Final Results - Year Ended 31 December 1999
Marshalls PLC
2 March 2000
Preliminary results for year to 31 December 1999
Marshalls Plc, the specialist Landscape, Stone and Clay Products Group,
announces results for the 12 months to 31 December 1999.
Year to Year to Increase
31 December 31 December %
99 98
Turnover (continuing 278.5m 252.3m 10
ops)
Operating Profit 42.8m 34.8m 23
(continuing ops)
Profit before tax 40.6m 33.5m 21
Earnings per share 17.60p 14.07p 25
(diluted)
Earnings per share 19.90p 15.70p 27
(basic)
Dividend per share 78.00p 7.00p 14
- profit before tax 21 % ahead
- Diluted earnings per share 25% ahead
- Dividend raised 14% to 8.0p
- Strong cash generation
- Current sales are ahead of last year
Commenting on the results, Christopher Burnett, Chairman said:
'Marshalls results in 1999 were another record for the Group. Increasing
profit before tax by 21 per cent in what turned out to be a difficult year for
the commercial construction sector, which normally accounts for about half our
sales, demonstrates the strength of our domestic market position.
'Sales for the first two months are ahead of last year. While rising interest
rates clearly remain a threat to the level of market activity, the Group has a
wealth of initiatives under way in all three Divisions that will help us
continue to grow. We therefore remain confident about the prospects for 2000
and beyond'.
Enquiries:
Christopher Burnett, Chairman Marshalls Plc 0171 404 5959 today
Graham Holden 01422 306 400 thereafter
Jon Coles Brunswick Group 0171 404 5959
James Garthwaite
CHAIRMAN'S STATEMENT
It is pleasing to report continued progress in our results, and to be able to
tell shareholders of further plans we have to drive the Group forward again in
2000.
Turnover for the year was £278.5 million some 10 per cent ahead of last year.
The domestic part of our market showed good growth whilst commercial building
activity, that produces about half our sales, remained flat throughout the
year.
Operating profit improved by 23 per cent from £34.7 million in 1998 to £42.8
million this year. All three of our divisions contributed to this encouraging
increase as a result of management focus on carrying through the strategies
and improvements contained in their individual business plans.
The Landscape Products Division increased its operating profit before goodwill
by 23 per cent to £38.6 million. The three principal contributory factors
were: first the close trading relationship derived from exclusive three year
supply agreements with the leading builders merchant groups; second higher
margins from the increased proportion of value added products within the sales
mix; and third the full year's profit contribution from Stonemarket acquired
in September 1998.
The Clay Products Division increased its operating profit by 23 per cent to
£4.3 million (1998 - £3.5 million), in part due to stronger brick demand. Also
we told shareholders in the interim statement that as a result of a detailed
operational performance review and external benchmaking exercise, a plan had
been produced to improve the results of this Division considerably. Some of
this work by the management team benefited the results in 1999 but much more
is still expected.
The Emerging Businesses Division is now the home for all of the smaller though
important activities that the Group owns and intends to grow into the new
divisions of tomorrow. They are businesses, described in later pages of this
Report, that fit with the Group and which through organic and acquisition
growth we see ways of making into significant profit contributors.
It is not yet practical to draw comparisons with the performance of this
Division in previous periods as its composition is still changing as we
identify more activities that would benefit from being separated out and
managed independently. In 1999, because of this increased focus, the
businesses that make up the Division contributed turnover of £38.9 million and
operating profit of £6.2 million, included in the Landscape Products figures
above.
BALANCE SHEET
The Group ended the year with borrowings of £6.5 million which represents
gearing of 4 per cent and interest cover was 20 times. Capital expenditure
and acquisitions during the year amounted to £22 million. Included in this we
spent a total of £2 million on the acquisition of more land adjacent to the
Landscape Products Division's Newport works and Stonemarket plant and we
acquired Classical Flagstones, details of which are included in the review in
the Emerging Businesses Division. The cash flow from operations remains
strong. Working capital at year end was £4 million higher than usual due to a
temporary increase in debtors caused by a larger number of invoice queries
associated with the switch over to our new computer system in the last quarter
of the year, offset by a reduction in finished goods stock brought about by
better stock management. The invoice difficulties are largely behind us and
the process of correcting the situation is proceeding systematically.
DIVIDEND
The Board has decided to recommend a final dividend of 5.33p per ordinary
share, making a total for the year of 8.00p (1998 - 7.00p), an increase of 14
per cent. Subject to shareholder approval, this will be paid on 3 July 2000
to shareholders on the register on 26 May 2000. Shareholders will recall that
the Board has previously made clear its dividend policy which is to reach an
ordinary share dividend this year such that the 6.5p preference shareholders
are treated on a par when the shares convert in October 2000. This means that
a 9.00p total dividend per ordinary share will be paid to shareholders in
respect of the 2000 financial year.
MANAGEMENT AND BOARD CHANGES
We announced in December that with effect from 1 January 2000, my status had
changed from non-executive to Executive Chairman. This change was made to
give more focus to, and implement more quickly, the growth opportunities in
our existing businesses as well as to continue working on the strategic
development of the Group.
The change was also made to enable Philip Marshall to devote himself full time
to managing the largest part of the Group, the Landscape Products Division,
implementing the many new initiatives already announced. Philip therefore
stepped down from his role as Chief Executive of the Group.
Under our new structure Philip Marshall Chief Executive Landscape Products
Division, Blair Illingworth Chief Executive Clay Products Division and Graham
Holden Chief Executive Emerging Businesses Division report directly to me as
Executive Chairman. Graham Holden continues as Finance Director.
We have at the same time strengthened the non-executive representation on the
Board. Dick Barfield joined the Board in May 1999. Until 1996 he was Chief
Investment Manager at Standard Life, Edinburgh and now holds a number of Plc
and private company directorships. In December 1999 we announced that Mike
Stacey, Chief Executive, Meggitt Plc, the aerospace and electronics group, had
also joined the Board as a non-executive director.
Together with John Footman, who came onto the Board in 1996 after retiring as
a Director of Wolseley Plc, the Group now has a strong team of independent
non-
executive directors to provide counsel, support and encouragement to the
Executive as we drive the Group forward.
OUTLOOK
Sales for the first two months are ahead of last year. While rising interest
rates clearly remain a threat to the level of market activity, the Group has a
wealth of initiatives under way in all three Divisions that will help us
continue to grow.
These are described in the divisional reviews that follow, but in summary
involve: in the Landscape Products Division a consumer marketing campaign
focused on our driveway, patio and garden products, and the establishment of
regional service centres to increase the flexibility and quality of service
provided to our customers; in the Clay Products Division the drive to gain
identified efficiency improvements; and in the Emerging Businesses Division
firm plans to grow our smaller businesses into more substantial profit
contributors. It is for these reasons that we enter 2000 with confidence.
Christohper Burnett
Chairman
LANDSCAPE PRODUCTS DIVISION
This was another record year for the Division both in terms of sales and
operating profit. Turnover of £249.3 million represented an increase of 12
per cent over 1998, and an improvement in profit of £7.1 million to £38.6
million, a rise of 23 per cent including Emerging Businesses. These results
were achieved in what can only be described as a lacklustre year for
commercial construction that in normal times accounts for about half our
sales. Both parts of the Division, the Marshalls and Stonemarket brands,
performed exceptionally well in the domestic market to produce this result.
MARSHALLS
Growth in sales this year came almost entirely from domestic landscape, patio
and garden products. Activity in this market accelerated throughout 1999 with
the increasing interest of homeowners in their garden, fuelled by the many
gardening programmes on prime time television. The consumer's demand for more
choice and higher quality products plays to the strength of the Marshalls
brand. Therefore the Division saw a further improvement in product mix in
favour of value added products.
In contrast, the commercial side of the business experienced unexpected
weakness in demand. Throughout the year enquiry levels were high but in
common with the majority of the construction industry, little has yet turned
into firm business. Almost holding our own in relation to last year's sales
represented an achievement in these circumstances.
The Division, continues to benefit from the sole supply agreements we have
with the three leading builders merchant groups. As the process of
consolidation in the industry gathers pace we endeavour to work with these
companies to bring their acquisitions within the agreements, to our mutual
advantage.
Progress has been made towards implementing the two major new strategic
developments outlined to shareholders with the half year results. We have
used the Eaglescliffe depot to create the blue print for turning most sites
throughout the country into Service Centres capable of supplying all customers
with a comprehensive range of Marshalls products in mixed loads. This site
formally opened in March and management are now hard at work introducing the
new concept in other depots. When complete this will enable us to offer
customers nationally a level of service unmatched by any competitor.
The other significant development, shareholders will recall, is the launch
this Spring of an extensive advertising campaign focused on the homeowner, and
designed to increase the demand for Marshalls block paving, garden and patio
products. Through landscape contractors, that we approve to participate in
the programme, consumers will be offered a ten year product and workmanship
guarantee when our products are used.
The Division maintains its relentless drive to improve manufacturing
efficiency and reduce costs through capital investment and continuous
improvement techniques, thus demonstrating management's determination to
maintain our strong leadership position within the UK landscape products
market.
STONEMARKET
This was the first full year we have enjoyed the benefit of this excellent
acquisition, made in September 1998. The business manufactures and sells to
the domestic market a unique range of concrete and natural stone products.
Stonemarket's customers are principally garden centres, garden landscapers and
independent builders' merchants.
The strong consumer interest in garden products also benefited this business.
Given the growth prospects still available in the market we have begun an
investment programme to increase production capacity. Towards the end of the
year we acquired 6.5 acres of land adjacent to the existing site which will
progressively become available to the business for the location of additional
production equipment and the storage of more finished stock.
These developments in both Marshalls and Stonemarket enable the Division to
look confidently to the future.
Philip D Marshall
Chief Executive - Landscape Products Division
CLAY PRODUCTS DIVISION
The Clay Products Division which produces a premium range of facing bricks,
engineering bricks, clay pavers and specialist acid resistant products in its
four Northern based factories, achieved turnover of £29.2 million in the year.
This was in line with 1998 in value and volume. An improved product mix in
favour of more added value products, a reduction in overheads and some gains
in operating efficiency, contributed towards an operating profit of £4.3
million, 23 per cent up on last year.
Only marginal benefit was gained from the operational review and benchmarking
exercise undertaken during the year, and already reported to shareholders.
This work did, however, lay the foundations for the 2000 business plan when we
expect to see the benefits from the actions taken by management to come
through.
The Division now has a clear trading strategy both in terms of the markets it
intends to pursue and the emphasis it plans to put on individual parts of the
product range. To achieve the improvements in operating efficiency some
capital investment will be necessary and implementation plans are well
advanced.
The rationalisation of the product range allowed the Division to reduce stocks
by nearly ten per cent, which had a positive impact on working capital.
Brick industry sales finished the year ahead of 1998 at a little over three
billion bricks. This represents a significant recovery from the early part
of the year and a strong last quarter. Industry production levels remain
fairly constant reducing industry stock below one billion bricks. This
backdrop is expected to produce reasonable price stability in the market.
R Blair Illingworth
Chief Executive - Clay Products Division
EMERGING BUSINESSES DIVISION
The Emerging Businesses Division was formed during the year so comparing its
performance with previous periods is neither easily possible or meaningful.
The intention was to bring together, though manage independently, all the
important smaller Group businesses like natural stone, flooring, drainage
products, interior paving and street furniture to give them individual focus
and attention. The Division is also a natural initial home for small
acquisitions where there is an opportunity to grow them into significant
profit contributors for the Group over a reasonable period of time.
Natural Stone
The business is the premium quality and service provider of branded natural
stone products to the UK commercial, domestic and selected overseas markets.
Sales in 1999 were 23 per cent ahead of 1998 reflecting the continuing move by
the market towards high quality natural materials and the widening of our
range to include imported products, like granite.
Further investment has been made to increase capacity and improve efficiency
in the processing operation. Some benefit from this will show through in 2000
given that the business enters the new financial year with a strong order
book.
Flooring
Flooring has supplemented its existing range of pre-cast concrete beams for
house floors, wide slab flooring for commercial projects, and pre-cast
stairways with a range of reinforced concrete products, focused on traffic
management and water storage.
This was a record year for the business with sales 14 per cent ahead. An
improvement in product mix and internal efficiencies, plus a reduction in
waste have all paid dividends. The sales of Jetfloor Super an innovative
product for the private housing market have been particularly encouraging. We
are confident that further progress is still possible in all these areas.
Drainage Products
The Drainage business unit manufactures and supplies a range of linear
drainage for use in highway construction and with hard landscaping schemes in
both the commercial and domestic sectors. The reduced road building programme
resulted in sales which were 9 per cent below 1998. Management has been
strengthened and a number of initiatives have been introduced to improve the
design service and customer response. This is expected to have an increasing
benefit as the current year progresses.
Street Furniture
The business manufactures a broad range of concrete street furniture and
supplements it with the resale of a wide range of complementary products.
Commercial developers and local authorities around the country are the main
customers of the business where the products are often specified in
conjunction with the Group's landscape products. Turnover increased in the
year by 13 per cent.
Classical Flagstones
Classical Flagstones, an exciting recent acquisition by the Group,
manufactures handmade flagstones for the interior market. While the business
is relatively small this is a growth sector, and management will be helped in
expanding the business by having access to Group resources.
Investment is being made immediately in additional premises and capacity to
facilitate the expansion.
Summary
The Division is well on the way to becoming established as a new profit centre
within the Group. Giving these smaller businesses individual focus and
attention, has identified many additional growth opportunities. Some of these
are already in progress but others will be pursued as the year progresses.
D Graham Holden
Chief Executive - Emerging Businesses Division
MARSHALLS PLC
PRELIMINARY ANNOUNCEMENT OF RESULTS
AUDITED CONSOLIDATED PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 31 DECEMBER 1999
1999 1998
Notes £'000 £'000
Turnover
Continuing operations 278,547 252,308
Discontinued operations - 1,627
_______ _______
1 278,547 253,935
_______ _______
Operating profit
Continuing operations 42,754 34,825
Discontinued operations - (135)
_______ _______
Profit on ordinary 1 42,754 34,690
activities before
interest
Interest - net 2,110 1,145
_______ _______
Profit on ordinary 40,644 33,545
activities before
taxation
Taxation on profit on 11,700 9,798
ordinary activities
_______ _______
Profit for the 28,944 23,747
financial year
Preference dividends - 3,596 4,090
non equity shares
_______ _______
Profit attributable to 25,348 19,657
ordinary shareholders
_______ _______
Earnings per share:
Basic 19.90p 15.70p
Diluted 17.60p 14.07p
_______ _______
MARSHALLS PLC
PRELIMINARY ANNOUNCEMENT OF RESULTS
AUDITED CONSOLIDATED BALANCE SHEET
AS AT 31 DECEMBER 1999
1999 1998
Notes £'000 £'000
Fixed assets
Intangible 14,146 11,276
Tangible 139,910 133,639
_______ _______
154,056 144,915
Current assets
Stocks 44,296 40,737
Debtors 39,412 29,888
Cash at bank and in 13,898 14,228
hand
_______ _______
97,606 84,853
Creditors - due within 56,292 49,344
one year
_______ _______
Net current assets 41,314 35,509
_______ _______
Total assets less 195,370 180,424
current liabilities
Creditors - due after 20,027 20,294
more than one year
_______ _______
Net assets 2 175,343 160,130
_______ _______
Capital and reserves
Called up share capital 43,498 43,645
Share premium 15,023 14,567
Revaluation reserve 5,166 5,166
Other reserves 10,274 10,274
Profit and loss account 101,382 86,478
_______ _______
Shareholders' funds 175,343 160,130
_______ _______
Analysis of
shareholders' funds
Equity 128,382 102,749
Non Equity 46,961 57,381
_______ ________
175,343 160,130
_______ ________
MARSHALLS PLC
PRELIMINARY ANNOUNCEMENT OF RESULTS
AUDITED CASH FLOW FOR THE YEAR ENDED 31 DECEMBER 1999
1999 1998
Notes £'000 £'000
Cash flow from 3 46,884 39,671
operating activities
Returns on investments (4,779) (5,354)
and servicing of
finance
Taxation (11,785) (9,981)
Capital Expenditure (17,779) (20,041)
Acquisitions and (3,508) (1,418)
disposals
Equity dividends paid (9,198) (7,812)
_______ _______
Cash outflow before use (165) (4,935)
of liquid resources and
financing
Management of liquid 4,650 22,500
resources
Financing (165) (17,748)
_______ _______
Increase/(decrease) in 4,320 (183)
cash in the year
_______ _______
Reconciliation of net
cash flow to movement
in net debt
Increase/(decrease) in 4,320 (183)
cash in the year
Cash outflow from 474 11,270
decrease in debt and
lease financing
Cash inflow from (4,650) (22,500)
decrease in liquid
resources
_______ _______
Change in net debt 144 (11,413)
resulting from cash
flows
New finance leases and (251) -
loans on acquisition of
businesses
Translation differences (13) (23)
_______ _______
Movement in net debt in (120) (11,436)
the year
Net (debt)/funds at (6,331) 5,105
beginning of year
_______ _______
Net debt at end of year (6,451) (6,331)
_______ _______
MARSHALLS PLC
PRELIMINARY ANNOUNCEMENT OF RESULTS
AUDITED PRIMARY STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 1999
1999 1998
Notes £'000 £'000
Consolidated statement
of total recognised
gains and losses
Profit for the 28,944 23,747
financial year
Exchange differences on
foreign currency loan (13) 89
_______ _______
Total recognised gains 28,931 23,836
and losses
_______ _______
MARSHALLS PLC
PRELIMINARY ANNOUNCEMENT OF RESULTS
AUDITED CONSOLIDATED NOTES
FOR THE YEAR ENDED 31 DECEMBER 1999
1999 1998
£'000 £'000
1. Analysis of turnover
and operating profit
Turnover
Continuing - UK
Landscape & Emerging 249,338 223,126
Businesses
Clay 29,209 29,182
_______ _______
278,547 252,308
Discontinued - USA
Concrete - 1,627
_______ _______
278,547 253,935
_______ _______
Operating profit
Continuing - UK
Landscape & Emerging 38,552 31,413
Businesses
Clay 4,316 3,512
Goodwill amortisation (629) (143)
Property 515 43
_______ _______
42,754 34,825
Discontinued - USA
Concrete - (135)
_______ _______
42,754 34,690
_______ _______
2. Analysis of net
assets
Continuing - UK
Landscape & Emerging 140,048 123,550
Businesses
Clay 43,522 44,534
_______ _______
183,570 168,084
Unallocated net (8,227) (7,954)
liabilities
_______ _______
175,343 160,130
_______ _______
1999 1998
£'000 £'000
3. Reconciliation of
operating profit to
cash flow from
operating activities
Operating profit 42,754 34,690
Amortisation charges 629 143
Depreciation charges 12,002 11,474
Profit on sale of (625) (198)
tangible fixed assets
Increase in stocks (3,509) (3,743)
Increase in debtors (9,403) (2,260)
Increase/(decrease) in 5,036 (435)
creditors
_______ _______
46,884 39,671
_______ _______
4. Other
The above financial information does not constitute statutory accounts for the
year ended 31 December 1999 or for the year ended 31 December 1998 but is
derived from those accounts. Statutory accounts for the year ended 31 December
1998 have been delivered to the Register of Companies. The auditors have
reported on the year ended 31 December 1998 accounts: 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 1999
will be finalised on the basis of the financial information presented by the
directors in this preliminary announcement and will be delivered to the
Registrar of Companies following the Company's Annual General Meeting.
The Annual General Meeting will be held at the Forte Posthouse Hotel,
Brighouse at 2.30pm on Wednesday 11 May 2000. The annual report will be posted
on 6 April 2000.
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