Interim Results
Marshalls PLC
05 September 2003
5th September 2003
Marshalls plc
Interim results for the Six Months to 30 June 2003
Marshalls plc, the specialist Landscape, Clay and Natural Stone Products Group,
today announces results for the 6 months to 30 June 2003.
Six months to Six months to %
30 June 2003 30 June 2002
(£m) (£m)
Turnover 183.6 181.3 1.3
Operating profit 30.6 29.0 5.5
Profit before tax 29.1 27.3 6.6
Basic EPS 11.80p 11.03p 7.0
Dividend per share 3.65p 3.30p 10.6
- Sales, excluding the Flooring business sold in November 2002, up 7%
- Operating profit, on the same basis, increased by 8.4%
- Dividends increased by 10.6% to 3.65p per share (2002: 3.30p per share)
- Balance sheet gearing reduced to 8.0% (2002: 12.9%) after £18.8m of capital
expenditure
- Continued sales growth, in the second half to date, in both the domestic and
commercial/public sectors
Commenting on these results, Christopher Burnett, Executive Chairman said:
'The first half growth in sales and profits, in a period of low inflation, was
very encouraging. It was particularly pleasing to experience healthy sales
growth across all Divisions in both the domestic and commercial/public sectors
of our business. The second half has seen an encouraging start with continued
sales growth. At this stage our market intelligence suggests that activity
levels will remain positive.'
Enquiries:
Christopher Burnett Executive Chairman Marshalls plc ) 020 7404 5959 today
Ian Burrell Finance Director Marshalls plc ) 01484 438900
thereafter
Jon Coles Brunswick Group 020 7404 5959
William Cullum Brunswick Group 020 7404 5959
CHAIRMAN'S STATEMENT
Group turnover in the six months to 30 June 2003 at £183.6 million (2002:
£181.3 million) was 1.3 per cent ahead of the same period last year. Excluding
our Flooring business that was sold in November 2002, turnover was up 7.0 per
cent. Profit before tax of £29.1 million (2002: £27.3 million) was up 6.6 per
cent, and excluding the Flooring business operating profit was 9.6 per cent
ahead. Basic earnings per share at 11.80p (2002: 11.03p) were 7.0 per cent
ahead of the comparable period last year.
All Divisions achieved satisfactory sales growth. Following the disposal of the
Flooring business it has been decided not to continue to publish the results of
our remaining Emerging Businesses separately. They are therefore combined with
the Landscape Products Division. On a comparable basis Landscape Products
increased sales by 6.3 per cent, Clay Products was ahead by 3.8 per cent and
Natural Stone was up by 19.1 per cent.
The Group invested £18.8 million (2002: £21.9 million) on capital expenditure
during the first six months. We also achieved a reduction of over £5 million in
stocks compared with the 2002 year end.
These factors helped reduce net borrowings at 30 June 2003 to £17.4 million
(2002: £25.4 million), and gave a gearing ratio of 8.0 per cent (2002: 12.9 per
cent).
The Board has decided to declare an interim dividend of 3.65p (2002: 3.30p) per
ordinary share, an increase of 10.6 per cent. The dividend will be paid on 8
December 2003 to shareholders on the Register on 7 November 2003. The
ex-dividend date will be 5 November 2003.
LANDSCAPE PRODUCTS DIVISION
The Landscape Products Division, incorporating the three businesses that were
previously reported within the Emerging Businesses Division, achieved sales of
£152.9 million (2002: £143.8 million), an increase of 6.3 per cent over last
year.
The increase in sales in the Landscape Products Division was evenly spread
between domestic demand for new driveways and patios, and work on infrastructure
and public sector projects.
The independent installers on the Marshalls Register continue to confirm strong
order books with no reduction in the forward order position. There is no doubt
that home-owners are taking advantage of the increased equity in their homes,
and low interest rates, to invest in external improvements to driveways and
gardens.
There has also been a noticeable increase in repair and maintenance work being
undertaken by local authorities. The new build programme funded by increased
Government spending also ensured that this other important sector of our
business had a good first half year.
Drainage, Street Furniture and Classical Flagstones, previously reported within
Emerging Businesses, all experienced encouraging sales growth. These profitable
businesses continue to be developed and have an excellent future within the
Group.
Operating profit for the Landscape Products Division increased by 10.4 per cent
to £26.1 million (2002: £23.7 million).
CLAY PRODUCTS DIVISION
The Clay Products Division increased sales in the first half by 3.8 per cent to
£15.9 million (2002: £15.3 million) with activity in the new housing market
underpinning Industry demand. Repair, maintenance and improvement expenditure,
both public and private, was also strong.
Operating profit, however, fell to £2.0 million (2002: £2.7 million). Whilst
volumes and sales prices were ahead of last year we suffered in terms of mix
because of shortages in supply of certain raw materials preventing us from
satisfying demand for clay pavers. These products, which are sold through the
Landscape Products Division Regional Service Centres, achieve higher unit
selling prices and contributions. This loss of contribution, together with some
re-organisation costs, accounted for the reduction in profit.
Our objective is to see the results of all our work in the Clay Products
Division show through in profit performance and we expect to begin to see the
benefit of this in the second half and beyond.
NATURAL STONE DIVISION
An impressive performance by the Natural Stone Division saw sales in the first
half increase by 19.1 per cent to £14.8 million (2002: £12.4 million). This
included a contribution from the acquisition of a small quarrying business made
at the end of last year. Organic sales growth was 10.7 per cent.
The Division includes our own natural stone products, imported stone and granite
products, and crushed aggregates sold from our own quarries. The majority of
customers are involved with public sector and infrastructure projects and
enquiries remain strong. We recently completed supplying product for the major
pedestrianisation project at Trafalgar Square in London, and we are currently
supplying product for Terminal 5 at Heathrow Airport.
Operating profit increased by 32.5 per cent to £2.4 million (2002: £1.8
million). Excluding the impact of the acquisition, profits increased by 12.4
per cent.
THE BOARD
On 23 July 2003, we announced the appointment of two new Non-Executive
Directors, Andrew Allner and Richard Scholes. I am delighted that we have
attracted two Non-Executive Directors of such high calibre. We are looking
forward to benefiting from their broad experience.
OUTLOOK
The first half growth in sales and profits, in a period of low inflation, was
very encouraging. It was particularly pleasing to experience healthy sales
growth across all Divisions in both the domestic and commercial/public sectors
of our business.
The second half has seen an encouraging start with continued sales growth. At
this stage our market intelligence suggests that activity levels will remain
positive.
CHRISTOPHER BURNETT
EXECUTIVE CHAIRMAN
Consolidated Profit and Loss Account
for the half year ended 30 June 2003
Unaudited Audited
Half Year ended Year ended
June December
Notes 2003 2002 2002
£'000 £'000 £'000
Turnover 1 183,583 181,262 342,056
Operating costs (153,029) (152,306) (291,727)
-------- -------- ---------
Operating profit 1 30,554 28,956 50,329
Gain on disposal and termination of - - 2,255
business
-------- -------- ---------
Profit on ordinary activities before 30,554 28,956 52,584
interest
Interest (net) (1,447) (1,649) (3,193)
-------- -------- ---------
Profit on ordinary activities before 29,107 27,307 49,391
taxation
Taxation on profit on ordinary (9,345) (8,782) (15,750)
activities
-------- -------- ---------
Profit for the financial period 19,762 18,525 33,641
Preference dividends: Non equity (36) (87) (137)
shares
-------- -------- ---------
Profit attributable to ordinary 19,726 18,438 33,504
shareholders
Ordinary dividends: Equity shares (6,101) (5,523) (16,737)
-------- -------- ---------
Retained profit for the financial 13,625 12,915 16,767
period
-------- -------- ---------
Earnings per share :
Basic 2 11.80p 11.03p 20.05p
Diluted 2 11.80p 11.01p 20.02p
Adjusted Basic 2 12.23p 11.39p 19.41p
-------- -------- ---------
Dividend per share:
Pence per share 3.65p 3.30p 10.00p
-------- -------- ---------
Consolidated Balance Sheet
as at 30 June 2003
Unaudited Audited
June December
2003 2002 2002
Notes £'000 £'000 £'000
Fixed assets
Intangible 24,445 20,721 24,113
Tangible 194,680 183,947 184,699
-------- -------- ---------
219,125 204,668 208,812
-------- -------- ---------
Current assets
Stocks 57,885 60,103 62,978
Debtors 63,138 62,141 30,997
Cash at bank and in hand 5,977 136 7,307
-------- -------- ---------
127,000 122,380 101,282
Creditors: Amounts falling due (89,392) (90,032) (67,493)
within one year -------- -------- ---------
Net current assets 37,608 32,348 33,789
-------- -------- ---------
Total assets less current 256,733 237,016 242,601
liabilities -------- -------- ---------
Creditors: Amounts falling due after (20,001) (20,005) (20,003)
more than one year
Provisions for liabilities and (20,358) (19,569) (19,852)
charges -------- -------- ---------
Net assets 3 216,374 197,442 202,746
-------- -------- ---------
Capital and reserves
Called up share capital 42,008 42,007 42,007
Share premium account 17,728 17,724 17,726
Revaluation reserve 5,166 5,166 5,166
Other reserves 14,352 14,352 14,352
Profit and loss account 137,120 118,193 123,495
-------- -------- ---------
Shareholders' funds 216,374 197,442 202,746
-------- -------- ---------
Analysis of shareholders'
funds
Equity 215,266 196,334 201,638
Non equity 1,108 1,108 1,108
-------- -------- ---------
216,374 197,442 202,746
-------- -------- ---------
Consolidated Cash Flow Statement
for the half year ended 30 June 2003
Unaudited Audited
Half year ended Year ended
June December
Notes 2003 2002 2002
£'000 £'000 £'000
Cash inflow from 4 28,554 17,542 54,608
operating activities
Returns on investments (1,559) (683) (3,407)
and servicing of finance
Taxation (6,676) (5,297) (13,301)
Capital expenditure (18,790) (21,932) (33,832)
Acquisitions and disposals (1,035) - 9,210
Equity dividends paid - - (16,128)
-------- -------- --------
Cash inflow/(outflow) before
financing 494 (10,370) (2,850)
Financing
Issue of shares 3 141 143
Repayment of 10% cumulative - (2,274) (2,274)
preference shares
Costs associated with - (52) (52)
share cancellation
Decrease in debt and (1,827) (2,312) (2,315)
lease financing
-------- -------- -------
Decrease in cash in the (1,330) (14,867) (7,348)
period
-------- -------- --------
Reconciliation of Net Cash Flow to Movement in Net Debt
Decrease in cash in the (1,330) (14,867) (7,348)
period
Cash outflow from decrease in debt and 1,827 2,312 2,315
lease financing
-------- ------- ---------
Movement in net debt in 497 (12,555) (5,033)
the period
Net debt at beginning of (17,895) (12,862) (12,862)
period -------- ------- ---------
Net debt at end of (17,398) (25,417) (17,895)
period
-------- -------- ---------
Net gearing 8.0% 12.9% 8.8%
Consolidated Reconciliation of Movements in Shareholders' Funds
for the half year ended 30 June 2003
Unaudited Audited
Half year ended Year ended
June December
2003 2002 2002
£'000 £'000 £'000
Profit for the financial period 19,762 18,525 33,641
Dividends (6,137) (5,610) (16,874)
(preference and ordinary)
New share capital issued 3 141 143
Repayment and - (2,274) (2,274)
cancellation of 10% cumulative
preference shares
Costs associated with - (52) (52)
share cancellation
Goodwill previously eliminated against - - 1,450
reserves on sale and termination
of business
-------- -------- ---------
Net additions to 13,628 10,730 16,034
shareholders' funds
Shareholders' funds at 202,746 186,712 186,712
beginning of period
-------- -------- ---------
Shareholders' funds at 216,374 197,442 202,746
end of period -------- -------- ---------
There were no recognised gains or losses in the period (2002: £Nil)
other than those reflected above.
Notes to the Interim Statements
1. Analysis of turnover and operating profit
Unaudited Audited
Half year ended Year ended
June December
2003 2002 2002
£'000 £'000 £'000
(a) Turnover
Landscape Products 152,865 143,834 270,384
Clay Products 15,918 15,341 30,252
Natural Stone 14,800 12,429 24,958
Flooring business disposed - 9,658 16,462
-------- -------- ---------
183,583 181,262 342,056
-------- -------- ---------
(b) Operating profit
Landscape Products 26,129 23,660 41,248
Clay Products 2,004 2,710 4,372
Natural Stone 2,421 1,827 3,282
Flooring business disposed - 759 1,427
-------- -------- ---------
30,554 28,956 50,329
-------- -------- ---------
The non-Flooring businesses previously included within the Emerging Businesses
segment are now shown within the Landscape Products segment in notes
1(a), 1(b) and 3. The comparative figures for 2002 have been restated
accordingly in each of these notes. For the half year ended 30 June 2002, the
Landscape Products turnover, operating profit and net assets were previously
stated at £136,077,000, £22,342,000 and £170,733,000 respectively (year ended 31
December 2002: £254,515,000, £38,530,000 and £171,437,000 respectively).
Operating profit includes £137,000 of income relating to property
disposals. Proceeds were £476,000 and costs and charges were £339,000.
2. Earnings per share
Unaudited Audited
Half year ended Year ended
June December
2003 2002 2002
£'000 £'000 £'000
Profit for the financial
period attributable to
ordinary shareholders 19,726 18,438 33,504
--------- --------- ---------
Profit for the financial
period attributable to
ordinary shares and
potentially ordinary dilutive
shares 19,726 18,438 33,504
--------- --------- ---------
Adjusted basic earnings per share reconciliation:
Profit for the financial period 19,726 18,438 33,504
Goodwill amortisation 710 595 1,190
Gain on disposal and termination
of business - - (2,255)
--------- --------- ---------
20,436 19,033 32,439
--------- --------- ---------
Weighted average number
of shares 167,145,851 167,115,664 167,130,230
--------- --------- ---------
Weighted average number 167,145,851 167,115,664 167,130,230
of shares
Dilutive shares 48,324 383,164 247,797
--------- --------- ---------
167,194,175 167,498,828 167,378,027
--------- --------- ---------
Basic earnings per share 11.80p 11.03p 20.05p
--------- --------- ---------
Diluted earnings per share 11.80p 11.01p 20.02p
--------- --------- ---------
Adjusted basic earnings per share 12.23p 11.39p 19.41p
--------- --------- ---------
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 gain on disposal and termination of
business.
3. Analysis of net assets
Unaudited Audited
Half year ended Year ended
June December
2003 2002 2002
£'000 £'000 £'000
Landscape Products 202,674 180,097 181,513
Clay Products 39,335 44,778 40,780
Natural Stone 32,180 25,366 28,120
Flooring business disposed - 7,134 -
-------- -------- ---------
274,189 257,375 250,413
Unallocated net liabilities (57,815) (59,933) (47,667)
-------- --------- ---------
216,374 197,442 202,746
-------- -------- ---------
Unallocated net liabilities comprise non-operating assets and liabilities of a
financing nature, principally net borrowings, corporation tax, deferred tax and
dividends payable. There is no material inter-segmental turnover.
4. Reconciliation of operating profit to cash flow from operating activities
Unaudited Audited
Half year ended Year ended
June December
2003 2002 2002
£'000 £'000 £'000
Operating profit 30,554 28,956 50,329
Amortisation charges 710 595 1,190
Depreciation charges 8,840 7,751 15,848
Loss/(profit) on sale of
tangible fixed assets other than
property sales 13 136 (66)
Decrease/(increase) in stocks 5,571 (5,716) (9,721)
Increase in debtors (31,108) (30,624) (964)
Increase/(decrease) in creditors 13,974 16,444 (2,008)
-------- -------- ---------
28,554 17,542 54,608
-------- -------- ---------
5. Pension Scheme
The Group operates a funded defined benefit pension scheme covering
certain employees. The scheme was closed to new employees in October 2000. An
actuarial valuation as at April 2003 is being undertaken. The results of the
valuation will not be finalised until towards the end of the year. It is
anticipated that the outcome of the valuation will result in a relatively modest
increase in costs and this is not expected to be material in the context of the
Group's results.
6. Basis of Preparation
The interim financial statements have been prepared on the basis of the
accounting policies set out in the Group's 2002 Annual Report.
7. Other
The above financial information does not constitute statutory accounts.
The financial information for the year ended 31 December 2002 has been extracted
from the statutory accounts for that period which have been delivered to the
Registrar of Companies and contain an unqualified audit report. An interim
dividend of 3.65p per ordinary share will be paid on 8 December 2003 to
shareholders on the register at the close of business on 7 November 2003. The
ex-dividend date will be 5 November 2003.
Review Report and Shareholder Information
Independent review report by KPMG Audit Plc to Marshalls plc
Introduction
We have been instructed by the Company to review the financial information set
out on pages 3 to 8 and we have read the other information contained in the
Interim Report and considered whether it contains any apparent misstatements or
material inconsistencies with the financial information.
This report is made solely to the Company in accordance with the terms of our
engagement to assist the Company in meeting the requirements of the Listing
Rules of the Financial Services Authority. Our review has been undertaken so
that we might state to the Company those matters we are required to state to it
in this report and for no other purpose. To the fullest extent permitted by
law, we do not accept or assume responsibility to anyone other than the Company
for our review work, for this report, or for the conclusions we have reached.
Directors' Responsibilities
The Interim Report, including the financial information contained therein, is
the responsibility of, and has been approved by, the Directors. The Directors
are responsible for preparing the Interim Report in accordance with the Listing
Rules which require that the accounting policies and presentation applied to the
interim figures should be consistent with those applied in preparing the
preceding annual financial statements except where they are to be changed in the
next annual financial statements in which case any changes, and the reasons for
them, are to be disclosed.
Review Work Performed
We conducted our review in accordance with guidance contained in Bulletin 1999/
4: Review of interim financial information issued by the Auditing Practices
Board.
A review consists principally of making enquiries of Group management and
applying analytical procedures to the financial information and underlying
financial data and, based thereon, assessing whether the accounting policies and
presentation have been consistently applied unless otherwise disclosed. A
review is substantially less in scope than an audit performed in accordance with
Auditing Standards and therefore provides a lower level of assurance than an
audit. Accordingly we do not express an audit opinion on the financial
information.
Review Conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 30 June 2003.
KPMG Audit Plc
Chartered Accountants
Registered Auditor
Leeds
5 September 2003
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