Final Results

RNS Number : 4167O

Marshalls PLC

06 March 2009

 



Preliminary results for the year ended 31 December 2008

Marshalls plc, the specialist Landscape Products Group, announces its full year results.

Financial Highlights

	Year ended 31 December 2008	Year ended 31 December 2007
Results before works closure costs and asset impairments:
Revenue	£378.1m	£402.9m
Operating profit	£30.6m	£48.8m
Profit before tax	£22.5m	£42.1m
Basic EPS	11.61p	21.28p
Dividends declared and paid	13.85p	13.40p
Final dividend recommended	1.45p	9.30p
Reported results:
Operating profit	£3.6m	£48.8m
(Loss)/profit before tax	£(4.5)m	£42.1m
Basic EPS	(4.46)p	21.28p

• Public Sector and Commercial market (59 per cent of Group revenue) showed resilience in 2008

• Domestic market suffering from low consumer confidence but with market for installed patios and driveways ('Don't Move, Improve') stronger than 'new build'

• Early evidence of significant opportunities for the Olympics

In view of the difficult market, Marshalls has taken rapid actions to reduce its cost base and further improve efficiency

• Four operating sites closed to reflect reduced volumes and to reduce fixed costs.  Managed Installations business closed to reduce fixed costs. Annualised fixed cost reduction of £8m a year

• Cash costs of closure covered by release of cash from inventory reduction and property sales

• Reductions in capital expenditure following strong investment in new and efficient plant over recent years

Marshalls has a strong brand, well invested and efficient manufacturing and distribution, and a robust balance sheet with significant headroom

Commenting on these results, Graham Holden, Chief Executive, said:

'In the face of current economic uncertainty the Group has been quick to right-size its operations and cost base to withstand the downturn whilst ensuring it retains the capacity and flexibility to meet the upturn when it comes.  As a focussed UK Building Materials Group with leading positions in its core markets, Marshalls continues to focus on the market sectors where activity is more robust, developing its paving, walling and street furniture businesses and expanding its natural stone offer. 

The Group's balance sheet is robust and the actions that have been taken will reduce borrowings in 2009.  The strength of the Marshalls brand, the continued emphasis on innovative new production and materials technology, together with a modern, well invested and efficient manufacturing and logistics network will ensure that the Group will weather the storm and emerge in a stronger competitive position when the upturn arrives.'

Enquiries:

Graham Holden	Chief Executive	Marshalls plc	01484 438900
Ian Burrell	Finance Director
Jon Coles		Brunswick Group LLP	0207 404 5959
Kate Miller

  Group Results

Marshalls' revenue at £378.1 million (2007: £402.9 million) was down 6.2 per cent compared with the prior year.  Acquisitions added £1.4 million to revenue and 'like for like' revenue was lower by £26.2 million. 

The Public Sector and Commercial market now represents 59 per cent of Group revenue (2007: 55 per cent).  This market delivered good growth in the first half of 2008 but declined from September 2008.  A lack of liquidity hit the whole market and resulted in immediate contract delays and cancellations.  Generally, Public Sector demand remains stronger than Industrial and Commercial but the recent growing proportion of private finance initiatives in the Public Sector means that it has also been affected.  Like for like sales were 1 per cent ahead of 2007 with volumes down 4 per cent and sales price and mix stronger by 5 per cent.

The Domestic market comprises the remaining 41 per cent of revenue (2007: 45 per cent).  Consumer confidence is low but the market for installed patios and driveways remains stronger than that for 'new build' and with the target customer groups covering 8.9 million homes it continues to be a far bigger potential market.  Like for like revenue was down 15 per cent compared with 2007, with volumes down 20 per cent and sales price and mix, to recover increases in input costs, stronger by 5 per cent. 

Operating profit, before works closure costs and asset impairments, was £30.6 million (2007: £48.8 million).  After works closure costs and asset impairments of £27.0 million, reported operating profit was £3.6 million (2007: £48.8 million).  

The net effect of investment in business development initiatives and other one-off items in the year was a net charge against operating profit of £3.3 million (2007: £2.3 million), giving an underlying operating profit of £33.9 million (2007: £51.1 million), a decrease of 33.7 per cent. 

Within this net charge the Group expensed £5.5 million (2007: £4.3 million) related to business developments including £4.1 million (2007: £3.6 million) on consumer initiatives. These initiatives included £1.6 million relating to further marketing costs (including the RHS Chelsea Flower Show) to support the development of the Marshalls brand, and investment to support and enhance the registered approved installer scheme.  Business development initiatives in the Public Sector and Commercial market have given rise to revenue expenditure of £1.4 million during the year.  The Group also generated a profit of £2.2 million from the sale of surplus properties and other assets. 

Marshalls has reduced its cost base and improved efficiency. The Group concluded, following a review of the medium term manufacturing strategy, that four operating sites could be closed permanently. The sites at Sawley in the East Midlands and Cannock in the West Midlands were closed in July 2008 and in the last quarter the Group has announced the closure of the works at Hambrook on the South Coast and Llay in North Wales.

The Group has also reduced its investment in its Managed Installation business at a cost of £5.1 million. This business was directed at the consumer market and, given the current cost structure relative to the market level of expected consumer activity, it was considered appropriate to reduce this cost. Initiatives on lead generation and the support of the approved installers are being progressed in a lower cost way.

The charge for works closure costs and further capacity reductions in 2008 was £17.7 million.  This charge includes the site closures at Cannock, Sawley and Hambrook and the cost of reducing the scale of the Managed Installations and Display Centre part of the Consumer business.  The cash outflow from this charge will be £11.0 million, of which £6.0 million was incurred in 2008, comprising redundancy, site decommissioning, plant and asset relocations.  The remaining charge of £6.7 million relates to non-cash plant and asset write offs. 

The works closure cost for Llay is expected to be around £5 million, of which £3 million will be non-cash asset write offs, and this will be charged in 2009.  The consultation process with employees and their representatives involved the consideration of alternatives to closure and was completed in late January 2009. 

This programme leaves the Group with well invested modern plants which have sufficient capacity to meet medium term demand requirements efficiently.

The closures are expected to reduce fixed costs by around £8 million in a full year of which the action taken in July 2008 gave a benefit of approximately £1.5 million in 2008.  In addition to cost savings the works closures have enabled the Group to realise cash from inventories.  In 2008 £6 million of inventory was released from the Cannock and Sawley closures and a further cash release of approximately £4 million is expected in 2009 from the further actions already taken and the further works closures.  Overall the release of cash from the reduction of inventory and the sale of the properties vacated are expected to exceed the cash cost of the action taken to close the four operating sites. 

Asset impairments of £9.3 million include the full amount of goodwill that was being carried in the Group balance sheet in respect of the Premier Mortars, Compton and Scenic Blue businesses.  Premier Mortars supplies ready to use mortar to the house building market, Compton supplies pre-fabricated garages to the consumer and Scenic Blue was part of the Managed Installations initiative.  These businesses have been particularly affected by the deterioration in current market conditions and the short term outlook remains challenging. 

Basic earnings per share, before works closure costs and asset impairments, was 11.61 pence (2007: 21.28 pence) per share. 

Operating Performance

The Marshalls operating strategy is to combine regional manufacturing and distribution sites, known as Service Centres, with national manufacturing works which produce the newly introduced and specialist products that have not reached the commercial volumes to justify regional manufacture.  The same capital equipment produces products for both the Domestic market and the Public Sector and Commercial market. Marshalls geographical spread is unique in the industry and ensures that Marshalls has the lowest cost to market.  Productivity gains created by recent investment in automation have meant that when demand improves it will be delivered from new and more efficient plants working harder with the remaining operating sites providing significant additional capacity.  The Group continues to position its manufacturing capability to be leaner and fitter when demand recovers.

Additional action to reduce cost has included the consolidation of manufacturing and administration in the Street Furniture and Stone Walling businesses and the overhead base has been adjusted to reflect the reduced sales volumes.  The final commissioning of five new ready to use mortar plants has also been delayed pending an improvement in the 'new build' housing market.  The total reduction in numbers employed as a result of these capacity reduction initiatives has been approximately 400, representing 14 per cent of the Group total.  The Group continues to balance the need for significant reductions in the cost base with the desire to continue to innovate, to drive long term growth. 

Capital investment in 2008 totalled £22.0 million (2007: £31.7 million).  This compares to a depreciation charge of £21.4 million (2007: £21.0 million).  Recent investment has enabled capital expenditure to be reduced significantly and this can extend for at least two years without any noticeable impact on the effectiveness of the business.  The Group will continue to invest selectively in innovation to deliver new products and improvement projects with a short payback period and will focus on maximising the benefit of past investment, particularly in the natural stone walling and aggregate businesses.  Given the focus on increased cash generation and the significant investment in productivity improvements over the past few years, we anticipate that total capital expenditure in 2009 will be approximately half of the 2008 level and broadly half of the expected depreciation charge.

Marshalls is the market leader in the domestic driveway and patio markets and has led the development of the consumer landscape products market over an extended period. The Group's Domestic strategy continues to be to create 'pull through' demand by investing in sales and marketing direct to the consumer to drive more sales through the quality approved installers.  The objective is to improve the product mix, continually develop the Marshalls brand and deliver a level of service that is 'second to none.'  Quality installers remain active and are seeing trends towards older customers and a higher proportion of cash transactions with long term residents rather than new home purchasers.  This suggests a shift to the 'Don't Move, Improve' category and that there is a greater resilience to the downturn in the 'Do it for me' market than 'new build.'  The Group sees the current market conditions as an opportunity to strengthen relationships with its approved quality installers.  Installer order books at the end of February 2009 were 5.6 weeks (October 2008: 6.4 weeks; February 2008: 8.4 weeks).

In response to market conditions the Group has reduced its investment in Managed Installations and Display Centres.  Currently seven Display Centres are in the process of being closed and the remaining five Lead Generation Centres will be staffed by employees from adjacent garden centres. 

In 2008 Marshalls sponsored the Royal Horticultural Society ('RHS') Chelsea Flower Show for the second of its three year sponsorship period.  This continued to provide excellent media coverage and increase brand awareness.  Installers are particularly encouraged by the increased visibility of the Marshalls brand on mainstream television and Marshalls is increasingly synonymous with garden and driveway makeovers.

An important part of Marshalls' strategy is the development of an integrated product offering for the Public Sector and Commercial market. In response to market demand, and working closely with architects, designers and contractors, the Group continues to offer fully integrated solutions that combine natural stone and concrete paving, linear drainage, bollards, seating, and attractively designed lighting.  This strategy is delivering good growth in the Street Furniture, natural stone paving and sustainable urban drainage businesses.  The Olympics projects are gathering momentum and the Group has already provided products for surrounding infrastructure developments. 

Corporate Activity

The Group continues to seek opportunities to expand reserves and geographical coverage in natural stone. During 2008 the Group completed the acquisition of the Gwrhyd Specialist Stone Quarry business in South Wales which owns a high quality reserve of pennant stone and supplies the Domestic market. This acquisition offers excellent synergy opportunities by increasing the product range of walling and paving products into the Public Sector and Commercial market.  The Group also acquired a 25 per cent interest in two Cotswold limestone quarry reserves.  In each case the Group has long term supply agreements for the extraction of block stone for paving and walling products which widen the range of colours that can be offered to customers.  The blocks will be processed through existing facilities, further benefiting efficiency.  The cash outflow in respect of these acquisitions was £6.1 million in 2008 and £0.8 million is payable in 2009.  With no additional cash outflow, the Group has also acquired the mineral lease and rights to extract good quality limestone aggregate from a consented reserve in South Wales. 

The Group recognises that, even in the current economic conditions, it is important to look to the medium and long term and to continue investing in such opportunities as they arise. The Group's valuable mineral reserves comprise 9.0 (2007: 8.5) million tonnes of block stone and 50.8 (2007: 48.1) million tonnes of aggregates which represent over 65 and 25 years' supply respectively at current extraction rates.

Balance Sheet

Net assets at 31 December 2008 were £193.2 million (2007: £200.6 million) which represented 135 pence (2007: 140 pence) per share.  

The Group continues to keep a tight control of receivables and our debtor days are industry leading. The Group insures all its debts which provides excellent intelligence to minimise the number and value of bad debts and ultimately provides compensation if bad debts are incurred.  Cover is in place until November 2010.  Inventories have increased to £89.8 million (2007: £82.9 million) due principally to higher inflationary factors that are affecting raw material costs which added £6.5 million to the inventory balance.

Risk management has been a key focus for the Group's pension scheme over recent years.  In the summer of 2007 changes in investment strategy were made with 20 per cent of scheme assets being transferred from equities to liability driven investments to match better the liability profile of the scheme membership.  This has benefited the fair value of the scheme assets which have increased from £177.0 million to £183.8 million.  The year end balance sheet value for pensions is a surplus of £16.5 million (2007: £17.8 million deficit).  This is in part due to the investment strategy but also due to the impact of the relevant financial assumptions set out in Note 9.  The AA corporate bond rate is 6.7 per cent (2007: 5.8 per cent).  Such changes have resulted in an actuarial gain of £19.9 million (net of deferred taxation) (2007: £12.6 million) and this has been recorded in the Consolidated Statement of Recognised Income and Expenses.

Net debt and borrowing facilities

Net debt has increased from £96.9 million to £111.3 million with gearing at the year end being 57.6 per cent (2007: 48.3 per cent).

The Group renewed its bank facilities in August 2008 and, as illustrated in Note 12, has significant committed facilities in place with a positive spread of medium term maturities with the majority of facilities not maturing until 2011 or later.  The disclosures in Note 12 also illustrate that the Group has significant headroom in its facilities with utilisation at 31 December 2008 representing 60 per cent of the available facilities. The Group's peak seasonal working capital requirements run from 1 February until 31 August and an additional working capital facility of £20.0 million is available between these dates.  The bank facilities are unsecured other than for normal inter-company cross guarantees between the Group's subsidiary undertakings.

Dividends

The Group has consistently increased dividends from 1993 to 2007 at a compound annual rate of 9.3 per cent and in 2004 £75 million was returned to shareholders through a return of capital.  In reviewing current dividend policy, the Board has assessed carefully the Group's short and medium term earnings outlook and cash generation.  Whilst any reduction in dividend is regrettable, the Board believes that it is appropriate in the current economic climate to rebase the dividend and accordingly a total dividend of 6.00 pence per share is recommended for 2008.

The Board remains committed to a progressive dividend policy and the level of future dividend payments will take into account the Group's underlying earnings, cash flows and capital investment plans, and the need to maintain an appropriate level of dividend cover.

An interim dividend of 4.55 pence (2007: 4.55 pence) per share was paid on 3 December 2008. A final dividend of 1.45 pence (2007: 9.30 pence) per share is now being recommended for payment on 3 July 2009 to shareholders on the register at the close of business on 5 June 2009. The ex-dividend date will be 3 June 2009. This gives a total of 6.00 pence (2007: 13.85 pence) per share for the year.

On an IFRS basis, which does not account for the final dividend until it is approved at the forthcoming Annual General Meeting, the total dividend declared for the year ended 31 December 2008 is 13.85 pence (2007: 13.40 pence) per share which represents an increase of 3.4 per cent. 

Outlook

The overall demand outlook remains uncertain with current sales volumes continuing to reduce.  The Group has good visibility of demand in the Public Sector and Commercial market, which now represents approximately 59 per cent of the Group's revenue. Low consumer confidence continues to impact the Domestic market and the short term winter weather conditions and the actions of distributors to reduce their inventories is distorting the underlying picture further.  As usual, this will become clearer after Easter. 

In the face of current economic uncertainty the Group has been quick to right-size its operations and cost base to withstand the downturn whilst ensuring it retains the capacity and flexibility to meet the upturn when it comes.  As a focussed UK Building Materials Group with leading positions in its core markets, Marshalls continues to focus on the market sectors where activity is more robust, developing its paving, walling and street furniture businesses and expanding its natural stone offer. 

The Group's balance sheet is robust and the actions that have been taken will reduce borrowings in 2009.  The strength of the Marshalls brand, the continued emphasis on innovative new production and materials technology, together with a modern, well invested and efficient manufacturing and logistics network will ensure that the Group will weather the storm and emerge in a stronger competitive position when the upturn arrives. 

Graham Holden

Chief Executive

  MARSHALLS PLC

PRELIMINARY ANNOUNCEMENT OF RESULTS

AUDITED CONSOLIDATED INCOME STATEMENT

FOR THE YEAR ENDED 31 DECEMBER 2008

	Notes	Before works closure costs and asset impairments 2008 £'000	Works closure costs and asset impairments 2008 £'000		Total 2008 £'000		Total  2007 £'000
Revenue	2	378,063	-		378,063		402,926
Net operating costs	3, 4	(347,447)	(26,989)		(374,436)		(354,116)
Operating profit	2	30,616	(26,989)		3,627		48,810
Financial expenses	5	(19,627)	-		(19,627)		(17,596)
Financial income	5	11,473	-		11,473		10,889
Profit/(loss) before tax		22,462	(26,989)		(4,527)		42,103
Income tax expense	6	(6,250)	4,556		(1,694)		(11,852)
Profit/(loss) for the financial period attributable to equity shareholders of the parent		16,212	(22,433)		(6,221)		30,251
Earnings/(loss) per share:
Basic	7	11.61p			(4.46)p		21.28p
Diluted	7	11.47p			(4.46)p		21.19p
Dividend:
Pence per share	8				13.85p		13.40p
Dividends declared	8				19,374		19,098

  MARSHALLS PLC

PRELIMINARY ANNOUNCEMENT OF RESULTS

AUDITED CONSOLIDATED BALANCE SHEET

AS AT 31 DECEMBER 2008

Assets	Notes		2008 £'000		2007 £'000
Non-current assets
Property, plant and equipment			216,888		209,313
Intangible assets			41,351		60,147
Investment in associates			2,113		-
Employee benefits	9		16,501		-
Deferred taxation assets			762		7,055
			277,615		276,515
Current assets
Inventories			89,814		82,920
Trade and other receivables			32,225		42,866
Cash and cash equivalents			538		19
Assets held for sale			-		8,199
			122,577		134,004
Total assets			400,192		410,519
Liabilities
Current liabilities
Bank overdraft			-		27,840
Trade and other payables			61,780		60,236
Corporation tax			3,855		8,710
Interest bearing loans and borrowings			23,429		7,234
			89,064		104,020
Non-current liabilities
Interest bearing loans and borrowings			88,439		61,871
Employee benefits			-		17,795
Deferred taxation liabilities			29,452		26,192
			117,891		105,858
Total liabilities			206,955		209,878
Net assets			193,237		200,641
Equity
Capital and reserves attributable to equity shareholders of the parent
Share capital			35,777		35,777
Share premium account			2,734		2,734
Own shares			(9,472)		(8,866)
Capital redemption reserve			75,394		75,394
Consolidation reserve			(213,067)		(213,067)
Hedging reserve			(124)		(3)
Retained earnings			301,995		308,672
Equity shareholders' funds			193,237		200,641

  MARSHALLS PLC

PRELIMINARY ANNOUNCEMENT OF RESULTS

AUDITED CONSOLIDATED CASH FLOW STATEMENT

FOR THE YEAR ENDED 31 DECEMBER 2008

	Notes			2008 £'000		2007 £'000
Net cash flow from operating activities	10(i)			21,878		27,666
Net cash flow from investing activities	10(ii)			(16,302)		(41,577)
Net cash flow from financing activities	10(iii)			22,783		(12,933)
Net increase/(decrease) in cash and cash equivalents				28,359		(26,844)
Cash and cash equivalents at 1 January				(27,821)		(977)
Cash and cash equivalents at 31 December				538		(27,821)

Reconciliation of Net Cash Flow to Movement in Net Debt

						2008 £'000		2007 £'000
Net increase/(decrease) in cash and cash equivalents						28,359		(26,844)
Cash inflow from increase in debt and lease financing						(42,763)		(14,890)
Finance leases acquired on acquisition of subsidiary undertakings						-		(586)
Movement in net debt in the period						(14,404)		(42,320)
Net debt at 1 January						(96,926)		(54,606)
Net debt at 31 December				11		(111,330)		(96,926)

AUDITED CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSES

FOR THE YEAR ENDED 31 DECEMBER 2008

				2008 £'000		2007 £'000
Cash flow hedges: Effective portion of changes in fair value (net of deferred taxation)				(121)		3
Actuarial gains (net of deferred taxation)				19,912			12,610
Net expense recognised directly in equity				19,791			12,613
(Loss)/profit for the financial period attributable to equity shareholders of the parent				(6,221)			30,251
Total recognised income and expenses for the period				13,570			42,864
(attributable to equity shareholders of the parent)

  MARSHALLS PLC

PRELIMINARY ANNOUNCEMENT OF RESULTS

AUDITED CONSOLIDATED NOTES

FOR THE YEAR ENDED 31 DECEMBER 2008

1.    Basis of Preparation

The Consolidated Financial Statements have been prepared on the basis of the requirements of adopted IFRSs in issue and adopted by the EU and effective at 31 December 2008.

Details of the Group's funding position are set out in note 12 and are subject to normal covenant arrangements. The Group's on-demand overdraft facility is renewed on an annual basis. As part of the planned maturity profile certain loans mature within the next twelve months.  As noted previously, the Group's performance is dependent on economic and market conditions, the outlook for which is uncertain and difficult to predict. The Group has taken decisive action to align its operational capacity with expected market conditions and, based on current expectations, the Group's cash forecasts meet half-year and year end bank covenants and there is adequate headroom which is not dependent on facility renewals.  The Directors believe that the Group is well placed to manage its business risks successfully despite the current uncertain economic outlook. Accordingly, they continue to adopt the going concern basis in preparing the Group Consolidated Financial Statements.

The accounting policies have been applied consistently throughout the Group for the purposes of these Consolidated Financial Statements and are also set out on the Company's website (www.marshalls.co.uk).

The Consolidated Financial Statements are presented in sterling, rounded to the nearest thousand.

The preparation of financial statements in conformity with adopted 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 (before works closure costs and asset impairments)		Operating Profit
	2008	2007	2008		2007		2008	2007
	£'000	£'000	£'000		£'000		£'000	£'000
Continuing operations	378,063	402,926	30,616		48,810		3,627	48,810
Financial income and expenses (net)							(8,154)	(6,707)
(Loss)/profit on ordinary activities							(4,527)	42,103
before taxation

        Operating Segments 

The Directors continue to report the Group's operations as a single business segment. The Directors consider that the continuing operations represent one product offering with similar risks and rewards and should be managed as a single business segment in line with the Group's internal reporting framework.

	2008	2007
	£'000	£'000
Geographical destination of revenue:
United Kingdom	374,830	400,253
Rest of the world	3,233	2,673
	378,063	402,926

All revenue originates in the United Kingdom from continuing operations and there is no material inter-segmental turnover.

3.    Net operating costs

	2008	2007
	£'000	£'000
Raw materials and consumables	124,366	135,423
Changes in inventories of finished goods and work in progress	(8,487)	(12,460)
Personnel costs	91,986	91,845
Depreciation    - owned	21,168	20,368
- leased	270	691
Own work capitalised	(2,132)	(2,516)
Manufacturing overheads	117,429	118,189
Amortisation of intangible fixed assets	841	661
Negative goodwill	-	(700)
Restructuring costs	-	1,766
Strategic business initiatives: Domestic Expansion	4,099	3,627
Strategic business initiatives: Commercial Expansion	1,371	712
Site closure costs	-	160
Share of results of associates	69	-
Operating costs	350,980	357,766
Other operating income	(1,304)	(1,493)
Net profit on asset and property disposals	(2,229)	(2,157)
Net operating costs before works closure costs and asset   impairments	347,447	354,116
Works closure costs and asset impairments (Note 4)	26,989	-
Net operating costs	374,436	354,116

4.    Works closure costs and asset impairments

	2008 £'000	2007 £'000
Works closure costs	17,677	-
Asset impairments	9,312	-
	26,989	-

The Board has determined that certain charges to the Consolidated Income Statement should be separately identified for better understanding of the Group's results for the year ended 31 December 2008.

Works closure costs reflect the impact of capacity reductions and the closure of concrete manufacturing operations at Cannock, Sawley and Hambrook. Works closure costs also include the cost of reducing the design, managed installations and Display Centre part of the Group's Consumer Initiatives.

Asset impairments include £8,912,000 which represents the full amount of goodwill that was being carried in the Group balance sheet in respect of the Premier Mortars, Compton and Scenic Blue businesses. Premier Mortars supplies ready to use mortar to the housebuilding market, Compton supplies pre-fabricated garages to the consumer and Scenic Blue was part of the Managed Installations initiative. These businesses have been particularly affected by the deterioration in current market conditions and the short term outlook remains challenging.  In addition, intangible assets totalling £400,000 have been impaired relating to the Group's Consumer Initiatives.

5.    Financial expenses and income

	2008 £'000	2007 £'000
(a)  Financial expenses
Interest expense on bank loans, overdrafts and loan notes	6,219	4,721
Interest on obligations under the defined benefit Pension Scheme	11,106	10,506
Debenture interest expense	2,275	2,275
B share dividend expense	-	42
Finance lease interest expense	27	52
	19,627	17,596
(b)  Financial income
Expected return on Scheme assets under the defined benefit Pension Scheme	11,148	10,875
Interest receivable and similar income	325	14
	11,473	10,889

6.      Income tax expense

	Before works closure costs and asset impairments	Works closure costs and asset impairments	Total
	2008 £'000	2008 £'000	2008 £'000	2007 £'000
Current tax expense
Current year	3,083	(2,005)	1,078	11,027
Adjustments for prior years	(1,241)	-	(1,241)	(1,321)
	1,842	(2,005)	(163)	9,706
Deferred taxation expense
Origination and reversal of temporary differences:
Current year	4,655	(2,551)	2,104	1,983
Adjustments for prior years	(247)	-	(247)	163
Income tax expense in the Consolidated Income Statement	6,250	(4,556)	1,694	11,852

    Reconciliation of effective tax rate

	2008	2008	2007	2007
	%	£'000	%	£'000
(Loss)/profit before tax	100.0	(4,527)	100.0	42,103
Tax using domestic corporation tax rate	28.0	(1,267)	30.0	12,631
Disallowed amortisation/impairment of intangible   assets	(61.2)	2,771	0.4	161
Net items not taxable	(37.1)	1,678	2.8	1,179
Adjustments for prior years	32.9	(1,488)	(2.7)	(1,158)
Impact of change in tax rate on deferred taxation	-	-	(2.3)	(961)
	(37.4)	1,694	28.2	11,852

The net amount of deferred taxation debited to the Consolidated Statement of Recognised Income and Expenses in the year was £7,696,000 (2007: £5,172,000).

7.    Earnings per share

Basic loss per share of 4.46 pence (2007: 21.28 earnings) per share is calculated by dividing the loss attributable to ordinary shareholders of £6,221,000 (2007: £30,251,000 profit) by the weighted average number of shares in issue during the year of 139,634,343 (2007: 142,159,560).

Basic earnings per share before works closure costs and asset impairments of 11.61 pence (2007: 21.28 pence) per share is calculated by dividing the profit before works closure costs and asset impairments of £16,212,000 (2007: £30,251,000) by the weighted average number of shares in issue during the year of 139,634,343 (2007: 142,159,560).

    (Loss)/profit attributable to ordinary shareholders

	2008	2007
	£'000	£'000
Profit attributable to ordinary shareholders before works closure   costs and asset impairments	16,212	30,251
Works closure costs and asset impairments (net of taxation)	(22,433)	-
(Loss)/profit attributable to ordinary shareholders:	(6,221)	30,251

    Weighted average number of ordinary shares

		2008	2007
Issued ordinary shares at 1 January		142,159,560	142,949,818
Effect of shares transferred into employee benefit trust		(100,217)	(366,765)
Effect of treasury shares		(2,425,000)	(423,493)
Weighted average number of ordinary shares at 31 December		139,634,343	142,159,560

    The potential ordinary shares set out below are considered to be anti-dilutive to the total earnings per share calculation.

Diluted earnings per share before works closure costs and asset impairments of 11.47 pence (2007: 21.19 pence) per share is calculated by dividing the profit attributable to ordinary shares, and potentially dilutive ordinary shares, of £16,212,000 (2007: £30,251,000) by the weighted average number of shares in issue during the year of 139,634,343 (2007: 142,159,560) plus dilutive shares of 1,649,173 (2007: 572,479) which totals 141,283,516 (2007: 142,732,039).

    Weighted average number of ordinary shares (diluted)

	2008	2007
Weighted average number of ordinary shares at 31 December	139,634,343	142,159,560
Effect of shares transferred into employee benefit trust	1,046,911	523,201
Effect of treasury shares	602,262	49,278
Weighted average number of ordinary shares at 31 December	141,283,516	142,732,039

8.    Dividends

	2008				2007
	per share	£'000		per share				£'000
2007 Final: paid 4 July 2008	9.30p		13,009			8.85p		12,653
2008 Interim: paid 3 December 2008	4.55p		6,365			4.55p		6,445
	13.85p		19,374			13.40p		19,098

 9.    Employee benefits

The Group operates the Marshalls plc Pension Scheme (the 'Scheme') which has both a defined benefit and a defined contribution section. The assets of the Scheme are held in separately managed funds which are independent of the Group's finances. The defined benefit section of the Scheme is closed to new members and future service accrual. Pension contributions, for both the employer and the employee, are made into the defined contribution section of the Scheme.

	2008	2007
	£'000	£'000
Present value of funded obligations	(167,312)	(194,782)
Fair value of Scheme assets	183,813	176,987
Surplus in the Scheme / net liability for defined benefit obligations	16,501	(17,795)

    Movements in the net liability for defined benefit obligations recognised in the balance sheet

	2008	2007
	£'000	£'000
Net liability for defined benefit obligations at 1 January	(17,795)	(41,945)
Contributions received	6,600	4,900
Gain recognised in the Consolidated Income Statement	42	1,468
Actuarial gains recognised in the Consolidated Statement of Recognised   Income and Expenses	27,654	17,782
Surplus in the Scheme / net liability for defined benefit obligations	16,501	(17,795)
at 31 December

    Principal actuarial assumptions at the balance sheet date (expressed as weighted averages):

	2008	2007
Discount rate (AA corporate bond rate)	6.7%	5.8%
Inflation	2.8%	3.2%
Future pension increases	2.8%	3.0%
Expected return on Scheme assets	6.0%	6.3%
Future expected lifetime of pensioner at age 65 (years):
Male:	20.4	19.3
Female:	23.4	21.9

10. Notes to the cash flow statement

	2008 £'000		2007 £'000
10(i)    Cash flows from operating activities
(Loss)/profit before tax	(4,527)		42,103
Adjustments for:
Depreciation	21,438		21,059
Amortisation	841		661
Works closure costs and asset impairments	21,013		-
Share of results of associates	69		-
Negative goodwill	-		(700)
Gain on sale of property, plant & equipment	(2,705)		(2,856)
Equity settled share based expenses	(994)		744
Financial income and expenses (net)	8,154		6,707
Operating cash flow before changes         in working capital, employee benefits and       pension scheme contributions	43,289		67,718
Decrease/(increase) in trade and other receivables	10,924		(7,403)
Increase in inventories	(7,675)		(13,815)
(Decrease)/increase in trade and other payables	(5,227)		2,723
Decrease in employee benefits	-		(1,099)
Pension scheme contributions	(6,600)		(4,400)
Cash generated from the operations	34,711		43,724
Financial expenses paid	(8,095)		(6,729)
Non equity dividends paid	-		(42)
Income tax paid	(4,738)		(9,287)
Net cash flow from operating activities	21,878		27,666
10(ii)    Cash flows from investing activities
Proceeds from sale of property, plant and equipment	11,495		2,960
Financial income received	325		14
Acquisition of subsidiaries	(6,077)		(12,604)
Bank overdraft acquired with subsidiaries	-		(240)
Acquisition of property, plant & equipment	(21,242)		(30,605)
Acquisition of intangible assets	(803)		(1,102)
Net cash flow from investing activities	(16,302)		(41,577)
10(iii)    Cash flows from financing activities
Payments to acquire own shares	(606)		(8,413)
Net decrease in other debt and finance leases	(237)		(414)
Redemption of B shares	-		(2,408)
Increase in borrowings	43,000		17,400
Equity dividends paid	(19,374)		(19,098)
Net cash flow from financing activities	22,783		(12,933)

11.    Analysis of net debt

		1 January 2008		Cash flow		31 December 2008
		£'000		£'000		£'000
Cash at bank and in hand		19		519		538
Overdrafts		(27,840)		27,840		-
		(27,821)		28,359		538
Debt due within one year		(7,000)		(16,327)		(23,327)
Debt due after one year		(61,727)		(26,673)		(88,400)
Finance leases		(378)		237		(141)
		(96,926)		(14,404)		(111,330)

12.    Borrowings

The total borrowing facilities at 31 December 2008 amounted to £186.7 million (2007: £156.7 million) of which total bank borrowing facilities amounted to £166.7 million (2007: £136.7 million) and of which £75.0 million (2007: £60.2 million) remained unutilised. There are additional seasonal bank working capital facilities of £20.0 million available between 1 February 2009 and 31 August 2009. The undrawn facilities available at 31 December 2008, in respect of which all conditions precedent had been met, were as follows:

		2008		2007
		£'000		£'000
Committed:
-    Expiring in more than two years but not more than five years		50,000		-
-    Expiring in one year or less		-		-
Uncommitted:
-    Expiring in one year or less (with option to convert to committed)		-		43,000
-    Expiring in one year or less		25,000		17,179
		75,000		60,179

The maturity profile of the total borrowing facilities is structured to provide balanced, committed and phased medium term debt and is set out as follows:

		Facility		Cumulative Facility
		£'000		£'000
Committed facilities:
Q2: 2014 (Debenture)		20,000		20,000
Q4: 2012		50,000		70,000
Q3: 2011		48,400		118,400
Q3: 2010		20,000		138,400
Q3: 2009		23,327		161,727
On demand facilities:
Available all year		25,000		186,727
Seasonal (February to August inclusive)		20,000		206,727

13.  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 14 May 2009.

14.  Other

The financial information set out above does not constitute the Company's consolidated statutory accounts for the years ended 31 December 2008 or 2007 but is derived from those accounts. Statutory accounts for the year ended 31 December 2007 have been delivered to the Registrar of Companies, and those for the year ended 31 December 2008 will be delivered following the Company's Annual General Meeting. The auditors have reported on those accounts; their reports were unqualified and did not contain statements under section 237(2) or (3) of the Companies Act 1985.

Forward Looking Statements

This Preliminary Announcement of Results for the year ended 31 December 2008 contains certain forward looking statements with respect to the Group's financial condition, its results, strategy, plans and objectives. These statements are not forecasts or guarantees of future performance and involve risk and uncertainty because they relate to events and depend upon circumstances that will occur in the future. There are a number of factors that could cause actual results or developments to differ materially from those expressed, implied or forecast by these forward looking statements.

All forward looking statements in this document are based on information known to the Group as at 6 March 2009.  The Group has no obligation publicly to update or revise any forward looking statements, whether as a result of new information or future events.  Nothing in this document should be construed as a profit forecast.

Directors' Liability

Neither the Company nor the Directors accept any liability to any person in relation to this Preliminary Announcement of Results except to the extent that such liability arises and may not be excluded under English law. Accordingly, any liability to a person who has demonstrated reliance on any untrue or misleading statement or omission shall be determined in accordance with Section 90A of the Financial Services and Markets Act 2000.

 

END

 

 

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