Interim Results
Marshalls PLC
07 September 2007
Interim Results for the Half Year Ended 30 June 2007
Marshalls plc, the specialist Landscape Products Group, delivers a resilient
trading performance
Half year ended Half year ended Increase
30 June 2007 30 June 2006 %
Revenue £209.9m £197.9m 6.0
EBITDA £40.9m £38.2m 7.2
Operating profit £30.5m £28.3m 7.9
Profit before tax £27.4m £25.1m 9.1
Basic EPS 13.80p 12.21p 13.0
Interim dividend per share 4.55p 4.30p 5.8
Business Highlights
- Good underlying momentum before exceptional summer rainfall
- Pace of development activity increasing:
- £11.8 million invested in bolt on acquisitions
- £3.5 million invested in strategic organic expansion
- Our fourth Marshalls Garden and Driveway Display Centre is now open with
a further six planned for the 2008 season
Commenting on these results, Graham Holden, Chief Executive, said:
'We have good visibility of demand in the Public Sector and Commercial market
and lead indicators continue to be positive for 2007 and 2008. The outcome of
the ongoing Comprehensive Spending Review will be announced later this year and
this is expected to reinforce medium term demand. The outlook for this market
sector, which represents half of our sales, remains good and we continue to
invest organically and through acquisition to deliver growth.
Underlying activity in the Domestic market was good until it was hampered by
exceptional summer rainfall. Installer order books continue to be strong at 9.7
weeks. Our successful sponsorship of the RHS Chelsea Flower Show has increased
brand awareness and provided the platform to launch our National Garden Design
and Installation Service. Continuing investment will result in a network of ten
Marshalls Garden and Driveway Display Centres for the 2008 season.
The pace of development is increasing and with the spread of our business across
the Public Sector and Commercial and Domestic markets we are well placed to take
advantage of market growth opportunities.'
Enquiries:
Graham Holden Chief Executive Marshalls plc 01484 438900
Ian Burrell Finance Director Marshalls plc 01484 438900
Jon Coles Brunswick Group 0207 404 5959
Kate Miller Brunswick Group 0207 404 5959
Chief Executive's Statement
Group Results
Marshalls' revenue was up 6.0 per cent, including acquisitions, in the half year
ended 30 June 2007 at £209.9 million (2006: £197.9 million). Like for like
revenue was up 3.7 per cent. Acquisition growth was 2.3 per cent at £4.7
million.
Operating profit for the period increased by 7.9 per cent to £30.5 million
(2006: £28.3 million) after accounting for start up costs and one-off items. The
start up costs of strategic initiatives expensed in the period were £2.3 million
and these were partially offset by a net profit of £1.8 million from the sale of
surplus properties. Operating profit before these one-off items was £31.0
million (2006: £30.0 million) an increase of 3.3 per cent.
Net financial expenses were £3.1 million (2006: £3.2 million) and interest cover
was 9.1 times (2006: 8.9 times).
The effective tax rate has reduced to 28.0 per cent (2006: 30.3 per cent) due to
the one-off beneficial impact on deferred tax of the future reduction in the
rate of corporation tax.
Basic earnings per share was up 13.0 per cent at 13.80 pence per share (2006:
12.21 pence per share).
The interim dividend will be 4.55 pence per share (2006: 4.30 pence per share)
an increase of 5.8 per cent. Our dividend policy continues to be that dividends
will move in line with medium term earnings growth.
Operating Performance
Like for like sales to the Public Sector and Commercial market, which represents
half of Group sales, were 5 per cent ahead of 2006 with encouraging double digit
organic growth in natural stone products. Underlying activity in the Domestic
market was good until it was hampered by exceptional summer rainfall. Like for
like sales to the Domestic market were 3 per cent ahead of 2006. Installer order
books at the end of June were a healthy 9.7 weeks, compared to 8.9 weeks at the
same time last year, although in part, this increase reflects the backlog due to
the reduced number of installations in June.
At the heart of Marshalls is a single manufacturing and distribution operation
that supports our two main markets. This fundamental competitive advantage
delivers industry leading product availability and delivery performance. We
continue to invest in order to improve our productivity, to make our workplace
safer and to reduce the environmental impact of our operations. Marshalls now
has 54 robots installed in our manufacturing facilities which are delivering a
significant competitive advantage.
Sustainability continues to be an integral part of the Marshalls culture. We
have committed significant resources to establish and maintain third party
accreditation for environmental management, safety management and quality. In
2006, independent audits confirmed that our chosen natural stone supplier
partners in India and China were complying with the Ethical Trading Initiative
base code. We continue to be the only major UK supplier in our sector who can
provide this degree of assurance to customers, providing a key business
differentiator.
We are increasing the pace of development of our integrated offer to the Public
Sector and Commercial market by continuing to improve the range of innovative
products and services we offer. This is particularly important for large
prestigious developments. In the Public Sector and Commercial market we expect a
good level of activity for the balance of 2007 and 2008.
The Group's Domestic strategy is gathering momentum. We continue to invest in
sales and marketing direct to the consumer to create 'pull through' demand and
improve product mix. We now have four Marshalls Garden and Driveway Display
Centres open and will have ten sites open for the 2008 season. Our sponsorship
of the Royal Horticultural Society's Chelsea Flower Show in May was very
successful and our presence at the Hampton Court and Tatton Park flower shows
has further increased brand awareness and public recognition of Marshalls'
innovative and design led products and services.
Corporate Activity
In the first half of 2007 we have invested £25.4 million in capital expenditure
and acquisitions, and further such investment will continue to be a key part of
our growth strategy.
Capital expenditure was £13.6 million including £10.1 million replacing assets
and for business and process improvements. In addition to the incremental
revenue investment referred to above we invested £3.5 million of capital
investment on strategic organic expansion to drive future growth. This included
the fourth Marshalls Garden and Driveway Display Centre and a range of natural
stone and street furniture developments that will begin to payback in 2008.
In the first half of 2007 we also invested £11.8 million in bolt on
acquisitions. We acquired one street furniture and two natural stone businesses.
Balance Sheet
Net assets at 30 June 2007 were £199.4 million which represented 139.4 pence per
share.
At 30 June 2007 net debt was £73.5 million (2006: £47.4 million) with gearing of
36.8 per cent. The movement in net debt in the period is mainly due to the
acquisitions and developments outlined above.
The liability for defined benefit pension obligations decreased from £41.9
million at 31 December 2006 to £28.2 million at 30 June 2007. This reduction is
mainly due to an increase in the AA corporate bond rate from 5.10 per cent to
5.75 per cent. An actuarial gain of £9.2 million (net of deferred taxation) has
been recorded in the Consolidated Interim Statement of Recognised Income and
Expenses.
Dividend
The Board has declared an interim dividend of 4.55 pence (2006: 4.30 pence) per
ordinary share, an increase of 5.8 per cent. This dividend will be paid on 5
December 2007 to shareholders on the register at the close of business on 2
November 2007. The ex-dividend date will be 31 October 2007.
Outlook
We have good visibility of demand in the Public Sector and Commercial market and
lead indicators continue to be positive for 2007 and 2008. The outcome of the
ongoing Comprehensive Spending Review will be announced later this year and this
is expected to reinforce medium term demand. The outlook for this market sector,
which represents half of our sales, remains good and we continue to invest
organically and through acquisition to deliver growth.
Underlying activity in the Domestic market was good until it was hampered by
exceptional summer rainfall. Installer order books continue to be strong at 9.7
weeks. Our successful sponsorship of the RHS Chelsea Flower Show has increased
brand awareness and provided the platform to launch our National Garden Design
and Installation Service. Continuing investment will result in a network of ten
Marshalls Garden and Driveway Display Centres for the 2008 season.
The pace of development is increasing and with the spread of our business across
the Public Sector and Commercial and Domestic markets we are well placed to take
advantage of market growth opportunities.
Graham Holden
Chief Executive
7 September 2007
Consolidated Interim Income Statement
for the half year ended 30 June 2007
Half year Year ended
ended June December
Notes 2007 2006 2006
£'000 £'000 £'000
Revenue 2 209,860 197,898 378,100
Net operating costs (179,362) (169,638) (330,339)
------- ------- -------
Operating profit 2 30,498 28,260 47,761
Financial expenses 3 (8,390) (7,853) (14,904)
Financial income 3 5,279 4,688 8,846
------- ------- -------
Profit before tax 2 27,387 25,095 41,703
Income tax expense (7,682) (7,628) (12,623)
------- ------- -------
Profit for the financial period 19,705 17,467 29,080
======= ======= =======
Earnings per share (total and continuing operations):
Basic 4 13.80p 12.21p 20.34p
======= ======= =======
Diluted 4 13.77p 12.21p 20.32p
======= ======= =======
Dividend:
Pence per share 5 8.85p 8.40p 12.70p
======= ======= =======
Dividends paid 5 12,665 12,010 18,158
======= ======= =======
Consolidated Interim Balance Sheet
at 30 June 2007
June December
2007 2006 2006
£'000 £'000 £'000
Assets
Non-current assets
Property, plant and equipment 213,003 200,281 202,941
Intangible fixed assets 58,799 49,882 52,667
Deferred taxation assets 10,136 17,748 15,018
------- ------- -------
281,938 267,911 270,626
------- ------- -------
Current assets
Inventories 74,738 69,096 68,256
Trade and other receivables 66,556 64,016 34,290
Cash and cash equivalents 67 3,912 22
------- ------- -------
141,361 137,024 102,568
------- ------- -------
Total assets 423,299 404,935 373,194
======= ======= =======
Liabilities
Current liabilities
Bank overdraft 9,150 - 999
Trade and other payables 96,833 92,800 65,547
Interest bearing loans and borrowings 14,165 161 3,565
------- ------- -------
120,148 92,961 70,111
------- ------- -------
Non-current liabilities
Interest bearing loans and borrowings 50,214 51,143 50,064
Employee benefits 28,163 58,877 41,945
Deferred taxation liabilities 25,334 24,749 26,532
------- ------- -------
103,711 134,769 118,541
------- ------- -------
Total liabilities 223,859 227,730 188,652
======= ======= =======
Net assets 199,440 177,205 184,542
======= ======= =======
Equity
Capital and reserves attributable to equity
shareholders of the parent
Share capital 35,777 35,777 35,777
Share premium account 2,734 2,732 2,732
Own shares (2,280) (407) (453)
Capital redemption reserve 73,298 72,986 73,298
Consolidation reserve (213,067) (213,067) (213,067)
Hedging reserve (4) (4) (6)
Retained earnings 302,982 279,188 286,261
------- ------- -------
Equity shareholders' funds 199,440 177,205 184,542
======= ======= =======
Consolidated Interim Cash Flow Statement
for the half year ended 30 June 2007
Half year Year ended
ended June December
Notes 2007 2006 2006
£'000 £'000 £'000
Net cashflow from operating 6
activities 7,121 12,459 38,846
Net cashflow from investing 6
activities (23,840) (12,597) (28,033)
Net cashflow from financing 6
activities 8,613 (1,160) (17,000)
------- ------- -------
Net decrease in cash and cash
equivalents (8,106) (1,298) (6,187)
Cash and cash equivalents at
beginning of period (977) 5,210 5,210
------- ------- -------
Cash and cash equivalents at end of
period (9,083) 3,912 (977)
======= ======= =======
Reconciliation of Net Cash Flow to Movement in Net Debt
2007 2006 2006
£'000 £'000 £'000
Net decrease in cash and cash equivalents (8,106) (1,298) (6,187)
Cash (inflow)/outflow from decrease in debt
and lease financing (10,164) 594 (1,731)
Finance leases acquired on acquisition of
subsidiary undertakings (586) - -
------- ------- -------
Movement in net debt in the period (18,856) (704) (7,918)
Net debt at beginning of the period (54,606) (46,688) (46,688)
------- ------- -------
Net debt at the end of the period (73,462) (47,392) (54,606)
======= ======= =======
Consolidated Interim Statement of Recognised Income and Expenses
2007 2006 2006
£'000 £'000 £'000
Cash flow hedges: Effective portion of
changes in fair value (net of
deferred taxation) (2) (2) (4)
Actuarial gains (net of deferred taxation) 9,212 5,672 7,342
------- ------- -------
Net income recognised directly in equity 9,210 5,670 7,338
Profit for the financial period attributable
to equity shareholders of the parent 19,705 17,467 29,080
------- ------- -------
Total recognised income and expenses for the
period(for equity shareholders of the parent) 28,915 23,137 36,418
======= ======= =======
Notes to the Consolidated Interim Financial Statements
1. Basis of preparation
Marshalls plc (the 'Company') is a company domiciled in the United Kingdom. The
Consolidated Interim Financial Statements of the Company for the half year ended
30 June 2007 comprise the Company and its subsidiaries (together referred to as
the 'Group').
The Consolidated Interim Financial Statements have been prepared on the basis of
the recognition and measurement requirements of IFRSs in issue and endorsed by
the EU and effective at 30 June 2007.
The Consolidated Interim Financial Statements do not include all the information
required for full annual Financial Statements and should be read in conjunction
with the Consolidated Financial Statements of the Group as at and for the year
ended 31 December 2006. The Consolidated Interim Financial Statements were
approved by the Board on 7 September 2007.
The Consolidated Interim Financial Statements have been prepared applying the
accounting policies and presentation that were applied in the Company's
published Consolidated Financial Statements for the year ended 31 December 2006.
The accounting policies are included on the Company's website and have been
applied consistently throughout the Group for the purposes of these Consolidated
Interim Financial Statements.
The preparation of financial statements in conformity with IFRSs requires
management to make judgements, estimates and assumptions that affect the
application of policies and 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.
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.
2. Segmental analysis
Revenue Operating Profit
Half year Year ended Half year Year ended
ended June December ended June December
2007 2006 2006 2007 2006 2006
£'000 £'000 £'000 £'000 £'000 £'000
Continuing
operations 209,860 197,898 378,100 30,498 28,260 47,761
======= ======= =======
Financial income and expenses (net) (3,111) (3,165) (6,058)
------ ------ ------
Profit on ordinary activities before tax 27,387 25,095 41,703
====== ====== ======
2007 2006 2006
£'000 £'000 £'000
Geographical destination of revenue:
United Kingdom 208,693 196,055 374,627
Rest of the world 1,167 1,843 3,473
------- ------- -------
209,860 197,898 378,100
======= ======= =======
All revenue originates in the United Kingdom from continuing operations and
there is no material inter-segmental turnover.
3. Financial expenses and income
Half year Year ended
ended June December
2007 2006 2006
£'000 £'000 £'000
(a) Financial expenses
Interest expense on bank loans, overdrafts
and loan notes 1,935 1,376 2,406
Interest on obligations under the defined
benefit pension scheme 5,248 5,278 10,107
Debenture interest expense 1,137 1,137 2,275
B share dividend expense 42 48 92
Finance lease interest expense 28 14 24
------- ------- -------
8,390 7,853 14,904
======= ======= =======
(b) Financial income
Expected return on scheme assets under
the defined benefit pension scheme 5,273 4,678 8,802
Interest receivable and similar income 6 10 44
------- ------- -------
5,279 4,688 8,846
======= ======= =======
4. Earnings per share
Basic earnings per share on total and continuing operations of 13.80 pence (30
June 2006: 12.21 pence) (31 December 2006: 20.34 pence) is calculated by
dividing the profit attributable to ordinary shareholders from total operations
of £19,705,000 (30 June 2006: £17,467,000) (31 December 2006: £29,080,000) by
the weighted average number of shares in issue during the period of 142,799,251
(30 June 2006: 143,001,830) (31 December 2006: 142,949,818).
Profit attributable to ordinary shareholders
Half year Year ended
ended June December
2007 2006 2006
£'000 £'000 £'000
Profit attributable to ordinary shareholders
- Continuing operations 19,705 17,467 29,080
======= ======= =======
Weighted average number of ordinary shares
Half year Year ended
ended June December
2007 2006 2006
Number Number Number
Issued ordinary shares at
beginning of period 143,106,254 143,087,712 143,087,712
Effect of shares issued in the period - 10,463 14,536
Effect of shares transferred into
employee benefit trust (307,003) (96,345) (152,430)
----------- ----------- -----------
Weighted average number of
ordinary shares at end of period 142,799,251 143,001,830 142,949,818
=========== =========== ===========
Diluted earnings per share on total and continuing operations of 13.77 pence (30
June 2006: 12.21 pence) (31 December 2006: 20.32 pence) is calculated by
dividing the profit attributable to ordinary shares and potentially dilutive
ordinary shares from total operations of £19,705,000 (30 June 2006: £17,467,000)
(31 December 2006: £29,080,000) by the weighted average number of shares in
issue during the period of 142,799,251 (30 June 2006: 143,001,830) (31 December
2006: 142,949,818) plus dilutive shares of 307,003 (30 June 2006: 96,345) (31
December 2006: 152,430) which totals 143,106,254 (30 June 2006: 143,098,175) (31
December 2006: 143,102,248).
Weighted average number of ordinary shares (diluted)
Half year Year ended
ended June December
2007 2006 2006
£'000 £'000 £'000
Weighted average number of ordinary
shares 142,799,251 143,001,830 142,949,818
Effect of share transfer 307,003 96,345 152,430
----------- ----------- -----------
Weighted average number of ordinary
shares (diluted) 143,106,254 143,098,175 143,102,248
=========== =========== ===========
5. Dividends
The following dividends were approved by the shareholders in the period.
Half year Year ended
ended June December
2007 2006 2006
£'000 £'000 £'000
8.85 pence per qualifying ordinary share 12,665 12,010 18,158
(30 June 2006: 8.40 pence, 31 December 2006:
12.70 pence) ====== ====== ======
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.
Half year Year ended
ended June December
2007 2006 2006
£'000 £'000 £'000
4.55 pence (30 June 2006: 4.30 pence, 31
December 2006: 8.85 pence) 6,511 6,154 12,665
====== ====== ======
6. Notes to the cash flow statement
Half year Year ended
ended June December
2007 2006 2006
£'000 £'000 £'000
Cash flows from operating activities
Profit before tax 27,387 25,095 41,703
Adjustments for:
Depreciation 10,180 9,750 19,530
Amortisation 240 160 357
Negative goodwill (700) - -
(Gain) / loss on sale of property, plant
& equipment (1,846) (39) 66
Gain / (loss) in hedging instrument 2 (2) -
Equity settled share based expenses 456 - 250
Financial income and expenses (net) 3,110 3,165 6,058
------ ------ ------
Operating cash flow before changes in
working capital, provisions
and pension scheme contributions 38,829 38,129 67,964
(Increase) / decrease in trade and other
receivables (31,091) (26,940) 2,323
(Increase) in inventories (5,633) (1,039) (53)
Increase / (decrease) in trade and other
payables 13,001 9,050 (3,197)
Increase / (decrease) in employee benefits - 1,117 (2,968)
Pension scheme contributions (1,100) - (10,000)
------ ------ ------
Cash generated from the operations 14,006 20,317 54,069
Financial expenses paid (3,116) (2,338) (4,265)
Non equity dividends paid (44) (105) (149)
Income tax paid (3,725) (5,415) (10,809)
------ ------ ------
Net cash flow from operating activities 7,121 12,459 38,846
====== ====== ======
Cash flows from investing activities
Proceeds from sale of property, plant and
equipment (net of costs) 1,538 125 565
Financial income received 6 4 44
Acquisition of subsidiaries (11,540) (1,000) (4,157)
Bank (overdraft) / balance acquired with
subsidiaries (239) - 79
Acquisition of property, plant and equipment (13,605) (11,726) (24,564)
------ ------ ------
Net cash flow from investing activities (23,840) (12,597) (28,033)
====== ====== ======
Cash flows from financing activities
Proceeds from issue of share capital 2 43 43
Payments to acquire own shares (1,827) (305) (453)
Increase / (decrease) in other debt and
lease financing 350 (181) (302)
Redemption of B shares (312) (687) (848)
New loans issued 10,400 - 2,758
Payment of transaction costs - (30) (40)
Equity dividends paid - - (18,158)
------ ------ ------
Net cash flow from financing activities 8,613 (1,160) (17,000)
====== ====== ======
7. Analysis of net debt
1 January Cash flow Other non 30 June
2007 cash changes 2007
£'000 £'000 £'000 £'000
Cash at bank and in hand 22 45 - 67
Overdrafts (999) (8,151) - (9,150)
----- ------ ------ ------
(977) (8,106) - (9,083)
Debt due within one year (3,423) (10,400) - (13,823)
Debt due after one year (50,000) - - (50,000)
Finance leases (206) 236 (586) (556)
----- ------ ------ ------
(54,606) (18,270) (586) (73,462)
===== ====== ====== ======
8. Comparative information
The comparative figures for the financial year ended 31 December 2006 are not
the Company's statutory financial statements for that financial year. Those
financial statements have been reported on by the Company's auditors and
delivered to the Registrar of Companies. The report of the auditors was (i)
unqualified, (ii) did not include a reference to any matters to which the
auditors drew attention by way of emphasis without qualifying their report, and
(iii) did not contain a statement under section 237(2) or (3) of the Companies
Act 1985.
Independent Review Report
Independent review report by KPMG Audit Plc to Marshalls plc
Introduction
We have been instructed by the Company to review the Financial Information for
the six months ended 30 June 2007 which comprises the Consolidated Interim
Income Statement, the Consolidated Interim Balance Sheet, the Consolidated
Interim Cash Flow Statement, the Consolidated Interim Statement of Recognised
Income and Expenses and the related notes. 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 of the Financial Services Authority 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 any changes, and the reasons for them, are disclosed.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin 1999/4
issued by the Auditing Practices Board for use in the UK. A review consists
principally of making enquiries of 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 excludes audit
procedures such as tests of controls and verification of assets, liabilities and
transactions. It is substantially less in scope than an audit performed in
accordance with International Statements on Auditing (UK and Ireland) 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 2007.
KPMG Audit Plc
Chartered Accountants
Leeds
7 September 2007
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