Last checked at 31 Mar 2017 15:44
31 March 2017
Marshalls plc
Annual Report 2016 and Notice of 2017 Annual General Meeting
The Company announces that it has made available its full Annual Report for the year ended 31 December 2016 on the Company's website at www.marshalls.co.uk.
Copies of the documents listed below will be mailed to shareholders on 6 April 2017:
1. Annual Report 2016
2. Notice of 2017 Annual General Meeting
3. Form of Proxy for the 2017 Annual General Meeting
Following mailing to shareholders, a copy of each of the above documents will be submitted to the UK Listing Authority via the National Storage Mechanism and will be available for inspection at www.morningstar.co.uk/uk/NSM.
These documents will also be accessible via the Company's website at www.marshalls.co.uk.
Reference is made to RNS announcement number 4794Z published on 15 March 2017 (Final Results). In addition to the information in that announcement, in accordance with DTR 6.3.5(2)(b), we also set out below the following extracts from the Annual Report 2016 in full text form:-
=Statement of Directors' Responsibilities;
=Principal Risks
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Statement of Directors' Responsibilities in respect of the Annual Report and the Financial Statements
The Directors are responsible for preparing the Annual Report and the Group and Parent Company Financial Statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare Group and Parent Company Financial Statements for each financial year. Under that law they are required to prepare the Group Financial Statements in accordance with IFRSs as adopted by the European Union and Article 4 of the IAS Regulation, and have elected to prepare the Parent Company Financial Statements in accordance with UK Accounting Standards, including FRS 101 "Reduced Disclosure Framework".
Under company law the Directors must not approve the Financial Statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and Parent Company and of their profit or loss for that period. In preparing each of the Group and Parent Company Financial Statements, the Directors are required to:
· select suitable accounting policies and then apply them consistently;
· make judgements and accounting estimates that are reasonable and prudent;
· for the Group Financial Statements, state whether they have been prepared in accordance with IFRSs as adopted by the EU;
· for the Parent Company Financial Statements, state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the Parent Company Financial Statements; and
· prepare the Financial Statements on the going concern basis unless it is inappropriate to presume that the Group and the Parent Company will continue in business.
In preparing the Group Financial Statements, IAS 1 requires that Directors:
· properly select and apply accounting policies;
· present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;
· provide additional disclosures when compliance with the specific requirements in IFRSs are insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entity's financial position and financial performance; and
· make an assessment of the Company's ability to continue as a going concern.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Parent Company's transactions and disclose with reasonable accuracy, at any time, the financial position of the Parent Company and enable them to ensure that its Financial Statements comply with the Companies Act 2006. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities.
Under applicable law and regulations, the Directors are also responsible for preparing a Strategic Report, Directors' Report, Directors' Remuneration Report and Corporate Governance Statement that comply with that law and those regulations.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
The Directors who held office at the date of approval of this Directors' Report and whose names and functions are listed on pages 34 and 35 of the Annual Report 2016 confirm that, to the best of each of their knowledge:
· the Financial Statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit of the Company and the undertakings included in the consolidation taken as a whole;
· the Strategic Report contained in this Annual Report includes a fair review of the development and performance of the business and the position of the Company and the Group taken as a whole, together with a description of the principal risks and uncertainties that they face; and
· the Annual Report and Financial Statements, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Group's position and performance, business model and strategy.
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Principal Risks
Process
There is a formal ongoing process to identify, assess and analyse risks and those of a potentially significant nature are included in the Group Risk Register. The conclusion of the Group's internal auditor, KPMG, is that the process continues to be a robust mechanism for monitoring and controlling the Group's principal risks.
The Group Risk Register is reviewed and updated at least every 6 months and the overall process is the subject of regular review. Risks are recorded with a full analysis and risk owners are nominated who have authority and responsibility for assessing and managing the risk. All risks are aligned with the Group's strategic objectives and each risk is analysed for impact and probability to determine exposure and impact to the business and the determination of a "gross risk score" enables risk exposure to be prioritised. External risks include the weather, political and economic conditions, the effect of legislation or other regulatory actions, the actions of competitors, foreign exchange, raw material prices and pension funding. Internal risks include investment in new products, new business strategies and acquisitions.
The Group seeks to mitigate exposure to all forms of strategic, financial and operational risk, both external and internal. The effectiveness of key mitigating controls is continually monitored and such controls are subjected to internal audit and periodic testing in order to provide independent verification where this is deemed appropriate. The effectiveness and impact of key controls are evaluated and this is used to determine a "net risk score" for each risk. The process is used to develop action plans that are used to manage, or respond to, the risks and these are monitored and reviewed on a regular basis by the Group's Audit Committee.
Principal risks and uncertainties
The Directors have undertaken a robust, systematic assessment of the Group's principal risks. These have been considered within the timeframe of 3 years, which aligns with our Viability Statement above.
Nature of risk | Potential impact | Mitigating factors | Change in risk in the year |
Macro-economic and political The Group is dependent on the level of activity in its end markets. Accordingly, it is susceptible to economic downturn and the impact of Government policy. | Increased macro-economic uncertainty could lead to lower activity levels which could reduce sales and production volumes and therefore have an adverse effect on the Group's financial results. The impact of exchange rate fluctuations could also have an adverse impact on material costs. | The Group closely monitors trends and lead indicators, invests in market research and is an active member of the CPA. The Group benefits from the diversity of its business and end markets. The Group focuses on sales opportunities and strategic growth initiatives, together with quality, service and its supply chain. The Group focuses on its supplier relationships, flexible contracts and the use of hedging instruments. | Given the perception of increased global economic uncertainty, this risk has increased and this is reflected in wider economic forecasts.
There continues to be growth potential in certain focus areas, eg. Rail, Water Management and Street Furniture and forward indicators in the core business remain positive.
The economic outlook for the Eurozone remains difficult, although proactive development of the product range continues to be positive.
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Weather The Group is exposed to the impact of prolonged periods of bad weather.
| Adverse working conditions could give rise to disruption and delays that might reduce short-term activity levels. This could reduce sales and production volumes and therefore have an adverse effect on the Group's financial results.
| The Group has a continuing focus on new product development, including landscape water management. The Group is developing its internal flooring offer and International strategy in order to diversify its activities. The development of the Group's Water Management business is a significant opportunity. | Weather conditions are beyond the Group's control. |
Cyber security risks Inadequate controls and procedures over the protection of intellectual property, sensitive employee information and market influencing data. The failure to improve controls against cyber security risk quickly enough, given the rapid pace of change and the continuing introduction of new threats. | Risk of data loss causing financial and reputational risk. | Use of IT security policies. The undertaking of regular cyber security risk audits by specialists and the quick introduction of mitigation controls and other recommended procedure updates. Sensitive data is currently restricted to selected senior and experienced employees who are used to handling such data. Where sensitive data is made available to third parties it is done under confidentiality agreements with reputable suppliers.
| This remains a high profile area and considerale focus is being given to promoting awareness of IT security policies. Appropriate tools and training procedures are in place to protect sensitive data when stored and transmitted between parties (e.g. encryption of hard drives, restricted USB devices, secure data transmission mechanisms and third party security audits). |
Customers The UK business has a number of key customers, in particular the national merchants. This is partly as a result of the consolidated nature of this market. | The loss of a significant customer may give rise to a significant adverse effect on the Group's financial results. | The Group focuses on brand and new product development, quality and customer service improvement. The Group maintains a national network of manufacturing and distribution sites. The Group undertakes ongoing reviews of trading policies and relationships and maintains constant communication with customers. | Although the underlying risk continues, the effective management of key relationships and the ongoing diversification of the business are serving to mitigate the risk. |
Competitor activity The Group has a number of existing competitors who compete on range, price, quality and service. Potential new low cost competitors may be attracted into the market through increased demand for imported natural stone products. | The increased competition could reduce volumes and margins on manufactured and traded products. | The Group has unique selling points that differentiate the Marshalls branded offer. The Group focuses on quality, service, reliability and ethical standards that differentiate Marshalls from competitor products. The Group continues to have the lowest cost to market. The Group has a continuing focus on new product development.
| The more uncertain market environment has not led to any significant changes in competitive pressure.
Although there is continuing demand for imported natural stone products, the fall in the value of Sterling during 2016 has arguable reduced the competitive risk.
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Threat from new technologies and new business models
Reduction in demand for traditional products. Risk of new competitors and new substitute products appearing. Failure to react to market developments.
| The increased competition could reduce volumes and margins on traditional products. | Good market intelligence. Flexible business strategy able to embrace new technologies. Significant focus on research and development and new products. Development of a digital strategy. | The ongoing diversification of the business, the continued development of the Marshalls' brand and the focus on new products and greater manufacturing efficiency continue to mitigate the risk. |
Cost and availability of raw materials The Group is susceptible to significant increases in the price of raw materials, utilities, fuel oil, haulage costs and decreases in vehicle availability.
As demand increases, the Group is potentially more exposed to the risk of temporary raw material shortages. | The increased costs could reduce margins and may be further impacted in the event of imbalances in the mix of regional activity.
The risk of market demand exceeding raw material supply could lead to inefficient production, which could reduce margins. | The Group benefits from the diversity of its business and end markets. The Group focuses on its supplier relationships, flexible contracts and the use of hedging instruments. The Group utilises sales pricing and purchasing policies designed to mitigate the risks. The Group uses specialist delivery vehicles. | Cost inflation remains a risk as demand for raw materials increases against a backdrop of increased economic uncertainty. All importers are faced with the same issues. The risk of temporary shortages is mitigated by proactive supply chain management and the use of alternative suppliers.
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Environmental The impact of the "Environmental Protocol" leads to the need for increasingly expensive processes. An environmental contamination event may lead to a prosecution and to reputational loss. | An incident could lead to disruption to production and to financial penalties as well as a potential negative impact on the Group's reputation. | The Group uses professional specialists covering carbon reduction, water management and biodiversity. The Group focuses on the implementation of ISO standards. The Group and has a formal Group sustainability strategy focusing on impact reduction.
| The Group is unable to predict future changes in environmental laws or policies or the ultimate cost of compliance with such laws or policies. |
Corporate, legal and regulatory The Group may be adversely affected by an unexpected reputational event, e.g. an issue in its ethical supply chain or due to a health and safety incident. | An incident could lead to a disruption to the supply of products for customers and to increased costs as well as a potential negative impact on the Group's reputation.
Significant increases in Athe penalty regime have increased the potential financial impact of health and safety incidents.
| The Group employs compliance procedures, policies and independent audit processes which seek to ensure that local, national and international regulatory and compliance procedures are fully complied with. | The Group has undertaken internal restructuring to provide greater focus for specialist teams and continues to improve compliance procedures within the supply chain.
Health and safety and the potential impact of the Bribery Act continue to be high profile risk areas. These areas are receiving additional management focus, but the impact of the underlying risk has increased.
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Cautionary statement and Directors' liability
This Annual Report 2016 has been prepared for, and only for, the members of the Company, as a body, and no other persons. Neither the Company nor the Directors accept or assume any liability to any person to whom this Annual Report is shown or into whose hands it may come except to the extent that such liability arises and may not be excluded 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 Annual Report contains certain forward-looking statements with respect to the Group's financial condition, results, strategy, plans and objectives. These statements are not forecasts or guarantees of future performance and 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, implied or forecast by these forward-looking statements. All forward-looking statements in this Annual Report are based on information known to the Group as at the date of this Annual Report and the Group has no obligation publicly to update or revise any forward-looking statements, whether as a result of new information or future events. Nothing in this Annual Report should be construed as a profit forecast.
Annual General Meeting
The Notice convening the Annual General Meeting to be held at The Cedar Court Hotel, Ainley Top, Huddersfield HD3 3RH at 11.00 am on Wednesday 10 May 2017 together with explanatory notes on the resolutions to be proposed is contained in a circular to be sent to shareholders on 6 April 2017.
Enquiries:
C E Baxandall, Group Company Secretary, Marshalls plc
Tel: 01422 314777