Interim Management Statement

RNS Number : 0343I

Marshalls PLC

13 November 2008

 



Interim Management Statement: 13 November 2008

Continuing emphasis on cash management, cost reduction and sales opportunities

Trading Performance

Marshalls' Group revenue for the ten months ended 31 October 2008 was down 3.5 per cent at £339 million (2007: £351 million). Sales to the Public Sector and Commercial market, which represent approximately 58 per cent of Marshalls' sales, were 4 per cent ahead of 2007 and sales to the Domestic market were down 13 per cent.  

Like for like revenue for the four months to 31 October 2008 was down 9.7 per cent at £128 million (2007: £141 million). This reduction is the result of a number of factors including the poor summer weather, tighter control of working capital by the distributors of our products and weaker demand in a number of our markets, particularly from mid September onwards. Sales to the Public Sector and Commercial market in the four months to 31 October 2008 were 5 per cent below 2007 and sales to the Domestic market were down 15 per cent. 

Current Priorities

In an increasingly uncertain market we are focussing our sales effort on market sectors where activity is robust, accelerating cost reduction initiatives and conserving cash to retain financial flexibility through reduced capital expenditure and control of working capital. Selectively, we are continuing to invest in innovation to reduce our operating costs and further extend our competitive advantage through new product development and service solutions.

Cash Management and Cost Reduction

In July we announced the proposed closure of the concrete manufacturing operations at Cannock and Sawley. This will enable us to realise the productivity gains from our investments in automation over recent years, reduce our fixed cost base, reduce stock volumes and release cash, whilst continuing to provide national geographical coverage which is a key competitive advantage. These changes are largely complete and to date £4 million of cash has been released from stock at Cannock and Sawley. 

Further capacity reductions have been made in a number of our operations to reflect the weakening demand outlook and to manage the volumes of stocks held during the normal stock build period through to the year end. There has also been a commensurate reduction in overheads.  

Balance Sheet and Cashflow

Marshalls' balance sheet remains strong and the Group is well invested. 

In our half-yearly statement we reported that the Group had renewed and increased its bank facilities. The total peak facilities, including the £20 million Debenture, are £206 million. The maturity profile is structured to provide balanced, committed and phased medium term debt and is set out in the following table.  

Expiry Date	Facility	Cumulative Facility
	£m	£m
Committed facilities
Q2 2014 (Debenture)	20	20
Q4 2012	50	70
Q3 2011	48	118
Q3 2010	20	138
Q3 2009	23	161
On demand facilities
Available all year	25	186
Seasonal (February to August inclusive)	20	206

At 30 June 2008 net debt was £97.9 million (2007: £73.5 million) with gearing of 48.1 per cent (2007: 36.8 per cent) and interest covered 6.6 times (2007: 9.8 times). Since that date we have completed the acquisition of a further natural stone paving and walling business in South Wales for a total consideration of £5 million and made an investment in a further Cotswold Limestone business taking our acquisition and investment for the year to £7 million. In addition we have invested £5 million in organic growth capital investment projects in the year. The acquisition, investment and organic growth capital expenditure, made to achieve long term benefits, will increase borrowings at the end of 2008.

We have invested significantly over the past few years in both productivity improvements and acquisitions and this will now enable us to reduce capital expenditure which will improve net cash generation in the future. We anticipate replacement capital expenditure in 2009 to be substantially below the 2008 level. 

Dividend 

A maintained interim dividend of 4.55 pence (2007: 4.55 pence) per share will be paid on 3 December 2008. This will take the total dividend paid in the year to 13.85 pence (2007: 13.40 pence) per share. A decision on the level of the final dividend for 2008 will be made in March 2009. This will take into account cash generation, the strength of the balance sheet and the medium term outlook for the business at that time. 

Outlook

Following the events of the past two months the overall demand outlook has deteriorated in a number of our markets. Based on contract awarded data, the outlook for 2009 in the Public Sector remains positive but there are signs of weakening demand in the Commercial and Industrial markets with projects being delayed or cancelled. 

In the Domestic market, installer order books at the end of September 2008 were as expected at 7.5 weeks (June 2008: 8.2 weeks). Since then we have completed a further survey at the end of October 2008, which reflects more recent events, and this shows installer order books have fallen to 6.4 weeks (October 2007: 9.9 weeks).

We maintain a strong emphasis on cash management, cost reduction and sales opportunities, particularly in areas that remain robust. Our market leading position, the strength of our brand, our efficient manufacturing and sourcing, our comprehensive distribution network and our decisive actions to focus on cost reduction and cash management will maximise our short term performance in an uncertain market without prejudicing our longer term prospects.

13 November 2008

Enquiries:

Graham Holden	Chief Executive	Marshalls plc	01484 438900
Ian Burrell	Finance Director	Marshalls plc
Jon Coles		Brunswick Group LLP	0207 404 5959
Kate Miller		Brunswick Group LLP

Note to the Editor:

About Marshalls:

Established in the late 1880s, Marshalls is the UK's leading manufacturer of superior natural stone and innovative concrete hard landscaping products, supplying the construction, home improvement and landscape markets. Marshalls provides the product ranges, design services, technical expertise, innovative ideas and inspiration to transform gardens, drives and public and commercial landscapes.

The Group operates its own quarries and manufacturing sites throughout the UK, including 10 regional service centres and 2 National manufacturing and distribution sites. As a major plc, Marshalls is committed to quality in everything it does, including environmental and ethical best practice and continual improvement in health and safety performance.

Forward-Looking Statements:

Any statements in this release, to the extent that they are forward-looking, are subject to risk factors associated with, amongst other things, the economic and business circumstances occurring from time to time in the markets in which the Group operates. It is believed that the expectations reflected in these statements are reasonable but they may be affected by a wide range of variables which could cause actual results to differ materially from those currently anticipated. More information about the factors that may affect the Group's performance is contained in the Annual Report to shareholders for the year ended 31 December 2007.

 

END

 

 

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