash equivalents at the end of the period

26,862


25,631


20,681


              


              


              

 



 

Marshalls plc

Condensed Consolidated Statement of Changes in Equity

for the half year ended 30 June 2017

 


Attributable to equity holders of the Company




Share

capital

Share

premium

account

Own

shares

Capital

redemption

reserve

Consolid-

ation

reserve

Hedging

reserve

Retained

earnings

Total

Non-con-

trolling

interests

Total

equity


£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

Current half year











At 1 January 2017

49,845

22,695

(3,622)

75,394

(213,067)

590

283,821

215,656

1,465

217,121

Total comprehensive

income / (expense) for the

period











Profit / (loss) for the financial

period attributable to

equity shareholders of

the Parent

-

-

-

-

-

-

23,779

23,779

(127)

23,652

Other comprehensive

income / (expense)











Foreign currency translation differences

-

-

-

-

-

-

(277)

(277)

213

(64)

Effective portion of

changes in fair value of

cash flow hedges

-

-

-

-

-

(704)

-

(704)

-

(704)

Net change in fair value of cash flow hedges transferred to the Income Statement

-

-

-

-

-

(251)

-

(251)

-

(251)

Deferred tax arising

-

-

-

-

-

159

-

159

-

159

Defined benefit plan

actuarial loss

-

-

-

-

-

-

(517)

(517)

-

(517)

Deferred tax arising

-

-

-

-

-

-

88

88

-

88

Total other comprehensive

(expense) / income

-

-

-

-

-

(796)

(706)

(1,502)

213

(1,289)

Total comprehensive

(expense) / income for the

period

-

-

-

-

-

(796)

23,073

22,277

86

22,363

Transactions with owners,

recorded directly in equity











Contributions by and

distributions to owners











Share-based payments

-

-

-

-

-

-

736

736

-

736

Deferred tax on share-based

payments

-

-

-

-

-

-

702

702

-

702

Corporation tax on share-

based payments

 

 

-

-

-

-

-

-

155

155

-

155

Dividends to equity shareholders

-

-

-

-

-

-

(17,387)

(17,387)

-

(17,387)

Purchase of own shares

-

-

(1,054)

-

-

-

-

(1,054)

-

(1,054)

Disposal of own shares

-

-

2,206

-

-

-

(2,206)

-

-

-

Total contributions by

and distributions to owners

-

-

1,152

-

-

-

(18,000)

(16,848)

-

(16,848)

Total transactions with

owners of the Company

-

-

1,152

-

-

(796)

5,073

5,429

86

5,515

At 30 June 2017

49,845

22,695

(2,470)

75,394

(213,067)

(206)

288,894

221,085

1,551

222,636

 

Marshalls plc

Condensed Consolidated Statement of Changes in Equity

for the half year ended 30 June 2017

 


Attributable to equity holders of the Company




Share

capital

Share

premium

account

Own

shares

Capital

redemption

reserve

Consolid-

ation

reserve

Hedging

reserve

Retained

earnings

Total

Non-con-

trolling

interests

Total

equity


£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

Prior half year











At 1 January 2016

49,845

22,695

(5,529)

75,394

(213,067)

(1,653)

263,894

191,579

1,139

192,718


             

              

            

              

               

             

              

             

             

             

Total comprehensive

income / (expense) for the

period











Profit / (loss) for the financial

period attributable to

equity shareholders of

the Parent

-

-

-

-

-

-

20,411

20,411

(80)

20,331

Other comprehensive

income / (expense)











Foreign currency translation differences

-

-

-

-

-

-

117

117

137

254

Effective portion of

changes in fair value of

cash flow hedges

-

-

-

-

-

412

-

412

-

412

Net change in fair value of cash flow hedges transferred to the Income Statement

-

-

-

-

-

1,220

-

1,220

-

1,220

Deferred tax arising

-

-

-

-

-

(327)

-

(327)

-

(327)

Defined benefit plan

actuarial gain

-

-

-

-

-

-

4,759

4,759

-

4,759

Deferred tax arising

-

-

-

-

-

-

(857)

(857)

-

(857)


             

             

             

             

             

             

              

              

             

             

Total other

Comprehensive income

-

-

-

-

-

1,305

4,019

5,324

137

5,461


             

             

             

             

             

             

              

              

             

             

Total comprehensive

income for the period

-

-

-

-

-

1,305

24,430

25,735

57

25,792


             

             

             

             

             

             

              

              

             

             












Transactions with

owners, recorded directly in    equity











Contributions by and distributions to owners











Share-based payments

-

-

-

-

-

-

629

629

-

629

Corporation tax on share-

based payments

-

-

-

-

-

-

220

220

-

220

Dividends to equity

shareholders

-

-

-

-

-

-

(13,314)

(13,314)

-

(13,314)

Purchase of own shares

-

-

(1,175)

-

-

-

-

(1,175)

-

(1,175)

Disposal of own shares

-

-

3,040

-

-

-

(3,040)

-

-

-

 


             

             

            

             

             

             

              

              

             

             

Total contributions by

and distributions to

owners

-

-

1,865

-

-

-

(15,505)

(13,640)

-

(13,640)


             

             

            

             

             

            

              

              

             

             

Total transactions with

owners of the Company

-

-

-

-

-

1,305

8,925

12,095

57

12,152


             

              

            

              

              

            

              

              

              

             

At 30 June 2016

49,845

22,695

(3,664)

75,394

(213,067)

(348)

272,819

203,674

1,196

204,870


             

              

            

              

               

             

              

              

              

              

 

Marshalls plc

Condensed Consolidated Statement of Changes in Equity

for the half year ended 30 June 2017

 


Attributable to equity holders of the Company




Share

capital

Share

premium

account

Own

shares

Capital

redemption

reserve

Consolid-

ation

reserve

Hedging

reserve

Retained

earnings

Total

Non-con-

trolling

interests

Total

equity


£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

Prior year











At 1 January 2016

49,845

22,695

(5,529)

75,394

(213,067)

(1,653)

263,894

191,579

1,139

192,718


             

              

            

              

               

             

              

             

             

             

Total comprehensive

income for the year











Profit for the financial

period attributable to

equity shareholders of

the Parent

-

-

-

-

-

-

37,350

37,350

157

37,507

Other comprehensive

income / (expense)











Foreign currency translation differences

-

-

-

-

-

-

88

88

169

257

Effective portion of

changes in fair value of

cash flow hedges

-

-

-

-

-

1,123

-

1,123

-

1,123

Net change in fair value of cash flow hedges transferred to the Income Statement

-

-

-

-

-

1,681

-

1,681

-

1,681

Deferred tax arising

-

-

-

-

-

(561)

-

(561)

-

(561)

Defined benefit plan

actuarial gain

-

-

-

-

-

-

1,394

1,394

-

1,394

Deferred tax arising

-

-

-

-

-

-

(237)

(237)

-

(237)


             

             

             

             

             

             

             

             

             

             

Total other

comprehensive income

-

-

-

-

-

2,243

1,245

3,488

169

3,657


             

             

             

             

             

             

             

             

             

             

Total comprehensive

income for the year

 

-

-

-

-

-

2,243

38,595

40,838

326

41,164


             

             

             

             

             

             

             

             

             

             

Transactions with

owners, recorded

directly in equity











Contributions by and

distributions to

owners











Share-based payments

-

-

-

-

-

-

2,884

2,884

-

2,884

Deferred tax on share-based

payments

-

-

-

-

-

-

122

122

-

122

Corporation tax on share-

based payments

-

-

-

-

-

-

442

442

-

442

Dividends to equity shareholders

-

-

-

-

-

-

(19,034)

(19,034)

-

(19,034)

Purchase of own shares

-

-

(1,175)

--

-

-

-

(1,175)

-

Disposal of own shares

-

-

3,082

-

-

-

(3,082)

-

-


             

             

          

             

             

             

             

             

             

             

Total contributions by

and distributions to

owners

-

-

1,907

-

-

-

(18,668)

(16,761)

-

(16,761)


             

             

          

             

             

             

             

             

             

             

Total transactions with

owners of the Company

-

-

1,907

-

-

2,243

19,927

24,077

326

24,403


             

              

          

              

             

             

              

              

              

             

At 31 December 2016

49,845

22,695

(3,622)

75,394

(213,067)

590

283,821

215,656

1,465

217,121


             

              

            

              

               

             

              

              

              

              

 

Notes to the Condensed Consolidated Financial Statements

for the half year ended 30 June 2017

 

1.   Basis of preparation

 

Marshalls plc (the "Company") is a company domiciled in the United Kingdom. The Condensed Consolidated Financial Statements of the Company for the half year ended 30 June 2017 comprise the Company and its subsidiaries (together referred to as the "Group").

 

The Condensed Consolidated Financial Statements have been prepared in accordance with the Disclosure and Transparency Rules of the UK Financial Conduct Authority and the requirements of IAS 34 "Interim Financial Reporting" as adopted by the European Union ("EU").

 

The Condensed Consolidated Financial Statements do not constitute statutory financial statements and do not include all the information and disclosures required for full annual financial statements.  The Condensed Consolidated Half Year Financial Statements were approved by the Board on 17 August 2017.  The Condensed Consolidated Half Year Financial Statements are not statutory accounts as defined by Section 434 of the Companies Act 2006.

 

The Condensed Consolidated Financial Statements for the half year ended 30 June 2017 and the comparative period have not been audited.  The Auditor has carried out a review of the Half Year Financial Information and its report is set out on page 23.

 

The financial information for the year ended 31 December 2016 has been extracted from the annual Financial Statements, included in the Annual Report 2016, which has been filed with the Registrar of Companies.  The report of the Auditor was: (i) unqualified; (ii) did not include a reference to any matters to which the Auditor drew attention by way of emphasis without qualifying its report; and (iii) did not contain a statement under Section 498 (2) and (3) of the Companies Act 2006.

 

The annual Financial Statements of the Group are prepared in accordance with International Financial Reporting Standards ("IFRSs") as adopted by the EU. As required by the Disclosure and Transparency Rules of the UK Financial Conduct Authority, the condensed set of Financial Statements has been prepared applying the accounting policies and presentation that were applied in the preparation of the Company's published Consolidated Financial Statements for the year ended 31 December 2016.

The Condensed Consolidated Half Year Financial Statements are prepared on the historical cost basis except that the following assets and liabilities are stated at their fair value: derivative financial instruments and liabilities for cash-settled share-based payments.

The accounting policies have been applied consistently throughout the Group for the purposes of these Condensed Consolidated Half Year Financial Statements and are also set out on the Company's website (www.marshalls.co.uk).  The Condensed Consolidated Half Year Financial Statements are presented in Sterling, rounded to the nearest thousand.

The preparation of financial statements in conformity with adopted IFRSs requires management to make judgements, estimates and assumptions that affect the application of policies and the reported amounts of assets and liabilities, income and expenses.  The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources.  Actual results may differ from these estimates.  In preparing these Condensed Consolidated Half Year Financial Statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the Consolidated Financial Statements of the Group for the year ended 31 December 2016.

 

The estimates and underlying assumptions are reviewed on an ongoing basis.  Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

 

Details of the Group's funding position are set out in Note 10 and are subject to normal covenant arrangements.  The Group's on-demand overdraft facility is reviewed on an annual basis and the current arrangements were renewed and signed on 1 August 2017. Management believes that there are sufficient unutilised facilities held which mature after 12 months.  The Group's performance is dependent on economic and market conditions, the outlook for which is difficult to predict.  Based on current expectations, the Group's cash forecasts continue to meet half year and year end bank covenants and there is adequate headroom that is not dependent on facility renewals.  After considering relevant uncertainties, the Directors believe that the Group is well placed to manage its business risks successfully.  Accordingly, they continue to adopt the going concern basis in preparing the Condensed Consolidated Half Year Financial Statements.

 

2.  Segmental analysis

 

IFRS 8 "Operating Segments" requires operating segments to be identified on the basis of discrete financial information about components of the Group that are regularly reviewed by the Group's Chief Operating Decision Maker ("CODM") to allocate resources to the segments and to assess their performance. As far as Marshalls is concerned, the CODM is regarded as being the Executive Directors. The Directors have concluded that the detailed requirements of IFRS 8 support the reporting of the Group's Landscape Products business as a reportable segment, which includes the UK operations of the Marshalls Landscape Products hard landscaping business, servicing both the UK Domestic and the UK Public Sector and Commercial end markets. Financial information for Landscape Products is reported to the Group's CODM for the assessment of segmental performance and to facilitate resource allocation.

 

The Landscape Products reportable segment operates a national manufacturing plan that is structured around a series of production units throughout the UK, in conjunction with a single logistics and distribution operation. A national planning process supports sales to both of the key end markets, namely the UK Domestic and UK Public Sector and Commercial end markets, and the operating assets produce and deliver a range of broadly similar products that are sold into each of these end markets. Within the Landscape Products operating segment, the focus is on the 1 integrated production, logistics and distribution network supporting both end markets.

 

Included in "Other" are the Group's Street Furniture, Mineral Products, Stone Cladding and International operations, which do not currently meet the IFRS 8 reporting requirements.

 

Segment revenues and results



Half year ended June

2017

Half year ended June

2016

Year ended December

2016


Landscape Products

Other

Total

Landscape Products

Other

Total

Landscape

Products

Other

Total


£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

External

revenue

163,924

57,624

221,548

148,057*

55,984*

204,041

293,287*

106,883*

400,170

Inter-segment

revenue

(92)

(2,325)

(2,417)

(58)

(1,612)

(1,670)

(89)

(3,159)

(3,248)


              

            

            

              

            

            

              

            

           

Total revenue

163,832

55,299

219,131

147,999*

54,372*

202,371

293,198*

103,724*

396,922


            

           

           

            

           

           

             

            

            









 

 

Segment

operating profit

31,067

2,708

33,775

25,772*

2,243*

28,015

48,678*

4,920*

53,598


            

           

 

            

           

 

             

            

            

Unallocated

administration

costs



(3,943)



(2,046)



(5,959)




           



           

 

 

            

Operating profit



29,832



25,969



47,639




 



 

 

 

 

Finance

charges (net)



(703)



(826)



(1,593)




            



            

 

 

            

Profit before tax



29,129



25,143



46,046

Taxation



(5,477)



(4,812)



(8,539)




            



            

 

 

            

Profit after tax



23,652



20,331



37,507




            



            

 

 

            

 

*Following a change to the way in which information is reported internally, the comparative figures have been restated to ensure consistent classification with the analysis reported for the half year ended 30 June 2017.

 

The accounting policies of the Landscape Products operating segment are the same as the Group's accounting policies.

 

Segment profit represents the profit earned without allocation of certain 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

 

June

2017

June

2016

December

2016


£'000

£'000

£'000





Fixed assets and inventory:




Landscape Products

152,538

148,392*

152,900*

Other

65,357

66,792*

62,808*


              

              

              

Total segment fixed assets and inventory

217,895

215,184

215,708





Unallocated assets

147,762

143,759

117,370


              

              

              

Consolidated total assets

365,657

358,943

333,078


              

              

              

*Following a change to the way in which information is reported internally, the comparative figures have been restated to ensure consistent classification with the analysis reported for the half year ended 30 June 2017.

 

For the purpose of monitoring segment performance and allocating performance between segments, the Group's CODM monitors the property, plant and equipment and inventory. Assets used jointly by reportable segments are not allocated to individual reportable segments.

 

Other segment information

 


Depreciation and amortisation

Fixed asset additions


Half year ended

June

Year ended

December

Half year ended

June

Year ended

December


2017

2016

2016

2017

2016

2016


£'000

£'000

£'000

£'000

£'000

£'000








Landscape Products

4,988

4,581*

9,200*

8,376

4,703*

9,131*

Other

1,951

1,831*

3,955*

451

993*

3,883*


              

              

              

              

              

              


6,939

6,412

13,155

8,827

5,696

13,014


              

           

             

           

           

             

*Following a change to the way in which information is reported internally, the comparative figures have been restated to ensure consistent classification with the analysis reported for the half year ended 30 June 2017.

 

 

Geographical destination of revenue



            Half year

             ended June

Year ended

December



2017

2016

2016



£'000

£'000

£'000

United Kingdom


205,613

191,645

377,659

 

Rest of the World


13,518

10,726

19,263



              

              

              



219,131

202,371

396,922



              

              

              

 

The Group's revenue is subject to seasonal fluctuations resulting from demand from customers.  In particular, demand is higher in the summer months.  The Group manages the seasonal impact through the use of a seasonal working capital facility.

 

3.   Net operating costs


Half year

ended June

Year ended

December


2017

2016

2016


£'000

£'000

£'000

Raw materials and consumables

79,779

76,547

142,011

Changes in inventories of finished goods and work

in progress

2,019

(3,165)

2,591

Personnel costs

51,086

49,628

98,128

Depreciation

6,438

5,916

12,146

Amortisation of intangible assets

501

496

1,009

Own work capitalised

(666)

(782)

(1,381)

Other operating costs

51,785

48,660

97,069

Restructuring costs

1,003

-

476


              

              

              

Operating costs

191,945

177,300

352,049

Other operating income

(1,776)

(812)

(2,157)

Net gain on asset and property disposals

(870)

(86)

(609)


              

              

              

Net operating costs

189,299

176,402

349,283


              

              

              

 

4.   Financial expenses and income


Half year

ended June

Year ended

December


2017

2016

2016


£'000

£'000

£'000

 

(a)  Financial expenses




 

Net interest expense on defined benefit pension scheme

187

244

445

 

Interest expense on bank loans, overdrafts and loan

notes

513

579

1,143

 

Finance lease interest expense

3

3

6

 

                       

              

              

              

 


703

826

1,594

 


              

              

              

 

(b) Financial income




 

Interest receivable and similar income

-

-

1

 


              

              

              

 

 

Net interest expense on the defined benefit pension scheme is disclosed net of Company recharges.

 

5.   Income tax expense

 


Half year

ended June

Year ended

December


2017

2016

2016


£'000

£'000

£'000

Current tax expense




Current year

6,363

5,946

10,611

Adjustments for prior years

(289)

(371)

(921)

                       

              

              

              


6,074

5,575

9,690

Deferred taxation expense




Origination and reversal of temporary

differences:




Current year

(478)

(711)

(1,098)

Adjustments for prior years

(119)

(52)

(53)


              

              

              

Total tax expense

5,477

4,812

8,539


              

              

              

 

 


Half year ended June

Year ended

December


2017

2016


2016


%

£'000

%

£'000

%

£'000

Reconciliation of effective tax rate







Profit before tax

100.0

29,129

100.0

25,143

100.0

46,046

Tax using domestic corporation tax rate

19.2

5,608

20.0

5,029

20.0

9,209

Impact of capital allowances in excess of depreciation

0.5

136

1.7

431

0.4

173

Short-term timing differences

1.1

310

(0.2)

(62)

1.0

480

Adjustment to tax charge in prior period

(1.1)

(289)

(1.5)

(371)

(2.0)

(921)

Expenses not deductible for tax purposes

1.1

309

2.2

548

1.6

749

Corporation tax charge for the year

20.8

6,074

22.2

5,575

21.0

9,690

Impact of capital allowances in excess of depreciation

(1.9)

(545)

(2.2)

(556)

(1.0)

(443)

Short-term timing differences

0.1

30

(0.2)

(56)

(0.1)

(66)

Pension scheme movements

0.1

23

-

-

0.3

127

Other items

1.8

509

(0.4)

(99)

(0.9)

(397)

Adjustment to tax charge in prior period

(0.4)

(119)

(0.2)

(52)

(0.1)

(53)

Impact of the change in the rate of corporation tax on deferred taxation

(1.7)

(495)

-

-

(0.7)

(319)

Total tax charge for the year

18.8

5,477

19.2

4,812

18.5

8,539

 

The net amount of deferred taxation credited to the Consolidated Statement of Comprehensive Income in the period was £247,000 credit (30 June 2016: £1,184,000 debit; 31 December 2016: £798,000 debit). The effective tax rate used is management's best estimate of the average annual effective tax rate expected for the full year, applied to pre-tax income for the 6-month period.

 

6.   Earnings per share

 

Basic earnings per share of 12.04 pence (30 June 2016: 10.36 pence; 31 December 2016: 18.95 pence) per share is calculated by dividing the profit attributable to Ordinary Shareholders for the financial period after adjusting for non-controlling interests of £23,779,000 (30 June 2016: £20,411,000; 31 December 2016: £37,350,000) by the weighted average number of shares in issue during the period of 197,440,624 (30 June 2016: 197,013,990; 31 December 2016: 197,130,419).

 

Profit attributable to Ordinary Shareholders


Half year

ended June

Year ended December


2017

£'000

2016

£'000

2016

£'000

 

Profit for the financial period

23,652

20,331

37,507

Result attributable to non-controlling interests

127

80

(157)


             

              

              

Profit attributable to Ordinary Shareholders

23,779

20,411

37,350


              

              

              

 

Weighted average number of Ordinary Shares

 



Half year

ended June

Year ended

December



2017

2016

2016



Number

Number

Number

Number of issued Ordinary Shares


199,378,755

199,378,755

199,378,755

Effect of shares transferred into employee benefit trust


(1,938,131)

(2,364,765)

(2,248,336)



                    

                    

                    

Weighted average number of Ordinary Shares

197,440,624

197,013,990

197,130,419



                    

                    

                    

 

Diluted earnings per share of 11.94 pence (30 June 2016: 10.22 pence; 31 December 2016: 18.61 pence) per share is calculated by dividing the profit for the financial period, after adjusting for non-controlling interests, of £23,779,000 (30 June 2016: £20,411,000; 31 December 2016: £37,350,000) by the weighted average number of shares in issue during the period of 197,440,624 (30 June 2016: 197,013,990; 31 December 2016: 197,130,419), plus potentially dilutive shares of 1,722,526 (30 June 2016: 2,629,255; 31 December 2016: 3,561,243), which totals 199,163,150 (30 June 2016: 199,643,245; 31 December 2016: 200,691,662).

 

Weighted average number of Ordinary Shares (diluted)

 


Half year

ended June

Year ended December


2017

2016

2016


Number

Number

Number





Weighted average number of Ordinary Shares

197,440,624

197,013,990

197,130,419

Dilutive shares

1,722,526

2,629,255

3,561,243


                    

                    

                    

Weighted average number of Ordinary Shares (diluted)

199,163,150

199,643,245

200,691,662


                    

                    

                    





 

7.   Dividends

 

After the balance sheet date, the following dividends were proposed by the Directors.  The dividends have not been provided and there were no income tax consequences.

 


Pence per qualifying share

Half year

ended June

Year ended

December



2017

2016

2016



£'000

£'000

£'000






2017 interim

3.40      

6,718

-

-

2016 supplementary

   3.00

-

-

5,927

2016 final

5.80      

-

-

11,460

2016 interim

2.90      

-

5,720

5,720



              

              

              



6,718

5,720

23,107



              

              

              

 

       The following dividends were approved by the shareholders in the period:

 


Pence per qualifying share

Half year

ended June

Year ended December



2017

2016

2016



£'000

£'000

£'000






2016 supplementary

3.00

5,927

-

-

2016 final

5.80

11,460

-

-

2016 interim

2.90

-

-

5,720

2015 supplementary

2.00

-

3,945

3,945

2015 final

4.75

-

9,369

9,369



              

              

              



17,387

13,314

19,034



              

              

              

 

The 2016 final dividend of 5.80 pence per qualifying Ordinary Share alongside a supplementary dividend of 3.00 pence per qualifying Ordinary Share (total value £17,387,000) was paid on 30 June 2017 to shareholders registered at the close of business on 16 June 2017.

 

The Board has declared an interim dividend of 3.40 pence (June 2016: 2.90 pence) per share. This dividend will be paid on 6 December 2017 to shareholders on the register at the close of business on 20 October 2017. The ex-dividend date will be 19 October 2017.

 

8.  Employee benefits

 

The Company sponsors a funded defined pension scheme in the UK ("the Scheme").  The Scheme is administered within a trust which is legally separate from the Company.  The Trustee Board is appointed by both the Company and the Scheme's membership and acts in the interests of the Scheme and all relevant stakeholders, including the members and the Company.  The Trustee is also responsible for the investment of the Scheme's assets.

 

The defined benefit section of the Scheme provides pension and lump sums to members on retirement and to dependants on death.  The defined benefit section closed to future accrual of benefits on 30 June 2006 with then active members becoming entitled to a deferred pension.  Members no longer pay contributions to the defined benefit section.  Company contributions to the defined benefit section after this date are used to fund any deficit in the Scheme and the expenses associated with administering the Scheme as determined by regular actuarial valuations.

 

The Trustee is required to use prudent assumptions to value the liabilities and costs of the Scheme whereas the accounting assumptions must be best estimates.

 

The defined benefit section of the Scheme poses a number of risks to the Company, for example longevity risk, investment risk, interest rate risk, inflation risk and salary risk.  The Trustee is aware of these risks and uses various techniques to control them.  The Trustee has a number of internal control policies, including a risk register, which are in place to manage and monitor the various risks it faces.  The Trustee's investment strategy incorporates the use of liability-driven investments ("LDIs") to minimise sensitivity of the actuarial funding position to movements in interest rates and inflation rates.

 

The defined benefit section of the Scheme is subject to regular actuarial valuations, which are usually carried out every 3 years.  The next actuarial valuation is expected to be carried out with an effective date of 5 April 2018.  These actuarial valuations are carried out in accordance with the requirements of the Pensions Act 2004 and so include deliberate margins for prudence.  This contrasts with these accounting disclosures which are determined using best estimate assumptions.

 

A formal actuarial valuation was carried out as at 5 April 2015.  The results of that valuation have been projected to 30 June 2017 by a qualified independent actuary.  The figures in the following disclosure were measured using the projected unit method.

 

The amounts recognised in the Consolidated Balance Sheet were as follows:


June

December


2017

2016

2016


£'000

£'000

£'000

Present value of Scheme liabilities

(353,971)

(347,452)

(355,793)

Fair value of Scheme assets

357,593

355,344

360,069


              

              

              

Net amount recognised (before any adjustment for deferred tax)

3,622

7,892

4,276


              

              

              

 

The current and past service costs, settlements and curtailments, together with the net interest expense for the period, are included in the employee benefits expense in the Statement of Comprehensive Income.  Remeasurements of the net defined benefit liability are included in other comprehensive income.

 


Half year

ended June

Year ended

December


2017

2016

2016


£'000

£'000

£'000

Service cost:




Net interest expense recognised in the Consolidated Income Statement

137

294

545


              

              

              

Remeasurements of the net liability:




     Return on scheme assets (excluding amount included in interest

     expense)

(507)

(54,879)

(59,979)

     Loss arising from changes in financial assumptions

5,565

53,764

62,474

     Gain arising from changes in demographic assumptions

(3,628)

-

-

     Experience gain

(913)

(3,644)

(3,889)


              

              

              

Charge / (credit) recorded in other comprehensive income

517

(4,759)

(1,394)


              

              

              

Total defined benefit charge / (credit)

654

(4,465)

(849)


              

              

              

 

 




 

  The principal actuarial assumptions used were:

 


June

December


2017

2016

2016

Liability discount rate

2.55%

2.70%

2.65%

Inflation assumption - RPI

3.15%

2.90%

3.20%

Inflation assumption - CPI

2.15%

1.90%

2.20%

Rate of increase in salaries

n/a

n/a

n/a





Revaluation of deferred pensions

2.15%

1.90%

2.20%

Increases for pensions in payment:




CPI pension increases (maximum 5% per annum)

2.15%

1.90%

2.20%

CPI pension increases (maximum 5% per annum,

minimum 3% per annum)

3.10%

3.10%

3.10%

CPI pension increases (maximum 3% per annum)

2.05%

1.80%

2.10%

Proportion of employees opting for early retirement

0%

0%

0%

Proportion of employees commuting pension for cash

50%

50%

50%

 

 

Mortality assumption - before retirement

Same as post retirement

Same as post retirement

Same as post retirement





Mortality assumption - after retirement (males)

S2PMA tables

S2PMA tables

S2PMA tables

Loading

105%

105%

105%

Projection basis

Year of birth

Year of birth

Year of birth


CMI_2016 1.0%

CMI_2015 1.0%

CMI_2015 1.0%





Mortality assumption - after retirement (females)

S2PFA tables

S2PFA tables

S2PFA tables

Loading

105%

105%

105%

Projection basis

Year of birth

Year of birth

Year of birth


CMI_2016 1.0%

CMI_2015 1.0%

CMI_2015 1.0%

Future expected lifetime of current pensioner at age 65:




Male aged 65 at year end

86.5

86.5

86.5

Female aged 65 at year end

88.4

88.5

88.5

Future expected lifetime of future pensioner at age 65:




Male aged 45 at year end

87.6

87.8

87.8

Female aged 45 at year end

89.6

90.0

89.8

 

9.   Analysis of net debt


1 January

2017

Cash flow

 

Other changes

30 June

2017


£'000

£'000

£'000

£'000






Cash at bank and in hand

20,681

6,219

(38)

26,862

Debt due after 1 year

(14,975)

(10,000)

(432)

(25,407)

Finance leases

(293)

-

(3)

(296)


              

              

              

              


5,413

(3,781)

(473)

1,159


              

              

              

              

 

Reconciliation of net cash flow to movement in net debt

 


Half year ended

June

Year ended December


2017

£'000


 2016

£'000

2016

£'000

 

Net increase / (decrease) in cash and cash equivalents

6,219


485

(4,680)

Cash (outflow) / inflow from decrease in debt and lease financing

(10,000)


4,155

23,831

Effect of exchange rate fluctuations

(473)


(2,005)

(2,276)


             


             

              

Movement in net debt in the period

(4,254)


2,635

16,875

Net cash / (debt) at beginning of the period

5,413


(11,462)

(11,462)


             


             

              

Net cash / (debt) at the end of the period

1,159


(8,827)

5,413


             


             

              

 

10.   Borrowing facilities

 

The total bank borrowing facilities at 30 June 2017 amounted to £105.0 million (30 June 2016: £115.0 million; 31 December 2016: £95.0 million), of which £79.6 million (30 June 2016: £80.9 million; 31 December 2016: £80.0 million) remained unutilised. 

 

These figures include an additional seasonal working capital facility of £10.0 million available between 1 February and 31 August each year.

 

The undrawn facilities available at 30 June 2017, in respect of which all conditions precedent had been met, were as follows:

 


June

December


2017

£'000

2016

£'000

2016

£'000

Committed:




- Expiring in more than 2 years but not more than 5 years

54,593

45,872

65,025

- Expiring in 1 year or less

-

-

-





Uncommitted:




- Expiring in 1 year or less

25,000

35,000

15,000


              

              

              


79,593

80,872

80,025


              

              

              

 

The total borrowing facilities at 17 August 2017 amounted to £105.0 million.  On 1 August 2017, the Group renewed its short-term working capital facilities of £25.0 million.  The committed facilities are all revolving credit facilities with interest charged at variable rates based on LIBOR.  The Group's bank facilities continue to be aligned with the current strategy to ensure that headroom against available facilities remains at appropriate levels.

 

The maturity profile of borrowing facilities is structured to provide balanced, committed and phased medium-term debt.  Following the recent refinancing of bank facilities, the current facilities are set out as follows:

 


Facility

Cumulative

facility


£'000

£'000

Committed facilities:



Q3: 2021

20,000

20,000

Q3: 2020

20,000

40,000

Q3: 2019

20,000

60,000

Q3: 2018

20,000

80,000




On-demand facilities:



Available all year

15,000

95,000

Seasonal (February to August inclusive)

10,000

105,000

 

11.  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 2017 is shown below:


June

June

December


2017

2016

2016


Book

amount

Fair

value

Book

 amount

Fair

value

Book

 amount

Fair

value


£'000

£'000

£'000

£'000

£'000

£'000








Trade and other receivables

70,217

 

70,217

65,847

65,847

46,033

46,033

Cash and cash equivalents

26,862

26,862

25,631

25,631

20,681

20,681

Bank loans

(25,407)

(24,322)

(34,128)

(33,582)

(14,975)

(14,192)

Finance lease liabilities

(296)

(317)

(330)

(360)

(293)

(320)

Trade and other payables

(81,638)

(81,638)

(98,071)

(98,071)

(70,939)

(70,939)

Interest rate swaps, forward contracts and fuel hedges

(276)

(276)

(515)

(515)

657

657


              


              


              


Financial instrument assets and liabilities - net

(10,538)


(41,566)


(18,836)


Non-financial instrument assets and liabilities - net

233,174


246,436


235,957



              


              


              



222,636


204,870


217,121



              


              


              


 

 

Estimation of fair values

 

The following summarises the major methods and assumptions used in estimating the fair values of financial instruments reflected in the table.

 

(a)  Derivatives

 

Derivative contracts are either marked to market using listed market prices or by discounting the contractual forward price at the relevant rate and deducting the current spot rate.  For interest rate swaps broker quotes are used.

 

(b) Interest-bearing loans and borrowings

 

Fair value is calculated based on the expected future principal and interest cash flows discounted at the market rate of interest at the balance sheet date.

 

(c)  Finance lease liabilities

 

The fair value is estimated as the present value of future cash flows, discounted at market interest rates for homogeneous lease agreements.  The estimated fair values reflect changes in interest rates.

 

(d)  Trade and other receivables / payables

 

For receivables / payables with a remaining life of less than 1 year, the notional amount is deemed to reflect the fair value.  All other receivables / payables are discounted to determine the fair value.

 

      (e)  Fair value hierarchy

 

      The table below analyses financial instruments, measured at fair value, into a fair value hierarchy based on the valuation techniques used to determine fair value.

 

·        Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.

·        Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

·        Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

 


Level 1

Level 2

Level 3

Total


£'000

£'000

£'000

£'000

30 June 2017





Derivative financial liabilities

-

(276)

-

(276)


              

              

              

              

30 June 2016





Derivative financial liabilities

-

(515)

-

(515)


              

              

              

              






31 December 2016





Derivative financial assets

-

657

-

657


              

              

              

              

 

12.  Principal risks and uncertainties

 

The principal risks and uncertainties that could impact the Group for the remainder of the current financial year are those detailed on pages 20 to 24 of the 2016 Annual Report.  These cover the strategic, financial and operational risks and have not changed during the period.

 

Strategic risks include those relating to general economic conditions, Government policy, the actions of customers, suppliers and competitors, and also weather conditions.  The Group also continues to be subject to various financial risks in relation to access to funding and to the pension scheme, principally the volatility of the discount (AA corporate bond) rate, any downturn in the performance of equities and increases in the longevity of members.  The other main financial risks arising from the Group's financial instruments are liquidity risk, interest rate risk, credit risk and foreign currency risk.  Operational risks include those relating to business integration, employees and key relationships. The Group continues to monitor all these risks and pursue policies that take account of, and mitigate, the risks where possible.

 

Responsibility Statement

 

The Directors who held office at the date of approval of these Financial Statements confirm that to the best of their knowledge:

 

·      the Condensed Consolidated Half Year Financial Statements have been prepared in accordance with IAS 34 "Interim Financial Reporting" as adopted by the European Union; and

·      the Half Year Management Report includes a fair review of the information required by:

 

            (a)        DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the half year ended 30 June 2017 and their impact on the Condensed Consolidated Half Year Financial Statements, and a description of the principal risks and uncertainties for the remaining second half of  the year; and

 

(b)        DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the half year ended 30 June 2017 and that have materially affected the financial position or performance of the entity during that period, and any changes in the related party transactions described in the last Annual Report that could do so.

 

The Board

 

The Directors serving during the half year ended 30 June 2017 were as follows:

 

Andrew Allner                Chairman

Janet Ashdown              Senior Non-Executive Director

Jack Clarke                   Finance Director

Martyn Coffey                Chief Executive

Mark Edwards               Non-Executive Director - retired on 10 May 2017

Tim Pile                        Non-Executive Director

Graham Prothero           Non-Executive Director - appointed on 10 May 2017

 

The responsibilities of the Directors during their period of service were as set out on pages 34 and 35 of the 2016 Annual Report.

 

By order of the Board

Cathy Baxandall

Group Company Secretary

17 August 2017

 

Cautionary statement

 

This Half Year Report contains certain forward-looking statements with respect to the financial condition, results, operations and business of Marshalls plc.  These statements and forecasts involve risk and uncertainty because they relate to events and depend upon circumstances that will occur in the future.  There are a number of factors that could cause actual results or developments to differ materially from those expressed or implied by these forward-looking statements and forecasts.  Nothing in this Half Year Report should be construed as a profit forecast.

 

Directors' liability

 

Neither the Company nor the Directors accept any liability to any person in relation to this Half Year Report except to the extent that such liability could arise under English law.  Accordingly, any liability to a person who has demonstrated reliance on any untrue or misleading statement or omission shall be determined in accordance with Section 90A of the Financial Services and Markets Act 2000.

 

Independent Review Report to Marshalls plc

 

Introduction

 

We have been engaged by the Company to review the condensed set of Financial Statements in the Half Year Financial Report for the 6 months ended 30 June 2017, which comprises the Condensed Consolidated Half Year Income Statement, the Condensed Consolidated Half Year Statement of Comprehensive Income, the Condensed Consolidated Half Year Balance Sheet, the Condensed Consolidated Half Year Cash Flow Statement, the Condensed Consolidated Half Year Statement of Changes in Equity and related Notes 1 to 12. We have read the other information contained in the Half Year Financial Report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of Financial Statements.

 

This report is made solely to the Company in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board.  Our work has been undertaken so that we might state to the Company those matters we are required to state to it in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our review work, for this report, or for the conclusions we have formed.

 

Directors' responsibilities

 

The Half Year Financial Report is the responsibility of, and has been approved by, the Directors.  The Directors are responsible for preparing the Half Year Financial Report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.

 

As disclosed in Note 1, the annual Financial Statements of the Group are prepared in accordance with IFRSs as adopted by the European Union.  The condensed set of Financial Statements included in this Half Year Financial Report has been prepared in accordance with International Accounting Standard 34 "Interim Financial Reporting" as adopted by the European Union.

 

Our responsibility

 

Our responsibility is to express to the Company a conclusion on the condensed set of Financial Statements in the Half Year Financial Report based on our review.

 

Scope of review

 

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of Half Year Financial Information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

 

Conclusion

 

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of Financial Statements in the Half Year Financial Report for the 6 months ended 30 June 2017 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.

 

 

Deloitte LLP

Statutory Auditor

Manchester, United Kingdom

17 August 2017

 

Shareholder Information

 

Financial calendar

 

Half Year results for the year ending December 2017

              Announced 17 August 2017

Half Year dividend for the year ending December 2017

              Payable 6 December 2017

Results for the year ending December 2017

              Announcement March 2018

Report and accounts for the year ending December 2017

                                                                   April 2018

Annual General Meeting

                                                                   May 2018

Final dividend for the year ending December 2017

                                                      Payable June 2018

 

Registrars

 

All administrative enquiries relating to shareholdings should, in the first instance, be directed to Computershare Investor Services PLC, PO Box 82, The Pavilions, Bridgwater Road, Bristol BS99 6ZZ (telephone: 0870 707 1134) and should clearly state the registered shareholder's name and address.

 

Dividend mandate

 

Any shareholder wishing dividends to be paid directly into a bank or building society should contact the Registrar for a dividend mandate form.  Dividends paid in this way will be paid through the Bankers' Automated Clearing System ("BACS").

 

Website

 

The Group has a website that gives information on the Group and its products and provides details of significant Group announcements. The address is www.marshalls.co.uk.

 

 


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