Final Results

Marshalls PLC 05 March 2004 Embargoed until 7.00am on Friday 5 March 2004 MARSHALLS PLC PRELIMINARY RESULTS FOR THE YEAR TO 31 DECEMBER 2003 Marshalls plc, the specialist Landscape, Clay and Natural Stone Products Group, today announces results for the year to 31 December 2003. Year to 31 Year to 31 Increase Increase December 2003 December 2002 As reported Like for like Â£'000 Â£'000 % % Turnover 349,481 342,056 2.2 6.5 Operating profit 53,128 50,329 5.6 7.1 Profit before tax 50,403 49,391 2.0 Adjusted basic EPS 21.46p 19.41p 10.6 Dividend per share 11.00p 10.00p 10.0 Like for like results exclude the Flooring business that was sold in November 2002 and the effect of two small acquisitions. Adjusted basic EPS is adjusted for goodwill amortisation and the gain on disposal and termination of business. Key Points â€¢Record turnover, operating profit and profit before tax â€¢Adjusted basic EPS up 10.6% â€¢Dividends up 10.0% to 11.0p per share â€¢Strong cash inflow from operating activities of over Â£81m â€¢Net debt reduced to Â£13m and gearing of 6.1% despite Â£40m of capital investment in the year â€¢Capital investment in the past three years of over Â£100m â€¢2004 has begun in line with our expectations â€¢Circa Â£75m of cash to be returned to shareholders Commenting on these results: Christopher Burnett, Chairman, said: 'This has been another successful year for the Group and all of our Divisions. Following the return of circa Â£75 million to shareholders, Marshalls will still have sufficient financial flexibility to take advantage of future investment opportunities. We continue to experience good trading conditions in the domestic, commercial and public sectors of the business. The new financial year has begun in line with our expectations'. Graham Holden, Chief Executive, said: 'The record profit achieved is not only a reflection of the quality of the Marshalls business but also results from the considerable investment we have made in both manufacturing efficiency and new product development'. Enquiries: Christopher Burnett Chairman Marshalls plc Graham Holden Chief Executive 0207 404 5959 on 5 March 2004 Ian Burrell Finance Director 01484 438900 thereafter Jon Coles Brunswick Group 0207 404 5959 William Cullum Preliminary Results Statement For the sixth year in a row, the Group has achieved record sales and profit before taxation. Turnover in the twelve months to 31 December 2003 increased by 2.2 per cent, to Â£349.5 million (2002: Â£342.1 million) and, on a like for like basis, this increase was 6.5%. Operating profit in the year increased by 5.6 per cent to Â£53.1 million (2002: Â£50.3 million) and on a like for like basis the growth was 7.1%. These like for like results exclude the Flooring business that was sold in November 2002 and the effect of two small acquisitions. Group Overview All Divisions produced good sales growth. Landscape Products increased by 6.8 per cent, Clay Products by 6.2 per cent, and Natural Stone, including acquisitions, by 14.3 per cent. In a low inflation environment this sales growth is very pleasing. Our improvement in profitability is underpinned by four things: a strong marketing and new product development programme; a commitment to the highest levels of customer service; a programme of capital investment which has amounted to over Â£100 million in the past three years; and a relentless drive to lower operating costs. Landscape Products Division The Division had sales of Â£288.8 million (2002: Â£270.4 million), an increase of 6.8 per cent over last year. Operating profit was Â£44.9 million (2002: Â£41.2 million), up 8.8 per cent. Activity during the year was as strong in the commercial and public sectors as it was in the domestic business. Our network of Approved Installers enables us to maintain a close watch on order backlog. This information gives us confidence to believe that the outlook remains positive. Clay Products Division The Division increased sales by 6.2 per cent to Â£32.1 million (2002: Â£30.3 million). Operating profit was Â£4.2 million (2002: Â£4.4 million). After a poor start to 2003, which as we explained in our half-year statement was due to a shortage of supply of a certain raw material, sales in the second half were 8.7 per cent ahead of the second half of 2002. The underlying increase in operating profit has shown good progress in the second half of the year. The outlook is encouraging with industry stocks at historically low levels and demand stronger than it has been for some years. We also believe we can achieve further improvements in our operating efficiency. Natural Stone Division Sales in the Division amounted to Â£28.5 million (2002: Â£25.0 million), 14.3 per cent ahead of 2002. These numbers include acquisition turnover that accounted for 11.3 per cent of this growth. Operating profit increased by 23.5 per cent to Â£4.1 million (2002: Â£3.3 million) of which 16.2 per cent arose from acquisitions. The Division tends to be associated with high profile prestigious projects, most recently the pedestrianisation of Trafalgar Square, and the re-layout of the Somerset House courtyard. Currently, the Division is supplying products for Terminal 5 at Heathrow Airport. Other prestige schemes in towns and cities around the country are in the pipeline. Balance Sheet The Group balance sheet remains strong. Cash inflow from operating activities amounted to Â£81.3 million (2002: Â£54.6 million). Net borrowings at the year-end of Â£13.2 million (2002: Â£17.9 million) represent gearing of 6.1 per cent (2002: 8.8 per cent) despite capital expenditure of Â£40.8 million. Stock was reduced by Â£6.2 million in the year. Dividend The Board recommends a final dividend of 7.35p (2002: 6.70p) per ordinary share making a total of 11.00p (2002: 10.00p) for the year, an increase of 10.0 per cent compared with 2002. The dividend will be paid on 7 July 2004 to shareholders on the Register on 4 June 2004. The ex-dividend date will be 2 June 2004. Improved capital structure / return of value to shareholders The Board of Marshalls announces its intention, subject to the arrangement of appropriate debt financing and following approval by shareholders at Extraordinary General Meetings which will follow immediately after the Annual General Meeting set for 10 June 2004, to return in the order of Â£75 million to shareholders during the course of this summer. It is envisaged that this return of value will be undertaken through the creation of redeemable B shares (and the subsequent redemption thereof) and will be achieved through the introduction of a new holding company for the Group via a court-approved scheme of arrangement and a subsequent reduction of capital, thereby creating additional distributable reserves for the Group. This return of value will enable Marshalls to create a more efficient capital structure, whilst also providing it with sufficient financial flexibility to take advantage of future investment opportunities. Shareholders will be kept informed of developments. Management As previously announced, Graham Holden, Chief Executive of the Landscape Products Division since November 2000, has become Group Chief Executive with effect from 1 January 2004. David Sarti, who was Operations Director of that Division, has been appointed Managing Director of Marshalls Landscape Products. In addition, during the second half of the year, there was a complete change in Non Executive Directors with the appointment of Andrew Allner and Richard Scholes. The new Board has now started the process of finding a Chairman to replace Christopher Burnett. We have announced previously that he has expressed the wish to leave the Group and to find a fresh business challenge. Comments Christopher Burnett, Chairman, said: 'This has been another successful year for the Group and all of our Divisions. Following the return of circa Â£75 million to shareholders Marshalls will still have sufficient financial flexibility to take advantage of future investment opportunities. We continue to experience good trading conditions in the domestic, commercial and public sectors of the business. The new financial year has begun in line with our expectations'. Graham Holden, Chief Executive, said, 'The record profit achieved is not only a reflection of the quality of the Marshalls business but also results from the considerable investment we have made in both manufacturing efficiency and new product development'. MARSHALLS PLC PRELIMINARY ANNOUNCEMENT OF RESULTS AUDITED CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31 DECEMBER 2003 Notes 2003 2002 Â£'000 Â£'000 Turnover 1 349,481 342,056 Operating costs (296,353) (291,727) -------- -------- Operating profit 1 53,128 50,329 Gain on disposal and termination of business 1 - 2,255 -------- -------- Profit on ordinary activities before interest 53,128 52,584 Interest (net) (2,725) (3,193) -------- -------- Profit on ordinary activities before taxation 1 50,403 49,391 Taxation on profit on ordinary activities 2 (15,902) (15,750) -------- -------- Profit for the financial year 34,501 33,641 Preference dividends: Non equity shares 3 (54) (137) -------- -------- Profit attributable to ordinary shareholders 34,447 33,504 Ordinary dividends: Equity shares 4 (18,401) (16,737) -------- -------- Retained profit for the financial year 16,046 16,767 -------- -------- Earnings per share: Basic 5 20.61p 20.05p -------- -------- Diluted 5 20.58p 20.02p -------- -------- Adjusted Basic 5 21.46p 19.41p -------- -------- Dividend per share: Pence per share 4 11.00p 10.00p -------- -------- MARSHALLS PLC PRELIMINARY ANNOUNCEMENT OF RESULTS AUDITED CONSOLIDATED BALANCE SHEET AS AT 31 DECEMBER 2003 Notes 2003 2002 Â£'000 Â£'000 Fixed assets Intangible 23,725 24,113 Tangible 206,650 184,699 -------- -------- 230,375 208,812 -------- -------- Current assets Stocks 56,744 62,978 Debtors 33,412 30,997 Cash at bank and in hand 7,884 7,307 -------- -------- 98,040 101,282 -------- -------- Creditors: Amounts falling due within one year (68,992) (67,493) -------- -------- Net current assets 29,048 33,789 -------- -------- Total assets less current liabilities 259,423 242,601 -------- -------- Creditors: Amounts falling due after more than one year (20,000) (20,003) Provisions for liabilities and charges (21,275) (19,852) -------- -------- Net assets 1 218,148 202,746 -------- -------- Capital and reserves Called up share capital 41,837 42,007 Share premium account 18,138 17,726 Revaluation reserve 5,166 5,166 Other reserves 14,574 14,352 Profit and loss account 138,433 123,495 -------- -------- Shareholders' funds 218,148 202,746 -------- -------- Analysis of shareholders' funds Equity 218,148 201,638 Non equity - 1,108 -------- -------- 218,148 202,746 -------- -------- MARSHALLS PLC PRELIMINARY ANNOUNCEMENT OF RESULTS AUDITED CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2003 Notes 2003 2002 Â£'000 Â£'000 Cash inflow from operating activities 6 81,261 54,608 Returns on investments and servicing of finance (2,831) (3,407) Taxation (14,018) (13,301) Capital expenditure (39,802) (33,832) Acquisitions and disposals (2,014) 9,210 Equity dividends paid (17,300) (16,128) -------- -------- Cash inflow/(outflow) before financing 5,296 (2,850) Financing (4,719) (4,498) -------- -------- Increase/(decrease) in cash in the year 577 (7,348) -------- -------- Reconciliation of net cash flow to movement in net debt Increase/(decrease) in cash in the year 577 (7,348) Cash outflow from decrease in debt and lease financing 4,075 2,315 -------- -------- Movement in net debt in the year 4,652 (5,033) Net debt at beginning of year (17,895) (12,862) -------- -------- Net debt at end of year (13,243) (17,895) -------- -------- Net gearing 6.1% 8.8% MARSHALLS PLC PRELIMINARY ANNOUNCEMENT OF RESULTS AUDITED CONSOLIDATED PRIMARY STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2003 Consolidated Reconciliation of Movements in Shareholders' Funds 2003 2002 Â£'000 Â£'000 Profit for the financial year 34,501 33,641 Dividends (preference and ordinary) (18,455) (16,874) -------- -------- Retained profit for the financial year 16,046 16,767 New share capital issued 464 143 Repayment of cumulative redeemable preference shares (1,108) - Repayment and cancellation of 10% cumulative preference shares - (2,274) Costs associated with share cancellation - (52) Goodwill previously eliminated against reserves - 1,450 -------- -------- Net additions to shareholders' funds 15,402 16,034 Shareholders' funds at beginning of year 202,746 186,712 -------- -------- Shareholders' funds at end of year 218,148 202,746 -------- -------- The Group had no other recognised gains or losses other than those disclosed in the Consolidated Profit and Loss Account in either the current or preceding financial year. There is no material difference between historical cost profits and those reported in the profit and loss account. MARSHALLS PLC PRELIMINARY ANNOUNCEMENT OF RESULTS AUDITED CONSOLIDATED NOTES FOR THE YEAR ENDED 31 DECEMBER 2003 1 Segmental analysis Turnover Operating profit 2003 2002 2003 2002 Â£'000 Â£'000 Â£'000 Â£'000 Landscape Products 288,819 270,384 44,874 41,248 Clay Products 32,130 30,252 4,202 4,372 Natural Stone 28,532 24,958 4,052 3,282 ------- ------- ------- ------ 349,481 325,594 53,128 48,902 Flooring business disposed - 16,462 - 1,427 ------- ------- ------- ------ 349,481 342,056 53,128 50,329 ------- ------- Gain on disposal and termination of business - 2,255 Interest (net) (2,725) (3,193) ------- ------ Profit on ordinary activities before taxation 50,403 49,391 ------- ------ The non-Flooring businesses previously included within the Emerging Businesses segment are now shown within the Landscape Products segment. The comparative figures for 2002 have been restated accordingly. For the year ended 31 December 2002, the Landscape Products turnover, operating profit and net assets were previously stated at Â£254,515,000, Â£38,530,000 and Â£171,437,000 respectively. The gain on disposal and termination of business in 2002 relates to the sale of the Group's Flooring business on 29 November 2002 for gross cash proceeds of Â£13.1 million and the closure of a related business on the same manufacturing site. The gain on disposal of Â£2,255,000 is disclosed net of goodwill of Â£1,450,000 previously eliminated against reserves. No tax is payable on the gain due to the utilisation of capital losses. 2003 2002 Â£'000 Â£'000 Geographical destination of sales: United Kingdom 344,609 337,101 Rest of the World 4,872 4,955 ------- ------- 349,481 342,056 ------- ------- All turnover originates in the United Kingdom from continuing operations and there is no material inter-segmental turnover. Net Assets 2003 2002 Â£'000 Â£'000 Landscape Products 200,026 181,513 Clay Products 37,089 40,780 Natural Stone 32,234 28,120 -------- -------- 269,349 250,413 Unallocated net liabilities (51,201) (47,667) -------- -------- 218,148 202,746 -------- -------- Unallocated net liabilities comprise non-operating assets and liabilities of a financing nature, principally net borrowings, corporation tax, deferred tax and dividends payable. MARSHALLS PLC PRELIMINARY ANNOUNCEMENT OF RESULTS AUDITED CONSOLIDATED NOTES FOR THE YEAR ENDED 31 DECEMBER 2003 2 Taxation on profit on ordinary activities 2003 2002 Â£'000 Â£'000 United Kingdom corporation tax at 30.0% (2002: 30.0%) Current year 14,688 14,772 Prior year (209) - ------ ------- 14,479 14,772 Deferred taxation 1,423 978 ------ ------- 15,902 15,750 ------ ------- 3 Preference dividends: non equity shares 2003 2002 per share Â£'000 per share Â£'000 Cumulative redeemable preference shares of 20p each 6.50p 54 6.50p 73 -------- -------- 10% cumulative preference shares of Â£1 each - 64 ------ ------ 54 137 ------ ------ On 1 October 2003, the Company repaid the cumulative redeemable preference shares of 20p each and they were subsequently cancelled. On 20 June 2002, the Company repaid the 10% cumulative preference shares and they were subsequently cancelled. 4 Ordinary dividends: equity shares 2003 2002 per share Â£'000 per share Â£'000 Interim: paid 8 December 2003 3.65p 6,101 3.30p 5,523 Final: proposed 7.35p 12,300 6.70p 11,214 -------- ------- -------- ------- 11.00p 18,401 10.00p 16,737 -------- ------- -------- ------- MARSHALLS PLC PRELIMINARY ANNOUNCEMENT OF RESULTS AUDITED CONSOLIDATED NOTES FOR THE YEAR ENDED 31 DECEMBER 2003 5 Earnings per share 2003 2002 Â£'000 Â£'000 Profit for the financial year attributable to ordinary shareholders 34,447 33,504 --------- --------- Profit for the financial year attributable to ordinary shares and potentially ordinary dilutive shares 34,447 33,504 --------- --------- Adjusted basic earnings per share reconciliation: Profit for the financial year 34,447 33,504 Goodwill amortisation 1,430 1,190 Gain on disposal and termination of business - (2,255) --------- --------- 35,877 32,439 --------- --------- Weighted average number of shares 167,159,671 167,130,230 ---------- ---------- Weighted average number of shares 167,159,671 167,130,230 Potentially dilutive shares 202,054 247,797 ---------- ---------- 167,361,725 167,378,027 ---------- ---------- Basic earnings per share 20.61p 20.05p ---------- ---------- Diluted earnings per share 20.58p 20.02p ---------- ---------- Adjusted basic earnings per share 21.46p 19.41p ---------- ---------- Basic earnings per share is calculated by dividing the profit attributable to ordinary shareholders of Â£34,447,000 (2002: Â£33,504,000) by the weighted average number of shares in issue during the year of 167,159,671 (2002: 167,130,230). Diluted earnings per share is calculated by dividing profit attributable to ordinary shares and potentially ordinary dilutive shares of Â£34,447,000 (2002: Â£33,504,000) by the weighted average number of shares in issue during the year of 167,159,671 (2002: 167,130,230), plus dilutive shares of 202,054 (2002: 247,797) which totals 167,361,725 (2002: 167,378,027). 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 the gain on disposal and termination of business. MARSHALLS PLC PRELIMINARY ANNOUNCEMENT OF RESULTS AUDITED CONSOLIDATED NOTES FOR THE YEAR ENDED 31 DECEMBER 2003 6 Reconciliation of operating profit to cash inflow from operating activities 2003 2002 Â£'000 Â£'000 Operating profit 53,128 50,329 Amortisation charges 1,430 1,190 Depreciation charges 17,538 15,848 Loss/(profit) on sale of tangible fixed assets 317 (66) Decrease/(increase) in stocks 6,711 (9,721) Increase in debtors (1,382) (964) Increase/(decrease) in creditors 3,519 (2,008) ------- ------- Cash inflow from operating activities 81,261 54,608 ------- ------- 7 Annual General Meeting The Annual General Meeting will be held at Birkby Grange, Birkby Hall Road, Birkby, Huddersfield, West Yorkshire, HD2 2YA at 12.00 (noon) on Thursday 10 June 2004. 8 Other The audited consolidated figures have been prepared on the basis of the accounting policies set out in the 2002 financial statements. The above financial information does not constitute statutory accounts for the year ended 31 December 2003 or for the year ended 31 December 2002 but is derived from those financial statements. Statutory accounts for the year ended 31 December 2002 have been delivered to the Registrar of Companies. The auditors have reported on the year ended 31 December 2002 financial statements and 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 2003 will be delivered to the Registrar of Companies following the Company's Annual General Meeting. END This information is provided by RNS The company news service from the London Stock Exchange

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