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Marshalls PLC (MSLH)

  Print          Annual reports

Tuesday 15 September, 2020

Marshalls PLC

Half-year Report

RNS Number : 9558Y
Marshalls PLC
15 September 2020
 

 

 

 

LEI: 213800S21IFC367J5V62

Well placed to deliver a strong recovery

 

Marshalls plc, the specialist Landscape Products group, announces its interim year results for the half year ended 30 June 2020.

 

Financial Highlights

Half Year ended

30 June 2020

Half Year ended

30 June 2019

Results before operational restructuring costs and asset impairments1

 

Revenue

 

 

£210.5m

 

£280.1m

EBITDA

EBITDA - pre-IFRS 16

Operating profit

£18.2m

£11.8m

£3.5m

£54.9m

£47.3m

£39.0m

Profit before tax

Basic EPS

£1.6m

0.12p

£37.1m

15.18p

 

 

 

ROCE

Net debt

Net debt - pre-IFRS 16

 

10.9%

£98.9m

£53.9m

19.3%

£97.7m

£55.6m

Statutory results

 

Operating profit

Operational restructuring costs and asset impairments

Operating (loss) / profit

(Loss) / profit before tax

Basic EPS

 

 

£3.5m

£(17.6)m

£(14.1)m

£(16.0)m

(7.25)p

 

 

£39.0m

-

£39.0m

£37.1m

15.18p

 

Notes:

1.  Alternative performance measures are used consistently throughout this Interim Announcement.  These relate to EBITA, EBITDA, return on capital employed ("ROCE"), net debt and results before operational restructuring costs and asset impairments. Following the transition to IFRS 16, reference has been made to "pre-IFRS 16" and "reported basis," the latter referring to amounts required under IFRS 16. For further details of their purpose, definition and reconciliation to the equivalent statutory measures, see Note 3.

 

Operational highlights

·   Priority given to health and safety during the COVID-19 crisis; no COVID-19 related incidents have been incurred

·   Trading has improved further since the half year end with revenue in the month of July at 94 per cent of the 2019 comparative period and in the month of August at 100 per cent of the 2019 comparative period

·   Maximised efficiency and maintained full national manufacturing operational flexibility and logistics capacity in order to meet demand

·   The operational restructuring exercise is now complete; resulting in the closure of certain manufacturing sites and overhead reductions across the Group

· All continuing manufacturing sites are now fully operational

· Maintained focus on innovation, ESG priorities, sales opportunities and growth over the medium term

 

Financial highlights

· Continued emphasis on cost reduction

· Group liquidity has been maintained and enhanced throughout the COVID-19 period

·   Net debt of £53.9m (2019: £55.6 million) on a pre-IFRS 16 basis

· Additional short term RCF bank facilities of £90m and CCFF facility of £200m

· Total bank facilities now £255m, of which £230m are committed

· Marshalls confirms its intention to repay in full the furlough monies received of £9.4m

· The costs associated with operational restructuring totalled £17.6 million and have been charged to the income statement in the period

·   Restructuring expected to reduce fixed costs by approximately £12 million in a full year and improve operational efficiency going forward

·   Maintained a strong balance sheet and a flexible capital structure - Marshalls should emerge in a stronger competitive position

 

Commenting on these results, Martyn Coffey, Chief Executive, said:

 

"Although business confidence and market demand remain uncertain, recent trading has been better than expected and continues to improve. Our restructuring programme is now complete and the new bank facilities have further strengthened the Group. The decisive actions that have been taken have improved the efficiency and flexibility of our plants and will help Marshalls to emerge from the current market difficulties in a stronger competitive position.

 

Marshalls holds a leading position and enjoys a strong brand in its core markets. We will continue to protect the long term sustainability of the business and will remain focused on developing future growth opportunities and delivering the strategic objectives set out in our 5 year Strategy."

 

There will be a video webcast for analysts and investors today at 10:00am. The presentation will be available for analysts and investors who are unable to view the webcast live and can be viewed on Marshalls' website at www.marshalls.co.uk . Users can register to access the webcast using the following link:

https://webcasting.brrmedia.co.uk/broadcast/5f3e2fa6b14d872626439f7f . There will also be a telephone dial in facility available Tel: +44 (0)330 336 9125 - Access Code: 1128610. 

 

Enquiries:

  Martyn Coffey

Chief Executive

Marshalls plc

+44 (0)1422 314777

  Jack Clarke

 

Group Finance Director

Marshalls plc

+44 (0)1422 314777

  Andrew Jaques

 

MHP Communications

+44 (0)20 3128 8540

  Charlie Barker

 

 

 

 

INTERIM MANAGEMENT REPORT

 

Group results

 

Marshalls' revenue for the 6 months ended 30 June 2020 was £210.5 million (2019: £280.1 million) which represents a decrease of 25 per cent year on year. Revenue in June was down 7 per cent, compared with the prior year, on a like for like basis. This result represented a significant improvement from the early part of the COVID-19 outbreak and compares with sales in April, which were 66 per cent down. Trading has improved further since the half year end with revenue in the month of July at 94 per cent of the 2019 comparative period and in the month of August at 100 per cent of the 2019 comparative period.

 

The Group continues to focus on cost reduction measures and in maintaining cash liquidity. As at 30 June 2020, the Group had net debt of £53.9 million, on a pre-IFRS 16 basis (2019: £55.6 million). We continue to monitor cash flows closely and at 31 August 2020 net debt, on a pre-IFRS 16 basis, remained ahead of management expectations at £60.8 million.

 

For the 6 months to 30 June 2020, sales to the Public Sector and Commercial end market represented 64 per cent of Group sales and were 28 per cent behind the comparative period in 2019. The Group continues to target those parts of the market where higher levels of growth are anticipated including Infrastructure projects in Road, Rail and Water Management.

 

For the 6 months to 30 June 2020, sales to the Domestic end market represented 28 per cent of Group sales and were 24 per cent behind the comparative period in 2019. Sales have picked up strongly since May. The survey of domestic installers at the end of June 2020 showed a healthy order book of 11.9 weeks (June 2019: 11.5 weeks; February 2020: 10.7 weeks). The stronger sales reflect increased demand for DIY projects, with the trend being for domestic consumers, who in many cases have been unable to take their usual holidays, to invest in home and garden projects. Although business confidence and market demand in the housebuilding sector remain uncertain, we have seen a shifting trend towards the "Don't Move, Improve" part of the Domestic end market.

 

Sales in the International business increased by 15 per cent compared with the prior year half year period, supported by strong sales from Marshalls NV in Belgium. International sales were 8 per cent of Group sales in the 6 months ended 30 June 2020. The Group continues to develop its global supply chains and infrastructure to ensure that international operations are sustainable and aligned with market opportunities.

 

EBITDA was £18.2 million (2019: £54.9 million) before operational restructuring costs and asset impairments of £17.6 million. Operating profit before operational restructuring costs and asset impairments was £3.5 million (2019: £39.0 million). After operational restructuring costs and asset impairments the reported loss before tax for the period was £16.0 million.

 

Group return on capital employed ("ROCE") was 10.9 per cent for the 12 months ended 30 June 2020 (30 June 2019: 19.3 per cent).

 

Net financial expenses were £1.9 million (2019: £1.9 million), including £0.7 million of IFRS 16 lease interest. On a rolling annual basis, interest was covered 14.8 times (2019: 32.4 times). 

 

Basic EPS, before operational restructuring costs and asset impairments, was 0.12 pence (2019: 15.18 pence) per share. Reported EPS was -7.25 pence.

 

Operational restructuring costs and other actions taken

 

Throughout the last few months, actions have been taken to control costs and maintain cash liquidity. Discretionary expenditure has been halted, capital expenditure restricted only to essential items and there remains a recruitment freeze. Additionally, the Board and Senior Management agreed to a temporary reduction in remuneration. The Group has utilised the Government's scheme which allows the deferral of tax payments that would normally have been payable in the period to 30 June 2020, and has also utilised the furlough arrangements that were available in the second quarter. The total amount of furlough received has been £9.4 million and it is the Group's intention to repay this.

 

In May, the Group announced a series of restructuring proposals covering all parts the business, including selective site closures, changes in shift patterns and proposed changes to the size and structure of support functions. Approximately 15 per cent of Marshalls total workforce have been impacted and the manufacturing facilities in Falkirk, Llan and Livingston have been closed along with a number of Premier Mortars sites. The restructuring programme is now complete and the full cost of £17.6 million has been charged to the Income Statement in the 6 months to 30 June 2020. These actions are expected to reduce fixed costs by approximately £12 million in a full year and improve operational efficiency going forward. The cash element of the operational restructuring costs is expected to be approximately £9.0 million, of which £3.5 million was incurred in the period to 30 June 2020.

 

The nature of the concrete manufacturing process means our facilities have short re-start times and low cost requirements. This flexibility and our improved efficiency means that capacity will not be materially reduced by the operational restructuring changes and we will continue to satisfy our customers' requirements. 

 

Marshalls 5 year Strategy

 

We continue to risk assess all challenges and develop risk mitigation strategies that seek to address a range of downside scenarios. The impact of COVID-19 has presented many challenges and a significant short term reduction in sales. However, these issues do not change the essential pillars and underlying objectives of our 5 year Strategy. We are confident that the strategy is the right one, with in-built flexibility such that the pace at which it is delivered can be adapted to external and economic uncertainties. The COVID-19 pandemic has necessitated a pause to certain aspects of the strategy but, as conditions allow, actions will be taken to re-commence initiatives that remain key parts of the 5 year Strategy.

 

Our 5 year Strategy will continue to lay the foundation for achieving our strategic goal of becoming the UK's leading manufacturer of products for the Built Environment. At the heart of our strategy are 8 priority areas for investment and business focus, and we will continue to strive to be more efficient, cost effective and innovative in order to challenge the market. The Group will continue to focus on service, quality, design, innovation and sustainability and we are committed to the promotion of our strong environmental, social and governance ("ESG") objectives. Marshalls continues to support the UN Global Compact sustainable development goals. https://media.marshalls.co.uk/image/upload/fl_attachment/v1597668615/Marshalls-plc-UNGC-COP-2019.pdf

The overall Group strategy continues to focus on the maintenance of a strong balance sheet, a flexible capital structure and a clear capital allocation policy.

 

Operating performance

 

All continuing manufacturing sites are now fully operational and our priority continues to be the safety and well-being of all our employees, suppliers and customers. Our health and safety practices are in line or, in many cases, exceed the recommended guidelines.

 

In the Public Sector and Commercial end market, Marshalls' strategy is to focus on those market areas where future demand is considered to be greatest, including New Build Housing, Road, Rail and Water Management. Our aim is to offer sustainable integrated solutions to customers, architects and contractors and our "Design Space" offices in Central London and Birmingham showcase the Group's brand leading capabilities and technical and design solutions. The UK Government has announced Public Sector investment of £640 billion over the next 5 years and is bringing forward £5 billion of capital investment projects. This includes a significant number of road and rail projects together with refurbishment programmes for schools, hospitals and town centres. The current stamp duty holiday and the extension to the Help to Buy scheme should both provide a boost to short term housing demand. Longer term the shortage of UK housing and the Government's desire to support building initiatives remain, although the overall outlook for the housebuilding sector will be largely dependent on consumer demand.

 

In the Domestic end market, the Group's strategy is to drive more sales through the Marshalls Register which comprises approximately 1,900 installer teams. This ensures a consistently high standard of quality, customer service and marketing support. We aim to be the supplier of choice and remain focused on providing outstanding customer experience by extending digitisation and our commitment to innovation. Homeowners on furlough or working from home have found it easier to undertake refurbishment projects and the Group has benefited in recent months from an increased demand for DIY projects. This growth has been supported by the Group's further development of its digital strategy. Investment in these areas has been a key part of the 5 year Strategy and our new platforms are moving towards providing a cohesive, frictionless user experience for customers.

 

Balance sheet and cash flow

 

Net assets at 30 June 2020 were £275.8 million (June 2019: £278.2 million).

 

On a reported basis, net debt was £98.9 million at 30 June 2020 (2019: £97.7 million). This net debt figure includes £45.0 million of IFRS 16 lease liabilities. On a pre-IFRS 16 basis, net debt was £53.9 million (30 June 2019: £55.6 million). This result was better than expected and reflects the improved trading performance. All PAYE, NIC and aggregates levy payments that were deferred during the second quarter in line with the Government's scheme were repaid before 30 June 2020.

 

On 1 May 2020, the Group signed agreements with each of NatWest, Lloyds and HSBC for an additional £30 million from each, for a 12 month committed revolving credit facility, with a 12 month extension option. These additional facilities totalling £90 million, significantly expand the Group's headroom. On 9 September 2020, the Group signed an agreement with HSBC to extend its existing 4 year £35 million facility for a further year until August 2024. Including the additional facilities, Marshalls now has total bank facilities of £255 million of which £230 million are committed. In addition, Marshalls has also established a commercial programme under the COVID Corporate Financing Facility ("CCFF") with an issuer limit of £200 million.  

 

At 30 June 2020 there were unutilised bank facilities of £115.1 million (Note 14) in addition to the undrawn CCFF facility. Cash generation has been better than expected and there is no current intention to utilise either the additional £90 million bank facilities or the CCFF commercial paper programme. The Group continues to focus on robust capital disciplines and strong cash management continues to be a high priority area. The Group operates tight control over business, through both operational and financial procedures and continues to focus on inventory levels and the close control of credit management procedures. The Group maintains credit insurance which provides excellent intelligence to minimise the number and value of bad debts. The Group does not engage in debt factoring.

 

The balance sheet value of the Group's defined benefit pension scheme was a surplus of £10.4 million at 30 June 2020 (December 2019: £15.7 million surplus; June 2019: £20.6 million surplus).  The surplus has been determined by the scheme actuary using assumptions that are considered to be prudent and in line with current market levels.  During the last 6 months the AA corporate bond rate has fallen from 2.10 per cent to 1.55 per cent and this is the primary driver of the surplus reduction. The expected rate of CPI inflation has remained at 2.05 per cent. The balance sheet value continues to benefit from the high proportion of liability-driven investments whose performance matches the liabilities.

 

Dividend

 

The Group's capital allocation strategy is to maintain a strong balance sheet and a flexible capital structure that recognises cyclical risk, while focusing on security, efficiency and liquidity. The capital allocation policy continues to prioritise organic capital investment although capital expenditure projects have been deferred in response to COVID-19.

 

As a consequence of COVID-19, the Board is not proposing an interim dividend for the current year. The payment of dividends continues to be a key priority for capital allocation. The resumption of future dividends will be reviewed at the full year.  The Group will maintain its policy objective of achieving up to 2 times dividend cover over the business cycle. 

 

Principal risks and uncertainties

 

There are a number of potential risks and uncertainties which could have a material impact on the Group's performance over the remaining 6 months of the financial year and could cause actual results to differ materially from expected and historical results.

 

The impact of the COVID-19 pandemic on the business and its underlying principal risks, set out below, are being assessed on an ongoing basis. Further details of how the Group has mitigated these risks in response to COVID-19 are set out in Note 16.

 

· Health and safety - to ensure the safety and well-being of all employees and other stakeholders.

· Significantly reduced sales - to manage the short term impact on the business.

· Liquidity - to ensure the adequacy and security of bank facilities.

· Information technology and cyber security - to ensure the continuity of business during the COVID-19 restrictions.

· Control environment - to ensure the maintenance of key operational controls during the COVID-19 restrictions.

· Return to "business as usual" - to ensure the effective and safe transition process of employees and stakeholders.

· Medium term strategy - to ensure the continued alignment of the business model to meet expected medium term demand.

 

A detailed explanation of the Group's risk environment and how the Group seeks to mitigate its risks, can be found on pages 24 to 29 of the 2019 Annual Report, which is available at www.marshalls.co.uk/investor/annual-and-interim-reports .

 

Going concern

 

Details of the Group's funding position are set out in Note 14. In assessing the appropriateness of adopting the going concern basis in the Condensed Consolidated Half Year Financial Statements, the Board reviewed a range of severe downside scenarios to assess the potential impact of COVID-19. Each of the downside scenarios modelled adopted significant sensitivities in relation to revenue, profit and cash flow over a 2 year period. The sensitivities applied to revenue were significant, being up to 70 per cent reductions for extended periods. Each scenario utilised different assumptions as to the immediacy, timing, length and depth of the most severe impact and one scenario covered the impact of a second "W-shaped" dip. Further details relating to the financial modelling that has been undertaken and the procedures taken by the Board to assess going concern are set out in Note 1.

 

Based on existing forecasts, current trading and expectations, the Group's cash forecasts continue to meet prevailing half year and year end bank covenants and there is adequate headroom which is not dependent on facility renewals.  The bank facilities available to the Group are sufficient to meet significant downside liquidity scenarios over a prolonged period and consequently the Group is well placed to manage its business risks successfully. 

 

The Directors are satisfied that the Group has sufficient resources to continue in operation for the foreseeable future, a period of not less than 12 months from the date of this report. Accordingly, they continue to adopt the going concern basis in preparing the Half Year Report.

 

Outlook

 

Although business confidence and market demand remain uncertain, recent trading has been better than expected and continues to improve. Our restructuring programme is now complete and the new bank facilities have further strengthened the Group. The decisive actions that have been taken have improved the efficiency and flexibility of our plants and will help Marshalls to emerge from the current market difficulties in a stronger competitive position.

 

Marshalls holds a leading position and enjoys a strong brand in its core markets . We will continue to protect the long term sustainability of the business and will remain focused on developing future growth opportunities and delivering the strategic objectives in our 5 year Strategy.

 

Following the onset of COVID-19, the Group withdrew financial guidance for the year on 27 March. Following the strong recovery in sales volumes seen in the business in recent weeks, Marshalls is reinstating guidance with this announcement, albeit on a qualified basis given the continued uncertainty regarding any future impacts from COVID-19. Assuming the current demand recovery continues, the Group anticipates delivering an operating profit for the full year consistent with current consensus.

 

Martyn Coffey

Chief Executive

 

 

Condensed Consolidated Income Statement

for the half year ended 30 June 2020

 

 

 

 

 

 

 

 

Before operational restructuring costs and asset impairments

Operational
restructuring
costs and asset impairments

Total

 

 

 

 

 

Half year ended June

  Year ended

December

 

 

2020

2020

2020

2019

2019

 

Notes

£'000

£'000

£'000

£'000

£'000

Revenue

4

 

210,473

-

210,473

280,107

     

 541,832

Net operating costs

5

(206,933)

(17,609)

(224,542)

(241,085)

(468,151)

Operating profit / (loss)

4

3,540

(17,609)

(14,069)

39,022

73,681

Financial expenses

7

(1,914)

-

(1,914)

(1,931)

(3,835)

Financial income

 

6

-

6

1

7

Profit / (loss) before tax

4

1,632

(17,609)

(15,977)

37,092

69,853

Income tax (expense) / credit

8

(1,186)

2,985

1,799

(7,055)

(11,942)

Profit / (loss) for the financial period

 

446

(14,624)

(14,178)

  30,037

57,911

Profit / (loss) for the financial period

Attributable to:

Equity shareholders of the parent

Non-controlling interests

 

 

 

 

233

213

(14,624)

-

(14,391)

213

  30,100

(63)

58,240 (329)

 

 

446

(14,624)

(14,178)

30,037

57,911

 

 

 

 

 

 

 

Earnings per share

 

 

 

 

 

 

Basic

9

0.12p

 

(7.25)p

15.18p

29.36p

Diluted

9

0.12p

 

-

15.07p

29.14p

Dividend

 

 

 

 

 

 

Pence per share

10

 

 

-

8.00p

12.00p

Supplementary

10

 

 

-

4.00p

4.70p

Dividends declared

10

 

 

-

23,802

33,113

 

All results relate to continuing operations.

 

Condensed Consolidated Statement of Comprehensive Income

for the half year ended 30 June 2020

 

 

Half year ended June

Year ended

December

 

2020

2019

2019

 

£'000

£'000

£'000

Profit for the financial period before operational restructuring costs and asset impairments

446

30,037

57,911

Operational restructuring costs and asset impairments

(14,624)

-

-

(Loss) / profit for the financial period

(14,178)

30,037

57,911

Other comprehensive (expense) / income

 

 

 

Items that will not be reclassified to the Income Statement:

 

 

 

Remeasurement of the net defined benefit asset

(5,205)

7,590

2,847

Deferred tax arising

989

(1,290)

(484)

Impact of the change in rate of deferred tax on defined benefit plan actuarial loss

(314)

-

-

Total items that will not be reclassified to the Income Statement

(4,530)

6,300

2,363

Items that are or may in the future be reclassified to the Income Statement:

 

 

 

Effective portion of changes in fair value of cash flow hedges

(1,273)

216

231

Fair value of cash flow hedges transferred to the Income Statement

619

(62)

113

Deferred tax arising

111

(26)

(58)

Exchange difference on retranslation of foreign currency net investment

1,243

27

(869)

Exchange movements associated with borrowings

(1,169)

(17)

992

Foreign currency translation differences - non-controlling interests

48

(5)

(42)

Total items that are or may be reclassified subsequently to the Income Statement

(421)

133

367

Other comprehensive (expense) / income for the period, net of income tax

(4,951)

6,433

2,730

Total comprehensive (expense) / income for the period

(19,129)

36,470

60,641

Attributable to:

 

 

 

Equity shareholders of the Parent

(19,390)

36,538

61,012

Non-controlling interests

261

(68)

(371)

 

(19,129)

36,470

60,641

 

Condensed Consolidated Balance Sheet

as at 30 June 2020

 

 

 

June

 

December

 

 

2020

2019

 2019

 

Notes

£'000

£'000

£'000

Assets

 

 

 

 

Non-current assets

 

 

 

 

Property, plant and equipment

 

194,794

190,036

195,554

Right-of-use assets

 

43,622

40,934

40,014

Intangible assets

 

95,598

89,727

95,799

Employee benefits

12

10,393

20,609

15,721

Deferred taxation assets

 

2,084

2,399

2,947

 

 

346,491

343,705

350,035

Current assets

 

 

 

 

Inventories

 

82,490

93,260

89,238

Trade and other receivables

 

95,233

101,923

69,418

Cash and cash equivalents

 

86,609

11,169

53,258

Derivative financial instruments

 

-

430

620

 

 

264,332

206,782

212,534

Total assets

 

610,823

550,487

562,569

Liabilities

 

 

 

 

Current liabilities

 

 

 

 

Trade and other payables

 

125,269

127,025

121,379

Corporation tax

 

4,610

11,635

11,234

Short-term lease liabilities

11

10,213

10,175

9,736

Interest-bearing loans and borrowings

 

-

21,301

20,000

Derivative financial instruments

 

34

-

-

 

 

140,126

170,136

162,349

Non-current liabilities

 

 

 

 

Long-term lease liabilities

11

35,404

32,702

32,224

Interest-bearing loans and borrowings

 

139,860

44,688

51,274

Provisions

 

2,649

6,462

2,649

Deferred taxation liabilities

 

17,005

18,328

18,307

 

 

194,918

102,180

104,454

Total liabilities

 

335,044

272,316

266,803

Net assets

 

275,779

278,171

295,766

Equity

 

 

 

 

Capital and reserves attributable to equity shareholders of the Parent

 

 

 

 

Share capital

 

50,013

50,017

50,013

Share premium account

 

24,482

24,532

24,482

Own shares

 

(1,075)

(1,406)

(1,391)

Capital redemption reserve

 

75,394

75,394

75,394

Consolidation reserve

 

(213,067)

(213,067)

(213,067)

Hedging reserve

 

16

401

559

Retained earnings

 

339,032

341,274

359,053

Equity attributable to equity shareholders of the Parent

 

274,795

277,145

295,043

Non-controlling interests

 

984

1,026

723

Total equity

 

275,779

278,171

295,766

 

Condensed Consolidated Cash Flow Statement

for the half year ended 30 June 2020

 

 

Half year ended June

Year ended

December

 

2020

2019

2019

 

£'000

£'000

£'000

Profit before operational restructuring costs and asset impairments

446

30,037

57,911

Operational restructuring costs and asset impairments

(14,624)

-

-

(Loss) / profit for the financial period

(14,178)

30,037

  57,911

Income tax expense on continuing operations

Income tax credit on operational restructuring costs and asset impairments

1,186

(2,985)

7,055

-

11,942

-

(Loss) / profit before tax  

(15,977)

37,092

69,853

Adjustments for:

 

 

 

Depreciation

13,340

14,740

27,771

Amortisation

1,295

1,183

2,423

Net gain on sale of property, plant and equipment

(37)

(108)

(306)

Share-based payment expense

1,244

1,313

3,024

Financial income and expenses (net)

1,908

1,930

3,828

Operating cash flow before changes in working capital

1,773

56,150

106,593

(Increase) / decrease in trade and other receivables

(25,207)

(21,672)

10,645

Decrease / (increase) in inventories

7,184

(8,925)

(5,262)

Increase / (decrease) in trade and other payables

7,772

5,069

(10,151)

Operational restructuring costs paid

(3,522)

-

(1,109)

Acquisition costs paid

-

(375)

(375)

Cash (absorbed by) / generated from operations

(12,000)

30,247

100,341

Financial expenses paid

(1,791)

(740)

(3,193)

Income tax paid

(4,631)

(5,225)

(9,023)

Net cash flow from operating activities

(18,422)

24,282

88,125

Cash flows from investing activities

 

 

 

Proceeds from sale of property, plant and equipment

73

108

523

Financial income received

6

1

7

Purchase of property, plant and equipment

(6,405)

(8,799)

(20,488)

Purchase of intangible assets

(1,094)

(1,266)

(2,420)

Net cash flow from investing activities

(7,420)

(9,956)

(22,378)

Cash flows from financing activities

 

 

 

Proceeds from issue of share capital

-

225

225

Payments to acquire own shares

(2,035)

(1,470)

(1,470)

Repayment of borrowings

(483)

(31,986)

(60,736)

New loans

67,900

15,837

49,809

Cash payments in respect of the principal portion of lease liabilities

(6,411)

(7,673)

(12,723)

Equity dividends paid

-

(23,802)

(33,203)

Net cash flow from financing activities

58,971

(48,869)

(58,098)

Net increase / (decrease) in cash and cash equivalents

33,129

(34,543)

7,649

Cash and cash equivalents at the beginning of the period

53,258

45,709

45,709

Effect of exchange rate fluctuations

222

3

(100)

Cash and cash equivalents at the end of the period

86,609

11,169

53,258

 

Condensed Consolidated Statement of Changes in Equity

for the half year ended 30 June 2020

 

 

Attributable to equity holders of the Company

 

 

 

 

Share

 

Capital

 

 

 

 

Non-

 

 

 

Share

premium

Own

redemption

Consolidation

Hedging

Retained

 

controlling

Total

 

 

capital

account

shares

reserve

reserve

reserve

earnings

Total

interests

equity

 

 

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

 

Current half year

 

 

 

 

 

 

 

 

 

 

 

At 1 January 2020

50,013

24,482

(1,391)

75,394

(213,067)

559

359,053

295,043

723

295,766

 

Total comprehensive income / (expense) for the period

 

 

 

 

 

 

 

 

 

 

 

(Loss) / profit for the financial period attributable to equity shareholders of the Parent

-

-

-

-

-

-

(14,391)

(14,391)

213

(14,178)

 

Other comprehensive income / (expense)

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation differences

-

-

-

-

-

-

74

74

48

122

 

Effective portion of changes in fair value of cash flow hedges

-

-

-

-

-

(1,273)

-

(1,273)

-

(1,273)

 

Net change in fair value of cash flow hedges transferred to the Income Statement

-

-

-

-

-

619

-

619

-

619

 

Deferred tax arising

-

-

-

-

-

111

-

111

-

111

 

Defined benefit plan actuarial loss

-

-

-

-

-

-

(5,205)

(5,205)

-

(5,205)

 

Deferred tax arising

-

-

-

-

-

-

989

989

-

989

 

Impact of the change in rate of deferred tax on defined benefit plan actuarial loss

-

-

-

-

-

-

(314)

(314)

-

(314)

 

Total other comprehensive income / (expense)

-

-

-

-

-

(543)

(4,456)

(4,999)

48

(4,951)

 

Total comprehensive income / (expense) for the period

-

-

-

-

-

(543)

(18,847)

(19,390)

261

(19,129)

 

Transactions with owners, recorded directly in equity

 

 

 

 

 

 

 

 

 

 

 

Contributions by and distributions to owners

 

 

 

 

 

 

 

 

 

 

 

Share-based payments

-

-

-

-

-

-

1,244

1,244

-

1,244

 

Deferred tax on share-based payments

-

-

-

-

-

-

(253)

(253)

-

(253)

 

Corporation tax on share-based payments

-

-

-

-

-

-

186

186

-

186

 

Dividends to equity shareholders

-

-

-

-

-

-

-

-

-

-

 

Shares issued

-

-

-

-

-

-

-

-

-

-

 

Purchase of own shares

-

-

(2,035)

-

-

-

-

(2,035)

-

(2,035)

 

Disposal of own shares

-

-

2,351

-

-

-

(2,351)

-

-

-

 

Total contributions by and distributions to owners

-

-

316

-

-

-

(1,174)

(858)

-

(858)

 

Total transactions with owners of the Company

-

-

316

-

-

(543)

(20,021)

(20,248)

261

(19,987)

 

At 30 June 2020

50,013

24,482

(1,075)

75,394

(213,067)

16

339,032

274,795

984

275,779

 

                           

 

Condensed Consolidated Statement of Changes in Equity (cont'd)

for the half year ended 30 June 2020

 

 

Attributable to equity holders of the Company

 

 

 

 

Share

 

Capital

 

 

 

 

Non-

 

 

Share

premium

Own

redemption

Consolidation

Hedging

Retained

 

controlling

Total

 

capital

account

shares

reserve

reserve

reserve

earnings

Total

interests

equity

 

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

Prior half year

 

 

 

 

 

 

 

 

 

 

At 1 January 2019

49,998

24,326

(888)

75,394

(213,067)

273

329,585

265,621

1,094

266,715

Effect of initial application of IFRS 16

-

-

-

-

-

-

(1,842)

(1,842)

-

(1,842)

At 1 January 2019 - as restated

49,998

24,326

(888)

75,394

(213,067)

273

327,743

263,779

1,094

264,873

Total comprehensive income / (expense) for the period

 

 

 

 

 

 

 

 

 

 

Profit / (loss) for the financial period attributable to equity shareholders of the Parent

-

-

-

-

-

-

30,100

30,100

(63)

30,037

Other comprehensive income / (expense)

 

 

 

 

 

 

 

 

 

 

Foreign currency translation differences

-

-

-

-

-

-

10

10

(5)

5

Effective portion of changes in fair value of cash flow hedges

-

-

-

-

-

216

-

216

-

216

Net change in fair value of cash flow hedges transferred to the Income Statement

-

-

-

-

-

(62)

-

(62)

-

(62)

Deferred tax arising

-

-

-

-

-

(26)

-

(26)

-

(26)

Defined benefit plan actuarial gain

-

-

-

-

-

-

7,590

7,590

-

7,590

Deferred tax arising

-

-

-

-

-

-

(1,290)

(1,290)

-

(1,290)

Total other comprehensive income / (expense)

-

-

-

-

-

128

6,310

6,438

(5)

6,433

Total comprehensive income / (expense) for the period

-

-

-

-

-

128

36,410

36,538

(68)

36,470

Transactions with owners, recorded directly in equity

 

 

 

 

 

 

 

 

 

 

Contributions by and distributions to owners

 

 

 

 

 

 

 

 

 

 

Share-based payments

-

-

-

-

-

-

1,313

1,313

-

1,313

Deferred tax on share-based payments

-

-

-

-

-

-

410

410

-

410

Corporation tax on share-based payments

-

-

-

-

-

-

152

152

-

152

Dividends to equity shareholders

-

-

-

-

-

-

(23,802)

(23,802)

-

(23,802)

Shares issued

19

206

-

-

-

-

-

225

-

225

Purchase of own shares

-

-

(1,470)

-

-

-

-

(1,470)

-

(1,470)

Disposal of own shares

-

-

952

-

-

-

(952)

-

-

-

Total contributions by and distributions to owners

19

206

(518)

-

-

-

(22,879)

(23,172)

-

(23,172)

Total transactions with owners of the Company

19

206

(518)

-

-

128

13,531

13,366

(68)

13,298

At 30 June 2019

50,017

24,532

(1,406)

75,394

(213,067)

401

341,274

277,145

1,026

278,171

 

Condensed Consolidated Statement of Changes in Equity (cont'd)

for the half year ended 30 June 2020

 

 

Attributable to equity holders of the Company

 

 

 

 

Share

 

Capital

 

 

 

 

Non-

 

 

Share

premium

Own

redemption

Consolidation

Hedging

Retained

 

controlling

Total

 

capital

account

shares

reserve

reserve

reserve

earnings

Total

interests

equity

 

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

Prior year

 

 

 

 

 

 

 

 

 

 

At 1 January 2019

49,998

24,326

(888)

75,394

(213,067)

273

329,585

265,621

1,094

266,715

Effect of initial application of IFRS 16

-

-

-

-

-

-

(1,842)

(1,842)

-

(1,842)

At 1 January 2019 - as restated

49,998

24,326

(888)

75,394

(213,067)

273

327,743

263,779

1,094

264,873

Total comprehensive income / (expense) for the year

 

 

 

 

 

 

 

 

 

 

Profit / (loss) for the financial year attributable to equity shareholders of the Parent

-

-

-

-

-

-

58,240

58,240

(329)

57,911

Other comprehensive income / (expense)

 

 

 

 

 

 

 

 

 

 

Foreign currency translation differences

-

-

-

-

-

-

123

123

(42)

81

Effective portion of changes in fair value of cash flow hedges

-

-

-

-

-

231

-

231

-

231

Net change in fair value of cash flow hedges transferred to the Income Statement

-

-

-

-

-

113

-

113

-

113

Deferred tax arising

-

-

-

-

-

(58)

-

(58)

-

(58)

Defined benefit plan actuarial gain

-

-

-

-

-

-

2,847

2,847

-

2,847

Deferred tax arising

-

-

-

-

-

-

(484)

(484)

-

(484)

Total other comprehensive income / (expense)

-

-

-

-

-

286

2,486

2,772

(42)

2,730

Total comprehensive income for the year / (expense)

-

-

-

-

-

286

60,726

61,012

(371)

60,641

Transactions with owners, recorded directly in equity

 

 

 

 

 

 

 

 

 

 

Contributions by and distributions to owners

 

 

 

 

 

 

 

 

 

 

Share-based payments

-

-

-

-

-

-

3,024

3,024

-

3,024

Deferred tax on share-based payments

-

-

-

-

-

-

1,219

1,219

-

1,219

Corporation tax on share-based payments

-

-

-

-

-

-

457

457

-

457

Dividends to equity shareholders

-

-

-

-

-

-

(33,203)

(33,203)

-

(33,203)

Shares issued

15

156

54

-

-

-

-

225

-

225

Purchase of own shares

-

-

(1,470)

-

-

-

-

(1,470)

-

(1,470)

Disposal of own shares

-

-

913

-

-

-

(913)

-

-

-

Total contributions by and distributions to owners

15

156

(503)

-

-

-

(29,416)

(29,748)

-

(29,748)

Total transactions with owners of the Company

15

156

(503)

-

-

286

31,310

31,264

(371)

30,893

At 31 December 2019

50,013

24,482

(1,391)

75,394

(213,067)

559

359,053

295,043

723

295,766

 

 

Notes to the Condensed Consolidated Financial Statements

for the half year ended 30 June 2020

 

1 Basis of preparation

Marshalls plc (the "Company") is a company domiciled in the United Kingdom. The Condensed Consolidated Financial Statements of the Company for the half year ended 30 June 2020 comprise the Company and its subsidiaries (together referred to as the "Group").

The Condensed Consolidated Financial Statements have been prepared in accordance with the Disclosure Guidance and Transparency Rules of the UK Financial Conduct Authority and the requirements of IAS 34 "Interim Financial Reporting" as adopted by the European Union ("EU").

The Condensed Consolidated Financial Statements do not constitute statutory financial statements and do not include all the information and disclosures required for full annual financial statements. The Condensed Consolidated Half Year Financial Statements were approved by the Board on 15 September 2020. The Condensed Consolidated Half Year Financial Statements are not statutory accounts as defined by Section 434 of the Companies Act 2006.

The financial information for the year ended 31 December 2019 has been extracted from the Annual Financial Statements, included in the Annual Report 2019, which has been filed with the Registrar of Companies. The report of the Auditor was: (i) unqualified; (ii) did not include a reference to any matters to which the Auditor drew attention by way of emphasis without qualifying its report; and (iii) did not contain a statement under Section 498 (2) and (3) of the Companies Act 2006.

The Condensed Consolidated Financial Statements for the half year ended 30 June 2020 and the comparative period have not been audited. The Auditor has carried out a review of the Half Year Financial Information and its report is set out below.

The Annual Financial Statements of the Group are prepared in accordance with International Financial Reporting Standards ("IFRSs") as adopted by the EU. As required by the Disclosure Guidance and Transparency Rules of the UK Financial Conduct Authority, the condensed set of Financial Statements has been prepared applying the accounting policies and presentation that were applied in the preparation of the Company's published Consolidated Financial Statements for the year ended 31 December 2019.

The Condensed Consolidated Half Year Financial Statements are prepared on the historical cost basis except that the following assets and liabilities are stated at their fair value: derivative financial instruments and liabilities for cash settled share-based payments.

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 the 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. In preparing these Condensed Consolidated Half Year Financial Statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the Consolidated Financial Statements of the Group for the year ended 31 December 2019.

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.

Going concern

Details of the Group's funding position are set out in Note 14. On 1 May 2020, the Group signed agreements with each of NatWest, Lloyds and HSBC for an additional £30 million, 12 month committed revolving credit facility with each. These additional facilities comprise £90 million and significantly strengthen the Group's headroom. Including these additional facilities, Marshalls now has total bank facilities of £255 million, of which £230 million are committed. In addition, Marshalls plc has been confirmed as being eligible for the COVID Corporate Financing Facility ("CCFF") with an issuer limit of £200 million. The Group has completed the processes and documentation to establish a commercial paper programme under this scheme and is able to access the liquidity available to it under this facility. The Group's on-demand overdraft facility is reviewed on an annual basis and the current arrangements were renewed and signed on 9 September 2020.

In assessing the appropriateness of adopting the going concern basis in the Condensed Consolidated Half Year Financial Statements, the Board reviewed a range of severe downside scenarios to assess the potential impact of COVID-19. Each of the downside scenarios modelled adopted significant sensitivities in relation to revenue, profit and cash flow over a 2 year period. The sensitivities applied to revenue were significant, being up to 70 per cent reductions for extended periods. Each scenario utilised different assumptions as to the immediacy, timing, length and depth of the most severe impact and one scenario covered the impact of a second "W-shaped" dip. To varying extents each scenario included the assumption that trading conditions would start to recover during 2021. The financial modelling revealed that the most sensitive point would be in March 2021 as, at this point, there could have been a full year of reduced trading as a consequence of COVID-19 restrictions which would combine with the natural working capital cycle peak ahead of the quarter 2 sales season. In terms of covenant testing, the December 2020 test date was likely to be most at risk of being breached under the deep downside scenarios. Temporary covenant waivers have been established for the period to 30 June 2021, during which there is an ongoing agreement with each partner bank that net debt (excluding lease liabilities under IFRS 16) will not exceed £200 million. In all the downside scenarios there remain options to extend mitigating actions available, such as further delaying planned capital expenditure.

The Group's performance is dependent on economic and market conditions, the outlook for which is difficult to predict. However, based on current expectations and as consequence of significantly improved trading, the Group's latest cash forecasts continue to meet half year and year end bank covenants and there is adequate headroom that is not dependent on facility renewals. At 30 June 2020, on a covenant test basis (pre-IFRS 16), the relevant ratios were comfortably achieved and were as follows:

· EBITA:interest charge - 18.1 times (covenant test requirement - to be greater than 2.5 times).

· Net Debt:EBITDA - 1.0 times (covenant test requirement - to be less than 3.0 times).

Net debt:EBITDA on a reported basis is 1.5 times at 30 June, with a continuing objective to be below 1.0 times. After considering the risks associated with COVID-19 and other relevant uncertainties, the Directors believe that the Group is well placed to manage its business risks successfully. The Board considers that the facilities now available to the Group, both from its enhanced bank facilities and its CCFF commercial paper programme, are sufficient to meet significant downside liquidity scenarios over a prolonged period and that there are sufficient unutilised facilities held which mature after 12 months. Accordingly, they continue to adopt the going concern basis in preparing the Condensed Consolidated Half Year Financial Statements.

2 Accounting policies

The Group applied IFRS 16 "Leases" with effect from 1 January 2019. The accounting policies have been applied consistently throughout the Group for the purposes of these Condensed Consolidated Half Year Financial Statements and are also set out on the Company's website (www.marshalls.co.uk). Other than in relation to exceptional "operational restructuring costs and asset impairments", the same accounting policies, methods of computation and disclosure are followed in the Condensed Consolidated Half Year Financial Statements as compared to the most recent Annual Financial Statements. Operational restructuring costs and asset impairments have been disclosed separately on the face of the Income Statement due to their scale and exceptional nature and to provide a better understanding of the Group's results. Further details have been included in Note 6. The Condensed Consolidated Half Year Financial Statements are presented in Sterling, rounded to the nearest thousand.

 

3. Alternative performance measures

The Group uses alternative performance measures ("APMs") which are not defined or specified under IFRS. The Group believes that its APMs, which are not considered to be a substitute for IFRS measures, provide additional helpful information. APMs are consistent with how business performance is planned, reported and assessed internally by management and the Board and provide more meaningful comparative information.

Results before operational restructuring costs and asset impairments

Operational restructuring costs and asset impairments have been disclosed separately on the face of the Income Statement due to their scale and exceptional nature and to provide a better understanding of the Group's results. Further details have been included in Note 6.

Pre-IFRS 16 basis

Disclosures required under IFRS are referred to as either on a post-IFRS 16 basis or on a reported basis. Disclosures referred to on a pre-IFRS 16 basis are restated to those that applied before the adoption of IFRS 16 and are used to provide additional information and a more detailed understanding of the Group results. A summarised Income Statement on both a reported basis and a pre-IFRS 16 basis is set out below. Both are before operational restructuring costs and asset impairments.

 

 

 

Pre-IFRS 16

As reported

 

Pre-IFRS 16

As reported

Pre-IFRS 16

As reported

 

 

June 2020

June 2020

 

June 2019

June 2019

December 2019

December 2019

 

 

£'000

£'000

 

£'000

£'000

£'000

£'000

Revenue

 

210,473

210,473

 

280,107

280,107

541,832

541,832

Net operating costs

 

(207,690)

(206,933)

 

(241,673)

(241,085)

(469,252)

(468,151)

Operating profit

 

2,783

3,540

 

38,434

39,022

72,580

73,681

Finance charges (net)

 

(1,241)

(1,908)

 

(1,237)

(1,930)

(2,486)

(3,828)

Profit before tax

 

1,542

1,632

 

37,197

37,092

70,094

69,853

Income tax

 

(1,186)

(1,186)

 

(7,055)

(7,055)

(11,942)

(11,942)

Profit after tax

 

356

446

 

30,142

30,037

58,152

57,911

 

The Financial metrics are presented on both a reported basis and a pre-IFRS 16 basis. Both are before operational restructuring costs and asset impairments and are as follows:

 

 

 

Pre-IFRS 16

As reported

 

Pre-IFRS 16

As reported

Pre-IFRS 16

As reported

 

 

June 2020

June 2020

 

June 2019

June 2019

December 2019

December 2019

Profit before tax (£'000)

 

1,542

1,632

 

37,197

37,092

70,094

69,853

EBITDA (£'000)

 

11,765

18,176

 

47,292

54,945

90,115

103,875

EPS (pence)

 

0.07

0.12

 

15.22

15.18

29.48

29.36

Net debt (£'000)

 

53,858

98,868

 

55,629

97,697

18,654

59,976

ROCE (%)

 

11.9

10.9

 

21.4

19.3

23.7

21.4

Net debt:EBITDA

 

1.0

1.5

 

0.6

1.0

0.2

0.6

Gearing (%)

 

19.4

35.9

 

19.8

35.1

6.3

20.3

 

EBITA and EBITDA

EBITA represents earnings before interest, tax and the amortisation of intangibles. This is a component of the ROCE calculation. EBITDA is calculated by adding back depreciation to EBITA. Both EBITA and EBITDA are disclosed before operational restructuring costs and asset impairments.

 

 

Pre-IFRS 16

As reported

Pre-IFRS 16

As reported

Pre-IFRS 16

As reported

 

June 2020

June 2020

June 2019

June 2019

December 2019

December 2019

 

£'000

£'000

£'000

£'000

£'000

£'000

EBITDA

11,765

18,176

47,292

54,945

90,115

103,875

Depreciation

(7,687)

(13,341)

(7,675)

(14,740)

(15,112)

(27,771)

EBITA

4,078

4,835

39,617

40,205

75,003

76,104

Amortisation of intangible assets

(1,295)

(1,295)

(1,183)

(1,183)

(2,423)

(2,423)

Operating profit

2,783

3,540

38,434

39,022

72,580

73,681

 

ROCE

Reported ROCE is defined as EBITA divided by shareholders' funds plus net debt. ROCE is disclosed before operational restructuring costs and asset impairments.

 

 

Pre-IFRS 16

As reported

 

Pre-IFRS 16

As reported

Pre-IFRS 16

As reported

 

 

June 2020

June 2020

 

June 2019

June 2019

December 2019

December 2019

 

 

£'000

£'000

 

£'000

£'000

£'000

£'000

EBITA - half year ended 30 June

 

4,078

4,835

 

39,617

40,205

39,617

40,205

EBITA - half year ended 31 December

 

35,386

35,899

 

32,363

32,363

35,386

35,899

EBITA - year ended 30 June

 

39,464

40,734

 

71,980

72,568

75,003

76,104

Shareholders' funds

 

277,773

275,779

 

280,425

278,171

297,850

295,766

Net debt

 

53,858

98,868

 

55,629

97,697

18,654

59,976

 

 

331,631

374,647

 

336,054

375,868

316,504

355,742

Reported ROCE

 

11.9%

10.9%

 

21.4%

19.3%

23.7%

21.4%

 

Net debt

 

Net debt comprises cash at bank and in hand, bank loans and leasing liabilities. An analysis of net debt is provided in Note 13.

 

4. Segmental analysis

IFRS 8 "Operating Segments" 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. As far as Marshalls plc is concerned, the CODM is regarded as being the Executive Directors. The Directors have concluded that the detailed requirements of IFRS 8 support the reporting of the Group's Landscape Products business as a reportable segment, which includes the UK operations of the Marshalls Landscape Products hard landscaping business, servicing both the UK Domestic and the UK Public Sector and Commercial end markets. Financial information for Landscape Products is reported to the Group's CODM for the assessment of segmental performance and to facilitate resource allocation.

The Landscape Products reportable segment operates a national manufacturing plan that is structured around a series of production units throughout the UK, in conjunction with a single logistics and distribution operation. A national planning process supports sales to both of the key end markets, namely the UK Domestic and UK Public Sector and Commercial end markets, and the operating assets produce and deliver a range of broadly similar products that are sold into each of these end markets. Within the Landscape Products operating segment, the focus is on the one integrated production, logistics and distribution network supporting both end markets.

Included in "Other" are the Group's Landscape Protection, Mineral Products, Premier Mortars and International operations, which do not currently meet the IFRS 8 reporting requirements. The accounting policies of the Landscape Products operating segment are the same as the Group's accounting policies. Segment profit represents the profit earned without allocation of certain central administration costs that are not capable of allocation. Centrally administered overhead costs that relate directly to the reportable segment are included within the segment's results.

Segment revenues and results

 

Half year ended June 2020

 

Half year ended June 2019

 

Year ended December 2019

 

Landscape

 

 

 

Landscape

 

 

 

Landscape

 

 

 

Products

Other

Total

 

Products*

Other*

Total

 

Products*

Other*

Total

 

£'000

£'000

£'000

 

£'000

£'000

£'000

 

£'000

£'000

£'000

External revenue

165,435

46,344

211,779

 

231,386

50,788

282,174

 

448,972

96,965

545,937

Inter-segment revenue

(14)

(1,292)

(1,306)

 

(143)

(1,924)

(2,067)

 

(362)

(3,743)

(4,105)

Total revenue

165,421

45,052

210,473

 

231,243

48,864

280,107

 

448,610

93,222

541,832

Segment operating profit

8,333

(441)

7,892

 

40,415

1,574

41,989

 

75,013

3,369

78,382

Operational restructuring costs and asset impairments

-

-

(17,609)

 

-

-

-

 

-

-

-

Unallocated administration costs

 

 

(4,352)

 

 

 

(2,967)

 

 

 

(4,701)

Operating (loss) / profit

 

 

(14,069)

 

 

 

39,022

 

 

 

73,681

Finance charges (net)

 

 

(1,908)

 

 

 

(1,930)

 

 

 

(3,828)

(Loss) / profit before tax

 

 

(15,977)

 

 

 

37,092

 

 

 

69,853

Taxation

 

 

1,799

 

 

 

(7,055)

 

 

 

(11,942)

(Loss) / profit after tax

 

 

(14,178)

 

 

 

30,037

 

 

 

57,911

 

* Following a change to the way in which information is reported internally, the comparative figures have been restated to ensure consistent classification with the analysis reported for the half year ended 30 June 2020 .

Segment assets

 

June

December

 

2020

2019*

2019*

 

£'000

£'000

£'000

Fixed assets, right-of-use assets and inventory:

 

 

 

Landscape Products

248,541

248,997

249,764

Other

72,365

75,233

75,042

Total segment fixed assets, right-of-use assets and inventory

320,906

324,230

324,806

Unallocated assets

289,917

226,257

237,763

Consolidated total assets

610,823

550,487

562,569

* Following a change to the way in which information is reported internally, the comparative figures have been restated to ensure consistent classification with the analysis reported for the half year ended 30 June 2020 .

 

For the purpose of monitoring segment performance and allocating performance between segments, the Group's CODM monitors the tangible fixed assets, right-of-use assets and inventory. Assets used jointly by reportable segments are not allocated to individual reportable segments.

Other segment information

 

Depreciation and amortisation (pre-IFRS 16)

 

Fixed asset and right-of-use asset additions

 

Half year ended June

Year ended

 

Half year ended June

Year ended

 

2020

2019*

December 2019*

 

2020

2019*

December 2019

 

£'000

£'000

£'000

 

£'000

£'000

£'000

Landscape Products

11,731

12,829

23,133

 

14,698

10,379

24,550

Other

2,905

3,094

7,061

 

969

1,399

5,027

 

14,636

15,923

30,194

 

15,667

11,778

29,577

* Following a change to the way in which information is reported internally, the comparative figures have been restated to ensure consistent classification with the analysis reported for the half year ended 30 June 2020 .

 

Geographical destination of revenue

 

Half year ended June

Year ended

December

 

2020

2019

2019

 

£'000

£'000

£'000

United Kingdom

192,833

264,724

514,905

Rest of the World

17,640

15,383

26,927

 

210,473

280,107

541,832

 

5. Net operating costs

 

Half year ended June

Year ended

December

 

2020

2019

2019

 

£'000

£'000

£'000

Raw materials and consumables

94,604

98,141

198,124

Changes in inventories of finished goods and work in progress

(7,494)

5,317

847

Personnel costs

52,108

64,185

128,221

Depreciation of property, plant and equipment

7,687

7,675

14,903

Depreciation of right-of-use assets

5,654

7,065

12,868

Amortisation of intangible assets

1,295

1,183

2,423

Own work capitalised

(967)

(1,368)

(4,216)

Other operating costs

54,601

60,135

116,135

Operational restructuring costs

-

-

1,396

Operating costs

207,488

242,333

470,701

Other operating income

(518)

(1,140)

(2,244)

Net gain on asset and property disposals

(37)

(108)

(306)

Net operating costs before operational restructuring costs and asset impairments

206,933

241,085

468,151

Operational restructuring costs and asset impairments (Note 6)

17,609

-

-

Net operating costs

224,542

241,085

468,151

 

6. Operational restructuring costs and asset impairments

 

Half year ended June

Year ended

December

 

2020

2019

2019

 

£'000

£'000

£'000

Works closure costs

3,257

-

-

Redundancy

7,657

-

-

Asset impairments

6,695

-

-

 

17,609

-

-

 

The Board has determined that certain charges to the Condensed Consolidated Half Year Report should be separately identified for better understanding of the Group's results for the half year ended 30 June 2020.

Operational restructuring costs reflect the implementation of a wide range of measures aimed at reducing costs and conserving cash. These changes cover all parts the business, including selective site closures, changes in shift patterns and changes to the size and structure of support functions. These initiatives reflect the deterioration in current market conditions, as a consequence of COVID-19, and the challenging medium-term outlook. Asset impairments include the write down of plant and machinery and other assets as a consequence of specific works closures.

 

7. Financial expenses

 

Half year ended June

Year ended

December

 

2020

2019

2019

 

£'000

£'000

£'000

Financial expenses

 

 

 

Net interest expense on defined benefit pension scheme

73

447

542

Interest expense on bank loans, overdrafts and loan notes

1,174

791

1,951

Interest expense on lease liabilities

667

693

1,342

 

1,914

1,931

3,835

 

Net interest expense on the defined benefit pension scheme is disclosed net of Company recharges.

8. Income tax expense

 

Before operational restructuring costs and asset impairments

Operational
restructuring
costs and asset impairments

Total

 

 

 

Half  year ended June

 

Year ended

December

 

2020

2020

2020

2019

2019

 

£'000

£'000

£'000

£'000

£'000

Current tax expense

 

 

 

 

 

Current year

940

(2,225)

(1,285)

8,067

13,214

Adjustments for prior years

(595)

-

(595)

(291)

(1,577)

 

345

(2,225)

(1,880)

7,776

11,637

Deferred taxation expense

 

 

 

 

 

Origination and reversal of temporary differences:

 

 

 

 

 

Current year

267

(760)

(493)

(469)

556

Adjustments for prior years

574

-

574

(252)

(251)

Total tax expense

1,186

(2,985)

(1,799)

7,055

11,942

 

 

Half year ended June

 

Half year ended June

 

Year ended December

 

2020

 

 

2019

 

 

2019

 

 

%

£'000

 

%

£'000

 

%

£'000

Reconciliation of effective tax rate

 

 

 

 

 

 

 

 

(Loss) / profit before tax

100.0

(15,977)

 

100.0

37,092

 

100.0

69,853

Tax using domestic corporation tax rate

19.0

(3,036)

 

19.0

7,047

 

19.0

13,272

Impact of deprecation in excess of capital allowances

(0.8)

131

 

2.2

809

 

(0.7)

(523)

Short-term timing differences

(4.0)

645

 

0.9

308

 

0.6

386

Adjustment to tax charge in prior period

3.7

(595)

 

(0.8)

(291)

 

(2.3)

(1,577)

Expenses not deductible for tax purposes

(6.1)

975

 

(0.3)

(97)

 

0.1

79

Corporation tax charge for the year

11.8

(1,880)

 

21.0

7,776

 

16.7

11,637

Impact of capital allowances in excess of depreciation

17.5

(2,795)

 

(0.4)

(138)

 

0.9

648

Short-term timing differences

(5.1)

815

 

(0.5)

(176)

 

-

-

Pension scheme movements

0.5

(76)

 

(0.2)

(84)

 

(0.2)

(109)

Other items

(0.1)

9

 

0.4

151

 

0.4

261

Adjustment to tax charge in prior period

(3.6)

574

 

(0.7)

(252)

 

(0.4)

(251)

Impact of the change in the rate of corporation tax on deferred taxation

(9.7)

1,554

 

(0.6)

(222)

 

(0.3)

(244)

Total tax (credit) / charge for the year

11.3

(1,799)

 

19.0

7,055

 

17.1

11,942

 

The net amount of deferred taxation credited to the Consolidated Statement of Comprehensive Income in the period was £1,100,000 (30 June 2019: £1,316,000 debit; 31 December 2019: £542,000 debit).

The 2019 Budget announced that the UK corporation tax rate will remain at 19 per cent from 2020 rather than reduce to 17 per cent, which had previously been confirmed. This change was substantively enacted on 17 March 2020 and, consequently, the deferred taxation liability at 30 June 2020 has been calculated at 19 per cent, which is the rate at which the deferred tax is expected to unwind in the future using rates enacted at the balance sheet date. This rate change has given rise to an increase to the deferred tax charge of £1.6 million.

 

9. Earnings per share

Basic loss per share from total operations of 7.25 pence (30 June 2019: 15.18 pence earnings; 31 December 2019: 29.36 pence earnings) per share is calculated by dividing the loss attributable to Ordinary Shareholders for the financial period after adjusting for non-controlling interests of £14,391,000 (30 June 2019: £30,100,000 profit; 31 December 2019: £58,240,000 profit) by the weighted average number of shares in issue during the period of 198,559,008 (30 June 2019: 198,330,626; 31 December 2019: 198,346,723).

Basic earnings per share before operational restructuring costs and asset impairments of 0.12 pence (30 June 2019: 15.18 pence; 31 December 2019: 29.36 pence) per share is calculated by dividing the profit attributable to Ordinary Shareholders for the financial period after adjusting for non-controlling interests of £233,000 (30 June 2019: £30,100,000; 31 December 2019: £58,240,000) by the weighted average number of shares in issue during the period of 198,559,008 (30 June 2019: 198,330,626; 31 December 2019: 198,346,723).

 

Profit attributable to Ordinary Shareholders

 

Half year ended June

Year ended

December

 

2020

2019

2019

 

£'000

£'000

£'000

Profit before operational restructuring costs and asset impairments

446

30,037

57,911

Operational restructuring costs and asset impairments

(14,624)

-

-

(Loss) / profit for the financial period

(14,178)

30,037

57,911

Result attributable to non-controlling interests

(213)

63

329

(Loss) / profit attributable to Ordinary Shareholders

(14,391)

30,100

58,240

 

 

Weighted average number of Ordinary Shares

 

Half year ended June

Year ended

December

 

2020

2019

2019

 

Number

Number

Number

Number of issued Ordinary Shares

200,052,157

200,044,482

200,052,157

Effect of shares transferred into employee benefit trust

(1,493,149)

(1,713,856)

(1,705,434)

Weighted average number of Ordinary Shares

198,559,008

198,330,626

198,346,723

 

For the half year ended 30 June 2020, 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 operational restructuring costs and asset impairments of 0.12 pence (30 June 2019: 15.07 pence; 31 December 2019: 29.14 pence) per share is calculated by dividing the profit for the financial period, after adjusting for non-controlling interests of £233,000 (30 June 2019: £30,100,000; 31 December 2019: £58,240,000), by the weighted average number of shares in issue during the period of 198,559,008 (30 June 2019: 198,330,626; 31 December 2019: 198,346,723), plus potentially dilutive shares of 1,508,427 (30 June 2019: 1,395,396; 31 December 2019: 1,496,678), which totals 200,067,435 (30 June 2019: 199,726,022; 31 December 2019: 199,843,401).

Weighted average number of Ordinary Shares (diluted)

 

Half year ended June

Year ended

December

 

2020

2019

2019

 

Number

Number

Number

Weighted average number of Ordinary Shares

198,559,008

198,330,626

198,346,723

Dilutive shares

1,508,427

1,395,396

1,496,678

Weighted average number of Ordinary Shares (diluted)

200,067,435

199,726,022

199,843,401

 

10. Dividends

After the balance sheet date, the following dividends were proposed by the Directors.

 

 

Half year ended June

Year ended

December

2019

£'000

 

Pence per

qualifying share

2020

£'000

2019

£'000

 

2020 interim

-

-

-

-

2019 supplementary

-

-

-

-

2019 final

-

-

-

-

2019 interim

4.70

-

9,323

9,323

 

 

-

9,323

9,323


The following dividends were approved by the shareholders in the period:

 

 

Half year ended June

Year ended

December

2019

£'000

 

Pence per

qualifying share

2020

£'000

2019

£'000

 

2019 supplementary

-

-

-

-

2019 final

-

-

-

-

2019 interim

4.70

-

-

9,323

2018 supplementary

4.00

-

7,934

7,930

2018 final

8.00

-

15,868

15,860

 

 

-

23,802

33,113

 

The Board has announced the suspension of the previously recommended 2019 final dividend and supplementary dividend as a result of the COVID-19 crisis.

11. Lease liabilities

 

June

December

 

2020

2019

2019

 

£

£

£

Analysed as:

 

 

 

Amounts due for settlement within 12 months (shown under current liabilities)

10,213

10,175

9,736

Amounts due for settlement after 12 months

35,404

32,702

32,224

 

45,617

42,877

41,960

 

The Group does not face a significant liquidity risk with regard to its lease liabilities. The interest expense on lease liabilities amounted to £667,000 for the half year ended 30 June 2020. Lease liabilities are calculated at the present value of the lease payments that are not paid at the commencement date.

For the half year ended 30 June 2020, the average effective borrowing rate was 2.7 per cent. Interest rates are fixed at the contract date. All leases are on a fixed repayment basis and no arrangements have been entered into for contingent rental payments.

The vast majority of lease obligations are denominated in Sterling.

12. Employee benefits

The Company sponsors a funded defined benefit pension scheme in the UK (the "Scheme"). The Scheme is administered within a trust which is legally separate from the Company. The Trustee Board is appointed by both the Company and the Scheme's membership and acts in the interests of the Scheme and all relevant stakeholders, including the members and the Company. The Trustee is also responsible for the investment of the Scheme's assets.

The defined benefit section of the Scheme provides pension and lump sums to members on retirement and to dependants on death. The defined benefit section closed to future accrual of benefits on 30 June 2006 with then active members becoming entitled to a deferred pension. Members no longer pay contributions to the defined benefit section. Company contributions to the defined benefit section after this date are used to fund any deficit in the Scheme and the expenses associated with administering the Scheme as determined by regular actuarial valuations.

The Trustee is required to use prudent assumptions to value the liabilities and costs of the Scheme whereas the accounting assumptions must be best estimates.

The defined benefit section of the Scheme poses a number of risks to the Company, for example longevity risk, investment risk, interest rate risk, inflation risk and salary risk. The Trustee is aware of these risks and uses various techniques to control them. The Trustee has a number of internal control policies, including a risk register, which are in place to manage and monitor the various risks it faces. The Trustee's investment strategy incorporates the use of liability-driven investments ("LDIs") to minimise sensitivity of the actuarial funding position to movements in interest rates and inflation rates.

The defined benefit section of the Scheme is subject to regular actuarial valuations, which are usually carried out every 3 years. The next actuarial valuation is expected to be carried out with an effective date of 5 April 2021. These actuarial valuations are carried out in accordance with the requirements of the Pensions Act 2004 and so include deliberate margins for prudence. This contrasts with these accounting disclosures which are determined using best estimate assumptions.

A formal actuarial valuation was carried out as at 5 April 2018. The results of that valuation have been projected to 30 June 2020 by a qualified independent actuary. The figures in the following disclosure were measured using the projected unit method.

The amounts recognised in the Consolidated Balance Sheet were as follows:

 

June

December

 

2020

2019

2019

 

£'000

£'000

£'000

Present value of Scheme liabilities

(388,391)

(344,178)

(353,136)

Fair value of Scheme assets

398,784

364,787

368,857

Net amount recognised (before any adjustment for deferred tax)

10,393

20,609

15,721

 

The current and past service costs, settlements and curtailments, together with the net interest expense for the period, are included in the employee benefits expense in the Statement of Comprehensive Income. Remeasurements of the net defined benefit liability are included in other comprehensive income.

 

Half year ended June

Year ended

December

 

2020

2019

2019

 

£'000

£'000

£'000

Service cost:

 

 

 

Net interest expense recognised in the Consolidated Income Statement

123

497

642

Remeasurements of the net liability:

 

 

 

Return on Scheme assets (excluding amount included in interest expense)

(32,494)

(24,947)

(33,362)

Loss arising from changes in financial assumptions

36,287

24,140

38,367

Loss / (gain) arising from changes in demographic assumptions

1,412

(11,948)

(13,017)

Experience loss

-

5,165

5,165

Debit / (credit) recorded in other comprehensive income

5,205

(7,590)

(2,847)

Total defined benefit debit / (credit)

5,328

(7,093)

(2,205)

 

The principal actuarial assumptions used were:

 

June

December

 

2020

2019

2019

Liability discount rate

1.55%

2.35%

2.10%

Inflation assumption - RPI

2.75%

3.15%

2.95%

Inflation assumption - CPI

2.05%

2.15%

2.05%

Rate of increase in salaries

n/a

n/a

n/a

Revaluation of deferred pensions

2.10%

2.15%

2.10%

Increases for pensions in payment:

 

 

 

CPI pension increases (maximum 5% per annum)

2.10%

2.15%

2.10%

CPI pension increases (maximum 5% per annum, minimum 3% per annum)

3.20%

3.20%

3.20%

CPI pension increases (maximum 3% per annum)

1.90%

1.95%

1.90%

Proportion of employees opting for early retirement

0%

0%

0%

Proportion of employees commuting pension for cash

80%

80%

80%

Mortality assumption - before retirement

Same as post

 retirement

Same as post

 retirement

Same as post

 retirement

Mortality assumption - after retirement (males)

S2PXA tables

S2PXA tables

S2PXA tables

Loading

110%

110%

110%

Projection basis

Year of birth

Year of birth

Year of birth

 

CMI_2019

1.0%

CMI_2018 1.0%

CMI_2018 1.0%

Mortality assumption - after retirement (females)

S2PXA tables

S2PXA tables

S2PXA tables

Loading

110%

110%

110%

Projection basis

Year of birth

Year of birth

Year of birth

 

CMI_2019

1.0%

CMI_2018 1.0%

CMI_2018 1.0%

Future expected lifetime of current pensioner at age 65:

 

 

 

Male aged 65 at year end

85.7

85.6

85.6

Female aged 65 at year end

87.7

87.5

87.5

Future expected lifetime of future pensioner at age 65:

 

 

 

Male aged 45 at year end

86.7

86.6

86.6

Female aged 45 at year end

88.9

88.7

88.7

 

13. Analysis of net debt

 

1 January

2020

Cash flow

New leases

Other changes(i)

30 June

2020

 

£'000

£'000

£'000

£'000

£'000

Cash at bank and in hand

53,258

33,129

-

222

86,609

Debt due within 1 year

(20,000)

-

-

20,000

-

Debt due after 1 year

(51,274)

(67,417)

-

(21,169)

(139,860)

Lease liabilities

(41,960)

6,411

(10,068)

-

(45,617)

 

(59,976)

(27,877)

(10,068)

(947)

(98,868)

(i) Other changes include foreign currency movements on cash and loan balances.

 

Reconciliation of net cash flow to movement in net debt

 

Half year ended June

Year ended

 December

 

 2020

2019

2019

 

£'000

£'000

£'000

Net increase in cash and cash equivalents

33,129

(34,543)

7,649

Leases recognised on adoption of IFRS 16

-

(47,277)

(45,579)

Cash (inflow) / outflow from (increase) / decrease in bank borrowings

(67,417)

16,149

10,927

Cash outflow from lease repayments

6,411

7,673

12,723

New leases entered into

(10,068)

(2,332)

(8,163)

Effect of exchange rate fluctuations

(947)

66

(100)

Movement in net debt in the period

(38,892)

(60,264)

(22,543)

Net debt at the beginning of the period

(59,976)

(37,433)

(37,433)

Net debt at the end of the period

(98,868)

(97,697)

(59,976)

 

14. Borrowing facilities

The total bank borrowing facilities at 30 June 2020 amounted to £255.0 million (30 June 2019: £150.0 million; 31 December 2019: £155.0 million), of which £115.1 million (30 June 2019: £84.0 million; 31 December 2019: £83.7 million) remained unutilised.

The undrawn facilities available at 30 June 2020, in respect of which all conditions precedent had been met, were as follows:

 

June

December

 

2020

2019

2019

 

£'000

£'000

£'000

Committed:

 

 

 

Expiring in more than 5 years

-

25,000

-

Expiring in more than 2 years but not more than 5 years

140

34,011

68,726

Expiring in 1 year or less

90,000

-

-

Uncommitted:

 

 

 

Expiring in 1 year or less

25,000

25,000

15,000

 

115,140

84,011

83,726

 

On 9 September 2020, the Group renewed its short-term working capital facilities of £25.0 million.

On 1 May 2020, the Group signed agreements with each of NatWest, Lloyds and HSBC for an additional £30 million, 12 month committed revolving credit facility with each. These additional facilities comprise £90 million and significantly strengthen the Group's headroom. Including these additional facilities, Marshalls now has total bank facilities of £255 million, of which £230 million are committed. In addition, Marshalls plc has been confirmed as being eligible for the COVID Corporate Financing Facility ("CCFF") with an issuer limit of £200 million. The Group has completed the processes and documentation to establish a commercial paper programme under this scheme and is able to access the liquidity available to it under this facility.  The Group's committed bank facilities are all revolving credit facilities with interest charged at variable rates based on LIBOR. The Group's bank facilities continue to be aligned with the current strategy to ensure that headroom against available facilities remains at appropriate levels. On 9 September 2020, the Group signed an agreement with HSBC to extend its existing 4 year, £35 million facility for a further year until August 2024. The maturity profile of borrowing facilities is structured to provide balanced, committed and phased medium-term debt.

 

Following the signing of new bank facilities on 1 May 2020, the current facilities are set out as follows:

 

 

Facility

Cumulative

facility

 

£'000

£'000

Committed facilities:

 

 

Q3: 2024

35,000

35,000

Q1: 2024

25,000

60,000

Q3: 2023

20,000

80,000

Q2: 2023

20,000

100,000

Q4: 2022

20,000

120,000

Q3: 2021

20,000

140,000

Q2: 2021

90,000

230,000

On-demand facilities:

 

 

Available all year

25,000

255,000

 

15. Fair values of financial assets and financial liabilities

A comparison by category of the book values and fair values of the financial assets and liabilities of the Group at 30 June 2020 is shown below:

 

June

2020

June

2019

 

 

December

2019

 

Book

Fair

Book

Fair

 

 

Book

Fair

 

amount

value

amount

value

 

 

amount

value

 

£'000

£'000

£'000

£'000

 

 

£'000

£'000

Trade and other receivables

86,527

86,527

90,387

90,387

 

 

60,162

60,162

Cash and cash equivalents

86,609

86,609

11,169

11,169

 

 

53,258

53,258

Bank loans

(139,860)

(133,859)

(65,989)

(61,114)

 

 

(71,274)

(69,936)

Lease liabilities

(45,617)

(55,817)

(42,877)

(42,877)

 

 

(41,960)

(52,851)

Trade and other payables

(100,700)

(100,700)

(114,441)

(114,441)

 

 

(108,621)

(108,621)

Interest rate swaps, forward contracts and fuel hedges

(34)

(34)

430

430

 

 

620

620

Contingent consideration

(2,420)

(2,420)

(2,420)

(2,420)

 

 

(2,420)

(2,420)

Financial instrument assets and liabilities - net

(115,495)

 

(123,741)

 

 

 

(110,235)

 

Non-financial instrument assets and liabilities - net

391,274

 

401,912

 

 

 

406,001

 

 

275,779

 

278,171

 

 

 

295,766

 

 

Estimation of fair values

The following summarises the major methods and assumptions used in estimating the fair values of financial instruments reflected in the table. Other than contingent consideration, which uses a level 3 basis, all use level 2 valuation techniques.

(a) Derivatives

Derivative contracts are either marked to market using listed market prices or by discounting the contractual forward price at the relevant rate and deducting the current spot rate. For interest rate swaps broker quotes are used.

(b) Interest-bearing loans and borrowings

Fair value is calculated based on the expected future principal and interest cash flows discounted at the market rate of interest at the balance sheet date.

(c) Lease liabilities

The fair value is estimated as the present value of future cash flows, discounted at market interest rates for homogeneous lease agreements. The estimated fair values reflect changes in interest rates.

(d) Trade and other receivables / payables

For receivables / payables with a remaining life of less than 1 year, the notional amount is deemed to reflect the fair value. All other receivables / payables are discounted to determine the fair value.

(e) Contingent consideration

Contingent consideration has been calculated based on the Group's expectation of what it will pay in relation to the post-acquisition performance of the acquired entities.

(f) Fair value hierarchy

The table below analyses financial instruments, measured at fair value, into a fair value hierarchy based on the valuation techniques used to determine fair value.

•Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.

•Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

•   Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

 

Level 1

Level 2

Level 3

Total

 

£'000

£'000

£'000

£'000

30 June 2020

 

 

 

 

Derivative financial liabilities

-

(34)

-

(34)

30 June 2019

 

 

 

 

Derivative financial assets

-

430

-

430

31 December 2019

 

 

 

 

Derivative financial assets

-

620

-

620

 

16. Principal risks and uncertainties

 

Risk management is the responsibility of the Marshalls plc Board and is a key factor in the delivery of the Group's strategic objectives. The Board establishes the culture of effective risk management and is responsible for maintaining appropriate systems and controls. The Board sets the risk appetite and determines the policies and procedures that are put in place to mitigate exposure to risks.

The impact of the COVID-19 pandemic has triggered the need to consider the implications of the virus for the business and its impact on the underlying principal risks, which are set out below. These are being assessed on an ongoing basis and the following headings summarise the key aspects for the Group. In each case, detailed, dynamic plans have been introduced which involve specific risk assessments and carefully designed new operating procedures. These are being routinely reassessed. Mitigating controls have been introduced as appropriate and additional scenario planning has been undertaken.

·Health and safety - to ensure the safety and wellbeing of all employees and other stakeholders. The Group has used frequent and consistent messaging with mental and physical health prioritised. For all employees, social distancing and health and safety procedures have been instigated in line with, and often exceeding, recommended guidelines.

·    Significantly reduced sales - to manage the short-term impact on the business. The Group has focused on maximising efficiency and operational flexibility in order to ensure that the vehicle fleet can continue to operate safely and meet customer demand.

·    Liquidity - to ensure the adequacy and security of bank facilities. New bank facilities have been arranged and covenant support has been received from our partner banks in order to maintain comfortable headroom against severe downside scenarios.

·    Information technology and cyber security - to ensure the continuity of business during the COVID-19 restrictions. Practical support and guidance, together with additional cyber security training has been provided to facilitate home working.

·Control environment - to ensure the maintenance of key operational controls during the COVID-19 restrictions. Key financial and operational controls have not been compromised during this period as a consequence of working from home. In many cases, additional controls have been introduced. A recent internal audit project has confirmed that control integrity has been maintained in the period to 30 June 2020.

· Return to "business as usual" - to ensure the effective and safe transition process for employees and stakeholders. Detailed plans have been put in place to ensure that employees can return to work safely. This has included the extension of flexible working patterns.

· Medium-term strategy - to ensure the continued alignment of the business model to meet expected medium-term demand. The strategy has built-in flexibility so that the business can respond to changing external circumstances and plans can be scaled back or accelerated as required.

Other principal risks and uncertainties that could impact the Group for the remainder of the current financial year are those detailed on pages 24 to 29 of the 2019 Annual Report. These cover the strategic, financial and operational risks and have not changed during the period.

Strategic risks include those relating to the ongoing Government policy in relation to COVID-19, general economic conditions, the actions of customers, suppliers and competitors, and also weather conditions. Cyber security risk within the wider market is also an increasing risk for the Group and continues to be an area of major focus. 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.

External operational risks other than COVID-19 include the weather, political and economic conditions, the potential impact of Brexit, the effect of legislation or other regulatory actions, the actions of competitors, raw material prices and threats from cyber security and new business strategies.

The Group continues to monitor all these risks and pursue policies that take account of, and mitigate, the risks where possible.

Responsibility Statement

 

The Directors who held office at the date of approval of these Financial Statements confirm that to the best of their knowledge:

• the Condensed Consolidated Half Year Financial Statements have been prepared in accordance with IAS 34 "Interim Financial Reporting" as adopted by the European Union; and

• the Half Year Management Report includes a fair review of the information required by:

(a)  DTR 4.2.7R of the Disclosure Guidance and Transparency Rules, being an indication of important events that have occurred during the half year ended 30 June 2020 and their impact on the Condensed Consolidated Half Year Financial Statements, and a description of the principal risks and uncertainties for the remaining second half of the year; and

(b)  DTR 4.2.8R of the Disclosure Guidance and Transparency Rules, being related party transactions that have taken place in the half year ended 30 June 2020 and that have materially affected the financial position or performance of the entity during that period, and any changes in the related party transactions described in the last Annual Report that could do so.

The Board

The Directors serving during the half year ended 30 June 2020 were as follows:

Vanda Murray OBE

Janet Ashdown

Angela Bromfield

Jack Clarke

Martyn Coffey

Tim Pile

Graham Prothero

Chair of the Board

Senior Non-Executive Director

Non-Executive Director

Group Finance Director

Chief Executive

Non-Executive Director

Non-Executive Director

The responsibilities of the Directors during their period of service were as set out on pages 42 and 43 of the 2019 Annual Report.

By order of the Board

 

Shiv Sibal

Group Company Secretary

15 September 2020

 

Cautionary statement

This Half Year 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 Half Year 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 Half Year 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.

 

Independent Review Report to Marshalls plc

 

We have been engaged by the Company to review the condensed set of Financial Statements in the Half Year Financial Report for the six months ended 30 June 2020 which comprises the Income Statement, the Balance Sheet, the Statement of Changes in Equity, the Cash Flow Statement and the related Notes 1 to 16. We have read the other information contained in the Half Year Financial Report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of Financial Statements. This report is made solely to the Company in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Financial Reporting Council. Our work has been undertaken so that we might state to the Company those matters we are required to state to it in an independent review 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 formed.

 

Directors' responsibilities

 

The Half Year Financial Report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the Half Year Financial Report in accordance with the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority. As disclosed in Note 1, the Annual Financial Statements of the Group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of Financial Statements included in this Half Year Financial Report has been prepared in accordance with International Accounting Standard 34 "Interim Financial Reporting" as adopted by the European Union.

 

Our responsibility

 

Our responsibility is to express to the Company a conclusion on the condensed set of Financial Statements in the Half Year Financial Report based on our review.

 

Scope of review

 

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Financial Reporting Council for use in the United Kingdom. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

 

Conclusion

 

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of Financial Statements in the Half Year Financial Report for the 6 months ended 30 June 2020 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.

 

Deloitte LLP

Statutory Auditor

Leeds, United Kingdom

15 September 2020

 

Shareholder Information

 

Financial calendar

Half year results for the year ending December 2020

Announced 15 September 2020

Results for the year ending December 2020

Announcement March 2021

Report and accounts for the year ending December 2020

April 2021

Annual General Meeting

May 2021

Final dividend for the year ending December 2020

Payable July 2021

 

Registrars

All administrative enquiries relating to shareholdings should, in the first instance, be directed to Computershare Investor Services PLC, PO Box 82, The Pavilions, Bridgwater Road, Bristol BS99 6ZZ (telephone: 0870 707 1134) and should clearly state the registered shareholder's name and address.

Dividend mandate

Any shareholder wishing dividends to be paid directly into a bank or building society should contact the Registrars for a dividend mandate form. Dividends paid in this way will be paid through the Bankers' Automated Clearing System ("BACS").

Website

The Group has a website that gives information on the Group and its products and provides details of significant Group announcements. The address is www.marshalls.co.uk.

 

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