REG - Marshalls PLC - Half-year Report
12/08/2024 07:00
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RNS Number : 9846Z Marshalls PLC 12 August 2024
Embargoed until 7.00am on Monday 12 August 2024
Half year results for the six months ended 30 June 2024
Positioning the Group for outperformance over the medium term
Marshalls plc, a leading manufacturer of sustainable solutions for the built
environment, announces its results for the half year ended 30 June 2024.
· Resilient Group performance in weak end markets, with the impact
partially mitigated by decisive management actions and the benefit of our
diversification strategy
· Landscape Products performance challenging - further self-help
actions being implemented at pace
· Balance sheet strengthened through further reduction in net debt
· Board believes that the 2024 outturn will be broadly in-line with
its previous expectations
· Capital markets event in November 2024 to set out medium term
growth opportunities
Financial summary
£'M H1 2024 H1 2023 Change
Revenue 306.7 354.1 (13%)
Adjusted results (Notes 1 and 2 below)
Adjusted EBITDA 50.6 58.8 (14%)
Adjusted operating profit 34.0 41.9 (19%)
Adjusted profit before tax 26.6 33.2 (20%)
Adjusted basic EPS - pence 7.9 10.2 (23%)
Adjusted annualised ROCE (%) 7.6 10.6 (3ppts)
Interim dividend - pence 2.6 2.6 -
Pre-IFRS 16 net debt 155.8 184.6 16%
Reported results
Operating profit 28.9 26.8 8%
Profit before tax 21.5 16.7 29%
Basic EPS - pence 6.4 5.2 23%
Financial highlights
· Group revenue reduction principally driven by Landscape Products reflecting
sustained low levels of new build housing and private housing repair,
maintenance and improvement ('RMI') spend.
· Financial performance benefitted from decisive actions taken in 2023 to reduce
costs and capacity.
· Adjusted operating cashflow conversion was strong at 111 per cent on an
annualised basis reflecting disciplined working capital management.
· Robust balance sheet with a year-on-year net debt reduction of £28.8 million
and leverage of 1.8 times adjusted EBITDA (Note 21).
Outlook
· The Board remains cautiously optimistic of a modest recovery in its end
markets during the second half of the year predicated on a progressive
improvement in the macro-economic environment.
· Against this backdrop and with the benefit of decisive management actions
taken in 2023, the Board believes that profit and pre-IFRS16 net debt for the
full year will be broadly in-line with its previous expectations.
Matt Pullen, Chief Executive, commented:
"The Group has delivered a resilient performance in weak end markets. The
result in the first half is encouraging and demonstrates that the strategy of
diversification, building on the Group's historic core Landscape Products
business, through the acquisition and improvement of less cyclical businesses
in recent years, has resulted in a more balanced Group. In addition, we have
maintained our focus on tightly controlling costs and working capital. We
are, therefore, pleased to report annualised operating cashflow conversion at
111 per cent and a year-on-year reduction in net debt of £28.8 million, which
remains a key capital allocation priority.
Whilst market conditions affected the Landscape Products result, I have a
strong view that the segment's performance can be substantially improved
through a number of self-help measures which we are implementing at pace. I
am excited for the segment's prospects in a market recovery as it will benefit
significantly from operational leverage.
We are undertaking a review of the Group's strategy and have identified a
number of opportunities to deliver outperformance over the medium term.
These include attractive sustainability-driven markets across bricks and
masonry, water management and energy transition alongside a cyclical recovery
in our core landscape and roofing businesses, supported by the new
Government's commitment to increase housebuilding significantly. We will
provide more information on our new five-year strategy at a capital markets
event on 19 November 2024.
We remain cautiously optimistic of a modest improvement in the Group's end
markets during the second half of the year predicated on a progressive
improvement in the macro-economic environment. Against this backdrop and with
the benefit of ongoing management actions, the Board believes that
profitability and pre-IFRS16 net debt for the full year will be broadly
in-line with its previous expectations."
Analyst presentation
There will be a live presentation today at 10:00am at the offices of Peel Hunt
for analysts and investors, which will also be webcast live. The presentation
will be available for analysts and investors who are unable to view the
webcast live and can be accessed 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://brrmedia.news/MSLH_HY24 (https://brrmedia.news/MSLH_HY24)
Notes:
1. The results for the period ended 30 June 2024 have been disclosed after adding
back adjusting items. These are set out in Note 4.
2. This Half Year Financial Report includes alternative performance measures
('APMs'), which are not defined or specified under the requirements of
International Financial Reporting Standards. The Board believes that these
APMs provide stakeholders with important additional information on the
Group. To support this, we have included an accounting policy note on APMs
in the Notes to this Half Year Financial Report, a glossary setting out the
APMs that we use, how we use them, an explanation of how they are calculated,
and a reconciliation of the APMs to the reported results, where relevant.
See Notes 4 and 21 for further details.
Enquiries:
+44 (0)1422 314777
Marshalls plc
Matt Pullen, Chief Executive
Justin Lockwood, Chief Financial Officer +44 (0)1422 314777
Hudson Sandler (Financial PR) Tel: +44 20 7796 4133
Mark Garraway Email: marshalls@hudsonsandler.com (mailto:marshalls@hudsonsandler.com)
Nick Lyon
Harry Griffiths
India Laidlaw
Chief Executive's Statement
Overview
I have now been Chief Executive of Marshalls for six months and I am very
excited about the opportunities that lie ahead for the business over the
medium term. Our new five-year strategy, which we will formally outline at a
capital markets event in November 2024, is taking shape and I talk more about
that below. At the same time, it is clear that we have more work to do to
ensure that the Group successfully navigates the challenging markets which we
have been experiencing for some time now.
The Group's key end markets of new build housing and private housing RMI,
which together contribute around 60 per cent of revenue, were weak in the
first half of the current year with activity levels lower than H1 2023.
Against this backdrop, the Group delivered a resilient performance during the
period with the impact of lower revenue being partially mitigated by the
benefit of the decisive management actions taken in 2023. These
decisions to mothball capacity and reduce the cost base have delivered the
expected cost savings providing some mitigation to the lower volumes. We
will continue to focus on managing through lower levels of demand by
controlling costs tightly and reducing net debt.
The Landscape Products reporting segment experienced a more difficult period
than the Group's other two reporting segments, in part due to market
conditions. I also have a strong view that the segment's performance can be
substantially improved through a number of self-help measures, which we are
implementing at pace, and will benefit significantly from a recovery in market
volumes that will drive improved operational leverage. I will share more
detailed views on this and our longer-term strategy for Landscape Products in
November.
Meanwhile, the strategy of diversification, beyond the Group's historic core
Landscape Products business through the acquisition and improvement of less
cyclical businesses, has resulted in a more resilient and balanced Group.
The Group is progressing its strategy review process and will outline its new
strategy at a capital markets event on 19 November 2024. The review is
assisting the management team's identification of opportunities to leverage
our diversified portfolio and create greater value and returns over the medium
term. This strategy will extend beyond our core landscape and roofing
businesses into increasingly attractive sustainability-driven end markets
across bricks and masonry, water management and energy transition.
We are therefore optimistic for the future. The combination of an uptick in
UK construction activity over the short term and the expectation of a
sustained recovery provides the Group, with its operational leverage and
market leading brands, products and sustainable solutions, the opportunity to
drive profitable growth and deliver outperformance over the medium-term.
Operational Review
Landscape Products
Landscape Products derives around 45 per cent of its revenues from commercial
& infrastructure, approximately 30 per cent from new build housing and 25
per cent from private housing RMI. Revenues generated from all end markets
contracted during the first half of the year with demand being particularly
weak in new build housing and private housing RMI. In addition, the
reduction in volumes partially resulted from some loss in market share and
steps are being taken to rebuild the Group's distribution points through
mutually beneficial trading arrangements. Like-for-like revenue contraction
of 19 per cent year-on-year reflected a combination of lower volumes and
pressure on price realisation resulting from the impact that weak market
demand had on the industry supply and demand dynamics.
Simon Bourne, who was recently appointed the Group's Chief Commercial Officer,
is leading a transformation programme which will see Landscape Products
leverage its market leading positions. In the near term, this is focused on
working closely with our customers to strengthen our trading relationships and
simplifying our product offer to better meet the needs of our customers in the
most profitable segments of the market. In addition, we will drive improved
operational efficiencies from our advantaged national manufacturing and supply
network and invest in developing our leadership of the reporting segment.
Building Products
Building Products 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. Revenue reduced by six per
cent year on year driven by continued weakness in new build housing. This
performance reflected modest revenue growth in the Group's drainage business,
supported by a pivot in revenues from new build housing to commercial &
infrastructure end markets, offset by revenue contraction in the bricks and
mortars businesses which had performed relatively well in the first half of
2023.
Roofing Products
Approximately 40 per cent of revenues in this segment are generated from new
build housing and 40 per cent from commercial & infrastructure (including
public housing RMI), with the balance of around 20 per cent from private
housing RMI. The market backdrop resulted in a reduction in revenues of five
per cent, with weaker volumes in Marley partially offset by revenue growth
from Viridian Solar. The weaker Marley volumes were driven by a year-on-year
reduction in new build housing volumes whilst public and private RMI activity
continued to be robust. Viridian Solar revenues grew despite lower new build
housing volumes as its market-leading products continue to be chosen by
housebuilders as part of their response to changes in building regulations in
England and Wales that require new housing to achieve higher levels of energy
efficiency.
Review of strategy
We are currently undertaking a review to underpin our new five-year strategy
and evaluating opportunities to develop the Group. We will update on this in
more detail at a capital markets event on 19 November 2024.
Despite recent market challenges, the medium-term outlook for the UK
construction industry is positive, and we anticipate a progressive recovery in
2025 that is expected to accelerate in 2026 through 2029. This is further
supported by the new Government and its stated mission to get Britain building
again, with a commitment to build 1.5 million new dwellings in this
parliament. We are confident that this more positive macro-economic backdrop
will drive future growth for all our businesses as part of the push for more
new houses, commitment to infrastructure programmes, the implementation of the
Water Industry's next investment cycle (AMP8) and continued commitment to
renewables.
Through the work being undertaken on our strategy, we are deepening our
understanding about the Group's end markets and customers and where the best
opportunities are for future value creation.
In Landscape Products, it is clear that the Group's national model drives
several sources of competitive advantage, including product ubiquity and
availability, end user sector and specification expertise and a national
network. We will focus on leveraging these competitive advantages and
optimising our share of the recovery in market volumes to significantly
improve profitability given the business' inherent operational leverage. The
Marley Roofing brand is a clear market leader that resonates strongly with its
installer base and commands strong premiums. It operates in a competitive
market and the Group will focus on protecting profitability through a strong
focus on specification, driving our integrated solar proposition, and
expanding the full roofing offer together with continued investment in
operational capabilities and efficiency.
Solar panels represent a significant growth driver, with Viridian Solar
expected to grow rapidly through the next cycle with an uptake in solar PV
driven by regulation through Part L and the Future Homes Standard, and the
Government's housebuilding targets. The adoption of solar PV in England and
Wales is expected to be in line with the trajectory we have seen in Scotland,
where the penetration of solar in new build housing is around 80 per cent.
The Group holds a strong competitive position in its core residential below
ground market in Civils and Drainage and has the opportunity to expand into
the wider water management sector that will benefit from future sector growth
tailwinds in wastewater and infrastructure. The business is expected to
benefit from a recovery in housebuilding and incremental Water Industry
investment from the AMP8 cycle, which is likely to be significantly higher
than AMP7. In Bricks and Masonry, the Group is expected to benefit from the
strong demand tailwinds that would be generated from an increase in
housebuilding. Housebuilders are increasingly keen to use concrete bricks,
particularly in affordable housing, and are becoming more comfortable with the
aesthetics as an alternative to clay. In addition, there is a wide variation
in regional adoption of the product which indicates significant potential for
future growth.
We are confident that the Group is well positioned with its market leading
brands, products and sustainable solutions to drive profitable diversified
growth and deliver outperformance over the medium-term.
ESG progress
The Group continues to make good progress on its carbon reduction programme.
As reported earlier this year, the Marshalls business has again exceeded its
absolute Scope 1 and 2 science-based target and was named one of Europe's
Climate Leaders by the Financial Times and Statista for the third time. Having
set out our plans to incorporate Marley and Viridian Solar into the Group's
overall carbon reduction targets, we await validation from the Science Based
Targets initiative. Our submitted carbon reduction plan includes targets for
our Scope 1, 2 and 3 emissions as well as an overall Group target for net
zero. We expect to be able to communicate our approved targets later this
year.
As well as a focus on reducing our Group carbon footprint, we continue to
provide our customers with product solutions that contribute to more
sustainable infrastructure such as our raingarden kerbs, solar panels and
water management systems. This is further supported by giving clear and
transparent information on the environmental impact of our products and
materials through the publication of more Environmental Product Declarations
(EPDs) in 2024, including for our Marley roofing products.
Financial Review
Group results
The Group's adjusted results are set out in the following table.
£'m H1 2024 H1 2023 Change (%)
Revenue 306.7 354.1 (13%)
Adjusted net operating costs (272.7) (312.2) 13%
Adjusted operating profit 34.0 41.9 (19%)
Adjusted net financial expenses (7.4) (8.7) 15%
Adjusted profit before taxation 26.6 33.2 (20%)
Adjusted taxation (6.7) (7.7) 13%
Adjusted profit after taxation 19.9 25.5 (22%)
Adjusted basic EPS - pence 7.9 10.2 (23%)
Adjusted diluted EPS - pence 7.8 10.1 (23%)
Interim dividend - pence 2.6 2.6 -
A reconciliation between the Group's adjusted results and reported results is
set out in the following table, further details are set out at Note 4.
£'m H1 2024 H1 2023 Change (%)
Adjusted operating profit 34.0 41.9 (19%)
Adjusting items (5.1) (15.1) 66%
Operating profit 28.9 26.8 8%
Net financial expenses (7.4) (10.1) 27%
Profit before taxation 21.5 16.7 29%
EPS - pence 6.4 5.2 23%
Group revenue for the six months ended 30 June 2024 was £306.7 million (H1
2023: £354.1 million) which is 12 per cent lower than 2023 on a like-for-like
basis. The contraction in revenue in Building Products and Roofing Products
was relatively modest at around five to six percent, whereas the like-for-like
reduction in Landscape Products was more significant at 19 per cent (see Note
21). Group adjusted operating profit was £34.0 million, which is 19 per
cent lower than 2023 reflecting the impact of lower volumes, a less favourable
product mix and weaker price over cost realisation. This was partially
offset by the benefit of cost savings from restructuring activity implemented
in 2023. Group adjusted operating margin reduced by 0.7 percentage points to
11.1 per cent (H1 2023: 11.8 per cent). We have continued to focus on tight
cost control and delivered the cost savings implemented in 2023 in-line with
our expectations. In addition, disciplined working capital management
alongside delivering further cash receipts of £4.4 million from the programme
of surplus land disposals, has resulted in a year-on-year reduction in
pre-IFRS 16 net debt of £28.8 million.
The reported operating profit is stated after adjusting items totalling £5.1
million as summarised in the following table, further details are set out at
Note 4.
£'m H1 2024 H1 2023
Amortisation of intangible assets arising on acquisitions (5.2) (5.2)
Contingent consideration (1.6) (1.2)
Significant property disposal gain 1.7 -
Impairment charges, restructuring and similar costs - (9.3)
Profit on disposal of Marshalls NV - 0.6
Adjusting items within operating profit (5.1) (15.1)
Adjusting items within financial expenses - (1.4)
Adjusting items within profit before taxation (5.1) (16.5)
Adjusting items in 2024 principally comprise the amortisation of intangible
assets arising on the acquisition of subsidiary undertakings of £5.2 million
(H1 2023: £5.2 million). In addition, a profit of £1.7 million was
generated on the disposal of a former manufacturing site, which was largely
offset by an £1.6 million increase in the provision for contingent
consideration in respect of Viridian Solar. The increased provision reflects
the Directors' latest expectation for the final contingent consideration
payment based on the strong performance of that business. Details of the
adjusting items arising in 2023 are set out at Note 4.
Net financial expenses were £7.4 million (H1 2023: £10.1 million and £8.7
million after deducting adjusting items). These expenses comprised financing
costs associated with the Group's bank borrowings of £6.4 million (H1 2023:
£7.1 million), IFRS 16 lease interest of £0.8 million (H1 2023: £1.3
million) and a pension related charge of £0.2 million (H1 2023: £1.7 million
and £0.3 million after deducting adjusting items). The reduction in adjusted
net financial expenses in H1 2024 reflects the impact of the lower drawn
borrowings and the derecognition of HGV leases under the logistics outsourcing
arrangements entered into in the first half, partially offset by higher base
rates.
Adjusted profit before tax was £26.6 million (H1 2023: £33.2 million).
Reported profit before tax was £5.1 million lower than the adjusted result at
£21.5 million (H1 2023: £16.7 million), reflecting the impact of the
adjusting items. The adjusted effective tax rate was 25 per cent (H1 2023: 23
per cent), which is in-line with the UK headline corporation tax rate for
2024. On a reported basis, the effective tax rate is 25 per cent. Adjusted
earnings per share was 7.9 pence (H1 2023: 10.2 pence), which is a 23 per cent
reduction year-on-year reflecting the weaker profitability and the increase in
the headline rate of corporation tax. Reported earnings per share was 6.4
pence (H1 2023: 5.2 pence), which is lower than the adjusted number due to the
adjusting items and their tax effect.
Segmental performance
The adjusted operating profit is analysed between the Group's reporting
segments as follows:
£'m H1 2024 H1 2023 Change (%)
Landscape Products 8.3 15.4 (46%)
Building Products 6.4 8.4 (24%)
Roofing Products 23.2 22.0 5%
Central costs (3.9) (3.9) -
Adjusted operating profit 34.0 41.9 (19%)
Landscape Products
Landscape Products delivered revenue of £137.0 million (2023: £174.1
million) which represents a like-for-like contraction of 19 per cent compared
to 2023 adjusting for the disposal of Marshalls NV which was sold in April
2023.
£'m H1 2024 H1 2023 Change (%)
Revenue 137.0 174.1 (21%)
Segment operating profit 8.3 15.4 (46%)
Segment operating margin % 6.1% 8.8% (2.7ppts)
Segment operating profit reduced by £7.1 million to £8.3 million. This was
driven by the combined effect of lower volumes on gross profit, a less
favourable product mix, weaker price realisation, and a reduction in the
operational efficiency of the manufacturing network due to lower production
volumes. This was partially offset by the benefit of cost savings of £3.4
million arising from the decisive action taken in 2023 to reduce capacity to
align to market demand and simplify operating structures. The fall in
volumes together with the impact of weaker margins resulted in segment
operating margins reducing by 2.7 ppts to 6.1 ppts for the half year.
Building Products
Marshalls Building Products comprises the Group's Civils and Drainage, Bricks
and Masonry, Mortars and Screeds and Aggregates businesses.
£'m H1 2024 H1 2023 Change (%)
Revenue 81.8 87.2 (6%)
Segment operating profit 6.4 8.4 (24%)
Segment operating margin % 7.8% 9.6% (1.8ppts)
Segment operating profit contracted by £2.0 million to £6.4 million. This
was driven by the impact of lower volumes on gross profit partially offset by
actions taken in 2023 that reduced the cost base by £1.2 million in the first
half of the year. The Group successfully recommissioned some brick
manufacturing capacity at one of its factories in the first half of the year
due to encouraging order intake of facing bricks, demonstrating the
flexibility of the manufacturing network. Segment operating margin reduced
by 1.8 ppts to 7.8 per cent reflecting the impact of lower volumes on
profitability.
Roofing Products
Marley Roofing Products comprises pitched roofing products and accessories and
roof integrated solar.
£'m H1 2024 H1 2023 Change (%)
Revenue 87.9 92.8 (5%)
Segment operating profit 23.2 22.0 5%
Segment operating margin % 26.4% 23.7% 2.7ppts
Segment operating profit in the period was £23.2 million, which was £1.2
million higher than H1 2023. This increase in profitability was driven
by a combination of robust price over cost discipline and an improvement in
manufacturing efficiency, which offset the negative impact of lower volumes.
Segment operating margin remained strong at 26.4 per cent, representing a
year-on-year increase of 2.7 ppts.
Balance sheet, cash flow and funding
A summary of the Group's capital deployment and net assets is set out below.
£'m June June December
2024 2023 2023
Goodwill 324.4 324.4 324.4
Intangible assets 222.7 232.2 227.5
Property, plant & equipment 240.5 256.4 249.4
Right-of-use assets 24.6 42.2 41.7
Net working capital 106.6 119.7 91.0
Net pension asset 17.3 26.1 11.0
Deferred tax (84.7) (89.4) (84.1)
Other net balances (6.7) (1.0) (2.0)
Total capital employed 844.7 910.6 858.9
Pre-IFRS 16 net debt (155.8) (184.6) (172.9)
Leases (27.2) (45.4) (44.7)
Net assets 661.7 680.6 641.3
Total capital employed at June 2024 was £844.7 million, which represents a
reduction of £14.2 million compared to December 2023 (June 2023: reduction of
£65.9 million). This reduction is due to the impact of amortising intangible
assets arising on acquisitions and depreciation of property plant and
equipment. In addition, right-to-use assets reduced by £17.6 million during
the period, principally due to the de-recognition of leases following the
outsourcing of the Group's logistics function. The increase in net working
capital in the first six months of 2024 of £15.6 million reflects the
seasonal working capital requirements of the Group with continued focus on
ensuring that inventory levels are well-balanced with market demand. Net
working capital balances are £13.1 million lower than June 2023 reflecting
the Board's focus on active management of inventories and reduced activity
levels in the tougher market environment.
The balance sheet value of the Group's defined benefit pension scheme ('the
Scheme') was a surplus of £17.3 million (June 2023: £26.1 million; December
2023: £11.0 million). The amount has been determined by the Scheme's pension
adviser using appropriate assumptions which are in line with current market
expectations. The fair value of the scheme assets at 30 June 2024 was £238.7
million (June 2023: £245.2 million; December 2023: £250.4 million) and the
present value of the scheme liabilities is £221.4 million (June 2023:
£219.1million; December 2023: £239.4 million). The total profit recorded
in the Statement of Comprehensive Income net of deferred taxation was £4.8
million (June 2023; £4.0 million gain; December 2023: £7.4 million loss).
The principal driver of the profit was an increase in corporate bond yields
since 31 December 2023, which has reduced the value of the Scheme's IAS19
liabilities during the period. This was partially offset by the return on plan
assets being lower than the actuarial assumptions. The last formal actuarial
valuation of the defined benefit pension scheme was undertaken on 5 April 2021
and resulted in a surplus of approximately £24.3 million, on a technical
provisions basis, which was a funding level of 107 per cent. The Company has
agreed with the Trustee that no cash contributions are payable under the
current funding and recovery plan. The next actuarial valuation is taking
place as at 5 April 2024.
Adjusted return on capital employed ('ROCE') was 7.6 per cent (June 2023: 10.6
per cent; December 2023: 8.4 per cent) on an annualised basis, with the
year-on-year reduction due to the weaker trading performance. Adjusted ROCE
is expected to increase in the medium term to around 15 per cent as the Group
benefits from operational leverage driven by the execution of its strategy and
a recovery in market conditions.
Operating cash flow conversion on an annualised basis at June 2024 was 111 per
cent of adjusted EBITDA (June 2023: 105 per cent December 2023: 106 per cent)
which demonstrates the consistently strong cash generative nature of the
Group's businesses. The proactive management of working capital combined with
tight control of capital expenditure resulted in a year-on-year reduction in
pre-IFRS16 net debt of £28.8 million to £155.8 million (June 2023: £184.6
million; December 2023: £172.9 million). The syndicated debt facility totals
£340 million with the majority of it maturing in April 2027. At June 2024,
£145 million of the Group's revolving credit facility of £160 million was
undrawn, which together with the £180 million term loan, provides the Group
with significant liquidity to fund its strategic and operational plans going
forward. Net debt to EBITDA was 1.8 times at June 2024 on an annualised
adjusted pre-IFRS16 basis (June 2023: 1.6 times; December 2023: 1.9 times).
The Group's banking covenants were comfortably met at June 2024.
Dividend
The Group maintains a dividend policy of distributions covered twice by
adjusted earnings with one third being an interim payment and the balance paid
as a final dividend. The Board has declared dividend of 2.6 pence per share
(2023: 2.6 pence), which is in-line with this policy and unchanged
year-on-year. The dividend will be paid on 2 December 2024 to shareholders
on the register at the close of business on 25 October 2024. The shares will
be marked ex-dividend on 24 October 2024.
Outlook
The Board remains cautiously optimistic of a modest recovery in its end
markets during the second half of the year predicated on a progressive
improvement in the macro-economic environment. Against this backdrop and with
the benefit of decisive management actions taken in 2023, the Board believes
that profitability and pre-IFRS16 net debt for the full year will be broadly
in-line with its previous expectations.
Over the medium-term, our new five-year strategy, which we will outline in
November, will position us strongly to benefit from the structural and
regulatory tailwinds underpinned by the new government's stated key mission of
getting Britain building again. Our market leading brands, products and
sustainable solutions put us in a strong place to drive profitable growth and
deliver relative outperformance.
Matt Pullen
Chief Executive
Condensed consolidated income statement
For the six months ended 30 June 2024
Unaudited Unaudited
six months ended June 2024 six months ended June 2023 Audited
Year ended December 2023
Notes £'m £'m £'m
Revenue 2 306.7 354.1 671.2
Net operating costs 3 (277.8) (327.3) (630.2)
Operating profit 2 28.9 26.8 41.0
Net financial expenses 5 (7.4) (10.1) (18.8)
Profit before tax 21.5 16.7 22.2
Income tax expense 6 (5.4) (3.8) (3.8)
Profit for the financial period 16.1 12.9 18.4
Profit for the year attributable to:
Equity shareholders of the Parent 16.1 13.1 18.6
Non-controlling interests - (0.2) (0.2)
Profit for the financial period 16.1 12.9 18.4
Earnings per share
Basic 7 6.4p 5.2p 7.4p
Diluted 7 6.3p 5.2p 7.3p
Dividend
Pence per share 8 2.6 2.6p 15.6p
A reconciliation of the Group's reported results to the adjusted results is
set out below.
Unaudited Unaudited
six months ended June 2024 six months ended June Audited
2023 Year ended December 2023
Notes £'m £'m £'m
Operating profit
Operating profit 28.9 26.8 41.0
Adjusting items 4 5.1 15.1 29.7
Adjusted operating profit 34.0 41.9 70.7
Profit before tax
Profit before tax 21.5 16.7 22.2
Adjusting items 4 5.1 16.5 31.1
Adjusted profit before tax 26.6 33.2 53.3
Profit after tax
Profit for the financial period 16.1 12.9 18.4
Adjusting items (net of tax) 4 3.8 12.6 23.7
Adjusted profit after tax 19.9 25.5 42.1
Earnings per share after adding back adjusting items
Basic 7 7.9p 10.2p 16.7p
Diluted 7 7.8p 10.1p 16.7p
Condensed consolidated statement of comprehensive income
For the six months ended 30 June 2024
Unaudited Unaudited Audited
six months ended June 2024 six months ended June Year ended December
2023 2023
£'m £'m £'m
Profit for the financial year 16.1 12.9 18.4
Other comprehensive income/(expense)
Items that will not be reclassified to the Income Statement:
Re-measurements of the net defined benefit surplus 6.4 5.4 (9.8)
Deferred tax arising (1.6) (1.4) 2.4
Total items that will not be reclassified to the Income Statement 4.8 4.0 (7.4)
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 0.8 2.6 (0.6)
Fair value of cash flow hedges transferred to the Income Statement (0.9) - (1.1)
Deferred tax arising - (0.5) 0.8
Reclassification on sale of subsidiary - (0.6) (0.6)
Exchange difference on retranslation of foreign currency net investment (0.1) 0.2 0.1
Exchange movements associated with borrowings designated as a hedge against - (0.2) (0.2)
net investment
Total items that are or may be reclassified to the Income Statement (0.2) 1.5 (1.6)
Other comprehensive income for the period, net of income tax 4.6 5.5 9.0
Total comprehensive income for the period 20.7 18.4 9.4
Attributable to:
Equity shareholders of the Parent 20.7 18.4 10.2
Non-controlling interests - - (0.8)
20.7 18.4 9.4
Condensed consolidated balance sheet
As at 30 June 2024
Unaudited Unaudited Audited
June 2024 June 2023 December 2023
Notes £'m £'m £'m
Assets
Non-current assets
Goodwill 9 324.4 324.4 324.4
Intangible assets 10 222.7 232.2 227.5
Property, plant and equipment 11 240.5 256.4 249.4
Right-of-use assets 12 24.6 42.2 41.7
Employee benefits 13 17.3 26.1 11.0
Deferred taxation assets 1.2 0.9 1.1
830.7 882.2 855.1
Current assets
Inventories 129.5 141.6 125.1
Trade and other receivables 116.8 132.3 93.4
Cash and cash equivalents 36.6 65.4 34.5
Assets classified as held for sale 0.8 1.3 2.4
Derivative financial instruments 1.8 6.4 1.9
Corporation tax - - 1.7
285.5 347.0 259.0
Total assets 1,116.2 1,229.2 1,114.1
Liabilities
Current liabilities
Trade and other payables 139.7 154.2 127.5
Corporation tax 2.7 0.6 -
Lease liabilities 14 4.7 8.3 8.0
Provisions 6.6 2.9 3.0
153.7 166.0 138.5
Non-current liabilities
Lease liabilities 14 22.5 37.1 36.7
Interest-bearing loans and borrowings 15 192.4 250.0 207.4
Provisions - 5.2 5.0
Deferred taxation liabilities 85.9 90.3 85.2
300.8 382.6 334.3
Total liabilities 454.5 548.6 472.8
Net assets 661.7 680.6 641.3
Equity
Called-up share capital 63.2 63.2 63.2
Share premium & merger reserve 341.6 341.6 341.6
Capital redemption reserve & consolidation reserve (137.7) (137.7) (137.7)
Other reserves 0.6 4.1 1.1
Retained earnings 394.0 409.4 373.1
Total equity 661.7 680.6 641.3
Condensed consolidated cash flow statement
For the six months ended 30 June 2024
Unaudited Unaudited Audited
six months ended June six months ended June Year ended December
2024 2023 2023
Notes £'m £'m £'m
Cash generated from operations 18 32.8 38.8 104.6
Financial expenses paid (4.8) (6.8) (16.5)
Income tax paid (2.3) (8.2) (10.4)
Net cash flow from operating activities 25.7 23.8 77.7
Cash flows from investing activities
Proceeds from sale of property, plant and equipment 4.4 3.7 6.9
Financial income received - - 0.1
Acquisition of subsidiary undertaking (2.6) (3.0) (3.0)
Acquisition of property, plant and equipment (3.9) (9.2) (18.3)
Acquisition of intangible assets (1.2) (1.2) (2.5)
Cash outflow from sale of subsidiary - (1.4) (1.4)
Net cash flow from investing activities (3.3) (11.1) (18.2)
Cash flows from financing activities
Payments to acquire own shares (1.4) (0.2) (0.3)
Repayment of borrowings (40.0) (34.4) (84.4)
New loans 25.0 37.4 44.8
Cash payment for the principal portion of lease liabilities (3.9) (6.2) (9.6)
Equity dividends paid - - (31.6)
Net cash flow from financing activities (20.3) (3.4) (81.1)
Net increase/(decrease) in cash and cash equivalents 2.1 9.3 (21.6)
Cash and cash equivalents at the beginning of the 34.5 56.3 56.3
period
Effect of exchange rate fluctuations - (0.2) (0.2)
Cash and cash equivalents at the end of the period 36.6 65.4 34.5
Condensed consolidated statement of changes in equity
for the six months ended 30 June 2024
Share capital Share premium & Capital redemption & Other reserves* Retained earnings Total
merger reserve
consolidation reserves
equity
£'m £'m £'m £'m £'m £'m
At 1 January 2024 63.2 341.6 (137.7) 1.1 373.1 641.3
Total comprehensive
income/(expense) for the
period
Profit for the financial period - - - - 16.1 16.1
Other comprehensive
income/(expense)
Foreign currency - - - (0.1) - (0.1)
translation differences
Reclassification on sale of - - - - - -
subsidiary
Effective portion of changes - - - 0.8 - 0.8
in fair value of cash flow
hedges
Net change in fair value of - - - (0.9) - (0.9)
cash flow hedges transferred
to the Income Statement
Deferred tax arising - - - - - -
Defined benefit plan actuarial - - - - 6.4 6.4
gain
Deferred tax arising - - - - (1.6) (1.6)
Total other comprehensive - - - (0.2) 4.8 4.6
income/(expense)
Total comprehensive - - - (0.2) 20.9 20.7
income/(expense) for the
period
Transactions with owners
Share-based payments - - - - 1.1 1.1
Deferred tax on - - - - - -
share-based payments
Corporation tax on - - - - - -
share-based payments
Dividends to equity shareholders - - - - - -
Purchase of own shares - - - (1.4) (1.4)
Own shares issued under - - - 1.1 (1.1) -
share scheme
Total contributions by and - - - (0.3) - (0.3)
distributions to owners
Total transactions with - - - (0.5) 20.9 20.4
owners
At 30 June 2024 63.2 341.6 (137.7) 0.6 394.0 661.7
Note*: Other reserves include own shares, hedging reserve and foreign exchange
reserve.
Condensed consolidated statement of changes in equity
for the six months ended 30 June 2023
Share capital Share premium & Capital redemption & Other reserves* Retained earnings Total Non-controlling interests Total
merger reserve
consolidation reserves
equity
£'m £'m £'m £'m £'m £'m £'m £'m
At 1 January 2023 63.2 341.6 (137.7) 2.0 391.2 660.3 0.8 661.1
Total comprehensive
income/(expense) for the
period
Profit for the financial period - - - - 13.1 13.1 (0.2) 12.9
Other comprehensive
income/(expense)
Foreign currency - - - - - - - -
translation differences
Reclassification on sale of - - - 0.3 (0.3) - (0.6) (0.6)
subsidiary
Effective portion of changes - - - 2.6 - 2.6 - 2.6
in fair value of cash flow
hedges
Net change in fair value of - - - - - - - -
cash flow hedges transferred
to the Income Statement
Deferred tax arising - - - (0.5) - (0.5) - (0.5)
Defined benefit plan actuarial - - - - 5.4 5.4 - 5.4
gain
Deferred tax arising - - - - (1.4) (1.4) - (1.4)
Total other comprehensive - - - 2.4 3.7 6.1 (0.6) 5.5
income/(expense)
Total comprehensive - - - 2.4 16.8 19.2 (0.8) 18.4
income/(expense) for the
period
Transactions with owners
Share-based payments - - - - 1.4 1.4 - 1.4
Deferred tax on - - - - (0.1) (0.1) - (0.1)
share-based payments
Corporation tax on - - - - - - - -
share-based payments
Purchase of own shares - - - (0.2) - (0.2) - (0.2)
Own shares issued under - - - (0.1) 0.1 - - -
share scheme
Total contributions by and - - - (0.3) 1.4 1.1 - 1.1
distributions to owners
Total transactions with - - - 2.1 18.2 20.3 (0.8) 19.5
owners
At 30 June 2023 63.2 341.6 (137.7) 4.1 409.4 680.6 - 680.6
Note*: Other reserves include own shares, hedging reserve and foreign exchange
reserve.
Condensed consolidated statement of changes in equity
for the year ended 31 December 2023
Share capital Share premium & Capital redemption & Other reserves* Retained earnings Total Non-controlling interests Total
merger reserve
consolidation reserves
equity
£'m £'m £'m £'m £'m £'m £'m £'m
At 1 January 2023 63.2 341.6 (137.7) 2.0 391.2 660.3 0.8 661.1
Total comprehensive
income/(expense) for the
period
Profit for the financial period - - - - 18.6 18.6 (0.2) 18.4
Other comprehensive
income/(expense)
Foreign currency - - - (0.1) - (0.1) - (0.1)
translation differences
Reclassification on sale of - - - 0.3 (0.3) - (0.6) (0.6)
subsidiary
Effective portion of changes - - - (0.6) - (0.6) - (0.6)
in fair value of cash flow
hedges
Net change in fair value of - - - (1.1) - (1.1) - (1.1)
cash flow hedges transferred
to the Income Statement
Deferred tax arising - - - 0.8 - 0.8 - 0.8
Defined benefit plan actuarial - - - - (9.8) (9.8) - (9.8)
loss
Deferred tax arising - - - - 2.4 2.4 - 2.4
Total other comprehensive - - - (0.7) (7.7) (8.4) (0.6) (9.0)
income/(expense)
Total comprehensive - - - (0.7) 10.9 10.2 (0.8) 9.4
income/(expense) for the
period
Transactions with owners
Share-based payments - - - - 2.8 2.8 - 2.8
Deferred tax on - - - - (0.1) (0.1) - (0.1)
share-based payments
Corporation tax on - - - - - - - -
share-based payments
Dividends to equity shareholders - - - - (31.6) (31.6) - (31.6)
Purchase of own shares - - - (0.3) - (0.3) - (0.3)
Own shares issued under - - - 0.1 (0.1) - - -
share scheme
Total contributions by and - - - (0.2) (29.0) (29.2) - (29.2)
distributions to owners
Total transactions with - - - (0.9) (18.1) (19.0) (0.8) (19.8)
owners
At 31 December 2023 63.2 341.6 (137.7) 1.1 373.1 641.3 - 641.3
Note*: Other reserves include own shares, hedging reserve and foreign exchange
reserve.
Notes to the condensed consolidated financial statements
For the six months ended 30 June 2024
1. Basis of preparation
These unaudited condensed consolidated interim financial statements for the
six months ended 30 June 2024 have been prepared in accordance with the
Disclosure and Transparency Rules ('DTR') of the Financial Conduct Authority
and with IAS 34 'Interim Financial Reporting' as adopted by the United
Kingdom. These condensed consolidated interim financial statements should be
read in conjunction with the Annual Report and Accounts ('the Annual Report')
for the year ended 31 December 2023, which have been prepared in accordance
with United Kingdom adopted international accounting standards and
International Financial Reporting Standards ('IFRS') as issued by the
International Accounting Standards Board ('IASB'). These condensed
consolidated interim financial statements were approved for release on 12
August 2024.
These condensed consolidated interim financial statements do not comprise
statutory accounts within the meaning of Section 434 of the Companies Act
2006. The Annual Report for the year ended 31 December 2023 were approved by
the Board on 18 March 2024 and delivered to the Registrar of Companies. The
Annual Report contained an unqualified audit report and did not include an
emphasis of matter paragraph or any statement under Section 498 of the
Companies Act 2006. The Annual Report is available on the Group's website
(www.marshalls.co.uk (http://www.marshalls.co.uk) ).
The accounting policies applied to prepare these condensed consolidated
interim financial statements are consistent with those applied in the most
recent Annual Report for the year ended 31 December 2023.
The Group operates a formal risk management process, the details of which are
set out on pages 52 to 54 of the Annual Report for the year ended 31 December
2023. The risks assessed in preparing these condensed consolidated interim
financial statements are consistent with those set out on pages 55 to 61 of
the Annual Report and an update on those risks is set out at Note 22 of this
report.
Going concern
In assessing the appropriateness of adopting the going concern basis in the
preparation of this Half Year Financial Report, the Board has considered the
Group's financial forecasts and its principal risks for a period of at least
12 months from the date of this report. The forecasts included projected
profit and loss, balance sheet, cash flows, headroom against debt facilities
and covenant compliance. As noted above, the Group's principal risks are set
out in the 2023 Annual Report and Accounts and an update is included in this
report.
The financial forecasts have been stress tested in downside scenarios to
assess the impact on future profitability, cash flows, funding requirements
and covenant compliance. The scenarios comprise a more severe economic
downturn (which represents the Group's most significant risk) than that
included in the base case forecast, and a reverse stress test on our financial
forecasts to assess the extent to which an economic downturn would need to
impact on revenues in order to breach a covenant. This showed that revenue
would need to deteriorate significantly from the financial forecast and the
Directors have a reasonable expectation that it is unlikely to deteriorate to
this extent.
Details of the Group's funding position are set out in Note 15. The Group has
a syndicated bank facility of £340 million that principally matures in April
2027, having repaid £30 million of the original £370 million facility in
January 2024. At 30 June 2024, £145 million of the facility was undrawn
(June 2023: £118 million undrawn), which is broadly in-line with December
2023 (£160 million undrawn) despite the Group's seasonal increase in working
capital requirements. There are two financial covenants in the bank facility
that are tested on a semi-annual basis and the Group maintains good cover
against these with pre-IFRS 16 net debt to EBITDA of 1.8 times (covenant
maximum of three times) and interest cover of 5.0 times (covenant minimum of
three times).
Taking these factors into account, the Board has the reasonable expectation
that the Group has adequate resources to continue in operation for the
foreseeable future and for this reason, the Board has adopted the going
concern basis in preparing this Half Year Financial Report.
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. A glossary setting out the APMs that the
Board use, how they are used, an explanation of how they are calculated, and a
reconciliation of the APMs to the reported results, where relevant is set out
at Note 21.
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. The adjusted results
should not be regarded as a complete picture of the Group's financial
performance, which is presented in the total results. Details of the
adjusting items are disclosed in Note 4 and Note 21.
Critical accounting judgements and key sources of estimation uncertainty
The preparation of consolidated financial statements requires the Group to
make estimates and judgements that affect the application of policies and
reported accounts. Critical judgements represent key decisions made by the
Board in the application of the Group accounting policies. Where a significant
risk of materially different outcomes exists due to the Board's assumptions or
sources of estimation uncertainty, this will represent a critical accounting
estimate. Estimates and judgements are continually evaluated and are based on
historical experience and other factors, including expectations of future
events that are believed to be reasonable under the circumstances. Actual
results may differ from these estimates. The estimates and judgements which
have a significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities are discussed below.
Critical accounting judgements
The following critical accounting judgements has been made in the preparation
of the consolidated financial statements:
· As noted above, adjusting items have been highlighted separately due to their
size, nature or incidence to provide a full understanding of the Group's
results and to demonstrate the Group's capacity to deliver dividends to
shareholders. The determination of whether items merit treatment as an
adjusting item is a matter of judgement. Note 4 sets out details of the
adjusting items.
Sources of estimation uncertainty
The Directors consider the following to be key sources of estimation
uncertainty:
· In arriving at the accounting value of the Group's defined benefit pension
scheme, key assumptions have to be made in respect of factors including
discount rates and inflation rates. These are determined on the basis of
advice received from a qualified actuary. These estimates may be different
to the actual outcomes. See further information in Note 13.
· The carrying value of goodwill is reviewed on an annual basis in accordance
with IAS36. This review requires the use of cash flow projections based on a
financial forecast that are discounted at an appropriate market-based discount
rate. The assumption on the market-based discount rate is determined based
on the advice of the Group's financial advisor. The actual cash flows
generated by the business may be different to the estimates included in the
forecasts. See further information in Note nine.
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. The
CODM at Marshalls is the Board. The Group reports under three reporting
segments, namely Marshalls Landscape Products, Marshalls Building Products and
Marley Roofing Products. Marshalls Landscape Products comprises the Group's
Commercial and Domestic landscape businesses and Landscape Protection.
Marshalls Building Products comprises the Group's Civil and Drainage, Bricks
and Masonry, Mortars and Screeds and Aggregate businesses.
Segment revenues and operating profit
Unaudited Unaudited Audited
six months ended June 2024 six months ended June year ended December
£'m 2023 2023
£'m £'m
Revenue
Landscape Products 137.0 174.1 321.5
Building Products 81.8 87.2 170.1
Roofing Products 87.9 92.8 179.6
Revenue 306.7 354.1 671.2
Operating profit
Landscape Products 8.3 15.4 21.3
Building Products 6.4 8.4 12.2
Roofing Products 23.2 22.0 44.9
Central costs (3.9) (3.9) (7.7)
Segment adjusted operating profit 34.0 41.9 70.7
Adjusting items (see Note 4) (5.1) (15.1) (29.7)
Reported operating profit* 28.9 26.8 41.0
*Operating profit as per Condensed consolidated Income Statement
The Group has one customer which 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.
The geographical destination of revenue is the United Kingdom £305.9 million
(six months ended June 2023: £347.5 million; year ended December 2023:
£662.8 million) and Rest of the World £0.8 million (six months ended June
2023: £6.6 million; year ended December 2023: £8.4 million).
Segment assets
Unaudited Unaudited Audited
June 2024 June 2023 December 2023
£'m £'m £'m
Segment assets
Landscape Products 218.4 243.9 240.8
Building Products 140.2 152.9 142.0
Roofing Products 583.9 600.0 587.7
Unallocated assets 173.7 232.4 143.6
Total 1,116.2 1,229.2 1,114.1
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.
Capital additions
Unaudited Unaudited Audited
six months ended June 2024 six months ended June year ended December
£'m 2023 2023
£'m £'m
Capital additions
Landscape Products 12.0 12.0 23.1
Building Products 0.6 3.1 4.9
Roofing Products 2.4 4.5 5.9
Total 15.0 19.6 33.9
Capital additions comprise property, plant and equipment (£3.0 million),
right-of-use assets (£10.8 million) and intangible assets (£1.2 million).
Depreciation and amortisation
Unaudited Unaudited Audited
six months ended June 2024 six months ended June year ended December
£'m 2023 2023
£'m £'m
Depreciation and amortisation
Landscape Products 10.1 10.1 19.5
Building Products 3.9 4.7 8.0
Roofing Products 2.6 2.1 5.4
Segment depreciation and amortisation 16.6 16.9 32.9
Adjusting items 5.2 5.2 10.4
Depreciation and amortisation 21.8 22.1 43.3
Depreciation and amortisation includes £5.2 million of amortisation of
intangible assets arising from the purchase price allocation exercises (six
months ended June 2023: £5.2 million; year ended December 2023: £10.4
million) comprising £0.1 million (six months ended June 2023: £0.1 million;
year ended December 2023: £0.1 million) in Landscape Products, £0.6 million
in Building Products (six months ended June 2023: £0.6 million; year ended
December 2023: £1.1 million) and £4.5 million in Roofing Products (six
months ended June 2023: £4.5 million; year ended December 2022: £9.2
million). The amortisation has been treated as an adjusting item (Note 4).
3. Net operating costs
Unaudited Unaudited Audited
six months ended June 2024 six months ended June year ended December
£'m 2023 2023
£'m £'m
Raw materials and consumables 113.0 128.2 235.4
Changes in inventories of finished goods and work in progress (5.6) (3.4) 12.9
Personnel costs 68.5 78.3 151.6
Depreciation of property, plant and equipment 11.7 10.9 21.4
Depreciation of right-of-use assets 4.1 5.1 9.8
Amortisation of intangible assets 6.0 6.1 12.1
Asset impairments - 4.8 7.3
Own work capitalised (0.6) (1.3) (2.5)
Other operating costs 84.8 96.9 177.5
Redundancy and other costs - 4.5 9.3
Operating costs 281.9 330.1 634.8
Other operating income (2.2) (1.5) (2.6)
Net gain on asset and property disposals (1.9) (0.7) (1.4)
Net gain on disposal of subsidiary - (0.6) (0.6)
Net operating costs 277.8 327.3 630.2
Adjusting items (Note 4) (5.1) (15.1) (29.7)
Adjusted net operating costs 272.7 312.2 600.5
4. Adjusting items
Unaudited Unaudited Audited
six months ended June 2024 six months year ended December
£'m ended June 2023
2023 £'m
£'m
Amortisation of intangible assets arising on acquisitions (5.2) (5.2) (10.4)
Contingent consideration (1.6) (1.2) (1.6)
Significant property disposal gain 1.7 - -
Restructuring and similar costs - (4.5) (11.3)
Impairment of property, plant and equipment - (4.8) (7.0)
Disposal of Belgian subsidiary - 0.6 0.6
Total adjusting items within operating profit (5.1) (15.1) (29.7)
Adjusting item in interest expense - (1.4) (1.4)
Total adjusting items before taxation (5.1) (16.5) (31.1)
Current tax on adjusting items (Note 6) - 1.0 2.7
Deferred tax on adjusting items (Note 6) 1.3 2.9 4.7
Total adjusting items after taxation (3.8) (12.6) (23.7)
· Amortisation of intangible assets arising on acquisitions is principally in
respect of values recognised for the Marley brand and its customer
relationships.
· The significant property disposal gain arose on the disposal of the Group's
former manufacturing site in Carluke.
· 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, reflecting a further
improvement in the performance of that business.
· Restructuring and similar costs arose during major restructuring exercises
conducted when the Group took steps to reduce manufacturing capacity and the
cost base in response to a reduction in market demand during 2023.
· The impairment of property, plant and equipment arose in connection with the
major restructuring exercises in 2023 noted above.
· The gain arising on the disposal of the Group's former Belgian subsidiary,
which was completed in April 2023.
· The adjusting item in interest expense of £1.4 million in 2023 is a non-cash
technical accounting charge arising from the resolution of certain historical
retirement benefit issues.
5. Financial expenses
Unaudited Unaudited Audited
six months ended June 2024 six months year ended December
£'m ended June 2023
2023 £'m
£'m
Net interest expense on defined benefit pension scheme 0.2 0.3 0.2
Net interest expense on bank loans 6.4 7.1 14.7
Interest expense of lease liabilities 0.8 1.3 2.5
7.4 8.7 17.4
Additional interest expense in defined benefit pension scheme - 1.4 1.4
Financial expenses 7.4 10.1 18.8
Net interest expense on the defined benefit pension scheme is disclosed net of
Company recharges for scheme administration. In 2023, the additional
technical interest expense in respect of the defined benefit pension scheme
arose from the resolution of certain historical issues, is non-cash and
non-recurring and was accounted for as an adjusting item (see Note 4).
6. Income tax expense
Unaudited Unaudited Audited
six months ended June 2024 six months year ended December
£'m ended June 2023
2023 £'m
£'m
Current tax expense
Current year 6.4 7.0 8.8
Adjustments for prior years - (0.2) (1.4)
6.4 6.8 7.4
Deferred taxation expense
Origination and reversal of temporary differences:
Current year (1.0) (3.0) (3.0)
Adjustments for prior years - - (0.6)
Total tax expense 5.4 3.8 3.8
Current tax on adjusting items (Note 4) - 1.0 2.7
Deferred tax on adjusting items (Note 4) 1.3 2.9 4.7
Total tax expenses after adding back adjusting items 6.7 7.7 11.2
7. Earnings per share
Basic earnings per share is calculated by dividing the profit attributable to
ordinary shareholders for the financial period by the weighted average number
of shares in issue during the period. Adjusted basic earnings per share is
calculated by dividing the adjusted profit attributable to ordinary
shareholders for the financial period by the weighted average number of shares
in issue during the period. Diluted earnings per ordinary share is
calculated by dividing the profit attributable to ordinary shareholders by the
sum of the weighted average number of shares in issue and potentially dilutive
shares. The calculation of adjusted profit attributable to ordinary
shareholders is calculated as follows:
Unaudited Unaudited Audited
six months ended June 2024 six months year ended December
£'m ended June 2023
2023 £'m
£'m
Profit attributable to ordinary shareholders 16.1 13.1 18.6
Adjusting items (net of tax) 3.8 12.6 23.7
Adjusted profit attributable to ordinary shareholders 19.9 25.7 42.3
The calculation of the weighted average number of shares and diluted weighted
average number of shares is calculated as follows:
Unaudited Unaudited Audited
six months ended June 2024 six months year ended December
ended June 2023
2023
Number Number Number
Number of issued ordinary shares 252,968,728 252,968,728 252,968,728
Effect of shares transferred into Employee Benefit Trust (201,653) (179,747) (144,651)
Weighted average number of ordinary shares 252,767,075 252,788,981 252,824,077
Effect of potentially dilutive ordinary shares 1,085,718 1,100,908 1,026,468
Diluted weighted average number of ordinary shares 253,852,793 253,889,889 253,850,545
8. Dividends
The Group maintains a dividend policy of distributions covered twice by
adjusted earnings. The Board has declared an interim dividend for 2024 of
2.6 pence per qualifying Ordinary Share amounting to £6.6 million, to be paid
on 2 December 2024 to shareholders registered at the close of business on 25
October 2024. The shares will be marked ex-dividend on 24 October 2024.
9. Goodwill
Unaudited Unaudited Audited
June 2024 June 2023 December 2023
£'m £'m £'m
Net book value at start of period 324.4 322.6 322.6
Adjustments to purchase price allocation - 1.8 1.8
Net book value at end of period 324.4 324.4 324.4
All goodwill has arisen from business combinations. The carrying amount of
goodwill is allocated across cash generating units ("CGUs") which represent
the lowest level within the Group at which the associated goodwill is
monitored for management purposes and is consistent with the operating
segments set out in Note 2. The Group has three material CGUs, Landscape
Products, Building Products and Roofing Products. The carrying amount of
goodwill has been allocated to CGUs at each period end as follows:
£'m
Landscape Products 34.8
Building Products 43.7
Roofing Products 245.9
324.4
The Board reviews goodwill for impairment on annual basis and more frequently
if there is an indication that goodwill may be impaired. The last such
review, which did not indicate an impairment, was conducted as part of the
2023 year end process and details of this are set out pages 134 and 135 of the
2023 Annual Report and Accounts. There has been no indicator of impairment
since this date and a formal impairment review will be conducted as part of
the 2024 year end process.
10. Intangible assets
Unaudited Unaudited Audited
June 2024 June 2023 December 2023
£'m £'m £'m
Net book value at start of period 227.5 237.1 237.1
Additions 1.2 1.2 2.5
Amortisation (6.0) (6.1) (12.1)
Net book value at end of period 222.7 232.2 227.5
Amortisation includes £5.2 million (six months ended June 2023: £5.2
million, year ended December 2023: £10.4 million) relating to intangible
assets arising on acquisitions that is accounted for as an adjusting item (see
Note 4). Included in software additions is £0.6 million (six months ended
June 2023: £0.8 million; year ended December 2023: £1.6 million) of own work
capitalised.
11. Property, plant and equipment
Unaudited Unaudited Audited
June 2024 June 2023 December 2023
£'m £'m £'m
Net book value at start of period 249.4 266.5 266.5
Additions 3.0 7.7 16.5
Depreciation (11.7) (10.9) (21.4)
Impairment - (4.8) (7.3)
Other movements (0.2) (2.1) (4.9)
Net book value at end of period 240.5 256.4 249.4
Impairment in the six months end June 2023 and year ended December 2023
represents the assets being written down to fair value less cost to sell of
£4.8 million and £7.3 million in relation to major restructuring exercises
at certain facilities in the Group's operational network.
12. Right-of-use assets
Right of use assets totalling £23.8 million were derecognised during the
period due to the outsourcing of the Group's logistics function.
13. Retirement benefit asset
The amounts recognised in the balance sheet in respect of the defined benefit
asset are as follows:
Unaudited Unaudited Audited
June 2024 June 2023 December 2023
£'m £'m £'m
Present value of Scheme liabilities (221.4) (219.1) (239.4)
Fair value of Scheme assets 238.7 245.2 250.4
Net amount recognised (before deferred tax) 17.3 26.1 11.0
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 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 Scheme poses a number of risks to the Company, for example longevity risk,
investment risk, interest rate risk, inflation risk and salary risk. The
Trustee is aware of these risks and uses various techniques to control them.
The Trustee has a number of internal control policies, including a Risk
Register, which are in place to manage and monitor the various risks it faces.
The Trustee's investment strategy incorporates the use of liability-driven
investments ("LDIs") to minimise sensitivity of the actuarial funding position
to movements in interest rates and inflation rates.
The defined benefit section of the Scheme is subject to regular actuarial
valuations, which are usually carried out every 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. The last formal actuarial
valuation was carried out as at 5 April 2021 which resulted in a surplus of
£24.3 million, on a technical provisions basis. The Company has agreed with
the Trustee that no cash contributions are payable under the funding plan.
In June 2023, the High Court handed down a decision in the case of Virgin
Media Limited v NTL Pension Trustees II Limited and others relating to the
validity of certain historical pension changes due to the lack of actuarial
confirmation required by law. In July 2024, the Court of Appeal dismissed
the appeal brought by Virgin Media Limited against aspects of the June 2023
decision. The conclusions reached by the court in this case may have
implications for other UK defined benefit plans. The potential impact of
this, if any, has not yet been confirmed and, in light of the recent ruling,
the Company will assess this in the second half of the year.
14. Lease liabilities
Unaudited Audited
Unaudited June 2023 December 2023
June 2024
£'m
£'m
£'m
Analysed as:
Amounts due for settlement within twelve months 4.7 8.3 8.0
Amounts due for settlement after twelve months 22.5 37.1 36.7
27.2 45.4 44.7
Lease liabilities are calculated at the present value of the lease payments
that are not paid at the commencement date. For the six months ended June
2024, the average effective borrowing rate was 4.1 per cent (six months ended
June 2023: 3.5 per cent; year ended December 2023: 4.2 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. Lease liabilities totalling £24.4 million were derecognised during
the period as a result of the outsourcing of the Group's logistics function to
Wincanton.
The total cash outflow in relation to leases was £4.8 million (six months to
June 2023: £7.5 million; year ended December 2023: £11.6 million). The total
cash outflow in relation to short-term and low value leases was £1.7 million
(six months ended June 2023: £3.9 million; year ended December 2023: £7.1
million).
15. Interest bearing loans and borrowings
Unaudited Unaudited Audited
June 2024 June 2023 December 2023
£'m
£'m
£'m
Analysed as:
Non-current liabilities 192.4 250.0 207.4
Interest bearing loans and borrowings are stated net of unamortised debt
arrangement fees of £2.6 million (June 2023: £2.6 million; December 2023:
£2.6 million).
The total syndicated bank facility at June 2024 was £340 million after £30
million of the term loan was repaid in January 2024 (June 2023: £370 million;
December 2023: £370 million), of which £145 million (June 2023: £117.5
million; December 2023: £160 million) remained unutilised. £8.5 million of
the undrawn facility available at June 2024 expires between one and two years
and £136.5 million expires between two and five 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 has a receivables purchase agreement with a UK bank and is party to
a reverse factoring finance arrangement between a UK bank and one of the
Group's key customers (the principal relationship is between the customer and
its partner bank). Under these agreements, Marshalls has the option of
transferring the ownership of certain customer receivables to the bank or to
receive advance payment of approved invoices from the key customer,
respectively. Utilising either agreement results in the derecognition of
receivables from the Group's balance sheet. The Group utilises these
facilities periodically in order to help manage its short-term funding
requirements and pays a finance charge upon utilisation.
16. Analysis of net debt
Unaudited Unaudited Audited
June 2024 June 2023 December 2023
£'m
£'m
£'m
Cash at bank and in hand 36.6 65.4 34.5
Debt due after 1 year (192.4) (250.0) (207.4)
Lease liabilities (27.2) (45.4) (44.7)
(183.0) (230.0) (217.6)
17. Reconciliation of net cash flow to movement in net debt
Unaudited Unaudited Audited
six months ended June 2024 six months year ended December
£'m ended June 2023
2023
£'m
£'m
Net increase / (decrease) in cash equivalents 2.1 10.6 (20.3)
Cash (inflow) / outflow from movement in bank borrowings 15.0 (3.0) 39.8
On disposal of subsidiary undertakings - (1.4) (1.4)
Cash outflow from lease repayments 3.9 6.2 9.6
New leases entered into (10.8) (11.0) (13.7)
Lease liability de-recognised (see Note 14) 24.4 5.3 5.3
Effect of exchange rate fluctuations - (0.1) (0.3)
Movement in net debt in the period 34.6 6.6 19.0
Net debt at beginning of the period (217.6) (236.6) (236.6)
Net debt at end of the period (183.0) (230.0) (217.6)
18. Reconciliation of profit after taxation to cash generated
from operating activities
Unaudited Unaudited Audited
six months ended June 2024 six months year ended December
ended June 2023
2023
Notes £'m £'m £'m
Profit after taxation 16.1 12.9 18.4
Income tax 6 5.4 3.8 3.8
Profit before tax 21.5 16.7 22.2
Adjustments for:
Depreciation of property, plant and equipment 11 11.7 10.9 21.4
Asset impairments 4 4.8 7.3
Depreciation of right-of-use assets 4.1 5.1 9.8
Amortisation 6.0 6.1 12.1
Gain on disposal of subsidiaries - (0.6) (0.6)
Gain on sale of property, plant and equipment (1.9) (0.7) (1.4)
Equity settled share-based payments 1.1 1.4 2.8
Financial income and expenses (net) 5 7.4 10.1 18.8
Operating cash flow before changes in working capital 49.9 53.8
92.4
(Increase)/decrease in trade and other receivables (23.3) (16.3) 25.8
(Increase)/decrease in inventories (4.4) (6.3) 10.1
Increase/(decrease) in trade and other payables 10.6 7.6 (23.7)
Cash generated from operations 32.8 38.8 104.6
19. 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 2023 is shown below:
Book value Fair value
Unaudited Unaudited Audited Unaudited Unaudited Audited
six months ended June 2024 six months year ended December six months ended June 2024 six months year ended December
£'m ended June 2023 £'m ended June 2023
2023 £'m 2023 £'m
£'m £'m
Trade and other receivables 110.9 122.3 87.5 110.9 122.3 87.5
Cash and cash equivalents 36.6 65.4 34.5 36.6 65.4 34.5
Bank loans (192.4) (250.0) (207.4) (192.1) (243.2) (202.2)
Trade payables, other payables and provisions (123.5) (135.0) (116.8) (123.5) (135.0) (116.8)
Derivatives 1.8 6.4 1.9 1.8 6.4 1.9
Contingent consideration (6.6) (7.6) (8.0) (6.6) (7.6) (8.0)
Financial instrument assets and liabilities - net (173.2) (198.5) (208.3)
Non-financial instrument assets and liabilities - net 834.9 879.1 849.6
Net assets 661.7 680.6 641.3
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 three basis, all use level two
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. This represents level two in the fair value hierarchy.
(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. This represents level three in the
fair value hierarchy.
(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).
20. Disposal of subsidiary
On 13 April 2023, the Group sold its interest in Marshalls NV, its former
Belgian subsidiary, for a nominal sum. The sale resulted in a profit on
disposal of £0.6 million, which was accounted for as an adjusting item (see
Note 4).
21. Alternative performance measures
The APMs set out by the group are made-up of earnings-based measures and ratio
measures with a selection of these measures being stated after adjusting
items.
Measures stated after excluding adjusting items
These performance measures are calculated using either the associated reported
measure or alternative performance measure after adding back the adjusting
items detailed in Note 4. The Group's accounting policy on adjusting items is
set out in Note 1, basis of preparation.
APM Definition and/or purpose
Adjusted operating profit, adjusted profit before tax, adjusted profit after The Directors assess the performance of the Group using these measures
tax, adjusted earnings per share, adjusted EBITA, adjusted EBITDA and adjusted including when considering dividend payments.
operating cash flow
Adjusted return on capital employed Adjusted return on capital employed is calculated as adjusted EBITA (on
annualised basis) 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.
Adjusted operating cash flow conversion Operating cash flow conversion is calculated by dividing adjusted operating
cash flow by adjusted EBITDA (both on an annualised basis). 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.
Pre-IFRS 16 measures
The Group's banking covenants are assessed on a pre-IFRS 16 basis. In order to
provide transparency and clarity regarding how the Group's compliance with
banking covenants, the following performance measures and their calculations
have been presented:
APM Definition and purpose
Pre-IFRS16 adjusted EBITDA Pre-IFRS16 adjusted EBITDA is adjusted EBITDA excluding right-of-use asset
depreciation and profit or losses on the sale of property, plant and
equipment.
Pre-IFRS16 net debt Pre-IFRS 16 net debt comprises cash at bank and in hand and bank loans but
excludes lease liabilities. It shows the overall net indebtedness of the
Group on a pre-IFRS 16 basis.
Pre-IFRS16 net debt leverage This is calculated by dividing pre-IFRS16 net debt by adjusted pre-IFRS16
EBITDA (on an annualised basis) to provide a measure of leverage.
Like-for-like
APM Definition and purpose
Like-for-like revenue growth Like-for-like revenue growth is revenue growth generated by the Group that
includes revenue for acquired businesses and excludes revenue for businesses
that have been sold for the corresponding periods in the prior year. This
provides users of the financial statements with an understanding about revenue
growth that is not impacted by acquisitions or disposals.
Other definitions
APM Definition and purpose
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.
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.
Reconciliations of IFRS reported income statement measures to income statement
APMs is set out in the following three tables. A reconciliation of operating
profit to like-for-like pre-IFRS16 adjusted EBITDA is set out below:
Unaudited Unaudited Audited
six months ended June 2024 six months year ended December
ended June 2023
2023
£'m £'m £'m
Operating profit 28.9 26.8 41.0
Adjusting items (Note 4) 5.1 15.1 29.7
Adjusted operating profit 34.0 41.9 70.7
Amortisation (excluding amortisation of intangible assets arising on 0.8 0.9 1.7
acquisitions)
Adjusted EBITA 34.8 42.8 72.4
Depreciation 15.8 16.0 31.2
Adjusted EBITDA 50.6 58.8 103.6
Profit on sale of property, plant and equipment (0.1) (0.7) (1.4)
Right-of-use asset principal payments (3.9) (6.2) (9.6)
Pre-IFRS16 adjusted EBITDA 46.6 51.9 92.6
Disclosures required under IFRS are referred to as on a reported basis.
Disclosures referred 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 measures are reported on an annualised basis
to show the preceding 12-month period where seasonality can impact on the
measure.
Like-for-like revenue growth
Unaudited Unaudited Change
six months ended June 2024 six months %
£'m ended June
2023
£'m
Marshalls Landscape Products 137.0 169.1 (19.0%)
Marshalls Building Products 81.8 87.2 (6.2%)
Marley Roofing Products 87.9 92.8 (5.3%)
Like-for-like revenue 306.7 349.1 (12.1%)
The Group sold its Belgian subsidiary on 13 April 2023 and therefore Marshalls
Landscape Products 2023 revenue has been restated to exclude £5.0 million of
revenue generated by that subsidiary between 1 January and 14 April 2023. No
adjustments have been to Marshalls Building Products and Marley Roofing
Products revenue.
Pre-IFRS 16 net debt and pre-IFRS16 net debt leverage
Net debt comprises cash at bank and in hand, bank loans and leasing
liabilities. An analysis of net debt is provided in Note 16. 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. Pre-IFRS16
net debt leverage is defined as pre-IFRS16 net debt divided by like-for-like
adjusted pre-IFRS16 EBITDA. Net debt as reported in Note 16 is reconciled to
pre-IFRS 16 net debt and pre-IFRS 16 net debt leverage below:
Unaudited Unaudited Unaudited Audited year ended December 2023
six months ended June 2024
six months ended December 2023
12 months ended June 2024 £m
£'m £'m £'m
Net debt - - 183.0 217.6
IFRS 16 leases - - (27.2) (44.7)
Net debt on a pre-IFRS16 basis - - 155.8 172.9
Adjusted pre-IFRS16 EBITDA 46.6 40.7 87.3 92.6
Pre-IFRS16 net debt leverage - - 1.8 1.9
Return on capital employed ('ROCE')
ROCE is defined as adjusted EBITA divided by shareholders' funds plus net
debt.
Unaudited Unaudited Unaudited Audited year ended December 2023
six months ended June 2024
six months ended December 2023
12 months ended June 2024 £m
£'m £'m £'m
Adjusted EBITA 34.8 29.6 64.4 72.4
Shareholders' funds - - 661.7 641.3
Net debt - - 183.0 217.6
Capital employed - - 844.7 858.9
ROCE - - 7.6% 8.4%
Adjusted operating cash flow conversion
Adjusted operating cash flow conversion is the ratio of adjusted operating
cash flow to adjusted EBITDA (on an annualised basis) and is calculated as set
out below:
Unaudited Unaudited Unaudited Audited year ended December 2023
six months ended June 2024
six months ended December 2023
12 months ended June 2024 £m
£'m £'m £'m
Net cash flow from operating activities 25.7 53.9 79.6 77.7
Adjusting items paid 3.4 3.9 7.3 5.5
Net financial expenses paid 4.8 9.7 14.5 16.5
Taxation paid 2.3 2.2 4.5 10.4
Adjusted operating cash flow 36.2 69.7 105.9 110.1
Adjusted EBITDA 50.6 44.8 95.4 103.6
Operating cash flow conversion 111% 106%
22. 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 high and persistent levels of cost inflation and an uncertain
outlook. In an addition to the macro-economic environment, the key risks for
the Group are cyber security, competitor activity and an increased focus in
climate change and other ESG related issues. In all these cases, specific
assessments continue to be reviewed, certain new operating procedures have
been implemented and mitigating controls continue to be reviewed as
appropriate. A summary of these risks is set out below.
· Macro-economic uncertainty - 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, changes in interest rates, the increasing impact
of wider geo-political factors (including the conflict in Ukraine and the
Middle East) and volatility in world markets. 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 response to
macro-economic uncertainty has been a major focus during the period including
continuing to control costs and working capital tightly whilst maintaining
flexibility to increase production when markets start to recover.
· Cyber security - the risk of a cyber security attack continues to increase
with more incidents being reported in UK businesses. In response, the Group
has a risk-based approach to the continued development of our cyber security
controls, including immutable back-ups, alongside procuring cyber insurance
for the Marshalls businesses.
· Competitor activity - It has continued to be more challenging to recover input
cost inflation through higher selling prices due to weaker demand levels
resulting in heightened competition for volumes in the marketplace and not all
input costs were covered by price increases in the first half of 2024. In
order to protect profitability, the Group is focusing on controlling its cost
base and simplifying processes with the aim of being easier to deal with
whilst continuing to invest in its brands, specification selling and new
product development.
· Climate change and other ESG issues - to ensure the effective management of
all relevant risks and opportunities. The Group remains committed to full
transparency for all stakeholders and the Group's sustainability objectives
remain core to the Group's business model and strategy. The Group employs
experienced, dedicated staff to support our ESG agenda.
The other principal risks and uncertainties that could impact the business for
the remainder of the current financial year are those set out in the 2023
Annual Report and Accounts on pages 55 to 61. 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 cyber security and information
technology, 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.
Responsibility Statement
The following statement is given by each of the directors, namely Vanda Murray
OBE, Chair; Simon Bourne, Chief Commercial Officer; Angela Bromfield,
Non-executive Director; Matt Pullen, Chief Executive; Avis Darzins,
Non-Executive Director; Diana Houghton, Non-executive Director; Justin
Lockwood, Chief Financial Officer; and Graham Prothero, Senior Non-executive
Director.
The Directors confirm to the best of their knowledge:
· The Condensed Consolidated Half Year Financial Statements have been prepared
in accordance with IAS 34 "Interim Financial Reporting" as contained in UK
adopted IFRS, give a true and fair view of the assets, liabilities, financial
position and profit and loss account of the issuer as required by DTR 4.2.4R
· The Half Year Report includes a fair review of the information required under
DTR 4.2.7R (indication of important events during the six months and
description of the principal risks and uncertainties for the remaining six
months of the year); and
· The Half Year Report includes a fair review of the information required by DTR
4.2.8 (disclosure related parties' transactions and changes therein).
Board members
As at 30 June 2024, the Group's Board members were as follows:
Vanda Murray OBE Chair
Simon Bourne Chief Commercial Officer
Angela Bromfield Non-Executive Director
Matt Pullen Chief Executive
Avis Darzins Non-Executive Director
Diana Houghton Non-Executive Director
Justin Lockwood Chief Financial Officer
Graham Prothero Senior Non-Executive Director
The responsibilities of the Directors during their period of service were as
set out on page 106 of the 2023 Annual Report.
By order of the Board
Shiv Sibal
Group Company Secretary
12 August 2024
Independent Review Report to Marshalls plc
Conclusion
We have been engaged by the Company to review the condensed set of Financial
Statements in the Half Year Financial Report for the six months ended 30 June
2024 which comprises the Income Statement, the Balance Sheet, the Statement of
Changes in Equity, the Cash Flow Statement and related Notes 1 to 22.
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of Financial Statements in the Half-Year
Financial Report for the six months ended 30 June 2024 is not prepared, in all
material respects, in accordance with United Kingdom adopted International
Accounting Standard 34 and the Disclosure Guidance and Transparency Rules of
the United Kingdom's Financial Conduct Authority.
Basis for Conclusion
We conducted our review in accordance with International Standard on Review
Engagements (UK) 2410 "Review of Interim Financial Information Performed by
the Independent Auditor of the Entity" issued by the Financial Reporting
Council for use in the United Kingdom (ISRE (UK) 2410). A review of interim
financial information consists of making enquiries, primarily of persons
responsible for financial and accounting matters, and applying analytical and
other review procedures. A review is substantially less in scope than an audit
conducted in accordance with International Standards on Auditing (UK) and
consequently does not enable us to obtain assurance that we would become aware
of all significant matters that might be identified in an audit. Accordingly,
we do not express an audit opinion.
As disclosed in Note 1, the annual Financial Statements of the Group are
prepared in accordance with United Kingdom adopted International Accounting
Standards. The condensed set of Financial Statements included in this
Half-Year Financial Report has been prepared in accordance with United Kingdom
adopted International Accounting Standard 34, "Interim Financial Reporting".
Conclusion Relating to Going Concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis for Conclusion section of this report,
nothing has come to our attention to suggest that the Directors have
inappropriately adopted the going concern basis of accounting or that the
Directors have identified material uncertainties relating to going concern
that are not appropriately disclosed.
This conclusion is based on the review procedures performed in accordance with
ISRE (UK) 2410; however future events or conditions may cause the entity to
cease to continue as a going concern.
Responsibilities of the Directors
The Directors are responsible for preparing the Half-Year Financial Report in
accordance with the Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
In preparing the Half-Year Financial Report, the Directors are responsible for
assessing the Group's ability to continue as a going concern, disclosing as
applicable, matters related to going concern and using the going concern basis
of accounting unless the Directors either intend to liquidate the company or
to cease operations, or have no realistic alternative but to do so.
Auditor's Responsibilities for the review of the financial information
In reviewing the Half-Year Financial Report, we are responsible for expressing
to the Group a conclusion on the condensed set of Financial Statements in the
Half-Year Financial Report. Our conclusion, including our Conclusion Relating
to Going Concern, are based on procedures that are less extensive than audit
procedures, as described in the Basis for Conclusion paragraph of this report.
Use of our report
This report is made solely to the Company in accordance with ISRE (UK) 2410.
Our work has been undertaken so that we might state to the Company those
matters we are required to state to it in an independent review report and for
no other purpose. To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the Company, for our review work,
for this report, or for the conclusions we have formed.
Deloitte LLP
Statutory Auditor
Leeds, United Kingdom
12 August 2024
Shareholder Information
Financial calendar
Interim dividend for the year ending December 2024 Payable 2 December 2024
Results for the year ending December 2024 Announcement March 2025
Report and accounts for the year ending December 2024 April 2025
Annual General Meeting May 2025
Registrars
All administrative enquiries relating to shareholdings should, in the first
instance, be directed to Computershare Investor Services PLC, PO Box 82, The
Pavilions, Bridgwater Road, Bristol BS99 6ZZ (telephone: 0870 707 1134) and
should clearly state the registered shareholder's name and address.
Dividend mandate
Any shareholder wishing dividends to be paid directly into a bank or building
society should contact the Registrars for a dividend mandate form. Dividends
paid in this way will be paid through the Bankers' Automated Clearing System
("BACS").
Website
The Group has a website that gives information on the Group and its products
and provides details of significant Group announcements. The address is
www.marshalls.co.uk (http://www.marshalls.co.uk) .
Cautionary Statement
This Half Year Financial Report contains certain forward-looking statements
with respect to the financial condition, results, operations and business of
Marshalls plc. These statements and forecasts involve risk and uncertainty
because they relate to events and depend upon circumstances that will occur in
the future. There are a number of factors that could cause actual results or
developments to differ materially from those expressed or implied by these
forward-looking statements and forecasts. Nothing in this Half Year Financial
Report 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 Half Year Financial Report 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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