Interim Results

MARSHALLS PLC 31 August 1999 Interim results for the half year to 30 June 1999 Marshalls Plc, the specialist landscaping and paving products group, announces results for the 6 months to 30 June 1999. 6 months to 6 months to Increase 30 June 99 30 June 98 Turnover (continuing £147.1m £132.2m 11 per cent ops) Operating Profit £24.2m £19.8m 22 per cent (continuing ops) Profit before tax £23.0m £19.0m 21 per cent Earnings per share 11.35p 8.98p 26 per cent (basic) Earnings per share 9.66p 7.78p 24 per cent (diluted) Dividend per share 2.67p 2.33p 15 per cent * Record profits before tax * Stonemarket business fully integrated and performing above expectations * Considerable profit improvement opportunities identified in the Clay Division * New marketing initiative and enhanced distribution arrangement Commenting on the results, Christopher Burnett, Chairman said: 'These are excellent results and reflect the considerable improvements we are making to the quality of the Marshalls business. Currently trading is good and we look forward to the future with confidence.' Enquires: Christopher Burnett, Chairman Marshalls Plc Philip Marshall, Chief Executive 0171 404 5959 today Graham Holden, Finance Director 01422 306 400 thereafter Jon Coles Brunswick 0171 404 5959 James Garthwaite Patrick Meyer CHAIRMAN'S STATEMENT The Group made a profit before tax of £23m in the six months to 30 June 1999, an increase of 21 per cent over the same period last year. Diluted earnings per share are 24 per cent ahead. It is particularly pleasing and reflects the progress we are making, that this profit is more than our total profit in the 1997 financial year, even after adding back the goodwill write-off we took in that year following the sale of our business in the United States. The Board have decided to declare an interim dividend of 2.67p per Ordinary Share compared with 2.33p last year, an increase of 15 per cent. This is in line with our dividend policy to increase the dividend during the next two years so that both classes of shareholders are treated on a par by the time the 6.5p Convertible Cumulative Preference Shares convert in October 2000. The dividend will be paid on 1 December 1999 to shareholders on the register on 24 September 1999. LANDSCAPE PRODUCTS DIVISION The Division achieved an operating profit of £19.1m, an increase of 29 per cent over 1998, on sales of £ 115.7m, an improvement of 12 per cent. The domestic side of our business experienced good trading conditions with further advances being made in the proportion of value added products in our product portfolio. The commercial market was less buoyant in line with the rest of the industry, though enquiry levels remain very encouraging. We have announced a reorganisation of the Division whereby over the next eighteen months we will be moving from a classical functional organisation to regional profit centres with devolved responsibility for manufacturing, sales and distribution in each region. Also, products that have previously only been available to customers by way of national distribution, mainly from Halifax, will be stocked at our regional depots and be available for rapid delivery. We have pioneered this concept in Scotland over the past two years with great success, and the prospect of repeating it throughout the country is very exciting, both in terms of customer service and our enhanced competitive position. The second major move we are announcing with these results is a major marketing initiative to increase the sale of our domestic patio, garden and driveway products. This will involve a national advertising campaign promoting Marshalls products and backing up a scheme we are launching to bring together via our builders merchant customers, consumers and approved product layers to give the homeowner quality assurance. We see this as a significant move to increase the use of our products in the domestic market. We have benefited this half year from a sizeable profit contribution from Stonemarket, the business we acquired in September last year. Stonemarket has experienced strong demand for its products and with the help we have provided it has increased its production. There is no doubt that Stonemarket is turning out to be an excellent acquisition and we have clear plans for developing the business. CLAY DIVISION The Clay Division profit of £2.4m, was an increase of 15 per cent over the same six months last year. This was achieved on turnover of £15.2m, slightly below 1998. The UK brick market volume was down 2.8 per cent in the same period. In March when we announced last year's Group results we did say that we were carrying out a major review of the Division because, while we believed it fitted strategically with the Group, we were not satisfied with its performance. This concern was reinforced by work we had carried out by consultants to benchmark the business against similar sized competitors. The review has now been completed. We have identified many ways in which to improve the profits we earn from this business. The changes we will be making involve both internal improvements and adjustments to our trading policies. Work on these changes has already begun and we expect to show significantly improved results in terms of the profit we earn in the year 2000. EMERGING BUSINESSES DIVISION One of the other changes we have made to the way in which we manage the Group has been to bring together all the smaller but still important Group businesses like natural stone, flooring products, drainage products etc, into a new Division which we call the Emerging Businesses Division. The change has given these smaller businesses individual focus and attention so we can decide on their future and how we can help them grow. The Division is also a natural home for small acquisitions we may make where we see an opportunity to grow them into significant profit contributors. We are not publishing half year trading results for this new Division, with comparative figures for the first six months of last year. However, to give shareholders a feel for the combined importance of these activities, the turnover for the six months was £16.2m and the profit contribution before interest £2.6m. BOARD APPOINTMENT I am pleased to confirm the appointment of Dick Barfield (52) as an additional Non-executive Director on 15 May 1999. Until 1996 he was Chief Investment Manager at Standard Life, Edinburgh, a position he had held for eight years. Currently he is a Director of Equitas and Chairman of its Investment Committee, a Director of New Look plc, Quintain Estates & Development plc, Apax Partners & Co. Asset Management, Baillie Gifford Japan Trust plc and The Merchants Trust plc. OUTLOOK The second half has begun well and we are therefore confident of a good result for the full year. Each Division has very clear objectives and plans that it has to deliver in both the short and medium term. The results we are achieving are a direct reflection of the commitment and hard work of our directors, managers and employees throughout the Group, and on behalf of shareholders I thank them for their excellent efforts. CHRISTOPHER BURNETT CHAIRMAN 31 August 1999 MARSHALLS PLC PRELIMINARY ANNOUNCEMENT OF RESULTS UNAUDITED FIGURES FOR THE HALF YEAR ENDED 30 JUNE 1999 Unaudited Audited Half year ended Year ended June December 1999 1998 1998 Notes £'000 £'000 Turnover Continuing operations 147,125 132,229 252,308 Discontinued operations - 1,627 1,627 ________ ________ ________ 1 147,125 133,856 253,935 ________ ________ ________ Operating profit ________ ________ ________ Continuing operations 24,166 19,759 34,825 Discontinued operations - (135) (135) ________ ________ ________ Profit on ordinary activities before interest 1 24,166 19,624 34,690 Interest - net 1,144 597 1,145 ________ ________ ________ Profit on ordinary activities before taxation 23,022 19,027 33,545 Taxation on profit on ordinary activities 6,900 5,700 9,798 ________ ________ ________ Profit for the period 16,122 13,327 23,747 Preference dividends - non equity shares 1,883 2,100 4,090 ________ ________ ________ Profit attributable to ordinary shareholders 14,239 11,227 19,657 ________ ________ ________ Earnings per share: Basic 3 11.35p 8.98p 15.70p Diluted 3 9.66p 7.78p 14.07p ________ ________ ________ Dividends declared Pence per share 2.67p 2.33p 7.00p Cost (£'000) 3,350 2,916 8,774 _______ _______ ________ MARSHALLS PLC PRELIMINARY ANNOUNCEMENT OF RESULTS UNAUDITED CONSOLIDATED BALANCE SHEET AS AT 30 JUNE 1999 Unaudited Audited Half year ended Year ended June December Notes 1999 1998 1998 £'000 £'000 £'000 Fixed assets Intangible 10,991 - 11,276 Tangible 135,546 125,978 133,639 ________ ________ ________ 146,537 125,978 144,915 Current assets Stocks 37,959 38,023 40,737 Debtors 64,379 54,261 29,888 Cash at bank and in hand 12,613 27,798 14,228 ________ ________ ________ 114,951 120,082 84,853 Creditors due within one year 67,734 58,649 49,344 ________ ________ ________ Net current assets 47,217 61,433 35,509 ________ ________ ________ Total assets less current liabilities 193,754 187,411 180,424 Creditors due after more ,20,294 than one year 22,733 23,309 ________ ________ ________ Net assets 2 171,021 164,102 160,130 ________ ________ ________ Capital and reserves Called up share capital 43,651 44,911 43,645 Share premium 14,585 14,551 14,567 Revaluation reserve 5,166 5,166 5,166 Other reserves 10,274 9,013 10,274 Profit and loss account 97,345 90,461 86,478 ________ ________ ________ Shareholders' funds 171,021 164,102 160,130 _________ __________ __________ Analysis of shareholders' funds Equity 113,640 100,046 102,749 ________ ________ ________ Non equity 57,381 64,056 57,381 ________ ________ ________ 171,021 164,102 160,130 ________ ________ ________ Net (borrowings)/funds (7,835) 7,027 (6,331) Net gearing 4.6 per (4.3) per 4.0 per cent cent cent ________ ________ ________ MARSHALLS PLC PRELIMINARY ANNOUNCEMENT OF RESULTS UNAUDITED CASH FLOW FOR THE HALF YEAR ENDED 30 JUNE 1999 Unaudited Audited Half year ended Year ended June December 1999 1998 1998 Notes £'000 £'000 £'000 Cash flow from operating activities 4 13,182 5,374 39,671 Returns on investments and servicing of finance (3,048) (2,690) (5,354) Taxation (1,299) (3,997) (9,981) Capital expenditure (10,339) (10,274) (20,041) Acquisitions and disposals - 15,238 (1,418) Equity dividends paid - (1,767) (7,812) ________ ________ ________ Cash (outflow)/inflow before use of liquid resources and financing (1,504) 1,884 (4,935) Management of liquid resources 7,300 8,550 22,500 Financing (111) (10,997) (17,748) ________ ________ ________ Increase/(decrease) in cash in the period 5,685 (563) (183) ________ ________ ________ Reconciliation of net cash flow to movement in net debt Increase/(decrease) in cash in the period 5,685 (563) (183) Cash outflow from decrease in debt and lease financing 134 11,049 11,270 Cash inflow from decrease in liquid resources (7,300) (8,550) (22,500) ________ ________ ________ Change in net debt resulting from cash flows (1,481) 1,936 (11,413) Translation differences (23) (14) (23) ________ ________ ________ Movement in net debt in the period (1,504) 1,922 (11,436) Net (debt)/funds at beginning of period (6,331) 5,105 5,105 ________ ________ ________ Net (debt)/funds at end of period (7,835) 7,027 (6,331) ________ ________ ________ MARSHALLS PLC PRELIMINARY ANNOUNCEMENT OF RESULTS UNAUDITED FIGURES FOR THE HALF YEAR ENDED 30 JUNE 1999 Unaudited Audited Half year ended Year ended June December 1999 1998 1998 Notes £'000 £'000 £'000 Consolidated statement of total recognised gains and losses Profit for the period 16,122 13,327 23,747 Exchange differences on foreign currency net investments (23) 99 89 ________ ________ ________ Total recognised gains and losses 16,099 13,426 23,836 ________ ________ ________ Reconciliation of movements in consolidated shareholders' funds Profit for the period 16,122 13,327 23,747 Dividends (5,232) (5,023) (12,874) Other recognised gains and losses (23) (99) 89 New share capital issued 24 161 63 Scrip dividend - - 108 Share capital redeemed - - (6,541) Goodwill - 2,436 2,436 ________ ________ ________ Net addition to shareholders' funds 10,891 11,000 7,028 Shareholders' funds at beginning of period 160,130 153,102 153,102 ________ ________ ________ Shareholders' funds at end 171,021 164,102 160,130 of period ________ ________ ________ MARSHALLS PLC PRELIMINARY ANNOUNCEMENT OF RESULTS UNAUDITED FIGURES FOR THE HALF YEAR ENDED 30 JUNE 1999 Unaudited Audited Half year ended Year ended June December Notes 1999 1998 1998 £'000 £'000 £'000 1. Analysis of turnover and operating profit (a) Turnover Continuing Concrete and stone 131,972 116,785 223,126 Clay 15,153 15,444 29,182 ________ ________ ________ 147,125 132,229 252,308 Discontinued Concrete USA - 1,627 1,627 ________ ________ ________ 147,125 133,856 253,935 ________ ________ ________ (b) Operating Profit Continuing Concrete and Stone 21,776 17,681 31,270 Clay 2,390 2,078 3,512 Property & Landfill - - 43 ________ ________ ________ 24,166 19,759 34,825 Discontinued Concrete USA - (135) (135) ________ ________ ________ 24,166 19,624 34,690 ________ ________ ________ Operating profit is stated after charging: Amortisation of goodwill 285 - 143 ________ ________ ________ 2. Analysis of net assets Continuing Concrete and Stone 142,951 123,634 123,550 Clay 46,159 45,390 44,534 ________ ________ ________ 189,110 169,024 168,084 Unallocated net liabilities (18,089) (4,922) (7,954) ________ ________ ________ 171,021 164,102 160,130 Unallocated net liabilities comprise non-operating assets and liabilities of a financing nature, principally net borrowings, corporation tax, dividends payable and capitalised goodwill. There is no material inter-segmental turnover. Concrete and Stone comprises Landscape Products and Emerging Businesses Divisions. 3. Earnings per share The earnings per share figures below have been calculated using the weighted average number of shares in issue during the period of 125,434,485 (June 1998 - 125,085,991) and, in respect of the basic earnings per share figure, profit for the period of £14,239,000) (June 1998 - £11,227,000) The diluted earnings per share figures below have been calculated using the weighted average number of shares in issue during the period plus the issue of dilutive shares, which totals 166,345,179 (June 1998 - 170,594, 868) and, in respect of the diluted earnings per share figure, total diluted profit for the period of £16,071,000 (June 1998 - £13,276,000). Unaudited Audited Half year ended Year ended June December Notes 1999 1998 1998 £'000 £'000 £'000 Basic earnings per share 11.35p 8.98p 15.70p Diluted earnings per share 9.66p 7.78p 14.07p 4. Reconciliation of operating profit to cash flow from operating activities Operating profit 24,166 19,624 34,690 Amortisation charges 285 - 143 Depreciation charges 5,810 5,682 11,474 Profit on sale of tangible fixed assets (12) (142) (198) Decrease/(increase) in stocks 2,778 (1,684) (3,743) Increase in debtors (34,720) (29,100) (2,260) Increase/(decrease) in creditors 14,875 10,994 (435) ________ ________ ________ 13,182 5,374 39,671 ________ ________ ________ 5. Year 2000 Over the last year and a half a project has been underway to replace the Group's existing computer system with a modern system which will significantly improve the Group's ability to service its customers and provide easier access to management information. The project has now been completed, and the system has gone live. Whilst it is not possible for any organisation to give an assurance that Year 2000 compliance can be achieved in full, the business systems have been separately tested and reviewed and the directors are satisfied that appropriate action is being taken to ensure that any disruption will be kept to a minimum. All costs which are not material, will be expensed as incurred in accordance with generally accepted accounting practice. 6. Other The above financial information does not constitute statutory accounts. The financial information for the year ended 31 December 1998 has been extracted from the statutory accounts for that period which have been delivered to the Registrar of Companies and contain an unqualified audit report. An ordinary dividend of 2.67p per ordinary share will be paid on 1 December 1999 to shareholders on the register at close of business on 24 September 1999.

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