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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 | |
|---|---|---|---|---|---|---|---|---|---|---|
| 3.00 | 1.14% | 265.50 | 264.50 | 265.50 | 265.50 | 260.00 | 261.50 | 514,595 | 16:29:55 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Construction Matl-whsl, Nec | 674.4M | 18.6M | 0.0736 | 36.07 | 671.15M |
From Apr 2019 to Apr 2024
TIDMMSLH
RNS Number : 8399F
Marshalls PLC
12 March 2020
Hot Features
Premium
LEI: 213800S21IFC367J5V62
Preliminary results for the year ended 31 December 2019
Marshalls plc, the specialist Landscape Products group, announces its full year results for the year ended 31 December 2019
Financial Highlights Year ended Year ended
31 December 31 December Increase
2019 2018 %
Revenue GBP541.8m GBP491.0m 10
EBITDA - reported GBP103.9m GBP80.8m 29
EBITDA - pre-IFRS 16 GBP90.1m GBP80.8m 12
Operating profit - reported GBP73.7m GBP64.8m 14
Operating profit - pre-IFRS 16 GBP72.6m GBP64.8m 12
Profit before tax - reported GBP69.9m GBP62.9m 11
Profit before tax - pre-IFRS 16 GBP70.1m GBP62.9m 11
Basic EPS - reported 29.36p 26.29p 12
Basic EPS - pre-IFRS 16 29.48p 26.29p 12
Total dividends - ordinary and supplementary 18.35p 16.00p 15
Final ordinary dividend - recommended 9.65p 8.00p 21
Discretionary supplementary dividend
- recommended 4.00p 4.00p -
ROCE - reported 21.4% 21.9%
ROCE - pre-IFRS 16 23.7% 21.9% Up 180 basis
points
Net debt - reported GBP60.0m GBP37.4m
Net debt - pre-IFRS 16 GBP18.7m GBP37.4m
Notes:
1. The financial impact of IFRS 16 is summarised below and in Note 1.
2. Alternative performance measures are used consistently throughout this Preliminary Announcement. These relate to EBITA, EBITDA, ROCE and net debt. For further details of their purpose, definition and reconciliation to the equivalent statutory measures, see Note 2.
Highlights:
-- Revenue growth of 10% to GBP541.8 million (2018: GBP491.0 million) -- Continued improvement in operating margins which increased to 13.4% (2018: 13.2%) -- Profit before tax up 11% to GBP69.9 million on a reported basis (2018: GBP62.9 million)
-- ROCE improved to 23.7% (2018: 21.9%) on a pre-IFRS 16 basis and on a reported basis was 21.4%
-- Reported EPS up 12% to 29.36 pence (2018: 26.29 pence) -- Edenhall performed well in the period and its operational integration is complete -- Strong cash generation has continued with operating cash flow at 96% of EBITDA -- Net debt of GBP18.7 million (2018: GBP37.4 million) on a pre-IFRS 16 basis
-- Reported net debt of GBP60.0 million, after the inclusion of GBP41.3 million of IFRS 16 lease liabilities
-- Recommended final ordinary dividend increased by 21% to 9.65 pence (2018: 8.00 pence) per share
-- Recommended supplementary dividend of 4.00 pence per share made possible by strong cash management
The new 5 year Strategy, launched in June 2019, maintains the objective of delivering sustainable growth. The main elements are:
-- Continued focus on organic growth and investment - capital expenditure of GBP20 million planned for 2020 to drive growth
-- Increasing momentum in the delivery of the digital strategy through continued investment and continuous improvement
-- Increase in research and development and new product development to drive sales growth -- Renewed focus on increasing the profitability of the Emerging UK Businesses
-- Continuing to target selective bolt-on acquisition opportunities in New Build Housing, Water Management and Minerals
-- Continued focus on customer service, brand, operational and manufacturing excellence and procurement efficiency
-- Maintaining a strong balance sheet, a flexible capital structure and a clear capital allocation policy
-- Maintaining a 2 times earnings cover dividend policy, enhanced by supplementary dividends
Commenting on these results, Martyn Coffey, Chief Executive, said:
"The Group has delivered further growth in 2019 despite a period of market slowdown and economic and political uncertainty. The CPA's recent Winter Forecast predicted an increase in UK market volumes of 0.6 per cent in 2019 followed by a decrease of 0.3 per cent in 2020. The underlying indicators in our key New Build Housing, Road, Rail and Water Management markets remain supportive.
The Board believes that the Group's new 5 year Strategy will continue to deliver sustainable growth, whilst maintaining a strong balance sheet and a flexible capital structure. The strategy is underpinned by positive market fundamentals, focused investment plans and an established brand."
Presentation for analysts and investors
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 9125 - Access Code: 2683077. 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 Group Finance Director Marshalls plc 01422 314777 Andrew Jaques MHP Communications 020 3128 8540 Charlie Barker
Group results
Group revenue for the year ended 31 December 2019 was up 10 per cent at GBP541.8 million (2018: GBP491.0 million). Excluding the impact of Edenhall, revenue was up 3 per cent.
Sales in the Public Sector and Commercial end market, which represented approximately 69 per cent of Group sales, were up 15 per cent compared with the prior year period. The Edenhall business, acquired on 11 December 2018, traded strongly during 2019, and its operational integration into the Marshalls Group is now complete.
Sales in the Domestic end market, which represented approximately 26 per cent of Group sales, were flat compared with 2018. These results are ahead of the overall Domestic market in 2019. Whilst the Domestic end market was softer in the second half and suffered from the poor weather, continued execution of the 2020 Strategy more than compensated by improving operating margins. The survey of domestic installers at the end of February 2020 revealed order books of 9.7 weeks (2019: 10.0 weeks) which compared with 10.9 weeks at the end of October 2019.
International revenue grew by 13 per cent during 2019 and represents approximately 5 per cent of Group sales. The Group continues to develop opportunities by improving its global supply chains and infrastructure to ensure that international operations are sustainable and aligned with market opportunities.
Reported operating profit increased to GBP73.7 million (2018: GBP64.8 million). The reported operating margin was 13.6 per cent (2018: 13.2 per cent). Pre-IFRS 16 operating margins increased to 13.4 per cent. Excluding the impact of Edenhall, the operating margin increased to 13.7 per cent. This is a direct result of our successful execution of the 2020 Strategy.
Profit before tax, on a reported post-IFRS 16 basis, was GBP69.9 million. On a pre-IFRS 16 basis, profit before tax was GBP70.1 million (2018: GBP62.9 million), an increase of 11 per cent. Reported EBITDA was GBP103.9 million. On a pre-IFRS 16 basis, EBITDA grew by 12 per cent to GBP90.1 million and the Group's earnings per share, at 29.48 pence, were up 12 per cent on a pre-IFRS 16 basis. Reported earnings per share were 29.36 pence.
ROCE was 21.4 per cent (2018: 21.9 per cent), on a reported basis, at 31 December 2019. The consistently high ROCE reflects the Group's tight control and management of inventory and monetary working capital. ROCE was 23.7 per cent on a pre-IFRS 16 basis (2018: 21.9 per cent).
Net financial expenses were GBP3.8 million (2018: GBP1.9 million), including GBP1.3 million of additional IFRS 16 lease interest. On a reported basis interest was covered 19.2 times and, on a pre-IFRS 16 basis, interest was covered 29.2 times (2018: 34.1 times). Interest charges on bank loans totalled GBP1.9 million (2018: GBP1.4 million) and, including scheme administration costs, there was an IAS 19 notional interest charge of GBP0.6 million (2018: GBP0.5 million) in relation to the Group's Pension Scheme. The IAS 19 notional interest includes interest on obligations under the defined benefit section of the Marshalls plc Pension Scheme, net of the expected return on Scheme assets.
The effective tax rate was 17.1 per cent (2018: 18.0 per cent). The Group has paid GBP9.0 million (2018: GBP9.9 million) of corporation tax during the year. Deferred tax of GBP0.5 million in relation to the actuarial gain arising on the defined benefit pension scheme in the year has been taken to the Consolidated Statement of Comprehensive Income.
For the sixth year running, Marshalls has been awarded the Fair Tax Mark, which recognises social responsibility and transparency in a company's tax affairs. The Group's tax approach has long been closely aligned with the Fair Tax Mark's objectives and this is supported by the Group's tax strategy and fully transparent tax disclosures. Taking into account not only corporation tax but also PAYE and NI paid on our employee wages, aggregate levy, VAT, fuel duty and business rates Marshalls has funded total taxation to the UK economy of GBP93.6 million in 2019.
Capital discipline remains a key priority and the Group's strong cash generation has continued. On a pre-IFRS 16 basis, net debt at 31 December 2019 was significantly reduced to GBP18.7 million (2018: GBP37.4 million). Operating cash flow was 96 per cent of EBITDA on a pre-IFRS 16 basis.
Reported net debt was GBP60.0 million at 31 December 2019 (2018: GBP37.4 million), following the inclusion of GBP41.3 million of IFRS 16 lease liabilities. The Group increased both capital expenditure and dividends, yet tight control of working capital has led to a reduction in net debt.
Impact of IFRS 16
In adopting IFRS 16 from 1 January 2019, the Group has applied the modified retrospective transition approach and not restated comparative amounts for the year ended 31 December 2018. Right-of-use assets of GBP45.0 million and lease liabilities of GBP46.5 million were recognised as at 1 January 2019. A transition adjustment of GBP1.8 million has been taken to retained earnings.
The impact on the Income Statement of transitioning to IFRS 16 has been marginal, with reported profit before tax of GBP0.2 million lower than the pre-IFRS 16 figure of GBP70.1 million. The application of IFRS 16 resulted in a decrease in other operating expenses of GBP14.0 million and an increase in depreciation of GBP12.9 million for the year ended 31 December 2019. The interest expense increased by GBP1.3 million due to additional IFRS 16 lease interest. Consequently, on a reported basis, there has been an increase in operating profit of GBP1.1 million and a reduction in profit before tax of GBP0.2 million. Reported EBITDA of GBP103.9 million compares with GBP90.1 million on a pre-IFRS 16 basis. Bank covenants remain on frozen GAAP.
Investment priorities
Our new 5 year Strategy lays the foundations for our goals and objectives and the Group's long term strategy continues to be to deliver sustainable growth with a continued emphasis on organic growth, investment and a focus on ESG initiatives. At the heart of the strategy are 8 priority areas for investment and business focus. We believe that these areas provide significant growth potential for the Group over the next 5 years. The priorities for investment within the new 5 year Strategy are:
-- Brand preference for product specification -- Digital transformation -- New product development -- Logistics excellence -- Sustainable materials supply -- Customer centricity -- Operational excellence -- Growth in emerging businesses
Operating performance
In the Public Sector and Commercial end market, Marshalls' strategy offers sustainable integrated solutions to customers, architects and contractors. The objective is to create a brand preference in order to secure product specification. Our Design Space office in Central London has been updated and refreshed during the year to offer specifiers, designers and clients an enhanced experience and to showcase our full range of brand-leading capabilities and technical and design solutions. During the year we have also opened a new Marshalls Design Space in the heart of Birmingham supporting the major redevelopment in the city. We are continually developing our product ranges and systems to ensure that we remain at the forefront of innovation and technology within our industry.
In the Domestic end market, the Group's strategy continues to be to drive sales through the Marshalls Register of approved domestic installers. This ensures a consistently high standard of quality, customer service and marketing support. The Marshalls Register is unique and comprises approximately 1,900 installer teams.
Capital expenditure was GBP22.9 million in the year ended 31 December 2019 and further capital expenditure of GBP20 million is planned for 2020. We continue to generate a good pipeline of capital investment projects that will drive future organic growth. Edenhall's new GBP6 million state-of-the-art factory in South Wales was completed and fully commissioned in 2019. It has the capacity to deliver 100 million brick equivalents per annum. CPM's new precast factory was completed in 2018 and has increased the manufacturing capability for bespoke water management solutions.
Further investment continues to be made to develop our wide-ranging digital strategy, encompassing digital trading, digital marketing and digital business. Digital investment has been GBP9 million over the last 3 years.
In the core Landscape Products business, the growth in revenue from new products continued strongly, increasing by 9 per cent during 2019. Research and development expenditure amounted to GBP5.5 million (2018: GBP4.9 million). The objective is to deliver innovative market leading new products that are aligned with customer needs across all business areas. The development pipeline continues to be strong and the Group is committed to providing high performance product solutions.
We aim to maintain the highest standards of health and safety which remains a cornerstone of The Marshalls Way. The Group has continued to invest in health and safety awareness training for all managers and supervisory staff and we continue to promote a culture in which all managers visibly demonstrate health and safety leadership. We remain committed to continual improvement in health and safety performance.
Environmental, social and governance ("ESG") objectives
The Board is committed to the promotion of strong ethical, environmental and corporate social responsibility principles. This is a fundamental element of The Marshalls Way. We recognise the need to have sustainable products and services and to consider the long-term impact of every decision the Group makes. We are focused in playing our part in addressing the risk of climate change and the protection of the environment and we are engaging with our stakeholders to ensure they also put sustainability first. Our ESG agenda is supported by a detailed framework and comprehensive policies.
We support capital projects which improve operational efficiency and better utilisation of resources and raw materials. The investment in our new stone processing sawmills is a good example of this and our procurement process is focused on sourcing ethical and sustainable materials. We are committed to reducing the environmental impact of our products, reducing packaging and the recycling of water at our sites.
Capital allocation
The Group's capital allocation strategy is to maintain a strong balance sheet and flexible capital structure that recognises cyclical risk, while focusing on security, efficiency and liquidity.
The capital allocation strategy prioritises organic capital investment, supported by an increase in new product development and research and development expenditure. The strategy also targets selective bolt-on acquisition opportunities. In addition, the objective is to maintain a dividend cover of 2 times earnings over the medium term and to give consideration to supplementary dividends.
Balance sheet and net debt
Net assets at 31 December 2019 were GBP295.8 million (2018: GBP266.7 million). The Group has a strong balance sheet with a good range of medium-term bank facilities available to fund investment initiatives to generate growth.
Reported net debt was GBP60.0 million at 31 December 2019 (2018: GBP37.4 million), following the inclusion of GBP41.3 million of IFRS 16 lease liabilities. The Group increased both capital expenditure and dividends, yet tight control of working capital has led to a reduction in net debt. The ratio of net debt to EBITDA was 0.6 times at 31 December 2019 on a reported basis, and 0.2 times on a pre-IFRS 16 basis. Both are comfortably within our target range, of between 0 to 1 times, and well below covenant levels. The Group continues to prioritise the close control of inventory and the effective management of working capital. Debtor days remain industry leading due to continued close control of credit management procedures.
The balance sheet value of the Group's defined benefit pension scheme was a surplus of GBP15.7 million (2018: GBP13.5 million). The amount has been determined by the Scheme actuary. The fair value of the scheme assets at 31 December 2019 was GBP368.8 million (2018: GBP343.7 million) and the present value of the scheme liabilities is GBP353.1 million (2018: GBP330.2 million).
These changes have resulted in an actuarial gain, net of deferred taxation, of GBP2.4 million (2018: GBP8.3 million actuarial gain) and this has been recorded in the Consolidated Statement of Comprehensive Income. Following the completion of the 2018 triennial actuarial valuation during the year, the Company has agreed with the Trustee that no cash contributions are now payable under the funding and recovery plan.
Dividends
The Group continues to follow a progressive dividend policy aimed at achieving up to 2 times earnings cover over the business cycle. For the current year, the Board is recommending a final dividend of 9.65 pence per share (2018: 8.00 pence per share) which, together with the interim dividend of 4.70 pence per share (2018: 4.00 pence per share), makes a combined dividend of 14.35 pence per share (2018: 12.00 pence per share), an increase of 20 per cent for the year.
The Board is also recommending a supplementary dividend of 4.00 pence per share for 2019 (2018: 4.00 pence per share). The aim continues to be to maintain a degree of flexibility within our dividend strategy by utilising discretionary supplementary dividends commensurate with free cash flow and after considering future group capital requirements. The payment of this supplementary dividend provides increased returns for shareholders whilst at the same time recognising an appropriate degree of caution and stewardship.
Subject to shareholder approval at the Annual General Meeting, the final ordinary and supplementary dividends will be paid on 30 June 2020 to shareholders on the register on 5 June 2020. If approved by shareholders, the total dividend for the year will be 18.35 pence per share (2018: 16:00 pence per share).
Outlook
The Group has delivered further growth in 2019 despite a period of market slowdown and economic and political uncertainty. The CPA's recent Winter Forecast predicted an increase in UK market volumes of 0.6 per cent in 2019, followed by a decrease of 0.3 per cent in 2020. The underlying indicators in our key New Build Housing, Road, Rail and Water Management markets remain supportive.
The Board is closely monitoring the rapidly evolving situation of COVID-19. To date we have seen no discernible impact on the business. The Company regularly carries out onerous stress testing of its balance sheet and liquidity using a set process. Consistent with Group strategy we look to maintain a conservative approach to debt with a policy of running leverage at less than one times debt to EBITDA. This proactive management of risk and conservative borrowing ensure good liquidity to manage any emerging risks.
The Board believes that the Group's new 5 year Strategy will continue to deliver sustainable growth, whilst maintaining a strong balance sheet and a flexible capital structure. The strategy is underpinned by positive market fundamentals, focused investment plans and an established brand.
Martyn Coffey
Chief Executive
Marshalls plc
Preliminary Announcement of Results
Consolidated Income Statement
for the year ended 31 December 2019
2019 2018
Notes GBP'000 GBP'000
---------------------------------- ----- --------- ---------
Revenue 3 541,832 490,988
Net operating costs 4 (468,151) (426,154)
---------------------------------- ----- --------- ---------
Operating profit 3 73,681 64,834
Financial expenses 5 (3,835) (1,904)
Financial income 5 7 5
---------------------------------- ----- --------- ---------
Profit before tax 2 69,853 62,935
Income tax expense 6 (11,942) (11,307)
---------------------------------- ----- --------- ---------
Profit for the financial year 57,911 51,628
---------------------------------- ----- --------- ---------
Profit for the year
Attributable to:
Equity shareholders of the Parent 58,240 51,958
Non-controlling interests (329) (330)
---------------------------------- ----- --------- ---------
57,911 51,628
---------------------------------- ----- --------- ---------
Earnings per share
Basic 7 29.36 26.29p
Diluted 7 29.14 26.08p
---------------------------------- ----- --------- ---------
Dividend
Pence per share 8 16.70p 14.80p
Dividends declared 8 31,113 29,250
---------------------------------- ----- --------- ---------
All results relate to continuing operations.
Marshalls plc
Preliminary Announcement of Results
Consolidated Statement of Comprehensive Income
for the year ended 31 December 2019
2019 2018
GBP'000 GBP'000
---------------------------------------------------- ------- -------
Profit for the financial year 57,911 51,628
----------------------------------------------------- ------- -------
Other comprehensive income / (expense)
Items that will not be reclassified to the
Income Statement:
Remeasurements of the net defined benefit
asset 2,847 9,985
Deferred tax arising (484) (1,698)
----------------------------------------------------- ------- -------
Total items that will not be reclassified
to the Income Statement 2,363 8,287
----------------------------------------------------- ------- -------
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 231 528
Fair value of cash flow hedges transferred
to the Income Statement 113 (668)
Deferred tax arising (58) 27
Exchange difference on retranslation of foreign
currency net investment 992 (208)
Exchange movements associated with borrowings
designated as a hedge against net investment (869) 199
Foreign currency translation differences -
non-controlling interests (42) (35)
----------------------------------------------------- ------- -------
Total items that are or may be reclassified
subsequently to the Income Statement 367 (157)
----------------------------------------------------- ------- -------
Other comprehensive income for the year, net
of income tax 2,730 8,130
----------------------------------------------------- ------- -------
Total comprehensive income for the year 60,641 59,758
----------------------------------------------------- ------- -------
Attributable to:
Equity shareholders of the Parent 61,012 60,123
Non-controlling interests (371) (365)
----------------------------------------------------- ------- -------
60,641 59,758
---------------------------------------------------- ------- -------
Marshalls plc
Preliminary Announcement of Results
Consolidated Balance Sheet
for the year ended 31 December 2019
2019 2018*
Notes GBP'000 GBP'000
-------------------------------------------- ----- --------- ---------
Assets
Non-current assets
Property, plant and equipment 195,554 192,061
Right-of-use assets 9 40,014 -
Intangible assets 95,799 95,802
Employee benefits 11 15,721 13,516
Deferred taxation assets 2,947 1,406
-------------------------------------------- ----- --------- ---------
350,035 302,785
-------------------------------------------- ----- --------- ---------
Current assets
Inventories 89,238 84,361
Trade and other receivables 69,418 80,430
Cash and cash equivalents 53,258 45,709
Derivative financial instruments 620 276
-------------------------------------------- ----- --------- ---------
212,534 210,776
-------------------------------------------- ----- --------- ---------
Total assets 562,569 513,561
-------------------------------------------- ----- --------- ---------
Liabilities
Current liabilities
Trade and other payables 121,379 128,533
Corporation tax 11,234 9,683
Short-term lease liabilities 10 9,736 -
Interest-bearing loans and borrowings 20,000 2,974
-------------------------------------------- ----- --------- ---------
162,349 141,190
-------------------------------------------- ----- --------- ---------
Non-current liabilities
Long-term lease liabilities 10 32,224 -
Interest-bearing loans and borrowings 51,274 80,168
Provisions 2,649 7,935
Deferred taxation liabilities 18,307 17,553
-------------------------------------------- ----- --------- ---------
104,454 105,656
-------------------------------------------- ----- --------- ---------
Total liabilities 266,803 246,846
-------------------------------------------- ----- --------- ---------
Net assets 295,766 266,715
-------------------------------------------- ----- --------- ---------
Equity
Capital and reserves attributable to equity
shareholders of the Parent
Called-up share capital 50,013 49,998
Share premium account 24,482 24,326
Own shares (1,391) (888) Capital redemption reserve 75,394 75,394 Consolidation reserve (213,067) (213,067) Hedging reserve 559 273 Retained earnings 359,053 329,585 -------------------------------------------- ----- --------- --------- Equity attributable to equity shareholders of the Parent 295,043 265,621 Non-controlling interests 723 1,094 -------------------------------------------- ----- --------- --------- Total equity 295,766 266,715 -------------------------------------------- ----- --------- ---------
*The comparatives have been restated as a result of a reassessment of the fair value of assets and liabilities (Note 12).
Marshalls plc
Preliminary Announcement of Results
Consolidated Cash Flow Statement
for the year ended 31 December 2019
2019 2018
Notes GBP'000 GBP'000
----------------------------------------------------- ----- -------- --------
Cash flows from operating activities
Profit for the financial year 57,911 51,628
Income tax expense 6 11,942 11,307
----------------------------------------------------- ----- -------- --------
Profit before tax 69,853 62,935
Adjustments for:
Depreciation 27,771 14,199
Amortisation 2,423 1,759
Gain on sale of property, plant and equipment (306) (738)
Equity settled share-based payments 3,024 1,434
Financial income and expenses (net) 3,828 1,899
----------------------------------------------------- ----- -------- --------
Operating cash flow before changes in working
capital 106,593 81,488
Decrease / (increase) in trade and other receivables 10,645 (6,927)
Increase in inventories (5,262) (4,314)
(Decrease) / increase in trade and other payables (10,151) 6,009
Operational restructuring costs paid (1,109) (1,244)
Acquisition costs paid (375) (594)
----------------------------------------------------- ----- -------- --------
Cash generated from operations 100,341 74,418
Financial expenses paid (3,193) (1,308)
Income tax paid (9,023) (9,855)
----------------------------------------------------- ----- -------- --------
Net cash flow from operating activities 88,125 63,255
----------------------------------------------------- ----- -------- --------
Cash flows from investing activities
Proceeds from sale of property, plant and
equipment 523 1,637
Financial income received 7 5
Acquisition of subsidiary undertaking - (11,726)
Acquisition of property, plant and equipment (20,488) (27,296)
Acquisition of intangible assets (2,420) (1,995)
----------------------------------------------------- ----- -------- --------
Net cash flow from investing activities (22,378) (39,375)
----------------------------------------------------- ----- -------- --------
Cash flows from financing activities
Proceeds from issue of share capital 225 1,784
Payments to acquire own shares (1,470) (1,210)
Payment in respect of share-based payment
awards - (3,683)
Repayment of borrowings following acquisition
of subsidiaries - (4,742)
(Decrease) / increase in borrowings (10,927) 39,101
Cash payment for the principle portion of
the lease liabilities (12,723) (101)
Equity dividends paid (33,203) (29,250)
----------------------------------------------------- ----- -------- --------
Net cash flow from financing activities (58,098) 1,899
----------------------------------------------------- ----- -------- --------
Net increase in cash and cash equivalents 7,649 25,779
Cash and cash equivalents at the beginning
of the year 45,709 19,845
Effect of exchange rate fluctuations (100) 85
----------------------------------------------------- ----- -------- --------
Cash and cash equivalents at the end of the
year 53,258 45,709
----------------------------------------------------- ----- -------- --------
Marshalls plc
Preliminary Announcement of Results
Consolidated Statement of Changes in Equity
for the year ended 31 December 2019
Attributable to equity holders of the Company
---------------------------------------------------------------------------------
Share Capital Non-
Share premium Own redemption Consolidation Hedging Retained controlling 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 year
At 1 January
2019 49,998 24,326 (888) 75,394 (213,067) 273 329,585 265,621 1,094 266,715
Effect of
initial
application
of IFRS
16 (Note 1) - - - - - - (1,842) (1,842) - (1,842)
-------------- ------- ------- ------- ---------- ------------- ------- -------- -------- ----------- --------
At 1 January
2019
- as restated 49,998 24,326 (888) 75,394 (213,067) 273 327,743 263,779 1,094 264,873
-------------- ------- ------- ------- ---------- ------------- ------- -------- -------- ----------- --------
Total
comprehensive
income for the
year
Profit for the
financial
year
attributable
to equity
shareholders
of the Parent - - - - - - 58,240 58,240 (329) 57,911
Other
comprehensive
income /
(expense)
Foreign
currency
translation
differences - - - - - - 123 123 (42) 81
Effective
portion
of changes in
fair
value of cash
flow
hedges - - - - - 231 - 231 - 231
Net change in
fair
value of cash
flow
hedges
transferred
to the Income
Statement - - - - - 113 - 113 - 113
Deferred tax
arising - - - - - (58) - (58) - (58)
Defined
benefit plan
actuarial
gain - - - - - - 2,847 2,847 - 2,847
Deferred tax
arising - - - - - - (484) (484) - (484)
-------------- ------- ------- ------- ---------- ------------- ------- -------- -------- ----------- --------
Total other
comprehensive
income - - - - - 286 2,486 2,772 (42) 2,730
-------------- ------- ------- ------- ---------- ------------- ------- -------- -------- ----------- --------
Total
comprehensive
income for
the year - - - - - 286 60,726 61,012 (371) 60,641
-------------- ------- ------- ------- ---------- ------------- ------- -------- -------- ----------- --------
Transactions
with
owners,
recorded
directly
in equity
Contributions
by and
distributions
to owners
Share-based
payments - - - - - - 3,024 3,024 - 3,024
Deferred tax
on
share-based
payments - - - - - - 1,219 1,219 - 1,219
Corporation
tax on
share-based
payments - - - - - - 457 457 - 457
Dividends to
equity
shareholders - - - - - - (33,203) (33,203) - (33,203)
Shares issued 15 156 54 - - - - 225 - 225
Purchase of
own shares - - (1,470) - - - - (1,470) - (1,470) Disposal of own shares - - 913 - - - (913) - - - -------------- ------- ------- ------- ---------- ------------- ------- -------- -------- ----------- -------- Total contributions by and distributions to owners 15 156 (503) - - - (29,416) (29,748) - (29,748) -------------- ------- ------- ------- ---------- ------------- ------- -------- -------- ----------- -------- Total transactions with owners of the Company 15 156 (503) - - 286 31,310 31,264 (371) 30,893 -------------- ------- ------- ------- ---------- ------------- ------- -------- -------- ----------- -------- At 31 December 2019 50,013 24,482 (1,391) 75,394 (213,067) 559 359,053 295,043 723 295,766 -------------- ------- ------- ------- ---------- ------------- ------- -------- -------- ----------- --------
Marshalls plc
Preliminary Announcement of Results
Consolidated Statement of Changes in Equity (continued)
for the year ended 31 December 2019
Attributable to equity holders of the Company
---------------------------------------------------------------------------------
Share Capital Non-
Share premium Own redemption Consolidation Hedging Retained controlling 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
2018 49,845 22,695 (2,359) 75,394 (213,067) 386 303,274 236,168 1,459 237,627
-------------- ------- ------- ------- ---------- ------------- ------- -------- -------- ----------- --------
Total
comprehensive
income for the
year
Profit for the
financial
year
attributable
to equity
shareholders
of the Parent - - - - - - 51,958 51,958 (330) 51,628
Other
comprehensive
income /
(expense)
Foreign
currency
translation
differences - - - - - - (9) (9) (35) (44)
Effective
portion
of changes in
fair
value of cash
flow
hedges - - - - - 528 - 528 - 528
Net change in
fair
value of cash
flow
hedges
transferred
to the Income
Statement - - - - - (668) - (668) - (668)
Deferred tax
arising - - - - - 27 - 27 - 27
Defined
benefit plan
actuarial
gain - - - - - - 9,985 9,985 - 9,985
Deferred tax
arising - - - - - - (1,698) (1,698) - (1,698)
-------------- ------- ------- ------- ---------- ------------- ------- -------- -------- ----------- --------
Total other
comprehensive
income - - - - - (113) 8,278 8,165 (35) 8,130
-------------- ------- ------- ------- ---------- ------------- ------- -------- -------- ----------- --------
Total
comprehensive
income for
the year - - - - - (113) 60,236 60,123 (365) 59,758
-------------- ------- ------- ------- ---------- ------------- ------- -------- -------- ----------- --------
Transactions
with
owners,
recorded
directly
in equity
Contributions
by and
distributions
to owners
Share-based
payments - - - - - - (2,249) (2,249) - (2,249)
Deferred tax
on
share-based
payments - - - - - - (171) (171) - (171)
Corporation
tax on
share-based
payments - - - - - - 426 426 - 426
Dividends to
equity
shareholders - - - - - - (29,250) (29,250) - (29,250)
Shares issued 153 1,631 - - - - - 1,784 - 1,784
Purchase of
own shares - - (1,210) - - - - (1,210) - (1,210)
Disposal of
own shares - - 2,681 - - - (2,681) - - -
-------------- ------- ------- ------- ---------- ------------- ------- -------- -------- ----------- --------
Total
contributions
by and
distributions
to owners 153 1,631 1,471 - - - (33,925) (30,670) - (30,670)
-------------- ------- ------- ------- ---------- ------------- ------- -------- -------- ----------- --------
Total
transactions
with owners
of the
Company 153 1,631 1,471 - - (113) 26,311 29,453 (365) 29,088
-------------- ------- ------- ------- ---------- ------------- ------- -------- -------- ----------- --------
At 31 December
2018 49,998 24,326 (888) 75,394 (213,067) 273 329,585 265,621 1,094 266,715
-------------- ------- ------- ------- ---------- ------------- ------- -------- -------- ----------- --------
Marshalls plc
Preliminary Announcement of Results
Notes to the Financial Statements
for the year ended 31 December 2019
1 Basis of Preparation
Whilst the Financial Information included in this Preliminary Announcement has been prepared on the basis of the recognition and measurement criteria of International Financial Reporting Standards ("IFRS") in issue, as adopted by the European Union and effective at 31 December 2019, this announcement does not itself contain sufficient information to comply with IFRS. The Group expects to publish full Consolidated Financial Statements in April 2020.
The Financial Information set out in this Preliminary Announcement does not constitute the Company's Consolidated Financial Statements for the years ended 31 December 2019 or 2018, but is derived from those Financial Statements. Statutory Financial Statements for 2018 have been delivered to the Registrar of Companies and those for 2019 will be delivered following the Company's Annual General Meeting. The auditor, Deloitte LLP, has reported on those Financial Statements. The audit reports were unqualified, did not draw attention to any matters by way of emphasis without qualifying the reports and did not contain statements under Section 498(2) or (3) of the Companies Act 2006 in respect of the Financial Statements for 2019 or 2018.
The Consolidated Financial Statements have been prepared in accordance with IFRSs as adopted for use in the EU and therefore the Group Financial Statements comply with Article 4 of the EU IAS Regulations. The Group has applied all accounting standards and interpretations issued by the IASB and International Financial Reporting Committee relevant to its operations and which are effective in respect of these Financial Statements.
Adoption of new standards in 2019
The Group has applied IFRS 16 "Leases" with effect from 1 January 2019. The impact of adoption is set out below.
Other than in respect of IFRS 16, the accounting policies have been applied consistently throughout the Group for the purpose of the Consolidated Financial Statements. The accounting policies are set out on the Company's website.
IFRS 16 "Leases"
IFRS 16 distinguishes leases and service contracts on the basis of whether an identified asset is controlled by a customer. Distinctions of operating leases (off balance sheet) and finance leases (on balance sheet) are removed for lessee accounting, and are replaced by a model where a right-of-use asset and a corresponding liability have to be recognised for all leases by lessees (i.e. all on balance sheet) except for short-term leases and leases of low value assets.
The right-of-use asset is initially measured at cost and subsequently measured at cost (subject to certain exceptions) less accumulated depreciation and impairment losses, adjusted for any remeasurement of the lease liability. The lease liability is initially measured at the present value of the lease payments that are not paid at that date. Subsequently, the lease liability is adjusted for interest and lease payments, as well as for the impact of lease modifications, amongst others. The classification of cash flows is affected because operating lease payments under IAS 17 are presented as operating cash flows, whereas, under the IFRS 16 model, the lease payments are split into a principal and an interest portion which are presented as financing and operating cash flows respectively. Depreciation of the right-of-use asset is recognised in the Income Statement on a straight line basis, with interest recognised on the lease liability.
In adopting IFRS 16 from 1 January 2019, the Group has applied the modified retrospective transition approach and not restated comparative amounts for the year ended 31 December 2018. Right-of-use assets of GBP45,022,000 and lease liabilities of GBP46,520,000 were recognised as at 1 January 2019. For certain leases the Group has elected to measure the right-of-use asset as if IFRS 16 had been applied since the start of the lease, but using the incremental borrowing rate at 1 January 2019, with the difference between the right-of-use asset and the lease liability taken to retained earnings. In other cases, the Group has elected to measure right-of-use assets at the amount of the lease liability on adoption (adjusted for any lease prepayments or accrued lease expenses, onerous lease provisions and leased assets which have subsequently been sub-leased). The Group has elected to adopt the following practical expedients on transition:
-- where an onerous lease provision is in existence, to utilise this provision to reduce the right-of-use asset value rather than undertaking an impairments review;
-- to use hindsight in determining the lease term; -- to exclude initial direct costs from the measurement of the right-of-use asset; and -- to apply the portfolio approach where a group of leases has similar characteristics.
The Group's leases principally comprise commercial vehicles and trailers, fork-lift trucks, motor vehicles, certain property assets and fixed plant.
Short-term leases, with a duration of less than 12 months, have been accounted for in accordance with the recognition exemption in IFRS 16 and hence related payments are expensed as incurred. The Group also made use of the option to apply the recognition exemption for low value assets (with a value of less than the equivalent of $5,000), which means that related payments have been expensed as incurred. Expenses for short-term and low value assets amounted to GBP555,000 in the year ended 31 December 2019.
Financial impact of IFRS 16
(a) Impact on transition
On transition to IFRS 16, the Group recognised additional right-of-use assets and additional lease liabilities, recognising the difference in retained earnings. The impact on transition is summarised below:
1 January
2019
GBP'000
Right-of-use assets 45,022
Lease liabilities (46,520)
Retained earnings 1,842
Deferred tax 415
Reclassification of prepayments and accruals (3)
Reclassification of finance lease assets (1,697)
Reclassification of finance lease liabilities 941
---------------------------------------------- ---------
-
---------------------------------------------- ---------
Included in the transition values for right-of-use assets and lease liabilities are GBP1,697,000 and GBP941,000 respectively in relation to previously recognised finance leases under IAS 17. The net assets value in respect of these items was GBP756,000.
Of the total right-of-use assets of GBP46,719,000 recognised at 1 January 2019, GBP20,910,000 related to leases of property and GBP25,809,000 to leases of plant and machinery.
The table below presents a reconciliation from operating lease commitments disclosed at 31 December 2018 to lease liabilities recognised at 1 January 2019.
GBP'000
Operating lease commitments disclosed under IAS 17 at 31 December
2018 66,508
Exclusion of service / maintenance elements of a contract from
the lease liability (8,934)
Effect of discounting (11,995)
Finance lease liabilities recognised under IAS 17 at 31 December
2018 941
------------------------------------------------------------------ --------
Lease liabilities recognised at 1 January 2019 46,520
------------------------------------------------------------------ --------
The lease liabilities were discounted at the incremental borrowing rate at 1 January 2019. The weighted average discount rate applied was 2.9 per cent. The incremental borrowing rate is calculated at the rate of interest which the Group would have been able to borrow for a similar term with a similar security of funds necessary to obtain a similar asset in a similar market.
(b) Impact for the period
In terms of the Income Statement impact, the application of IFRS 16 resulted in a decrease in other operating expenses and an increase in depreciation and interest expense compared to IAS 17. During the year ended 31 December 2019, in relation to leases under IFRS 16, the Group recognised the following amounts in the Consolidated Income Statement.
GBP'000
Depreciation 12,868
Interest expense 1,342
Other lease payments including short-term and low value lease
expenses 555
-------------------------------------------------------------- -------
14,765
-------------------------------------------------------------- -------
The reconciliation of the Income Statement is as follows:
Pre-IFRS As reported
16 December December
December Impact of 2019 2018
2019 IFRS 16
GBP'000 GBP'000 GBP'000 GBP'000
Revenue 541,832 - 541,832 490,988
Net operating costs (469,252) 1,101 (468,151) (426,154)
----------------------- ---------- ------------ ------------ -----------
Operating profit 72,580 1,101 73,681 64,834
Finance charges (net) (2,486) (1,342) (3,828) (1,899)
----------------------- ---------- ------------ ------------ -----------
Profit before tax 70,094 (241) 69,853 62,935
Income tax (11,942) - (11,942) (11,307)
----------------------- ---------- ------------ ------------ -----------
Profit after tax 58,152 (241) 57,911 51,628
----------------------- ---------- ------------ ------------ -----------
(c) Impact on the Cash Flow Statement
Under IFRS 16 the cash payments for leasing are presented within financing activities and amount to GBP12,723,000 in the Consolidated Cash Flow Statement. Under IAS 17 operating lease payments were presented as operating cash outflows. The impact on the Consolidated Cash Flow Statement for the year ended 31 December 2019 has been to increase net cash flow from operating activities to GBP88,125,000. On a pre-IFRS 16 basis net cash flows from operating activities would have been GBP75,712,000 (2018: GBP63,255,000).
(d) Impact on the Balance Sheet
Pre-IFRS
16 Impact As reported
December of December December
2019 IFRS 16 2019 2018
GBP'000 GBP'000 GBP'000 GBP'000
Property, plant and equipment 196,989 (1,435) 195,554 192,061
Right-of-use assets - 40,014 40,014 -
Deferred taxation assets 2,550 397 2,947 1,406
--------------------------------------- ---------- --------- ------------ -----------
Net impact on total assets 199,539 38,976 238,515 193,467
--------------------------------------- ---------- --------- ------------ -----------
Interest bearing loans and borrowings 71,912 (638) 71,274 83,142
Lease liabilities - 41,960 41,960 -
Deferred taxation liabilities 18,307 - 18,307 17,553
Net impact on total liabilities 90,219 41,322 131,541 100,695
--------------------------------------- ---------- --------- ------------ -----------
Retained earnings 361,137 (2,084) 359,053 329,585
Net assets 297,850 (2,084) 295,766 266,715
(e) Impact on financial metrics
Pre-IFRS As reported
16 December December
December Impact of 2019 2018
2019 IFRS 16
Profit before tax (GBP'000) 70,094 (241) 69,853 62,935
EBITDA (GBP'000) 90,115 13,760 103,875 80,792
EPS (pence) 29.48 (0.12) 29.36 26.29
Net debt (GBP'000) 18,654 41,322 59,976 37,433
ROCE (%) 23.7 (2.3) 21.4 21.9
Net debt : EBITDA 0.2 0.4 0.6 0.5
Gearing (%) 6.3 14.0 20.3 14.0
The following other standards, interpretations and amendments to existing standards became effective on 1 January 2019 and have not had a material impact on the Group.
- IFRC 23: "Uncertainty over Income Tax Treatments", effect from 1 January 2019;
- Amendments to IFRS 9: "Prepayment Features with Negative Compensation", effective from 1 January 2019;
- Amendments to IAS 28: "Long-term Interests in Associates and Joint Ventures", effective from 1 January 2019;
- Amendments to IAS 19: "Plan Amendment, Curtailment or Settlement", effective from 1 January 2019; and
- "Annual Improvements to IFRS Standards 2015-2017 Cycle", effective from 1 January 2019.
The following other standards, interpretations and amendments to existing standards have been issued but were not mandatory for accounting periods beginning 1 January 2019 and are not expected to have a material impact on the Group.
- Amendments to IFRS 3: "Definition of a Business, effective from 1 January 2020" (not yet endorsed by the EU);
- Amendments to References to the Conceptual Framework in IFRS Standards, effective from 1 January 2020 (not yet endorsed by the EU);
- Amendments to IAS 1 and IAS 8: "Definition of Material", effective from 1 January 2020 (not yet endorsed by the EU);
- "IFRS 17 Insurance Contracts", effective from 1 January 2021;
- Amendments to IFRS 10 and IAS 28: "Sale or contribution of assets between an investor and its associate or joint venture, effective date deferred indefinitely";
- Annual improvements 2018 - 2020 cycle (not yet endorsed by the EU); and
- "Interest Rate Benchmark Reform (amendments to IFRS 9, IAS 39, and IFRS 7)", effective from 1 January 2020.
Other than in respect of IFRS 16 "Leases", the Directors do not expect that the adoption of the standards listed above will have a material impact on the Financial Statements of the Group in future periods.
Details of the Group's funding position are set out in Note 13 and are subject to normal covenant arrangements. The Group's on-demand overdraft facility is reviewed on an annual basis and the current arrangements were renewed and signed on 6 August 2019. In the opinion of the Directors 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 which is not dependent on facility renewals. 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 Consolidated Financial Statements.
The Consolidated 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 Consolidated Financial Statements and are also set out on the Company's website (www.marshalls.co.uk/investor/financial-performance).
The Consolidated Financial Statements are presented in Sterling, rounded to the nearest thousand. Sterling is the currency of the primary economic environment in which the Group operates.
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.
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.
2 Alternative performance measures
The Group uses alternative performance measures ("APMs") which are not defined or specified under IFRS. The Group believes that these APMs, which are not considered to be a substitute for IFRS measures, provide additional helpful information. APMs are consistent with how business performance is planned, reported and assessed internally by management and the Board and provide more meaningful comparative information.
Like-for-like revenue growth
Management uses like-for-like revenue growth as it provides a consistent measure of the percentage increase / decrease in revenue year-on-year, excluding the effect of acquisitions.
2019 2018 Increase
GBP'000 GBP'000 %
---------------------------------- -------- ------- --------
Reported revenue 541,832 490,988 10%
Edenhall post-acquisition revenue (35,489) (675)
---------------------------------- -------- ------- --------
Like-for-like revenue 506,343 490,313 3%
---------------------------------- -------- ------- --------
EBITA and EBITDA
EBITA represents earnings before interest, tax and the amortisation of intangibles. This is a component of the ROCE calculation. EBITDA is calculated by adding back depreciation to EBITA.
As reported Pre-IFRS Pre-IFRS
16 16
2019 2019 2018 Increase
GBP'000 GBP'000 GBP'000 %
---------------------------------- ----------- --------- -------- --------
EBITDA 103,875 90,115 80,792 29%
Depreciation (27,771) (15,112)* (14,199)
---------------------------------- ----------- --------- -------- --------
EBITA 76,104 75,003 66,593
Amortisation of intangible assets (2,423) (2,423) (1,759)
---------------------------------- ----------- --------- -------- --------
Operating profit 73,681 72,580 64,834 14%
---------------------------------- ----------- --------- -------- --------
* Pre-IFRS 16 depreciation of GBP15,112,000 comprises depreciation of GBP14,903,000 in respect of tangible fixed assets (Note 4) and GBP209,000 relating to assets previously classified as finance leases but now reclassified as right-of-use assets.
ROCE
Reported ROCE is defined as EBITA divided by shareholders' funds plus cash / net debt.
As reported Pre-IFRS Pre-IFRS
16 16
2019 2019 2018
GBP'000 GBP'000 GBP'000
-------------------- ----------- -------- --------
EBITA 76,104 75,003 66,593
-------------------- ----------- -------- --------
Shareholders' funds 295,766 297,850 266,715
Net debt 59,976 18,654 37,433
-------------------- ----------- -------- --------
355,742 316,504 304,148
-------------------- ----------- -------- --------
Reported ROCE 21.4% 23.7% 21.9%
-------------------- ----------- -------- --------
ROCE on a like-for-like basis (excluding the impact of acquisitions) includes adjustments to report the calculation on a basis that eliminates the impact of the acquisition of Edenhall in 2018. This ensures comparability with the prior year period.
2019 2018
GBP'000 GBP'000
--------------------------------------------------------- ------- --------
Reported EBITA 76,104 66,593
Post-acquisition EBIT - (21)
Amortisation of intangible assets in year of acquisition - 17
Acquisition costs - 375
--------------------------------------------------------- ------- --------
Adjusted EBITA 76,104 66,964
--------------------------------------------------------- ------- --------
Shareholders' funds 295,766 266,715
Net debt 59,976 37,433
--------------------------------------------------------- ------- --------
355,742 304,148
Impact on net debt arising from the acquisitions in
the year - (16,468)
--------------------------------------------------------- ------- --------
As adjusted 355,742 287,680
--------------------------------------------------------- ------- --------
ROCE on a like-for-like basis (excluding the impact
of acquisitions) 21.4% 23.3%
--------------------------------------------------------- ------- --------
Net Debt
Net debt comprises cash at bank and in hand, bank loans and leasing liabilities. An analysis of net debt is provided at Note 13.
IFRS 16 transition
The financial impact of the transition to IFRS 16 is set out in Note 1. Disclosures required under IFRS are referred to as either on a post-IFRS 16 basis or on a reported basis. Disclosures referred to on a pre-IFRS 16 basis are restated to those that applied before the adoption of IFRS 16 and are used throughout this Annual Report to show a like-for-like comparison with prior year periods.
The ratio of operating cash flows to EBITDA
The ratio of operating cash flows to EBITDA is calculated on a pre-IFRS 16 basis as set out below:
Pre-IFRS Pre-IFRS
16 16
2019 2018
GBP'000 GBP'000
Net cash flows from operating activities 75,712 63,255
Net financial expenses paid 1,851 1,308
Taxation paid 9,023 9,855
----------------------------------------- -------- --------
Operating cash flow 86,586 74,418
----------------------------------------- -------- --------
EBITDA 90,115 80,792
----------------------------------------- -------- --------
Ratio of operating cash flow to EBITDA 96.1% 92.1%
----------------------------------------- -------- --------
3 Segmental analysis
Segment revenues and results
2019 2018
---------------------------- ----------------------------
Landscape Landscape
Products Other Total Products Other Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------- --------- ------- -------- --------- ------- --------
Total revenue 413,484 132,453 545,937 398,128 96,943 495,071
Inter-segment revenue (362) (3,743) (4,105) (228) (3,855) (4,083)
--------------------------- --------- ------- -------- --------- ------- --------
External revenue 413,122 128,710 541,832 397,900 93,088 490,988
--------------------------- --------- ------- -------- --------- ------- --------
Segment operating
profit 71,663 6,719 78,382 68,418 2,095 70,513
--------------------------- --------- ------- -------- --------- ------- --------
Unallocated administration
costs (4,701) (5,679)
--------------------------- --------- ------- -------- --------- ------- --------
Operating profit 73,681 64,834
Finance charges
(net) (3,828) (1,899)
--------------------------- --------- ------- -------- --------- ------- --------
Profit before tax 69,853 62,935
Taxation (11,942) (11,307)
--------------------------- --------- ------- -------- --------- ------- --------
Profit after tax 57,911 51,628
--------------------------- --------- ------- -------- --------- ------- --------
The Group has 2 customers which each contributed more than 10 per cent of total revenue in the current and prior year.
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 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 one integrated production, logistics and distribution network supporting both end markets.
Included in "Other" are the Group's Landscape Protection, Mineral Products, Premier Mortars and International operations, which do not currently meet the IFRS 8 reporting requirements. Following the acquisition, the Edenhall business has been included within "Other".
The accounting policies of the Landscape Products operating segment are the same as the Group's accounting policies. Segment profit represents the profit earned without allocation of certain central administration costs that are not capable of allocation. Centrally administered overhead costs that relate directly to the reportable segment are included within the segment's results.
Segment assets
2019 2018*
GBP'000 GBP'000
---------------------------------------------------- ------- -------
Fixed assets, right-of-use assets and inventory:
Landscape Products 232,539 201,489
Other 92,267 74,933
---------------------------------------------------- ------- -------
Total segment fixed assets, right-of-use assets and
inventory 324,806 276,422
Unallocated assets 237,763 237,139
---------------------------------------------------- ------- -------
Consolidated total assets 562,569 513,561
---------------------------------------------------- ------- -------
* The comparatives have been restated as a result of a reassessment of the fair value of assets and liabilities acquired (Note 12).
For the purpose of monitoring segment performance and allocating resources between segments, the Group's CODM monitors the tangible fixed assets, right-of-use assets and inventory. Assets used jointly by reportable segments are not allocated to individual reportable segments.
Other segment information
Fixed asset and
Depreciation and right-of-use asset
amortisation additions
------------------ ---------------------
2019 2018 2019 2018
GBP'000 GBP'000 GBP'000 GBP'000
------------------- -------- -------- ---------- ---------
Landscape Products 21,603 13,251 24,550 21,060
Other 8,591 2,707 5,027 6,256
------------------- -------- -------- ---------- ---------
30,194 15,958 29,577 27,316
------------------- -------- -------- ---------- ---------
Geographical destination of revenue
2019 2018
GBP'000 GBP'000
------------------ ------- -------
United Kingdom 514,905 467,032
Rest of the world 26,927 23,956
------------------ ------- -------
541,832 490,988
------------------ ------- -------
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.
4 Net operating costs
2019 2018
GBP'000 GBP'000
-------------------------------------------------- ------- -------
Raw materials and consumables 198,124 172,175
Changes in inventories of finished goods and work
in progress 847 6,267
Personnel costs 128,221 116,588
Depreciation of property, plant and equipment 14,903 14,199
Depreciation of right-to-use assets 12,868 -
Amortisation of intangible assets 2,423 1,759
Own work capitalised (4,216) (3,340)
Other operating costs 116,135 120,187
Operational restructuring costs 1,396 1,244
Acquisition costs - 375
-------------------------------------------------- ------- -------
Operating costs 470,701 429,454
Other operating income (2,244) (2,562)
Net gain on asset and property disposals (306) (738)*
-------------------------------------------------- ------- -------
Net operating costs 468,151 426,154
-------------------------------------------------- ------- -------
* This reflects the proceeds of the sale of a domain name and is net of associated digital strategy costs.
In the prior year operating costs were expensed in accordance with the requirements of IAS 17. For the period ended 31 December 2019, leasing expenses for short-term leases as well as leases of low value assets remain within leasing costs, because the Group has applied the recognition exemption for those contracts provided by IFRS 16. Right-of-use assets are depreciated over the lease term.
5 Financial expenses and income
2019 2018
GBP'000 GBP'000
------------------------------------------------------- ------- -------
(a) Financial expenses
Net interest expense on defined benefit pension scheme 542 496
Interest expense on bank loans, overdrafts and loan
notes 1,951 1,403
Interest expense on lease liabilities 1,342 5
------------------------------------------------------- ------- -------
3,835 1,904
------------------------------------------------------- ------- -------
(b) Financial income
Interest receivable and similar income 7 5
------------------------------------------------------- ------- -------
Net interest expense on the defined benefit pension scheme is disclosed net of Company recharges.
6 Income tax expense
2019 2018
GBP'000 GBP'000
--------------------------------------------------- ------- -------
Current tax expense
Current year 13,214 11,269
Adjustments for prior years (1,577) (934)
--------------------------------------------------- ------- -------
11,637 10,335
Deferred taxation expense
Origination and reversal of temporary differences:
Current year 556 921
Adjustments for prior years (251) 51
--------------------------------------------------- ------- -------
Total tax expense 11,942 11,307
--------------------------------------------------- ------- -------
2019 2019 2018 2018
% GBP'000 % GBP'000
----------------------------------------- ----- ------- ----- -------
Reconciliation of effective tax rate
Profit before tax 100 69,853 100.0 62,935
----------------------------------------- ----- ------- ----- -------
Tax using domestic corporation tax
rate 19.0 13,272 19.0 11,957
Impact of capital allowances in excess
of depreciation (0.7) (523) (0.6) (402)
Short-term timing differences 0.6 386 0.9 595
Adjustment to tax charge in prior
year (2.3) (1,577) (1.5) (934)
Expenses not deductible for tax purposes 0.1 79 (1.4) (881)
----------------------------------------- ----- ------- ----- -------
Corporation tax charge for the year 16.7 11,637 16.4 10,335
Impact of capital allowances in excess
of depreciation 0.9 648 (0.2) (130)
Short-term timing differences - - 1.8 1,139
Pension scheme movements (0.2) (109) (0.2) (101)
Other items 0.4 261 0.5 300
Adjustment to tax charge in prior
year (0.4) (251) 0.1 51
Impact of the change in the rate
of corporation tax on deferred taxation (0.3) (244) (0.4) (287)
----------------------------------------- ----- ------- ----- -------
Total tax charge for the year 17.1 11,942 18.0 11,307
----------------------------------------- ----- ------- ----- -------
The net amount of deferred taxation debited to the Consolidated Statement of Comprehensive Income in the year was GBP542,000 (2018: GBP1,671,000).
The majority of the Group's profits are earned in the UK with the standard rate of corporation tax being 19 per cent for the year to 31 December 2019.
Capital allowances are tax reliefs provided in law for the expenditure the Group makes on fixed assets. The rates are determined by Parliament annually, and spread the tax relief due over a number of years. This contrasts with the accounting treatment for such spending, where the expenditure on fixed assets is treated as an investment with the cost then being spread over the anticipated useful life of the asset, and / or impaired if the value of such assets is considered to have reduced materially.
The different accounting treatment of fixed assets for tax and accounting purposes is one reason why the taxable income of the Group is not the same as its accounting profit. During the year ended 31 December 2019 the capital allowances due to the Group exceeded the depreciation charge for the year.
Short-term timing differences arise on items such as depreciation in stock and share-based payments because the treatment of such items is different for tax and accounting purposes. These differences usually reverse in the years following those in which they arise, as is reflected in the deferred tax charge in the Financial Statements.
Adjustments to tax charges arising in earlier years arise because the tax charge to be included in a set of accounts has to be estimated before those Financial Statements are finalised. Such charges therefore include some estimates that are checked and refined before the Group's corporation tax returns for the year are submitted to HM Revenue & Customs, which may reflect a different liability as a result.
Some expenses incurred may be entirely appropriate charges for inclusion in the Financial Statements but are not allowed as a deduction against taxable income when calculating the Group's tax liability for the same accounting period. Examples of such disallowable expenditure include business entertainment costs and some legal expenses.
The prior year adjustment in corporation tax includes the reversal of some tax provisions made on acquisition of subsidiaries in 2017 and 2018 which are no longer required.
As can be seen from the tax reconciliation, the process of adjustment that can give rise to current year adjustments to tax charges arising in previous periods can also give rise to revisions in prior year deferred tax estimates. This is why the current year adjustments to the current year charge for capital allowances and short-term timing differences are not exactly replicated in the deferred taxation charge for the year.
The Group's overseas operations comprise a manufacturing operation in Belgium and sales and administration offices in the USA, China and Dubai. The sales of these units, in total, were less than 5 per cent of the Group's turnover in the year ended 31 December 2019. In total, the trading profits were not material and no tax was due.
7 Earnings per share
Basic earnings per share of 29.36 pence (2018: 26.29 pence) per share is calculated by dividing the profit attributable to Ordinary Shareholders for the financial year, after adjusting for non-controlling interests, of GBP58,240,000 (2018: GBP51,958,000) by the weighted average number of shares in issue during the period of 198,346,723 (2018: 197,669,293).
Profit attributable to Ordinary Shareholders
2019 2018
GBP'000 GBP'000
----------------------------------------------- ------- -------
Profit for the financial year 57,911 51,628
Loss attributable to non-controlling interests 329 330
----------------------------------------------- ------- -------
Profit attributable to Ordinary Shareholders 58,240 51,958
----------------------------------------------- ------- -------
Weighted average number of Ordinary Shares
2019 2018
Number Number
--------------------------------------------------- ----------- -----------
Number of issued Ordinary Shares 200,052,157 199,419,571
Effect of shares transferred into Employee Benefit
Trust (1,705,434) (1,750,278)
--------------------------------------------------- ----------- -----------
Weighted average number of Ordinary Shares at the
end of the year 198,346,723 197,669,293
--------------------------------------------------- ----------- -----------
Diluted earnings per share of 29.14 pence (2018: 26.08 pence) per share is calculated by dividing the profit for the financial year, after adjusting for non-controlling interests, of GBP58,240,000 (2018: GBP51,958,000) by the weighted average number of shares in issue during the period of 198,346,723 (2018: 197,669,293) plus potentially dilutive shares of 1,496,678 (2018: 1,548,929), which totals 199,843,401 (2018: 199,218,222).
Weighted average number of Ordinary Shares (diluted)
2019 2018
Number Number
----------------------------------------------------- ----------- -----------
Weighted average number of Ordinary Shares 198,346,723 197,669,293
Potentially dilutive shares 1,496,678 1,548,929
----------------------------------------------------- ----------- -----------
Weighted average number of Ordinary Shares (diluted) 199,843,401 199,218,222
----------------------------------------------------- ----------- -----------
8 Dividends
After the balance sheet date a final dividend of 9.65 pence (2018: 8.00 pence) per qualifying Ordinary Share was proposed by the Directors. In addition a supplementary dividend of 4.00 pence (2018: 4.00 pence) per qualifying Ordinary Share was proposed by the Directors. These dividends have not been provided for and there are no income tax consequences. The total dividends proposed in respect of the year are as follows:
Pence per 2019 2018
qualifying
share GBP'000 GBP'000
------------------- ---------- ------- -------
2019 supplementary 4.00 7,934
2019 final 9.65 19,142
2019 interim 4.70 9,323
------------------- ---------- ------- -------
18.35 36,399
------------------- ---------- ------- -------
2018 supplementary 4.00 7,930
2018 final 8.00 15,860
2018 interim 4.00 7,906
------------------- ---------- ------- -------
16.00 31,696
------------------- ---------- ------- -------
The following dividends were approved by the shareholders and recognised in the year:
Pence per 2019 2018
qualifying
share GBP'000 GBP'000
------------------- ---------- ------- -------
2019 interim 4.70 9,323
2018 supplementary 4.00 7,930
2018 final 8.00 15,860
------------------- ---------- ------- -------
16.70 33,113
------------------- ---------- ------- -------
2018 interim 4.00 7,906
2017 supplementary 4.00 7,905
2017 final 6.80 13,439
------------------- ---------- ------- -------
14.80 29,250
------------------- ---------- ------- -------
The Board recommends a 2019 final dividend of 9.65 pence per qualifying Ordinary Share (amounting to GBP19,142,000), alongside a supplementary dividend of 4.00 pence per qualifying Ordinary Share (amounting to GBP7,934,000), to be paid on 30 June 2020 to shareholders registered at the close of business on 5 June 2020.
9 Right-of-use assets
Land and Plant and
buildings equipment Total
GBP'000 GBP'000 GBP'000
Cost
New leases recognised 20,508 24,514 45,022
Reclassification of finance lease assets 402 1,295 1,697
------------------------------------------ ----------- ----------- --------
At 1 January 2019 20,910 25,809 46,719
Additions 74 6,089 6,163
------------------------------------------ ----------- ----------- --------
At 31 December 2019 20,984 31,898 52,882
------------------------------------------ ----------- ----------- --------
Depreciation and impairment losses
At 1 January 2019 - - -
Depreciation change for the year 2,057 10,811 12,868
------------------------------------------ ----------- ----------- --------
At 31 December 2019 2,057 10,811 12,868
------------------------------------------ ----------- ----------- --------
Net book value
1 January 2019 20,910 25,809 46,719
------------------------------------------ ----------- ----------- --------
31 December 2019 18,927 21,087 40,014
------------------------------------------ ----------- ----------- --------
Depreciation charge
The depreciation charge is recognised in the following line items in the Consolidated Income Statement:
2019 2018
GBP'000 GBP'000
-------------------- ------- -------
Net operating costs 12,868 -
-------------------- ------- -------
Lease commitments
2019 2018
GBP'000 GBP'000
--------------------------------------------------- ------- -------
Lease commitments that has been contracted for but
have not yet commenced 1,764 -
--------------------------------------------------- ------- -------
10. Lease liabilities
31 December 1 January
2019 2019
GBP'000 GBP'000
Analysed as:
Amounts due for settlement within 12 months
(shown under current liabilities) 9,736 11,523
Amounts due for settlement after 12 months 32,224 34,997
--------------------------------------------- ------------ ----------
41,960 46,520
--------------------------------------------- ------------ ----------
2019
-----------------------------
Minimum
lease
payments Interest Principal
GBP'000 GBP'000 GBP'000
-------- -------- ---------
Less than 1 year 10,835 1,099 9,736
1 to 2 years 8,322 1,476 6,846
2 to 5 years 12,469 2,080 10,389
In more than 5 years 21,225 6,236 14,989
---------------------- -------- -------- ---------
52,851 10,891 41,960
--------------------- -------- -------- ---------
As at 31 December 2019, the total minimum lease payments (above) comprised property of GBP30,323,000 and plant, machinery and vehicles of GBP22,528,000
Certain leased properties have been sublet by the Group. Sublease payments of GBP214,068 (2018: GBP207,779) are expected to be received during the following financial year. An amount of GBP229,034 (2018: GBP211,164) was recognised as income in the Consolidated Income Statement within net operating costs in respect of subleases.
The Group does not face a significant liquidity risk with regard to its lease liabilities. The interest expense on lease liabilities amounted to GBP1,342,000 for the year ended 31 December 2019. Lease liabilities are calculated at the present value of the lease payments that are not paid at the commencement date.
For the year ended 31 December 2019, the average effective borrowing rate was 2.9 per cent. Interest rates are fixed at the contract date. All leases are on a fixed repayment basis and no arrangements have been entered into for contingent rental payments.
11 Employee benefits
The Company sponsors a funded defined benefit pension scheme in the UK (the "Scheme"). The Scheme is administered within a trust which is legally separate from the Company. The Trustee Board is appointed by both the Company and the Scheme's membership and acts in the interest of the Scheme and all relevant stakeholders, including the members and the Company. The Trustee is also responsible for the investment of the Scheme's assets.
The defined benefit section of the Scheme provides pension and lump sums to members on retirement and to dependants on death. The defined benefit section closed to future accrual of benefits on 30 June 2006 with the active members becoming entitled to a deferred pension. Members no longer pay contributions to the defined benefit section. Company contributions to the defined benefit section after this date are used to fund any deficit in the Scheme and the expenses associated with administering the Scheme, as determined by regular actuarial valuations.
The 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 2021. 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 2018. The results of that valuation have been projected to 31 December 2019 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:
2019 2018 2017
GBP'000 GBP'000 GBP'000
---------------------------------------------- --------- --------- ---------
Present value of Scheme liabilities (353,136) (330,222) (350,554)
Fair value of Scheme assets 368,857 343,738 354,681
---------------------------------------------- --------- --------- ---------
Net amount recognised at the year end (before
any adjustments for deferred tax) 15,721 13,516 4,127
---------------------------------------------- --------- --------- ---------
The current and past service costs, settlements and curtailments, together with the net interest expense for the year, are included in the employee benefits expense in the Consolidated Statement of Comprehensive Income. Remeasurements of the net defined benefit surplus are included in other comprehensive income.
2019 2018
GBP'000 GBP'000
-------------------------------------------------------------- -------- --------
Net interest expense recognised in the Consolidated
Income Statement 642 596
-------------------------------------------------------------- -------- --------
Remeasurements of the net liability:
Return on scheme assets (excluding amount included
in interest expense) (33,362) 7,872
Loss / (gain) arising from changes in financial assumptions 38,367 (16,326)
Gain arising from changes in demographic assumptions (13,017) (1,531)
Experience loss 5,165 -
-------------------------------------------------------------- -------- --------
Credit recorded in other comprehensive income (2,847) (9,985)
-------------------------------------------------------------- -------- --------
Total defined benefit credit (2,205) (9,389)
-------------------------------------------------------------- -------- --------
The principal actuarial assumptions used were:
2019 2018
GBP'000 GBP'000
----------------------------------------------------- ------------- -----------
Liability discount rate 2.10% 2.75%
Inflation assumption - RPI 2.95% 3.15%
Inflation assumption - CPI 2.05% 2.15%
Rate of increase in salaries n/a n/a
Revaluation of deferred pensions 2.10% 2.15%
Increases for pensions in payment:
CPI pension increases (maximum 5% p.a.) 2.10% 2.15%
CPI pension increases (maximum 5% p.a., minimum 3%
p.a.) 3.20% 3.20%
CPI pension increases (maximum 3% p.a.) 1.90% 1.95%
Proportion of employees opting for early retirement 0% 0%
Proportion of employees commuting pension for cash 80% 50%
Same as post Same as
retirement post
Mortality assumption - before retirement retirement
S2PXA tables S2PXA
Mortality assumption - after retirement (males) tables
Loading 110% 105%
Year of birth Year of
Projection basis birth
CMI_2018
1.0% CMI_2017
1.0%
S2PXA tables S2PXA
Mortality assumption - after retirement (females) tables
Loading 110% 105%
Year of birth Year of
Projection basis birth
CMI_2018
1.0% CMI_2017
1.0%
Future expected lifetime of current pensioner at age
65:
Male aged 65 at year end 85.6 86.1
Female aged 65 at year end 87.5 88.0
Future expected lifetime of future pensioner at age
65:
Male aged 45 at year end 86.6 87.1
Female aged 45 at year end 88.7 89.2
----------------------------------------------------- ------------- -----------
12 Acquisition of subsidiary
On 11 December 2018, Marshalls Mono Limited acquired 100 per cent of the issued share capital of Edenhall Holdings Limited, a concrete brick manufacturer. Edenhall Holdings Limited operates within the UK and is registered in England and Wales.
2018
Edenhall
fair values
acquired
as restated
GBP'000
Land and buildings 3,962
Plant, machinery and vehicles 8,139
Identifiable intangible assets 3,897
Inventories 2,105
Trade and other receivables 5,726
Cash and cash equivalents 33
Trade and other payables (18,772)
Provisions (1,647)
Borrowings (3,959)
Finance leases (783)
Corporation tax (692)
Deferred tax (1,120)
------------------------------------------------------------ ------------
Total identifiable net liabilities (3,111)
------------------------------------------------------------ ------------
Goodwill 18,190
------------------------------------------------------------ ------------
Total consideration
Satisfied by:
Cash consideration 10,759
Deferred consideration 1,900
Contingent consideration 2,420
------------------------------------------------------------ ------------
Total cost of investment 15,079
Monies paid into escrow 1,000
------------------------------------------------------------ ------------
16,079
------------------------------------------------------------ ------------
Analysis of amounts paid in connection with the acquisition
Total cash payments 11,759
Net cash acquired (33)
------------------------------------------------------------ ------------
Total cash outflow in connection with the acquisition 11,726
------------------------------------------------------------ ------------
Acquisition of Edenhall Holdings Limited
Initial cash consideration paid to the vendors was GBP10,759,000 and, in addition, a further GBP1,000,000 was paid into an escrow account in relation to certain ongoing legal and regulatory matters identified during the course of due diligence carried out prior to concluding the acquisition. The Group has a right to be reimbursed from amounts held in escrow to the extent that any liability crystallises in respect of these ongoing legal and regulatory matters, up to the full value of the GBP1,000,000 held in escrow and consequently a reimbursement asset of GBP1,000,000 was recognised within other debtors. To the extent that any such liabilities are resolved at a lower value than the escrow balances, the excess balance remaining in escrow is payable to the vendors as additional consideration.
The Group has agreed to pay the vendors deferred consideration of GBP1,900,000 which is payable on 11 December 2021. This is not dependent on performance. Additional consideration is also payable dependent on the achievement of performance targets in the periods post acquisition. These performance periods are up to 3 years in duration and will be settled in cash on their payment date on achieving the relevant targets. The range of the additional consideration payment is estimated to be between GBPnil and GBP2,420,000. The Group has included GBP2,420,000 as contingent consideration related to the additional consideration, which represents its fair value at the acquisition date. Contingent consideration has been calculated based on the Group's expectation of what it will pay in relation to the post-acquisition performance of the acquired entities.
As part of the ongoing review of the fair value of assets and liabilities acquired, adjustments were made to certain accruals and provisions during the period, These had the effect of decreasing the fair value of the net assets acquired under the acquisition by GBP6,157,000, which has given rise to an increase in goodwill of a similar amount. Goodwill, land and buildings, plant and machinery, trade and other payables and provisions have been restated accordingly in respect of the reported 31 December 2018 balance sheet.
Due to their contractual dates, the fair value of the receivables (shown above) is approximate to the gross contractual amounts receivable. The amount of gross contractual receivables not expected to be recovered is immaterial.
The goodwill arising from the acquisition represents the opportunity to grow by utilising the capabilities and technical expertise of the acquired workforce and by developing synergistic opportunities.
The goodwill arising from the acquisition is not expected to be deductible for income tax purposes.
Transaction costs incurred on acquisition were GBP375,000 and these were fully expensed in the period to 31 December 2018 (Note 4).
13 Analysis of net debt
1 January Other 31 December
2019 IFRS 16 Cash flow New leases changes 2019
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------- --------- -------- --------- ---------- ------- -----------
Cash at bank and in
hand 45,709 - 7,649 - (100) 53,258
Debt due within 1 year (22,493) - 10,927 - (8,434) (20,000)
Debt due after 1 year (59,708) - - - 8,434 (51,274)
Finance leases (941) 941 - - - -
Lease liabilities - (46,520) 12,723 (8,163) - (41,960)
----------------------- --------- -------- --------- ---------- ------- -----------
(37,433) (45,579) 31,299 (8,163) (100) (59,976)
----------------------- --------- -------- --------- ---------- ------- -----------
Reconciliation of net cash flow to movement in net debt
2019 2018
GBP'000 GBP'000
-------------------------------------------------------------- -------- --------
Net increase in cash equivalents 7,649 25,779
Leases recognised on adoption of IFRS 16 (45,579) -
Cash outflow / (inflow) from decrease / (increase)
in bank borrowings 10,927 (34,164)
Cash outflow from lease repayments 12,723 101
Repayment of borrowings following acquisition of subsidiaries - (4,742)
New leases entered into (8,163) -
Effect of exchange rate fluctuations (100) (110)
-------------------------------------------------------------- -------- --------
Movement in net debt in the year (22,543) (13,136)
Net debt at 1 January (37,433) (24,297)
-------------------------------------------------------------- -------- --------
Net debt at 31 December (59,976) (37,433)
-------------------------------------------------------------- -------- --------
Borrowing facilities
The total bank borrowing facilities at 31 December 2019 amounted to GBP155.0 million (2018: GBP140.0 million), of which GBP83.7 million (2018: GBP60.5 million) remained unutilised. There are additional seasonal bank working capital facilities of GBP10.0 million available between 1 February and 31 August each year. The undrawn facilities available at 31 December 2019, in respect of which all conditions precedent had been met, were as follows:
2019 2018
GBP'000 GBP'000
-------------------------------------------------- ------- -------
Committed:
Expiring in more than 5 years - 25,000
Expiring in more than 2 years but not more than 5
years 68,726 20,292
Expiring in 1 year or less - 180
Uncommitted:
Expiring in 1 year or less 15,000 15,000
-------------------------------------------------- ------- -------
83,726 60,472
-------------------------------------------------- ------- -------
On 6 August 2019, the Group renewed its short-term working capital facilities of GBP25.0 million and took out an additional committed facility of GBP35.0 million with a 2023 maturity date. The committed facilities are all revolving credit facilities with interest charged at variable rates based on LIBOR. The Group's bank facilities continue to be aligned with the current strategy to ensure that headroom against available facilities remains at appropriate levels.
The maturity profile of borrowing facilities is structured to provide balanced, committed and phased medium-term debt. The current facilities are set out as follows:
Cumulative
Facility facility
GBP'000 GBP'000
---------------------------------------- -------- -----------------
Committed facilities
Q1: 2024 25,000 25,000
Q3: 2023 55,000 80,000
Q3: 2022 20,000 100,000
Q3: 2021 20,000 120,000
Q3: 2020 20,000 140,000
On-demand facilities
Available all year 15,000 155,000
Seasonal (February to August inclusive) 10,000 165,000
---------------------------------------- -------- -----------------
14 Principal risks and uncertainties
The principal risks and uncertainties that could impact the Group for the remainder of the current financial year are set out in the 2019 Annual Report. These cover the strategic, financial and operational risks and have not changed during the period.
Strategic risks include those relating to general economic conditions, Government policy, the actions of customers, suppliers and competitors and also weather conditions. Cyber risk within the wider market is also an increasing risk for the Group and an area of major focus. The Group also continues to be subject to various financial risks in relation to access to funding and to the pension scheme, principally the volatility of the discount (AA corporate bond) rate, any downturn in the performance of equities and increases in the longevity of members. The other main financial risks arising from the Group's financial instruments are liquidity risk, interest rate risk, credit risk and foreign currency risk.
External operational risks include the weather, political and economic uncertainty in relation to the ongoing Brexit transaction process, the effect of legislation or other regulatory actions, the actions of competitors, raw material prices and threats from cyber security, new technologies and business models. Internal operational risks include investment in new products, new business strategies, acquisitions and the integration of Edenhall.
The Group continues to monitor all these risks and pursue policies that take account of, and mitigate, the risks where possible.
15 Annual General Meeting
The Annual General Meeting will be held at The Holiday Inn, Clifton Village, Brighouse, HD6 4HW at 11.00am on Wednesday 13 May 2020.
The Board
The Directors serving during the year ended 31 December 2019 were as follows:
Vanda Murray OBE Chair
Janet Ashdown Non-Executive Director
Angela Bromfield (appointed 1 October 2019)
Jack Clarke Finance Director
Martyn Coffey Chief Executive
Tim Pile Non-Executive Director
Graham Prothero Non-Executive Director
By order of the Board
Cathy Baxandall
Company Secretary
12 March 2020
Cautionary Statement
This Preliminary Results announcement contains certain forward looking statements with respect to the financial condition, results, operations and business of Marshalls plc. These statements and forecasts involve risk and uncertainty because they relate to events and depend upon circumstances that will occur in the future. There are a number of factors that could cause actual results or developments to differ materially from those expressed or implied by these forward looking statements and forecasts. Nothing in this Preliminary Results announcement should be construed as a profit forecast.
Directors' Liability
Neither the Company nor the Directors accept any liability to any person in relation to the contents of this Preliminary Results announcement except to the extent that such liability arises under English law. Accordingly, any liability to a person who has demonstrated reliance on any untrue or misleading statement or omission shall be determined in accordance with section 90A of the Financial Services and Markets Act 2000.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
END
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