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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Marshalls Plc | LSE:MSLH | London | Ordinary Share | GB00B012BV22 | ORD 25P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| -0.50 | -0.19% | 256.00 | 254.50 | 255.00 | 258.00 | 252.50 | 254.00 | 338,217 | 16:35:11 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Construction Matl-whsl, Nec | 674.4M | 18.6M | 0.0736 | 34.65 | 644.61M |
From Apr 2019 to Apr 2024
TIDMMSLH
RNS Number : 9473X
Marshalls PLC
16 August 2018
Interim results for the half year ended 30 June 2018
Marshalls plc, the specialist Landscape Products group, announces its half year results
Hot Features
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Financial Highlights Half Year ended Half Year Increase
30 June 2018 ended %
30 June 2017
Revenue GBP244.3m GBP219.1m 12
EBITDA GBP41.6m GBP36.7m 13
Operating profit GBP33.5m GBP29.8m 12
Profit before tax GBP32.5m GBP29.1m 12
Basic EPS 13.24p 12.04p 10
Interim dividend 4.00p 3.40p 18
ROCE 20.0% 23.7%
Net (debt) / cash GBP(48.9)m GBP1.2m
Note:
Alternative performance measures are used consistently throughout this Interim Announcement. These relate to EBITA, EBITDA and ROCE. For further details of their purpose, definition and reconciliation to the equivalent statutory measures, see Note 3.
Highlights:
-- Strong revenue growth for the half year despite severe weather impact -- Operating margins slightly ahead to 13.7% (2017: 13.6%) -- Recent trading very strong - both June and July revenues up 21%
-- CPM Group Limited performed well in the period and its integration is on track and well advanced
-- The Group's strong cash generation has continued
-- Net debt of GBP48.9 million (31 December 2017: GBP24.3 million), reflecting the purchase of CPM for GBP41.4 million
-- Payment of GBP21.3 million final and supplementary dividends on 29 June 2018
-- Return on capital employed for the 12 months ended 30 June 2018 continues at circa 20% (31 December 2017 : 20.8%)
The 2020 Strategy continues to deliver long-term sustainable EBITDA growth, high ROCE and a strengthened brand:
-- Capital expenditure of GBP28 million planned for 2018 to support growth and deliver cost savings of GBP5 million per annum by
2019
-- Research and development expenditure increased to GBP2.2 million (2017: GBP1.7 million) coupled with new product
development and service to drive sales growth
-- Focus on increasing the profitability of the Emerging UK Businesses continues
-- Digital strategy gaining momentum and delivering real benefits across the business
-- Continue to target selective bolt-on acquisition opportunities
-- Maintained a 2 times dividend cover policy, enhanced by supplementary dividends
Commenting on these results, Martyn Coffey, Chief Executive, said:
"The Group continues to outperform the Construction Products Association's ("CPA") growth figures, despite ongoing macroeconomic uncertainty. The CPA's recent Summer Forecast predicts a decrease in UK market volumes of 0.6 per cent in 2018, followed by an increase of 2.3 per cent in 2019, while the underlying indicators in the New Build Housing, Road, Rail and Water Management markets remains supportive. Recent trading has been very strong with both June and July revenues up 21 per cent against the prior year period.
The self help programme to support organic growth is progressing well and the integration of CPM Group Limited ("CPM") is on track with post acquisition trading continuing strongly. The Board believes that Marshalls' innovative product range and strong market positions mean the Group is well placed to deliver continued future growth. The Group's focus remains the delivery of long-term sustainable growth, whilst maintaining a strong balance sheet and a flexible capital structure.
The Board remains confident of achieving its expectations for 2018."
There will be a presentation for analysts and investors today at 9.00 am with a telephone dial in facility available tel: number +44 (0)330 336 9411 - Access Code: 1478410. Marshalls' Analyst Presentation will be available for analysts and investors who are unable to attend the presentation. The presentation can be viewed on Marshalls' website at www.marshalls.co.uk.
Enquiries:
Martyn Coffey Chief Executive Marshalls plc 01422 314777
Group Finance
Jack Clarke Director Marshalls plc 01422 314777
Andrew Jaques MHP Communications 020 3128 8540
James White
INTERIM MANAGEMENT REPORT
Group Results
Marshalls' revenue for the 6 months ended 30 June 2018 grew by 12 per cent to GBP244.3 million (2017: GBP219.1 million). This result has been achieved despite the severe weather conditions in the first 4 months, which resulted in a reduction in sales of approximately GBP9 million. Recent trading has been strong and the Group has continued to experience strong order intake. Revenue in both June and July is up 21 per cent against the prior year period. Encouragingly, despite wider political and economic uncertainty, the underlying indicators remain positive in Marshalls' end markets. The Group's positive cash generation has continued in the period.
Sales to the Domestic end market, which represented approximately 31 per cent of Group sales, were significantly impacted by the severe weather. Despite this, results were in line with the prior year period reflecting strong growth either side of the bad weather period. The survey of domestic installers at the end of June 2018 shows continuing strong order books of 11.3 weeks (June 2017: 11.9 weeks; February 2018 : 10.8 weeks).
Sales to the Public Sector and Commercial end market, which represented approximately 64 per cent of Group sales, increased by 19 per cent compared with the prior year period. CPM, which was acquired in October 2017, has continued to trade strongly and its integration is in line with our expectations and well advanced. The Group continues to target those parts of the market where higher levels of growth are anticipated including New Build Housing, Road, Rail and Water Management.
Sales in the International business increased by 1 per cent in the 6 months ended 30 June 2018 and represented 5 per cent of Group sales. Progress continues to be made to develop our International business and the Group continues to improve its global infrastructure, supply chains and routes to market.
Operating profit increased to GBP33.5 million (2017: GBP29.8 million) with operating margins slightly ahead at 13.7 per cent (2017 : 13.6 per cent). EBITDA improved to GBP41.6 million (2017: GBP36.7 million).
Group return on capital employed ("ROCE") remained strong and was 20.0 per cent for the 12 months ended 30 June 2018. This compares with 20.8 per cent for the year ended 31 December 2017 and reflects the increase in the pension scheme surplus. ROCE is defined as EBITA divided by shareholders' funds plus cash / net debt.
Net financial expenses were GBP1.0 million (2017: GBP0.7 million) and interest was covered 34.0 times (2017: 42.4 times). The effective tax rate was 19.5 per cent (2017: 18.8 per cent).
Basic EPS was 13.24 pence (2017: 12.04 pence) per share, which represented an increase of 10 per cent. The Board has declared an interim dividend of 4.00 pence (2017: 3.40 pence) per share, an increase of 18 per cent, reflecting the strong cash generation and the Group's continuing progressive dividend policy.
The Group continues to deliver strong operational cash flows through the ongoing tight control of inventory and effective management of working capital. As a consequence of the acquisition of CPM in October 2017 for GBP41.4 million, including GBP3 million of CPM debt taken on, the Group reported net debt of GBP48.9 million at 30 June 2018 (30 June 2017: net cash of GBP1.2 million). The half year end net debt is after the payment of the 2017 final and supplementary dividends of GBP21.3 million made to shareholders on 29 June 2018.
Group Strategy
The Group strategy continues to focus on the delivery of long-term sustainable growth. The strategy is to maintain a strong balance sheet, a flexible capital structure and a clear capital allocation policy that drives both long-term growth and shareholder returns. The Group is continuing to invest in the Marshalls brand and to prioritise organic capital expenditure projects. We continue to increase research and development and new product development, which are delivering an encouraging pipeline of new products. The focus remains on innovation and new product development, and the aim is to extend the product range and provide more integrated solutions to improve the customer experience and so strengthen and differentiate the Marshalls brand.
The Group's key priority is to deliver improvements in profit margins across all businesses and end markets through the continued focus on service, quality, design, innovation and a commitment to research and development and sustainability, together with sustainable cost reductions and improvements in operational efficiency.
Numerous cross-selling opportunities have been identified and CPM is generating a strong pipeline of new products. Our acquisition focus remains centred on the Minerals, Protective Street Furniture, Building Materials and Water Management markets. We have identified a good pipeline of potential acquisition targets but remain selective and will not compromise on the investment criteria and the hurdle rates we have in place.
Marshalls' digital strategy is increasing in momentum across all Group operations. The strategy combines digital trading, digital marketing and digital business and is focused on the customer experience. The strategy puts the interests of stakeholders and the requirements of customers as the key priority. For example, web and mobile applications enable customers to model their requirements and allow full digital access. A new Commercial web platform was launched in this period and a new Domestic platform will follow later this year. Our strategic direction is "digital by default", which seeks to define digital as a core part of the Group's culture.
Operating Performance
Operating margins increased slightly to 13.7 per cent in the 6 months ended 30 June 2018 (2017: 13.6 per cent). The increased operating margins in the core Landscape Products business, together with the positive impact from CPM, were tempered by the performances of certain of the Emerging UK Businesses and the impact of restructuring costs. CPM has delivered strong trading results since the acquisition date and its half year performance is in line with expectations. Revenue increased by GBP25.3 million and operating profit by GBP4.8 million in the Landscape Products business, which serves both the Public Sector and Commercial and Domestic end markets. The increase in operating margins within the Landscape Products business reflects the delivery of sustainable cost reductions and operational efficiency improvements as part of our 2020 Strategy programmes. The performance of our Emerging UK Businesses has been mixed during the half year period, with significant focus on restructuring certain less profitable areas. The profit is calculated after charging restructuring costs of GBP0.9 million which have been incurred in the period and are designed to benefit these businesses going forward. Increasing profitability in the Emerging UK Businesses remains a key part of the Group's 2020 Strategy and Street Furniture, Mineral Products and Premier Mortars remain important growth drivers for the Group.
In the Domestic end market, the Group continues to drive more sales through the Marshalls Register of approved domestic installers. The Marshalls Register is unique and comprises approximately 1,900 installer teams. The Group is committed to delivering a consistently high standard of quality, customer service and marketing support and we remain focused on enhancing the overall customer experience by extending digitisation and our commitment to innovation.
In the Public Sector and Commercial end market, Marshalls' continuing strategy is to offer sustainable integrated solutions to customers, architects and contractors. The Group's technical and sales teams remain particularly focused on those market areas where future demand is considered to be greatest, including New Build Housing, Road, Rail and Water Management. CPM is now fully part of the Landscape Products business and numerous cross-selling opportunities have been identified. CPM has a strong order book and a healthy pipeline of new products and has recently secured orders to supply a number of Smart Motorway projects.
The Group continues to focus on innovation and new product development to drive sales growth. Research and development expenditure in the 6 months ended 30 June 2018 was GBP2.2 million (2017: GBP1.7 million). This investment includes project engineering to enhance manufacturing capabilities, concrete and other materials technology innovations and extending the new product pipeline. New product solutions for the Domestic range include Urbex Riven paving for new housing, together with additional innovative stone and vitrified paving products. In Public Sector and Commercial, CPM's Perfect Manhole System and its Redi-Rock Flood Protection System are important new product solutions now available to the Group. Revenue from new products in the core Landscape Products business has continued to grow strongly and represented 11 per cent of Group sales in the 6 months ended 30 June 2018.
Capital investment in property, plant and equipment in the 6 months ended 30 June 2018 totalled GBP13.5 million (2017: GBP7.9 million) and this compares with depreciation of GBP7.4 million (2017: GBP6.4 million). The Group's self help investment programme remains an important part of our 2020 Strategy and total capital expenditure of GBP28 million is planned in 2018. The aim is to deliver sustainable cost savings of GBP5 million per annum by 2019. This detailed plan is on track and includes various projects within natural stone, block paving and automated material handling. In addition, further to our acquisition last year, a new factory is due for completion at CPM's Somerset site in November 2018, at a cost of GBP5 million, which is expected to increase capacity and efficiency at the plant.
Balance Sheet and Cash Flow
Net assets at 30 June 2018 were GBP244.6 million (June 2017: GBP222.6 million).
Cash generation remains strong, although the bad weather in the first 4 months of the year has pushed out the working capital cycle in the second quarter. This knock-on impact of the bad weather is reflected in the reported net cash flows from operating activities, which were GBP14.0 million (2017: GBP19.2 million) in the 6 months ended 30 June 2018. The Group continues to focus on maintaining a strong balance sheet supported by robust capital disciplines, and strong cash management continues to be a high priority area. The Group operates tight control over business, operational and financial procedures, and continues to focus on inventory levels and the management of capital expenditure and trade receivables.
The Group's existing bank facilities provide headroom against available facilities at appropriately conservative levels. On 9 August 2018 we extended our committed facilities by 1 year to 2023 to enhance the maturity profile and also renewed short-term working capital facilities with RBS. Marshalls maintains a policy of having significant committed facilities in place with a positive spread of medium-term maturities. We have significant capacity within our banking facilities to fund organic investment and selective "bolt-on" acquisitions.
The balance sheet value of the Group's defined benefit pension scheme was a surplus of GBP11.5 million at 30 June 2018 (December 2017: GBP4.1 million surplus; June 2017: GBP3.6 million surplus). The surplus has been determined by the scheme actuary using assumptions that are considered to be prudent and in line with current market levels. The increased surplus is largely due to an increase, during the last 6 months, in the AA corporate bond rate from 2.50 per cent to 2.60 per cent and this is in line with market movements. The expected rate of inflation decreased to 2.10 per cent from 2.15 per cent at 31 December 2017. The balance sheet value continues to benefit from the high proportion of liability-driven investments whose performance matches the liabilities.
Dividend
The Group has a progressive dividend policy with a stated objective of achieving up to 2 times dividend cover over the business cycle. The Board has declared an interim dividend of 4.00 pence (June 2017: 3.40 pence) per share, an increase of 18 per cent, which reflects the Group's strong cash generation. This dividend will be paid on 5 December 2018 to shareholders on the register at the close of business on 19 October 2018. The ex-dividend date will be 18 October 2018.
Risks and Uncertainties
There are a number of potential risks and uncertainties which could have a material impact on the Group's performance over the remaining 6 months of the financial year and could cause actual results to differ materially from expected and historical results. The Board does not consider that the principal risks and uncertainties have changed since the publication of the Annual Report for the year ended 31 December 2017. A detailed explanation of the risks, and how the Group seeks to mitigate these risks, can be found on pages 20 to 24 of the 2017 Annual Report, which is available at www.marshalls.co.uk/investor/annual-and-interim-reports.
Going concern
As stated in Note 1 of the 2018 Half Year Report, the Directors are satisfied that the Group has sufficient resources to continue in operation for the foreseeable future, a period of not less than 12 months from the date of this report. Accordingly, they continue to adopt the going concern basis in preparing the Half Year Report.
Outlook
The Group continues to outperform the Construction Products Association's ("CPA") growth figures, despite ongoing macroeconomic uncertainty. The CPA's recent Summer Forecast predicts a decrease in UK market volumes of 0.6 per cent in 2018, followed by an increase of 2.3 per cent in 2019, while the underlying indicators in the New Build Housing, Road, Rail and Water Management markets remain supportive. Recent trading has been very strong with both June and July revenues up 21 per cent against the prior year period.
The self help programme to support organic growth is progressing well and the integration of CPM Group Limited is on track with post acquisition trading continuing strongly. The Board believes that Marshalls' innovative product range and strong market positions mean the Group is well placed to deliver continued future growth. The Group's focus remains the delivery of long-term sustainable growth, whilst maintaining a strong balance sheet and a flexible capital structure.
The Board remains confident of achieving its expectations for 2018.
Martyn Coffey
Chief Executive
Condensed Consolidated Income Statement
for the half year ended 30 June 2018
Half year Year ended
ended June December
2018 2017 2017
Notes GBP'000 GBP'000 GBP'000
Revenue 4 244,340 219,131 430,194
Net operating costs 5 (210,827) (189,299) (376,755)
Operating profit 4 33,513 29,832 53,439
Financial expenses 6 (986) (703) (1,388)
Profit before tax 4 32,527 29,129 52,051
Income tax expense 7 (6,350) (5,477) (9,925)
Profit for the financial
period 26,177 23,652 42,126
Profit for the period
Attributable to:
Equity shareholders of
the Parent 26,158 23,779 42,503
Non-controlling interests 19 (127) (377)
26,177 23,652 42,126
Earnings per share
Basic 8 13.24p 12.04p 21.52p
Diluted 8 13.13p 11.94p 21.37p
Dividend
Pence per share 9 6.80p 5.80p 9.20p
Supplementary 4.00p 3.00p 3.00p
Dividends declared 9 21,344 17,387 24,105
All results relate to continuing operations.
Condensed Consolidated Statement of Comprehensive Income
for the half year ended 30 June 2018
Half year Year ended
ended June December
2018 2017 2017
GBP'000 GBP'000 GBP'000
Profit for the financial period 26,177 23,652 42,126
Other comprehensive income / (expense)
Items that will not be reclassified to
the Income Statement:
Remeasurement of the net defined benefit
liability 7,699 (517) 328
Deferred tax arising (1,309) 88 (56)
Total items that will not be reclassified
to the Income
Statement 6,390 (429) 272
Items that are or may in the future be
reclassified to the Income Statement:
Effective portion of changes in fair
value of cash flow hedges 500 (704) 146
Fair value of cash flow hedges transferred
to the Income Statement (262) (251) (385)
Deferred tax arising (38) 159 35
Exchange difference on retranslation
of foreign currency net
investment 62 135 179
Exchange movements associated with borrowings (84) (412) (638)
Foreign currency translation differences
- non-controlling interests (5) 213 371
Total items that are or may be reclassified
subsequently to
the Income Statement 173 (860) (292)
Other comprehensive income / (expense)
for the period,
net of income tax 6,563 (1,289) (20)
Total comprehensive income for the period 32,740 22,363 42,106
Attributable to:
Equity shareholders of the Parent 32,726 22,277 42,112
Non-controlling interests 14 86 (6)
32,740 22,363 42,106
Condensed Consolidated Balance Sheet
as at 30 June 2018
June December
Notes 2018 2017 2017*
GBP'000 GBP'000 GBP'000
Assets
Non-current assets
Property, plant and equipment 173,662 147,514 169,093
Intangible assets 73,318 40,386 72,060
Trade and other receivables - 208 -
Employee benefits 10 11,498 3,622 4,127
Deferred taxation assets 1,324 2,390 2,775
259,802 194,120 248,055
Current assets
Inventories 84,867 70,380 77,859
Trade and other receivables 94,644 74,295 68,221
Cash and cash equivalents 20,617 26,862 19,845
Derivative financial instruments 654 - 447
200,782 171,537 166,372
Total assets 460,584 365,657 414,427
Liabilities
Current liabilities
Trade and other payables 114,394 96,818 100,173
Corporation tax 8,282 7,555 9,299
Interest-bearing loans and borrowings 34 34 35
Derivative financial instruments - 276 -
122,710 104,683 109,507
Non-current liabilities
Interest-bearing loans and borrowings 69,484 25,669 44,107
Provisions 7,540 - 8,200
Deferred taxation liabilities 16,274 12,669 14,986
93,298 38,338 67,293
Total liabilities 216,008 143,021 176,800
Net assets 244,576 222,636 237,627
Equity
Capital and reserves attributable to equity
shareholders of the Parent
Share capital 49,845 49,845 49,845
Share premium account 22,695 22,695 22,695
Own shares (919) (2,470) (2,359)
Capital redemption reserve 75,394 75,394 75,394
Consolidation reserve (213,067) (213,067) (213,067)
Hedging reserve 586 (206) 386
Retained earnings 308,569 288,894 303,274
Equity attributable to equity shareholders
of the Parent 243,103 221,085 236,168
Non-controlling interests 1,473 1,551 1,459
Total equity 244,576 222,636 237,627
* The comparatives have been restated as a result of a reassessment of the fair value of assets and liabilities acquired (Note 11
Condensed Consolidated Cash Flow Statement
for the half year ended 30 June 2018
Half year ended Year ended
June December
2018 2017 2017
GBP'000 GBP'000 GBP'000
Cash flows from operating activities
Profit for the financial period 26,177 23,652 42,126
Income tax expense 6,350 5,477 9,925
Profit before tax 32,527 29,129 52,051
Adjustments for:
Depreciation 7,427 6,438 13,314
Amortisation 717 501 1,142
Gain on sale of property, plant and equipment (954) (870) (948)
Share-based payment expense 534 736 2,382
Financial income and expenses (net) 986 703 1,388
Operating cash flow before changes in
working capital 41,237 36,637 69,329
(Increase) / decrease in trade and other
receivables (26,729) (24,569) 5,334
Increase in inventories (7,045) (1,469) (4,252)
Increase / (decrease) in trade and other
payables 14,830 14,842 (320) Operational restructuring costs paid (917) - (1,217) Acquisition costs paid (594) - (193) Cash generated from operations 20,782 25,441 68,681 Financial expenses paid (707) (513) (911) Income tax paid (6,057) (5,723) (10,465) Net cash flow from operating activities 14,018 19,205 57,305 Cash flows from investing activities Proceeds from sale of property, plant and equipment 1,571 4,171 3,891 Acquisition of subsidiary undertaking - - (41,227) Acquisition of property, plant and equipment (13,539) (7,922) (18,895) Acquisition of intangible assets (557) (794) (1,750) Net cash flow from investing activities (12,525) (4,545) (57,981) Cash flows from financing activities Payments to acquire own shares (1,210) (1,054) (1,068) Payments in respect of share-based awards (3,683) - - Net decrease in other debt and finance leases - - (3,407) Increase in borrowings 25,500 10,000 28,226 Equity dividends paid (21,344) (17,387) (24,105) Net cash flow from financing activities (737) (8,441) (354) Net increase / (decrease) in cash and cash equivalents 756 6,219 (1,030) Cash and cash equivalents at the beginning of the period 19,845 20,681 20,681 Effect of exchange rate fluctuations 16 (38) 194 Cash and cash equivalents at the end of the period 20,617 26,862 19,845
Condensed Consolidated Statement of Changes in Equity
for the half year ended 30 June 2018
Attributable to equity holders of the Company
Share Capital Consolid- Non-con-
Share premium Own redemption ation Hedging Retained trolling Total
capital account shares reserve reserve reserve earnings Total interests equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Current half
year
At 1 January
2018 49,845 22,695 (2,359) 75,394 (213,067) 386 303,274 236,168 1,459 237,627
Total
comprehensive
income /
(expense)
for the
period
Profit for the
financial
period
attributable
to
equity
shareholders
of
the Parent - - - - - - 26,158 26,158 19 26,177
Other
comprehensive
income /
(expense)
Foreign
currency
translation
differences - - - - - - (22) (22) (5) (27)
Effective
portion
of
changes in
fair
value of
cash flow
hedges - - - - - 500 - 500 - 500
Net change in
fair value of
cash flow
hedges
transferred
to the Income
Statement - - - - - (262) - (262) - (262)
Deferred tax
arising - - - - - (38) - (38) - (38)
Defined
benefit
plan
actuarial
gain - - - - - - 7,699 7,699 - 7,699
Deferred tax
arising - - - - - - (1,309) (1,309) - (1,309)
Total other
comprehensive
income - - - - - 200 6,368 6,568 (5) 6,563
Total
comprehensive
income for
the
period - - - - - 200 32,526 32,726 14 32,740
Transactions
with
owners,
recorded
directly
in equity
Contributions
by and
distributions
to owners
Share-based
payments - - - - - - (3,149) (3,149) - (3,149)
Deferred tax
on
share-based
payments - - - - - - (352) (352) - (352)
Corporation
tax
on share-
based
payments - - - - - - 264 264 - 264
Dividends to
equity
shareholders - - - - - - (21,344) (21,344) - (21,344)
Purchase of
own
shares - - (1,210) - - - - (1,210) - (1,210)
Disposal of
own
shares - - 2,650 - - - (2,650) - - -
Total
contributions
by
and
distributions
to owners - - 1,440 - - - (27,231) (25,791) - (25,791)
Total
transactions
with
owners of the
Company - - 1,440 - - 200 5,295 6,935 14 6,949
At 30 June
2018 49,845 22,695 (919) 75,394 (213,067) 586 308,569 243,103 1,473 244,576
Condensed Consolidated Statement of Changes in Equity (continued)
for the half year ended 30 June 2018
Attributable to equity holders of the Company
Share Capital Consolid- Non-con-
Share premium Own redemption ation Hedging Retained trolling Total
capital account shares reserve reserve reserve earnings Total interests equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Prior half
year
At 1 January
2017 49,845 22,695 (3,622) 75,394 (213,067) 590 283,821 215,656 1,465 217,121
Total
comprehensive
income /
(expense)
for
the period
Profit for the
financial
period
attributable
to
equity
shareholders
of
the Parent - - - - - - 23,779 23,779 (127) 23,652
Other
comprehensive
income /
(expense)
Foreign
currency
translation
differences - - - - - - (277) (277) 213 (64)
Effective
portion
of
changes in
fair
value of
cash flow
hedges - - - - - (704) - (704) - (704)
Net change in
fair value
of cash flow
hedges
transferred
to the
Income
Statement - - - - - (251) - (251) - (251)
Deferred tax
arising - - - - - 159 - 159 - 159
Defined
benefit
plan
actuarial
loss - - - - - - (517) (517) - (517)
Deferred tax
arising - - - - - - 88 88 - 88
Total other
comprehensive
income /
(expense) - - - - - (796) (706) (1,502) 213 (1,289)
Total
comprehensive
income /
(expense)
for
the period - - - - - (796) 23,073 22,277 86 22,363
Transactions
with
owners,
recorded
directly
in equity
Contributions
by and
distributions
to owners
Share-based
payments - - - - - - 736 736 - 736
Deferred tax
on share-
based
payments - - - - - - 702 702 - 702
Corporation
tax
on share-
based
payments - - - - - - 155 155 - 155
Dividends to
equity
shareholders - - - - - - (17,387) (17,387) - (17,387) Purchase of own shares - - (1,054) - - - - (1,054) - (1,054) Disposal of own shares - - 2,206 - - - (2,206) - - - Total contributions by and distributions to owners - - 1,152 - - - (18,000) (16,848) - (16,848) Total transactions with owners of the Company - - 1,152 - - (796) 5,073 5,429 86 5,515 At 30 June 2017 49,845 22,695 (2,470) 75,394 (213,067) (206) 288,894 221,085 1,551 222,636
Condensed Consolidated Statement of Changes in Equity (continued)
for the half year ended 30 June 2018
Attributable to equity holders of the Company
Share Capital Consolid- Non-con-
Share premium Own redemption ation Hedging Retained trolling Total
capital account shares reserve reserve reserve earnings Total interests equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Prior year
At 1 January
2017 49,845 22,695 (3,622) 75,394 (213,067) 590 283,821 215,656 1,465 217,121
Total
comprehensive
income /
(expense)
for the
year
Profit for the
financial
period
attributable
to
equity
shareholders
of
the Parent - - - - - - 42,503 42,503 (377) 42,126
Other
comprehensive
income /
(expense)
Foreign
currency
translation
differences - - - - - - (459) (459) 371 (88)
Effective
portion
of
changes in
fair
value of
cash flow
hedges - - - - - 146 - 146 - 146
Net change in
fair value of
cash flow
hedges
transferred
to
the Income
Statement - - - - - (385) - (385) - (385)
Deferred tax
arising - - - - - 35 - 35 - 35
Defined
benefit
plan
actuarial
gain - - - - - - 328 328 - 328
Deferred tax
arising - - - - - - (56) (56) - (56)
Total other
comprehensive
income /
(expense) - - - - - (204) (187) (391) 371 (20)
Total
comprehensive
income /
(expense)
for
the year - - - - - (204) 42,316 42,112 (6) 42,106
Transactions
with
owners,
recorded
directly in
equity
Contributions
by and
distributions
to
owners
Share-based
payments - - - - - - 2,382 2,382 - 2,382
Deferred tax
on
share-based
payments - - - - - - 885 885 - 885
Corporation
tax
on share-
based
payments - - - - - - 306 306 - 306
Dividends to
equity
shareholders - - - - - - (24,105) (24,105) - (24,105)
Purchase of
own
shares - - (1,068) - - - - (1,068) - (1,068)
Disposal of
own
shares - - 2,331 - - - (2,331) - - -
Total
contributions
by
and
distributions
to
owners - - 1,263 - - - (22,863) (21,600) - (21,600)
Total
transactions
with
owners of the
Company - - 1,263 - - (204) 19,453 20,512 (6) 20,506
At 31 December
2017 49,845 22,695 (2,359) 75,394 (213,067) 386 303,274 236,168 1,459 237,627
Notes to the Condensed Consolidated Financial Statements
for the half year ended 30 June 2018
1. Basis of preparation
Marshalls plc (the "Company") is a company domiciled in the United Kingdom. The Condensed Consolidated Financial Statements of the Company for the half year ended 30 June 2018 comprise the Company and its subsidiaries (together referred to as the "Group").
The Condensed Consolidated Financial Statements have been prepared in accordance with the Disclosure Guidance and Transparency Rules of the UK Financial Conduct Authority and the requirements of IAS 34 "Interim Financial Reporting" as adopted by the European Union ("EU").
The Condensed Consolidated Financial Statements do not constitute statutory financial statements and do not include all the information and disclosures required for full annual financial statements. The Condensed Consolidated Half Year Financial Statements were approved by the Board on 16 August 2018. The Condensed Consolidated Half Year Financial Statements are not statutory accounts as defined by Section 434 of the Companies Act 2006.
The Condensed Consolidated Financial Statements for the half year ended 30 June 2018 and the comparative period have not been audited. The Auditor has carried out a review of the Half Year Financial Information and its report is set out on page 27.
The financial information for the year ended 31 December 2017 has been extracted from the annual Financial Statements, included in the Annual Report 2017, which has been filed with the Registrar of Companies. The report of the Auditor was: (i) unqualified; (ii) did not include a reference to any matters to which the Auditor drew attention by way of emphasis without qualifying its report; and (iii) did not contain a statement under Section 498 (2) and (3) of the Companies Act 2006.
The annual Financial Statements of the Group are prepared in accordance with International Financial Reporting Standards ("IFRSs") as adopted by the EU. As required by the Disclosure Guidance and Transparency Rules of the UK Financial Conduct Authority and, other than in respect of IFRS 9 and IFRS 15 which apply from 1 January 2018, the condensed set of Financial Statements has been prepared applying the accounting policies and presentation that were applied in the preparation of the Company's published Consolidated Financial Statements for the year ended 31 December 2017.
The Condensed Consolidated Half Year Financial Statements are prepared on the historical cost basis except that the following assets and liabilities are stated at their fair value: derivative financial instruments and liabilities for cash settled share-based payments.
The preparation of financial statements in conformity with adopted IFRSs requires management to make judgements, estimates and assumptions that affect the application of policies and the reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. In preparing these Condensed Consolidated Half Year Financial Statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the Consolidated Financial Statements of the Group for the year ended 31 December 2017.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.
Details of the Group's funding position are set out in Note 13 and are subject to normal covenant arrangements. The Group's on-demand overdraft facility is reviewed on an annual basis and the current arrangements were renewed and signed on 9 August 2018. Management believes that there are sufficient unutilised facilities held which mature after 12 months. The Group's performance is dependent on economic and market conditions, the outlook for which is difficult to predict. Based on current expectations, the Group's cash forecasts continue to meet half year and year end bank covenants and there is adequate headroom that is not dependent on facility renewals. After considering relevant uncertainties, the Directors believe that the Group is well placed to manage its business risks successfully. Accordingly, they continue to adopt the going concern basis in preparing the Condensed Consolidated Half Year Financial Statements.
2. Accounting policies
IFRS 9, "Financial Instruments" and IFRS 15 "Revenue from Contracts with Customers", have been applied from 1 January 2018. The application of both Standards has not had a material impact on the Group's financial reporting. The Group expects to adopt IFRS 16 "Leases", with effect from 1 January 2019. The Group is currently assessing the impact of IFRS 16, which is expected to have a significant impact on the consolidated results of the Group. It is not practicable to provide a reasonable estimate of the financial effect until the Directors complete the review.
Except as stated below, the accounting policies have been applied consistently throughout the Group for the purposes of these Condensed Consolidated Half Year Financial Statements and are also set out on the Company's website (www.marshalls.co.uk). The Condensed Consolidated Half Year Financial Statements are presented in Sterling, rounded to the nearest thousand.
The following new accounting policies have been applied from 1 January 2018.
IFRS 9, "Financial Instruments"
IFRS 9 replaces the provisions of IAS 39 that relate to recognition, classification and measurement of financial assets and financial liabilities, de-recognition of financial instruments, impairment of financial assets and hedge accounting. The adoption of IFRS 9, "Financial Instruments" from 1 January 2018 resulted in changes in accounting policies, however, no adjustments were required to the amounts recognised in the financial statements in previous periods. The new accounting policies are set out below.
(a) Classification and measurement
On 1 January 2018, the Group has classified its financial instruments in the appropriate IFRS 9 categories.
The derivative financial instruments designated as cash flow hedges and fair value hedges under IAS 39 at 31 December 2017 continue to qualify for hedge accounting under IFRS 9 at 1 January 2018 and are, therefore, treated as continuing hedges.
(b) Impairment of financial assets
The Group has one type of financial asset that is subject to IFRS 9's new expected credit loss model:
-- trade and other receivables
Trade and other receivables do not contain a significant financing element and therefore expected credit losses are measured using the simplified approach permitted by IFRS 9, which requires expected lifetime losses to be recognised from the initial recognition of the receivables.
While cash and cash equivalents are also subject to the impairment requirements of IFRS 9, the identified impairment loss was immaterial.
There was no IFRS 9 impact on retained earnings at 1 January 2018.
IFRS 15, "Revenue from Contracts with Customers"
IFRS 15 establishes a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. IFRS 15 supersedes the revenue recognition guidance within IAS 18 "Revenue" and the related interpretations. The Group adopted IFRS 15 on 1 January 2018. Comparative information has not been restated as the impact on prior periods is not material.
IFRS 15 provides a single, principles-based, five-step model to be applied to all sales contracts, based on the transfer of control of goods and services to customers, and it replaces the separate model for goods and services of IAS 18 "Revenue".
Revenue represents income derived from contracts for the provision of goods and services by the Company and its subsidiary undertakings to customers in exchange for consideration in the ordinary course of the Group's activities.
Upon approval by the parties to a contract, the contract is assessed to identify each promise to transfer either a distinct good or service, or a series of distinct goods or services, that are substantially the same and have the same pattern of transfer to the customer. Goods and services are distinct and accounted for as separate performance obligations in the contract if the customer can benefit from them either on their own or together with other resources that are readily available to the customer and they are separately identifiable in the contract.
The Group's revenues are primarily earned from the sale of goods and revenue is recognised when the performance obligation in the contracts with customers is satisfied, typically on delivery of goods to customers.
At the start of the contract the total transaction price is estimated as the amount of consideration to which the Group expect to be entitled in exchange for transferring the promised goods and services to the customer, excluding sales taxes. Any variable consideration is included based on the expected value, or most likely amount, only to the extent that it is highly probable that there will not be a reversal in the amount of revenue recognised. Total transaction price is allocated to the performance obligations identified in the contract in proportion to their relative standalone selling prices.
3. Alternative performance measures
The Group used alternative performance measures ("APMs") which are not defined or specified under IFRS. The Group believes that their APMs, which are not considered to be a substitute for IFRS measures, provide additional helpful information. APMs are consistent with how business performance is planned, reported and assessed internally by management and the Board and provide more meaningful comparative information.
EBITA and EBITDA
EBITA represents earnings before interest, tax and the amortisation of intangibles. This is a component of the ROCE calculation. EBITDA is calculated by adding back depreciation to EBITA.
June June December Increase
2018 2017 2017
GBP'000 GBP'000 GBP'000 %
EBITDA 41,657 36,771 67,895 13
Depreciation (7,427) (6,438) (13,314)
EBITA 34,230 30,333 54,581
Amortisation of intangible
assets (717) (501) (1,142)
Operating profit 33,513 29,832 53,439 12
ROCE
Reported ROCE is defined as EBITA divided by shareholders funds plus net debt / (cash).
June June December
2018 2017 2017
GBP'000 GBP'000 GBP'000
EBITA - half year ended 30 June 34,230 30,333 30,333
EBITA - half year ended 31 December 24,248 22,183 24,248
EBITA - year ended 30 June 58,478 52,516 54,581
Shareholders funds 244,576 222,636 237,627
Net debt / (cash) 48,901 (1,159) 24,297
293,477 221,477 261,924
Reported ROCE 20.0% 23.7% 20.8%
4. Segmental analysis
IFRS 8, "Operating Segments" requires operating segments to be identified on the basis of discrete financial information about components of the Group that are regularly reviewed by the Group's Chief Operating Decision Maker ("CODM") to allocate resources to the segments and to assess their performance. As far as Marshalls plc is concerned, the CODM is regarded as being the Executive Directors. The Directors have concluded that the detailed requirements of IFRS 8 support the reporting of the Group's Landscape Products business as a reportable segment, which includes the UK operations of the Marshalls Landscape Products hard landscaping business, servicing both the UK Domestic and the UK Public Sector and Commercial end markets. Financial information for Landscape Products is reported to the Group's CODM for the assessment of segmental performance and to facilitate resource allocation.
The Landscape Products reportable segment operates a national manufacturing plan that is structured around a series of production units throughout the UK, in conjunction with a single logistics and distribution operation. A national planning process supports sales to both of the key end markets, namely the UK Domestic and UK Public Sector and Commercial end markets, and the operating assets produce and deliver a range of broadly similar products that are sold into each of these end markets. Within the Landscape Products operating segment, the focus is on the one integrated production, logistics and distribution network supporting both end markets. Following its acquisition, the CPM business has been included within the Landscape Products operating segment.
Included in "Other" are the Group's Street Furniture, Mineral Products, Premier Mortars and International operations, which do not currently meet the IFRS 8 reporting requirements. The accounting policies of the Landscape Products operating segment are the same as the Group's accounting policies. Segment profit represents the profit earned without allocation of certain central administration costs that are not capable of allocation. Centrally administered overhead costs that relate directly to the reportable segment are included within the segment's results.
Segment revenues and results
Half year ended June Half year ended June Year ended December
2018 2017 2017
Landscape Landscape Landscape
Products Other Total Products Other Total Products Other Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
External
revenue 197,545 48,745 246,290 172,140* 49,408* 221,548 339,655 94,622 434,277
Inter-segment
revenue (105) (1,845) (1,950) (130)* (2,287)* (2,417) (226) (3,857) (4,083)
Total revenue 197,440 46,900 244,340 172,010 47,121 219,131 339,429 90,765 430,194 Segment operating profit 35,489 1,010 36,499 31,676* 2,099* 33,775 56,104 1,873 57,977 Unallocated administration costs (2,986) (3,943) (4,538) Operating profit 33,513 29,832 53,439 Finance charges (net) (986) (703) (1,388) Profit before tax 32,527 29,129 52,051 Taxation (6,350) (5,477) (9,925) Profit after tax 26,177 23,652 42,126
* Following a change to the way in which information is reported internally, the June 2017 comparative figures have been restated to ensure consistent classification with the analysis reported for the half year ended 30 June 2018.
June June December
Segment assets 2018 2017 2017
GBP'000 GBP'000 GBP'000
Fixed assets and inventory:
Landscape Products 200,973 162,369* 182,391
Other 57,556 55,525* 64,561
Total segment fixed assets and
inventory 258,529 217,894 246,952
Unallocated assets 202,055 147,763 167,475**
Consolidated total assets 460,584 365,657 414,427
* Following a change to the way in which information is reported internally, the June 2017 comparative figures have been restated to ensure consistent classification with the analysis reported for the half year ended 30 June 2018.
** The comparatives have been restated as a result of a reassessment of the fair value of assets and liabilities acquired (Note 11).
For the purpose of monitoring segment performance and allocating performance between segments, the Group's CODM monitors the property, plant and equipment and inventory. Assets used jointly by reportable segments are not allocated to individual reportable segments.
Other segment information
Depreciation and amortisation Fixed asset additions
Half year ended Year ended Half year ended Year ended
June December June December
2018 2017 2017 2018 2017 2017
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Landscape Products 5,816 5,111* 10,878 11,376 6,749* 17,041
Other 2,328 1,828* 3,578 713 2,078* 5,445
8,144 6,939 14,456 12,089 8,827 22,486
*Following a change to the way in which information is reported internally, the June 2017 comparative figures have been restated to ensure consistent classification with the analysis reported for the half year ended 30 June 2018.
Geographical destination of revenue
Half year Year ended
ended June December
2018 2017 2017
GBP'000 GBP'000 GBP'000
United Kingdom 230,784 205,670 407,215
Rest of the World 13,556 13,461 22,979
244,340 219,131 430,194
The Group's revenue is subject to seasonal fluctuations resulting from demand from customers. In particular, demand is higher in the summer months. The Group manages the seasonal impact through the use of a seasonal working capital facility.
5. Net operating costs
Half year Year ended
ended June December
2018 2017 2017
GBP'000 GBP'000 GBP'000
Raw materials and consumables 81,871 79,779 151,343
Changes in inventories of finished
goods and work
in progress 6,241 2,019 7,231
Personnel costs 57,633 51,086 100,811
Depreciation 7,427 6,438 13,314
Amortisation of intangible assets 717 501 1,142
Own work capitalised (1,494) (666) (1,919)
Other operating costs 59,483 51,785 106,569
Restructuring costs 917 1,003 1,217
Acquisition costs - - 837
Operating costs 212,795 191,945 380,545
Other operating income (1,014) (1,776) (2,842)
Net gain on asset and property
disposals (954)* (870) (948)
Net operating costs 210,827 189,299 376,755
* This reflects the proceeds of the sale of a domain name and is net of the associated digital strategy costs.
6. Financial expenses and income
Half year Year ended
ended June December
2018 2017 2017
GBP'000 GBP'000 GBP'000
(a) Financial expenses
Net interest expense on defined
benefit pension
scheme 278 187 377
Interest expense on bank loans,
overdrafts and loan
notes 705 513 1,005
Finance lease interest expense 3 3 6
986 703 1,388
Net interest expense on the defined benefit pension scheme is disclosed net of Company recharges.
7. Income tax expense
Half year Year ended
ended June December
2018 2017 2017
GBP'000 GBP'000 GBP'000
Current tax expense
Current year 5,624 6,363 11,554
Adjustments for prior years (320) (289) (732)
5,304 6,074 10,822
Deferred taxation expense
Origination and reversal
of temporary
differences:
Current year 998 (478) (797)
Adjustments for prior years 48 (119) (100)
Total tax expense 6,350 5,477 9,925
Year ended
Half year ended June December
2018 2017 2017
% GBP'000 % GBP'000 % GBP'000
Reconciliation of effective
tax rate
Profit before tax 100.0 32,527 100.0 29,129 100.0 52,051
Tax using domestic corporation
tax rate 19.0 6,180 19.3 5,608 19.3 10,020
Impact of capital allowances
in excess of depreciation 0.1 27 0.4 136 0.3 184
Short-term timing differences 1.0 328 1.1 310 1.2 630
Adjustment to tax charge in
prior period (1.0) (320) (1.1) (289) (1.4) (732)
Expenses not deductible for
tax purposes (2.8) (911) 1.1 309 1.4 720
Corporation tax charge for the
year 16.3 5,304 20.8 6,074 20.8 10,822
Impact of capital allowances
in excess of depreciation 0.3 82 (1.9) (545) (1.2) (618)
Short-term timing differences 2.6 860 0.1 30 (0.2) (103)
Pension scheme movements - - 0.1 23 (0.1) (77)
Other items - (3) 1.8 509 1.0 532
Adjustment to tax charge in
prior period 0.1 48 (0.4) (119) (0.2) (100)
Impact of the change in the
rate of corporation tax on deferred
taxation 0.2 59 (1.7) (495) (1.0) (531)
Total tax charge for the year 19.5 6,350 18.8 5,477 19.1 9,925
The net amount of deferred taxation credited to the Consolidated Statement of Comprehensive Income in the period was GBP1,347,000 debit (30 June 2017: GBP247,000 credit; 31 December 2017: GBP21,000 debit). The effective tax rate used is management's best estimate of the average annual effective tax rate expected for the full year, applied to pre-tax income for the 6-month period.
8. Earnings per share
Basic earnings per share of 13.24 pence (30 June 2017: 12.04 pence; 31 December 2017: 21.52 pence) per share is calculated by dividing the profit attributable to Ordinary Shareholders for the financial period after adjusting for non-controlling interests of GBP26,158,000 (30 June 2017: GBP23,779,000; 31 December 2017: GBP42,503,000) by the weighted average number of shares in issue during the period of 197,619,775 (30 June 2017: 197,440,624; 31 December 2017: 197,518,109).
Profit attributable to Ordinary Shareholders
Half year Year ended
ended June December
2018 2017 2017
GBP'000 GBP'000 GBP'000
Profit for the financial period 26,177 23,652 42,126
Result attributable to non-controlling interests (19) 127 377
Profit attributable to Ordinary Shareholders 26,158 23,779 42,503
Weighted average number of Ordinary Shares
Half year Year ended
ended June December
2018 2017 2017
Number Number Number
Number of issued Ordinary Shares 199,378,755 199,378,755 199,378,755
Effect of shares transferred into employee
benefit trust (1,758,980) (1,938,131) (1,860,646)
Weighted average number of Ordinary Shares 197,619,775 197,440,624 197,518,109
Diluted earnings per share of 13.13 pence (30 June 2017: 11.94 pence; 31 December 2017: 21.37 pence) per share is calculated by dividing the profit for the financial period, after adjusting for non-controlling interests of GBP26,158,000 (30 June 2017: GBP23,779,000; 31 December 2017: GBP42,503,000), by the weighted average number of shares in issue during the period of 197,619,775 (30 June 2017: 197,440,624; 31 December 2017: 197,518,109), plus potentially dilutive shares of 1,609,647 (30 June 2017: 1,722,526; 31 December 2017: 1,384,707), which totals 199,229,422 (30 June 2017: 199,163,150 31 December 2017: 198,902,816).
Weighted average number of Ordinary Shares (diluted)
Half year Year ended
ended June December
2018 2017 2017
Number Number Number
Weighted average number of Ordinary Shares 197,619,775 197,440,624 197,518,109
Dilutive shares 1,609,647 1,722,526 1,384,707
Weighted average number of Ordinary Shares
(diluted) 199,229,422 199,163,150 198,902,816
9. Dividends
After the balance sheet date, the following dividends were proposed by the Directors. The dividends have not been provided and there were no income tax consequences.
Pence per qualifying Half year Year ended
share ended June December
2018 2017 2017
GBP'000 GBP'000 GBP'000
2018 interim 4.00 7,905 - -
2017 supplementary 4.00 - - 7,904
2017 final 6.80 - - 13,436
2017 interim 3.40 - 6,718 6,718
7,905 6,718 28,058
The following dividends were approved by the shareholders in the period:
Pence per qualifying Half year Year ended
share ended June December
2018 2017 2017
GBP'000 GBP'000 GBP'000
2017 supplementary 4.00 7,905 - -
2017 final 6.80 13,439 - -
2017 interim 3.40 - - 6,718
2016 supplementary 3.00 - 5,927 5,927
2016 final 5.80 - 11,460 11,460
21,344 17,387 24,105
The 2017 final dividend of 6.80 pence per qualifying Ordinary Share alongside a supplementary dividend of 4.00 pence per qualifying Ordinary Share (total value GBP21,344,000) was paid on 29 June 2018 to shareholders registered at the close of business on 8 June 2018.
The Board has declared an interim dividend of 4.00 pence (June 2017: 3.40 pence) per share. This dividend will be paid on 5 December 2018 to shareholders on the register at the close of business on 19 October 2018. The ex-dividend date will be 18 October 2018.
10. Employee benefits
The Company sponsors a funded defined pension scheme in the UK (the "Scheme"). The Scheme is administered within a trust which is legally separate from the Company. The Trustee Board is appointed by both the Company and the Scheme's membership and acts in the interests of the Scheme and all relevant stakeholders, including the members and the Company. The Trustee is also responsible for the investment of the Scheme's assets.
The defined benefit section of the Scheme provides pension and lump sums to members on retirement and to dependants on death. The defined benefit section closed to future accrual of benefits on 30 June 2006 with then active members becoming entitled to a deferred pension. Members no longer pay contributions to the defined benefit section. Company contributions to the defined benefit section after this date are used to fund any deficit in the Scheme and the expenses associated with administering the Scheme as determined by regular actuarial valuations.
The Trustee is required to use prudent assumptions to value the liabilities and costs of the Scheme whereas the accounting assumptions must be best estimates.
The defined benefit section of the Scheme poses a number of risks to the Company, for example longevity risk, investment risk, interest rate risk, inflation risk and salary risk. The Trustee is aware of these risks and uses various techniques to control them. The Trustee has a number of internal control policies, including a risk register, which are in place to manage and monitor the various risks it faces. The Trustee's investment strategy incorporates the use of liability-driven investments ("LDIs") to minimise sensitivity of the actuarial funding position to movements in interest rates and inflation rates.
The defined benefit section of the Scheme is subject to regular actuarial valuations, which are usually carried out every 3 years. The next actuarial valuation is expected to be carried out with an effective date of 5 April 2018. These actuarial valuations are carried out in accordance with the requirements of the Pensions Act 2004 and so include deliberate margins for prudence. This contrasts with these accounting disclosures which are determined using best estimate assumptions.
A formal actuarial valuation was carried out as at 5 April 2015. The results of that valuation have been projected to 30 June 2018 by a qualified independent actuary. The figures in the following disclosure were measured using the projected unit method.
The amounts recognised in the Consolidated Balance Sheet were as follows:
June December
2018 2017 2017
GBP'000 GBP'000 GBP'000
Present value of Scheme liabilities (342,992) (353,971) (350,554)
Fair value of Scheme assets 354,490 357,593 354,681
Net amount recognised (before any adjustment
for deferred tax) 11,498 3,622 4,127
The current and past service costs, settlements and curtailments, together with the net interest expense for the period, are included in the employee benefits expense in the Statement of Comprehensive Income. Remeasurements of the net defined benefit liability are included in other comprehensive income.
Half year Year ended
ended June December
2018 2017 2017
GBP'000 GBP'000 GBP'000
Service cost:
Net interest expense recognised in the Consolidated
Income Statement 328 137 477
Remeasurements of the net liability:
Return on scheme assets (excluding amount included
in interest
expense) (762) (507) (2,819)
(Gain) / loss arising from changes in financial
assumptions (6,937) 5,565 10,158
Gain arising from changes in demographic assumptions - (3,628) (7,667)
Experience gain - (913) -
(Credit) / charge recorded in other comprehensive
income (7,699) 517 (328) Total defined benefit (credit) / charge (7,371) 654 149
The principal actuarial assumptions used were:
June December
2018 2017 2017
Liability discount rate 2.60% 2.55% 2.50%
Inflation assumption - RPI 3.10% 3.15% 3.15%
Inflation assumption - CPI 2.10% 2.15% 2.15%
Rate of increase in salaries n/a n/a n/a
Revaluation of deferred pensions 2.10% 2.15% 2.15%
Increases for pensions in payment:
CPI pension increases (maximum 5%
per annum) 2.10% 2.15% 2.15%
CPI pension increases (maximum 5%
per annum,
minimum 3% per annum) 3.20% 3.10% 3.20%
CPI pension increases (maximum 3%
per annum) 1.90% 2.05% 1.95%
Proportion of employees opting for
early retirement 0% 0% 0%
Proportion of employees commuting
pension for cash 50.0% 50% 50.0%
Mortality assumption - before retirement Same as post Same as post Same as post
retirement retirement retirement
Mortality assumption - after retirement S2PMA tables S2PMA tables S2PMA tables
(males)
Loading 105% 105% 105%
Projection basis Year of birth Year of birth Year of birth
CMI_2016 1.0% CMI_2016 1.0% CMI_2016 1.0%
Mortality assumption - after retirement S2PFA tables S2PFA tables S2PFA tables
(females)
Loading 105% 105% 105%
Projection basis Year of birth Year of birth Year of birth
CMI_2016 1.0% CMI_2016 1.0% CMI_2016 1.0%
Future expected lifetime of current
pensioner at age 65:
Male aged 65 at year end 86.2 86.5 86.2
Female aged 65 at year end 88.0 88.4 88.0
Future expected lifetime of future
pensioner at age 65:
Male aged 45 at year end 87.2 87.6 87.2
Female aged 45 at year end 89.2 89.6 89.2
11. Acquisition of subsidiary
On 19 October 2017, Marshalls Mono Limited acquired 100 per cent of the issued share capital of CPM Group Limited, a precast concrete manufacturer which specialises in underground water management solutions.
Initial cash consideration paid to the vendors was GBP26,272,000 and, in addition, a further GBP12,000,000 was paid into an escrow account in relation to certain ongoing legal and regulatory matters identified during the course of due diligence carried out prior to concluding the acquisition. Provisions of GBP11,840,000 were recorded at the date of acquisition, for the estimated liabilities arising from concluding these ongoing matters. The Group has a right of reimbursement of amounts held in an escrow account to the extent that any liability crystallises in respect of these ongoing legal and regulatory matters to enable the Group to settle these liabilities, up to the full value of the GBP12,000,000 held in escrow and consequently a reimbursement asset of GBP12,000,000 was recognised within other debtors. To the extent that any liabilities arising from these ongoing legal and regulatory matters are resolved at a lower amount than the escrow balances, the excess balance remaining in escrow is payable to the vendors as additional consideration.
As required under the terms of the sale and purchase agreement, a net working capital review was undertaken in the period. Adjustments were agreed with the vendor which resulted in a reimbursement of GBP2,163,000 to Marshalls Mono Limited during the period to 30 June 2018. This amount covered both the required working capital adjustment and monies that were required to settle certain of the legal and regulatory matters which crystallised during the period.
In addition, and as part of the same review required under the terms of the sale and purchase agreement, an amount of GBP1,419,000 was paid to the vendors from the escrow account during the period.
As part of the ongoing review of the fair value of assets and liabilities acquired, adjustments were made to certain accruals and provisions during the period. These had the effect of increasing the fair value of the net assets acquired under the acquisition by GBP1,019,000, which has given rise to a reduction in goodwill of a similar amount. Goodwill, trade and other payables and provisions have been restated accordingly in the reported 31 December 2017 balance sheet.
12. Analysis of net debt
1 January Cash flow Other changes 30 June
2018 2018
GBP'000 GBP'000 GBP'000 GBP'000
Cash at bank and in hand 19,845 756 16 20,617
Debt due after 1 year (43,883) (25,443) 70 (69,256)
Finance leases (259) - (3) (262)
(24,297) (24,687) 83 (48,901)
Reconciliation of net cash flow to movement in net debt
Half year ended Year ended
June December
2018 2017 2017
GBP'000 GBP'000 GBP'000
Net increase in cash and cash equivalents 756 6,219 1,925
Cash inflow from increase in debt and lease
financing (25,443) (10,000) (24,819)
On acquisition of subsidiary undertaking - - (6,362)
Effect of exchange rate fluctuations 83 (473) (454)
Movement in net debt in the period (24,604) (4,254) (29,710)
Net (debt) / cash at the beginning of the
period (24,297) 5,413 5,413
Net (debt) / cash at the end of the period (48,901) 1,159 (24,297)
13. Borrowing facilities
The total bank borrowing facilities at 30 June 2018 amounted to GBP125.0 million (30 June 2017: GBP105.0 million; 31 December 2017: GBP115.0 million), of which GBP55.7 million (30 June 2017: GBP79.6 million; 31 December 2017: GBP71.1 million) remained unutilised.
These figures include an additional seasonal working capital facility of GBP10.0 million available between 1 February and 31 August each year.
The undrawn facilities available at 30 June 2018, in respect of which all conditions precedent had been met, were as follows:
June December
2018 2017 2017
GBP'000 GBP'000 GBP'000
Committed:
- Expiring in more than 2 years but not more
than 5 years 30,379 54,593 50,617
- Expiring in 1 year or less 365 - 5,500
Uncommitted:
- Expiring in 1 year or less 25,000 25,000 15,000
55,744 79,593 71,117
The total borrowing facilities at 16 August 2018 amounted to GBP125.0 million. On 9 August 2018, the Group renewed its short-term working capital facilities of GBP25.0 million and took out an additional committed facility of GBP20.0 million with a 2023 maturity date. The committed facilities are all revolving credit facilities with interest charged at variable rates based on LIBOR. The Group's bank facilities continue to be aligned with the current strategy to ensure that headroom against available facilities remains at appropriate levels.
The maturity profile of borrowing facilities is structured to provide balanced, committed and phased medium-term debt. Following the recent refinancing of bank facilities, the current facilities are set out as follows:
Facility Cumulative
facility
GBP'000 GBP'000
Committed facilities:
Q3: 2023 20,000 20,000
Q3: 2022 20,000 40,000
Q3: 2021 20,000 60,000
Q3: 2020 20,000 80,000
Q3: 2019 20,000 100,000
On-demand facilities:
Available all year 15,000 115,000
Seasonal (February to August inclusive) 10,000 125,000
14. Fair values of financial assets and financial liabilities
A comparison by category of the book values and fair values of the financial assets and liabilities of the Group at 30 June 2018 is shown below:
June June December
2018 2017 2017*
Book Fair Book Fair Book Fair
amount value amount value amount value
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Trade and other receivables 84,713 84,713 70,217 70,217 62,787 62,787
Cash and cash equivalents 20,617 20,617 26,862 26,862 19,845 19,845
Bank loans (69,256) (70,639) (25,407) (24,322) (43,883) (42,836)
Finance lease liabilities (262) (280) (296) (317) (259) (280)
Trade and other payables (100,260) (100,260) (81,638) (81,638) (94,758) (95,777)
Interest rate swaps,
forward contracts and
fuel hedges 654 654 (276) (276) 447 447
Financial instrument
assets and liabilities
- net (63,794) (10,538) (55,821)
Non-financial instrument
assets and liabilities
- net 308,370 233,174 293,448
244,576 222,636 237,627
* The comparatives have been restated a result of the reassessment of the Fair Value of asset and liabilities acquired (Note 11).
Estimation of fair values
The following summarises the major methods and assumptions used in estimating the fair values of financial instruments reflected in the table.
(a) Derivatives
Derivative contracts are either marked to market using listed market prices or by discounting the contractual forward price at the relevant rate and deducting the current spot rate. For interest rate swaps broker quotes are used.
(b) Interest-bearing loans and borrowings
Fair value is calculated based on the expected future principal and interest cash flows discounted at the market rate of interest at the balance sheet date.
(c) Finance lease liabilities
The fair value is estimated as the present value of future cash flows, discounted at market interest rates for homogeneous lease agreements. The estimated fair values reflect changes in interest rates.
(d) Trade and other receivables / payables
For receivables / payables with a remaining life of less than 1 year, the notional amount is deemed to reflect the fair value. All other receivables / payables are discounted to determine the fair value.
(e) Fair value hierarchy
The table below analyses financial instruments, measured at fair value, into a fair value hierarchy based on the valuation techniques used to determine fair value.
-- Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
-- Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
-- Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
Level 1 Level 2 Level 3 Total
GBP'000 GBP'000 GBP'000 GBP'000
30 June 2018
Derivative financial assets - 654 - 654
30 June 2017
Derivative financial liabilities - (276) - (276)
31 December 2017
Derivative financial assets - 447 - 447
15. Principal risks and uncertainties
The principal risks and uncertainties that could impact the Group for the remainder of the current financial year are those detailed on pages 20 to 24 of the 2017 Annual Report. These cover the strategic, financial and operational risks and have not changed during the period.
Strategic risks include those relating to general economic conditions, Government policy, the actions of customers, suppliers and competitors, and also weather conditions. Cyber risks within the wider market is also an increasing risk for the Group and an area of major focus. The Group also continues to be subject to various financial risks in relation to access to funding and to the pension scheme, principally the volatility of the discount (AA corporate bond) rate, any downturn in the performance of equities and increases in the longevity of members. The other main financial risks arising from the Group's financial instruments are liquidity risk, interest rate risk, credit risk and foreign currency risk.
External operational risks include the weather, political and economic conditions, the potential impact of Brexit, the effect of legislation or other regulatory actions, the actions of competitors, raw material prices and threats from cyber security, new business strategies, acquisitions and the integration of CPM.
The Group continues to monitor all these risks and pursue policies that take account of, and mitigate, the risks where possible.
Responsibility Statement
The Directors who held office at the date of approval of these Financial Statements confirm that to the best of their knowledge:
-- the Condensed Consolidated Half Year Financial Statements have been prepared in accordance with IAS 34 "Interim Financial Reporting" as adopted by the European Union; and
-- the Half Year Management Report includes a fair review of the information required by:
(a) DTR 4.2.7R of the Disclosure Guidance and Transparency Rules, being an indication of important events that have occurred during the half year ended 30 June 2018 and their impact on the Condensed Consolidated Half Year Financial Statements, and a description of the principal risks and uncertainties for the remaining second half of the year; and
(b) DTR 4.2.8R of the Disclosure Guidance and Transparency Rules, being related party transactions that have taken place in the half year ended 30 June 2018 and that have materially affected the financial position or performance of the entity during that period, and any changes in the related party transactions described in the last Annual Report that could do so.
The Board
The Directors serving during the half year ended 30 June 2018 were as follows:
Vanda Murray Chair of the Board (appointed 9 May 2018) Andrew Allner Chair of the Board (retired 9 May 2018) Janet Ashdown Senior Non-Executive Director Jack Clarke Group Finance Director Martyn Coffey Chief Executive Tim Pile Non-Executive Director Graham Prothero Non-Executive Director
The responsibilities of the Directors during their period of service were as set out on pages 44 and 45 of the 2017 Annual Report.
By order of the Board
Cathy Baxandall
Group Company Secretary
16 August 2018
Cautionary statement
This Half Year Report contains certain forward-looking statements with respect to the financial condition, results, operations and business of Marshalls plc. These statements and forecasts involve risk and uncertainty because they relate to events and depend upon circumstances that will occur in the future. There are a number of factors that could cause actual results or developments to differ materially from those expressed or implied by these forward-looking statements and forecasts. Nothing in this Half Year Report should be construed as a profit forecast.
Directors' liability
Neither the Company nor the Directors accept any liability to any person in relation to this Half Year Report except to the extent that such liability could arise under English law. Accordingly, any liability to a person who has demonstrated reliance on any untrue or misleading statement or omission shall be determined in accordance with Section 90A of the Financial Services and Markets Act 2000.
Independent Review Report to Marshalls plc
Introduction
We have been engaged by the Company to review the condensed set of Financial Statements in the Half Year Financial Report for the 6 months ended 30 June 2018, which comprises the Condensed Consolidated Income Statement, the Condensed Consolidated Statement of Comprehensive Income, the Condensed Consolidated Balance Sheet, the Condensed Consolidated Cash Flow Statement, the Condensed Consolidated Statement of Changes in Equity and related Notes 1 to 14. We have read the other information contained in the Half Year Financial Report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of Financial Statements.
This report is made solely to the Company in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. Our work has been undertaken so that we might state to the Company those matters we are required to state to it in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our review work, for this report, or for the conclusions we have formed.
Directors' responsibilities
The Half Year Financial Report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the Half Year Financial Report in accordance with the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.
As disclosed in Note 1, the annual Financial Statements of the Group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of Financial Statements included in this Half Year Financial Report has been prepared in accordance with International Accounting Standard 34 "Interim Financial Reporting" as adopted by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed set of Financial Statements in the Half Year Financial Report based on our review.
Scope of review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Financial Reporting Council for use in the United Kingdom. A review of Half Year Financial Information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of Financial Statements in the Half Year Financial Report for the 6 months ended 30 June 2018 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.
Deloitte LLP
Statutory Auditor
Manchester, United Kingdom
16 August 2018
Shareholder Information
Financial calendar
Half year results for the year ending Announced 16 August 2018 December 2018 Half year dividend for the year ending Payable 5 December 2018 December 2018 Results for the year ending December Announcement March 2019 2018 Report and accounts for the year ending April 2019 December 2018 Annual General Meeting May 2019 Final dividend for the year ending Payable June 2019 December 2018
Registrars
All administrative enquiries relating to shareholdings should, in the first instance, be directed to Computershare Investor Services PLC, PO Box 82, The Pavilions, Bridgwater Road, Bristol BS99 6ZZ (telephone: 0870 707 1134) and should clearly state the registered shareholder's name and address.
Dividend mandate
Any shareholder wishing dividends to be paid directly into a bank or building society should contact the Registrar for a dividend mandate form. Dividends paid in this way will be paid through the Bankers' Automated Clearing System ("BACS").
Website
The Group has a website that gives information on the Group and its products and provides details of significant Group announcements. The address is www.marshalls.co.uk.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
END
IR EAKPSFLNPEFF
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