REG - Marshalls PLC - Final Results <Origin Href="QuoteRef">MSLH.L</Origin> - Part 2
15/03/2017 07:06
- Part 2: For the preceding part double click ID:nRSO4794Za
396,922 386,204
The Group's revenue is subject to seasonal fluctuations resulting from demand from customers. In particular, demand is
higher in the summer months. The Group manages the seasonal impact through the use of a seasonal working capital facility.
3 Net operating costs 2016£'000 2015£'000
Raw materials and consumables 142,011 141,471
Changes in inventories of finished goods and work in progress 2,591 (1,801)
Personnel costs 98,128 96,716
Depreciation 12,146 13,054
Amortisation of intangible assets 1,009 1,322
Own work capitalised (1,381) (1,810)
Other operating costs 97,069 100,707
Restructuring costs 476 -
Operating costs 352,049 349,659
Other operating income (2,157) (1,340)
Net gain on asset and property disposals (609) (149)
Associates - 582
Net operating costs 349,283 348,752
4 Financial expenses and income
2016 2015
£'000 £'000
(a) Financial expenses
Net interest expense on defined benefit pension scheme 445 406
Interest expense on bank loans, overdrafts and loan notes 1,143 1,767
Finance lease interest expense 6 8
1,594 2,181
(b) Financial income
Interest receivable and similar income 1 7
Net interest expense on defined benefit pension scheme is disclosed net of Company recharges.
5 Income tax expense
2016 2015
£'000 £'000
Current tax expense Current year 10,611 8,164
Adjustments for prior years (921) 289
9,690 8,453
Deferred taxation expense
Origination and reversal of temporary differences:
Current year (1,098) (684)
Adjustments for prior years (53) (382)
Total tax expense 8,539 7,387
2016 2015
% £'000 % £'000
Reconciliation of effective tax rate
Profit before tax 100.0 46,046 100.0 35,278
Tax using domestic corporation tax rate 20.0 9,209 20.2 7,144
Impact of capital allowances in excess of depreciation 0.4 173 2.0 710
Short-term timing differences 1.0 480 (0.2) (81)
Adjustment to tax charge in prior year (2.0) (921) 0.8 289
Expenses not deductible for tax purposes 1.6 749 1.1 391
Corporation tax charge for the year 21.0 9,690 23.9 8,453
Impact of capital allowances in excess of depreciation (1.0) (443) (1.0) (355)
Short-term timing differences (0.1) (66) (0.2) (79)
Pension scheme movements 0.3 127 2.1 746
Other items (0.9) (397) (0.3) (100)
Adjustment to tax charge in prior year (0.1) (53) (1.1) (382)
Impact of the change in the rate of corporation tax on deferred taxation (0.7) (319) (2.5) (896)
Total tax charge for the year 18.5 8,539 20.9 7,387
The net amount of deferred taxation (debited) / credited to the Consolidated Statement of Comprehensive Income in the year
was £798,000 debit (2015: £189,000 credit).
The majority of the Group's profits are earned in the UK with the standard rate of corporation tax being 20 per cent for
the year to 31 December 2016.
Capital allowances are tax reliefs provided in law for the expenditure the Group makes on fixed assets. The rates are
determined by Parliament annually, and spread the tax relief due over a number of years. This contrasts with the accounting
treatment for such spending, where the expenditure on fixed assets is treated as an investment with the cost then being
spread over the anticipated useful life of the asset, and / or impaired if the value of such assets is considered to have
reduced materially.
The different accounting treatment of fixed assets for tax and accounting purposes is one reason why the taxable income of
the Group is not the same as its accounting profit. During the year to 31 December 2016 the depreciation charge for the
year exceeded the capital allowances due to the Group.
Short-term timing differences arise on items such as depreciation in stock and share-based payments because the treatment
of such items is different for tax and accounting purposes. These differences usually reverse in the years following those
in which they arise, as is reflected in the deferred tax charge in the Financial Statements.
Adjustments to tax charges arising in earlier years arise because the tax charge to be included in a set of accounts has to
be estimated before those financial statements are finalised. Such charges therefore include some estimates that are
checked and refined before the Group's corporation tax returns for the year are submitted to HM Revenue & Customs, which
may reflect a different liability as a result.
Some expenses incurred may be entirely appropriate charges for inclusion in the Financial Statements but are not allowed as
a deduction against taxable income when calculating the Group's tax liability for the same accounting period. Examples of
such disallowable expenditure include business entertainment costs and some legal expenses.
As can be seen from the tax reconciliation, the process of adjustment that can give rise to current year adjustments to tax
charges arising in previous periods can also give rise to revisions in prior year deferred tax estimates. This is why the
current year adjustments to the current year charge for capital allowances and short-term timing differences are not
exactly replicated in the deferred taxation charge for the year.
The Group's overseas operations comprise a manufacturing operation in Belgium and sales and administration offices in the
USA, China and Dubai. The sales of these units, in total, were less than 5 per cent of the Group's turnover in the year to
31 December 2016. In total, the trading profits were not material and no tax was due.
6 Earnings per share
Basic earnings per share of 18.95 pence (2015: 14.32 pence) per share is calculated by dividing the profit attributable to
Ordinary Shareholders for the financial year, after adjusting for non-controlling interests, of £37,350,000 (2015:
£28,149,000) by the weighted average number of shares in issue during the period of 197,130,419 (2015: 196,574,435).
Profit attributable to Ordinary Shareholders
2016 2015
£'000 £'000
Profit for the financial year 37,507 27,891
Profit / (loss) attributable to non-controlling interests (157) 258
Profit attributable to Ordinary Shareholders 37,350 28,149
Weighted average number of Ordinary Shares
2016 2015
Number Number
Number of issued Ordinary Shares (at beginning of the year) 199,378,755 199,378,755
Effect of shares transferred into employee benefit trust (2,248,336) (2,804,320)
Weighted average number of Ordinary Shares at end of the year 197,130,419 196,574,435
Diluted earnings per share of 18.61 pence (2015: 14.10 pence) per share is calculated by dividing the profit for the
financial year, after adjusting for non-controlling interests, of £37,350,000 (2015: £28,149,000) by the weighted average
number of shares in issue during the period of197,130,419 (2015: 196,574,435) plus potentially dilutive shares of 3,561,243
(2015: 3,092,619), which totals 200,691,662 (2015: 199,667,054).
Weighted average number of Ordinary Shares (diluted) 2016 2015
Number Number
Weighted average number of Ordinary Shares 197,130,419 196,574,435
Potentially dilutive shares 3,561,243 3,092,619
Weighted average number of Ordinary Shares (diluted) 200,691,662 199,667,054
7 Dividends
After the balance sheet date a final dividend of 5.80 pence (2015: 4.75 pence) per qualifying Ordinary Share was proposed
by the Directors. In addition a supplementary dividend of 3.00 pence (2015: 2.00 pence) per qualifying Ordinary Share was
proposed by the Directors. These dividends have not been provided for and there are no income tax consequences. The total
dividends proposed in respect of the year are as follows:
Pence per qualifying shares 2016£'000 2015£'000
2016 supplementary 3.00 5,917
2016 final 5.80 11,440
2016 interim 2.90 5,720
11.70 23,077
2015 supplementary 2.00 3,988
2015 final 4.75 9,470
2015 interim 2.25 4,425
9.00 17,883
The following dividends were approved by the shareholders and recognised in the year:
Pence per qualifying shares 2016£'000 2015£'000
2016 interim 2.90 5,720
2015 supplementary 2.00 3,945
2015 final 4.75 9,369
9.65 19,034
2015 interim 2.25 4,425
2014 final 4.00 7,866
6.25 12,291
The Board recommends a 2016 final dividend of 5.80 pence per qualifying Ordinary Share (amounting to £11,440,000),
alongside a supplementary dividend of 3.00 pence per qualifying Ordinary Share (amounting to £5,917,000), to be paid on 30
June 2017 to shareholders registered at the close of business on 16 June 2017.
8 Employee benefits
The Company sponsors a pension scheme for employees in the UK which incorporates a funded defined benefit pension section
and a defined contribution section (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 interest 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, which closed to future service accrual on 30 June 2006, provides pension and
lump sums to members on retirement and to dependants on death. Members of the defined benefit section became entitled to a
deferred pension on closure. 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 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 2018. 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 2015. The results of that valuation have been projected to 31
December 2016 by a qualified independent actuary. The figures in the following disclosure were measured using the projected
unit method.
During 2015 an exercise was carried out offering eligible defined benefit section members and current pensioners and
dependants the option to commute small pensions for a cash lump sum representing the value of their benefits. This
represents a settlement of benefits for members taking the option. The cash lump sums were determined by the Trustee on a
best estimate basis after taking advice from the actuary.
The amounts recognised in the Consolidated Balance Sheet were as follows:
2016 2015 2014
£'000 £'000 £'000
Present value of Scheme liabilities (355,793) (298,812) (309,067)
Fair value of Scheme assets 360,069 302,239 312,516
Net amount recognised at year end (before any adjustments for deferred tax) 4,276 3,427 3,449
The current and past service costs, settlements and curtailments, together with the net interest expense for the year, are
included in the employee benefits expense in the Statement of Comprehensive Income. Remeasurements of the net defined
benefit surplus are included in other comprehensive income.
2016£'000 2015£'000
Net interest expense recognised in the Consolidated Income Statement 545 506
Remeasurements of the net liability:
Return on scheme assets (excluding amount included in interest expense) (59,979) 14,164
Loss / (gain) arising from changes in financial assumptions 62,474 (5,063)
Gain arising from changes in demographic assumptions - (7,412)
Experience (gain) / loss (3,889) 2,177
(Credit) / charge recorded in other comprehensive income (1,394) 3,866
Total defined benefit (credit) / charge (849) 4,372
The principal actuarial assumptions used were: 2016£'000 2015£'000
Liability discount rate 2.65% 3.70%
Inflation assumption - RPI 3.20% 3.10%
Inflation assumption - CPI 2.20% 2.10%
Rate of increase in salaries n/a n/a
Revaluation of deferred pensions 2.20% 2.10%
Increases for pensions in payment:
CPI pension increases (maximum 5% pa) 2.20% 2.10%
CPI pension increases (maximum 5% pa, minimum 3% pa) 3.10% 3.10%
CPI pension increases (maximum 3% pa) 2.10% 2.00%
Proportion of employees opting for early retirement 0% 0%
Proportion of employees commuting pension for cash 50.0% 50.0%
Mortality assumption - before retirement Same as post retirement Same as post retirement
Mortality assumption - after retirement (males) S2PMA tables S2PMA tables
Loading 105% 105%
Projection basis Year of birth Year of birth
CMI_2015 1.0% CMI_2015 1.0%
Mortality assumption - after retirement (females) S2PFA tables S2PFA tables
Loading 105% 105%
Projection basis Year of birth Year of birth
CMI_2015 1.0% CMI_2015 1.0%
Future expected lifetime of current pensioner at age 65:
Male aged 65 at year end 86.5 86.5
Female aged 65 at year end 88.5 88.5
Future expected lifetime of future pensioner at age 65:
Male aged 45 at year end 87.8 87.7
Female aged 45 at year end 89.8 89.8
9 Analysis of net debt
1 January Cash Other 31 December
2016 flow changes 2016
£'000 £'000 £'000 £'000
Cash at bank and in hand 24,990 (4,680) 371 20,681
Debt due after 1 year (36,125) 23,791 (2,641) (14,975)
Finance leases (327) 40 (6) (293)
(11,462) 19,151 (2,276) 5,413
Reconciliation of net cash flow to movement in net debt 2016£'000 2015£'000
Net (decrease) / increase in cash equivalents (4,680) 4,679
Cash outflow from decrease in debt and lease financing 23,831 13,350
Effect of exchange rate fluctuations (2,276) 989
Movement in net debt in the year 16,875 19,018
Net debt at 1 January (11,462) (30,480)
Net debt at 31 December 5,413 (11,462)
Borrowing facilities
The total bank borrowing facilities at 31 December 2016 amounted to £95.0 million (2015: £95.0 million) of which £80.0
million (2015: £58.9 million) remained unutilised. There are additional seasonal bank working capital facilities of £10.0
million available between 1 February and 31 August each year. The undrawn facilities available at 31 December 2016, in
respect of which all conditions precedent had been met, were as follows:
2016£'000 2015£'000
Committed:
Expiring in more than 2 years but not more than 5 years 65,025 43,875
Expiring in 1 year or less - -
Uncommitted:
Expiring in 1 year or less 15,000 15,000
80,025 58,875
On 16 August 2016, the Group renewed its short-term working capital facilities and reduced its seasonal working capital
facility to £10.0 million. The Group also extended the maturity of each of its committed facilities by 12 months. The
committed 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.
The maturity profile of borrowing facilities is structured to provide balanced, committed and phased medium-term debt. The
current facilities are set out as follows:
Facility£'000 Cumulativefacility£'000
Committed facilities:
Q3: 2021 20,000 20,000
Q3: 2020 20,000 40,000
Q3: 2019 20,000 60,000
Q3: 2018 20,000 80,000
On-demand facilities:
Available all year 15,000 95,000
Seasonal (February to August inclusive) 10,000 105,000
10 Principal risks and uncertainties
The principal risks and uncertainties that could impact the Group for the remainder of the current financial year are set
out in the 2016 Annual Report. These cover the strategic, financial and operational risks.
Strategic risks include those relating to general economic conditions, Government policy, the actions of customers,
suppliers and competitors and also weather conditions. Cyber risk within the wider market is also an increasing risk for
the Group and 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 include the weather, political and economic conditions, the effect of legislation or other
regulatory actions, the actions of competitors, raw material prices and threats from cyber security, new technologies and
business models. Internal operational risks include investment in new products, new business strategies and acquisitions.
The Group continues to monitor all these risks and pursue policies that take account of, and mitigate, the risks where
possible.
11Annual General Meeting
The Annual General Meeting will be held at The Cedar Court Hotel, Ainley Top, Huddersfield, HD3 3RH at 11.00am on Wednesday
10 May 2017.
The Board
The Directors serving during the year ended 31 December 2016 were as follows:
Andrew Allner Chairman
Janet Ashdown Non-Executive Director
Jack Clarke Finance Director
Martyn Coffey Chief Executive
Alan Coppin Non-Executive Director (retired 18 May 2016)
Mark Edwards Non-Executive Director
Tim Pile Non-Executive Director
By order of the Board
Cathy Baxandall
Company Secretary
15 March 2017
Cautionary Statement
This Preliminary Results announcement 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 Preliminary Results announcement should be construed as a profit forecast.
Directors' Liability
Neither the Company nor the Directors accept any liability to any person in relation to the contents of this Preliminary
Results announcement except to the extent that such liability arises 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.
This information is provided by RNS
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