Interim Results

Marshalls PLC 05 September 2003 5th September 2003 Marshalls plc Interim results for the Six Months to 30 June 2003 Marshalls plc, the specialist Landscape, Clay and Natural Stone Products Group, today announces results for the 6 months to 30 June 2003. Six months to Six months to % 30 June 2003 30 June 2002 (Â£m) (Â£m) Turnover 183.6 181.3 1.3 Operating profit 30.6 29.0 5.5 Profit before tax 29.1 27.3 6.6 Basic EPS 11.80p 11.03p 7.0 Dividend per share 3.65p 3.30p 10.6 - Sales, excluding the Flooring business sold in November 2002, up 7% - Operating profit, on the same basis, increased by 8.4% - Dividends increased by 10.6% to 3.65p per share (2002: 3.30p per share) - Balance sheet gearing reduced to 8.0% (2002: 12.9%) after Â£18.8m of capital expenditure - Continued sales growth, in the second half to date, in both the domestic and commercial/public sectors Commenting on these results, Christopher Burnett, Executive Chairman said: 'The first half growth in sales and profits, in a period of low inflation, was very encouraging. It was particularly pleasing to experience healthy sales growth across all Divisions in both the domestic and commercial/public sectors of our business. The second half has seen an encouraging start with continued sales growth. At this stage our market intelligence suggests that activity levels will remain positive.' Enquiries: Christopher Burnett Executive Chairman Marshalls plc ) 020 7404 5959 today Ian Burrell Finance Director Marshalls plc ) 01484 438900 thereafter Jon Coles Brunswick Group 020 7404 5959 William Cullum Brunswick Group 020 7404 5959 CHAIRMAN'S STATEMENT Group turnover in the six months to 30 June 2003 at Â£183.6 million (2002: Â£181.3 million) was 1.3 per cent ahead of the same period last year. Excluding our Flooring business that was sold in November 2002, turnover was up 7.0 per cent. Profit before tax of Â£29.1 million (2002: Â£27.3 million) was up 6.6 per cent, and excluding the Flooring business operating profit was 9.6 per cent ahead. Basic earnings per share at 11.80p (2002: 11.03p) were 7.0 per cent ahead of the comparable period last year. All Divisions achieved satisfactory sales growth. Following the disposal of the Flooring business it has been decided not to continue to publish the results of our remaining Emerging Businesses separately. They are therefore combined with the Landscape Products Division. On a comparable basis Landscape Products increased sales by 6.3 per cent, Clay Products was ahead by 3.8 per cent and Natural Stone was up by 19.1 per cent. The Group invested Â£18.8 million (2002: Â£21.9 million) on capital expenditure during the first six months. We also achieved a reduction of over Â£5 million in stocks compared with the 2002 year end. These factors helped reduce net borrowings at 30 June 2003 to Â£17.4 million (2002: Â£25.4 million), and gave a gearing ratio of 8.0 per cent (2002: 12.9 per cent). The Board has decided to declare an interim dividend of 3.65p (2002: 3.30p) per ordinary share, an increase of 10.6 per cent. The dividend will be paid on 8 December 2003 to shareholders on the Register on 7 November 2003. The ex-dividend date will be 5 November 2003. LANDSCAPE PRODUCTS DIVISION The Landscape Products Division, incorporating the three businesses that were previously reported within the Emerging Businesses Division, achieved sales of Â£152.9 million (2002: Â£143.8 million), an increase of 6.3 per cent over last year. The increase in sales in the Landscape Products Division was evenly spread between domestic demand for new driveways and patios, and work on infrastructure and public sector projects. The independent installers on the Marshalls Register continue to confirm strong order books with no reduction in the forward order position. There is no doubt that home-owners are taking advantage of the increased equity in their homes, and low interest rates, to invest in external improvements to driveways and gardens. There has also been a noticeable increase in repair and maintenance work being undertaken by local authorities. The new build programme funded by increased Government spending also ensured that this other important sector of our business had a good first half year. Drainage, Street Furniture and Classical Flagstones, previously reported within Emerging Businesses, all experienced encouraging sales growth. These profitable businesses continue to be developed and have an excellent future within the Group. Operating profit for the Landscape Products Division increased by 10.4 per cent to Â£26.1 million (2002: Â£23.7 million). CLAY PRODUCTS DIVISION The Clay Products Division increased sales in the first half by 3.8 per cent to Â£15.9 million (2002: Â£15.3 million) with activity in the new housing market underpinning Industry demand. Repair, maintenance and improvement expenditure, both public and private, was also strong. Operating profit, however, fell to Â£2.0 million (2002: Â£2.7 million). Whilst volumes and sales prices were ahead of last year we suffered in terms of mix because of shortages in supply of certain raw materials preventing us from satisfying demand for clay pavers. These products, which are sold through the Landscape Products Division Regional Service Centres, achieve higher unit selling prices and contributions. This loss of contribution, together with some re-organisation costs, accounted for the reduction in profit. Our objective is to see the results of all our work in the Clay Products Division show through in profit performance and we expect to begin to see the benefit of this in the second half and beyond. NATURAL STONE DIVISION An impressive performance by the Natural Stone Division saw sales in the first half increase by 19.1 per cent to Â£14.8 million (2002: Â£12.4 million). This included a contribution from the acquisition of a small quarrying business made at the end of last year. Organic sales growth was 10.7 per cent. The Division includes our own natural stone products, imported stone and granite products, and crushed aggregates sold from our own quarries. The majority of customers are involved with public sector and infrastructure projects and enquiries remain strong. We recently completed supplying product for the major pedestrianisation project at Trafalgar Square in London, and we are currently supplying product for Terminal 5 at Heathrow Airport. Operating profit increased by 32.5 per cent to Â£2.4 million (2002: Â£1.8 million). Excluding the impact of the acquisition, profits increased by 12.4 per cent. THE BOARD On 23 July 2003, we announced the appointment of two new Non-Executive Directors, Andrew Allner and Richard Scholes. I am delighted that we have attracted two Non-Executive Directors of such high calibre. We are looking forward to benefiting from their broad experience. OUTLOOK The first half growth in sales and profits, in a period of low inflation, was very encouraging. It was particularly pleasing to experience healthy sales growth across all Divisions in both the domestic and commercial/public sectors of our business. The second half has seen an encouraging start with continued sales growth. At this stage our market intelligence suggests that activity levels will remain positive. CHRISTOPHER BURNETT EXECUTIVE CHAIRMAN Consolidated Profit and Loss Account for the half year ended 30 June 2003 Unaudited Audited Half Year ended Year ended June December Notes 2003 2002 2002 Â£'000 Â£'000 Â£'000 Turnover 1 183,583 181,262 342,056 Operating costs (153,029) (152,306) (291,727) -------- -------- --------- Operating profit 1 30,554 28,956 50,329 Gain on disposal and termination of - - 2,255 business -------- -------- --------- Profit on ordinary activities before 30,554 28,956 52,584 interest Interest (net) (1,447) (1,649) (3,193) -------- -------- --------- Profit on ordinary activities before 29,107 27,307 49,391 taxation Taxation on profit on ordinary (9,345) (8,782) (15,750) activities -------- -------- --------- Profit for the financial period 19,762 18,525 33,641 Preference dividends: Non equity (36) (87) (137) shares -------- -------- --------- Profit attributable to ordinary 19,726 18,438 33,504 shareholders Ordinary dividends: Equity shares (6,101) (5,523) (16,737) -------- -------- --------- Retained profit for the financial 13,625 12,915 16,767 period -------- -------- --------- Earnings per share : Basic 2 11.80p 11.03p 20.05p Diluted 2 11.80p 11.01p 20.02p Adjusted Basic 2 12.23p 11.39p 19.41p -------- -------- --------- Dividend per share: Pence per share 3.65p 3.30p 10.00p -------- -------- --------- Consolidated Balance Sheet as at 30 June 2003 Unaudited Audited June December 2003 2002 2002 Notes Â£'000 Â£'000 Â£'000 Fixed assets Intangible 24,445 20,721 24,113 Tangible 194,680 183,947 184,699 -------- -------- --------- 219,125 204,668 208,812 -------- -------- --------- Current assets Stocks 57,885 60,103 62,978 Debtors 63,138 62,141 30,997 Cash at bank and in hand 5,977 136 7,307 -------- -------- --------- 127,000 122,380 101,282 Creditors: Amounts falling due (89,392) (90,032) (67,493) within one year -------- -------- --------- Net current assets 37,608 32,348 33,789 -------- -------- --------- Total assets less current 256,733 237,016 242,601 liabilities -------- -------- --------- Creditors: Amounts falling due after (20,001) (20,005) (20,003) more than one year Provisions for liabilities and (20,358) (19,569) (19,852) charges -------- -------- --------- Net assets 3 216,374 197,442 202,746 -------- -------- --------- Capital and reserves Called up share capital 42,008 42,007 42,007 Share premium account 17,728 17,724 17,726 Revaluation reserve 5,166 5,166 5,166 Other reserves 14,352 14,352 14,352 Profit and loss account 137,120 118,193 123,495 -------- -------- --------- Shareholders' funds 216,374 197,442 202,746 -------- -------- --------- Analysis of shareholders' funds Equity 215,266 196,334 201,638 Non equity 1,108 1,108 1,108 -------- -------- --------- 216,374 197,442 202,746 -------- -------- --------- Consolidated Cash Flow Statement for the half year ended 30 June 2003 Unaudited Audited Half year ended Year ended June December Notes 2003 2002 2002 Â£'000 Â£'000 Â£'000 Cash inflow from 4 28,554 17,542 54,608 operating activities Returns on investments (1,559) (683) (3,407) and servicing of finance Taxation (6,676) (5,297) (13,301) Capital expenditure (18,790) (21,932) (33,832) Acquisitions and disposals (1,035) - 9,210 Equity dividends paid - - (16,128) -------- -------- -------- Cash inflow/(outflow) before financing 494 (10,370) (2,850) Financing Issue of shares 3 141 143 Repayment of 10% cumulative - (2,274) (2,274) preference shares Costs associated with - (52) (52) share cancellation Decrease in debt and (1,827) (2,312) (2,315) lease financing -------- -------- ------- Decrease in cash in the (1,330) (14,867) (7,348) period -------- -------- -------- Reconciliation of Net Cash Flow to Movement in Net Debt Decrease in cash in the (1,330) (14,867) (7,348) period Cash outflow from decrease in debt and 1,827 2,312 2,315 lease financing -------- ------- --------- Movement in net debt in 497 (12,555) (5,033) the period Net debt at beginning of (17,895) (12,862) (12,862) period -------- ------- --------- Net debt at end of (17,398) (25,417) (17,895) period -------- -------- --------- Net gearing 8.0% 12.9% 8.8% Consolidated Reconciliation of Movements in Shareholders' Funds for the half year ended 30 June 2003 Unaudited Audited Half year ended Year ended June December 2003 2002 2002 Â£'000 Â£'000 Â£'000 Profit for the financial period 19,762 18,525 33,641 Dividends (6,137) (5,610) (16,874) (preference and ordinary) New share capital issued 3 141 143 Repayment and - (2,274) (2,274) cancellation of 10% cumulative preference shares Costs associated with - (52) (52) share cancellation Goodwill previously eliminated against - - 1,450 reserves on sale and termination of business -------- -------- --------- Net additions to 13,628 10,730 16,034 shareholders' funds Shareholders' funds at 202,746 186,712 186,712 beginning of period -------- -------- --------- Shareholders' funds at 216,374 197,442 202,746 end of period -------- -------- --------- There were no recognised gains or losses in the period (2002: Â£Nil) other than those reflected above. Notes to the Interim Statements 1. Analysis of turnover and operating profit Unaudited Audited Half year ended Year ended June December 2003 2002 2002 Â£'000 Â£'000 Â£'000 (a) Turnover Landscape Products 152,865 143,834 270,384 Clay Products 15,918 15,341 30,252 Natural Stone 14,800 12,429 24,958 Flooring business disposed - 9,658 16,462 -------- -------- --------- 183,583 181,262 342,056 -------- -------- --------- (b) Operating profit Landscape Products 26,129 23,660 41,248 Clay Products 2,004 2,710 4,372 Natural Stone 2,421 1,827 3,282 Flooring business disposed - 759 1,427 -------- -------- --------- 30,554 28,956 50,329 -------- -------- --------- The non-Flooring businesses previously included within the Emerging Businesses segment are now shown within the Landscape Products segment in notes 1(a), 1(b) and 3. The comparative figures for 2002 have been restated accordingly in each of these notes. For the half year ended 30 June 2002, the Landscape Products turnover, operating profit and net assets were previously stated at Â£136,077,000, Â£22,342,000 and Â£170,733,000 respectively (year ended 31 December 2002: Â£254,515,000, Â£38,530,000 and Â£171,437,000 respectively). Operating profit includes Â£137,000 of income relating to property disposals. Proceeds were Â£476,000 and costs and charges were Â£339,000. 2. Earnings per share Unaudited Audited Half year ended Year ended June December 2003 2002 2002 Â£'000 Â£'000 Â£'000 Profit for the financial period attributable to ordinary shareholders 19,726 18,438 33,504 --------- --------- --------- Profit for the financial period attributable to ordinary shares and potentially ordinary dilutive shares 19,726 18,438 33,504 --------- --------- --------- Adjusted basic earnings per share reconciliation: Profit for the financial period 19,726 18,438 33,504 Goodwill amortisation 710 595 1,190 Gain on disposal and termination of business - - (2,255) --------- --------- --------- 20,436 19,033 32,439 --------- --------- --------- Weighted average number of shares 167,145,851 167,115,664 167,130,230 --------- --------- --------- Weighted average number 167,145,851 167,115,664 167,130,230 of shares Dilutive shares 48,324 383,164 247,797 --------- --------- --------- 167,194,175 167,498,828 167,378,027 --------- --------- --------- Basic earnings per share 11.80p 11.03p 20.05p --------- --------- --------- Diluted earnings per share 11.80p 11.01p 20.02p --------- --------- --------- Adjusted basic earnings per share 12.23p 11.39p 19.41p --------- --------- --------- 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 and gain on disposal and termination of business. 3. Analysis of net assets Unaudited Audited Half year ended Year ended June December 2003 2002 2002 Â£'000 Â£'000 Â£'000 Landscape Products 202,674 180,097 181,513 Clay Products 39,335 44,778 40,780 Natural Stone 32,180 25,366 28,120 Flooring business disposed - 7,134 - -------- -------- --------- 274,189 257,375 250,413 Unallocated net liabilities (57,815) (59,933) (47,667) -------- --------- --------- 216,374 197,442 202,746 -------- -------- --------- Unallocated net liabilities comprise non-operating assets and liabilities of a financing nature, principally net borrowings, corporation tax, deferred tax and dividends payable. There is no material inter-segmental turnover. 4. Reconciliation of operating profit to cash flow from operating activities Unaudited Audited Half year ended Year ended June December 2003 2002 2002 Â£'000 Â£'000 Â£'000 Operating profit 30,554 28,956 50,329 Amortisation charges 710 595 1,190 Depreciation charges 8,840 7,751 15,848 Loss/(profit) on sale of tangible fixed assets other than property sales 13 136 (66) Decrease/(increase) in stocks 5,571 (5,716) (9,721) Increase in debtors (31,108) (30,624) (964) Increase/(decrease) in creditors 13,974 16,444 (2,008) -------- -------- --------- 28,554 17,542 54,608 -------- -------- --------- 5. Pension Scheme The Group operates a funded defined benefit pension scheme covering certain employees. The scheme was closed to new employees in October 2000. An actuarial valuation as at April 2003 is being undertaken. The results of the valuation will not be finalised until towards the end of the year. It is anticipated that the outcome of the valuation will result in a relatively modest increase in costs and this is not expected to be material in the context of the Group's results. 6. Basis of Preparation The interim financial statements have been prepared on the basis of the accounting policies set out in the Group's 2002 Annual Report. 7. Other The above financial information does not constitute statutory accounts. The financial information for the year ended 31 December 2002 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 interim dividend of 3.65p per ordinary share will be paid on 8 December 2003 to shareholders on the register at the close of business on 7 November 2003. The ex-dividend date will be 5 November 2003. Review Report and Shareholder Information Independent review report by KPMG Audit Plc to Marshalls plc Introduction We have been instructed by the Company to review the financial information set out on pages 3 to 8 and we have read the other information contained in the Interim Report and considered whether it contains any apparent misstatements or material inconsistencies with the financial information. This report is made solely to the Company in accordance with the terms of our engagement to assist the Company in meeting the requirements of the Listing Rules of the Financial Services Authority. Our review has been undertaken so that we might state to the Company those matters we are required to state to it in this 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 reached. Directors' Responsibilities The Interim Report, including the financial information contained therein, is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the Interim Report in accordance with the Listing Rules which require that the accounting policies and presentation applied to the interim figures should be consistent with those applied in preparing the preceding annual financial statements except where they are to be changed in the next annual financial statements in which case any changes, and the reasons for them, are to be disclosed. Review Work Performed We conducted our review in accordance with guidance contained in Bulletin 1999/ 4: Review of interim financial information issued by the Auditing Practices Board. A review consists principally of making enquiries of Group management and applying analytical procedures to the financial information and underlying financial data and, based thereon, assessing whether the accounting policies and presentation have been consistently applied unless otherwise disclosed. A review is substantially less in scope than an audit performed in accordance with Auditing Standards and therefore provides a lower level of assurance than an audit. Accordingly we do not express an audit opinion on the financial information. Review Conclusion On the basis of our review we are not aware of any material modifications that should be made to the financial information as presented for the six months ended 30 June 2003. KPMG Audit Plc Chartered Accountants Registered Auditor Leeds 5 September 2003 This information is provided by RNS The company news service from the London Stock Exchange

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