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Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
---|---|---|---|---|---|
Marshalls Plc | LSE:MSLH | London | Ordinary Share | GB00B012BV22 | ORD 25P |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
-0.50 | -0.19% | 256.00 | 254.50 | 255.00 | 258.00 | 252.50 | 254.00 | 342,461 | 16:35:11 |
Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
---|---|---|---|---|---|
Construction Matl-whsl, Nec | 674.4M | 18.6M | 0.0736 | 34.65 | 644.61M |
TIDMMSLH
RNS Number : 1803I
Marshalls PLC
26 August 2016
Interim results for the half year ended 30 June 2016
Marshalls plc, the specialist Landscape Products Group, announces its half year results
Financial Highlights Half Year ended Half Year ended Increase 30 June 2016 30 June 2015 % Revenue GBP202.4m GBP199.1m 2 EBITDA GBP32.4m GBP29.7m 9 Operating profit GBP26.0m GBP22.0m 18 Profit before tax GBP25.1m GBP20.8m 21 Basic EPS 10.36p 8.50p 22 Interim dividend 2.90p 2.25p 29 470 ROCE 19.9% 15.2% basis points Net debt to EBITDA 0.2 times 0.7 times
Highlights:
-- Revenue up 2% to GBP202.4 million (2015: GBP199.1 million) -- EBITDA up 9% to GBP32.4 million (2015: GBP29.7 million) -- Improvement in operating margins to 12.8% (2015: 11.1%) -- Profit before tax up 21% to GBP25.1 million (2015: GBP20.8 million) -- Strong operating cash flow with sustainable working capital improvements
-- Return on capital employed for the year ended 30 June 2016 up 31% (470 basis points) to 19.9% (2015: 15.2%)
-- EPS up 22% to 10.36 pence (2015: 8.50 pence) -- Interim dividend increased by 29% to 2.90 pence (2015: 2.25 pence) per share
-- Net debt of GBP8.8 million (30 June 2015: GBP32.9 million) with significant borrowing capacity
-- The Board is confident of achieving its expectations for 2016
Current priorities:
-- To deliver the growth initiatives set out in the 2020 strategy
-- To drive through sustainable cost reductions, innovation and improvements in operational efficiency
-- To grow our business organically and selectively through acquisitions
-- To continue to develop and invest in our strategic growth initiatives, particularly in Water Management, Street Furniture, Rail and Newbuild Housing
-- To develop the Group's wide ranging digital strategy
Commenting on these results, Martyn Coffey, Chief Executive, said:
"Following a strong first half, the Group's focus remains the delivery of the growth initiatives set out in the 2020 Strategy, whilst maintaining a strong balance sheet and flexible capital structure. The underlying medium to long-term market indicators remain supportive notwithstanding the heightened economic and political uncertainty since the EU referendum. This increased uncertainty has not impacted underlying trading to date although we continue to monitor closely the wider business environment. The Board is confident of achieving its expectations for 2016.
The Group continues to invest in product innovation and service delivery initiatives and is driving through sustainable cost reductions and improvements in operational efficiency. This continues to improve the operational gearing across the Group which, alongside Marshalls' growth strategy, will drive future shareholder return."
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)203 433 3570 - Access Code: 7494 9045 19#. 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 2016 grew by 2 per cent to GBP202.4 million (2015: GBP199.1 million). Despite recent economic and political uncertainty following the EU referendum, underlying trading conditions remain supportive. The Group delivered a strong sales performance in May and June and the moving average monthly revenue trend shows that 2016 sales still exceed those of previous years for the same period. The Group has continued to experience strong order intake during the second half.
Sales to the Public Sector and Commercial end market, which represent approximately 63 per cent of Group sales, were broadly flat compared with the prior year period. Sales to the Domestic end market, which represent approximately 32 per cent of Group sales, were up 7.1 per cent. Revenue in May and June was particularly strong in the Domestic end market, where growth was 12 per cent year on year. The survey of domestic installers at the end of June 2016 revealed continuing strong order books of 11.7 weeks (2015: 12.0 weeks) and compares with 12.4 weeks at the end of April 2016.
Sales in the International business decreased by 10.8 per cent in the 6 months ended 30 June 2016 and represent 5 per cent of Group sales. However, despite the reduction in revenue, there has been a reduced loss within the International business. The new sales office in Dubai opened in January 2016 and this is having a positive impact on sales and order generation in the Middle East.
Operating profit increased to GBP26.0 million (2015: GBP22.0 million) and EBITDA also improved to GBP32.4 million (2015: GBP29.7 million).
Group return on capital employed ("ROCE") was 19.9 per cent for the year ended 30 June 2016, which represents an increase of 470 basis points compared with the prior year. ROCE is defined as EBITA divided by shareholders' funds plus net debt.
Net financial expenses were GBP0.8 million (2015: GBP1.2 million) and interest was strongly covered 31.4 times (2015: 18.5 times). The effective tax rate was 19.1 per cent (2015: 20.8 per cent).
Basic EPS was 10.36 pence (2015: 8.50 pence) per share. The interim dividend will be 2.90 pence (2015: 2.25 pence) per share, reflecting the strong cash generation and the Board's confidence in the future.
Significant cash generation and sustained working capital improvements have seen the Group's net debt fall to GBP8.8 million at 30 June 2016 (30 June 2015: GBP32.9 million).
2020 Strategy
The Group's strategy is to grow the business organically and selectively through acquisitions. The strategic objectives include the improvement of profit margins in all businesses and to increase the Group's ROCE. The 2020 Strategy is being driven by a focus on innovation and new product development. The aim is to extend the product range and provide more integrated solutions to improve the customer experience and differentiate the Marshalls brand. The strategy is to maintain a conservative balance sheet and a flexible capital structure that recognises cyclical risk, while focusing on security, efficiency and liquidity.
Current Priorities
The Group's key priority is to deliver improvement in profit margins in all businesses and end markets through the continued focus on service, quality, design, innovation and a commitment to research and development and sustainability. The aim is to drive through sustainable cost reductions and improvements in operational efficiency. Marshalls' digital strategy is increasing in its importance, combining digital trading, digital marketing and digital business. This strategy is focused on the customer experience and the key touchpoints therein. Specifically we have created web and mobile applications which allow customers to model their requirements, allow digital access to the registered installer base and allow real-time visibility of stock.
Operating Performance
Operating margins increased to 12.8 per cent in the 6 months ended 30 June 2016 (2015: 11.1 per cent), representing an improvement of 15.3 per cent and reflecting improved operational efficiency.
Revenue increased by GBP2.0 million and operating profit by GBP3.2 million in the Landscape Products business which serves both the UK Public Sector and Commercial and UK 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. The smaller UK businesses have collectively delivered revenue growth of GBP2.5 million and operating profit growth of GBP0.7 million in the 6 months ended 30 June 2016. Delivering growth in the smaller UK businesses is a key part of the 2020 Strategy and these include Street Furniture, Mineral Products and Stone Cladding.
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 order intake and demand continues to be strong in Water Management, Newbuild Housing and Rail and particular focus is being directed to these markets. Crossrail is a particular focus with product opportunities for station platforms, concourses and adjacent public spaces.
In the Domestic end market the Group continues to drive more sales through the Marshalls Register of approved domestic installers, which has now grown to nearly 1,900 teams. This represents an increase of 5 per cent over the last 12 months. The Group remains committed to improving the product mix and to achieving a consistently high standard of quality, customer service and marketing support.
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 2016 amounted to GBP1.6 million (2015: GBP1.6 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. Revenue from new products in the core Landscape Products business increased by 11 per cent in the 6 months ended 30 June 2016, and represents 13 per cent of its sales.
The Group's previously announced "Self-Help" capital investment programme is on track and progressing well. This investment is in addition to our normal annual capital expenditure and will total GBP15 million over the next 3 years and is expected to deliver cost savings of GBP5 million per annum by 2019. The detailed plan includes various projects within Natural Stone, block paving and automated material handling.
Ongoing progress is being made developing the International business and the Group continues to improve its global infrastructure, supply chains and routes to market. Whilst the Belgium business has again improved, the market background in mainland Europe remains subdued. Our US business looks to increase the distribution of our natural stone products into the North American market and the new sales office in Dubai is already generating further sales growth in the Middle East.
Balance Sheet and Cash Flow
Net assets at 30 June 2016 were GBP204.9 million (June 2015: GBP184.0 million).
In the 6 months ended 30 June 2016 net cash flows from operating activities were GBP9.3 million (2015: GBP5.2 million). This strong cash generation has enabled net debt at 30 June 2016 to be reduced to GBP8.8 million (June 2015: GBP32.9 million) with gearing at 4.3 per cent (June 2015: 17.9 per cent).
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 and capital expenditure management and trade receivables. Capital investment in property, plant and equipment in the 6 months ended 30 June 2016 totalled GBP5.8 million (2015: GBP5.5 million) and this compares with depreciation of GBP5.9 million (2015: GBP7.0 million).
The Group's bank facilities support our current strategy and continued strong cash management focus ensures headroom against available facilities remains at appropriately conservative levels. Our committed facilities have been extended one year to 2021 to enhance the maturity profile and, in August 2016, 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.
The balance sheet value of the defined benefit pension scheme was a surplus of GBP7.9 million at 30 June 2016 (December 2015: GBP3.4 million surplus; June 2015: GBP0.8 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. Significant market volatility has been evident in the first 6 months of 2016 and this volatility increased further following the EU referendum on 23 June 2016. The most notable change has been a reduction in the AA corporate bond rate from 3.7 per cent to 2.7 per cent, in line with market movements. This caused the IAS 19 pension liabilities to increase by GBP48.6 million. However, the scheme assets have increased by GBP53.1 million due mainly to the high proportion of liability-driven investments whose performance matches the liabilities. The expected rate of inflation reduced to 2.9 per cent from 3.1 per cent at 31 December 2015.
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 2.90 pence (June 2015: 2.25 pence) per share, an increase of 29 per cent which reflects the strong cash generation. This dividend will be paid on 2 December 2016 to shareholders on the register at the close of business on 21 October 2016. The ex-dividend date will be 20 October 2016.
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. While recognising some increased economic uncertainty post the EU referendum, the Directors do not consider that the principal risks and uncertainties have changed since the publication of the Annual Report for the year ended 31 December 2015. A detailed explanation of the risks, and how the Group seeks to mitigate these risks, can be found on pages 20 to 23 of the Annual Report, which is available at www.marshalls.co.uk/documents/reports/2015-full-annual-report.
Going concern
As stated in Note 1 of the 2016 Half-yearly 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-yearly Report.
Outlook
Following a strong first half, the Group's focus remains the delivery of the growth initiatives set out in the 2020 Strategy, whilst maintaining a strong balance sheet and flexible capital structure. The underlying medium to long-term market indicators remain supportive notwithstanding the heightened economic and political uncertainty since the EU referendum. This increased uncertainty has not impacted underlying trading to date although we continue to monitor closely the wider business environment. The Board is confident of achieving its expectations for 2016.
The Group continues to invest in product innovation and service delivery initiatives and is driving through sustainable cost reductions and improvements in operational efficiency. This continues to improve the operational gearing across the Group which, alongside Marshalls' growth strategy, will drive future shareholder return.
Martyn Coffey
Chief Executive
Condensed Consolidated Half-yearly Income Statement
for the half year ended 30 June 2016
Half year Year ended ended June December 2016 2015 2015 Notes GBP'000 GBP'000 GBP'000 Revenue 2 202,371 199,067 386,204 Net operating costs 3 (176,402) (177,053) (348,752) Operating profit 2 25,969 22,014 37,452 Financial expenses 4 (826) (1,197) (2,181) Financial income 4 - 5 7 Profit before tax 2 25,143 20,822 35,278 Income tax expense 5 (4,812) (4,335) (7,387) Profit for the financial period 20,331 16,487 27,891 Profit for the period Attributable to: Equity shareholders of the Parent 20,411 16,711 28,149 Non-controlling interests (80) (224) (258) 20,331 16,487 27,891 Earnings per share Basic 6 10.36p 8.50p 14.32p Diluted 6 10.22p 8.39p 14.10p Dividend Pence per share 7 4.75p 4.00p 6.25p Supplementary 2.00p - - Dividends declared 7 13,314 7,866 12,291
All results relate to continuing operations.
Condensed Consolidated Half-yearly Statement of Comprehensive Income
for the half year ended 30 June 2016
Half year Year ended ended June December 2016 2015 2015 GBP'000 GBP'000 GBP'000 Profit for the financial period 20,331 16,487 27,891 Other comprehensive income / (expense) Items that will not be reclassified to the Income Statement: Remeasurements of the net defined benefit liability 4,759 (6,777) (3,866) Deferred tax arising (857) 1,355 773 Total items that will not be reclassified to the Income Statement 3,902 (5,422) (3,093) 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 412 602 (940) Fair value of cash flow hedges transferred to the Income Statement 1,220 870 1,984 Deferred tax arising (327) (294) (209) Impact of the change in rate of deferred
tax - - (375) Exchange difference on retranslation of foreign currency net investment 2,275 (1,718) (980) Exchange movements associated with borrowings (2,158) 1,719 847 Foreign currency translation differences - non-controlling interests 137 (136) (78) Total items that are or may be reclassified subsequently to the Income Statement 1,559 1,043 249 Other comprehensive income / (expense) for the period, net of income tax 5,461 (4,379) (2,844) Total comprehensive income for the period 25,792 12,108 25,047 Attributable to: Equity shareholders of the Parent 25,735 12,468 25,383 Non-controlling interests 57 (360) (336) 25,792 12,108 25,047
Condensed Consolidated Half-yearly Balance Sheet
as at 30 June 2016
June December Notes 2016 2015 2015 GBP'000 GBP'000 GBP'000 Assets Non-current assets Property, plant and equipment 147,736 148,025 147,489 Intangible assets 40,091 40,374 40,168 Investments in associates - 854 - Trade and other receivables 415 - 415 Employee benefits 8 7,892 799 3,427 Deferred taxation assets 1,364 1,325 1,316 197,498 191,377 192,815 Current assets Inventories 67,448 70,269 65,254 Trade and other receivables 65,847 69,713 44,542 Cash and cash equivalents 25,631 20,500 24,990 Assets classified as held for sale 2,519 - 2,231 161,445 160,482 137,017 Total assets 358,943 351,859 329,832 Liabilities Current liabilities Trade and other payables 98,071 94,337 79,607 Corporation tax 6,887 4,443 5,281 Interest bearing loans and borrowings 33 33 34 Derivative financial instruments 515 1,719 2,149 105,506 100,532 87,071 Non-current liabilities Interest bearing loans and borrowings 34,425 53,397 36,418 Deferred taxation liabilities 14,142 13,966 13,625 48,567 67,363 50,043 Total liabilities 154,073 167,895 137,114 Net assets 204,870 183,964 192,718 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 (3,664) (5,532) (5,529) Capital redemption reserve 75,394 75,394 75,394 Consolidation reserve (213,067) (213,067) (213,067) Hedging reserve (348) (1,310) (1,653) Retained earnings 272,819 254,824 263,894 Equity attributable to equity shareholders of the Parent 203,674 182,849 191,579 Non-controlling interests 1,196 1,115 1,139 Total equity 204,870 183,964 192,718
Condensed Consolidated Half-yearly Cash Flow Statement
for the half year ended 30 June 2016
Half year ended Year ended June December 2016 2015 2015 GBP'000 GBP'000 GBP'000 Cash flows from operating activities Profit for the financial period 20,331 16,487 27,891 Income tax expense 4,812 4,335 7,387 Profit before tax 25,143 20,822 35,278 Adjustments for: Depreciation 5,916 7,006 13,054 Amortisation 496 645 1,322 Associates - (72) 582 (Gain) / loss on sale of property, plant and equipment (86) 84 (149) Equity settled share-based expenses 629 974 2,202 Financial income and expenses (net) 826 1,192 2,174 Operating cash flow before changes in working capital and pension scheme contributions 32,924 30,651 54,463 Increase in trade and other receivables (21,120) (39,119) (443) (Increase) / decrease in inventories (1,308) (3,584) 1,706 Increase in trade and other payables 3,098 26,608 7,262 Operational restructuring costs paid - (260) (175) Pension scheme contributions - (4,300) (4,350) Cash generated from operations 13,594 9,996 58,463 Financial expenses paid (579) (1,074) (1,775) Income tax paid (3,665) (3,724) (7,003) Net cash flow from operating activities 9,350 5,198 49,685 Cash flows from investing activities Proceeds from sale of property, plant and equipment 490 93 933 Financial income received - 5 7 Net proceeds from disposal of associates - - 200 Acquisition of property, plant and equipment (5,764) (5,545) (14,016) Acquisition of intangible assets (419) (441) (909) Net cash flow from investing activities (5,693) (5,888) (13,785) Cash flows from financing activities Payments to acquire own shares (1,175) (3,461) (4,582) Net (decrease) in other debt and finance leases - (117) (166) (Decrease) / increase in borrowings (1,997) 4,465 (14,182) Equity dividends paid - - (12,291) Net cash flow from financing activities (3,172) 887 (31,221) Net increase in cash and cash equivalents 485 197 4,679 Cash and cash equivalents at beginning of the period 24,990 20,320 20,320 Effect of exchange rate fluctuations 156 (17) (9) Cash and cash equivalents at end of the period 25,631 20,500 24,990
Condensed Consolidated Half-yearly Statement of Changes in Equity
for the half year ended 30 June 2016
Attributable to equity holders of the Company Share Capital Consolid- Non-con- Share premium Own redemption ation Hedging Retained trolling Total capital account shares reserve reserve reserve earnings Total interests equity GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 Current half year At 1 January 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 - - 1,865 - - 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 Attributable to equity holders of the Company Share Capital Consolid- Non-con- Share premium Own redemption ation Hedging Retained trolling Total capital account shares reserve reserve reserve earnings Total interests equity GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 Prior half year At 1 January 2015 49,845 22,695 (6,689) 75,394 (213,067) (2,488) 254,729 180,419 1,475 181,894 Total comprehensive income / (expense) for the period Profit/ (loss) for the financial period attributable to equity shareholders of the Parent - - - - - - 16,711 16,711 (224) 16,487 Other comprehensive income / (expense) Foreign currency translation differences - - - - - - 1 1 (136) (135) Effective portion of changes in fair value of cash flow hedges - - - - - 602 - 602 - 602 Net change in fair value of cash flow hedges transferred to the Income Statement - - - - - 870 - 870 - 870 Deferred tax arising - - - - - (294) - (294) - (294) Defined benefit plan actuarial losses - - - - - - (6,777) (6,777) - (6,777) Deferred tax arising - - - - - - 1,355 1,355 - 1,355 Total other comprehensive income / (expense) - - - - - 1,178 (5,421) (4,243) (136) (4,379) Total comprehensive income / (expense) for the period - - - - - 1,178 11,290 12,468 (360) 12,108 Transactions with owners, recorded directly in equity Contributions by and distributions to owners Share-based payments - - - - - - 974 974 - 974 Deferred tax on share-based payments - - - - - - 100 100 - 100 Corporation tax on share- based payments - - - - - - 215 215 - 215 Dividends to equity shareholders - - - - - - (7,866) (7,866) - (7,866) Purchase of own shares - - (3,461) - - - - (3,461) - (3,461) Disposal of own shares - - 4,618 - - - (4,618) - - - Total contributions by and distributions to owners - - 1,157 - - - (11,195) (10,038) - (10,038) Total transactions with owners of the Company - - 1,157 - - 1,178 95 2,430 (360) 2,070 At 30 June
2015 49,845 22,695 (5,532) 75,394 (213,067) (1,310) 254,824 182,849 1,115 183,964 Attributable to equity holders of the Company Share Capital Consolid- Non-con- Share premium Own redemption ation Hedging Retained trolling Total capital account shares reserve reserve reserve earnings Total interests equity GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 Prior year At 1 January 2015 49,845 22,695 (6,689) 75,394 (213,067) (2,488) 254,729 180,419 1,475 181,894 Total comprehensive income / (expense) for the period Profit / (loss) for the financial period attributable to equity shareholders of the Parent - - - - - - 28,149 28,149 (258) 27,891 Other comprehensive income / (expense) Foreign currency translation differences - - - - - - (133) (133) (78) (211) Effective portion of changes in fair value of cash flow hedges - - - - - (940) - (940) - (940) Net change in fair value of cash flow hedges transferred to the Income Statement - - - - - 1,984 - 1,984 - 1,984 Deferred tax arising - - - - - (209) - (209) - (209) Defined benefit plan actuarial losses - - - - - - (3,866) (3,866) - (3,866) Impact of change of rate of deferred tax - - - - - - (375) (375) - (375) Deferred tax arising - - - - - - 773 773 - 773 Total other comprehensive income / (expense) - - - - - 835 (3,601) (2,766) (78) (2,844) Total comprehensive income / (expense) for the period / (expense) for the period - - - - - 835 24,548 25,383 (336) 25,047 Transactions with owners, recorded directly in equity Contributions by and distributions to owners Share-based payments - - - - - - 2,202 2,202 - 2,202 Deferred tax on share-based payments - - - - - - (5) (5) - (5) Corporation tax on share- based payments - - - - - - 445 445 - 445 Impact of the change in rate of deferred tax on share-based payments - - - - - - 8 8 - 8 Dividends to equity shareholders - - - - - - (12,291) (12,291) - (12,291) Purchase of own shares - - (4,582) - - - - (4,582) - (4,582) Disposal of own shares - - 5,742 - - - (5,742) - - - Total contributions by and distributions to owners - - 1,160 - - - (15,383) (14,223) - (14,223) Total transactions with owners of the Company - - 1,160 - - 835 9,165 11,160 (336) 10,824 At 31 December 2015 49,845 22,695 (5,529) 75,394 (213,067) (1,653) 263,894 191,579 1,139 192,718
Notes to the Condensed Consolidated Half-yearly Financial Statements
1. Basis of preparation
Marshalls plc (the "Company") is a company domiciled in the United Kingdom. The Condensed Consolidated Half-yearly Financial Statements of the Company for the half year ended 30 June 2016 comprise the Company and its subsidiaries (together referred to as the "Group").
The Condensed Consolidated Half-yearly 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 Half-yearly Financial Statements do not constitute financial statements and do not include all the information and disclosures required for full annual financial statements. The Condensed Consolidated Half-yearly Financial Statements were approved by the Board on 26 August 2016. The Condensed Consolidated Half-yearly 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 2016 and comparative period have not been audited. The Auditor has carried out a review of the Half-yearly Financial Information and their report is set out on page 23.
The financial information for the year ended 31 December 2015 has been extracted from the annual Financial Statements, included in the Annual Report 2015, 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 their 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 Financial Conduct Authority, the condensed set of Financial Statements has, other than in respect of the matters referred to below, 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 2015.
The Condensed Consolidated Half-yearly 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-yearly Financial Statements and are also set out on the Company's website (www.marshalls.co.uk). The Condensed Consolidated Half-yearly 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 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-yearly 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 2015.
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 16 August 2016. Management believe 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-yearly Financial Statements.
The June 2015 comparative amounts for trade receivables and other payables have been restated by GBP11,384,000 to reflect comparability with regards to gross settled transactions. Notes 2 and 11 have also been updated accordingly.
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 Domestic and Public Sector and Commercial end markets and the operating assets produce and deliver a range of broadly similar products that are sold into each of these end markets. Within the Landscape Products operating segment the focus is on the one integrated production, logistics and distribution network supporting both end markets.
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 Half year ended June Year ended December 2016 2015 2015 Landscape Landscape Landscape Products Other Total Products Other Total Products Other Total GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 External revenue 156,967 47,074 204,041 154,590 46,756 201,346 299,650 90,915 390,565 Inter-segment revenue (58) (1,612) (1,670) (18) (2,261) (2,279) (123) (4,238) (4,361) Total revenue 156,909 45,462 202,371 154,572 44,495 199,067 299,527 86,677 386,204 Segment operating profit 26,538 1,477 28,015 24,710 720 25,430 41,816 1,763 43,579 Unallocated administration costs (2,046) (3,488) (5,545) Share of profits of associates - 72 (582) Operating profit 25,969 22,014 37,452 Finance charges (net) (826) (1,192) (2,174) Profit before tax 25,143 20,822 35,278 Taxation (4,812) (4,335) (7,387) Profit after tax 20,331 16,487 27,891
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 the share of profit of associates and certain administration costs that are not capable of allocation. Centrally administered overhead costs that relate directly to the reportable segments are included within the segment results.
June June December Segment assets 2016 2015 2015 GBP'000 GBP'000 GBP'000 Fixed assets and inventory: Landscape Products 157,453 158,807 156,112 Other 57,731 59,487 56,631 Total segment fixed assets and inventory 215,184 218,294 212,743 Unallocated assets 143,759 133,565 117,089 Consolidated total assets 358,943 351,859 329,832
For the purpose of monitoring segment performance and allocating performance between segments, the Group's CODM monitors the property, plant and equipment and inventory. Assets used jointly by reportable segments are not allocated to individual reportable segments.
Other segment information
Depreciation and amortisation Fixed asset additions Half year ended Year ended Half year ended Year ended June December June December 2016 2015 2015 2016 2015 2015 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 Landscape Products 4,714 5,286 10,465 4,703 4,594 11,678 Other 1,698 2,365 3,911 993 1,392 3,816 6,412 7,651 14,376 5,696 5,986 15,494 Geographical destination of revenue Half year Year ended ended June December 2016 2015 2015 GBP'000 GBP'000 GBP'000 United Kingdom 191,645 187,062 367,248 Rest of the World 10,726 12,005 18,956 202,371 199,067 386,204
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 Year ended ended June December 2016 2015 2015 GBP'000 GBP'000 GBP'000 Raw materials and consumables 76,547 73,124 141,471 Changes in inventories of finished goods and work in progress (3,165) (1,494) (1,801) Personnel costs 49,628 48,744 96,716 Depreciation - owned 5,916 7,006 13,054 Amortisation of intangible assets 496 645 1,322 Own work capitalised (782) (907) (1,810) Other operating costs 48,660 50,551 100,707 Operating costs 177,300 177,669 349,659 Other income (812) (628) (1,340) Net (gain) / loss on asset and property disposals (86) 84 (149) Share of results of associates - (72) 582 Net operating costs 176,402 177,053 348,752 4. Financial expenses and income Half year Year ended ended June December 2016 2015 2015
GBP'000 GBP'000 GBP'000 (a) Financial expenses Net interest expense on defined benefit pension scheme 244 123 406 Interest expense on bank loans, overdrafts and loan notes 579 1,070 1,767 Finance lease interest expense 3 4 8 826 1,197 2,181 (b) Financial income Interest receivable and similar income - 5 7 5. Income tax expense Half year Year ended ended June December 2016 2015 2015 GBP'000 GBP'000 GBP'000 Current tax expense Current year 5,946 4,057 8,164 Adjustments for prior years (371) 49 289 5,575 4,106 8,453 Deferred taxation expense Origination and reversal of temporary differences: Current year (711) 162 (684) Adjustments for prior years (52) 67 (382) Total tax expense 4,812 4,335 7,387 Year ended Half year ended June December 2016 2015 2015 % GBP'000% GBP'000 % GBP'000 Reconciliation of effective tax rate Profit before tax 100.0 25,143 100.0 20,822 100.0 35,278 Tax using domestic corporation tax rate 20.0 5,029 20.2 4,206 20.2 7,144 Impact of capital allowances in excess of depreciation 1.7 431 2.6 531 2.0 710 Short-term timing differences (0.2) (62)- - (0.2) (81) Adjustment to tax charge in prior period (1.5) (371) 0.2 49 0.8 289 Pension scheme movements - - (4.0) (835) (2.1) (755) Expenses not deductible for tax purposes 2.2 549 0.7 155 3.2 1,146 Corporation tax charge for the period 22.2 5,576 19.7 4,106 23.9 8,453 Impact of capital allowances in excess of depreciation (2.2) (556) (3.6) (732) (1.0) (355) Short-term timing differences (0.2) (56)- (9) (0.2) (79) Pension scheme movements - - 4.0 825 2.1 746 Other items (0.4) (99) 0.4 78 (0.3) (100) Adjustment to tax charge in prior period (0.2) (53) 0.3 67 (1.1) (382) Impact of the change in the rate of corporation tax on deferred taxation - -- - (2.5) (896) Total tax charge for the period 19.2 4,812 20.8 4,335 20.9 7,387
The net amount of deferred taxation (debited) / credited to the Consolidated Statement of Comprehensive Income in the period was GBP1,184,000 debit (30 June 2015: GBP1,061,000 credit; 31 December 2015: GBP189,000 credit). 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 10.36 pence (30 June 2015: 8.50 pence; 31 December 2015: 14.32 pence) per share is calculated by dividing the profit attributable to Ordinary shareholders for the financial period, after adjusting for non-controlling interests, of GBP20,411,000 (30 June 2015: GBP16,711,000; 31 December 2015: GBP28,149,000) by the weighted average number of shares in issue during the period of 197,013,990 (30 June 2015: 196,484,800; 31 December 2015: 196,574,435).
Profit attributable to Ordinary shareholders
Half year Year ended ended June December 2016 2015 2015 GBP'000 GBP'000 GBP'000 Profit for the financial period 20,331 16,487 27,891 Loss attributable to non-controlling interests 80 224 258 Profit attributable to Ordinary shareholders 20,411 16,711 28,149
Weighted average number of Ordinary shares
Half year Year ended ended June December 2016 2015 2015 Number Number Number Number of issued Ordinary shares (at beginning of the period) 199,378,755 199,378,755 199,378,755 Effect of shares transferred into employee benefit trust (2,364,765) (2,893,955) (2,804,320) Weighted average number of Ordinary shares at end of the period 197,013,990 196,484,800 196,574,435
Diluted earnings per share of 10.22 pence (30 June 2015: 8.39 pence; 31 December 2015: 14.10 pence) per share is calculated by dividing the profit for the financial period, after adjusting for non-controlling interests, of GBP20,411,000 (30 June 2015: GBP16,711,000; 31 December 2015: GBP28,149,000) by the weighted average number of shares in issue during the period of 197,013,990 (30 June 2015: 196,484,800; 31 December 2015: 196,574,435), plus potentially dilutive shares of 2,629,255 (30 June 2015: 2,734,019; 31 December 2015: 3,092,619), which totals 199,643,245 (30 June 2015: 199,218,819; 31 December 2015: 199,667,054).
Weighted average number of Ordinary shares (diluted)
Half year Year ended ended June December 2016 2015 2015 Number Number Number Weighted average number of Ordinary shares 197,013,990 196,484,800 196,574,435 Dilutive shares 2,629,255 2,734,019 3,092,619 Weighted average number of Ordinary shares (diluted) 199,643,245 199,218,819 199,667,054 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 Half year Year ended share ended June December 2016 2015 2015 GBP'000 GBP'000 GBP'000 2016 interim 2.90 5,693 - - 2015 supplementary 2.00 - - 3,988 2015 final 4.75 - - 9,470 2015 interim 2.25 - 4,425 4,425 5,693 4,425 17,883
The following dividends were approved by the shareholders in the period:
Pence per qualifying Half year Year ended share ended June December 2016 2015 2015 GBP'000 GBP'000 GBP'000 2015 supplementary 2.00 3,945 - - 2015 final 4.75 9,369 - - 2015 interim 2.25 - - 4,425 2014 final 4.00 - 7,866 7,866 13,314 7,866 12,291
The 2015 final dividend of 4.75 pence per qualifying ordinary share alongside a supplementary dividend of 2.00 pence per qualifying Ordinary share (total value GBP13,314,000) was paid on 8 July 2016 to shareholders registered at the close of business on 3 June 2016.
The Board has declared an interim dividend of 2.90 pence (June 2015: 2.25 pence) per share. This dividend will be paid on 2 December 2016 to shareholders on the register at the close of business on 21 October 2016. The ex-dividend date will be 20 October 2016.
8. Employee benefits
The Company sponsors a pension scheme for employees in the UK which incorporates a funded defined benefit section and a defined contribution section ("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, which closed to future service accrual on 30 June 2006, provides pension and lump sums to members on retirement and to dependants on death. Members of the defined benefit section became entitled to a deferred pension on closure. 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 2016 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 2016 2015 2015 GBP'000 GBP'000 GBP'000 Present value of Scheme liabilities (347,452) (305,730) (298,812) Fair value of Scheme assets 355,344 306,529 302,239 Net amount recognised (before any adjustment for deferred tax) 7,892 799 3,427
The amounts recognised in Comprehensive Income were:
The current and past service costs, settlement and curtailments, together with the net interest expense for the period are included in the employee benefits expense in the Statement of Comprehensive Income. Remeasurements of the net defined benefit liability are included in other comprehensive income.
Half year Year ended ended June December 2016 2015 2015 GBP'000 GBP'000 GBP'000 Service cost: Net interest expense recognised in the Consolidated Income Statement 294 123 506 Remeasurements of the net liability: Return on scheme assets (excluding amount included in interest expense) (54,879) 10,866 14,164 Loss / (gain) arising from changes in financial assumptions 53,764 (1,727) (5,063) Gain arising from changes in demographic assumptions - (4,461) (7,412) Experience (gain) / loss (3,644) 2,099 2,177 (Credit) / charge recorded in other comprehensive income (4,759) 6,777 3,866 Total defined benefit (credit) / charge (4,465) 6,900 4,372
The principal actuarial assumptions used were:
June December 2016 2015 2015 Liability discount rate 2.70% 3.70% 3.70% Inflation assumption - RPI 2.90% 3.30% 3.10% Inflation assumption - CPI 1.90% 2.30% 2.10% Rate of increase in salaries n/a n/a n/a Revaluation of deferred pensions 1.90% 2.30% Increases for pensions in payment: 2.10% CPI pension increases (maximum 5% per annum) 1.90% 2.30% 2.10% CPI pension increases (maximum 5% per annum, minimum 3% per annum) 3.10% 3.10% 3.10% CPI pension increases (maximum 3% per annum) 1.80% 2.20% 2.00% 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 Same as post Same as post retirement retirement retirement Mortality assumption - after retirement S2PMA tables S2PMA tables S2PMA tables (males) Loading 105% 105% 105% Projection basis Year of birth Year of birth Year of birth CMI_2015 1.0% CMI_2014 1.0% CMI_2015 1.0% Mortality assumption - after retirement S2PFA tables S2PFA tables S2PFA tables (females) Loading 105% 105% 105% Projection basis Year of birth Year of birth Year of birth CMI_2015 1.0% CMI_2014 1.0% CMI_2015 1.0% Future expected lifetime of current pensioner at age 65: Male aged 65 at year end 86.5 86.7 86.5 Female aged 65 at year end 88.5 88.7 88.5 Future expected lifetime of future pensioner at age 65: Male aged 45 at year end 87.8 88.0 87.7 Female aged 45 at year end 90.0 90.2 89.8 9. Analysis of net debt 1 January Cash flow Other changes 30 June 2016 2016 GBP'000 GBP'000 GBP'000 GBP'000 Cash at bank and in hand 24,990 485 156 25,631 Debt due after 1 year (36,125) 4,155 (2,158) (34,128) Finance leases (327) - (3) (330) (11,462) 4,640 (2,005) (8,827)
Reconciliation of net cash flow to movement in net debt
Half year ended Year ended June December 2016 2015 2015 GBP'000 GBP'000 GBP'000 Net increase in cash and cash equivalents 485 197 4,679 Cash outflow/ (inflow) from decrease / (increase) in debt and lease financing 4,155 (4,348) 13,350 Effect of exchange rate fluctuations (2,005) 1,701 989 Movement in net debt in the period 2,635 (2,450) 19,018 Net debt at beginning of the period (11,462) (30,480) (30,480) Net debt at the end of the period (8,827) (32,930) (11,462) 10. Borrowing facilities
The total bank borrowing facilities at 30 June 2016 amounted to GBP115.0 million (30 June 2015: GBP145.0 million; 31 December 2015: GBP95.0 million) of which GBP80.9 million (30 June 2015: GBP91.9 million; 31 December 2015: GBP58.9 million) remained unutilised.
These figures include an additional seasonal working capital facility of GBP20.0 million available between 1 February and 31 August each year.
The undrawn facilities available at 30 June 2016, in respect of which all conditions precedent had been met, were as follows:
June December 2016 2015 2015 GBP'000 GBP'000 GBP'000 Committed: - Expiring in more than 2 years but not more than 5 years 45,872 31,934 43,875 - Expiring in 1 year or less - 25,000 - Uncommitted: - Expiring in 1 year or less 35,000 35,000 15,000 80,872 91,934 58,875
The total borrowing facilities at 26 August 2016 amounted to GBP105.0 million. On 16 August 2016, the Group renewed its short-term working capital facilities and reduced its seasonal working capital facility to GBP10.0 million. The Group also extended the maturity of each of its committed facilities by 12 months. The committed facilities are all revolving credit facilities with interest charged at variable rate based on LIBOR. The Group's bank facilities continue to be aligned with the current strategy to ensure that headroom against available facilities remains at appropriate levels.
The maturity profile of borrowing facilities is structured to provide balanced, committed and phased medium-term debt. Following the recent refinancing of bank facilities, the current facilities are set out as follows:
Facility Cumulative facility GBP'000 GBP'000 Committed facilities: Q3: 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 2016 is shown below:
June December 2016 2015 Book Fair Book Fair amount value amount value GBP'000 GBP'000 GBP'000 GBP'000 Trade and other receivables 65,847 65,847 44,542 44,542 Cash and cash equivalents 25,631 25,631 24,990 24,990 Bank loans (34,128) (33,582) (36,125) (34,906) Finance lease liabilities (330) (360) (327) (360) Trade and other payables (98,071) (98,071) (79,607) (79,607) Interest rate swaps, forward contracts and fuel hedges (515) (515) (2,149) (2,149) Financial liabilities - net (41,566) (48,676) Other assets - net 246,436 241,394 204,870 192,718
Estimation of fair values
The following summarises the major methods and assumptions used in estimating the fair values of financial instruments reflected in the table.
(a) Derivatives
Derivative contracts are either marked to market using listed market prices or by discounting the contractual forward price at the relevant rate and deducting the current spot rate. For interest rate swaps broker quotes are used.
(b) Interest-bearing loans and borrowings
Fair value is calculated based on the expected future principal and interest cash flows discounted at the market rate of interest at the balance sheet date.
(c) Finance lease liabilities
The fair value is estimated as the present value of future cash flows, discounted at market interest rates for homogeneous lease agreements. The estimated fair values reflect changes in interest rates.
(d) Trade and other receivables / payables
For receivables / payables with a remaining life of less than 1 year, the notional amount is deemed to reflect the fair value. All other receivables / payables are discounted to determine the fair value.
(e) Fair value hierarchy
The table below analyses financial instruments, measured at fair value, into a fair value hierarchy based on the valuation techniques used to determine fair value.
-- Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
-- Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
-- Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
Level 1 Level 2 Level 3 Total GBP'000 GBP'000 GBP'000 GBP'000 30 June 2016 Derivative financial liabilities - 515 - - 31 December 2015 Derivative financial liabilities - 2,149 - - 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 23 of the 2015 Annual Report. These cover the strategic, financial and operational risks and, other than some increased economic uncertainty post the EU referendum, 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-yearly Financial Statements have been prepared in accordance with IAS 34 "Interim Financial Reporting" as adopted by the European Union; and
the Half-yearly 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 2016 and their impact on the Condensed Consolidated Half-yearly 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 2016 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 2016 were as follows:
Andrew Allner Chairman Janet Ashdown Non-Executive Director Jack Clarke Finance Director Martyn Coffey Chief Executive Alan Coppin Non-Executive Director - retired on 18 May 2016 Mark Edwards Non-Executive Director Tim Pile Non-Executive Director
The responsibilities of the Directors during their period of service were as set out on pages 34 and 35 of the 2015 Annual Report.
Cathy Baxandall
Company Secretary
By order of the Board
26 August 2016
Cautionary statement
This Half-yearly 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-yearly 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-yearly 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-yearly Financial Report for the 6 months ended 30 June 2016, which comprises the Condensed Consolidated Half-yearly Income Statement, the Condensed Consolidated Half-yearly Statement of Comprehensive Income, the Condensed Consolidated Half-yearly Balance Sheet, the Condensed Consolidated Half-yearly Cash Flow Statement, the Condensed Consolidated Half-yearly Statement of Changes in Equity and related Notes 1 to 12. We have read the other information contained in the Half-yearly 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-yearly Financial Report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the Half-yearly 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-yearly 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-yearly 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-yearly 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-yearly Financial Report for the 6 months ended 30 June 2016 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
Chartered Accountants
Leeds, United Kingdom
26 August 2016
Shareholder Information
Financial calendar
Half-yearly results for the year ending Announced 26 August 2016 December 2016 Half-yearly dividend for the year Payable 2 December 2016 ending December 2016 Results for the year ending December Announcement March 2017 2016 Report and accounts for the year ending April 2017 December 2016 Annual General Meeting 10 May 2017 Final dividend for the year ending Payable July 2017 December 2016
Registrars
All administrative enquiries relating to shareholdings should, in the first instance, be directed to Computershare Investor Services PLC, PO Box 82, The Pavilions, Bridgwater Road, Bristol BS99 6ZZ (telephone: 0870 707 1134) and should clearly state the registered shareholder's name and address.
Dividend mandate
Any shareholder wishing dividends to be paid directly into a bank or building society should contact the Registrar for a dividend mandate form. Dividends paid in this way will be paid through the Bankers' Automated Clearing System ("BACS").
Website
The Group has a website that gives information on the Group and its products and provides details of significant Group announcements. The address is www.marshalls.co.uk.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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