8 Apr 2016 09:23
8 April 2016
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Marshalls plc
Annual Report 2015 and Notice of 2016 Annual General Meeting
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The Company announces that it has published its full Annual Report for the year ended聽31聽December 2015 and Notice of 2016 Annual General Meeting which is to be held at 11.00am on Wednesday 18 May 2016 at The Cedar Court Hotel, Ainley Top, Huddersfield HD3 3RH.
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Copies of the documents listed below have been posted to shareholders:
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1. Annual Report 2015
2. Notice of 2016 Annual General Meeting
3. Form of Proxy for the 2016 Annual General Meeting
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A copy of each of these documents has also been submitted to the UK Listing Authority via the National Storage Mechanism and is available for inspection at www.morningstar.co.uk/uk/NSM.
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These documents are also accessible via the Company's website at www.marshalls.co.uk.
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Reference is made to RNS announcement number 7570R published on 11 March 2016 (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 2015 in full text form:-
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=Statement of Directors' Responsibilities;
=Principal Risks
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Statement of Directors' Responsibilities in respect of the Annual Report and the Financial Statements
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The Directors are responsible for preparing the Annual Report and聽the Group and Parent Company Financial Statements in accordance聽with applicable law and regulations.
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Company law requires the Directors to prepare Group and Parent聽Company Financial Statements for each financial year. Under that聽law they are required to prepare the Group Financial Statements聽in accordance with IFRSs as adopted by the EU and Article 4 of the IAS Regulation,聽and have elected to prepare the Parent Company Financial Statements in accordance with UK Accounting Standards, including聽FRS 101 "Reduced Disclosure Framework".
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Under company law the Directors must not approve the Financial聽Statements unless they are satisfied that they give a true and fair聽view of the state of affairs of the Group and Parent Company and of聽their profit or loss for that period. In preparing each of the Group and聽Parent Company Financial Statements, the Directors are required to:
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路 select suitable accounting policies and then聽apply them consistently;
路 make judgements and estimates that are reasonable聽and prudent;
路 for the Group Financial Statements, state whether they have聽been prepared in accordance with IFRSs as adopted by the EU;
路 for the Parent Company Financial Statements, state whether聽applicable UK Accounting Standards have been followed,聽subject to any material departures disclosed and explained聽in the Parent Company Financial Statements; and
路 prepare the Financial Statements on the going concern basis聽unless it is inappropriate to presume that the Group and the聽Parent Company will continue in business.
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In preparing the Group Financial Statements, IAS 1 requires that Directors:
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路 properly select and apply accounting policies;
路 present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;
路 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
路 make an assessment of the Company's ability to continue as a going concern.
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The Directors are responsible for keeping adequate accounting聽records that are sufficient to show and explain the Parent Company's聽transactions and disclose with reasonable accuracy, at any time, the聽financial position of the Parent Company and enable them to ensure聽that its Financial Statements comply with the Companies Act 2006.
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They have general responsibility for taking such steps as聽are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities.
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Under applicable law and regulations, the Directors are also聽responsible for preparing a Strategic Report, Directors' Report,聽Directors' Remuneration Report and Corporate Governance聽Statement that comply with that law and those regulations.
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The Directors are responsible for the maintenance and integrity of聽the corporate and financial information included on the Company's聽website. Legislation in the UK governing the preparation and聽dissemination of financial statements聽may differ from聽legislation in other jurisdictions.
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The Directors who held聽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 2015 confirm that, to the best of each of their knowledge:
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路 the Financial Statements prepared in accordance with the聽applicable set of accounting standards, give a true and fair view聽of聽the聽assets,聽liabilities,聽financial聽position聽and聽profit聽of聽the聽Company聽and the undertakings included in the consolidation taken as a whole; and
路 the Strategic Report contained in the Annual Report includes a聽fair review of the development and performance of the business聽and the position of the Company and the Group taken as a聽whole, together with a description of the principal risks and聽uncertainties that they face.
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The Directors consider the Annual Report and Financial Statements,聽taken as a whole, to be fair, balanced and understandable and聽provides the information necessary for shareholders to assess the聽Group's position and performance, business model and strategy.
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Principal Risks
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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. During 2015, the Risk Register process has been independently reviewed by KPMG, in its capacity as the Group's internal auditor, and a number of design improvements have been incorporated. The conclusion of this review has been that the process continues to be a robust mechanism for monitoring and controlling the Group's principal risks.
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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 threats from cyber security, new technologies and business models. Internal risks include investment in new products, new business strategies and acquisitions. Environmental and sustainability considerations are also taken into account.
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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.
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Principal risks and uncertainties
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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 (page 23 of the Annual Report).
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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. The availability of credit to the Group's customers is a key determinant of economic activity. | The lower activity levels could reduce sales and production volumes and, therefore, could have an adverse effect on the Group's financial results. | 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. | Economic risk has reduced as economic and sector outlook and growth rates have improved. 聽 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. 聽 The economic outlook for the eurozone continues to be difficult, although proactive development of the product range continues to be positive. 聽 |
Weather The Group is exposed to the impact of prolonged periods of bad weather. 聽 | The lower activity levels could reduce sales and production volumes and, therefore, could 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 developing its International strategy in order to diversify its activities. | Weather conditions are totally beyond the Group's control. |
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. |
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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 brand. 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 improved market outlook has increased demand (relative to available supply) and this has led to a reduction in such competitive pressure. 聽 There is continuing demand for imported natural stone products although Marshalls' brand development and product differentiation continue to mitigate the risk. 聽 |
Threat from new technologies and new business models 聽 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 ogoing diversification of the business and the continued development of the Marshalls' brand 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 vehicle availability. 聽 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. 聽 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. 聽 The improved market outlook has increased demand (relative to available supply) but the risk of temporary shortages has stabilised due to proactive supply chain management and the use of alternative suppliers. 聽 |
IT Infrastructure Disruption to the IT environment could affect the Group's ability to conduct its ongoing operations. | Ineffective procedures could lead to an adverse effect on the Group's financial results. | All IT system development projects are actively and carefully planned with defined governance and control procedures. Regular independent risk and project management audits are undertaken. The Group ensures that industry standards are adopted and disaster recovery plans and procedures exist and are regularly tested. | The continued investment in and maintenance of IT systems across the Group gives rise to good control of this risk. |
Cyber security risks Inadequate controls and procedures over the protection of intellectual property, sensitive employee information and market- influencing data. | Risk of data loss - financial and reputational risk. | Use of IT security policies. Restructured IT department to co-ordinate the stewardship of cyber security risks. 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. | Currently a high profile area and considerable 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 (eg. encryption of hard drives, restricted USB devices, secure data transmission mechanisms and third party security audits). 聽 |
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. 聽 | 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, for example, 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. 聽 Significant increases in the penalty regime have increased the potential financial impact of health and safety incidents. 聽 | 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 extension of the Group's activities into new international markets causes this risk to continue, notwithstanding the additional compliance procedures within the supply chain. 聽 Health and safety and the potential impact of the Bribery Act continue to be high profile risk areas. |
Access to funding The Group continues to require debt funding in order to meet its trading obligations and to grow the business. | Insufficient access to funding could limit the Group's ability to achieve the desired levels of growth. | The Group has significant committed facilities in place with a good spread of medium-term maturities and significant headroom. The Group's policy continues to be to arrange funding ahead of requirements and to maintain sufficient undrawn committed bank facilities. | The improved economic outlook and the Group's reduced gearing have continued to reduce this risk. There is also improved liquidity and increased competition within the banking sector. |
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Cautionary statement and Directors' liability
The Annual Report 2015 has been prepared for, and only for,聽the members of the Company, as a body, and no other persons.
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Neither the Company nor the Directors accept or assume any liability聽to any person to whom this Annual Report is shown or into whose聽hands it may come except to the extent that such liability arises and聽may not be excluded under English law. Accordingly, any liability to a person who has demonstrated reliance on any untrue or misleading聽statement or omission shall be determined in accordance with聽Section 90A of the Financial Services and Markets Act 2000.
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The Annual Report contains certain forward-looking statements with聽respect to the Group's financial condition, results, strategy, plans and聽objectives.聽These statements are not forecasts or guarantees of future聽performance and involve risk and uncertainty because they relate to聽events and depend upon circumstances that will occur in the future.
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There are a number of factors that could cause actual results or聽developments to differ materially聽from those expressed,聽implied or forecast by these forward-looking statements. All forward-looking聽statements in the Annual Report are based on information known聽to the Group as at the date of the Annual Report and the Group has no obligation publicly to update or revise any forward-looking聽statements, whether as a result of new information or future events.
Nothing聽in聽the聽Annual聽Report聽should聽be聽construed聽as聽a聽profit聽forecast.
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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 18 May 2016 together with explanatory notes on the resolutions to be proposed is contained in a circular sent to shareholders on 7 April 2016.
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Enquiries:
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C E Baxandall, Group Company Secretary, Marshalls plc
Tel: 01422 314777
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Marshalls (MSLH)