REG - Marshalls PLC - Final Results
15/03/2023 07:00
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RNS Number : 9827S Marshalls PLC 15 March 2023
Marshalls plc
Transformational acquisition, record adjusted results and well positioned for
when markets improve
Marshalls plc, a leading manufacturer of products for the built environment,
announces its full year results for the year ended 31 December 2022
Highlights
Year ended Year ended Change 2022 / 2021 (%)
31 December 2022 31 December 2021
£M (as restated)
Revenue 719.4 589.3 22
Adjusted results (Notes 1, 2 and 3)
Adjusted EBITDA 136.0 107.1 27
Adjusted operating profit 101.1 77.4 31
Adjusted profit before tax 90.4 73.3 23
Adjusted basic EPS - pence 31.3 29.2 7
Adjusted proforma ROCE (%) 13.3 20.6 (7.3)ppts
Final dividend - pence 9.9 9.6 3
Total dividend for the year - pence 15.6 14.3 9
Net debt 236.6 41.1 -
Net debt /(cash) - pre-IFRS 16 190.8 (0.1) -
Statutory results
EBITDA 90.2 107.1 (16)
Operating profit 47.9 76.2 (37)
Profit before tax 37.2 69.3 (46)
Basic EPS - pence 11.4 27.5 (59)
Financial highlights
· Revenue growth of 22 per cent over 2021 which included eight months
contribution from the acquisition of Marley Group plc ('Marley'); growth of
one per cent on a like-for-like basis
· Adjusted operating profit of £101.1 million, an increase of 31 per cent
on 2021, reflecting the benefit of the Marley acquisition (statutory operating
profit: £47.9 million; 2021: £76.2 million)
· Adjusted profit before tax of £90.4 million, an increase of 23 per
cent on 2021
· Profit before tax on a statutory basis was £37.2 million (2021:
£69.3 million) including the impact of adjusting items of £53.2 million
· Adjusted basic earnings per share up seven per cent at 31.3 pence per
share (statutory earnings per share: 11.4 pence; 2021: 27.5 pence)
· Net debt of £191 million (on a pre-IFRS 16 basis) and leverage of
1.35 times adjusted proforma EBITDA
· Proposed final dividend of 9.9 pence per share totalling a full year
dividend of 15.6 pence, an increase of nine per cent compared to 2021
Strategic highlights
· Transformational acquisition of Marley completed on 29 April 2022
o Accelerated the diversification of the Group's product offering providing
increased resilience through the cycle
o Traded robustly and ahead of plan in the post-acquisition period
o Integration tracking in line with plan and management remain confident of
delivering operational improvements
· Conservative capital structure maintained and increased priority to
deleveraging in capital allocation policy
· Ongoing investment in leading edge technology to enhance capabilities
and efficiency - £24 million dual block plant at St Ives expected to be
operational in the first half of 2023 with exciting new product development
opportunities
· New digital trading platform 'Dropship' developed which extends the
range of products offered by merchants
· Reduced volumes and profitability in Landscape Products resulted in
decisive action to reduce capacity and the annual cost base by £10 million
· Good progress made on ESG priorities - carbon sequestration to be
trialled in a factory environment and cement reduction plan being executed
Outlook
· The Board remains confident that the Group is well placed to deliver
profitable long-term growth when market conditions improve and continues to
focus on its key strategic initiatives
· In the shorter-term, whilst the macro-economic climate is expected to
remain challenging and assuming a progressive improvement in our end markets
during the year, the Board remains confident of delivering a result that is
in-line with its expectations
Commenting on the results, Martyn Coffey, Chief Executive, said:
"Marshalls reported a record financial performance in 2022 against challenging
market conditions. This performance demonstrates the benefit of the Group's
deliberate diversification strategy, illustrated by the acquisition of Marley
in 2022 and other acquisitions in recent years that now form the core of our
Building Products segment.
We took decisive action to reduce our capacity and cost base in 2022 in
response to a contraction of demand in our Landscape Products business, and we
will continue to focus on maintaining flexibility to respond to evolving
market conditions and executing self-help initiatives as required.
Our strategy is underpinned by our strong market positions, established brands
and focused investment plans to drive ongoing operational improvement.
Notwithstanding short-term challenges, the Board remains confident that the
Group is well placed to deliver profitable long‑term growth when market
conditions improve and continues to focus on its key strategic initiatives."
There will be a video webcast for analysts and investors today at 09:00am. 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 (https://protect-eu.mimecast.com/s/zHWuCQnkphX8NoNHPS8Eb)
. Users can register to access the webcast using the following link:
https://stream.brrmedia.co.uk/broadcast/63cfb902777efd4a8b514e2e
(https://stream.brrmedia.co.uk/broadcast/63cfb902777efd4a8b514e2e)
There will also be a telephone dial in facility available Tel: UK-Wide: +44
(0) 33 0551 0200 and password "Marshalls FY Results" when prompted by the
operator.
Notes:
1. Alternative performance measures are used consistently throughout this
Announcement. These relate to like-for-like revenue growth, EBITA, adjusted
proforma EBITA, EBITDA, adjusted EBITDA, adjusted proforma pre-IFRS16 EBITDA,
adjusted proforma return on capital employed ('ROCE'), net debt, pre-IFRS16
net debt, pre-IFRS16 net debt to adjusted proforma EBITDA, adjusted operating
cash flow and results after adding back adjusting items. For further details
of their purpose, definition and reconciliation to the equivalent statutory
measures, see Note 1.
2. The results for the year ended 31 December 2022 have been disclosed
after adding back adjusting items. These are set out in Note 4.
3. Following a change to the reporting segments and the inclusion of the
amortisation of acquired intangibles in adjusting items, the comparative
figures have been restated to ensure consistent classification with the
analysis reported for the year ended 31 December 2022 (Note 2).
Enquiries:
Martyn Coffey Chief Executive Marshalls plc +44 (0)1422 314777
Justin Lockwood Chief Financial Officer Marshalls plc +44 (0)1422 314777
Tim Rowntree MHP Communications +44 (0)20 3128 8540
Charlie Barker +44 (0)20 3128 8147
Introduction
I am pleased to report significant strategic progress in 2022, which included
the transformational acquisition of Marley Group plc ('Marley'). The
contribution of Marley helped deliver a record financial performance at group
level, despite significant challenges in our Landscape Products business
arising from a weak market backdrop particularly in private housing RMI.
Marshalls is now a more diversified business which will benefit from the
greater scale and resilience that Marley and other recent acquisitions bring
to the Group.
Market overview
A core element of the Group's strategy has been to broaden its product range
in order to complement its strong market position in landscaping products with
a particular focus on new build housing and water management. We accelerated
the execution of our strategy through the acquisition of Marley in April
2022. The deal was transformational for the Group, building on the
acquisitions of concrete pipe manufacturer, CPM, in 2017 and concrete brick
manufacturer, Edenhall, in 2018 and further diversified the Group's presence
in the construction products market. We estimate that around 40 per cent of
the enlarged Group's revenues are derived from each of the new build housing
and commercial & infrastructure end markets. The remaining revenues of
around 20 per cent are focused on private housing RMI and around two thirds of
this comes from driveway and patio products that are supplied to the UK market
with the balance being less discretionary products and international revenues.
The conflict in Ukraine had a significant impact on global energy and
commodity prices, placing additional pressure on economies and supply chains
that were recovering from the COVID-19 pandemic. These factors resulted in
significant cost inflation in the UK economy, successive base rate increases
by the Bank of England and falling real wages, all of which put unprecedented
pressure on household budgets. The UK Government's 'mini-budget' in
September was received negatively by financial markets and resulted in a loss
of confidence and a sharp increase in gilt rates, which fed through into
material increases in the price of fixed rate mortgages. Taken together,
this resulted in a reduction in consumer confidence, a weaker environment for
major purchases and the expectation that the UK economy will contract before
starting to recover in the second half of 2023. The economic challenges will
inevitably feed into the output of the construction sector and therefore
customer demand for the Group's products in 2023. This is reflected in the
CPA's winter forecast which anticipates a contraction in activity of 4.7 per
cent in 2023, with a weaker outlook for some of our key end markets. The CPA
forecast that the construction industry will return to growth in 2024 as the
macro-economic environment improves.
Looking further ahead, we believe that the UK construction market continues to
have attractive medium and long-term growth potential driven by the structural
deficit in new housebuilding, an ageing housing stock that requires increased
repair and maintenance and the need to continue improving UK infrastructure.
The Group's strategy is underpinned by our strong market positions,
established brands and focused investment plans to drive ongoing operational
improvement.
Group results
The Group delivered record revenue and adjusted profitability in 2022, driven
by the benefit of Marley's eight-month contribution together with a strong
performance by Marshalls Building Products, which was partially offset by a
weaker result from Marshalls Landscape Products.
£'m Year ended 31 December 2022 Year ended 31 December 2021 Change 2022 /
(as restated) 2021
(%)
Revenue 719.4 589.3 22
Net operating costs (618.3) (511.9)
Adjusted operating profit 101.1 77.4 31
Adjusting items (53.2) (1.2)
Statutory operating profit 47.9 76.2 (37)
Financial expenses (10.7) (6.9)
Profit before taxation 37.2 69.3 (46)
Taxation (10.7) (14.4)
Profit after taxation 26.5 54.9 (52)
Adjusted EPS 31.3 29.2 7
Statutory EPS 11.4 27.5 (59)
Total dividend for the year - pence 15.6 14.3 9
Group revenue for the year ended 31 December 2022 was £719.4 million (2021:
£589.3 million) which is 22 per cent higher than 2021 including the benefit
of Marley's revenues following the acquisition. On a like-for-like basis,
Group revenue increased by one per cent, with revenue growth in Marshalls
Building Products and Marley being largely offset by a contraction in
Marshalls Landscape Products.
Group adjusted operating profit was £101.1 million, which represents growth
of 31 per cent, and this increase was driven by the benefit of Marley from 29
April 2022 together with a strong performance from Marshalls Building
Products. This has been partially offset by Marshalls Landscape Products,
where the impact of a softer private housing RMI market compared to the
elevated levels reported in 2021 and the effect of higher prices suppressing
demand, resulted in sharply lower volumes and profitability. The Group
adjusted operating margin increased by one percentage point to 14.1 per cent
(2021: 13.1 per cent) and reflects an improved performance by Marshalls
Building Products and the benefit of Marley's structurally higher margins,
partially offset by a compression of margins in Marshalls Landscape
Products. Commentary on the performance of each reporting segment is set out
below.
The statutory operating profit is stated after adjusting items totalling
£53.2 million as summarised in the following table, further details are set
out at note 4.
£'m Year ended 31 December 2022 Year ended 31 December 2021
(as restated)
Transaction related costs 14.9 -
Amortisation of acquired intangible assets 7.3 1.2
Fair value adjustment to inventory 3.9 -
Additional contingent consideration 3.9 -
Restructuring costs 13.0 2.8
Impairment of assets in Belgian subsidiary 10.2 -
Other - (2.8)
Adjusting items 53.2 1.2
Transaction related costs totalling £14.9 million were incurred in respect of
the acquisition of Marley and principally comprised adviser fees. A purchase
price allocation exercise was undertaken to recognise the assets of Marley on
acquisition at fair value and this resulted in the creation of intangible
assets and a non-cash adjustment to increase inventory to its fair value.
The acquired intangible assets are being amortised over a period of between 15
and 25 years and therefore the associated charge will be a recurring feature
of the Group's statutory profit and loss account. Additional contingent
consideration of £3.9 million has been charged as an adjusting item following
a re-assessment of the amounts that will become payable to vendors arising in
relation to Marley's acquisition of Viridian Solar Limited in 2021. In
response to lower levels of customer demand we undertook a restructuring
exercise to right-size our capacity and cost base and this resulted in a
charge of £13.0 million, which comprises £3 million of cash redundancy costs
and £10 million of non-cash impairment charges. The impairment of assets in
the Group's Belgian subsidiary arose from an impairment review carried out in
response to a downturn in the business' performance during 2022.
Net financial expenses were £10.7 million (2021: £6.9 million) including
£2.4 million (2021: £1.9 million) of IFRS 16 lease interest and a pension
related expense of £0.1 million (2021: £3.3 million). The increase in the
period reflects the additional interest cost of the bank debt used to
part-fund the acquisition of Marley. The pension related interest cost in
2021 included a non-cash charge of £2.8 million, which was accounted for as
an adjusting item.
Adjusted profit before tax was £90.4 million (2021: £73.3 million).
Statutory profit before tax was £53.2 million lower than the adjusted result
at £37.2 million (2021: £69.3 million), reflecting the impact of the
adjusting items. The adjusted effective tax rate was 18.9 per cent (2021: 20.5
per cent), which is broadly in-line with the UK headline corporation tax rate.
On a reported basis, the effective tax rate is 28.7 per cent due to certain
transaction related costs not being eligible for a tax deduction and there
being no tax relief available for the asset impairment in the Belgian
subsidiary. Adjusted earnings per share was 31.3 pence (2021: 29.2 pence)
which is a seven per cent increase year-on-year and represents a record for
the Group. Reported earnings per share was 11.4 pence (2021: 27.5 pence),
which is lower than the adjusted number due to the adjusting items and their
tax effect.
Proforma adjusted return on capital employed ('ROCE') was 13.3 per cent (2021:
20.6 per cent), with the year-on-year reduction arising from an increase in
capital employed following the Marley acquisition and the weaker performance
from Marshalls Landscape Products. We expect adjusted ROCE to increase
progressively in the medium term to around 15 per cent as volumes recover and
we benefit from operational leverage.
Segmental performance
The Board reviewed the Group's reporting segments following the acquisition of
Marley and concluded that it was appropriate to report under three separate
reporting segments, being Marshalls Landscape Products, Marshalls Building
Products and Marley Roofing Products. This reflects the new internal
performance reporting and management responsibility framework. Adjusted
operating profit is analysed between the Group's reporting segments as
follows:
£'m Year ended Year ended Change 2022 /
31 December 2022 31 December 2021 2021
(as restated) (%)
Marshalls Landscape Products 45.3 62.4 (27)
Marshalls Building Products 26.8 19.6 37
Marley Roofing Products 34.4 - -
Central costs (5.4) (4.6) (17)
Adjusted operating profit 101.1 77.4 31
Marshalls Landscape Products
Marshalls Landscape Products, which comprises the Group's Commercial and
Domestic landscape business, Landscape Protection and the International
businesses, delivered revenue of £394.1 million (2021: £424.8 million),
which represents a contraction of seven per cent compared to 2021.
£'m Year ended 31 Year ended 31 Change 2022 /
December 2022 December 2021 2021
(as restated) (%)
Revenue 394.1 424.8 (7)
Segment operating profit 45.3 62.4 (27)
Segment operating margin % 11.5% 14.7% (3.2 ppts)
This reporting segment derives around 40 per cent of its revenues from
commercial & infrastructure and approximately 30 per cent from each of new
build housing and private housing RMI. The business was adversely impacted
by weakness in private housing RMI, in both the UK and Belgium, driven by the
discretionary nature of our domestic products, lower consumer confidence, a
reprioritisation of household expenditure and falling real wages. Installer
order books at the end of February 2023 moderated to 14.7 weeks (February and
June 2022: both 17.4 weeks), which is in-line with pre COVID-19 levels and
demonstrates continued demand for professional installations. However, there
is reduced installation capacity compared to prior years and DIY activity
levels contracted markedly compared to the elevated activity levels in 2021.
This resulted in a reduction in domestic volumes of around one third, with a
weaker performance in the second half of the year partially driven by
merchants adjusting stocking levels to align with reduced customer demand.
The reduction in sales volumes was partially offset by price increases that
were implemented to offset the impact of cost inflation, which in turn, also
suppressed demand in all end markets.
Segment operating profit reduced by £17.1 million to £45.3 million. This
was driven by the combined effect of lower volumes on gross profit and a
significant reduction in the operational efficiency of manufacturing network
due to reduced production volumes. The impact of both these factors
increased in the second half of the year due to the weaker H2 sales
performance and reduced manufacturing output to manage inventory levels. We
took decisive action to reduce capacity and costs within our manufacturing
network and trading function to ensure alignment with lower levels of customer
demand and this reduced operating costs by around £10 million per annum from
the start of 2023. The cost associated with this action has been presented
as an adjusting item (see note 4). The fall in volumes resulted in operating
margins reducing by 3.2 ppts to 11.5 ppts for the year.
We expect this reporting segment to experience relatively tough market
conditions in 2023 due to its exposure to private housing RMI and new build
housing. However, we remain focused on developing the business and will
capitalise on the new product development opportunities arising from our
investment in the dual block plant at St Ives, invest further to improve
customer service and ensure that operating costs are optimised. In the medium
term, our target is to return operating margins to at least 15 per cent as
customer demand recovers.
Marshalls Building Products
Marshalls Building Products comprises the Group's Civils and Drainage, Bricks
and Masonry, Mortars and Screeds and Aggregates businesses. It delivered a
strong performance in 2022 and reported revenue of £193.1 million, which
represents year-on-year growth of 17 per cent.
£'m Year ended 31 Year ended 31 Change 2022 /
December 2022 December 2021 2021
(as restated) (%)
Revenue 193.1 164.5 17
Segment operating profit 26.8 19.6 37
Segment operating margin % 13.9% 11.9% 2.0 ppts
This reporting segment generates around 60 per cent of its revenues from new
build housing, around 30 per cent from commercial & infrastructure, with
the balance being derived from private housing RMI. All the business units
in this reporting segment delivered a good performance, supported by a
resilient performance by the new housebuilding sector, with particularly
strong demand for Bricks and Masonry products and our Mortars and Screeds from
this end market. We reported some slowing of activity in the final quarter
of the year with poor weather impacting construction sites and housebuilders
opening new sites at a reduced rate, which particularly impacted demand for
our Civils and Drainage products.
Segment operating profit increased by £7.2 million to £26.8 million. The
businesses operated in an inflationary environment in 2022 driven by
escalating energy and commodity prices and was successful in recovering these
through sales price increases during the year. The adjusted operating margin
increased by 2.0 ppts to 13.9 per cent reflecting the operational leverage
benefit of higher revenues and offsetting the rate of growth in overheads.
We expect that the market backdrop for this reporting segment to be
challenging in 2023 due to forecast reductions in activity in new build
housing. However, we believe that there are opportunities to increase
volumes in our Bricks and Masonry business given the relatively low carbon
footprint of our products compared with clay bricks and our modest share of
the UK facing brick market. The Group's block paving production assets have
the flexibility to produce concrete bricks and therefore negligible investment
is required to manufacture the additional volumes.
Marley Roofing Products
Marley was acquired by the Group on 29 April 2022 and consequently the results
include approximately eight months of trading from the Marley business.
Marley's revenues in the post-acquisition period were six per cent higher than
the corresponding period, pre-ownership, in 2021.
£'m Year ended 31 December 2022 Year ended Change 2022 /
31 December 2021 2021
(as restated) (%)
Revenue 132.2 - -
Segment operating profit 34.4 - -
Segment operating margin % 26.0% - -
Approximately 40 per cent of Marley's revenues are generated from each of new
build housing and commercial & infrastructure (including public housing
RMI) with the balance of around 20 per cent from private housing RMI. The
market environment for this reporting segment was positive in 2022 and the
private housing RMI segment is less discretionary than in the Group's
Landscape Products business due to a larger weighting of repair and
maintenance activity rather than improvement. Revenue growth in the period
was principally driven by a strong performance by our roof-integrated solar
panel business, which benefitted from the trend towards energy efficient
solutions in the face of energy price inflation.
Segment operating profit in the post-acquisition period was £34.4 million,
which represents an increase of one per cent compared to the corresponding
period, pre-ownership, in 2021. This growth was driven by proactive
management of inflationary pressures and it resulted in a segment operating
margin of 26.0 per cent.
We expect the market environment for this reporting segment to be more
challenging in 2023 due to its exposure to new build housing and private
housing RMI. However, we expect to see continued strong growth in
roof-integrated solar PV panels due to increased penetration in the RMI
projects and changes in building regulations that require new build houses to
achieve increased energy efficiency targets. In the medium-term, segment
operating margins are expected to be in the range of 20 per cent to 25 per
cent reflecting an increasing proportion of total revenues being generated
from lower margin solar PV.
Strategy and ESG update
Acquisition of Marley
The acquisition of Marley was a transformational step in delivering the
Group's strategic goal of becoming the UK's leading manufacturer of products
for the built environment. It extended our product range into the pitched
roofing market with an extensive range of products and solutions across the
full roofing system with highly recognised and market leading brands. It
enhanced the Group's exposure to the more cyclically resilient UK roofing RMI
market, which has a strong medium-term outlook, underpinned by attractive
structural drivers such as the UK's ageing housing stock with a product range
principally focused on less discretionary products. The Marshalls and Marley
businesses employ a similar commercial strategy that focuses on generating
pull demand from key specifiers and influencers. Responsibility for Marley's
operations was transitioned to the Group team in the second half of the year
and the Board remain confident of delivering significant operational
improvements focused on people, plant, and process. We have reduced vacancy
rates using the Marshalls in-house recruitment team, assessed plant failure
rates and implemented a targeted refurbishment programme, and introduced a
structured performance management system. This has resulted in increased
manufacturing efficiency on concrete tile production lines of eleven per cent
in recent months. In addition, we have integrated our procurement functions,
embarked on a review of our combined logistics footprint and are evaluating
how we leverage Marshalls' ESG leadership within the business.
Capital allocation policy
The Group's capital allocation policy was reviewed by the Board in the second
half of the year in the context of increased balance sheet leverage following
the acquisition of Marley. Whilst the Board is comfortable operating with
the Group's current post-transaction leverage, in light of the
macro-environment, the policy has been revised to focus on accelerating the
repayment of borrowings, prioritising this over any significant M&A
activity until leverage is around one times adjusted EBITDA on a pre-IFRS16
basis (December 2022: 1.35 times). Supplementary dividends have temporarily
been removed from the policy. The Board is targeting net debt to reduce to
around one times adjusted EBITDA by December 2024 through organic free
cashflow generation. In addition, the Group is undertaking a review of its
manufacturing and property network, with the potential to dispose of non-core
sites, which would accelerate deleveraging, whilst improving network
efficiency.
Dual block plant
The project to construct the dual block plant at the Group's site in St Ives,
Cambridgeshire is now in the commissioning phase and producing its first
blocks. We expect it to be operational in the first half of 2023. The
facility will be unique in the UK and will support the launch of new ranges of
innovative value-added products that have the aesthetic appeal of natural
stone at a lower price point and with a significantly reduced carbon
footprint. The first in the range of these products was launched to
commercial specifiers in the second half of the year and has received positive
feedback.
Digital
We continue to focus on executing our digital strategy which aims to provide
an end-to-end digital offering and to pioneer the digital standards for the
industry. We have developed a new digital trading platform using dropship
technology that will allow us to offer an extended range of products on our
customers' websites without requiring the merchant to stock the ranges.
Customers will be able to place orders with the merchants that will be
fulfilled using Marshalls' distribution capability. The model offers a
win-win outcome, where the merchant generates incremental sales due to an
extended product range, without incurring the costs associated with regular
orders and Marshalls benefits by realising additional sales via the merchant
channel. We are currently live or in testing with two national merchants, at
an advanced stage with three other customers and will evaluate performance in
the first half of 2023.
ESG
Our ESG strategy continues to generate organic growth opportunities which,
going forward, we believe will be a source of significant competitive
advantage. We are continuing to focus our new product development activity on
lower carbon products and as part of this programme we are accelerating our
development of technologies to reduce the carbon intensity of our products
using cement replacement and carbon sequestration techniques. As part of this
initiative, the Group is the first UK company to adopt CarbonCure
Technologies' carbon mineralisation technology that uses waste CO2 from other
industrial processes to accelerate the carbonation of concrete which
effectively reduces the embodied carbon. This is being trialled during the
first half of 2023 in one of our concrete brick manufacturing sites. In
addition, we are investing in several sites to support the rollout of a new
concrete mix design that will reduce both raw material costs and embodied
carbon.
Our commitment for the Marshalls businesses (excluding Marley) is to reduce
scope one and two greenhouse gas emissions by 59 per cent per tonne of
production by 2030 from a 2018 base year. For scope three emissions, we have
also targeted that 73 per cent of our suppliers by emissions, covering
purchased goods and services and upstream transport and distribution, will
have science-based targets by 2024. Our emission reduction targets have been
approved by the Science Based Targets initiative as consistent with levels
required to meet our net-zero commitment with a 1.5°C trajectory. We were the
first UK company in our sector to have approved science-based targets and have
a roadmap to support our targets towards the commitment to net zero.
We remain fully committed to our carbon reduction journey and want to move
forward as a Group. However, with the addition of Marley into the Group,
2030 may not be a realistic target for the enlarged business to achieve
net-zero. Marley has a very different energy usage profile than Marshalls and,
as a result, it will require a fundamental review of our roadmap for the
Group. The Science Based Targets initiative also requires companies to
recalculate their targets following a major change, such as an acquisition.
The process to re-baseline and calculate our new targets will start in 2023.
This will enable us to evaluate the impact that the acquisition of Marley has
on the enlarged Group's net-zero commitment. This re-baselining project will
bring together the monitoring and measuring of carbon emissions and validate a
new roadmap for the Group. The final stage will be to submit our new targets
to the Science Based Targets initiative for formal approval.
Balance sheet, funding and cash flow
The Group balance sheet reflects the acquisition of Marley, along with the
equity fundraising and additional debt financing. The financing structure of
the acquisition was designed to be conservative with over 60 per cent of the
consideration funded by equity, and debt facilities sized to ensure that the
Group continues to operate with significant headroom. Whilst our key near
term financing priority is to utilise the cash generated by the enlarged Group
to reduce leverage and we have updated our capital allocation policy to be
aligned to this objective. We will continue to invest in organic capital
investment opportunities and new product development where these support our
strategic goals.
A purchase price allocation exercise has been undertaken to establish the
constituent parts of the Marley balance sheet at fair value on acquisition.
This exercise has recognised £472.3 million of additional intangible assets
in relation to Marley, principally customer relationships of £145.4 million
and the values attributable to the Marley and Viridian brands of £82.8
million. Residual goodwill of £244.1 million has been recognised. As is
customary in these circumstances, we have kept this under review in the second
half of the year and made some minor changes to the initial assessment
performed at the half year. The assessment will remain under review and
subject to change during the twelve-month hindsight period which ends in April
2023. Further details of this are set out at Note 14.
Net assets have increased to £661.1 million compared with £344.3 million at
31 December 2021. This is largely due to the equity issuance of £330.3
million to part fund the acquisition of Marley. Intangible assets increased by
£464.7 million, principally due to intangible assets acquired in respect of
Marley. The acquisition has also increased tangible fixed assets by £96.2
million, net working capital by £26.2 million and tax balances (mainly
deferred tax) by £63.8 million. A term loan of £210 million was introduced
to partially fund the acquisition.
The balance sheet value of the Group's defined benefit pension scheme was a
surplus of £22.4 million (December 2021: £25.8 million). The amount has
been determined by the Scheme's pension adviser. The fair value of the Scheme
assets at 31 December 2022 was £254.9 million (2021: £392.1 million) and
the present value of the Scheme liabilities was £232.5
million (2021: £366.3 million). These changes have resulted in an actuarial
loss, net of deferred taxation, of £2.3 million (December 2021: £19.8
million actuarial gain) and this has been recorded in the Consolidated
Statement of Comprehensive Income.
The volatility in gilt markets since the half year has had a significant
impact on defined benefit pension schemes. Due to the scheme's strategy of
using liability driven investments ("LDI") to provide an effective hedge
against both inflation and interest rates, this volatility and the significant
spike in gilt rates also had consequences for the Marshalls' scheme. Despite
the unprecedented levels of market volatility, the scheme's LDI asset
portfolio continues to hedge protection against volatility in interest rates
and inflation. The scheme's strategy is to include a relatively high
proportion of "liquid" investments in the portfolio and this has helped the
scheme respond to the recent market volatility and the short-notice collateral
calls. However, during the last year the AA corporate bond rate has increased
significantly from 1.90 per cent to 4.90 per cent. This has led to a reduction
in liabilities but due to the high level of hedging in the investment strategy
the scheme assets have also decreased in value. The Scheme's actuarial
valuation as at 5 April 2021 was a surplus of £24.3 million, on a technical
provisions basis, and the Company has agreed with the Trustee that no cash
contributions will be payable under the funding and recovery plan.
The Group had net debt at 31 December 2022 of £236.6 million (December
2021: £41.1 million), including £45.8 million (December 2021: £41.3
million) of IFRS 16 lease liabilities. Net debt on a pre-IFRS16 basis was
£190.8 million compared to net cash of £0.1 million at December 2021. On 3
May 2022, the Group drew down the new four-year term loan of £210
million to support the funding of the acquisition of Marley. In addition to
the term loan, the Group has entered into a new committed revolving credit
facility of £160 million with a maturity date of four years. Net debt to
EBITDA was 1.35 times at 31 December 2022 on an adjusted pre-IFRS 16 proforma
basis. Good headroom is maintained against the new bank facility and its
covenants, which will support investment priorities going forward, and were
comfortably met as at 31 December 2022.
Adjusted operating cash flow (before interest and taxation) for 2022
represented 91 per cent of adjusted EBITDA (2021: 80 per cent) which
demonstrates the cash generative nature of the Group's businesses. Strong
conversion of EBITDA into operating cash flow is expected to support the
Group's capital allocation priorities going forward including continued
investment in organic growth opportunities, new product development, dividend
payments and progressive deleveraging.
Dividend
The Group maintains a dividend policy of distributions covered twice by
adjusted earnings through the cycle. The Board has proposed a final dividend
of 9.9 pence per share, which taken together with the interim dividend of 5.7
pence per share, would result in a pay-out in respect of 2022 of 15.6 pence.
This is in-line with the Group policy and would represent a year-on-year
increase of nine per cent. The dividend will be paid on 3 July 2023 to
shareholders on the register at the close of business on 2 June 2023. The
shares will be marked ex-dividend on 1 June 2023.
Outlook
The Board remains confident that the Group is well placed to deliver
profitable long-term growth when market conditions improve and continues to
focus on its key strategic initiatives. In the shorter-term, whilst the
macro-economic climate is expected to remain challenging and assuming a
progressive improvement in our end markets during the year, the Board remains
confident of delivering a result that is in-line with its expectations.
The Board are mindful that the macro-economic climate continues to be
challenging and are planning for an overall reduction in volumes in 2023
in-line with the Construction Products Association's Winter forecast. The
first half of the year is expected to be more challenging due to stronger
comparators and difficult economic conditions with some improvement expected
in the second half driven by a strong labour market, declining inflation and
energy prices, and the stabilisation of mortgage rates.
Against this backdrop, trading in the seasonally low volume months of January
and February, was subdued due to weak end market demand and poor weather
conditions. Revenue growth was 18 per cent, including the benefit of Marley,
but on a like-for-like basis revenue contracted by 10 per cent. The weakest
performances were in the domestic side of Marshalls Landscape Products, which
is trading against the strongest comparators from 2022.
Order intake has improved in recent weeks, and we will continue to monitor
performance, respond flexibly to evolving market conditions and execute
self-help initiatives as required. We also expect a strong performance from
our integrated solar business, supported by changes in building regulations,
and our concrete brick business is expected to build market share due to its
low carbon product range.
Martyn Coffey
Chief Executive
Marshalls plc
Preliminary Announcement of Results
Consolidated Income Statement
For the year ended 31 December 2022
2022 2021
Notes £'000 £'000
Revenue 2 719,373 589,264
Net operating costs 3 (671,461) (513,041)
Operating profit 2 47,912 76,223
Financial expenses 5 (10,716) (6,903)
Financial income 5 1 2
Profit before tax 2 37,197 69,322
Income tax expense 6 (10,656) (14,424)
Profit for the financial year 26,541 54,898
Profit for the year
Attributable to:
Equity shareholders of the Parent 26,791 54,806
Non-controlling interests (250) 92
Profit for the financial year 26,541 54,898
Earnings per share
Basic 7 11.4p 27.5p
Diluted 7 11.3p 27.4p
Dividend
Pence per share 8 15.6p 14.3p
Dividends declared in the period 8 39,427 28,484
2022 2021
(as restated)
Notes £'000 £'000
Operating profit before adjusting items
Operating profit 47,912 76,223
Adjusting items 4 53,220 1,148
Adjusted operating profit 101,132 77,371
Profit before tax and adjusting items
Profit before tax 37,197 69,322
Adjusting items 4 53,220 3,961
Adjusted profit before tax 90,417 73,283
Profit after tax and adjusting items
Profit for the financial year 26,541 54,898
Adjusting items (net of tax) 4 46,815 3,355
Adjusted profit after tax 73,356 58,253
Earnings per share after adding back adjusting items
Basic 7 31.3p 29.2p
Diluted 7 31.1p 29.0p
Marshalls plc
Preliminary Announcement of Results
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2022
2022 2021
(as restated)
Notes £'000 £'000
Profit for the financial year 26,541 54,898
Other comprehensive income/(expense)
Items that will not be reclassified to the Income Statement:
Re-measurements of the net defined benefit surplus (3,126) 26,383
Deferred tax arising 781 (6,600)
Impact of the change in rate of deferred tax on defined benefit plan actuarial - 17
gain
Total items that will not be reclassified to the Income Statement (2,345) 19,800
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 5,660 1,403
Fair value of cash flow hedges transferred to the Income Statement (2,847) (922)
Deferred tax arsing (680) 36
Exchange difference on retranslation of foreign currency net investment 610 (232)
Exchange movements associated with borrowings designated as a hedge against (282) 640
net investment
Foreign currency translation differences - non-controlling interests 45 (55)
Total items that are or may be reclassified to the Income Statement 2,506 870
Other comprehensive income for the year, net of income tax 161 20,670
Total comprehensive income for the year 26,702 75,568
Attributable to:
Equity shareholders of the Parent 26,907 75,531
Non-controlling interests (205) 37
26,702 75,568
Marshalls plc
Preliminary Announcement of Results
Consolidated Balance Sheet
For the year ended 31 December 2022
2022 2021
Notes £'000 £'000
Assets
Non-current assets
Property, plant and equipment 9 266,451 173,931
Right-of-use assets 36,997 36,445
Intangible assets 10 559,743 95,004
Employee benefits 13 22,434 25,757
Deferred taxation assets 1,270 1,605
886,895 332,742
Current assets
Inventories 138,765 107,436
Trade and other receivables 123,281 111,909
Cash and cash equivalents 56,264 41,212
Assets classified as held for sale - 1,860
Derivative financial instruments 3,661 813
321,971 263,230
Total assets 1,208,866 595,972
Liabilities
Current liabilities
Trade and other payables 152,440 138,218
Corporation tax 2,128 2,198
Lease liabilities 11 9,764 8,545
Interest-bearing loans and borrowings 12 - 1,673
Provisions 3,000 -
167,332 150,634
Non-current liabilities
Lease liabilities 11 36,070 32,776
Interest-bearing loans and borrowings 12 247,035 39,341
Provisions 6,699 839
Deferred taxation liabilities 90,661 28,065
380,465 101,021
Total liabilities 547,797 251,655
Net assets 661,069 344,317
Equity
Capital and reserves attributable to equity shareholders of the Parent
Called-up share capital 63,242 50,013
Share premium account 199,927 24,482
Merger reserve 141,605 -
Own shares (1,325) (646)
Capital redemption reserve 75,394 75,394
Consolidation reserve (213,067) (213,067)
Hedging reserve 2,963 830
Foreign exchange reserve 375 47
Retained earnings 391,173 406,277
Equity attributable to equity shareholders of the Parent 660,287 343,330
Non-controlling interests 782 987
Total equity 661,069 344,317
Marshalls plc
Preliminary Announcement of Results
Consolidated Cash Flow Statement
For the year ended 31 December 2022
2022 2021
(as restated)
Notes £'000 £'000
Profit for the financial year 26,541 54,898
Income tax expense on continuing operations 6 17,061 15,030
Income tax credit on adjusting items 6 (6,405) (606)
Profit before tax 37,197 69,322
Adjustments for:
Depreciation of property, plant and equipment 21,817 16,423
Asset impairments 14,042 233
Depreciation of right-of-use assets 11,328 11,315
Amortisation 1,765 1,965
Adjusting items 39,177 1,213
Gain on sale of property, plant and equipment (1,207) (9,194)
Equity settled share-based payments 1,254 2,303
Financial income and expenses (net) 5 10,715 6,901
Operating cash flow before changes in working capital 136,088 100,481
Decrease/(increase) in trade and other receivables 22,900 (16,696)
Increase in inventories (13,997) (18,108)
(Decrease)/increase in trade and other payables (20,737) 19,740
Adjusting items paid (17,410) (2,820)
Cash generated from operations 106,844 82,597
Financial expenses paid (9,909) (3,534)
Income tax paid (11,592) (13,527)
Net cash flow from operating activities 85,343 65,536
Cash flows from investing activities
Proceeds from sale of property, plant and equipment 1,408 14,892
Financial income received 1 2
Acquisition of subsidiary undertaking (86,193) -
Acquisition of property, plant and equipment (27,840) (19,037)
Acquisition of intangible assets (2,310) (2,885)
Net cash flow from investing activities (114,934) (7,028)
Cash flows from financing activities
Net proceeds from issue of share capital 182,651 -
Payments to acquire own shares (1,075) (3,567)
Payment in respect of share-based payment award (1,252) -
Repayment of debt on acquisition of subsidiaries (291,956) -
Repayment of borrowings (97,729) (121,286)
New loans 303,467 32,658
Cash payment for the principal portion of lease liabilities (11,090) (10,828)
Equity dividends paid (38,669) (17,924)
Net cash flow from financing activities 44,347 (120,947)
Net increase/(decrease) in cash and cash equivalents 14,756 (62,439)
Cash and cash equivalents at the beginning of the year 41,212 103,707
Effect of exchange rate fluctuations 296 (56)
Cash and cash equivalents at the end of the year 56,264 41,212
Marshalls plc
Preliminary Announcement of Results
Consolidated Statement of Changes in Equity
For the year ended 31 December 2022
Attributable to equity holders of the Company
Share Capital Foreign Non-
Share premium Merger Own redemption Consolidation Hedging exchange Retained controlling Total
capital account reserve shares reserve reserve reserve reserve earnings Total interests equity
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Current year
At 1 January 2022 50,013 24,482 - (646) 75,394 (213,067) 830 47 406,277 343,330 987 344,317
Total comprehensive income/(expense) for the year
Profit for the financial year - - - - - - - 26,791 26,791 (250) 26,541
-
Other comprehensive
income/(expense)
Foreign currency - - - - - - 328 - 328 45 373
translation differences
-
Effective portion of changes in fair value of cash flow hedges - - - - - 5,660 - - 5,660 - 5,660
-
Net change in fair value of cash flow hedges transferred to the Income - - - - - (2,847) - - (2,847) - (2,847)
Statement
-
Deferred tax arising - - - - - - (680) - - (680) - (680)
Defined benefit plan actuarial loss - - - - - - - (3,126) (3,126) - (3,126)
-
Deferred tax arising - - - - - - - - 781 781 - 781
Total other comprehensive income/(expense) - - - - - 2,133 328 (2,345) 116 45 161
-
Total comprehensive income/(expense) for the year - - - - - 2,133 328 24,446 26,907 (205) 26,702
-
Shares issued 13,229 180,151 141,605 - - - - - - 334,985 - 334,985
Share issue costs - (4,706) - - - - - - (4,706) - (4,706)
Share-based payments - - - - - - - 2 2 - 2
-
Deferred tax on - - - - - - - (608) (608) - (608)
share-based payments
-
Corporation tax on - - - - - - - 121 121 - 121
share-based payments
-
Dividends to equity shareholders - - - - - - - (38,669) (38,669) - (38,669)
-
Purchase of own shares - - (1,075) - - - - - (1,075) - (1,075)
-
Own shares issued under share scheme - - 396 - - - - (396) - - -
-
Total contributions by and distributions to owners 13,229 175,445 (679) - - - - (39,550) 290,050 - 290,050
141,605
Total transactions with owners of the Company 13,229 175,445 (679) - - 2,133 328 (15,104) 316,957 (205) 316,752
141,605
At 31 December 2022 63,242 199,927 (1,325) 75,394 (213,067) 2,963 375 391,173 660,287 782 661,069
141,605
Marshalls plc
Preliminary Announcement of Results
Consolidated Statement of Changes in Equity
For the year ended 31 December 2022
Attributable to equity holders of the Company
Share Capital Foreign Non-
Share premium Own redemption Consolidation Hedging exchange Retained controlling Total
capital account shares reserve reserve reserve reserve earnings Total interests equity
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Current year
At 1 January 2021 50,013 24,482 (806) 75,394 (213,067) 313 (361) 350,930 286,898 950 287,848
Total comprehensive income/(expense) for the year
Profit for the financial year - - - - - - - 54,806 54,806 92 54,898
Other comprehensive
income/(expense)
Foreign currency - - - - - - 408 - 408 (55) 353
translation differences
Effective portion of changes in fair value of cash flow hedges - - - - - 1,403 - - 1,403 - 1,403
Net change in fair value of cash flow hedges transferred to the Income - - - - - (922) - - (922) - (922)
Statement
Deferred tax arising - - - - - 36 - - 36 - 36
Defined benefit plan actuarial gain - - - - - - - 26,383 26,383 - 26,383
Deferred tax arising - - - - - - - (6,600) (6,600) - (6,600)
Impact of the change in rate of deferred tax on defined benefit plan actuarial - - - - - - - 17 17 - 17
gain
Total other comprehensive income/(expense) - - - - - 517 408 19,800 20,725 (55) 20,670
Total comprehensive income/(expense) for the year - - - - - 517 408 74,606 75,531 37 75,568
Share-based payments - - - - - - - 2,303 2,303 - 2,303
Deferred tax on - - - - - - - (256) (256) - (256)
share-based payments
Corporation tax on - - - - - - - 345 345 - 345
share-based payments
Dividends to equity shareholders - - - - - - - (17,924) (17,924) - (17,924)
Purchase of own shares - - (3,567) - - - - - (3,567) - (3,567)
Own shares issued under share scheme - - 3,727 - - - - (3,727) - - -
Total contributions by and distributions to owners - - 160 - - - - (19,259) (19,099) - (19,099)
Total transactions with owners of the Company - - 160 - - 517 408 55,347 56,432 37 56,469
At 31 December 2021 50,013 24,482 (646) 75,394 (213,067) 830 47 406,277 343,330 987 344,317
Marshalls plc
Preliminary Announcement of Results
Notes to the Consolidated Financial Statements
For the year ended 31 December 2022
1 Basis of preparation
Whilst the Financial Information included in this Preliminary Announcement has
been prepared on the basis of the recognition and measurement criteria of
International Financial Reporting Standards ("IFRS") this announcement does
not itself contain sufficient information to comply with IFRS. The Group
expects to publish full Consolidated Financial Statements in April 2023.
The Financial Information set out in this Preliminary Announcement does not
constitute the Company's Consolidated Financial Statements for the years ended
31 December 2022 or 2021, but is derived from those Financial Statements.
Statutory Financial Statements for 2021 have been delivered to the Registrar
of Companies and those for 2022 will be delivered following the Company's
Annual General Meeting. The auditor, Deloitte LLP, has reported on those
Financial Statements. The audit reports were unqualified, did not draw
attention to any matters by way of emphasis without qualifying the reports and
did not contain statements under Section 498(2) or (3) of the Companies Act
2006 in respect of the Financial Statements for 2022 or 2021.
The Consolidated Financial Statements have been prepared in accordance with
international accounting standards in conformity with the requirements of the
Companies Act 2006 and International Financial Reporting Standards as issued
by the International Accounting Standards Board. The Group has applied all
accounting standards and interpretations issued by the IASB and International
Financial Reporting Committee relevant to its operations and which are
effective in respect of these Financial Statements.
The Consolidated 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 Consolidated Financial Statements are presented in Sterling, rounded to
the nearest thousand. Sterling is the currency of the primary economic
environment in which the Group operates.
Going concern
Details of the Group's funding position are set out in Note 12. On 3 May 2022,
the Group drew down on a new four-year bank loan of £210 million to support
the acquisition of Marley Group plc. In addition to the term loan, the Group
has entered into a new committed revolving credit facility of £160 million
with a maturity date of four years. Net debt to adjusted EBITDA was 1.35 times
at 31 December 2022 on an adjusted pre-IFRS 16 proforma basis.
In assessing the appropriateness of adopting the going concern basis in the
Consolidated Financial Statements, the Board reviewed a range of severe
downside scenarios to stress test the potential impact of emerging and
longer-term risks on covenant compliance and liquidity. The stress tests
reviewed do not impact the Directors' opinion that there is sufficient
headroom against both the Group's bank facility and the associated covenants.
The Group's performance is dependent on economic and market conditions, the
outlook for which is difficult to predict. However, the potential impact of
wider political and economic uncertainties has been considered, including
issues or delays as a consequence of continuing issues relating to the wider
supply chain and the impact of cost inflation. The deteriorating
macro-economic environment is the key underlying risk. The financial impact of
climate change risk continues to be assessed along with market changes driven
by advances in technology. Based on current expectations, 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 31 December 2022, on an adjusted pre-IFRS 16 proforma basis, the relevant
ratios were comfortably achieved and were as follows:
• EBITA: interest charge - 16 times (covenant test requirement - to
be greater than 3.0 times).
• Net debt: adjusted EBITDA - 1.35 times (covenant test requirement
- to be less than 3.0 times).
In performing an assessment of the Group's going concern, the Directors have
considered the Group's capital allocation policy, priorities for capital and
the possible future cash requirements arising from each of these priorities
for capital.
After considering these capital allocation priorities and the risks associated
with other relevant uncertainties (including the impact on markets and supply
chains of geographical risks such as the current crisis in Ukraine, the risk
of further COVID-19 uncertainty and continuing macro-economic factors and
inflation), 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 are sufficient to meet significant downside liquidity
scenarios over a prolonged period and that there are sufficient unutilised
facilities held which mature after twelve months. Accordingly, the Directors
continue to adopt the going concern basis in preparing the Consolidated
Financial Statements.
Adoption of new standards in 2022
The accounting policies have been applied consistently throughout the Group
for the purposes of these Consolidated Financial Statements and are also set
out on the Company's website
(www.marshalls.co.uk/investor/financial-performance). Adjusting items have
been disclosed separately because of their size, nature or incidence to enable
a full understanding of the Group's underlying results.
There are no new or amended standards or interpretations adopted during the
year that have a significant impact on the Consolidated Financial Statements.
At the date of authorisation of these Consolidated Financial Statements, the
Group has not applied the following new and revised IFRS Standards that have
been issued but are not yet effective:
• Amendments to IAS 16 - "Property, plant and equipment - proceeds
before intended use";
• Annual improvements to IFRS Standards 2018-2020 Cycle -
"Amendments to IFRS1 First-time Adoption of International Financial Reporting
Standards, IFRS 9 and Financial Instruments, IFRS 16 Leases and IAS 41
Agriculture";
• Amendments to IFRS 3 - "Reference to the conceptual framework";
• Amendments to IAS 37 - "Onerous contracts - costs of fulfilling a
contract";
• Amendment to IFRS 16 - "Covid-19 related rent concessions beyond
30 June 2021";
• IFRS 17 - "Insurance Contracts";
• Amendment to IAS 1 - "Classification of liabilities as current or
non-current";
• Amendments to IAS 1 and IFRS Practice Statement 2 - "Disclosure of
accounting policies";
• Amendments to IAS 12 - "Deferred tax related to assets and
liabilities arising from a single transaction";
• Amendments to IAS 8 - "Definition of accounting estimates";
• Amendments to IFRS 16 - "Lease liability in a sale and leaseback";
and
• Amendment to IAS 1 - "Non-current liabilities with covenants".
The Directors do not expect that the adoption of the Standards listed above
will have a material impact on the Consolidated Financial Statements of the
Group in future periods.
Segment reporting
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 trading performance.
As far as Marshalls is concerned, the CODM is regarded as being the Board.
Following the acquisition of Marley, the Group has reviewed its reporting
segments. The Directors have concluded that going forward the Group will
report under three reporting segments, namely Marshalls Landscape Products,
Marshalls Building Products and Marley Roofing Products.
Alternative performance measures and adjusting items
The Group uses alternative performance measures ("APMs") which are not defined
or specified under IFRS. The Group believes that these 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
additional comparative information. The prior period alternative performance
measures have been restated to reflect the amortisation of acquired intangible
assets in adjusting items.
Adjusting items
Adjusting items are items that are unusual because of their size, nature or
incidence and which the Directors consider should be disclosed separately to
enable a full understanding of the Group's results and to demonstrate the
Group's capacity to deliver dividends to shareholders. Adjusted items should
not be regarded as a complete picture of the Group's financial performance,
which is presented in the total results.
For the year ended 31 December 2022 adjusting items include various charges
that relate to the acquisition of Marley Group plc on 29 April 2022. These
include professional fees and other transaction costs relating to the
acquisition, the unwinding of an inventory fair value adjustments, the
amortisation of acquired intangible assets and an increase in the estimate of
contingent consideration payable in respect of Viridian Solar Limited.
Adjusting items also include redundancy costs and asset impairments following
a restructuring exercise to reduce production capacity and the impairment of
certain assets in the Group's Belgian subsidiary. Further details have been
disclosed in Note 4.
For the year ended 31 December 2021, adjusting items include the disposal of
the Group's site at Ryton, significant asset impairments, the costs of closing
the site at Stoke and exiting the manufacture of cast stone and the special
"thank you" bonus paid to employees in recognition of their contributions
during the COVID-19 pandemic. Adjusting items in 2021 also included an
accounting charge relating to additional consideration for the acquisition of
CPM, a non-cash finance charge resulting from the receipt of a Counsel legal
opinion in relation to certain historic pension issues and the amortisation of
acquired intangible assets. Further details have been disclosed in Note 4.
The APM's set out by the Group together with an explanation of how they are
calculated and why we use them is set out below.
APM Definition and purpose
Like-for-like revenue growth Like-for-like revenue growth is revenue growth generated by the business
assuming that acquired businesses had been part of the Group for the
comparative period in the previous year. This provide users with an
understanding about revenue growth that is not impacted by acquisitions.
Adjusted operating profit, adjusted profit before tax, adjusted profit after These performance measures are all calculated using the relevant statutory
tax and adjusted earnings per share measure and are stated after adding back adjusting items. The Group's
accounting policy on adjusting items is set out above this table. The
Directors assess the performance of the Group using these measures including
when considering dividend payments.
EBITA and adjusted proforma EBITA EBITA is earnings before interest, taxation and amortisation and provides
users with further information about the profitability of the business before
financing costs, taxation and amortisation. Adjusted proforma EBITA is
stated after adding back adjusting items and including EBITA from 1 January to
28 April 2022 for Marley to give users information that it helpful in
assessing future performance potential.
EBITDA and adjusted EBITDA EBITDA is earnings before interest, taxation, depreciation and amortisation
and provides users with further information about the profitability of the
business before financing costs, taxation and non-cash charges. Adjusted
EBITDA is EBITDA stated after adding back adjusting items. It provides users
with additional information about the performance of the Group.
Adjusted proforma pre-IFRS16 EBITDA Adjusted proforma pre-IFRS16 EBITDA is earnings before interest, taxation,
depreciation (but not right-of-use asset depreciation), amortisation and after
adding back adjusting items and profit or losses on the sale of property,
plant and equipment and including EBITDA from 1 January to 28 April 2022 for
Marley and is used to assess compliance with covenants in the Group's bank
facility.
Adjusted proforma return on capital employed Adjusted proforma return on capital employed is calculated as adjusted
proforma EBITA divided by shareholders' funds plus net debt at the period
end. It is designed to give further information about the returns being
generated by the Group as a proportion of capital employed. The use of
adjusted proforma EBITA ensures that the return is matched to the higher value
of capital employed following the Marley acquisition.
Net debt Net debt comprises cash at bank and in hand, bank loans and lease
liabilities. It shows the overall net indebtedness of the Group.
Pre-IFRS16 net debt Net debt comprises cash at bank and in hand and bank loans. It shows the
overall net indebtedness of the Group excluding leases and is used is used in
assessing compliance with covenants in the Group's bank facility.
Pre-IFRS16 net debt to adjusted proforma EBITDA This is calculated by dividing pre-IFRS16 net debt by adjusted proforma
pre-IFRS16 EBITDA to provide a measure of leverage. It is used in assessing
compliance with the covenants in the Group's bank facility.
Adjusted operating cash flow This measure is net cash flow from operating activities stated after adding
back adjusting items paid, net financial expenses paid and taxation paid. It
is used to calculate the ratio of adjusted operating cash flow to adjusted
EBITDA.
Ratio of adjusted operating cash flow to adjusted EBITDA This measure is calculated by dividing adjusted operating cash flow by
adjusted EBITDA. Adjusted operating cash flow is calculated by adding back
adjusting items paid, net financial expenses paid and taxation paid. It
illustrates the rate of conversion of profitability into cash flow.
The following table sets out statutory operating profit before tax and profit
after tax and the impact of adding back adjusting items. Details of the
adjusting items are set out in Note 4.
2022 2021
(as restated)
£'000 £'000
Operating profit 47,912 76,223
Adjusting items (Note 4) 53,220 1,148
Adjusted operating Profit 101,132 77,371
Profit before tax 37,197 69,322
Adjusting items (Note 4) 53,220 3,961
Adjusted profit before tax 90,417 73,283
Profit for the financial year (reported) 26,541 54,898
Adjusting items (net of tax) (Note 4) 46,815 3,355
Adjusted profit after tax 73,356 58,253
Earnings per share after adding back adjusting items
Basic (pence) 31.3p 29.2p
Diluted (pence) 31.1p 29.0p
A reconciliation of IFRS reported income statement measures to income
statement APMs is set out below.
2022 2021
(as restated)
£'000 £'000
Operating profit 47,912 76,223
Adjusting items (Note 4) 53,220 1,148
Adjusted operating Profit 101,132 77,371
Amortisation (excluding amortisation of acquired intangible assets) 1,765 1,965
Adjusted EBITA 102,897 79,336
Depreciation 33,145 27,738
Adjusted EBITDA 136,042 107,074
Marley pre-acquisition EBITDA 18,099 -
Profit on sale of property, plant and equipment (1,207) (47)
Right-of-use asset depreciation (11,328) (11,315)
Adjusted proforma pre-IFRS16 EBITDA 141,606 95,712
A reconciliation of operating profit to adjusted EBITDA is set out below.
2022 2021
(as restated)
£'000 £'000
Operating profit 47,912 76,223
Depreciation and amortisation 42,264 30,916
Reported EBITDA 90,176 107,139
Adjusting items (excluding amortisation of acquired intangible assets) 45,866 (65)
Adjusted EBITDA 136,042 107,074
A reconciliation of operating profit to adjusted proforma EBITA is set out
below.
2022 2021
(as restated)
£'000 £'000
Operating profit 47,912 76,223
Amortisation 9,119 3,178
EBITA 57,031 79,401
Adjusting items (excluding amortisation of acquired intangible assets) 45,866 (65)
Adjusted EBITA 102,897 79,336
Marley pre-acquisition EBITA 16,358 -
Adjusted proforma EBITA 119,255 79,336
Disclosures required under IFRS are referred to as on a reported basis.
Disclosures referred to on an after adding back adjusting items basis are
restated and are used to provide additional information and a more detailed
understanding of the Group's results. Certain financial information on a
reported basis and after adding back adjusting items is set out below.
Adjusted Adjusted As reported Adjusted As reported
pre-IFRS 16 proforma 2022 2022 (as restated) (as restated)
2022 2021 2021
EBITDA (£'000) 141,606 136,042 90,176 107,074 107,139
Net debt (£'000) 190,771 236,605 236,605 41,123 41,123
Net debt: EBITDA 1.35 1.7 2.6 0.4 0.4
EPS (pence) n/a 31.3 11.4 29.2 27.5
Like-for-like revenue growth
Marley Group Limited was acquired in 29 April 2022 and the following
reconciliation discloses the impact of the revenue in the comparative
post-acquisition period in order to provide a like-for-like comparison of
revenue.
2022 2021 Increase
£'000 £'000 %
Reported revenue - Marshalls 587,146 589,264 -
Comparable Marley revenue 132,227 124,935 6
Like-for-like revenue 719,373 714,199 1
Marley revenue is reported for 2022 and in 2021 it represents revenue for
period from 29 April to 31 December.
ROCE
ROCE is defined as EBITA divided by shareholders' funds plus net debt.
Adjusted Adjusted As reported Adjusted As reported
proforma
(as restated)
2022 2022 2022 2021 2021
£'000 £'000 £'000 £'000 £'000
EBITA 119,255 102,897 57,031 79,336 79,401
Shareholders' funds 661,069 661,069 661,069 344,317 344,317
Net (cash)/debt 236,605 236,605 236,605 41,123 41,123
Capital employed 897,674 897,674 897,674 385,440 385,440
ROCE 13.3% 11.5% 6.4% 20.6% 20.6%
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 15. Net debt on a
pre-IFRS 16 basis has been disclosed to provide additional information and to
align with reporting required for the Group's banking covenants. Net debt on
both a reported basis and on a pre-IFRS 16 basis is set out below:
2022 2021
£'000 £'000
Net debt on a reported basis 236,605 41,123
IFRS 16 leases (45,834) (41,198)
Net debt/(cash) on a pre-IRS 16 basis 190,771 (75)
The ratio of adjusted operating cash flow to adjusted EBITDA
The ratio of adjusted operating cash flow to adjusted EBITDA is calculated as
set out below:
2022 2021
£'000 £'000
Net cash flows from operating activities 85,343 65,536
Adjusting items paid 17,410 2,820
Net financial expenses paid 9,909 3,534
Taxation paid 11,592 13,527
Adjusted operating cash flow 124,254 85,417
Adjusted EBITDA 136,042 107,074
Ratio of adjusted operating cash flow to EBITDA 91% 80%
2 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 Board.
Following the acquisition of Marley, the Group has reviewed its reporting
segments. The Directors have concluded that going forward the Group will
report under three reporting segments, namely Marshalls Landscape Products,
Marshalls Building Products and Marley Roofing Products.
Marshalls Landscape Products comprises the Group's Public Sector and
Commercial and Domestic landscape business, Landscape Protection and the
International businesses. Marshalls Building Products comprises the Group's
Civil and Drainage, Bricks and Masonry, Mortars and Screeds and Aggregate
businesses.
Segment revenues and results
2022 2021*
Landscape Building Roofing Landscape Building Roofing
Products Products Products Total Products Products Products Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Total revenue 394,075 195,445 132,227 721,747 424,807 167,358 - 592,165
Inter-segment revenue (26) (2,348) - (2,374) (21) (2,880) - (2,901)
External revenue 394,049 193,097 132,227 719,373 424,786 164,478 - 589,264
Segment operating profit 45,335 26,797 34,452 106,584 62,412 19,640 - 82,052
Unallocated central costs (5,452) (4,681)
Operating profit before adjusting items 101,132 77,371
Adjusting items (53,220) (1,148)
Operating profit 47,912 76,223
Net finance charges (Note 5) (10,715) (6,901)
Profit before tax 37,197 69,322
Taxation (Note 6) (10,656) (14,424)
Profit after tax 26,541 54,898
* Following a change to the reporting segments, the comparative figures are
being restated to ensure consistent classification with the analysis reported
for the year ended December 2022. The change reflects the new internal
performance reports and management responsibility framework.
The Group has two customers which each contributed more than 10 per cent of
total revenue in the current and prior year.
The accounting policies of the three operating segments 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 assets
2022 2021*
£'000 £'000
Property, plant and equipment, right-of-use assets, intangible assets and
inventory:
Landscape Products 260,450 256,933
Building Products 148,400 155,883
Roofing Products 593,106 -
Total segment property, plant and equipment, right-of-use assets, intangible 1,001,956 412,816
assets and inventory
Unallocated assets 206,910 183,156
Consolidated total assets 1,208,866 595,972
* Following a change to the reporting segments, the comparative figures are
being restated to ensure consistent classification with the analysis reported
for the year ended December 2022. The change reflects the new internal
performance reports and management responsibility framework.
For the purpose of monitoring segment performance and allocating resources
between segments, the Group's CODM monitors the property, plant and equipment,
right-of-use assets, intangible assets and inventory. Assets used jointly by
reportable segments are not allocated to individual reportable segments.
Other segment information
Depreciation Property, plant and equipment,
right-of-use asset and intangible asset additions
and amortisation
2022 2021* 2022 2021*
£'000 £'000 £'000 £'000
Landscape Products 22,263 20,491 37,127 21,048
Building Products 8,786 9,212 4,602 6,621
Roofing Products 3,861 - 1,957 -
34,910 29,703 43,686 27,669
Included in adjusting items (Note 4) 7,354 1,213 - -
42,264 30,916 43,686 27,669
* Following a change to the reporting segments, the comparative figures are
being restated to ensure consistent classification with the analysis reported
for the year ended December 2022. The change reflects the new internal
performance reports and management responsibility framework.
Depreciation and amortisation includes £7,354,000 of amortisation of
intangible assets arising from the purchase price allocation exercises
comprising £100,000 (2021: £100,000) in Marshalls Landscape Products,
£1,113,000 (2021: £1,113,000) in Marshalls Building Products and £6,141,000
in Marley Roofing Products. The amortisation has been treated as an adjusting
item (Note 4)
Geographical destination of revenue
2022 2022
£'000 £'000
United Kingdom 687,903 556,110
Rest of the world 31,470 33,154
719,373 589,264
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
2022 2021
(as restated)
£'000 £'000
Raw materials and consumables 267,254 246,478
Changes in inventories of finished goods and work in progress 6,625 (15,762)
Personnel costs 155,521 130,903
Depreciation of property, plant and equipment 21,817 16,423
Depreciation of right-of-use assets 11,328 11,315
Amortisation of intangible assets 1,765 1,965
Own work capitalised (3,108) (2,758)
Other operating costs 159,779 124,665
Redundancy and other costs 498 398
Operating costs 621,479 513,627
Other operating income (2,031) (1,687)
Net gain on asset and property disposals (1,207) (47)
Net operating costs before adjusting items 618,241 511,893
Adjusting items (Note 4) 53,220 1,148
Total net operating costs 671,461 513,041
4 Adjusting items
2022 2021
(as restated)
£'000 £'000
Transaction related costs (i) 14,887 -
Amortisation of acquired intangible assets (ii) 7,354 1,213
Unwind of inventory fair value adjustment (iii) 3,900 -
Contingent consideration (iv) 3,928 -
Redundancy and other closure costs (v) 4,173 1,175
Impairment of property, plant and equipment (vi) 8,794 1,666
Impairment of assets in Belgian subsidiary (vii) 10,184 -
Additional special COVID-19 bonus paid to all colleagues (viii) - 2,216
Additional consideration to the CPM vendors (ix) - 3,750
Net gain on sale of significant surplus site (x) - (8,872)
Total adjusting items within operating costs 53,220 1,148
Adjusting interest expense on defined benefit pension scheme (xi) - 2,813
Total adjusting items before taxation 53,220 3,961
Current tax on adjusting items (Note 6) (1,599) 97
Deferred tax on adjusting items (Note 6) (4,806) (703)
Total adjusting items after taxation 46,815 3,355
Notes:
(i) Transaction related costs relating to the acquisition of Marley
Group plc. These comprise the fees charged by professional advisors.
(ii) Amortisation of acquired intangible assets is principally in
respect of values recognised for the Marley brand and its customer
relationships.
(iii) The unwind of the inventory fair value adjustment relates to the
fair value uplift of the inventory as part of the Marley acquisition that has
subsequently been sold. This item has been shown as an adjusting item to align
with the internal reporting and to present a margin consistent with that which
would have been reported in the absence of a recent acquisition transaction.
(iv) The additional contingent consideration relates to the reassessment
of the amounts that will become payable to vendors arising in relation to
Marley's acquisition of Viridian Solar Limited in 2021
(v) 2022 redundancy and other closure costs relate a restructuring
exercise to right-size production capacity. The 2021 redundancy and other
closure costs relate to the Edenhall Stoke site, following a network review,
was used to manufacture cast stone and the Group decided to exit this market.
(vi) The 2022 asset impairment relates to the restructuring exercise to
reduce capacity and includes the mothballing of manufacturing plant at the
Group's site at Sandy and the closure of certain facilities elsewhere in the
network. The 2021 write-off of property, plant and equipment relates to assets
at our St Ives site that are being dismantled to allow construction of the
dual block plant.
(vii) Impairment of property, plant and equipment (£1,072,000),
intangible assets (£731,000), right of use assets (£3,445,000) and inventory
(£4,936,000) in the Belgian subsidiary resulting from an impairment review
carried out in response to a downturn in the business' performance in 2022.
These assets have been impaired to their fair value, this being higher than
the value in use. This value is based upon the Directors' assessment and
consideration of the observable market information relating to such assets.
(viii) The additional special bonus payable to employees as a thank you for
their support during the pandemic.
(ix) The additional consideration to the CPM vendors represents an
accounting charge relating to the acquisition of CPM following the agreement
reached with the vendors to release of funds initially set aside in escrow,
following the identification of an under-funded pension scheme of a related
company. This risk is now considered to be remote and £3,750,000 will be
released from escrow and paid to the vendors as additional consideration. This
results in a charge to the Income Statement because it falls outside the
hindsight period of twelve months as set out under IAS.
(x) The net gain on a significant surplus site relates to the sale of
Ryton near Coventry.
(xi) The interest expense on defined benefit pension scheme relates to a
technical non-cash finance charge resulting from the receipt of Counsel's
opinion on certain historic benefit issues (Note 5).
5 Financial expenses and income
2022 2021
£'000 £'000
(a) Financial expenses
Net interest expense on defined benefit pension scheme 97 439
Interest expense on bank loans 8,238 1,762
Interest expense on lease liabilities 2,381 1,889
10,716 4,090
(b) Adjusting items
Adjusting interest expense on defined benefit pension scheme (Note 4) - 2,813
10,716 6,903
(c) Financial income
Interest receivable and similar income 1 2
Net interest expense on the defined benefit pension scheme is disclosed net of
Company recharges for scheme administration. .
6 Income tax expense
2022 2021
£'000 £'000
Current tax expense
Current year 11,558 11,360
Adjustments for prior years (568) (2,147)
10,990 9,213
Deferred taxation expense
Origination and reversal of temporary differences:
Current year 757 6,519
Adjustments for prior years (1,091) (1,308)
Total tax expense 10,656 14,424
Current tax on adjusting items (Note 4) 1,599 (97)
Deferred tax on adjusting items (Note 4) 4,806 703
Total tax expenses after adding back adjusting items 17,061 15,030
2022 2022 2021 2021
% £'000 % £'000
Reconciliation of effective tax rate
Profit before tax 100.0 37,197 100.0 69,322
Tax using domestic corporation tax rate 19.0 7,067 19.0 13,171
Impact of capital allowances in excess of depreciation (13.9) (5,164) (3.3) (2,260)
Short-term timing differences 2.5 925 (0.1) (74)
Adjustment to tax charge in prior year (1.5) (568) (3.1) (2,147)
Expenses not deductible for tax purposes 23.5 8,730 0.8 523
Corporation tax charge for the year 29.6 10,990 13.3 9,213
Impact of capital allowances in excess of depreciation 13.7 5,101 2.3 1,610
Short-term timing differences - 23 - (22)
Pension scheme movements (0.1) (52) 0.9 659
Adjusting items (12.9) (4,806) (0.2) (152)
Other items 0.4 158 (0.7) (481)
Adjustment to tax charge in prior year (2.9) (1,091) (1.9) (1,308)
Impact of the change in the rate of corporation tax on deferred taxation 0.9 333 7.1 4,905
Total tax charge for the year 28.7 10,656 20.8 14,424
The net amount of deferred taxation credited to the Consolidated Statement of
Comprehensive Income in the year was £101,000 (2021: debited £6,547,000).
The majority of the Group's profits are earned in the UK with the standard
rate of corporation tax being 19 per cent for the year to 31 December 2022.
The UK corporation tax rate will increase to 25 per cent from 2023 and, the
deferred taxation liability at 31 December 2022 has been calculated at 25 per
cent, which is the rate at which the deferred tax is expected to unwind in the
future.
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 ended 31 December 2022 the capital
allowances due to the Group exceeded the depreciation charge for the year.
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, some legal expenses and a significant proportion of the
transaction costs arising on the acquisition of Marley.
The prior year adjustment in corporation tax includes the reversal of tax
provisions made in prior years which are no longer required, including
provisions made on acquisition of subsidiaries.
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 and China. The sales of these
units, in total, were under 5 per cent of the Group's turnover in the year
ended 31 December 2022. In total, the trading profits were not material and a
minimal amount of tax is due to be paid overseas.
7 Earnings per share
Basic earnings per share from total operations of 11.4 pence (2021: 27.5
pence) per share is calculated by dividing the profit attributable to Ordinary
Shareholders for the financial year, after adjusting for non-controlling
interests, of £26,791,000 (2021: £54,806,000) by the weighted average number
of shares in issue during the period of 235,388,001 (2021: 199,094,964).
Basic earnings per share after adding back adjusting items of 31.3 pence
(2021: 29.2 pence) per share is calculated by dividing the adjusted profit
attributable to Ordinary Shareholders for the financial year, after adjusting
for non-controlling interests, of £73,606,000 (2021: £58,161,000) by the
weighted average number of shares in issue during the period of 235,388,001
(2021: 199,094,964).
Profit attributable to Ordinary Shareholders
2022 2021
(as restated)
£'000 £'000
Profit before adding back adjusting items 73,356 58,253
Adjusting items (46,815) (3,355)
Profit for the financial year 26,541 54,898
Profit attributable to non-controlling interests 250 (92)
Profit attributable to Ordinary Shareholders 26,791 54,806
Weighted average number of Ordinary Shares
2022 2021
Number Number
Number of issued Ordinary Shares 252,968,728 200,052,157
Effect of shares issued during the period (17,299,649) -
Effect of shares transferred into Employee Benefit Trust (281,078) (957,193)
Weighted average number of Ordinary Shares at the end of the year 235,388,001 199,094,964
Diluted earnings per share from total operations of 11.3 pence (2021: 27.4
pence) per share is calculated by dividing the profit for the financial year,
after adjusting for non-controlling interests, of £26,791,000 (2021:
£54,806,000) by the weighted average number of shares in issue during the
period of 235,388,001 (2021: 199,094,964) plus potentially dilutive shares of
1,213,042 (2021: 1,222,847), which totals 236,601,043 (2021: 200,317,811).
Diluted earnings per share after adding back adjusting items of 31.1 pence
(2021: 29.0 pence) per share is calculated by dividing the adjusted profit for
the financial year, after adjusting for non-controlling interests, of
£73,606,000 (2021: £58,161,000) by the weighted average number of shares in
issue during the period of 235,388,001 (2021: 199,094,964) plus potentially
dilutive shares of 1,213,042 (2021: 1,222,847), which totals 236,601,043
(2021: 200,317,811).
Weighted average number of Ordinary Shares (diluted)
2022 2021
Number Number
Weighted average number of Ordinary Shares 235,388,001 199,094,964
Potentially dilutive shares 1,213,042 1,222,847
Weighted average number of Ordinary Shares (diluted) 236,601,043 200,317,811
8 Dividends
After the balance sheet date, a final dividend of 9.9 pence was proposed by
the Directors. This dividend has not been provided for and there are no income
tax consequences.
Pence per 2022 2021
qualifying share £'000 £'000
2022 final 9.9 25,021
2022 interim 5.7 14,406
15.6 39,427
2021 final 9.6 19,122
2021 interim 4.7 9,362
14.3 28,484
The following dividends were approved by the shareholders and recognised in
the Financial Statements:
Pence per 2022 2021
qualifying share £'000 £'000
2022 interim 5.7 14,406
2021 final 9.6 24,263
15.3 38,669
2021 interim 4.7 9,362
2020 final 4.3 8,562
9.0 17,924
The Board recommends a 2022 final dividend of 9.9 pence per qualifying
Ordinary Share amounting to £25,021,000, to be paid on 3 July 2023 to
shareholders registered at the close of business on 2 June 2023.
9 Property, plant and equipment
Land and Plant, machinery
buildings Quarries and vehicles Total
£'000 £'000 £'000 £'000
Cost
At 1 January 2021 96,492 29,474 388,679 514,645
Exchange differences (12) - (420) (432)
Additions 1,327 - 19,231 20,558
Reclassified as held for sale (1,536) - (1,566) (3,102)
Reclassified to intangibles - - (837) (837)
Reclassifications 2,305 (2,305) - -
Disposals (7,175) (73) (17,567) (24,815)
At 31 December 2021 91,401 27,096 387,520 506,017
At 1 January 2022 91,401 27,096 387,520 506,017
Exchange differences 10 - 383 393
Additions 1,305 - 27,110 28,415
Acquisition of subsidiary 66,321 - 29,869 96,190
Reclassifications (444) 444 - -
Disposals (7) (1,388) (3,558) (4,953)
At 31 December 2022 158,586 26,152 441,324 626,062
Depreciation and impairment losses
At 1 January 2021 44,501 9,285 281,458 335,244
Depreciation charge for the year 2,660 368 13,395 16,423
Exchange differences (2) - (368) (370)
Impairments 188 - 45 233
Reclassified as held for sale (413) - (829) (1,242)
Reclassified to intangibles - - (219) (219)
Reclassifications 28 (28) - -
Disposals (3,038) (23) (14,922) (17,983)
At 31 December 2021 43,924 9,602 278,560 332,086
At 1 January 2022 43,924 9,602 278,560 332,086
Depreciation charge for the year 1,929 555 19,333 21,817
Exchange differences 2 - 349 351
Impairments 422 1,403 8,041 9,866
Disposals - (1,241) (3,268) (4,509)
At 31 December 2022 46,277 10,319 303,015 359,611
Net book value
At 1 January 2021 51,991 20,189 107,221 179,401
At 31 December 2021 47,477 17,494 108,960 173,931
At 31 December 2022 112,309 15,833 138,309 266,451
Mineral reserves and associated land have been separately disclosed under the
heading of "Quarries".
The impairment represents the assets being written down to fair value less
cost to sell of £8,794,000 in relation to restructuring exercise to reduce
capacity at Sandy and certain facilities elsewhere in the network and
£1,072,000 in relation to the Belgian subsidiary. (Note 4)
During the year ended 31 December 2022, land and buildings with a book value
of £nil (2021: £1,860,000) have been reclassified as held for sale in
accordance with IFRS 5 "Non-current Assets Held for Sale and Discontinued
Operations".
Group cost of land and buildings and plant and machinery includes £708,000
(2021: £318,000) and £24,434,000 (2021: £8,534,000) respectively for assets
in the course of construction.
10 Intangible assets
Patents,
trademarks
Customer Supplier and Development
Goodwill Brand relationships relationships know-how costs Software Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Cost
At 1 January 2021 87,426 - 12,811 1,629 1,760 159 20,374 124,159
Additions - - - - - 139 2,746 2,885
Reclassified from property, plant and equipment - - - - - 342 495 837
At 31 December 2021 87,426 - 12,811 1,629 1,760 640 23,615 127,881
At 1 January 2022 87,426 - 12,811 1,629 1,760 640 23,615 127,881
Additions - - - - - - 2,310 2,310
Recognised on acquisition of subsidiary 244,119 82,760 145,400 - - - - 472,279
At 31 December 2022 331,545 82,760 158,211 1,629 1,760 640 25,925 602,470
Amortisation and impairment losses
At 1 January 2021 8,912 - 5,121 1,166 1,558 133 12,590 29,480
Amortisation for the year - - 1,060 103 42 88 1,885 3,178
Reclassified from property, plant and equipment - - - - - 144 75 219
At 31 December 2021 8,912 - 6,181 1,269 1,600 365 14,550 32,877
At 1 January 2022 8,912 - 6,181 1,269 1,600 365 14,550 32,877
Amortisation for the year - 2,381 4,820 103 42 90 1,683 9,119
Impairments - - - - - - 731 731
At 31 December 2022 8,912 2,381 11,001 1,372 1,642 455 16,964 42,727
Carrying amounts
At 1 January 2021 78,514 - 7,690 463 202 26 7,784 94,679
At 31 December 2021 78,514 - 6,630 360 160 275 9,065 95,004
At 31 December 2022 322,633 80,379 147,210 257 118 185 8,961 559,743
All goodwill has arisen from business combinations. The carrying amount of
goodwill is allocated across cash generating units ("CGUs") and these CGUs are
independent sources of income streams and represent the lowest level within
the Group at which the associated goodwill is monitored for management
purposes. The Group tests goodwill annually for impairment, or more frequently
if there are indications that goodwill might be impaired. The recoverable
amounts of the CGUs are determined from value-in-use calculations and at both
31 December 2022 and 31 December 2021. These calculations use cash flow
projections based on a combination of individual financial three-year
forecasts, containing assumptions for revenue growth and operational gearing,
and appropriate long-term growth rates of 2.4 per cent. The long-term growth
rate assumption reflects the long-term average growth rate for the UK economy.
To prepare value-in-use calculations, the cash flow forecasts are discounted
back to present value using an appropriate market-based discount rate. The
pre-tax discount rate used to calculate the value in use was 15.1 per cent
(2021: 14.8 per cent). The Directors have reviewed the recoverable amounts of
the CGUs, and considered possible impacts that might arise from a range of
uncertainties, including supply chain risks and cost inflation, that could
lead to a reduction in consumer confidence and a continuing slowdown in the UK
economy. The financial impact of climate change risk, including the cost of
the Group's operational mitigation initiatives, continues to be assessed,
along with market changes driven by advances in technology.
The Group has two main CGUs, namely the landscaping and building products
businesses within Marshalls and the newly acquired Marley Group has now been
identified as a separate CGU. The landscaping and building products CGU's
associated cash flows are assessed as a whole when assessing impairment. This
is unchanged from previous years. The Directors do not consider that any
reasonable change in the assumptions would give rise to the need for further
impairment in either of these CGU's.
The Marley business was acquired on 29 April 2022 and consequently the Marley
CGU is the most sensitive to change. The post-tax discount rate is 8.9 per
cent, (pre-tax: 15.1 per cent). Applying a sensitivity of 10 per cent, as an
incremental discount rate, there is headroom of £43.7 million. The breakeven
point that would indicate impairment would occur is a discount rate of 10.6
per cent.
The impairment represents the assets being written down to fair value less
cost to sell of £731,000 in relation to the Belgian subsidiary (Note 4).
Included in software additions is £1,807,000 (2021: £1,610,000) of own work
capitalised.
Amortisation charge
The amortisation charge is recognised in the following line items in the
Consolidated Income Statement:
2022 2021
£'000 £'000
Net operating costs (Note 3) 1,765 1,965
Adjusting items (Note 4) 7,354 1,213
9,119 3,178
11 Lease liabilities
2022 2021
£'000 £'000
Analysed as:
Amounts due for settlement within twelve months (shown under current 9,764 8,545
liabilities)
Amounts due for settlement after twelve months 36,070 32,776
45,834 41,321
2022 2021
Minimum Minimum
lease lease
payments Interest Principal payments Interest Principal
£'000 £'000 £'000 £'000 £'000 £'000
Less than 1 year 11,046 1,282 9,764 9,828 1,283 8,545
1 to 2 years 8,176 1,126 7,050 7,316 1,110 6,206
2 to 5 years 14,576 2,384 12,192 13,149 2,434 10,715
In more than 5 years 22,230 5,402 16,828 21,915 6,060 15,855
56,028 10,194 45,834 52,208 10,887 41,321
As at 31 December 2022, the total minimum lease payments (above) comprised
property of £30,686,000 (2021: £33,272,000) and plant, machinery and
vehicles of £25,342,000 (2021: £18,936,000).
Certain leased properties have been sublet by the Group. Sublease payments of
£200,176 (2021: £285,254) are expected to be received during the following
financial year. An amount of £206,541 (2021: £295,548) was recognised as
income in the Consolidated Income Statement within net operating costs in
respect of subleases.
The Group does not face a significant liquidity risk with regard to its lease
liabilities. For the year ended 31 December 2022, the interest expense on
lease liabilities amounted to £2,381,000 (2021: £1,889,000). Lease
liabilities are calculated at the present value of the lease payments that are
not paid at the commencement date.
For the year ended 31 December 2022, the average effective borrowing rate was
3.4 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.
For the year ended 31 December 2022, the total cash outflow in relation to
leases amounts to £13,471,000 (2021: £12,717,000). The total cash outflow in
relation to short-term and low value leases was £7,010,000 (2021:
£5,671,000).
12 Interest bearing loans and borrowings
2022 2021
£'000 £'000
Analysed as:
Current liabilities - 1,673
Non-current liabilities 247,035 39,341
247,035 41,014
Bank loans and borrowing facilities
The bank loans are subject to by intra-group guarantees by certain subsidiary
undertakings.
The total bank borrowing facility at 31 December 2022 amounted to £370.0
million (2021: £155.0 million), of which £120.1 million (2021: £114.0
million) remained unutilised. The undrawn facility available at 31 December
2022, in respect of which all conditions precedent had been met, was as
follows:
2022 2021
£'000 £'000
Committed:
Expiring in more than 5 years - -
Expiring in more than 2 years but not more than 5 years 120,095 80,659
Expiring in 1 year or less - 18,327
Uncommitted:
Expiring in 1 year or less - 15,000
120,095 113,986
On 3 May 2022, the Group drew down a new four-year loan of £210 million to
support the funding of the acquisition of Marley. In addition, to support
ongoing working capital requirements, the Group has entered into a new
committed revolving credit facility of £160 million with a maturity date of
four years.
The Group's committed bank facilities are charged at variable rates based on
SONIA plus a margin. The Group's bank facility continues to be aligned with
the current strategy to ensure that headroom against the available facility
remains at appropriate levels and are structured to provide committed
medium-term debt.
Marshalls is party to a reverse factoring finance arrangement between a third
party UK bank and one of the Group's key customers. The principal relationship
is between the customer and its partner bank. The agreement enables Marshalls
to benefit from additional credit against approved invoices and, in practice,
this provides a facility of up to £15 million which the Group utilises
periodically in order to help manage its short-term, mid-month funding
requirements. The credit risk is retained by the customer and Marshalls pays a
finance charge upon utilisation.
13 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 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 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 the 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 volatility in gilt markets during 2022 has had a significant impact on
pension schemes. Due to the Scheme's LDI strategy to provide an effective
hedge against both inflation and interest rates this volatility and the
increase in gilt rates during the year had consequences for the Marshalls
Pension Scheme. The Scheme utilises a "cash driven investment strategy" which
has ensured there have been sufficient "liquid" investments in the Scheme to
enable the Trust Board to respond effectively to the market volatility and the
short-notice collateral calls.
The defined benefit section of the Scheme is subject to regular actuarial
valuations, which are usually carried out every three years. The next
actuarial valuation is being carried out with an effective date of 5 April
2024. 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 2021. The results
of that valuation have been projected to 31 December 2022 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:
2022 2021 2020
£'000 £'000 £'000
Present value of Scheme liabilities (232,469) (366,359) (399,938)
Fair value of Scheme assets 254,903 392,116 402,664
Net amount recognised at the year end (before any adjustments for deferred 22,434 25,757 2,726
tax)
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 Consolidated Statement of Comprehensive Income.
Remeasurements of the net defined benefit surplus are included in other
comprehensive income.
2022 2021
£'000 £'000
Net interest expense before adjusting items 197 539
Adjusting interest expense (Note 5) - 2,813
Net interest expense recognised in the Consolidated Income Statement 197 3,352
Remeasurements of the net liability:
Return on Scheme assets (excluding amount included in interest expense) 130,067 3,786
Gain arising from changes in financial assumptions (134,472) (20,383)
Gain arising from changes in demographic assumptions (886) (6,317)
Experience loss/(gain) 8,417 (3,469)
Debit/(credit) recorded in other comprehensive income 3,126 (26,383)
Total defined benefit debit/(credit) 3,323 (23,031)
The principal actuarial assumptions used were:
2022 2021
£'000 £'000
Liability discount rate 4.90% 1.90%
Inflation assumption - RPI 3.15% 3.30%
Inflation assumption - CPI 2.60% 2.70%
Rate of increase in salaries n/a n/a
Revaluation of deferred pensions 2.60% 2.70%
Increases for pensions in payment:
CPI pension increases (maximum 5% p.a.) 2.55% 2.70%
CPI pension increases (maximum 5% p.a., minimum 3% p.a.) 3.60% 3.35%
CPI pension increases (maximum 3% p.a.) 1.95% 2.35%
Proportion of employees opting for early retirement 0% 0%
Proportion of employees commuting pension for cash 80% 80%
Mortality assumption - before retirement Same as post- Same as post-
retirement retirement
Mortality assumption - after retirement (males) S2PXA tables S2PXA tables
Loading 110% 110%
Projection basis Year of birth Year of birth
CMI_2021 CMI_2020
1.0% 1.0%
Mortality assumption - after retirement (females) S2PXA tables S2PXA tables
Loading 110% 110%
Projection basis Year of birth CMI_2021 Year of birth
CMI_2020
1.0% 1.0%
Future expected lifetime of current pensioner at age 65:
Male aged 65 at year end 85.3 85.4
Female aged 65 at year end 87.5 87.5
Future expected lifetime of future pensioner at age 65:
Male aged 45 at year end 86.3 86.3
Female aged 45 at year end 88.7 88.7
14 Acquisition of subsidiary
On 29 April 2022 Marshalls Group Limited acquired 100 per cent of the issued
share capital of Marley Group plc, a leader in the manufacture and supply of
pitched roofing systems to the UK construction market. Marley Group plc
operates within the UK and is registered in England and Wales. The fair values
acquired are disclosed as provisional given that the acquisition was made on
29 April 2022.
The amounts in respect of the identifiable assets acquired and liabilities
assumed are set out in the table below:
Provisional fair values acquired
£'000
Land and buildings 66,321
Plant, machinery and vehicles 29,869
Right-of-use assets 1,424
Brand 82,760
Customer relationships 145,400
Inventories 27,423
Trade and other receivables 33,284
Cash and cash equivalents 34,087
Trade and other payables (34,556)
Provisions (4,932)
Borrowings (291,956)
Lease liabilities (1,588)
Corporation tax (987)
Deferred tax (62,761)
Total identifiable net assets 23,788
Goodwill 244,119
267,907
Total consideration satisfied by:
Cash consideration 120,280
Equity consideration 147,627
Total cost of investment 267,907
Total cash movements in connection with the acquisition
Cash consideration 120,280
Cash and cash equivalents acquired (34,087)
Borrowings acquired 291,956
Lease liabilities acquired 1,588
Total cash outflow (net) in connection with the acquisition 379,737
The headline enterprise value agreed for the transaction was £535 million on
a cash free and debt free basis. Due to the timing between the agreed
consideration share price as at 6 April 2022 of £6.80 and the share price at
the date of completion on 29 April 2022 of £6.18, the enterprise value of the
transaction at fair value was £525.7 million. The consideration for the
acquisition was funded by a combination of new debt financing and £187
million from a Firm Placing and Placing Open Offer. In addition 24,092,457 new
ordinary shares were issued to the seller at a price of £6.80 per share,
equating to a value of £163,827,000. The fair value of the equity
consideration is £147,627,000, which reflects a reduction of £16,200,000
being the impact of the reduced share price of £6.18 at the date of
completion on 29 April 2022.
As part of the ongoing review of the fair value of assets and liabilities
acquired, adjustments have been made to the initial assessment that was
disclosed in the Half Year Statement at 30 June 2022. These had the effect of
reducing fair value of the net assets acquired under the acquisition by
£13,795,000 which has given rise to an increase in goodwill of the same
amount. The provisional value of goodwill reported in respect of Marley as
at 31 December 2022 is £244,119,000. Goodwill, trade and other payables,
trade and other receivables and corporation tax balances have been restated
accordingly in the 31 December 2022 balance sheet. In assessing the fair value
of land and buildings, brands and customer relationships, the Group has
engaged the support of third party specialists, including PwC and Avison
Young.
Due to their contractual dates, fair value receivables (shown above)
approximate to the gross contractual amounts receivable. The amount of gross
contractual receivables not expected to be received is minimal.
The goodwill arising from the acquisition represents the opportunity to grow
by utilising the capabilities and technical experience of the acquired
workforce and the developing synergistic opportunities. The goodwill arising
from the acquisition is not expected to be deductible for income tax purposes.
Transaction costs incurred on the acquisition totalled £14,887,000 and
further details are set out in Note 4, adjusting items.
Marley contributed revenue of £132,227,000 and adjusted operating profit of
£34,452,000 to the Group's results for the period between the date of
acquisition and the balance sheet date.
15 Analysis of net debt
1 January On acquisition Other 31 December
2021 Cash flow New leases Of Marley changes i 2022
£'000 £'000 £'000 £'000 £'000 £'000
Cash at bank and in hand 41,212 (19,331) - 34,087 296 56,264
Debt due within 1 year (1,673) 1,673 - - - -
Debt due after 1 year (39,341) 84,545 - (291,956) (283) (247,035)
Lease liabilities (41,321) 11,090 (14,015) (1,588) - (45,834)
(41,123) 77,977 (14,015) (259,457) 13 (236,605)
(i)Other changes include foreign currency movements on cash and loan balances
Movement in the net debt is shown net of bank arrangement fees.
Reconciliation of net cash flow to movement in net debt
2022 2021
£'000 £'000
Net decrease in cash equivalents (19,331) (62,439)
Cash outflow from decrease in bank borrowings 86,218 88,628
On acquisition of subsidiary undertakings (259,457) -
Cash outflow from lease repayments 11,090 10,828
New leases entered into (14,015) (3,158)
Effect of exchange rate fluctuations 13 584
Movement in net debt in the year (195,482) 34,443
Net debt at 1 January (41,123) (75,566)
Net debt at 31 December (236,605) (41,123)
16 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 31 December 2022 is shown below:
2022 2021
Book amount Fair value Book amount Fair value
£'000 £'000 £'000 £'000
Trade and other receivables 113,538 113,538 95,032 95,032
Cash and cash equivalents 56,264 56,264 41,212 41,212
Bank loans (247,035) (259,180) (41,014) (40,023)
Trade payables, other payables and provisions (136,525) (136,525) (118,888) (118,888)
Interest rate swaps, forward contracts and fuel hedges 3,661 3,661 813 813
Contingent consideration (8,860) (8,860) (1,563) (1,563)
Financial instrument assets and liabilities - net (218,957) (24,408)
Non-financial instrument assets and liabilities - net 880,026 368,725
661,069 344,317
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) Trade and other receivables/payables
For receivables/payables with a remaining life of less than one year, the
notional amount is deemed to reflect the fair value. All other
receivables/payables are discounted to determine the fair value.
(d) Contingent consideration
The 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.
(e) 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
31 December 2022
Derivative financial assets/(liabilities) - 3,661 - 3,661
Contingent consideration - - (8,860) (8,860)
- 3,661 (8,860) (5,199)
31 December 2021
Derivative financial assets/(liabilities) - 813 - 813
Contingent consideration - - (1,563) (1,563)
- 813 (1,563) (750)
17 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 Board plays a central role in the Group's Risk Review
process, which covers emerging risks and incorporates scenario planning and
detailed stress testing.
There continue to be external risks and significant volatility in UK and world
markets with continuing cost inflation and an uncertain outlook. In an
addition to the macro-economic environment, the key risks for the Group
continue to be cyber security and information technology, the security of raw
materials supply and supply chain risks and climate change and other ESG
related issues. In all these cases, specific assessments continue to be
reviewed and certain new operating procedures have been developed. Mitigating
controls continue to be reviewed as appropriate.
The current assessment identifies external market demand as being the key
medium-term risk. The Group is dependent on the level of activity in its end
markets. Accordingly, it is susceptible to economic downturn, the impact of
Government policy, increases in interest rates and volatility in world
markets. Other factors include the increasing impact of wider geo-political
factors (including the conflict in Ukraine) and unprecedented levels of
Government borrowings. The Group closely monitors trends and lead indicators,
invests in market research and is an active member of the Construction
Products Association. The Group's resilience and flexibility in response to
macro-economic uncertainty has been a major focus during the year. The
acquisition of Marley has been an important transaction for the Group and has
increased the diversification of the business and its underlying resilience by
broadening the range of markets we sell into. The Group benefits from the
diversity of its business and end markets. The proactive development of the
product range continues to offer protection.
The other principal risks and uncertainties that could impact the business for
the remainder of the current financial year are those detailed in the Annual
Report. These cover the strategic, financial and operational risks and have
not changed significantly during the period. Strategic risks include those
relating to the ongoing Government policy, general economic conditions, the
actions of customers, suppliers and competitors, and weather conditions. The
Group also continues to be subject to various financial risks in relation 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 effect of
legislation or other regulatory actions 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.
18 Annual General Meeting
The Annual General Meeting will be held at the offices of Walker Morris, 33
Wellington Street, Leeds, West Yorkshire, LS1 4DL at 11.00am on Wednesday 10
May 2023.
The Board
The Directors serving during the year ended 31 December 2022 and up to the
date of this report were as follows:
Vanda Murray OBE Chair
Simon Bourne Chief Operating Officer
Angela Bromfield Non-Executive Director
Martyn Coffey Chief Executive
Avis Darzins Non-Executive Director
Diana Houghton Non-Executive Director (appointed on 1 January 2023)
Justin Lockwood Chief Financial Officer
Tim Pile Non-Executive Director
Graham Prothero Senior Non-Executive Director
By order of the Board
Shiv Sibal
Group Company Secretary
15 March 2023
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 Market Act 2020.
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