Final Results
Marshalls PLC
07 March 2003
Embargoed until 07.00 on 7 March 2003
MARSHALLS PLC
PRELIMINARY RESULTS FOR THE YEAR TO 31 DECEMBER 2002
Marshalls plc, the specialist Landscape, Clay and Natural Stone Products Group,
today announces results for the year to 31 December 2002.
Year to 31 Year to 31 Increase
December 2002 December 2001
(£'000) (£'000) %
Turnover 342,056 328,036 4.3
Operating profit 50,329 45,333 11.0
Profit before tax 49,391 42,711 15.6
Basic earnings per share 20.05p 17.11p 17.2
Dividend per share 10.00p 9.50p 5.3
• Record sales and profits
• Basic earnings per share up 17%
• Disposal of Flooring business for £13.1m
• Strong balance sheet with gearing of 8.8% despite £40m of capital and
acquisition investment
• Graham Holden to become Chief Executive
• Dividends up 5.3% to 10.0p per share
• 2003 has started with strong customer demand
Commenting on these results, Christopher Burnett, Chairman said:
'In what was an unusual and challenging year in terms of trading conditions, it
is pleasing to have again achieved record sales and profits. Customer demand
remains strong and, as a consequence of the backlog of domestic work that has
built up during the year, the installers of our products began 2003 with healthy
order books. The commercial and public sector markets, where likewise we have
seen a backlog of work, also remain strong.
I am delighted that we are today announcing that Graham Holden is to become
Chief Executive of the Group after I step down as Executive Chairman. Graham
has significantly improved the performance of the Landscape Division. We have
also commenced the search for a new Non-Executive Chairman who, together with
Graham and the Board, will ensure that we continue to deliver superior value for
our shareholders.'
Enquiries:
Christopher Burnett Chairman Marshalls plc 0207 404 5959 on 7 March 2003
Ian Burrell Finance Director Marshalls plc 01484 438900 thereafter
Jon Coles Brunswick Group 0207 404 5959
William Cullum Brunswick Group 0207 404 5959
Chairman's Statement
Turnover in the twelve months to 31 December 2002 increased by 4.3% to £342.1
million (2001: £328.0 million). Operating profit in the period increased by 11%
to £50.3 million (2001: £45.3 million). Taking into account the £2.3 million
profit on the disposal of the Flooring business, explained later in my
statement, the Group profit before tax at £49.4 million (2001: £42.7 million)
was 15.6 per cent above 2001.
All Divisions achieved sales growth. Landscape Products increased by 2.8 per
cent, Clay Products by 2.9 per cent and Natural Stone Products, with a full year
contribution from Stancliffe Stone, by 27.6 per cent. Emerging Businesses,
including the contribution from the Flooring business sold after eleven months,
increased sales by 2.7 per cent. The remaining Emerging Businesses, increased
sales by 12.7 per cent.
It is very pleasing to me to report to you that the Board have decided that
Graham Holden (43), currently Chief Executive of the Landscape Products
Division, will become Group Chief Executive when I step down as Executive
Chairman of the Group. Graham joined Marshalls in 1986 and was appointed to the
Board in 1992 as Finance Director. He became Chief Executive of the Landscape
Products Division in November 2000 and has significantly improved the
performance of that Division since his appointment. We have already commenced
the search for a new Managing Director of Marshalls Landscape Products who will
be expected to join the Board on appointment. In addition, we have commenced
the search for a new Non-Executive Chairman who, together with Graham and the
Board, will ensure that we continue to deliver superior value for our
shareholders.
Landscape Products Division
Sales in 2002 were £254.5 million (2001: £247.6 million) an increase of 2.8 per
cent over last year despite the significant disruption to trade caused by the
special events in the summer. However, we still managed to increase operating
profit by 11.9%, to a record £38.5 million (2001: £34.4 million).
The year had three very different trading periods. It started very strongly
with sales ahead of expectations, there then followed the special events of the
summer, which dramatically reduced activity right across the industry, and
finally came a slow recovery through until September when sales returned to more
normal levels.
The significant capital investment programme undertaken over the past few years
has enabled us to deliver record operating profits. This is not only producing
greater manufacturing efficiency, but also, as all Service Centres now have the
appropriate plant, we are able to deliver our full range of products to every
region of the country at lower cost.
The other aspect of our strategy, investment in marketing both to the domestic
and commercial sectors, did not produce all the potential benefits in 2002
because of the unusual trading conditions. Nevertheless, the business will gain
this year from new products and the continued development of the Marshalls
Register of approved driveway and patio installers, and investment in focused
advertising directed at our various target customer groups. All three elements
of the marketing strategy will again be taken to new levels during 2003.
Divisional Outlook
Our market research continues to confirm strong consumer interest in driveway,
garden and patio products to enhance the home environment. Consumers also
recognise that investment in this area improves the value of their property, and
can easily be financed.
In 2003 we plan to use television advertising for the first time through
sponsoring lunchtime gardening programmes on UK Style, the satellite channel.
To link with this we are also extending our offer to consumers, through members
of the Marshalls Register, to include a finance package that will make it easier
for them to meet the cost of installation.
New products already launched and directed specifically at the commercial and
public sector markets, put us in a strong position to also win a share of
announced Government spending projects. These are continuing to forecast that
construction sector growth will be ahead of the wider economy which should
compensate for any possible weakness in consumer spending.
While it is not within our power to influence economic conditions we can improve
the performance of our own business and will continue to work to that effect
during 2003.
Clay Products Division
The 2.9 per cent increase in sales to £30.3 million (2001: £29.4 million) should
be seen in the context of a half per cent rise in Industry volumes for the year,
despite the improved level of activity in the construction sector.
We saw most growth from products sold to builders merchants through the
Landscape Products Division's Service Centres. This facility allows merchants
to purchase smaller quantities of Clay products for immediate delivery when
ordering other landscape products.
While market conditions are not easy, the restructuring already undertaken by
other companies in the Industry, including capacity reduction, has resulted in a
better trading environment. This has also been helped by falling Industry
stocks.
Operating profit at £4.4 million (2001: £4.5 million) is after charging
redundancy costs and writing down certain stocks as part of a stock cleansing
programme.
We have told shareholders previously of our continuing drive to lower the cost
base of the business and find more operating efficiencies. There still remains
much to be done in this area. We are as determined as ever to deliver this
value to shareholders.
Divisional Outlook
The outlook for the brick market is probably better than it has been for some
time. With the private house building market remaining active, and the
Government's intention to increase significantly the provision of low cost
public housing, there are encouraging signs for future demand. Other public
sector projects, particularly new schools and hospitals, together with increased
spending by local authorities on repair and maintenance, should also create more
demand for bricks.
Natural Stone Division
The Natural Stone Division supplies a diverse range of products, principally for
commercial and public sector projects. Besides Yorkstone products from our own
quarries the range includes aggregates and imported granite and sandstone. This
is the first year in which we have disclosed the results of this business which
now merits Divisional status. Sales, amounted to £25.0 million (2001: £19.6
million) an increase of 27.6 per cent, including a full year's contribution from
Stancliffe Stone, acquired in June 2001. Organic growth in sales was 14.0 per
cent. Operating profit, after reorganisation costs and goodwill amortisation,
increased by 31.1 per cent to £3.3 million (2001: £2.5 million). Organic
growth in operating profit was 10.6 per cent.
Over the past 2 years, significant investment in new plant and technology has
been made to enhance the Division's productivity. The benefits of this policy
are showing through in the results. More investment will take place in 2003.
The Division's diverse portfolio of stone products is appreciated by leading
Architectural practices working on prestigious schemes, particularly in London
and the South East. Recent projects include Somerset House, The Royal Opera
House and currently Trafalgar Square.
Divisional Outlook
The Management structure of the Division has been strengthened to take advantage
of the many opportunities that exist in the marketplace. With a healthy order
book, the prospects for further growth are encouraging. 2003 will also see a
full year contribution from a small but profitable sand and gravel business
acquired in December 2002.
Emerging Businesses Division
Sales in the Division amounted to £32.3 million (2001: £31.5 million), an
increase of 2.7 per cent. Following the disposal of the Flooring business in
November 2002, the Division now consists of three businesses: Drainage
Products, Street Furniture, and Classical Flagstones. The sales of these
remaining businesses, on a like for like basis, increased by 12.7 per cent.
Operating profits at £4.1 million (2001: £3.9 million) increased by 6.1%.
The reason for the sale of our Flooring business is that we did not see the
prospect of Marshalls establishing a major market presence in this sector. It
remains the strategy of the Division that we either grow the individual
businesses organically, or by acquisition, to create a significant presence in
their sector, or we dispose of them. The prospects for the remaining businesses
are good as the growth in sales would suggest.
Drainage Products
The business supplies linear drainage for use in road building as well as for
commercial and domestic landscaping schemes. Until this year it has been a
split site business with some activity on the same site as our Flooring
business. Encouraged by the prospect of selling that business, drainage
products have now been consolidated on one site. Despite this disruption, the
business managed to increase sales by 20.9 per cent in the year.
Street Furniture
The Street Furniture business consists of our own manufactured concrete products
and metal telescopic bollards, supplemented by a wide range of factored
products. This year saw sales improve by a very encouraging 16.6 per cent. The
management of this business has also been strengthened recently. As a result
more attention will be given in future to working closely with the rest of the
Group on enquiries for projects where our other products are also likely to be
specified.
Classical Flagstones
The aspirational ranges of high quality flagstones produced by this business are
sold mainly to the domestic market for internal flooring in hallways and
kitchens. During the year we encountered difficulties with our production
facilities that took some time to resolve. As a consequence we were required to
delay fulfilling orders until these problems were corrected. Sales were
therefore more than 26 per cent below last year. The business is now back to
normal production levels.
Divisional Outlook
The improvements we have made across the Division during 2002 in terms of sales
and production and also in strengthening the management teams give every reason
to believe that the Division will deliver further significant growth in 2003.
We are also actively seeking acquisitions to increase the size and market share
of each business.
Balance Sheet
The Group balance sheet remains exceptionally strong. The net borrowings at the
year end of £17.9 million (2001: £12.9 million) represents gearing of 8.8 per
cent (2001: 6.9 per cent). This position has been affected by a combination of
our continuing capital investment programme, an acquisition and higher stock
levels which have been partially offset by the cash inflow from the disposal of
our Flooring business. Cash inflow from operating activities amounted to £54.6
million (2001: £70.7 million). The main change from 2001 relates to an increase
in stock levels of £8.6 million. The higher stock levels are predominantly in
the Landscape Products Division and related to the special events in the summer
and the slower recovery in the third quarter. Only in September did sales
return to more normal levels and stock levels start to reduce. Initiatives have
been established to reduce stock to target levels in 2003.
Investment and Disposals
The Group continued to invest significantly in its capital expenditure programme
spending £36.5 million (2001: £31.3 million). In addition in December 2002 a
small sand and gravel business was acquired for £4.75 million.
On 29 November 2002 the Group disposed of its Flooring business, which
manufactures pre-cast concrete flooring, to Hanson Building Products, part of
Hanson PLC for cash proceeds of £13.1 million and commenced the closure of a
related business on the same manufacturing site. The gain on disposal and
termination of business of £2.3 million is disclosed net of goodwill of £1.5
million previously eliminated against reserves.
Dividend
The Board has decided to recommend a final dividend of 6.70p (2001: 6.35p) per
ordinary share making a total of 10.00p (2001: 9.50p) for the year, an increase
of 5.3 per cent compared with 2001. The dividend will be paid on 7 July 2003 to
Shareholders on the Register on 6 June 2003. The ex-dividend date will be 4
June 2003.
Outlook
We enter the new financial year with installers having good domestic order
books. Whilst general economic conditions are expected to be more difficult in
2003, the prospects for the UK construction industry should still remain good in
view of public sector spending plans. With this in mind, and the developments
we have in place for all our Divisions, we are looking forward to another
successful year.
MARSHALLS PLC
PRELIMINARY ANNOUNCEMENT OF RESULTS
AUDITED CONSOLIDATED PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 31 DECEMBER 2002
Notes 2002 2001
£'000 £'000
(As
restated)
Turnover 1 342,056 328,036
Operating costs 1 (291,727) (282,703)
Operating profit 1 50,329 45,333
Gain on disposals of property 1 - 321
Gain on disposal and termination of business 1 2,255 -
Profit on ordinary activities before interest 52,584 45,654
Interest (net) (3,193) (2,943)
Profit on ordinary activities before taxation 1 49,391 42,711
Taxation on profit on ordinary activities 2 (15,750) (14,003)
Profit for the financial year 33,641 28,708
Preference dividends: non equity shares 3 (137) (174)
Profit attributable to ordinary shareholders 33,504 28,534
Ordinary dividends: equity shares 4 (16,737) (15,846)
Retained profit for the financial year 16,767 12,688
Earnings per share :
Basic 5 20.05p 17.11p
Diluted 5 20.02p 17.10p
Adjusted Basic 5 19.41p 17.58p
Dividend per share 4 10.00p 9.50p
The comparatives have been restated for the effect of FRS19 'Deferred Tax'.
MARSHALLS PLC
PRELIMINARY ANNOUNCEMENT OF RESULTS
AUDITED CONSOLIDATED BALANCE SHEET
AS AT 31 DECEMBER 2002
Notes 2002 2001
£'000 £'000
(As
restated)
Fixed assets
Intangible 24,113 21,316
Tangible 184,699 169,902
208,812 191,218
Current assets
Stocks 62,978 54,387
Debtors 30,997 31,517
Cash at bank and in hand 7,307 14,655
101,282 100,559
Creditors: Amounts falling due within one year (67,493) (66,215)
Net current assets 33,789 34,344
Total assets less current liabilities 242,601 225,562
Creditors: Amounts falling due after more than one (20,003) (20,007)
year
Provisions for liabilities and charges (19,852) (18,843)
Net assets 1 202,746 186,712
Capital and reserves
Called up share capital 42,007 43,006
Share premium account 17,726 18,910
Revaluation reserve 5,166 5,166
Other reserves 14,352 14,352
Profit and loss account 123,495 105,278
Shareholders' funds 202,746 186,712
Analysis of shareholders' funds
Equity 201,638 184,589
Non Equity 1,108 2,123
202,746 186,712
The comparatives have been restated for the effect of FRS19 'Deferred Tax'.
MARSHALLS PLC
PRELIMINARY ANNOUNCEMENT OF RESULTS
AUDITED CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2002
Notes 2002 2001
£'000 £'000
Cash inflow from operating activities 6 54,608 70,677
Returns on investments and servicing of finance (3,407) (4,118)
Taxation (13,301) (13,172)
Capital expenditure (33,832) (30,607)
Acquisitions and disposals 9,210 (5,696)
Equity dividends paid (16,128) (15,239)
Cash (outflow)/inflow before financing (2,850) 1,845
Financing (4,498) 281
(Decrease)/increase in cash in the year (7,348) 2,126
Reconciliation of net cash flow to movement in net debt
(Decrease)/increase in cash in the year (7,348) 2,126
Cash outflow from decrease in debt and lease financing 2,315 262
Change in net debt resulting from cashflows (5,033) 2,388
Loans issued on acquisition of businesses - (6,408)
Movement in net debt in the year (5,033) (4,020)
Net debt at beginning of year (12,862) (8,842)
Net debt at end of year (17,895) (12,862)
Net gearing 8.8% 6.9%
MARSHALLS PLC
PRELIMINARY ANNOUNCEMENT OF RESULTS
AUDITED CONSOLIDATED PRIMARY STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2002
Consolidated Statement of Total Recognised Gains and Losses
Notes 2002 2001
£'000 £'000
(As
restated)
Profit for the financial year 33,641 28,708
Total recognised gains for the year 33,641 28,708
Prior year adjustment 8 (18,843)
Total recognised gains since last annual report 14,798
Consolidated Reconciliation of Movements in Shareholders' Funds
2002 2001
£'000 £'000
(As
restated)
Profit for the financial year 33,641 28,708
Dividends (preference and ordinary) (16,874) (16,020)
Retained profit for the financial year 16,767 12,688
New share capital issued 143 552
Repayment and cancellation of 10% Cumulative Preference Shares (2,274) -
Costs associated with share cancellation (52) -
Write off on issue of shares to QUEST - (9)
Goodwill previously eliminated against reserves 1,450 -
Net additions to shareholders' funds 16,034 13,231
Shareholders' funds at beginning of year 186,712 173,481
(originally £205,555,000 restated for prior year adjustment of
£18,843,000)
Shareholders' funds at end of year 202,746 186,712
The comparatives have been restated for the effect of FRS19 'Deferred Tax'.
Consolidated Historical Cost Profits and Losses
There is no material difference between historical cost profits and those
reported in the profit and loss account.
MARSHALLS PLC
PRELIMINARY ANNOUNCEMENT OF RESULTS
AUDITED CONSOLIDATED NOTES
FOR THE YEAR ENDED 31 DECEMBER 2002
1 Segmental analysis
Turnover Operating profit
2002 2001 2002 2001
£'000 £'000 £'000 £'000
Landscape 254,515 247,585 38,530 34,441
Clay 30,252 29,401 4,372 4,482
Natural Stone 24,958 19,567 3,282 2,503
Emerging Businesses 32,331 31,483 4,145 3,907
342,056 328,036 50,329 45,333
Gain on disposals of property - 321
Gain on disposal and termination of business 2,255 -
Interest (net) (3,193) (2,943)
Profit on ordinary activities before 49,391 42,711
taxation
The gain on disposal and termination of business relates to the sale of the
Group's Flooring business on 29 November 2002 for gross cash proceeds of £13.1
million and the closure of a related business on the same manufacturing site.
The gain on disposal of £2,255,000 is disclosed net of goodwill of £1,450,000
previously eliminated against reserves. No tax is payable on the gain due to
the utilisation of capital losses.
Net Assets
2002 2001
£'000 £'000
(As
restated)
Landscape 171,437 142,248
Clay 40,780 43,910
Natural Stone 28,120 25,094
Emerging Businesses 10,076 15,083
250,413 226,335
Unallocated net liabilities (47,667) (39,623)
202,746 186,712
Unallocated net liabilities comprise non-operating assets and liabilities of a
financing nature, principally net borrowings, corporation tax, deferred tax and
dividends payable.
2002 2001
£'000 £'000
Geographical destination of sales:
United Kingdom 337,101 322,846
Rest of the world 4,955 5,190
342,056 328,036
All turnover originates in the United Kingdom from continuing operations and
there is no material inter-segmental turnover.
MARSHALLS PLC
PRELIMINARY ANNOUNCEMENT OF RESULTS
AUDITED CONSOLIDATED NOTES
FOR THE YEAR ENDED 31 DECEMBER 2002
2 Taxation on profit on ordinary activities
2002 2001
£'000 £'000
(As
restated)
United Kingdom corporation tax at 30% (2001: 30.00%) 14,772 12,500
Deferred taxation 978 1,503
15,750 14,003
3 Preference dividends: non equity shares
2002 2001
per share £'000 per share £'000
Cumulative redeemable preference shares of 20p each 6.50p 73 6.50p 73
10% cumulative preference shares of £1 each 64 101
137 174
On 20 June 2002, the Company repaid the 10% cumulative preference shares and
they were subsequently cancelled.
4 Ordinary dividends: equity shares
2002 2001
per share £'000 per share £'000
Interim: paid 2 December 2002 3.30p 5,523 3.15p 5,246
Final: proposed 6.70p 11,214 6.35p 10,600
10.00p 16,737 9.50p 15,846
MARSHALLS PLC
PRELIMINARY ANNOUNCEMENT OF RESULTS
AUDITED CONSOLIDATED NOTES
FOR THE YEAR ENDED 31 DECEMBER 2002
5 Earnings per share
2002 2001
£'000 £'000
(As restated)
Profit for the financial year attributable to ordinary shareholders 33,504 28,534
Profit for the financial year attributable to ordinary shares and potentially 33,504 28,534
ordinary dilutive shares
Adjusted basic earnings per share reconciliation:
Profit for the financial year 33,504 28,534
Goodwill amortisation 1,190 1,024
Gain on disposals of property - (321)
Gain on disposal and termination of (2,255) -
business
Taxation - 94
32,439 29,331
Weighted average number of shares 167,130,230 166,804,445
Weighted average number of shares 167,130,230 166,804,445
Dilutive shares 247,797 45,244
167,378,027 166,849,689
Basic earnings per share 20.05p 17.11p
Diluted earnings per share 20.02p 17.10p
Adjusted basic earnings per share 19.41p 17.58p
Basic earnings per share is calculated by dividing the profit attributable to
ordinary shareholders of £33,504,000 (2001: £28,534,000) by the weighted average
number of shares in issue during the year of 167,130,230 (2001: 166,804,445).
Diluted earnings per share is calculated by dividing profit attributable to
ordinary shares and potentially ordinary dilutive shares of £33,504,000 (2001:
£28,534,000) by the weighted average number of shares in issue during the year
of 167,130,230 (2001: 166,804,445), plus dilutive shares of 247,797 (2001:
45,244) which totals 167,378,027 (2001: 166,849,689).
An adjusted basic earnings per share has been prepared in order to show the
underlying performance of the business. The adjusted basic earnings per share
is adjusted for goodwill amortisation, gain on disposals of property, the gain
on disposal and termination of business and the associated taxation. The
comparative adjusted basic earnings per share has been restated to ensure
comparability with the current year. In the year ended 31 December 2002,
reorganisation costs of £2.0 million have not been disclosed as exceptional and
consequently the adjusted basic earnings per share for the year ended 31
December 2001, as disclosed above, makes no adjustment for exceptional items.
MARSHALLS PLC
PRELIMINARY ANNOUNCEMENT OF RESULTS
AUDITED CONSOLIDATED NOTES
FOR THE YEAR ENDED 31 DECEMBER 2002
6 Reconciliation of operating profit to cash inflow from operating activities
2002 2001
£'000 £'000
Operating profit 50,329 45,333
Amortisation charges 1,190 1,024
Depreciation charges 15,848 14,616
(Profit)/loss on sale of tangible fixed assets (66) 301
(Increase)/decrease in stocks (9,721) 3,663
(Increase)/decrease in debtors (964) 4,276
(Decrease)/increase in creditors (2,008) 1,464
Cash inflow from operating activities 54,608 70,677
7 Annual General Meeting
The Annual General Meeting will be held at Birkby Grange, Birkby Hall Road,
Birkby, Huddersfield, West Yorkshire, HD2 2YA at 12.00 (noon) on Wednesday 28
May 2003. The Annual Report will be posted on 16 April 2003.
8 Other
The audited consolidated figures have been prepared on the basis of the
accounting policies set out in the 2001 financial statements modified for the
adoption of FRS19 'Deferred Tax'. The comparatives have been restated and the
changes have been dealt with as a prior year adjustment. The impact of these
changes on the profit for the period ended 31 December 2002 and 31 December 2001
is to increase the tax charge by £978,000 and £1,503,000 respectively. The
impact of these changes on the balance sheet at 31 December 2002 and 31 December
2001 is to reduce shareholders' funds by £19,852,000 and £18,843,000
respectively.
The above financial information does not constitute statutory accounts for the
year ended 31 December 2002 or for the year ended 31 December 2001 but is
derived from those financial statements. Statutory accounts for the year ended
31 December 2001 have been delivered to the Registrar of Companies. The auditors
have reported on the year ended 31 December 2001 financial statements and their
report was unqualified and did not contain a statement under section 237(2) or
(3) of the Companies Act 1985. The statutory accounts for the year ended 31
December 2002 will be delivered to the Registrar of Companies following the
Company's Annual General Meeting.
This information is provided by RNS
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