Marshalls PLC — Earnings Release 2014

Mar 6, 2015

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RNS Number : 7004G

Marshalls PLC

06 March 2015

Preliminary results for the year ended 31 December 2014

Marshalls plc, the specialist Landscape Products Group, announces its full year results

Financial Highlights	Year ended 31 December 2014*	Year ended 31 December 2013	Increase %
Continuing operations:
Revenue	£358.5m	£307.4m	17
EBITDA	£38.5m	£30.2m	27
Operating profit	£25.3m	£16.1m	57
Profit before tax	£22.4m	£13.0m	72
Basic EPS	10.13p	6.94p	46
Basic EPS on total operations	10.13p	7.20p	41
Dividends declared and paid	5.50p	5.25p
Final dividend recommended	4.00p	3.50p	14
ROCE	12.5%	8.1%	↑ 440 basis points
Net debt to EBITDA	0.8 times	1.2 times

* After £2.0m restructuring costs in the Belgium business in 2014

Highlights:

·       Good revenue growth of 17% to £358.5 million (2013: £307.4 million) driven by volume growth of 13%

·       Improvement in operating margins to 7.1% (2013: 5.2%)

·       Strong profit before tax growth of 72% to £22.4 million (2013: £13.0 million) with benefits being delivered from operational  gearing

·      Return on capital employed improved 54% (440 basis points) to 12.5% (2013: 8.1%) due to operational flexibility,  manufacturing efficiency and effective management of working capital

·       EPS from continuing operations up 46% to 10.13p (2013: 6.94p)

·       Final dividend increased by 14% to 4.00p (2013: 3.50p) per share

Current priorities:

·      To increase output to meet growing demand and to deliver benefits from operational gearing

·      To further strengthen the Marshalls brand by focusing on innovation, service and new product development

·      To grow our business both organically and selectively through acquisitions

·      To continue to develop and invest in our strategic growth initiatives, particularly in Rail, Newbuild Housing, Water Management and Street Furniture

·      To develop and grow the International business profitably

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

"2014 has been a strong year for Marshalls with significant revenue and profit growth. Trading conditions remain positive and the Group continues to experience strong order intake and sales growth in all its end markets.

The market outlook remains strong with the CPA's current forecast for construction output standing at 5.3 per cent growth in 2015 and growth of 4.2 per cent, 3.4 per cent and 3.9 per cent in the following 3 years.

2015 has started well with sales in January and February up 13 per cent against the prior year comparatives.  We are planning for further progress in 2015 against a background of continuing favourable market conditions."

Enquiries:

Martyn Coffey	Chief Executive	Marshalls plc	01422 314777
Jack Clarke	Finance Director	Marshalls plc	01422 314777
Jon Coles Simon Maine		Brunswick Group	0207 404 5959

Group Results

Marshalls' revenue, from continuing operations, for the year ended 31 December 2014 was up 17 per cent at £358.5 million (2013: £307.4 million). Revenue for the six months ended 31 December 2014 was up 18 per cent compared with the second half of 2013. This continued growth in the second half has been seen in the Public Sector and Commercial and also the Domestic end markets.

Sales to the Public Sector and Commercial end market, which represent approximately 64 per cent of Group sales, were up 20 per cent for the year, on a continuing basis, compared with 2013.

Sales to the UK Domestic end market, which represent approximately 30 per cent of Group sales, were up 9 per cent compared with the prior year. The survey of domestic installers at the end of February 2015 revealed order books of 9.0 weeks (2014: 9.3 weeks).

Operating profit from continuing operations increased strongly to £25.3 million (2013: £16.1 million). EBITDA from continuing operations increased to £38.5 million (2013: £30.2 million).

International revenue grew by 27 per cent during 2014 and is now almost 6 per cent of Group sales. Activity levels in Belgium have been encouraging despite the subdued market background in mainland Europe. During the second half we have taken action to ensure that the operations in Belgium are better aligned with market opportunities and this has resulted in a charge of £2 million in relation to the restructuring of Marshalls NV.

Return on capital employed has increased markedly to 12.5 per cent (2013: 8.1 per cent).  Capital expenditure investment has increased to £12.0 million from £6.1 million in 2013 and net debt has reduced to £30.5 million (2013: £35.6 million).

Net finance costs were £2.9 million (2013: £3.1 million) and interest was covered 8.8 times (2013: 5.3 times). External charges were £2.8 million and, in addition, there was an IAS 19 notional interest debit of £0.1 million (2013: £0.6 million credit) in relation to the Group's Pension Scheme.

The effective tax rate on continuing operations was 18.7 per cent (2013: 0.5 per cent), benefiting from a further reduction in the rate of corporation tax and a credit arising on the finalisation of prior year tax computations. The effective tax rate in 2013 also benefited from a corporation tax rate reduction and a prior year credit. An additional deferred tax credit of £2.6 million arose in 2013 due to substantively enacted reductions in the rate of corporation tax to 20 per cent by April 2015. The Group paid £4.0 million of corporation tax during the year. Deferred tax of £0.6 million in relation to the actuarial loss arising on the defined benefit pension scheme in the year has been taken to the Consolidated Statement of Comprehensive Income.

Basic EPS from continuing operations was 10.13 pence (2013: 6.94 pence), an increase of 46 per cent. Reported EPS from total operations was 10.13 pence (2013: 7.20 pence).

Operating Performance

Marshalls is a leading, trusted brand with a strong market position and maintains clear values and excellent sustainability and environmental credentials. The Group has maintained its national geographic coverage and retains industry-leading customer service.

Marshalls' operating flexibility has enabled manufacturing output to be increased without significant increase in the Group's cost base and this is delivering benefits from our operational gearing. The Group's underlying operating margin has increased from 5.2 per cent to 7.6 per cent (before restructuring costs) during the year and volume growth of 13 per cent in 2014 has been significantly ahead of Construction Products Association ("CPA") market forecasts.

The Group operates its own concrete production facilities as well as quarries throughout the UK producing paving, walling, masonry and cladding products and is supported by a centrally managed logistics and distribution operation. The structure gives the Group operational flexibility through the optimisation of the production and logistics footprint to provide nationwide lowest cost to market products.

In the UK, the Group has a unique manufacturing network of 13 concrete manufacturing sites with enough capacity to absorb medium term demand and the opportunity for further capacity and capability investment.  The well invested capital equipment provides the ability to manufacture products for both the Public Sector and Commercial and the UK Domestic end markets and this operational flexibility remains a key objective. Manufactured products from this network are combined with ethically sourced natural stone products imported from India, China and Vietnam and are supplied to distributors' depots or, at their request, direct to site.

The Group operates its own fleet of 44-tonne delivery vehicles equipped with crane offloading capability and is in the process of expanding this further in 2015 in order to continue to guarantee continuity of our high service levels, as the construction industry is currently experiencing shortages of both vehicles and drivers.  This manufacturing, sourcing and distribution network enables the Group to supply products to 97 per cent of its customers within a 2 hour drive. The proximity to our customers enables costs to be controlled and unparalleled service levels to be maintained.

There has been a significant performance improvement in our smaller UK businesses during 2014 and they have collectively delivered volume revenue growth of £9.3 million and related profit growth of £2.7 million. These businesses include Street Furniture, Mineral Products and Stone Cladding. Stone Cladding is a particular growth area and Marshalls has been supplying stone for a prestigious office building in the City of London.

Internationally the Group has placed a key geographic focus on northern Europe, North America and the Middle East.  Marshalls now has a sales presence in North America and is supplying natural stone to commercial projects via distribution relationships with a small number of US companies.  The Group continues to supply a number of high profile projects in the Middle East, in particular focusing on driving sales in the United Arab Emirates, Qatar and Saudi Arabia.  In 2014, Marshalls supplied King Abdulaziz International Airport in Saudi Arabia with £1 million of bespoke lighting, as well as paving to the world's largest shopping centre in Kuwait.

Product Innovation

The Group continues to target those parts of the market where higher levels of growth are expected, such as Rail, Newbuild Housing, Water Management and Street Furniture.

In 2014, the Commercial side of the business extended its water management range with a number of innovative new drainage products, including Mono Beany, a market-first concrete combined kerb and drainage product. Marshalls has also continued to develop its range of market-leading permeable paving products.

On the Domestic side there has been a contemporary extension to the Drivesys range of patented driveway products, as well as the launch of Pavesys, the patio version of this product range.  As well as being technically superior, these products are 50 per cent quicker to install assisting installers with lengthy order books.

Marshalls has added a new material to its Domestic range with vitrified paving. As well as being aesthetically pleasing this material is exceptionally hard wearing and has ultra low water absorbency qualities meaning that it will not become discoloured. This product is already proving to be exceptionally popular in northern Europe.

Marshalls has a world class Manufacturing, Innovation and Development team of engineers and technicians which is integrated to provide competitive advantage through combining machinery design and installation with process improvement. This capability and competency is a key component of the Group's success and will be invested in further to accelerate new product development across the business in 2015.

Current Priorities

The Group has a number of current priorities that will grow and develop the business this year and into the future.

The current focus for Marshalls is to maximise the benefits from the improved market conditions in order to generate volume growth and benefit from operational gearing. We have already seen operating margins improve during 2014 and a key objective will be to deliver further improvement in profit margins in all businesses and end markets. We continue to experience strong growth in a number of key areas, for example, Rail, Newbuild Housing, Water Management and Street Furniture.

The operational priorities remain service, quality, design, innovation and a commitment to research and development, sustainability and an integrated product offer.

The Group has continued to focus on innovation and new product development to drive sales growth in areas of particular opportunity and to further strengthen and differentiate the Marshalls brand. The Group intends to invest further resource over the medium term to drive further innovation and new product development. One specific area of opportunity is "intelligent street furniture," which would see the incorporation of new technology into street lighting systems and items such as bollards and bins. The technology facilitates the communication of information; for example, bins that can signal when they need emptying and bollards that can inform pedestrians where to go.

Developing the International market is also a key priority and the Group will continue to invest in its International structures in order to grow this part of the business profitably and to develop opportunities to promote growth.

The Group is well positioned to grow both organically and through acquisition. We will put increasing focus on our growth objectives in 2015 and 2016.

Balance Sheet and Net Debt

Net assets at 31 December 2014 were £181.9 million (2013: £175.4 million).

At 31 December 2014 net debt was £30.5 million (2013: £35.6 million) resulting in gearing of 16.8 per cent (2013: 20.3 per cent). This reduction is due to the operating cash flow impact of improved trading together with a continuation of the close control of inventory and the effective management of working capital. Cash management continues to be a high priority.

The Group has a strong balance sheet with a good range of medium term bank facilities available to fund investment initiatives to generate growth as market conditions improve.

Risk management has been a key focus for the Group's Pension Scheme over recent years and the actions taken by the Group and the Pension Trustee have reduced actuarial volatility and risk. In accordance with the Scheme specific funding and recovery plan, the Group made cash contributions of £4.6 million into the Scheme in the year ended 31 December 2014. The fair value of the Scheme assets at 31 December 2014 was £312.5 million (2013: £258.6 million) and the present value of the Scheme liabilities is £309.1 million (2013: £262.9 million).  This has given rise to an accounting surplus of £3.4 million (2013: £4.3 million deficit) at the balance sheet date.

Dividends

The Group has a progressive dividend policy with the objective of achieving up to 2 times dividend cover over the business cycle. As earnings increase we plan to share the increase between strengthening cover and progressively raising the rate of dividend. Accordingly the Board is recommending a final dividend of 4.00 pence (2013: 3.50 pence) per share which, together with the interim dividend of 2.00 pence (2013: 1.75 pence ) per share, makes a combined dividend of 6.00 pence (2013: 5.25 pence ) per share. This represents dividend cover of 1.7 times (2013: 1.3 times) and an increase in the total dividend for the year of 14 per cent.

Outlook

2014 has been a strong year for Marshalls with significant revenue and profit growth. Trading conditions remain positive and the Group continues to experience strong order intake and sales growth in all its end markets.

The market outlook remains strong with the CPA's current forecast for construction output standing at 5.3 per cent growth in 2015 and growth of 4.2 per cent, 3.4 per cent and 3.9 per cent in the following 3 years.

2015 has started well with sales in January and February up 13 per cent against the prior year comparatives. We are planning for further progress in 2015 against a background of continuing favourable market conditions.

Martyn Coffey

Chief Executive

MARSHALLS PLC

PRELIMINARY ANNOUNCEMENT OF RESULTS

CONSOLIDATED INCOME STATEMENT

FOR THE YEAR ENDED 31 DECEMBER 2014

	Notes	2014 £'000	2013 £'000
Revenue	2	358,516	307,390
Net operating costs	3	(333,211)	(291,300)
Operating profit	2	25,305	16,090
Financial expenses	4	(2,889)	(3,649)
Financial income	4	5	585
Profit before tax	2	22,421	13,026
Income tax expense	5	(4,198)	(67)
Profit for the financial period before post tax profit of   discontinued operations		18,223	12,959
Post tax profit of discontinued operations	6	-	503
Profit for the financial period		18,223	13,462
Profit for the period
Attributable to:
Equity shareholders of the parent		19,857	14,096
Non-controlling interests		(1,634)	(634)
		18,223	13,462
Earnings per share (total operations):
Basic	7	10.13p	7.20p
Diluted	7	9.89p	7.07p
Earnings per share (continuing operations):
Basic	7	10.13p	6.94p
Diluted	7	9.89p	6.82p
Dividend:
Pence per share	8	5.50p	5.25p
Dividends declared	8	10,791	10,292

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 DECEMBER 2014

	2014 £'000	2013 £'000
Profit for the financial period	18,223	13,462
Other comprehensive income / (expense)
Items that will not be reclassified to the Income Statement:
Remeasurements of the net defined benefit liability	3,244	(18,735)
Deferred tax arising	(649)	3,747
Deferred tax on share-based payments	460	176
Corporation tax on share-based payments	332	-
Total items that will not be reclassified to the Income Statement	3,387	(14,812)
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	(3,984)	2,787
Fair value of cash flow hedges transferred to the Income Statement	1,076	(1,447)
Deferred tax arising	582	(286)
Impact of the change in rate of deferred taxation	-	275
Foreign currency translation differences - foreign operations	(75)	(51)
Foreign currency translation differences - non-controlling interests	(186)	45
Total items that are or may be reclassified subsequently to the Income   Statement	(2,587)	1,323
Other comprehensive income / (expense) for period, net of income tax	800	(13,489)
Total comprehensive income / (expense) for the period	19,023	(27)
Attributable to:
Equity shareholders of the parent	20,843	562
Non-controlling interests	(1,820)	(589)
	19,023	(27)

CONSOLIDATED BALANCE SHEET

31 DECEMBER 2014

Assets	Notes		2014 £'000		2013 £'000
Non-current assets
Property, plant and equipment			149,745		154,721
Intangible assets			40,581		41,071
Investment in associates			782		664
Employee benefits	9		3,449		-
Deferred taxation assets			1,394		1,626
195,951		198,082
## Current assets
Inventories			67,323		70,807
Trade and other receivables			32,254		32,373
Cash and cash equivalents			20,320		17,652
			119,897		120,832
Total assets			315,848		318,914
## Liabilities
## Current liabilities
Trade and other payables			63,912		65,882
Corporation tax			4,276		4,802
Interest bearing loans and borrowings			85		3,453
			68,273		74,137
## Non-current liabilities
Interest bearing loans and borrowings			50,715		49,768
Employee benefits	9		-		4,347
Deferred taxation liabilities			14,966		15,230
			65,681		69,345
Total liabilities			133,954		143,482
Net assets			181,894		175,432
Equity
Capital and reserves attributable to equity shareholders of the parent
Called-up share capital			49,845		49,845
Share premium account			22,695		22,695
Own shares			(6,689)		(9,512)
Capital redemption reserve			75,394		75,394
Consolidation reserve			(213,067)		(213,067)
Hedging reserve			(2,488)		(162)
Retained earnings			254,729		246,944
Equity attributable to equity shareholders of the parent			180,419		172,137
Non-controlling interests			1,475		3,295
Total equity			181,894		175,432

CONSOLIDATED CASH FLOW STATEMENT

FOR THE YEAR ENDED 31 DECEMBER 2014

	2014 £'000		2013 £'000
Cash flows from operating activities
Profit for the financial period	18,223		13,462
Income tax expense on continuing operations	4,198		67
Profit on disposal and closure of discontinued operations	-		(272)
Income tax expense on discontinued operations	-		110
Profit before tax on total operations	22,421		13,367
Adjustments for:
Depreciation	11,982		13,455
Amortisation	1,231		938
Share of results of associates	(118)		(14)
Gain on sale of property, plant and equipment	(360)		(131)
Equity settled share-based expenses	2,496		2,353
Financial income and expenses (net)	2,884		3,064
Operating cash flow before changes in working capital and pension scheme   contributions	40,536		33,032
Increase in trade and other receivables	(159)		(2,933)
Decrease in inventories	3,102		2,840
(Decrease) / increase in trade and other payables	(2,656)		5,146
Operational restructuring costs paid	(235)		(870)
Pension scheme contributions	(4,600)		(5,600)
Cash generated from the operations	35,988		31,615
Financial expenses paid	(2,840)		(3,649)
Income tax paid	(4,031)		(842)
Net cash flow from operating activities	29,117		27,124
Cash flows from investing activities
Proceeds from sale of property, plant and equipment	3,077		175
Financial income received	5		9
Net proceeds from disposal of discontinued operations	-		16,999
Acquisition of property, plant and equipment	(11,269)		(5,462)
Acquisition of intangible assets	(741)		(596)
Net cash flow from investing activities	(8,928)		11,125
Cash flows from financing activities
Payments to acquire own shares	(4,266)		-
Net increase / (decrease) in other debt and finance leases	269		(95)
Decrease in borrowings	(2,690)		(21,328)
Equity dividends paid	(10,791)		(10,292)
Net cash flow from financing activities	(17,478)		(31,715)
Net increase in cash and cash equivalents	2,711		6,534
Cash and cash equivalents at beginning of the period	17,652		11,101
Effect of exchange rate fluctuations	(43)		17
Cash and cash equivalents at end of the period	20,320		17,652

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2014

	Attributable to equity holders of the Company
	Share capital	Share premium account	Own shares	Capital redemption reserve	Consolid- ation reserve	Hedging reserve	Retained earnings	Total	Non-con- trolling interests	Total equity
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Current year
At 1 January 2014	49,845	22,695	(9,512)	75,394	(213,067)	(162)	246,944	172,137	3,295	175,432
Total comprehensive   income / (expense) for   the period
Profit for the financial   period attributable to   equity shareholders of   the parent	-	-	-	-	-	-	19,857	19,857	(1,634)	18,223
Other comprehensive   income / (expense)
Foreign currency   translation differences	-	-	-	-	-	-	(75)	(75)	(186)	(261)
Effective portion of   changes in fair value of   cash flow hedges	-	-	-	-	-	(3,984)	-	(3,984)	-	# (3,984)
Net change in fair value of cash flow hedges transferred to the Income Statement	-	-	-	-	-	1,076	-	1,076	-	1,076
Deferred tax arising	-	-	-	-	-	582	-	582	-	582
Defined benefit plan   actuarial gains	-	-	-	-	-	-	3,244	3,244	-	3,244
Deferred tax arising	-	-	-	-	-	-	(649)	(649)	-	(649)
Deferred tax on share-based payments	-	-	-	-	-	-	460	460	-	460
Corporation tax on share-   based payments	-	-	-	-	-	-	332	332	-	332
Total other   comprehensive income / (expense)	-	-	-	-	-	(2,326)	3,312	986	(186)	800
Total comprehensive   income / (expense) for   the period	-	-	-	-	-	(2,326)	23,169	20,843	(1,820)	19,023
Transactions with   owners, recorded   directly in equity
Contributions by and   distributions to   owners
Share-based expenses	-	-	-	-	-	-	2,496	2,496	-	2,496
Dividends to equity   shareholders	-	-	-	-	-	-	(10,791)	(10,791)	-	(10,791)
Purchase of own shares	-	-	(4,266)	-	-	-	-	(4,266)	-	(4,266)
Disposal of own shares	-	-	7,089	-	-	-	(7,089)	-	-	-
	-
Total contributions by   and distributions to   owners	-	-	2,823	-	-	-	(15,384)	(12,561)	-	(12,561)
Total transactions with  owners of the Company	-	-	2,823	-	-	(2,326)	7,785	8,282	(1,820)	6,462
At 31 December 2014	49,845	22,695	(6,689)	75,394	(213,067)	(2,488)	254,729	180,419	1,475	181,894

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2014

	Attributable to equity holders of the Company
	Share capital	Share premium account	Own shares	Capital redemption reserve	Consolid- ation reserve	Hedging reserve	Retained earnings	Total	Non-con- trolling interests	Total equity
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Prior year
At 1 January 2013	49,845	22,695	(9,571)	75,394	(213,067)	(1,216)	255,610	179,690	3,884	183,574
Total comprehensive   income / (expense) for   the period
Profit for the financial   period attributable to   equity shareholders of   the parent	-	-	-	-	-	-	14,096	14,096	(634)	13,462
Other comprehensive   income / (expense)
Foreign currency   translation differences	-	-	-	-	-	-	(51)	(51)	45	(6)
Effective portion of   changes in fair value of   cash flow hedges	-	-	-	-	-	2,787	-	2,787	-	# 2,787
Net change in fair value of cash flow hedges transferred to the Income Statement	-	-	-	-	-	(1,447)	-	(1,447)	-	(1,447)
Deferred tax arising	-	-	-	-	-	(286)	-	(286)	-	(286)
Defined benefit plan   actuarial gains	-	-	-	-	-	-	(18,735)	(18,735)	-	(18,735)
Deferred tax arising	-	-	-	-	-	-	3,747	3,747	-	3,747
Deferred tax on share-based expenses	-	-	-	-	-	-	176	176	-	176
Impact of the change in   rate of deferred taxation	-	-	-	-	-	-	275	275	-	275
Total other   comprehensive income / (expense)	-	-	-	-	-	1,054	(14,588)	(13,534)	45	(13,489)
Total comprehensive   income / (expense) for   the period	-	-	-	-	-	1,054	(492)	562	(589)	(27)
Transactions with   owners, recorded   directly in equity
Contributions by and   distributions to   owners
Share-based expenses	-	-	-	-	-	-	2,177	2,177	-	2,177
Dividends to equity   shareholders	-	-	-	-	-	-	(10,292)	(10,292)	-	(10,292)
Disposal of own shares	-	-	59	-	-	-	(59)	-	-	-
	-
Total contributions by   and distributions to   owners	-	-	59	-	-	-	(8,174)	(8,115)	-	(8,115)
Total transactions with  owners of the Company	-	-	59	-	-	1,054	(8,666)	(7,553)	(589)	(8,142)
At 31 December 2013	49,845	22,695	(9,512)	75,394	(213,067)	(162)	246,944	172,137	3,295	175,432

MARSHALLS PLC

PRELIMINARY ANNOUNCEMENT OF RESULTS

CONSOLIDATED NOTES

FOR THE YEAR ENDED 31 DECEMBER 2014

1    Basis of preparation

Whilst the Financial Information included in this Preliminary Announcement has been prepared on the basis of the requirements of IFRSs in issue, as adopted by the European Union and effective at 31 December 2014, this announcement does not itself contain sufficient information to comply with IFRS.  The Group expects to publish full Consolidated Financial Statements in April 2015.

The Financial Information set out in this Preliminary Announcement does not constitute the Company's Consolidated Financial Statements for the years ended 31 December 2014 or 2013, but is derived from those Financial Statements.  Statutory Financial Statements for 2013 have been delivered to the Registrar of Companies and those for 2014 will be delivered following the Company's Annual General Meeting.  The auditor, KPMG LLP, has reported on those Financial Statements.  The audit reports were unqualified, did not draw attention to any matters by way of emphasis without qualifying the reports and did not contain statements under Section 498(2) or (3) of the Companies Act 2006 in respect of the Financial Statements for 2014 or 2013.

The Consolidated Financial Statements have been prepared in accordance with IFRSs as adopted for use in the EU. The Group has applied all accounting standards and interpretations issued by the IASB and International Financial Reporting Committee relevant to its operations and which are effective in respect of these Financial Statements.

The following new accounting standards and amendments to standards are mandatory and have been adopted for the first time in the year ended 31 December 2014:

IFRS 10 - "Consolidated Financial Statements" and IAS 27 - "Separate Financial Statements", IFRS 11 - "Joint Arrangements" and IAS 28 - "Investments in Associated and Joint Ventures".  These are part of a new suite of standards on consolidation and related standards, replacing the existing accounting for subsidiaries and joint ventures (now joint arrangements) and making limited amendments in relation to associates.

IFRS 12 - "Disclosure of Interest in Other Entities".  This contains the disclosure requirements for entities that have interests in subsidiaries, joint arrangements (i.e. joint operations or joint ventures), associates and/or unconsolidated structured entities.

These standards have not had a material impact on the Consolidated Financial Statements.

Details of the Group's funding position are set out in Note 11 and are subject to normal covenant arrangements.  The Group's on-demand overdraft facility is reviewed on an annual basis and the current arrangements were renewed and signed on 16 July 2014. In the opinion of the Directors there are sufficient unutilised facilities held which mature after 12 months.  The Group's performance is dependent on economic and market conditions, the outlook for which is difficult to predict.  Based on current expectations, the Group's cash forecasts continue to meet half-year and year end bank covenants and there is adequate headroom which is not dependent on facility renewals.  The Directors believe that the Group is well placed to manage its business risks successfully.  Accordingly, they continue to adopt the going concern basis in preparing the Consolidated  Financial Statements.

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

The accounting policies have been applied consistently throughout the Group for the purposes of these Consolidated Financial Statements and are also set out on the Company's website (www.marshalls.co.uk).

The Consolidated Financial Statements are presented in sterling, rounded to the nearest thousand.

The preparation of financial statements in conformity with adopted IFRSs requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised, if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

2     Segmental analysis

Segment revenues and results

	2014			2013
	Landscape Products	Other	Total	Landscape Products	Other	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Total revenue	279,500	83,941	363,441	242,386	69,938	312,324
Inter-segment revenue	(194)	(4,731)	(4,925)	(87)	(4,847)	(4,934)
External revenue	279,306	79,210	358,516	242,299	65,091	307,390
Segment operating profit	36,066	(4,549)*	31,517	25,591	(4,850)	20,741
Unallocated administration   costs			(6,330)			(4,665)
Share of profits of associates			118			14
Operating profit			25,305			16,090
Finance charges (net)			(2,884)			(3,064)
Profit before tax			22,421			13,026
Taxation			(4,198)			(67)
Profit after tax			18,223			12,959

*After charging £1,995,000 in respect of restructuring costs in the Belgium business.

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

Included in "Other" are the Group's Street Furniture, Mineral Products, Stone Cladding and International operations which do not currently meet the IRFS 8 reporting requirements.

The accounting policies of the Landscape Products operating segment are the same as the Group's accounting policies. Segment profit represents the profit earned without allocation of the share of profit of associates and certain central administration costs that are not capable of allocation. Centrally administered overhead costs that relate directly to the reportable segment are included within the segment's results.

Segment assets
	2014	2013
	£'000	£'000
Fixed assets and inventory:
Landscape Products	156,509	163,276
Other	60,559	62,252
Total segment fixed assets and inventory	217,068	225,528
Unallocated assets	98,780	93,386
Consolidated total assets	315,848	318,914

For the purpose of monitoring segment performance and allocating resources between segments the Group's Chief Operating Decision Maker ("CODM") monitors the tangible fixed assets and inventory.  Assets used jointly by reportable segments are not allocated to individual reportable segments.

	Depreciation and amortisation		Fixed asset additions
	2014	2013	2014	2013
	£'000	£'000	£'000	£'000
Landscape Products	9,919	10,467	7,994	3,243
Other	3,294	3,670	4,016	2,815
	13,213	14,137	12,010	6,058

	2014	2013
	£'000	£'000
United Kingdom	337,475	290,855
Rest of the World	21,041	16,535
	358,516	307,390

The Group's revenue is subject to seasonal fluctuations resulting from demand from customers. In particular, demand is higher in the summer months. The Group manages the seasonal impact through the use of a seasonal working capital facility.

3     Net operating costs

	2014	2013
	£'000	£'000
Raw materials and consumables	137,250	117,176
Changes in inventories of finished goods and work in progress	(3,484)	1,470
Personnel costs	93,439	80,549
Depreciation      - owned	11,907	13,041
- leased	75	158
Amortisation of intangible assets	1,231	938
Own work capitalised	(1,473)	(1,071)
Other operating costs	94,910	80,425
International "start-up" costs	-	84
Restructuring costs in Marshalls NV	1,995	-
Operating costs	335,850	292,770
Other operating income	(2,161)	(1,325)
Net gain on asset and property disposals	(360)	(131)
Share of results of associates	(118)	(14)
Net operating costs	333,211	291,300

4     Financial expenses and income

	2014 £'000	2013 £'000
(a)  Financial expenses
Interest expense on defined benefit pension scheme	48	-
Interest expense on bank loans, overdrafts and loan notes	2,835	3,638
Finance lease interest expense	6	11
	2,889	3,649
(b)  Financial income
Expected return on the defined benefit pension scheme	-	576
Interest receivable and similar income	5	9
	5	585

5     Income tax expense

	2014 £'000	2013 £'000
Current tax expense
Current year	5,670	4,251
Adjustments for prior years	(1,834)	(1,642)
	3,836	2,609
Deferred taxation expense
Origination and reversal of temporary  differences:
Current year	(319)	(2,944)
Adjustments for prior years	681	402
Income tax expense in the Consolidated Income Statement (continuing   operations)	4,198	67
Tax on discontinued operations	-	210
Total tax expense	4,198	277

	%	2014 £'000	%	2013 £'000
Reconciliation of effective tax rate
Profit before tax:
Continuing operations	100.0	22,421	100.0	13,026
Tax using domestic corporation tax rate	21.5	4,821	23.3	3,051
Disallowed amortisation of intangible assets	0.1	20	0.3	33
Net income / (expenditure) not taxable	2.3	510	6.4	839
Adjustments for prior years	(5.2)	(1,153)	(9.5)	(1,240)
Impact of the change in the rate of   corporation tax on deferred taxation	-	-	(20.0)	(2,616)
	18.7	4,198	0.5	67

The net amount of deferred taxation (debited) / credited to the Consolidated Statement of Comprehensive Income in the year was £393,000 credit (2013: £3,912,000 credit).

6     Discontinued operations

On 30 April 2013 the Group completed the sale of aggregate quarries to Breedon Aggregates England Limited for cash consideration of £17.5 million. The assets sold comprised quarries solely supplying aggregates, sand and gravel. The Group has retained all of its dimensional stone quarries, some of which produce aggregate as an ancillary product. The disposed quarries were the freehold and leasehold quarries at Clearwell, near Lydney, Gloucestershire, which produces primarily high quality limestone aggregates and the Group's sand and gravel quarries located at Dunsville, near Hatfield, South Yorkshire, Astley Moss in Greater Manchester and Mold in North Wales which operates under the Lloyds Sand and Gravel trading name and the business carried on from these quarries. Also included was an option to develop sand and gravel resources near Saredon, Staffordshire. On 23 August 2013 additional consideration of £1.2 million was received following the satisfactory completion of a post completion condition. This condition had required the commissioning of a sand extraction plant to the satisfaction of the purchaser. The additional consideration, net of attributable costs, gave rise to a post tax profit of discontinued operations of £0.5 million.

	2014	2013
	£'000	£'000
Revenue	-	2,989
Net operating costs	-	(2,648)
Profit before tax	-	341
Income tax expense	-	(110)
Profit after tax	-	231
Profit on disposal and closure of discontinued operations	-	272
Net profit attributable to discontinued operations	-	503
Basic earnings per share (pence)	-	0.26
Diluted earnings per share (pence)	-	0.25

7     Earnings per share

Basic earnings per share from total operations of 10.13 pence (2013: 7.20 pence) per share is calculated by dividing the profit attributable to ordinary shareholders from total operations, after adjusting for non-controlling interests, of £19,857,000 (2013: £14,096,000) by the weighted average number of shares in issue during the period of 196,116,404 (2013: 195,742,757).

Basic earnings per share from continuing operations of 10.13 pence (2013: 6.94 pence) per share is calculated by dividing the profit from continuing operations, after adjusting for non-controlling interests, of £19,857,000 (2013: £13,593,000) by the weighted average number of shares in issue during the year of 196,116,404 (2013: 195,742,757).

Profit attributable to ordinary shareholders

	2014 £'000	2013 £'000
Profit from continuing operations	18,223	12,959
Profit from discontinued operations	-	503
Profit for the financial period	18,223	13,462
Loss attributable to non-controlling interests	1,634	634
Profit attributable to ordinary shareholders	19,857	14,096

Weighted average number of ordinary shares

	2014	2013
	Number	Number
Number of issued ordinary shares (at beginning of the period)	199,378,755	199,378,755
Effect of shares transferred into employee benefit trust	(3,262,351)	(1,210,998)
Effect of treasury shares acquired	-	(2,425,000)
Weighted average number of ordinary shares at end of the period	196,116,404	195,742,757

Diluted earnings per share from total operations of 9.89 pence (2013: 7.07 pence) per share is calculated by dividing the profit from total operations, after adjusting for non-controlling interests, of £19,857,000 (2013: £14,096,000) by the weighted average number of shares in issue during the period of 196,116,404 (2013: 195,742,757) plus potentially dilutive shares of 4,646,375 (2013: 3,635,998) which totals 200,762,779 (2013: 199,378,755).

Diluted earnings per share from continuing operations of 9.89 pence (2013: 6.82 pence) per share is calculated by dividing the profit from continuing operations, after adjusting for non-controlling interests, of £19,857,000 (2013: £13,593,000) by the weighted average number of shares in issue during the period of 196,116,404 (2013: 195,742,757) plus potentially dilutive shares of 4,646,375 (2013: 3,635,998) which totals 200,762,779 (2013: 199,378,755).

Weighted average number of ordinary shares (diluted)

	2014	2013
	Number	Number
Weighted average number of ordinary shares	196,116,404	195,742,757
Potentially dilutive shares	4,646,375	1,210,998
Effect of treasury shares acquired	-	2,425,000
Weighted average number of ordinary shares (diluted)	200,762,779	199,378,755

8     Dividends

After the balance sheet date a dividend of 4.00 pence (2013: 3.50 pence) per qualifying ordinary share was proposed by the Directors. The dividend has not been provided for and there are no income tax consequences. The total dividends proposed in respect of the year are as follows:

		Pence per qualifying	2014	2013
		share	£'000	£'000
2014 final		4.00	7,975
2014 interim		2.00	3,924
		6.00	11,899
2013 final		3.50		6,861
2013 interim		1.75		3,431
		5.25		10,292

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

		Pence per qualifying	2014	2013
		share	£'000	£'000
2014 interim		2.00	3,924
2013 final		3.50	6,867
		5.50	10,791
2013 interim		1.75		3,431
2012 final		3.50		6,861
		5.25		10,292

The final dividend of 4.00 pence per qualifying ordinary share, with a total value of £7,975,000, will be paid on 3 July 2015 to shareholders registered at the close of business on 5 June 2015.

9     Employee benefits

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

The defined benefit section of the Scheme closed to future service accrual with effect from 30 June 2006 and members no longer pay contributions to the defined benefit section. Company contributions after this date are used to fund any deficit in the Scheme and the expenses associated with administering the Scheme, as determined by regular actuarial valuations.

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

The Scheme poses a number of risks to the Company, for example longevity risk, investment risk, interest rate risk and inflation 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 they face. The Trustee's investment strategy incorporates the use of liability driven investments ("LDIs") to minimise sensitivity of the actuarial funding position to movements, interest rates and inflation rates.

The Scheme is subject to regular actuarial valuations, which are usually carried out at intervals of no less than every 3 years. The next actuarial valuation is due to be carried out with an effective date of 5 April 2015. These actuarial valuations are carried out in accordance with the requirements of the Pensions Act 2004 and include deliberate margins for prudence. This contrasts with these accounting disclosures which are determined using best estimate assumptions.

An interim actuarial valuation was carried out as at 5 April 2014. The results of that valuation have been projected to 31 December 2014 by a qualified independent actuary. The figures in the following disclosure were measured using the projected unit method.

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

	2014	2013	2012
	£'000	£'000	£'000
Present value of a Scheme liabilities	(309,067)	(262,900)	(246,573)
Fair value of Scheme assets	312,516	258,553	254,785
Net amount recognised at year end (before any   adjustments for deferred tax)	3,449	(4,347)	8,212

The amounts recognised in Comprehensive Income were:

The current and past service costs, settlement and curtailments, together with the net interest expense for the year are included in the employee benefits expense in the Statement of Comprehensive Income. Re-measurements of the net defined benefit surplus / (liability) are included in Other Comprehensive Income.

	2014	2013
	£'000	£'000
Service cost:
Net interest expense / (credit) recognised in the Consolidated Income   Statement	48	(576)
Remeasurements of the net liability:
Difference between actual and expected investment return	(46,766)	5,108
Loss arising from changes in financial assumptions	44,242	13,437
Loss arising from changes in demographic assumptions	-	987
Experience gain	(720)	(797)
(Credit) / charge recorded in Other Comprehensive Income	(3,244)	18,735
	(3,196)	18,159

The principal actuarial assumptions used were:

	2014	2013
	£'000	£'000
Liability discount rate	3.60%	4.60%
Inflation assumption - RPI	3.10%	3.40%
Inflation assumption - CPI	2.10%	2.40%
Rate of increase in salaries	n/a	n/a
Revaluation of deferred pensions	2.10%	2.40%

Future expected lifetime of current pensioner at age 65:
Male aged 65 at year end	21.9	21.9
Female age 65 at year end	24.2	24.1
Future expected lifetime of future pensioner at age 65:
Male aged 45 at year end	23.3	23.2
Female age 45 at year end	25.7	25.6

10 Analysis of net debt

		1 January 2014		Cash flow		Other changes		31 December 2014
		£'000		£'000		£'000		£'000
Cash at bank and in hand		17,652		2,711		(43)		20,320
Debt due within one year		(3,370)		3,370		-		-
Debt due after one year		(49,627)		(1,536)		856		(50,307)
Finance leases		(224)		(282)		13		(493)
		(35,569)		4,263		826		(30,480)

Reconciliation of Net Cash Flow to Movement in Net Debt

						2014 £'000		2013 £'000
Net increase in cash equivalents						2,711		6,534
Cash outflow from decrease in debt and lease financing						1,552		21,568
Effect of exchange rate fluctuations						826		(128)
Movement in net debt in the period						5,089		27,974
Net debt at 1 January						(35,569)		(63,543)
Net debt at 31 December						(30,480)		(35,569)

11 Borrowing facilities

The total bank borrowing facilities at 31 December 2014 amounted to £125.0 million (2013: £145.0 million) of which £74.7 million (2013: £92.0 million) remained unutilised. There are additional seasonal bank working capital facilities of £20.0 million available between 1 February and 31 August each year. The undrawn facilities available at 31 December 2014, in respect of which all conditions precedent had been met, were as follows:

		2014		2013
		£'000		£'000
Committed:
-      Expiring in more than two years but not more than five years		34,693		50,373
-      Expiring in one year or less		25,000		16,630
Uncommitted:
-      Expiring in one year or less		15,000		25,000
		74,693		92,003

The committed facilities are all revolving credit facilities with interest charged at a variable rate based on LIBOR.

The total borrowing facilities at 31 December 2014 amounted to £125.0 million. This was due to the Group's decision to reduce uncommitted loan facilities by £10.0 million on 16 July 2014 and the refinancing on 21 August 2014 of two existing committed loan facilities totalling in aggregate £50.0 million with extended maturity dates to 2017 and 2018 at newly arranged levels totalling £40.0 million. An additional loan facility of £20.0 million reached maturity on 20 August 2014 and has been refinanced with an extended maturity date to 2019.

	Facility	Cumulative Facility
	£'000	£'000
Committed facilities:
Q3 2019	20,000	20,000
Q3 2018	20,000	40,000
Q3 2017	20,000	60,000
Q3 2016	25,000	85,000
Q3 2015	25,000	110,000
On demand facilities:
Available all year	15,000	125,000
Seasonal (February to August inclusive)	20,000	145,000

12   Principal risks and uncertainties

The principal risks and uncertainties which could impact the Group for the remainder of the current financial year are those detailed in the Group's Annual Report.  These cover the Strategic, Financial and Operational Risks and have not changed during the period.

Strategic risks include those relating to general economic conditions, Government policy, the actions of customers, suppliers and competitors and also weather conditions.  The Group also continues to be subject to various financial risks in relation to access to funding and to the Pension Scheme, principally the volatility of the discount (AA corporate bond) rate, any downturn in the performance of equities and increases in the longevity of members.  The other main financial risks arising from the Group's financial instruments are liquidity risk, interest rate risk, credit risk and foreign currency risk.  Operational risks include those relating to business integration, employees and key relationships. The Group continues to monitor all these risks and pursue policies that take account of, and mitigate, the risks where possible.

13   Annual General Meeting

The Annual General Meeting will be held at The Cedar Court Hotel, Ainley Top, Huddersfield, HD3 3RH at 11.00am on Wednesday 20 May 2015.

The Board

The Directors serving during the year ended 31 December 2014 were as follows:

Andrew Allner	Non-Executive Chairman
Martyn Coffey	Chief Executive
Jack Clarke	Finance Director (appointed 1 October 2014)
Ian Burrell	Finance Director (resigned 1 October 2014)
David Sarti	Chief Operating Officer (resigned 1 December 2014)
Alan Coppin	Senior Independent Director
Mark Edwards	Non-Executive Director
Tim Pile	Non-Executive Director

By order of the Board

Cathy Baxandall

Company Secretary

6 March 2015

Cautionary Statement

This 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 Report should be construed as a profit forecast.

Directors' Liability

Neither the Company nor the Directors accept any liability to any person in relation to this Report except to the extent that such liability could arise under English law.  Accordingly, any liability to a person who has demonstrated reliance on any untrue or misleading statement or omission shall be determined in accordance with section 90A of the Financial Services and Markets Act 2000. 

This information is provided by RNS

The company news service from the London Stock Exchange

END

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