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Marshalls PLC - Annual Financial Report

Marshalls plc, the specialist Landscape Products Group, announces its full year results for the year ended 31 December 2018.


Financial Highlights


       Year ended

31 December


       Year ended

31 December
















Operating profit




Profit before tax





Basic EPS





Total dividends - ordinary and supplementary




Final ordinary dividend - recommended

Supplementary dividend - recommended


Return on capital employed ("ROCE")


Net debt
















up 110

basis points



·      Revenue up 14% to £491.0 million (2017: £430.2 million)

·      Profit before tax up 21% to £62.9 million (2017: £52.1 million)

·      ROCE improved 110 basis points to 21.9% (2017: 20.8%) and on a like-for-like basis (excluding the acquisition of Edenhall) ROCE was 23.3% (2017: 24.8%)

·      EPS up 22% to 26.29 pence (2017: 21.52 pence)

·      Strong cash generation has continued with Group operating cash flow at 92% of EBITDA

·   Net debt of £37.4 million (2017: £24.3 million) reflects cash outflow of £16.4 million relating to the Edenhall acquisition

·      Final ordinary dividend increased by 18% to 8.00 pence (2017: 6.80 pence) per share

·     Supplementary dividend of 4.00 pence (2017: 4.00 pence) per share, reflecting better than expected year end debt levels

·      Strong trading start to 2019 - sales up 16% including Edenhall (up 8% underlying) in first 2 months


Delivering our strategic growth objectives:

·      EBITDA growth continues alongside improved ROCE, strong cash flows and a strengthened brand

·      Self help programme well advanced and delivering efficiency gains

·      Organic capital investment continuing strongly

·      Research and development expenditure continues to be increased

·      Focus on innovation, new product development and service to drive sales growth

·      Focus on increasing profitability of the emerging UK businesses continues

·      Wide-ranging digital strategy gaining momentum and continuing to drive real benefits across the business

·      Integrating CPM and Edenhall and continue to target selective bolt-on acquisitions

·      Maintain a 2 times dividend cover policy

Group Results

Group revenue for the year ended 31 December 2018 was up 14 per cent at £491.0 million (2017: £430.2 million). This is a very positive result given the first 4 months of the year were affected by severe weather conditions. Revenue growth in the second half of the year was particularly strong at 17 per cent.

Sales in the Domestic end market, which represented approximately 29 per cent of Group sales, continue to outperform CPA forecasts and were up 3 per cent compared with the prior year period. Whilst the first half of the year was particularly affected by the severe weather, revenue growth in the second half of the year was up 7 per cent against the prior period. The survey of domestic installers at the end of February 2019 revealed order books of 10.0 weeks (2018: 10.8 weeks) which compared with 10.8 weeks at the end of October 2018.

Sales in the Public Sector and Commercial end market, which represented approximately 66 per cent of Group sales, were up 20 per cent compared with 2017. This included a full year contribution from CPM.

The core Commercial and Domestic businesses continue to deliver benefits from operational efficiency improvements. The strong performance of our Landscape Protection business in the second half of the year and the growth in the sustainable profitability of our emerging UK businesses remain a key part of the Group's strategy. The organic growth of protective security street furniture continues with strong focus on new product development and new target markets.

International revenue grew by 4 per cent during 2018 and represents approximately 5 per cent of Group sales. Marshalls has made continued progress in developing the International business and its trading performance has improved in line with revenue growth.

Profit before tax increased by 21 per cent to £62.9 million (2017: £52.1 million) and EBITDA increased by 19 per cent to £80.8 million (2017: £67.9 million). Basic EPS was 26.29 pence (2017: 21.52 pence), an increase of 22 per cent.

ROCE remained strong and, notwithstanding the acquisition of Edenhall in December 2018, was 21.9 per cent (2017: 20.8 per cent), on a reported basis, at 31 December 2018. On a like-for-like basis (excluding the acquisition of Edenhall), ROCE was 23.3 per cent (2017: 24.8 per cent). Capital employed increased by 16.1 per cent to £304.1 million (2017: £261.9 million) following the acquisition of Edenhall. The consistently high ROCE reflects the Group's focus on capital structure and the tight control and management of inventory and monetary working capital.

Net finance costs were £1.9 million (2017: £1.4 million) and interest was covered 34.1 times (2017: 38.5 times). Interest charges on bank loans totalled £1.4 million (2017: £1.0 million) and, including scheme administration costs, there was an IAS 19 notional interest charge of £0.5 million (2017: £0.4 million) in relation to the Group's Pension Scheme. The IAS 19 notional interest includes interest on obligations under the defined benefit section of the Marshalls plc Pension Scheme, net of the expected return on Scheme assets.

The effective tax rate was 18.0 per cent (2017: 19.1 per cent). The Group paid £9.9 million (2017: £10.5 million) of corporation tax during the year. Deferred tax of £1.7 million in relation to the actuarial gain arising on the defined benefit Pension Scheme in the year has been taken to the Consolidated Statement of Comprehensive Income.

For the fifth year running, Marshalls has been awarded the Fair Tax Mark which recognises social responsibility and transparency in a company's tax affairs. The Group's tax approach has long been closely aligned with the Fair Tax Mark's objectives and this is supported by the Group's tax strategy and fully transparent tax disclosures. Taking into account not only corporation tax paid but also the PAYE and NI paid on our employee wages, aggregate levy, VAT, fuel duty and business rates Marshalls has funded total taxation receipts to the UK economy of £108 million during 2018.

Capital discipline remains a key priority for the Board and the Group's strong cash generation has continued in the year. Operating cash flow was 92 per cent of EBITDA. Net debt at 31 December 2018 of £37.4 million (2017: £24.3 million) was better than expected, even after the total cash outflow of £16.4 million in connection with the acquisition of Edenhall.

Acquisition of Edenhall

As previously announced, the Group acquired Edenhall Holdings Limited on 11 December 2018 for an initial cash consideration of £16.4 million including the take on of £4.7 million of existing Edenhall debt. The acquisition of Edenhall is in line with our stated Group strategy of expanding into adjacent building products related to New Build Housing. This is a strategic focus for Marshalls. Edenhall is a concrete brick manufacturer capable of providing a spectrum of colours, shades and textures to meet any specification requirements for facing bricks and specials. The acquisition will enable us to offer customers a broader product choice. The combination of Marshalls and Edenhall will build our specification ability for both brands and will also create leverage for our existing business in Mortars and Screeds. Trading since completion has been strong and integration is on track with our expectations.


The Board is recommending a final dividend of 8.00 pence per share (2017: 6.80 pence per share) which, together with the interim dividend of 4.00 pence per share (2017: 3.40 pence per share), makes a total ordinary dividend of 12.00 pence per share (2017: 10.20 pence per share), an increase of 18 per cent for the year.

The Board is also recommending a supplementary dividend of 4.00 pence per share for 2018 (2017: 4.00 pence per share). The payment of a discretionary supplementary dividend is in line with the Board's objective of maintaining an efficient capital structure whilst retaining capacity to invest in further growth opportunities. The Group's cash flows remain strong and permit us to recommend and maintain a supplementary dividend of 4.00 pence. The level of supplementary dividend reflects a better than expected year end debt position and this year provides increased total returns for shareholders whilst recognising the increased political and economic uncertainties caused by the prolonged Brexit negotiations.  The Board will continue to adhere to the Group's capital allocation policy and the Group's policy of rewarding shareholders on the basis of maintaining a 2 times dividend cover.


The Group delivered a strong result in 2018 and continues to outperform the Construction Products Association's ("CPA") growth figures, despite ongoing macro-economic and Brexit uncertainty. The CPA's recent Winter Forecast predicted a decrease in UK market volumes of 0.2 per cent in 2018, followed by an increase of 0.3 per cent in 2019. However, our recent trading has been strong and the underlying indicators in the New Build Housing, Road, Rail and Water Management markets remain supportive to our growth strategy and plans.

Good progress has been made during the year, notably, the successful integration of CPM and the ongoing self help programme to drive organic growth and these have been enhanced by the acquisition of Edenhall. The Group's focus remains the delivery of long-term sustainable growth, whilst maintaining a strong balance sheet and a flexible capital structure.