Final Results

RNS Number : 7429C

Marshalls PLC

11 March 2011

 



Preliminary results for the year ended 31 December 2010

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

Financial Highlights

	Year ended 31 December 2010	Year ended 31 December 2009
Reported results:
Revenue	£323.1m	£311.7m
EBITDA	£31.1m	£28.8m
Operating profit	£11.8m	£9.2m
Profit/loss before tax	£9.2m	£(2.4)m
Basic EPS	3.76p	(0.42)p
Dividends declared and paid	5.25p	3.05p
Final dividend recommended	3.50p	3.50p
Net debt	£66.8m	£69.2m

Key features of 2010:

Highlights

·      Results in line with January Trading Update

·      Revenue up 3.7% despite loss of sales from the severe weather at the end of the year

·      Sales to Public Sector and Commercial up 6%, sales to Domestic up 1%

·      Dividend maintained at 5.25p reflecting stabilisation of the Group's markets and comfortable cash cover

·      Gearing down to 33.7% (2009: 38.2%) and interest cover of 4.6 times (2009: 3.8 times)

·      Operational and financial flexibility to respond to changes in market conditions

 Current priorities

·      Broad range of initiatives to build competitive advantage and grow market share

·      Continued focus on innovation to deliver new products to new and existing markets

·      Manufacturing and distribution efficiency maintained to ensure lowest cost to market

·      Integrated product solutions to meet Public Sector and Commercial end market demand

·      Growing network of approved domestic installation teams

·      Industry leading customer service standards in product quality, availability and "on time" delivery

·      Sustainability embedded in everything we do

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

"Sales have started to turn up following the difficult trading conditions of the previous two years although market uncertainty remains.  On balance, the outlook for the Public Sector and Commercial end market is mildly positive. The Domestic end market showed modest growth in the second half of 2010 and installer order books at the end of February 2011 were an encouraging 7.2 weeks."

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 for the year ended 31 December 2010 was £323.1 million (2009: £311.7 million) which represented an increase of 3.7 per cent and included one extra trading day.  This revenue growth has been achieved despite the loss of sales at both the beginning and end of the year due to severe weather conditions.  The impact was approximately £6 million of lost sales in January and February, which we recovered during the remainder of the first half, and a further £5 million in November and December which we did not recover in the year. 

Against this backdrop the overall revenue growth in 2010 clearly illustrates that sales have started to turn upwards again following the difficult trading conditions of the last two years.  Sales to the Public Sector and Commercial end market, which represent approximately 60 per cent of Marshalls' sales, were up 6 per cent for the full year.  Sales to the Domestic end market were up 1 per cent compared to the prior year.

EBITDA was £31.1 million (2009: £28.8 million) and operating profit, on a reported basis, was £11.8 million (2009: £9.2 million).  In 2009 works closure costs of £7.2 million relating to the closure of the Llay site and further capacity reductions were separately disclosed in the reported results. In 2010 the incremental costs of the severe weather at both ends of the year were approximately £2.8 million comprising additional operational, distribution and rectification costs. Before the impact of both of these costs EBITDA would have been £33.9 million (2009: £36.0 million) and operating profit would have been £14.6 million (2009: £16.4 million).

Net financial expenses were reduced significantly to £2.6 million (2009: £4.3 million before the redemption of the debenture).  This was due mainly to the redemption in 2009 of the Group's £20 million Debenture Stock.  Interest cover was 4.6 times (2009: 3.8 times before works closure costs and the redemption of the debenture).

The tax charge for 2010 was £1.9 million (2009: £2.4 million before works closure costs and the redemption of the debenture) which represented an effective rate of 20.2 per cent (2009: 20.1 per cent).  This is due to tax credits from finalising earlier years' computations.

Basic earnings per share was 3.76 pence per share (2009: reported loss of 0.42 pence per share; earnings of 5.38 pence per share before works closure costs and the redemption of the debenture).

Operating Performance

The Marshalls' operating strategy combines regional manufacturing with a unique national network of distribution sites with a wide geographical spread. The same capital equipment produces products for both the Public Sector and Commercial and Domestic end markets and this flexibility remains a key operational objective.  These factors optimise manufacturing efficiency and ensure that Marshalls continues to have the lowest cost to market.

Within the Public Sector and Commercial end market the Group's lead indicators remain mildly positive with any weakness in the Public Sector being compensated for by stronger Commercial demand.  

The Group is marketing and sales led with an increasingly well known brand. For 2011 Marshalls has again been independently classified as a business Superbrand. A broad range of initiatives continue to be pursued in order to build on Marshalls' competitive advantages and the Group continues to invest selectively in innovation to drive growth in the medium term.  A good example of product innovation is the Group's range of anti-terrorist bollards developed in conjunction with the Centre for Protection of National Infrastructure. There has been significant interest in this new range of products worldwide with quotations raised to date in excess of £3.5 million and specifications secured in excess of £2 million.

Marshalls is the only landscape products business that is able to provide a fully integrated product offer to the Public Sector and Commercial end market. This integrated offer was created in response to the specific demand of clients, architects and contractors but its value is now also appreciated in a wider environmental context and increasingly by local authorities and other Public Sector bodies.

In the Domestic end market Marshalls has focussed on brand development, increasing customer awareness and developing stronger links with installers. During 2010 the Group has increased its development of the installer base through increased training, marketing materials and sales support. Marshalls has now built a substantial and growing network of 1,640 approved domestic installation teams throughout the country. This is unique within the hard landscaping sector and the number of installation teams on the Marshalls Register has grown by 12 per cent since the beginning of 2010 and continues to be on an upward trend.

Consumer confidence has recovered from the extreme lows of late 2008 and last year installer order books returned to pre-recession levels being an encouraging 7.2 weeks at the end of February 2011 (February 2010: 6.8 weeks).  However, the Group remains cautious about the outlook in view of recent consumer confidence data. 

The Group continues to focus on customer service with industry leading standards of product quality, availability and "on time" delivery. Marshalls continues to receive good feedback from its customers and installers for the consistency and quality of its products and service.  

The Group's plants are modern and well invested and this continues to enable capital expenditure to be maintained at historically low levels for the medium term without any noticeable impact on the effectiveness of the business.  Capital investment in 2010 totalled £11.9 million (2009: £9.2 million).  This compares to depreciation of £17.8 million (2009: £18.8 million).  The Group will continue to invest selectively in innovation to deliver new products and improvement projects that reinforce its market leading position.

The site closure programme announced in 2008 is now complete and this has reduced our cost base by £11.4 million.  This reduction is permanent and therefore by lowering our break-even point we can increase profits earlier when market volumes improve.  During the site closure programme the Group released £9 million from inventory and a further £4 million from the disposal of surplus properties.  We have now exchanged contracts for the sale of a further released site and expect to receive cash proceeds of £5 million during 2011.  Overall, the cash released from inventory and associated property is expected to exceed the cash cost of the site closures.  The programme leaves the Group with well invested modern plants which have sufficient capacity to meet medium term demand requirements efficiently. The Group continues to have the operational and financial flexibility to respond to any further changes in market conditions.

There continues to be a number of legislative developments and lifestyle trends that are placing greater emphasis on sustainability and carbon reduction.  Marshalls has won numerous national and international awards for its ground breaking work on ethical sourcing and carbon labelling. Looking forward, these initiatives will be a "must have" and therefore represent a competitive advantage to the Group.  Consequently Marshalls continues to ensure that sustainability is embedded in everything it does. Legislation in water run off and flooding is also increasing and the Group now has a full range of permeable paving and surface drainage products making this an area of opportunity.

Corporate Development

There continues to be a potential for growth in the Group's existing markets.  The Group continues to seek opportunities to expand its reserves and geographical coverage in dimensional natural stone and strategically located aggregates reserves.   In addition, however, a number of other markets have been identified for expansion where currently the Group has existing capabilities.  The Group is building its activities in Western Europe, the Middle East and Asia with particular emphasis on natural stone paving, street furniture and water management.  

Balance Sheet

Net assets at 31 December 2010 were £198.2 million (2009: £181.1 million).  

The Group's inventory reduction programme, following the closure of four manufacturing sites, has been very successful.  In 2010 inventory values were maintained with upward cost inflation being offset by a volume decrease.  The Group continues to keep a tight control of receivables and debtor days remain industry leading.    

Risk management has been a key focus for the Group's Pension Scheme over recent years and the actions the Group has taken have reduced actuarial volatility and risk.  Under the Scheme specific funding requirements there is a recovery plan under which the Group continues to make cash contributions into the Scheme.

At 31 December 2010 the accounting pension net liability was £4.1 million compared with £38.0 million in the prior period.  This position has benefited from a £12.1 million reduction due to the actuarial change from the Government's decision to move from RPI to CPI for deferred and future pension increases and a gain in the Scheme's assets of £13.7 million.  These gains have been partially offset by a reduction in the AA corporate bond rate from 5.8 per cent to 5.5 per cent.

These changes have resulted in an actuarial gain of £20.2 million (net of deferred taxation) (2009: £40.3 million loss net of deferred tax) and this has been recorded in the Consolidated Statement of Comprehensive Income.  The net liability of £4.1 million is made up of £212.4 million in respect of the present value of funded obligations less £208.3 million for the fair value of Scheme assets.  The values have been determined by the Scheme Actuary using prudent assumptions in line with current market levels for accounting purposes.

Net Debt and Borrowing Facilities

Net debt has reduced to £66.8 million from £69.2 million during the year with gearing at the year end being 33.7 per cent (2009: 38.2 per cent).

The Group renewed its bank facilities in August 2010 and has significant committed facilities in place with three banks and with a positive spread of medium term maturities.  The total bank borrowing facilities at 31 December 2010 amounted to £168.4 million (2009: £168.4 million) of which £97.5 million (2009: £90.0 million) remained unutilised.  Committed facilities expiring in the second half of 2011 amounting to £40.9 million have been classified as current liabilities and we have continued to utilise these as they represent low effective costs of borrowing.  The Group will review these during 2011 and continue its policy of ensuring that there is a good spread of medium term maturities at all times.  The Group also has a seasonal working capital facility of £20.0 million which is available between 1 February and 31 August each year.  The Group has significant headroom in its facilities with utilisation at 31 December 2010 representing just under 40 per cent of the available facilities.

Dividends

An interim dividend of 1.75 pence (2009: 1.75 pence) per share was paid on 3 December 2010.  A final dividend of 3.50 pence (2009: 3.50 pence) per share is now being recommended for payment on 8 July 2011 to shareholders on the register at the close of business on 10 June 2011.  The ex-dividend date will be 8 June 2011.  This gives a total dividend of 5.25 pence (2009: 5.25 pence) per share for the year.  The maintenance of the dividend at these levels reflects the current stabilisation of the Group's markets and the comfortable level of cash cover.

On an IFRS basis, which does not account for the final dividend until it is approved at the forthcoming Annual General Meeting, the dividend declared for the year ended 31 December 2010 is 5.25 pence (2009: 3.05 pence) per share. 

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.

Outlook

Sales have started to turn up following the difficult trading conditions of the previous two years although market uncertainty remains.  On balance, the outlook for the Public Sector and Commercial end market is mildly positive. The Domestic end market showed modest growth in the second half of 2010 and installer order books at the end of February 2011 were an encouraging 7.2 weeks.

Through the recession we have set out to ensure that the business will be in a strong position to benefit when markets improve.  We have permanently reduced the cost base of the business and now have the lowest cost to market across the widest geographical range.  Growth opportunities exist and we have the operational and financial flexibility to take advantage of these as they arise.

Graham Holden

Chief Executive

 

MARSHALLS PLC

PRELIMINARY ANNOUNCEMENT OF RESULTS

CONSOLIDATED INCOME STATEMENT

FOR THE YEAR ENDED 31 DECEMBER 2010

	Notes	Total 2010 £'000	Before works closure costs and redemption of debenture 2009 £'000	Works closure costs and redemption of debenture 2009 £'000	Total 2009 £'000
Revenue	2	323,104	311,685	-	311,685
Net operating costs	3, 4	(311,333)	(295,276)	(7,217)	(302,493)
Operating profit	2	11,771	16,409	(7,217)	9,192
Financial expenses	5	(14,479)	(15,247)	(7,259)	(22,506)
Financial income	5	11,921	10,944	-	10,944
Profit/(loss) before tax	2	9,213	12,106	(14,476)	(2,370)
Income tax (expense)/credit	6	(1,863)	(2,435)	4,053	1,618
Profit/(loss) for the financial   period attributable to equity   shareholders of the parent		7,350	9,671	(10,423)	(752)
Earnings per share:
Basic	7	3.76p	5.38p		(0.42)p
Diluted	7	3.69p	5.28p		(0.42)p
Dividend:
Pence per share	8	5.25p			3.05p
Dividends declared	8	10,294			5,460

 

* Dividends per share in the prior period have been adjusted by the "bonus factor" inherent in the Rights Issue.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 DECEMBER 2010

	2010 £'000	2009 £'000
Profit/(loss) for the period	7,350	(752)
Other comprehensive income
Effective portion of changes in fair value of cash flow hedges	(505)	172
Fair value of cash flow hedges transferred to the Income Statement	262	-
Deferred tax arising	66	(50)
Defined benefit scheme actuarial gains/(losses)	27,640	(56,002)
Deferred tax arising	(7,463)	15,680
Impact of the change in rate of deferred taxation	(123)	-
Other comprehensive income/(expense) for period, net of income tax	19,877	(40,200)
Total comprehensive income/(expense) for the period (attributable to   equity shareholders of the parent)	27,227	(40,952)

CONSOLIDATED BALANCE SHEET

AS AT 31 DECEMBER 2010

Assets	Notes		2010 £'000		2009 £'000
Non-current assets
Property, plant and equipment			190,627		202,570
Intangible assets			42,945		41,559
Investment in associates			2,163		2,118
Deferred taxation assets			1,171		10,696
			236,906		256,943
Current assets
Inventories			81,626		82,187
Trade and other receivables			27,925		31,267
Cash and cash equivalents	10		4,059		9,283
			113,610		122,737
Total assets			350,516		379,680
Liabilities
Current liabilities
Trade and other payables			48,552		53,248
Corporation tax			5,164		3,845
Interest bearing loans and borrowings	10		40,900		20,039
			94,616		77,132
Non-current liabilities
Interest bearing loans and borrowings	10		30,000		58,400
Employee benefits	9		4,092		37,956
Deferred taxation liabilities			23,568		25,093
			57,660		121,449
Total liabilities			152,276		198,581
Net assets			198,240		181,099
Equity
Capital and reserves attributable to equity shareholders of the parent
Share capital			49,845		49,845
Share premium account			22,695		22,695
Own shares			(9,514)		(9,472)
Capital redemption reserve			75,394		75,394
Consolidation reserve			(213,067)		(213,067)
Hedging reserve			(179)		(2)
Retained earnings			273,066		255,706
Equity shareholders' funds			198,240		181,099

CONSOLIDATED CASH FLOW STATEMENT

FOR THE YEAR ENDED 31 DECEMBER 2010

		2010 £'000		2009 £'000
Cash flows from operating activities
Profit/(loss) before tax		9,213		(2,370)
Adjustments for:
Depreciation		17,771		18,773
Amortisation		1,554		877
Works closure costs		-		7,217
Share of results of associates		63		(5)
Gain on sale of property, plant and equipment		(746)		(859)
Equity settled share based expenses		250		245
Financial income and expenses (net)		2,558		11,562
Operating cash flow before changes     in working capital and pension scheme contributions		30,663		35,440
Decrease in trade and other receivables		3,342		955
Decrease in inventories		561		7,627
Decrease in trade and other payables		(3,436)		(5,346)
Works closure costs paid		(1,447)		(6,854)
Pension scheme contributions		(6,600)		(2,150)
Cash generated from the operations		23,083		29,672
Financial expenses paid		(2,177)		(4,296)
Income tax (paid)/received		(129)		2,950
Net cash flow from operating activities		20,777		28,326
Cash flows from investing activities
Proceeds from sale of property, plant and equipment		3,936		2,353
Financial income received		4		97
Acquisition of subsidiaries and investment in associates		(108)		(750)
Acquisition of property, plant and equipment		(9,018)		(8,077)
Acquisition of intangible assets		(2,940)		(1,085)
Net cash flow from investing activities		(8,126)		(7,462)
Cash flows from financing activities
Proceeds from issue of share capital		-		36,588
Share issue costs paid		-		(2,559)
Payments to acquire own shares		(42)		-
Net decrease in other debt and finance leases		(39)		(102)
Premium on redemption of debenture		-		(7,259)
Decrease in borrowings		(7,500)		(33,327)
Equity dividends paid		(10,294)		(5,460)
Net cash flow from financing activities		(17,875)		(12,119)
Net (decrease)/increase in cash and cash equivalents		(5,224)		8,745
Cash and cash equivalents at 1 January		9,283		538
Cash and cash equivalents at 31 December		4,059		9,283

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2010

	Share capital	Share premium account	Own shares	Capital redemption reserve	Consolid- ation reserve	Hedging reserve	Retained earnings	Total
		£'000	£'000	£'000	£'000	£'000	£'000	£'000
Current year
At 1 January 2010	49,845	22,695	(9,472)	75,394	(213,067)	(2)	255,706	181,099
Total comprehensive income for   the period
Profit for the financial  period   attributable to equity   shareholders of the parent	-	-	-	-	-	-	7,350	7,350
Other comprehensive  income
Effective portion of changes in   fair value of cash flow hedges	-	-	-	-	-	(505)	-	(505)
Net change in fair value of   cashflow hedges transferred    to the Income Statement	-	-	-	-	-	262	-	262
Deferred tax arising	-	-	-	-	-	66	-	66
Defined benefit plan actuarial   gains/(losses)	-	-	-	-	-	-	27,640	27,640
Deferred tax arising	-	-	-	-	-	-	(7,463)	(7,463)
Impact of the change in rate of   deferred taxation	-	-	-	-	-	-	(123)	(123)
Total other comprehensive   income	-	-	-	-	-	(177)	20,054	19,877
Total comprehensive  income   for the period	-	-	-	-	-	(177)	27,404	27,227
Transactions with  owners,    recorded directly in equity
Contributions by and   distributions to owners
Share based expenses	-	-	-	-	-	-	250	250
Dividends to equity   shareholders	-	-	-	-	-	-	(10,294)	(10,294)
Purchase of own shares	-	-	(42)	-	-	-	-	(42)
Total contributions by and   distributions to owners	-	-	(42)	-	-	-	(10,044)	(10,086)
At 31 December 2010	49,845	22,695	(9,514)	75,394	(213,067)	(179)	273,066	198,240

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2010

	Share capital	Share premium account	Own shares	Capital redemption reserve	Consolid- ation reserve	Hedging reserve	Retained earnings	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Prior year
At 1 January 2009	35,777	2,734	(9,472)	75,394	(213,067)	(124)	301,995	193,237
Total comprehensive income for   the period
Loss for the financial period   attributable to equity   shareholders of the parent	-	-	-	-	-	-	(752)	(752)
Other comprehensive income
Effective portion of changes in   fair value  of cash flow hedges	-	-	-	-	-	172	-	172
Deferred tax arising	-	-	-	-	-	(50)	-	(50)
Defined benefit plan actuarial   losses	-	-	-	-	-	-	(56,002)	(56,002)
Deferred tax arising	-	-	-	-	-	-	15,680	15,680
Total other comprehensive   Income	-	-	-	-	-	122	(40,322)	(40,200)
Total comprehensive income for    the period	-	-	-	-	-	122	(41,074)	(40,952)
Transactions with owners,   recorded  directly in equity
Contributions by and   distributions to Owners
Share based expenses	-	-	-	-	-	-	245	245
Dividends to equity   shareholders	-	-	-	-	-	-	(5,460)	(5,460)
Shares issued	14,068	22,520	-	-	-	-	-	36,588
Shares issue costs	-	(2,559)	-	-	-	-	-	(2,559)
Total contributions by and   distributions to owners	14,068	19,961	-	-	-	-	(5,215)	28,814
At 31 December 2009	49,845	22,695	(9,472)	75,394	(213,067)	(2)	255,706	181,099

CONSOLIDATED NOTES

FOR THE YEAR ENDED 31 DECEMBER 2010

1    Basis of preparation

Whilst the Financial Information included in this Preliminary Announcement has been prepared on the basis of the requirements of IFRSs in issue, as adopted by the European Union and effective at 31 December 2010, this announcement does not itself contain sufficient information to comply with IFRS.  The Group expects to publish full Consolidated Financial Statements in April 2011.

The Financial Information set out in this Preliminary Announcement does not constitute the Company's Consolidated Financial Statements for the years ended 31 December 2010 or 2009, but is derived from those Financial Statements.  Statutory Financial Statements for 2009 have been delivered to the Registrar of Companies and those for 2010 will be delivered following the Company's Annual General Meeting.  The auditors, KPMG Audit Plc, have reported on those Financial Statements; their reports were unqualified, did not draw attention to any matters by way of emphasis without qualifying their report and did not contain statements under Section 498(2) or (3) of the Companies Act 2006 in respect of the Financial Statements for 2010 or 2009.

The following published accounting standards have become effective for the first time in the year ended 31 December 2010:

·     Revised IFRS 3 - 'Business Combinations' - (mandatory for the year commencing on or after 1 July 2009) - This provides comprehensive revision on applying the acquisition method of accounting. Changes include the requirement that transaction costs must be expensed when they are incurred and do not form part of the acquisition price. Contingent consideration is required to be recognised at fair value even if it is not deemed to be probable of payment at the date of the acquisition. All subsequent changes in debt contingent consideration are recognised in the Income Statement, rather than against goodwill as it is deemed to be a liability recognised under IAS 32/39. These changes have no material impact on the Consolidated Financial Statements as retrospective application to earlier business combinations is not allowed.

·     Amendments to IAS 27 - 'Consolidated and Separate Financial Statements' (mandatory for the year commencing on or after 1 July 2009) - The amendments to IAS 27 reflect changes to the accounting for non-controlling (minority) interests and deal primarily with the accounting for changes in ownership interests in subsidiaries after control is obtained, the accounting for the loss of control of subsidiaries, and the allocation of profit or loss to controlling and non-controlling interests in a subsidiary. These changes have had no material impact on the Consolidated Financial Statements as there is no minority interest, as subsidiaries are fully owned and there have been no changes in the control of subsidiaries in the year.

·     Amendments to IAS 39 - 'Financial Instruments: Recognition and Measurement: Eligible Hedged Items' (mandatory for year commencing on or after 1 July 2009) - The amendments to IAS 39 clarify how to apply existing principles in determining eligible hedged risks and portions. These changes have had no material impact on the Consolidated Financial Statements.

·     Amendments to IAS 39 - 'Reclassification of Financial Assets: Effective Date and Transition' (mandatory for year commencing on or after 1 July 2009). These changes have had no material impact on the Consolidated Financial Statements.

·    Improvements to IFRSs - (issued 16 April 2009) (adoption dates vary but certain improvements are mandatory for the year commencing on or after 1 July 2009) - On 16 April 2009 the IASB published the Improvements to IFRSs 2009. The Improvements to IFRSs 2009 is the result of the IASB's second annual improvements project (AIP). This project has involved the IASB accumulating throughout the year what it believes are non-urgent but necessary improvements to IFRSs and then processing these amendments collectively. The Improvements to IFRSs 2009 contains 15 amendments to 12 standards. These changes have had no material impact on the Consolidated Financial Statements.

A number of standards have been endorsed but, in respect of the year ended 31 December 2010, are not yet effective. None of these are expected to have a material impact on the Consolidated Financial Statements.

Details of the Group's funding position are set out in Note 11 and are subject to normal covenant arrangements.  The Group's on-demand overdraft facility is renewed on an annual basis and the current arrangements were renewed and signed on 20 August 2010.  As part of the planned maturity profile certain loans mature within the next twelve months.  Management believe that these facilities that are due for renewal can be renewed and that there are sufficient unutilised facilities held which mature after twelve months.  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.  Markets appear to be easing and stabilising 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 redemption of debenture)			Operating Profit
	2010	2009	2010	2009	2010		2009
	£'000	£'000	£'000	£'000	£'000		£'000
Continuing operations	323,104	311,685	11,771	16,409	11,771		9,192
Financial income and expenses (net)			(2,558)	(4,303)	(2,558)		(11,562)
Profit/(loss) before tax			9,213	12,106	9,213		(2,370)

Operating segments

The Group has adopted IFRS 8 "Operating Segments", with effect from 1 January 2009. IFRS 8 requires operating segments to be identified on the basis of discrete financial information about components of the Group that are regularly reviewed by the Group's Chief Operating Decision Maker ("CODM") to allocate resources to the segments and to assess their performance.  The Directors have concluded that, in terms of the Group's operations, the detailed requirements of IFRS 8 support the reporting of the Group's operations as a single business segment.  As far as Marshalls is concerned the CODM is regarded as being the Executive Directors.

									2010	2009
									£'000	£'000
Geographical destination of revenue:
United Kingdom									320,303	308,498
Rest of the world									2,801	3,187
									323,104	311,685

All revenue originates in the United Kingdom from continuing operations.

3    Net operating costs

	2010	2009
	£'000	£'000
Raw materials and consumables	113,562	92,970
Changes in inventories of finished goods and work in progress	830	5,454
Personnel costs	84,442	84,244
Depreciation      - owned	17,670	18,671
- leased	101	102
Amortisation of intangible fixed assets	1,554	877
Own work capitalised	(2,194)	(1,581)
Manufacturing overheads	97,480	95,879
Share of results of associates	63	(5)
Operating costs	313,508	296,611
Other operating income	(1,754)	(718)
Net profit on asset and property disposals	(421)	(617)
Net operating costs before works closure costs	311,333	295,276
Works closure costs (Note 4)	-	7,217
Net operating costs	311,333	302,493

4    Works closure costs

		2010 £'000	2009 £'000
Works closure costs		-	7,217

The Board 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 2009.

In the year ended 31 December 2009, works closure costs reflected the impact of the closure of the concrete manufacturing operations at Llay and other capacity reductions.

5    Financial expenses and income

	Total  2010 £'000	Before redemption of debenture 2009 £'000	Redemption of debenture 2009 £'000	Total 2009 £'000
(a)  Financial expenses
Interest expense on bank loans, overdrafts and  loan   notes	2,180	2,146	-	2,146
Interest on obligations under the defined benefit   Pension Scheme	12,293	10,952	-	10,952
Debenture interest expense	-	2,136	-	2,136
Redemption of debenture	-	-	7,259	7,259
Finance lease interest expense	6	13	-	13
	14,479	15,247	7,259	22,506
(b)  Financial income
Expected return on Scheme assets under the defined   benefit Pension Scheme	11,917	10,847	-	10,847
Interest receivable and similar income	4	97	-	97
	11,921	10,944	-	10,944

6    Income tax expense/(credit)

	Total 2010	Before works closure costs and redemption of debenture 2009	Works closure costs and redemption of debenture 2009	Total 2009
	£'000	£'000	£'000	£'000
Current tax expense
Current year	1,889	3,297	(3,297)	-
Adjustments for prior years	(506)	(2,955)	-	(2,955)
	1,383	342	(3,297)	(2,955)
Deferred taxation expense
Origination and reversal of   temporary differences:
Current year	1,047	1,278	(756)	522
Adjustments for prior years	(567)	815	-	815
Income tax expense/(credit) in the   Consolidated Income Statement	1,863	2,435	(4,053)	(1,618)

      Reconciliation of effective tax rate

	2010	2010	2009	2009
	%	£'000	%	£'000
Profit/(loss) before tax	100.0	9,213	100.0	(2,370)
Tax using domestic corporation tax rate	28.0	2,580	28.0	(664)
Disallowed amortisation/impairment of intangible assets	4.7	435	(10.4)	246
Net items not taxable	8.1	746	(39.7)	940
Adjustments for prior years	(11.6)	(1,073)	90.4	(2,140)
Impact of the change in the rate of corporation tax on   deferred taxation	(9.0)	(825)	-	-
	20.2	1,863	68.3	(1,618)

      The net amount of deferred taxation credited to the Consolidated Statement of Comprehensive Income in the year was £7,520,000 (2009: £15,630,000).

      The Emergency Budget on 22 June 2010 announced that the UK corporation tax rate will reduce from 28 per cent to 24 per cent over a period of 4 years from 2011.  The first reduction in the UK corporation tax rate from 28 per cent to 27 per cent was substantively enacted in July 2010 and will be effective from 1 April 2011.  This will reduce the Company's future current tax charge accordingly.  The announced further 3 per cent rate reduction will further reduce the Company's future current tax charge and reduce the Company's deferred tax liabilities/assets.

 

7    Earnings per share

Basic profit per share of 3.76 pence (2009: 0.42 pence loss) per share is calculated by dividing the profit attributable to ordinary shareholders from total operations of £7,350,000 (2009: £752,000 loss) by the theoretical ex-rights weighted average number of shares in issue during the year of 195,462,449 (2009: 179,596,717).

      Profit/(loss) attributable to ordinary shareholders

	2010	2009
	£'000	£'000
Profit attributable to ordinary shareholders before 2009 works   closure costs and redemption of debenture	7,350	9,671
Works closure costs and redemption of debenture (net of    taxation)	-	(10,423)
Profit/(loss) attributable to ordinary shareholders:	7,350	(752)

Weighted average number of ordinary shares

		2010	2009
		Number	Number
Number of issued ordinary shares (at beginning of the year)		199,378,755	143,106,254
Weighted average number of Rights Issue shares		-	40,282,221
Effect of shares transferred into employee benefit trust		(1,491,306)	(1,366,758)
Effect of treasury shares acquired		(2,425,000)	(2,425,000)
Weighted average number of ordinary shares at end of period		195,462,449	179,596,717

For the year ended 31 December 2010 diluted earnings per share of 3.69 pence per share is calculated by dividing the profit attributable to ordinary shares and potentially dilutive ordinary shares of £7,350,000 by the theoretical ex-rights weighted average number of shares in issue during the period of 195,462,449 plus potentially dilutive shares of 3,916,306 which totals 199,378,755.

 

For the year ended 31 December 2009 the potential ordinary shares are considered to be anti-dilutive to the total earnings per share calculation.

For the year ended 31 December 2009 diluted earnings per share before works closure costs and redemption of debenture of 5.28 pence per share is calculated by dividing the profit attributable to ordinary shares and potentially dilutive ordinary shares of  £9,671,000 by the theoretical ex-rights weighted average number of shares in issue during the period of 179,596,717 plus potentially dilutive shares of 3,737,128 which totals 183,333,845.

      Weighted average number of ordinary shares (diluted)

		2010	2009
		£'000	£'000
Weighted average number of ordinary shares		195,462,449	179,596,717
Effect of shares transferred into employee benefit trust		1,491,306	1,194,754
Effect of treasury shares acquired in the period		2,425,000	2,542,374
Weighted average number of ordinary shares (diluted)		199,378,755	183,333,845

 

8    Dividends

After the balance sheet date dividends of 3.50 pence per qualifying ordinary share (2009: 3.50 pence) were proposed by the Directors.  The dividends have not been provided for and there were no income tax consequences. The total dividends proposed in respect of the year are as follows:

		Pence per qualifying share
			2010	2009
			£'000	£'000
2010 final		3.50	6,863
2010 interim		1.75	3,431
		5.25	10,294
2009 final		3.50		6,863
2009 interim		1.75		3,447
		5.25		10,310

The following dividends were approved by the shareholders and recognised in the period.

		Pence per qualifying share (restated)
			2010	2009
			£'000	£'000
2010 interim		1.75	3,431
2009 final		3.50	6,863
		5.25	10,294
2009 interim		1.75		3,447
2008 final		1.30		2,013
		3.05		5,460

The 2010 final dividend of 3.50 pence per qualifying ordinary share, total value £6,863,000 will be paid on 8 July 2011 to shareholders registered at the close of business on 10 June 2011.

The 2008 final dividend per share has been adjusted by the "bonus factor" inherent in the Rights Issue and was previously 1.45 pence per qualifying ordinary share.

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.

	2010	2009
	£'000	£'000
Present value of funded obligations	(212,394)	(221,895)
Fair value of Scheme assets	208,302	183,939
Net liability in the Scheme for defined benefit obligations	(4,092)	(37,956)
Experience adjustments on Scheme liabilities	14,332	(51,099)
Experience adjustments on Scheme assets	13,658	(4,903)

      Movements in the (net liability)/surplus for defined benefit obligations recognised in the balance sheet

	2010	2009
	£'000	£'000
(Net liability)/surplus for defined benefit obligations at 1 January	(37,956)	16,501
Contributions received	6,600	1,650
Loss recognised in the Consolidated Income Statement	(376)	(105)
Actuarial gains/(losses) recognised in the Consolidated Statement of  Comprehensive Income	27,640	(56,002)
Net liability in the Scheme for the defined benefit obligations   at 31 December	(4,092)	(37,956)

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

	2010	2009
Discount rate (AA corporate bond rate)	5.5%	5.8%
Inflation (RPI)	3.4%	3.5%
Inflation (CPI)	2.7%	-
Future pension increases	2.7%	3.5%
Expected return on Scheme assets	5.8%	6.5%
Future expected lifetime of pensioner at age 65 (years):
Male:	20.6	20.5
Female:	23.8	23.5

10   Analysis of net debt

		1 January 2010		Cash flow		Other changes		31 December 2010
		£'000		£'000		£'000		£'000
Cash at bank and in hand		9,283		(5,224)		-		4,059
Debt due within one year		(20,000)		-		(20,900)		(40,900)
Debt due after one year		(58,400)		7,500		20,900		(30,000)
Finance leases		(39)		39		-		-
		(69,156)		2,315		-		(66,841)

      Reconciliation of Net Cash Flow to Movement in Net Debt

		2010 £'000		2009 £'000
Net (decrease)/increase in cash and cash equivalents		(5,224)		8,745
Cash outflow from increase in debt and lease financing		7,539		33,429
Movement in net debt in the period		2,315		42,174
Net debt at 1 January		(69,156)		(111,330)
Net debt at 31 December		(66,841)		(69,156)

11   Borrowing facilities

The total bank borrowing facilities at 31 December 2010 amounted to £168.4 million (2009: £168.4 million) of which £97.5 million (2009: £90.0 million) remained unutilised.  There are additional seasonal bank working capital facilities of £20.0 million available between 1 February and 31 August each year.  The undrawn facilities available at 31 December 2010, in respect of which all conditions precedent had been met, were as follows:

		2010		2009
		£'000		£'000
Committed:
-      Expiring in one year or less		7,500		-
-     Expiring in more than two years but not more than five years		65,000		65,000
Uncommitted:
-     Expiring in one year or less		25,000		25,000
		97,500		90,000

The maturity profile of 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:
Q3 2014		20,000		20,000
Q1 2013		50,000		70,000
Q4 2012		25,000		95,000
Q3 2011		48,400		143,400
On demand facilities:
Available all year		25,000		168,400
Seasonal (February to August inclusive)		20,000		188,400

12   Principal risks and uncertainties

The principal risks and uncertainties which could impact the Group for the remainder of the current financial year are those detailed in the Group's Annual Report.  These cover the Strategic, Financial and Operational Risks and have not changed during the period.

Strategic risks include those relating to general economic conditions, Government policy, the actions of customers, suppliers and competitors and also weather conditions.  The Group also continues to be subject to various financial risks in relation to access to funding and to the Pension Scheme, principally the volatility of the discount (AA corporate bond) rate, any downturn in the performance of equities and increases in the longevity of members.  The other main financial risks arising from the Group's financial instruments are liquidity risk, interest rate risk, credit risk and foreign currency risk.  Operational risks include those relating to business integration, employees and key relationships. The Group continues to monitor all these risks and pursue policies that take account of, and mitigate, the risks where possible.

13   Annual General Meeting

The Annual General Meeting will be held at Birkby Grange, Birkby Hall Road, Birkby, Huddersfield, West Yorkshire HD2 2YA at 10.00am on Wednesday 11 May 2011.

Responsibility Statement

The Statement of Directors' Responsibilities is made in respect of the full Annual Report Financial Statements not the extracts from the Financial Statements required to be set out in this Announcement.

The 2010 Annual Report and Financial Statements comply with the United Kingdom's Financial Services Authority Disclosure and Transparency Rules in respect of the requirement to produce an annual Financial Report.

The Directors confirm that to the best of our knowledge:

·     The Group and Parent Company Financial Statements, contained in the 2010 Annual Report and Financial Statements prepared in accordance with IFRSs as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and profit of the Company and the undertakings included in the consolidation taken as a whole; and

·     The Business Review, contained in the 2010 Annual Report and Financial Statements includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole together with a description of the principal risks and uncertainties that they face.

The Board

The Directors serving during the year ended 31 December 2010 were as follows:

Andrew Allner                Non-Executive Director               (Chairman from 12 May 2010)

Graham Holden              Chief Executive

Ian Burrell                      Finance Director

David Sarti                     Chief Operating Officer

Alan Coppin                   Senior Independent Director        (appointed 12 May 2010)

Mark Edwards               Non-Executive Director               (appointed 12 May 2010)

Tim Pile                        Non-Executive Director               (appointed 5 October 2010)

Mike Davies                   Non-Executive Chairman             (resigned 12 May 2010)

Richard Scholes            Non-Executive Director               (resigned 12 May 2010)

Bill Husselby                 Non-Executive Director               (resigned 5 October 2010)

By order of the Board

Cathy Baxandall

Company Secretary

11 March 2011

Cautionary Statement

This Report contains certain forward looking statements with respect to the financial condition, results, operations and business of Marshalls plc.  These statements and forecasts 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 or implied by these forward looking statements and forecasts.  Nothing in this Report 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 Report except to the extent that such liability could arise 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

 

 

FR BUGDXRUBBGBG