7th Sep 2007 07:00
Marshalls PLC07 September 2007 Interim Results for the Half Year Ended 30 June 2007 Marshalls plc, the specialist Landscape Products Group, delivers a resilienttrading performance Half year ended Half year ended Increase 30 June 2007 30 June 2006 % Revenue £209.9m £197.9m 6.0EBITDA £40.9m £38.2m 7.2Operating profit £30.5m £28.3m 7.9Profit before tax £27.4m £25.1m 9.1Basic EPS 13.80p 12.21p 13.0Interim 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 marketand lead indicators continue to be positive for 2007 and 2008. The outcome ofthe ongoing Comprehensive Spending Review will be announced later this year andthis is expected to reinforce medium term demand. The outlook for this marketsector, which represents half of our sales, remains good and we continue toinvest organically and through acquisition to deliver growth. Underlying activity in the Domestic market was good until it was hampered byexceptional summer rainfall. Installer order books continue to be strong at 9.7weeks. Our successful sponsorship of the RHS Chelsea Flower Show has increasedbrand awareness and provided the platform to launch our National Garden Designand Installation Service. Continuing investment will result in a network of tenMarshalls Garden and Driveway Display Centres for the 2008 season. The pace of development is increasing and with the spread of our business acrossthe Public Sector and Commercial and Domestic markets we are well placed to takeadvantage of market growth opportunities." Enquiries: Graham Holden Chief Executive Marshalls plc 01484 438900Ian Burrell Finance Director Marshalls plc 01484 438900 Jon Coles Brunswick Group 0207 404 5959Kate 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 yearended 30 June 2007 at £209.9 million (2006: £197.9 million). Like for likerevenue was up 3.7 per cent. Acquisition growth was 2.3 per cent at £4.7million. 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. Thestart up costs of strategic initiatives expensed in the period were £2.3 millionand these were partially offset by a net profit of £1.8 million from the sale ofsurplus properties. Operating profit before these one-off items was £31.0million (2006: £30.0 million) an increase of 3.3 per cent. Net financial expenses were £3.1 million (2006: £3.2 million) and interest coverwas 9.1 times (2006: 8.9 times). The effective tax rate has reduced to 28.0 per cent (2006: 30.3 per cent) due tothe one-off beneficial impact on deferred tax of the future reduction in therate 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 dividendswill move in line with medium term earnings growth. Operating Performance Like for like sales to the Public Sector and Commercial market, which representshalf of Group sales, were 5 per cent ahead of 2006 with encouraging double digitorganic growth in natural stone products. Underlying activity in the Domesticmarket was good until it was hampered by exceptional summer rainfall. Like forlike sales to the Domestic market were 3 per cent ahead of 2006. Installer orderbooks at the end of June were a healthy 9.7 weeks, compared to 8.9 weeks at thesame time last year, although in part, this increase reflects the backlog due tothe reduced number of installations in June. At the heart of Marshalls is a single manufacturing and distribution operationthat supports our two main markets. This fundamental competitive advantagedelivers industry leading product availability and delivery performance. Wecontinue to invest in order to improve our productivity, to make our workplacesafer and to reduce the environmental impact of our operations. Marshalls nowhas 54 robots installed in our manufacturing facilities which are delivering asignificant competitive advantage. Sustainability continues to be an integral part of the Marshalls culture. Wehave committed significant resources to establish and maintain third partyaccreditation for environmental management, safety management and quality. In2006, independent audits confirmed that our chosen natural stone supplierpartners in India and China were complying with the Ethical Trading Initiativebase code. We continue to be the only major UK supplier in our sector who canprovide this degree of assurance to customers, providing a key businessdifferentiator. We are increasing the pace of development of our integrated offer to the PublicSector and Commercial market by continuing to improve the range of innovativeproducts and services we offer. This is particularly important for largeprestigious developments. In the Public Sector and Commercial market we expect agood level of activity for the balance of 2007 and 2008. The Group's Domestic strategy is gathering momentum. We continue to invest insales and marketing direct to the consumer to create "pull through" demand andimprove product mix. We now have four Marshalls Garden and Driveway DisplayCentres open and will have ten sites open for the 2008 season. Our sponsorshipof the Royal Horticultural Society's Chelsea Flower Show in May was verysuccessful and our presence at the Hampton Court and Tatton Park flower showshas 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 expenditureand acquisitions, and further such investment will continue to be a key part ofour growth strategy. Capital expenditure was £13.6 million including £10.1 million replacing assetsand for business and process improvements. In addition to the incrementalrevenue investment referred to above we invested £3.5 million of capitalinvestment on strategic organic expansion to drive future growth. This includedthe fourth Marshalls Garden and Driveway Display Centre and a range of naturalstone 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 onacquisitions. 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 pershare. At 30 June 2007 net debt was £73.5 million (2006: £47.4 million) with gearing of36.8 per cent. The movement in net debt in the period is mainly due to theacquisitions and developments outlined above. The liability for defined benefit pension obligations decreased from £41.9million at 31 December 2006 to £28.2 million at 30 June 2007. This reduction ismainly due to an increase in the AA corporate bond rate from 5.10 per cent to5.75 per cent. An actuarial gain of £9.2 million (net of deferred taxation) hasbeen recorded in the Consolidated Interim Statement of Recognised Income andExpenses. Dividend The Board has declared an interim dividend of 4.55 pence (2006: 4.30 pence) perordinary share, an increase of 5.8 per cent. This dividend will be paid on 5December 2007 to shareholders on the register at the close of business on 2November 2007. The ex-dividend date will be 31 October 2007. Outlook We have good visibility of demand in the Public Sector and Commercial market andlead indicators continue to be positive for 2007 and 2008. The outcome of theongoing Comprehensive Spending Review will be announced later this year and thisis expected to reinforce medium term demand. The outlook for this market sector,which represents half of our sales, remains good and we continue to investorganically and through acquisition to deliver growth. Underlying activity in the Domestic market was good until it was hampered byexceptional summer rainfall. Installer order books continue to be strong at 9.7weeks. Our successful sponsorship of the RHS Chelsea Flower Show has increasedbrand awareness and provided the platform to launch our National Garden Designand Installation Service. Continuing investment will result in a network of tenMarshalls Garden and Driveway Display Centres for the 2008 season. The pace of development is increasing and with the spread of our business acrossthe Public Sector and Commercial and Domestic markets we are well placed to takeadvantage of market growth opportunities. Graham HoldenChief Executive7 September 2007 Consolidated Interim Income Statementfor 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 47,761Financial 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 41,703Income 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 Sheetat 30 June 2007 June December 2007 2006 2006 £'000 £'000 £'000AssetsNon-current assetsProperty, plant and equipment 213,003 200,281 202,941Intangible fixed assets 58,799 49,882 52,667Deferred taxation assets 10,136 17,748 15,018 ------- ------- ------- 281,938 267,911 270,626 ------- ------- -------Current assetsInventories 74,738 69,096 68,256Trade and other receivables 66,556 64,016 34,290Cash and cash equivalents 67 3,912 22 ------- ------- ------- 141,361 137,024 102,568 ------- ------- -------Total assets 423,299 404,935 373,194 ======= ======= ======= LiabilitiesCurrent liabilitiesBank overdraft 9,150 - 999Trade and other payables 96,833 92,800 65,547Interest bearing loans and borrowings 14,165 161 3,565 ------- ------- ------- 120,148 92,961 70,111 ------- ------- ------- Non-current liabilitiesInterest bearing loans and borrowings 50,214 51,143 50,064Employee benefits 28,163 58,877 41,945Deferred 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 ======= ======= ======= EquityCapital and reserves attributable to equityshareholders of the parent Share capital 35,777 35,777 35,777Share premium account 2,734 2,732 2,732Own shares (2,280) (407) (453)Capital redemption reserve 73,298 72,986 73,298Consolidation 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 Statementfor the half year ended 30 June 2007 Half year Year ended ended June December Notes 2007 2006 2006 £'000 £'000 £'000Net cashflow from operating 6activities 7,121 12,459 38,846Net cashflow from investing 6activities (23,840) (12,597) (28,033)Net cashflow from financing 6activities 8,613 (1,160) (17,000) ------- ------- -------Net decrease in cash and cashequivalents (8,106) (1,298) (6,187)Cash and cash equivalents atbeginning of period (977) 5,210 5,210 ------- ------- -------Cash and cash equivalents at end ofperiod (9,083) 3,912 (977) ======= ======= ======= Reconciliation of Net Cash Flow to Movement in Net Debt 2007 2006 2006 £'000 £'000 £'000Net decrease in cash and cash equivalents (8,106) (1,298) (6,187)Cash (inflow)/outflow from decrease in debtand lease financing (10,164) 594 (1,731)Finance leases acquired on acquisition ofsubsidiary 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 £'000Cash flow hedges: Effective portion ofchanges in fair value (net ofdeferred 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 7,338Profit for the financial period attributableto equity shareholders of the parent 19,705 17,467 29,080 ------- ------- -------Total recognised income and expenses for theperiod(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. TheConsolidated Interim Financial Statements of the Company for the half year ended30 June 2007 comprise the Company and its subsidiaries (together referred to asthe "Group"). The Consolidated Interim Financial Statements have been prepared on the basis ofthe recognition and measurement requirements of IFRSs in issue and endorsed bythe EU and effective at 30 June 2007. The Consolidated Interim Financial Statements do not include all the informationrequired for full annual Financial Statements and should be read in conjunctionwith the Consolidated Financial Statements of the Group as at and for the yearended 31 December 2006. The Consolidated Interim Financial Statements wereapproved by the Board on 7 September 2007. The Consolidated Interim Financial Statements have been prepared applying theaccounting policies and presentation that were applied in the Company'spublished Consolidated Financial Statements for the year ended 31 December 2006.The accounting policies are included on the Company's website and have beenapplied consistently throughout the Group for the purposes of these ConsolidatedInterim Financial Statements. The preparation of financial statements in conformity with IFRSs requiresmanagement to make judgements, estimates and assumptions that affect theapplication of policies and reported amounts of assets and liabilities, incomeand expenses. The estimates and associated assumptions are based on historicalexperience and various other factors that are believed to be reasonable underthe circumstances, the results of which form the basis of making the judgementsabout carrying values of assets and liabilities that are not readily apparentfrom 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 theestimate is revised if the revision affects only that period, or in the periodof the revision and future periods if the revision affects both current andfuture 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 £'000Continuingoperations 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 £'000Geographical destination of revenue:United Kingdom 208,693 196,055 374,627Rest 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 andthere 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 expensesInterest expense on bank loans, overdraftsand loan notes 1,935 1,376 2,406Interest on obligations under the definedbenefit pension scheme 5,248 5,278 10,107Debenture interest expense 1,137 1,137 2,275B share dividend expense 42 48 92Finance lease interest expense 28 14 24 ------- ------- ------- 8,390 7,853 14,904 ======= ======= ======= (b) Financial incomeExpected return on scheme assets underthe defined benefit pension scheme 5,273 4,678 8,802Interest 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 (30June 2006: 12.21 pence) (31 December 2006: 20.34 pence) is calculated bydividing the profit attributable to ordinary shareholders from total operationsof £19,705,000 (30 June 2006: £17,467,000) (31 December 2006: £29,080,000) bythe 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 £'000Profit 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 NumberIssued ordinary shares atbeginning of period 143,106,254 143,087,712 143,087,712Effect of shares issued in the period - 10,463 14,536Effect of shares transferred intoemployee benefit trust (307,003) (96,345) (152,430) ----------- ----------- -----------Weighted average number ofordinary 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 (30June 2006: 12.21 pence) (31 December 2006: 20.32 pence) is calculated bydividing the profit attributable to ordinary shares and potentially dilutiveordinary 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 inissue during the period of 142,799,251 (30 June 2006: 143,001,830) (31 December2006: 142,949,818) plus dilutive shares of 307,003 (30 June 2006: 96,345) (31December 2006: 152,430) which totals 143,106,254 (30 June 2006: 143,098,175) (31December 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 ordinaryshares 142,799,251 143,001,830 142,949,818Effect of share transfer 307,003 96,345 152,430 ----------- ----------- -----------Weighted average number of ordinaryshares (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 theDirectors. The dividends have not been provided and there were no income taxconsequences. Half year Year ended ended June December 2007 2006 2006 £'000 £'000 £'000 4.55 pence (30 June 2006: 4.30 pence, 31December 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 £'000Cash flows from operating activitiesProfit before tax 27,387 25,095 41,703 Adjustments for:Depreciation 10,180 9,750 19,530Amortisation 240 160 357Negative goodwill (700) - -(Gain) / loss on sale of property, plant& equipment (1,846) (39) 66Gain / (loss) in hedging instrument 2 (2) -Equity settled share based expenses 456 - 250Financial income and expenses (net) 3,110 3,165 6,058 ------ ------ ------Operating cash flow before changes inworking capital, provisionsand pension scheme contributions 38,829 38,129 67,964(Increase) / decrease in trade and otherreceivables (31,091) (26,940) 2,323(Increase) in inventories (5,633) (1,039) (53)Increase / (decrease) in trade and otherpayables 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 54,069Financial 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 activitiesProceeds from sale of property, plant andequipment (net of costs) 1,538 125 565Financial income received 6 4 44Acquisition of subsidiaries (11,540) (1,000) (4,157)Bank (overdraft) / balance acquired withsubsidiaries (239) - 79Acquisition 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 activitiesProceeds from issue of share capital 2 43 43Payments to acquire own shares (1,827) (305) (453)Increase / (decrease) in other debt andlease financing 350 (181) (302)Redemption of B shares (312) (687) (848)New loans issued 10,400 - 2,758Payment 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 - 67Overdrafts (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 notthe Company's statutory financial statements for that financial year. Thosefinancial statements have been reported on by the Company's auditors anddelivered to the Registrar of Companies. The report of the auditors was (i)unqualified, (ii) did not include a reference to any matters to which theauditors 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 CompaniesAct 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 forthe six months ended 30 June 2007 which comprises the Consolidated InterimIncome Statement, the Consolidated Interim Balance Sheet, the ConsolidatedInterim Cash Flow Statement, the Consolidated Interim Statement of RecognisedIncome and Expenses and the related notes. We have read the other informationcontained in the Interim Report and considered whether it contains any apparentmisstatements or material inconsistencies with the Financial Information.This report is made solely to the Company in accordance with the terms of ourengagement to assist the Company in meeting the requirements of the ListingRules of the Financial Services Authority. Our review has been undertaken sothat we might state to the Company those matters we are required to state to itin 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 forour review work, for this report, or for the conclusions we have reached. Directors' responsibilities The Interim Report, including the Financial Information contained therein, isthe responsibility of, and has been approved by, the Directors. The Directorsare responsible for preparing the Interim Report in accordance with the ListingRules of the Financial Services Authority which require that the accountingpolicies and presentation applied to the interim figures should be consistentwith those applied in preparing the preceding annual financial statements exceptwhere any changes, and the reasons for them, are disclosed. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4issued by the Auditing Practices Board for use in the UK. A review consistsprincipally of making enquiries of management and applying analytical proceduresto the Financial Information and underlying financial data and, based thereon,assessing whether the accounting policies and presentation have beenconsistently applied unless otherwise disclosed. A review excludes auditprocedures such as tests of controls and verification of assets, liabilities andtransactions. It is substantially less in scope than an audit performed inaccordance with International Statements on Auditing (UK and Ireland) andtherefore provides a lower level of assurance than an audit. Accordingly, we donot express an audit opinion on the Financial Information. Review conclusion On the basis of our review we are not aware of any material modifications thatshould be made to the Financial Information as presented for the six monthsended 30 June 2007. KPMG Audit Plc Chartered AccountantsLeeds7 September 2007 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Marshalls