Strong recovery –
positioned well for
sustainable growth
Marshalls plc Annual Report and Accounts 2020
We do the right things, for the
right reasons, in the right way
This is The Marshalls Way
of doing business
We exist to create better spaces and futures for everyone.
• We lead the market in developing sustainable and innovative products
• We match high performing operations with logistics excellence
• We deliver the best customer experience
• We provide a digital experience that balances the new with the traditional
• We target market opportunities through selective acquisitions
• We recruit the best talent to remain truly competitive
Our purpose is to create better spaces
and futures for everyone: socially,
environmentally and economically
Our mission is to deliver sustainable
growth through a brand that drives
customer specification of innovative
product solutions for the built
environment.
Our strategic goal is to become the UK’s
leading manufacturer of products for the
built environment
Read more on page 6
Read more on page 6
Read more on page 6
Stay up to date with the latest
investor news at marshalls.co.uk
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SYMPHONY® Matte porcelain paving in carbon
On this page
1 Conservation X kerb
2 Marshalls concrete brick
3 Redi Rock
The Group’s Non-financial Information Statement, as
required by the Companies Act 2006, is set out on page 39.
S
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Strategic Report
02 Highlights
04 Marshalls at a Glance
06 5 year Strategy
08 Chair’s Statement
10 Chief Executive’s Statement
12 Q&A with the Chief Executive
13 The Marshalls Way
14 Growth Markets
16 Business Model
18 Our Section 172(1) Statement
18 Stakeholder Engagement
20 Strategy
22 Key Performance Indicators
24 Risk Management and Principal Risks
32 Financial Review
Strategic Report – Environmental
and Social
38 What ESG means to Marshalls
42 Sustainability Pillars
44 Environment
48 Social
51 Health and Safety
Governance
52 Board of Directors
54 Corporate Governance Statement
64 Nomination Committee Report
66 Audit Committee Report
70 Remuneration Committee Report
79 Annual Remuneration Report
90 Directors’ Report – Other
Regulatory Information
92 Statement of Directors’ Responsibilities
94
Independent Auditor’s Report
Financial Statements
101 Consolidated Income Statement
102 Consolidated Statement of
Comprehensive Income
103 Consolidated Balance Sheet
104 Consolidated Cash Flow Statement
105 Consolidated Statement of Changes
in Equity
107 Notes to the Consolidated Financial
Statements
140 Parent Company Statement of
Changes in Equity
141 Company Balance Sheet
142 Notes to the Company
Financial Statements
148 Financial History – Consolidated Group
149 Shareholder Information
Marshalls plc
marshalls.co.uk
1
Highlights
Recent trading continues
to improve
Our continued focus on New
Build Housing, Road, Rail and
Water Management means
we are positioned in the right
parts of the market.
Operational highlights
• Priority given to health and safety throughout the COVID-19 crisis
• Trading has started strongly in 2021 – at the end of February, sales
are up 7% and orders are up 12% compared to the same period
in 2020
• Focus on servicing our customers
• Operational restructuring exercise completed in H1 2020 – increased
manufacturing efficiency and operational flexibility, with fixed costs
reduced by £12 million per annum
• Maintained focus on innovation, ESG priorities, sales opportunities
and sustainable growth over the medium term
• Capital investment of £30 million planned for 2021
Financial highlights
• Progressive growth in sales over the second half of 2020 – sales in
quarter 4 ahead of prior year
• Reinstatement of dividends – final dividend of 4.30 pence
recommended
• Full year revenue of £469.5 million (2019: £541.8 million)
• Strong growth in Domestic sales – growth of 9% in H2 2020
• Increase in International sales of 16%
• Strong balance sheet and a flexible capital structure
• Full repayment of all Government coronavirus assistance
(furlough and deferred VAT)
Results before operational
restructuring costs and
asset impairments*
Revenue
EBITDA
Adjusted operating profit
Profit before tax
Basic EPS
ROCE
Net debt (reported)
Net debt (pre-IFRS 16)
Adjusted operating profit
Operational restructuring
costs and asset impairments
Statutory operating profit
Statutory results
Statutory operating profit
Profit before tax
Basic EPS
Recommended final dividend
2020
£’000
2019
£’000
£469.5m £541.8m
£57.6m £103.9m
£73.7m
£27.2m
£69.9m
£22.5m
29.36p
8.60p
21.4%
8.2%
£60.0m
£75.6m
£18.7m
£26.9m
£73.7m
£27.2m
£(17.8)m
£9.4m
—
£73.7m
£9.4m
£4.7m
1.19p
4.30p
£73.7m
£69.9m
29.36p
—
Note
* Alternative performance measures are used consistently throughout the Annual Report and Accounts. These relate to like-for-like, EBITA, EBITDA, return on capital employed (“ROCE”),
net debt and results before operational restructuring costs and asset impairments. Following the transition to IFRS 16, reference has been made to “pre-IFRS 16” and “reported
basis”, the latter referring to amounts required under IFRS 16. For further details of their purpose, definition and reconciliation to the equivalent statutory measures see Note 1
to the Financial Statements.
2
Marshalls plc
Annual Report and Accounts 2020
Strategic Report year Strategy – Read more on page 6
Capital investment
We are investing more than £30 million
in 2021 to increase capacity for existing
product ranges, build on our sustainable
processes and boost product and digital
innovation. We have a good pipeline of
capital investment projects that will drive
future organic growth.
Product
Conservation X block
in silver grey
Location
Heartlands, Cornwall
In 2021 we will commence construction of a flagship
dual block plant at our St. Ives manufacturing site,
which will be the first facility of this nature in the UK.
This represents a significant capital investment
of approximately £20 million over three years,
which will significantly increase capacity, improve
efficiency, enable multiple secondary finishing
and facilitate the launch of new products.
£30m
Capital investment planned for 2021
Marshalls plc
marshalls.co.uk
3
Strategic report Marshalls at a Glance
The UK’s leading manufacturer
of hard landscaping products
Marshalls is a complete external landscaping,
interior design, paving and flooring products
business, from planning and engineering, to
guidance and delivery.
Where we operate
We have manufacturing plants, quarries
and distribution sites across the UK.
Our unique national network ensures
proximity to customers and an
efficient logistics footprint.
Locations
Marshalls Group
Marshalls Landscape
Mineral Products
CPM
Premier Mortars
Edenhall
Stancliffe Stone
Natural Stone
Marshalls NV
Maltby
Site reopened
We have re-opened our Maltby
site, with a new manufacturing
facility to supply the Marshalls
concrete brick.
Marshalls NV
16% growth in sales in 2020
Manufacturing and trading operation,
based in Rumst, Belgium.
What sets us apart
Growth agenda
Innovation and NPD
Strong market position
Carbon reduction
Digital investment
New product ranges
£12m
over last 4 years
132
launched in the last 2 years
A strategy driven by organic
growth, digital investment and
selective acquisitions.
Read about our strategy
on pages 20 and 21
We continue to focus on
innovation and new product
development, and continue to
invest in digital, manufacturing
and materials technology
capabilities.
Read more about research
and development on
pages 46 and 47
4
Marshalls plc
Annual Report and Accounts 2020
CPA growth forecast
for 2021
14.0%
(2022: 4.9%) (total construction output)
Wide market reach targeting
strong growth areas, e.g. New
Build Housing, Road and Rail,
Infrastructure and Water
Management.
Read more about our
markets on pages 14 and 15
Science Based Targets
initiative commitment set
50% reduction
in the Group’s carbon footprint
(total CO2e including
transport) since 2008
Our sustainability strategy is built
on our vision of creating better
spaces and futures for everyone.
Read more about our ESG
credentials on pages 38 to 51
Strategic Report Growth Markets pages 14 and 15
Business Model pages 16 and 17
Strategy pages 20 and 21
Homeowners
Our markets
Public Sector
and Commercial
International
Marshalls’ Domestic customers range
from DIY enthusiasts to professional
landscapers, driveway installers and
garden designers.
Marshalls specialises in helping
homeowners to create beautiful,
yet practical, outdoor spaces which
families can enjoy for years to come.
In the Public Sector and Commercial end
market, Marshalls satisfies the needs
of a diverse commercial customer base
which spans local authorities, commercial
architects, specifiers, contractors and
housebuilders. We have unrivalled
technical expertise and manufacturing
capability and an enviable product range.
Marshalls’ International operations
comprise a manufacturing site in Belgium
and sales and administration offices in
the USA and China.
International revenue, which also includes
exports from the UK, comprises 7 per cent
of Group sales.
Homeowners revenue
27%
(2019: 26%)
66+
Public Sector and
Commercial revenue
66%
(2019: 69%)
66+
International revenue
7%
(2019: 5%)
66+
Diversified Group
Efficient
manufacturing
network
Domestic revenue growth
in 2020 HY2
Capital investment
planned for 2021
9%
£30m
Serving Public Sector,
Commercial and Domestic end
markets. Wide-ranging mineral
reserves with the “Marshalls
Stone Standard” quality mark.
Well-invested manufacturing
plants with continuing emphasis
on high-quality maintenance,
technology improvements and
reinvestment.
Read about how we are
improving our digital offering
on page 26
Read about our capital
investment on page 3
Strong and efficient
balance sheet
Culture
Net debt: EBITDA
1.3 times
(0.6 times on a pre-IFRS 16
basis)
Strong balance sheet with low
gearing of 26.3 per cent (9.3 per
cent on a pre-IFRS 16 basis).
Read about our balance
sheet on pages 35 to 37
Culture
Fair Tax Mark
accreditation
7 years
Active
apprenticeships
99
The Marshalls Way underpins
our culture with our key
objective of doing business
responsibly. This is embedded
in our Code of Conduct and
relationship with stakeholders.
Read about our sustainability
strategy from page 39
Marshalls plc
marshalls.co.uk
5
Strategic report28
+
6
+
D
28
+
6
+
D
28
+
6
+
D
Our strategic priorities
5 year Strategy
Building on strong foundations
Our 5 year Strategy lays the foundation for achieving our strategic
goal of becoming the UK’s leading manufacturer of products for the
Built Environment. At the heart of the strategy are eight priority areas
for investment and business focus. We believe that these areas provide
significant growth potential for the Group.
OUR PURPOSE
OUR MISSION
Our purpose is to create
better spaces and futures
for everyone: socially,
environmentally and
economically.
Our mission is to deliver sustainable
growth through a brand that
drives customer specification
of innovative product solutions
for the built environment.
OUR
STRATEGIC
GOAL…
is to become the UK’s
leading manufacturer
of products for the
built environment
Strategic
priorities
Brand
preference
for product
specification
Logistics
excellence
Customer
centricity
Sustainable
materials
supply
New product
development
Enabled by
people and talent
development
Digital
transformation
Operational
excellence
Growth in the
emerging businesses
6
Marshalls plc
Annual Report and Accounts 2020
Brand preference for
product specification
We have superior product
knowledge, quality
and performance.
Our objectives
To build relationships and make sure our
products are specified by developers,
builders and architects.
What we have achieved
We have an in-depth understanding of the
customer segments and create demand
through brand and “best in class” customer
experience that in turn drives the
specification of our products.
Logistics
excellence
We put customer wants and
needs first with direct, informed
and professional deliveries.
Our objectives
To deliver logistics excellence with
greener vehicles and new technology
across our full fleet.
What we have achieved
During 2020 we have introduced new
technology and implemented changes
to our processes to ensure that we can
continue to deliver and keep ourselves
and our customers safe.
Strategic Report Strategy pages 20 and 21
Key Performance Indicators pages 22 and 23
Our strategic priorities
Sustainable
materials supply
Operational
excellence
Growth in the emerging
businesses
We source and supply sustainable
materials, products and solutions.
Our objectives
To do business responsibly and ethically,
to address the risk of climate change and
protect the environment.
What we have achieved
We have a procurement process focused
on sourcing ethical and sustainable
materials. We are committed to reducing
the environmental impact of our products,
reducing packaging and the recycling
of water at our sites.
We invest in our manufacturing
facilities and industrial network
and use the best tools, processes
and systems.
We make selective acquisitions
to complement our business and
help us advance into new and
untapped areas.
Our objectives
To deliver operational excellence by
continuously improving how we work
and deliver new ways of thinking.
What we have achieved
We have restructured our network and
re-opened our Maltby site to manufacture
the Marshalls concrete brick. Capital
investment has been £101 million over the
last five years.
Our objectives
To grow our emerging businesses to help
us expand into key growth areas.
What we have achieved
We have restructured the reporting channels to
provide additional focus and have continued
to invest to promote the introduction of new
products and fuel growth.
Customer
centricity
New product
development
Digital
transformation
We balance innovation and
tradition and provide an easy-
to-use service in a complex
and competitive market.
Our objectives
To deliver a market leading customer service
and exceed customer expectations.
What we have achieved
We have an experienced customer service
team co-ordinating functional departments
across the Marshalls Group, including sales,
production, E-commerce and haulage. We
increasingly use IT and digital technology to
improve the user and customer experience.
We deliver market leading
product innovation.
Our objectives
To create new, innovative products that
will drive the market forward.
What we have achieved
We have delivered many new products into
the Domestic and Commercial end markets
over the last five years. Our manufacturing
facilities in South Wales and Maltby now
have capacity to produce 150 million
concrete bricks each year. Compared with
the clay brick alternative, the concrete brick
reduces the CO2 impact over the lifetime
of the brick by approximately 49 per cent.
We are continuing to
invest in digital and
forward-thinking technology.
Our objectives
To provide an end-to-end digital offering and
to pioneer the digital standard for the industry.
What we have achieved
We introduced our E-commerce platform
during 2020. Demand has been strong during
the year and we expect sales to double
during 2021. The E-commerce platform is
creating a cohesive, frictionless user
experience for all customer types.
Marshalls plc
marshalls.co.uk
7
Strategic report Chair’s Statement
Vanda Murray OBE
New objectives for improvement
and growth have been set for
every area of the business
our employees, suppliers and customers have been at the top of
our agenda.
In the second half of the year, the strong sales growth was
better than expected and continued to improve throughout
the period. Our manufacturing sites have been busy since July,
operating health and safety practices which have been, in
many cases, ahead of the recommended guidelines. Our focus
has been to meet the expectations of our customers and all
other stakeholders throughout. Demand remains high and order
books have been strong moving into 2021.
Results
Group revenue for the year ended 31 December 2020 was
£469.5 million (2019: £541.8 million), which represents a decrease of
13 per cent. At the half year point, revenue was down 25 per cent
compared with the prior year period and consequently the full
year result reflects a significant improvement in the second half
of the year. Since the half year, the trend of sales growth has
progressively increased and in the second half of the year sales
were just slightly down against the comparative period for 2019.
Profit before tax was £22.5 million, before operational
restructuring costs and asset impairments of £17.8 million.
Reported profit before tax was £4.7 million (2019: £69.9 million).
EBITDA, before operational restructuring costs and asset
impairments, was £57.6 million (2019: £103.9 million) and earnings
per share, before operational restructuring costs and asset
impairments, was 8.60 pence (2019: 29.36 pence). Reported
earnings per share was 1.19 pence.
Marshalls continues to have strong cash generation, with year-end
net debt, on a pre-IFRS 16 basis, of £26.9 million (2019: £18.7 million).
On a reported basis, net debt was £75.6 million (2019: £60.0 million).
We have repaid all furlough monies and deferred VAT during the
second half of the year.
Dividends
Due to the impact of COVID-19, the Board did not propose
an interim dividend during 2020. However, the payment of
dividends continues to be a key pillar of the Group’s capital
allocation policy.
The Group continues to maintain a progressive dividend policy
with the objective of achieving two 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.
The Board is now proposing a final dividend of 4.30 pence which
compares with earnings per share of 8.60 pence for the year ended
“The Board is committed to
the promotion of strong environmental,
social and governance principles.”
Summary
• Decisive action taken in response to COVID-19
• Health and safety has been our priority
• Order books remain strong moving into 2021
• Commitment to ESG and sustainability
• 50% carbon reduction since 2008 and SBTi
targets set
• Reintroduction of dividends – 2020 dividend
of 4.30 pence recommended
• Maintaining 2 times cover dividend policy
Overview
The last year has seen tremendous challenges for all for us,
both at work and in our personal lives. The reduction in sales
in the second quarter of 2020 was dramatic, both in terms
of quantum and the speed of the decline. Difficult decisions
had to be made and the operational restructuring exercise,
undertaken in the second quarter of 2020, included certain
site closures, and the resulting redundancies covered
approximately 15 per cent of Marshalls’ total workforce.
During this period, your Board took an active role in
responding to the crisis, communicating regularly with the
management team and holding weekly Board meetings.
Throughout the last year, the health, safety and wellbeing of
8
Marshalls plc
Annual Report and Accounts 2020
Strategic Report 31 December 2020 (before exceptional operational restructuring
costs and asset impairments). This represents two times cover.
On the assumption that trading supports this position, the Group
would look to maintain the stated policy of two times cover for the
year ending 31 December 2021. This policy will provide increased
returns for shareholders whilst at the same time recognising an
appropriate degree of caution and stewardship.
consistent with levels required to meet the goals of the Paris
Agreement. Marshalls has committed to reduce Scope 1 and 2
greenhouse gas emissions by 40 per cent per tonne of production
by 2030 from a 2018 base year. For Scope 3, we have also
committed that 73 per cent of our suppliers by emissions,
covering purchase goods and services and upstream transport
and distribution, will have science-based targets by 2024.
Marshalls’ 5 year Strategy
This year we have refreshed our 5 year Strategy which continues
to be supported by our goals and growth objectives which are
set out within the Group’s eight strategic growth pillars. Each
area of the business has a range of improvement plans to drive
growth. These are explained in more detail on pages 6 and 7
and we have now set new objectives for improvement and
growth in every area of the business. The strategy is explained in
more detail throughout this Annual Report and, in particular, in a
Q&A format on pages 12.
The Marshalls Way and responsible business
The Group’s strategy is underpinned by The Marshalls Way which
is fundamental to the Group’s culture and embedded in our desire
to undertake business responsibly. Our Code of Conduct lays out
what we expect from our employees and stakeholders in doing
business the right way. Essentially, The Marshalls Way means
doing the right things, for the right reasons, in the right way.
The Board will continue to focus on culture and people
engagement. Our priorities include work on employee
wellbeing and safety, succession and development
planning and diversity, equality, respect and inclusion.
Janet Ashdown leads the Board’s engagement with the elected
Employee Voice Group which includes employees from all parts
of the Group. This initiative has proved very successful and has
been supported by the “Your Voice” listening initiative. Three full
employee feedback questionnaires have been run during 2020
by our strategic partner, Peakon, focusing on “Life at Marshalls”,
employee wellbeing and our handling of COVID-19. These
initiatives are explained in more detail on pages 48 to 50.
Read more about The Marshalls Way on page 13
Environmental, social and governance
(“ESG”) objectives
The Group is committed to the promotion of strong environmental,
social and governance objectives and this year we have included a
dedicated ESG section within the Annual Report. We have set out
our policies, objectives and approach in relation to all associated
aspects and also explain how we engage with all our stakeholder
groups. We aim to give full consideration to the long-term impact
of all business operations, which means that all our products and
services need to be ethically sourced and sustainable. Marshalls
continues to support the UN Sustainable Development Goals
and we maintain a detailed framework and comprehensive
policies covering the environment, human rights, labour and
governance (anti-corruption). We are pleased that for the
seventh consecutive year Marshalls has been awarded the
Fair Tax Mark accreditation. This recognises social responsibility
and transparency in our tax affairs.
Read more about ESG from pages 38 to 51
We are focused on playing our part in addressing the risk of
climate change and the protection of the environment. The Group
continues to be committed to decarbonisation and we have
aligned all greenhouse gas emission reduction targets to be well
below two per cent emissions scenarios. During 2020, we became
the first company in our sector to have emission reduction targets
approved by the Science Based Targets initiative as being
Governance
We are committed to the highest standards of corporate
governance and we comply with all the provisions of the UK
Corporate Governance Code as outlined in our Corporate
Governance Statement on pages 54 to 63. To ensure a strong
alignment between the interests of management and our
shareholders a large proportion of management’s remuneration
continues to be in shares which must be retained for up to five years.
During the second quarter of the year, the Board and Executive
Management agreed to a 20 per cent reduction in remuneration
and other senior managers also agreed to a 15 per cent reduction.
These amounts, totalling £120,000, have subsequently been
paid to Macmillan Cancer Support and to MIND, which are the
Company’s charities.
The Group’s response to the COVID-19 pandemic has been a
critical feature of 2020. A detailed plan was formulated covering
all aspects of the business including health and safety, working
from home measures, maintenance of IT and financial control,
operational and manufacturing business continuity, liquidity
and scenario planning. The Board was heavily involved with the
development of plans and ongoing monitoring and provided
detailed oversight and governance. Further details of how the
Board exercised governance, and was fully involved with the
ongoing engagement with stakeholders throughout the year,
are set out in a COVID-19 case study on pages 56 and 57.
Our people
Our employees continue to be a major strength of the business
and I would like to thank every member of our diverse and skilled
workforce for their resilience and forbearance in the face of the
many challenges that we have been faced with during the last
year. I have been continually impressed with the way that all our
employees have managed to adapt and we should all be proud
of what has been achieved.
Read more about our people on pages 48 to 50
Outlook
Trading has started strongly in 2021. At the end of February, sales
are up 7 per cent and orders are up 12 per cent compared to the
same period in 2020. The CPA’s winter base case scenario predicts
an increase in UK market volumes of 14.0 per cent in 2021 and 4.9
per cent in 2022. Despite wider market uncertainty, the underlying
indicators in our main growth markets of New Build Housing, Road,
Rail and Water Management remain positive.
Although market demand remains uncertain, we remain focused on
developing future growth opportunities and delivering the strategic
objectives in our 5 year Strategy. Our strategy continues to be
underpinned by strong market positions, focused investment plans
and an established brand. Marshalls’ liquidity is strong and will
support our investment priorities going forward.
Vanda Murray OBE
Chair
Marshalls plc
marshalls.co.uk
9
Strategic report Chief Executive’s Statement
Martyn Coffey
We are well placed to deliver
long-term sustainable growth
Revenue in the second half of the year improved strongly and
has been almost in line with the comparative period in 2019.
Better than expected trading in the final months of the year
has enabled us to repay all the furlough monies (£9.4 million) and
deferred VAT (£11.3 million) and still report a low year-end net debt
figure of £26.9 million, on a pre-IFRS 16 basis. We continue to
maintain a strong balance sheet, supported by a flexible capital
structure, and we maintain significant headroom against our
bank facilities. Recent trading has also exceeded expectations
and continues to improve. Order books remain strong.
2020 trading summary
Group revenue for the year ended 31 December 2020 was
£469.5 million (2019: £541.8 million), which represents a decrease
of 13 per cent. This compares with a decrease in sales of 25 per
cent in the first half of the year.
Sales in the Domestic end market were up 9 per cent in the
six months ended 31 December 2020, compared with the
same period last year, which compares with a decrease of
25 per cent in the first half of the year. For the full year, revenue
was down 9 per cent compared with 2019 and for the year ended
31 December 2020 Domestic sales represented 27 per cent of Group
revenue. The survey of domestic installers at the end of February
2021 revealed order books of 12.2 weeks (2020: 10.7 weeks) which
compared with 12.8 weeks at the end of October 2020. There
has been a strong demand for DIY projects with consumers
spending more time at home and choosing to invest in home
and garden projects. We have seen a trend towards the
“Don’t Move, Improve” part of the Domestic market.
Sales in the Public Sector and Commercial end market were
down 6 per cent in the six months ended 31 December 2020,
compared with 2019, which compares with a decrease of 28
per cent in the first half of the year. For the full year, revenue was
down 17 per cent compared with 2019 and for the year ended
31 December 2020 and represented 66 per cent of Group sales.
International revenue grew by 16 per cent during 2020, supported
by consistently strong sales from Marshalls NV in Belgium, and
now represents approximately 7 per cent of Group sales. We
have continued to develop Marshalls NV’s operating model and
improve efficiency. In 2020 the business became profitable for the
first time and there are further opportunities for improvement.
Operational restructuring costs
In the second quarter of the year, the Group undertook a
restructuring programme covering all parts the business. In total,
around 15 per cent of Marshalls’ workforce left the business and
the closure of manufacturing facilities at Falkirk, Llan and
Livingston was announced along with a number of Premier
“Recent trading continues to improve
and order books remain strong.”
Summary
• Revenue in second half of 2020
improved strongly
• Trading continues to improve
• Operational restructuring programme
complete – reduced fixed cost base
• Full year revenue of £469.5 million
(2019: £541.8 million)
• Commitment to invest - £30 million capital
plan for 2021
• Strong balance sheet, with low debt,
and a flexible capital structure
Introduction
The positive actions taken by the Group in response to
the COVID-19 pandemic have ensured the Group’s much
improved performance in the second half of the year, which
has also seen sales growth at higher rates than was initially
expected. We have prioritised the safety and wellbeing of
our employees and customers and by maintaining robust
health and safety procedures we have ensured that we could
continue operating and delivering to our customers safely.
10
Marshalls plc
Annual Report and Accounts 2020
Strategic Report Mortars sites. The full cost of the restructuring programme has
been £17.8 million and this has been charged to the Income
Statement. These actions are expected to reduce fixed costs by
approximately £12 million in a full year and improve operational
efficiency going forward.
2020 results
EBITDA was £57.6 million (2019: £103.9 million) before operational
restructuring costs and asset impairments of £17.8 million. Operating
profit, before operational restructuring costs and asset
impairments, was £27.2 million (2019: £73.7 million). After operational
restructuring costs and asset impairments the reported profit
before tax for the period was £4.7 million (2019: £69.9 million).
Basic earnings per share, before operational restructuring costs and
asset impairments, was 8.60 pence (2019: 29.36 pence) per share.
Reported earnings per share was 1.19 pence (2019: 29.36 pence)
per share).
Capital discipline remains a key priority and the Group’s
strong cash generation has continued. Reported net debt at
31 December 2020 was £75.6 million (2019: £60.0 million). On a
pre-IFRS 16 basis, net debt was £26.9 million (2019: £18.7 million).
Organic investment
During the year ended 31 December 2020, capital expenditure
was restricted to only essential items and amounted to £14.7 million
(2019: £22.9 million). The Group is now committed to increase
organic investment significantly over the medium term and
further capital expenditure of £30 million is planned for 2021.
We continue to generate a good pipeline of capital investment
projects that will drive future organic growth.
Our Maltby site was mothballed in 2012 but has continued to
be maintained. We have invested in new plant during 2020 and
the site was reopened at the start of 2021 to manufacture the
Marshalls concrete brick, which will allow us to grow our sales
into the housebuilding sector. Our range of perforated concrete
bricks has been designed to maximise the CO2 savings and to
provide significant installation benefits. The site retains flexibility
to produce our full range of concrete block paving products.
Reflecting our increased market confidence, in 2021 we will
commence construction of a flagship dual block plant at our
St Ives site, which will be the first facility of this nature in the UK.
The planned investment over the next three years will be around
£20 million and the project will significantly increase capacity,
improve efficiency, enable multiple secondary finishing and
facilitate the launch of new products.
There will be a continued focus on innovation and new product
development across all parts of the Group. Research and
development expenditure of £5 million is planned for 2021.
The development pipeline continues to be strong and the
Group is committed to providing sustainable, high performance
product solutions.
Organic growth will continue to be supported by targeted
acquisitions. We will continue to focus on bolt-on acquisition
targets in our key growth areas of Water Management and
New Build Housing.
Improvements in operational efficiency
COVID-19 has caused operational efficiency challenges for
the whole construction products sector. The growth in sales in
quarter three was greater than expected and, combined with
lower stocks, this gave rise to significant operational challenges,
especially in quarter four. We have experienced strong order
books but, in line with the rest of the construction sector, we
have been faced with longer lead times, and the operational
challenge of balancing supply with demand. The Group’s
year Strategy – Read more on page 6
Brand preference for
product specification
Our products are specified by developers,
builders and architects. We build supportive
and professional relationships with our customers.
The Marshalls brand benefits from:
• an excellent product range;
• market leading quality and performance;
• superior product knowledge;
• strong working relationships;
• a strong digital presence and strategy;
• in-field commercial and technical support;
• a strong trading policy; and
• national reach.
national network of concrete manufacturing sites and quarries
has continued to provide an advantage in this regard and our
flexible operating framework has enabled us to rebalance
supply and demand across the network.
Despite the challenges of 2020, we are driving cost efficiency
improvements throughout the business and our objective
continues to be to mitigate inflation on an ongoing basis to
ensure sustainable business continuity and cost control. The
Group’s E-commerce trading business model was launched in
April 2020 and has delivered approximately £5 million of sales
during the year. E-commerce revenue will complement existing
sales channels and is expected to double during 2021. A key
aspect of the model is that it supports and respects our
merchant customers.
Health and safety
We are committed to ensuring the health, safety and wellbeing
of everyone who works with us or for us. This has been at the top
of our list of priority areas throughout the COVID-19 crisis and
the additional provisions that have been put in place at our
sites are in line with or, in most cases, exceed the recommended
guidelines. The new working from home requirements for office
staff have, in certain cases, given rise to the potential for
adversely impacting employee wellbeing and mental health.
We recognise this and regular communication and support,
including our dedicated external and confidential Employee
Assistance Helpline, have been actively promoted.
Marshalls’ 5 year Strategy and ESG agenda
We remain confident that our strategy is the right one for
Marshalls, as it has built-in flexibility such that the pace of
delivery can be adopted for external and economic uncertainties.
The Group’s long-term strategy continues to focus on organic
investment to drive growth and is supported by an increasingly
strong ESG agenda. The overall Group strategy continues to
focus on the maintenance of a strong balance sheet, a flexible
capital structure and a clear capital allocation policy. These
objectives drive both long-term sustainable growth and
shareholder returns.
Martyn Coffey
Chief Executive
Marshalls plc
marshalls.co.uk
11
Strategic report Q&A with the Chief Executive
We remain committed
to the 2025 Strategy as
our driver for growth
How has the pandemic impacted the Group’s
5 year Strategy?
The impact of COVID-19 has presented many challenges and led
to a significant reduction in sales during the second quarter of
2020. The pandemic necessitated a temporary pause to certain
aspects of the strategy, but we remain confident that the
strategy is the right one, with built-in flexibility such that the
pace of delivery can be adjusted for external uncertainties.
How has COVID-19 impacted Marshalls during 2020?
The impact of COVID-19 has been unprecedented and has put
extreme pressure on all parts of society and business life. Health
and safety has remained a key area of focus throughout. Sales
in April 2020 were 66 per cent lower than the comparative
month in 2019 and decisive actions were necessary to protect
the business. New short-term bank facilities were entered into
in May 2020 to ensure that adequate liquidity was maintained.
Discretionary and non-essential expenditure was deferred and
the Group utilised the Government’s furlough arrangements
and other tax deferral schemes. All furlough and deferred tax
payments have now been repaid. Despite the disruption to
normal working practices, we maintained a strong focus on
control and governance throughout the year.
“We operate in attractive
markets and are well
placed to deliver
improvements in
operational efficiency.”
How have you emerged stronger from the pandemic?
The restructuring programme undertaken during the year
covered all parts of the business and the actions taken are
expected to reduce fixed costs by approximately £12 million in
a full year and improve operational efficiency going forward. Our
national network and digital focus have provided a competitive
advantage in comparison to many of our competitors during
2020. Our priority areas of New Build Housing, Road, Rail and
Water Management remain attractive markets and we are
well placed to deliver continued growth and operational
profit improvements. Our continuing investments in digital and
operational efficiency programmes mean that we are now in
the best possible position to benefit from future market growth.
How do you aim to achieve your strategic goals?
At the heart of the strategy are eight priority areas for
investment and business focus. We believe that these areas,
12
Marshalls plc
Annual Report and Accounts 2020
which are set out on pages 6 and 7, provide significant growth
potential for the Group over the next five years.
During 2020 we have increased the pace of delivery of the
digital strategy, with the accelerated launch of the E-commerce
trading platform. We have a clear opportunity to pioneer the
digital standard for our industry.
There continues to be opportunities to improve operational
efficiency in the manufacturing network. We lead the market
on quality for our products and services and our aim is to match
this with market leading and forward-thinking technology.
We continue to focus on new product development and have
a strong pipeline of projects.
At the heart of everything is the desire to source and supply
sustainable materials, products and solutions. We want to do
business responsibly and ethically, to address the risk of climate
change and to protect the environment.
What do you see as the key risks now for the business?
The Group continues to face significant challenges, both
external and internal to the business. We have a well-defined
risk management process and we formally review these risks,
and the Group’s response to them, twice a year. The Group’s
main risks are volatility in the market, cyber risk, people related
risks and the risk of reputational damage if we do not do things
in the right way. The rapid pace of digital change in the market
is a significant emerging risk and new technology could lead
to further major changes in the market. In mitigation, we are
continuing to make significant investment in digital as a key part
of our 5 year Strategy. Our principal risks and risk management
framework are set out in detail on pages 24 to 31.
year Strategy – Read more on page 7
Operational
excellence
We invest in our manufacturing facilities and
industrial network and use the best tools,
processes and systems.
We want to deliver operational excellence by continuously
improving how we work and deliver new ways of thinking.
The operational restructuring programme, completed during
the year, will reduce fixed costs and improve operational
efficiency going forward. The Group’s production capacity
has not been reduced by the restructuring changes made.
Strategic Report The Marshalls Way
Our culture is built
on strong foundations
of passion and pride
We are proud of our depth of
experience, but we are humble
enough never to stop learning.
We do the right things, for the right
reasons, in the right way. This is The
Marshalls Way of doing business, which
has enabled us to become the UK’s
leading hard landscaping manufacturer.
Our teams understand what The
Marshalls Way means day to day and
we work together to demonstrate this
in all we do. We all know that when we
Act with Courage and Inspire with
Purpose then we can help Shape the
Future so that we Win Together.
Do the right things
• We have high standards
• We deliver market leading quality to our customers
• We meet customer expectations
• We continually develop our business and people
For the right reasons
• We consider the long-term impact of our decisions
• We are guided by strong principles
• We operate in the most ethical and sustainable way
• We take responsibility for every action
In the right way
• We put people, communities and the environment first
• We set clear expectations
• We anticipate and embrace change
• We work as a team to proactively propose solutions
Find our business model on pages 16 and 17
Read more about our culture from page 13
Go home safely
Marshalls plc
marshalls.co.uk
13
Strategic report Growth Markets
We continue to
outperform the market
Our focus continues to be in those parts of the
market with greatest growth potential. These
include New Build Housing, Water Management
and Infrastructure projects in Road and Rail.
CPA total construction output
CPA 2021
£20.9bn (14.0%)
Total construction output
Chain linked volume – 2018 prices
Construction market overview
The CPA’s recent winter forecast shows, under its main scenario,
total construction output increasing by 14.0 per cent in 2021,
after a fall of 14.3 per cent in 2020. Its forecast indicates further
growth of 4.9 per cent in 2022, at which point it will surpass the
levels of output achieved in 2019. This represents an improvement
compared with forecasts in the second half of 2020. The COVID-19
background has eased for construction, with the more recent
Government restrictions specifically allowing construction,
manufacturing and builders merchants to continue operating
their sites under the established health and safety measures.
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14 15 16 17 18 19 20 21 22
% growth
Total
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Why is this important for Marshalls?
• Detailed analysis means we understand the long-term drivers
of market growth.
For the Group’s main markets, the CPA’s main scenario forecasts that:
• We are able to highlight significant variations between regions
• Private Housing output will increase by 15.5 per cent in 2021
and 6.0 per cent in 2022;
and sectors.
• It facilitates the formulation of our strategy and scenario planning.
• Total other new work output will increase by 17.4 per cent in
2021 and by 4.4 per cent in 2022;
Response to market challenges – our strategic priorities
• We target individual market sectors – those with sustainable growth.
• Private Housing repair, maintenance and improvement (“RM&I”)
output will increase by 10.1 per cent in 2021 and 3.0 per cent in
2022; and
• Infrastructure work will rise by 32.1 per cent in 2021 and 6.0 per
cent in 2022.
Construction output is expected to be resilient with many parts
of the construction sector recovering quickly during the second
half of 2020. The CPA’s main scenario is based on a “W-shaped”
economic recession and recovery, with sustained improvement
commencing in the second quarter of 2021. There is downside risk
following the end of the Government’s furlough and self-employed
income support schemes, which may lead to rises in unemployment
which could reduce the strength of the recovery.
Infrastructure has been less impacted by the pandemic than
other parts of the construction industry, with larger sites being
able to operate effective safety measures. Growth in 2021 is
expected to be driven by larger projects, such as HS2, and
additional focus on medium-term investment programmes.
The Private Housing sector has been supported by the stamp
duty holiday and the end of the first phase of the Help to Buy
scheme. The strength of recovery may be impacted by the
Government’s appetite for extending these schemes.
Both DIY activity and Private Housing RM&I have been boosted
by increased working at home and a greater desire for additional
space and home improvement. Many households have benefited
from higher disposable incomes due to lower commuting costs and
lower cash outflows on other things, including holidays.
Marshalls continues to target those areas of the market with the
greatest growth potential and the underlying indicators in the
New Build Housing, Road, Rail and Water Management markets
remain supportive.
14
Marshalls plc
Annual Report and Accounts 2020
• We aim to deliver an end-to-end digital offering with market leading and
forward-thinking technology.
• We focus on innovation and customer service.
CPA cumulative growth forecasts
Cumulative growth from 2019
Chain linked volume – 2018 prices
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2020 growth
2021 growth cumulative
2022 growth cumulative
Why is this important for Marshalls?
• New Housing and Infrastructure are key sectors for Marshalls.
The chart highlights growth expectations for Infrastructure.
• Private Housing RM&I is the main driver for our UK Domestic
end market.
Response to market challenges – our strategic priorities
• We deliver products that lead on quality and performance.
• We focus on building strong relationships.
• We aim to ensure that our products are specified by developers,
contractors and architects.
Strategic Report
CPA all New Housing
£5.6bn (15.4%)
CPA 2021
All New Housing
Chain linked volume – 2018 prices
CPA Private Housing RM&I
CPA 2021
£2.0bn (10.1%)
Private Housing RM&I
Chain linked volume – 2018 prices
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14 15 16 17 18 19 20 21 22
% growth
All New
Housing
40.0
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14 15 16 17 18 19 20 21 22
% growth
Private New
Housing
15.0
10.0
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-10.0
-15.0
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Why is this important for Marshalls?
• New Build Housing is a key strategic growth area.
Why is this important for Marshalls?
• Driven by housing wealth, pension wealth and savings which
remain robust in the key over-55s age category.
• Property transactions and credit availability are key drivers.
• The sector comprises Private Housing and Public Housing.
• Consumer confidence remains a key factor along with regional
• Both Public Housing (15.5 per cent) and Private Housing (14.8 per
cent) are forecast to grow in 2021 – overall growth of 15.4 per cent.
Response to market challenges – our strategic priorities
• We develop strategic relationships with housebuilders and
merchants across the UK.
• We focus on the development of sustainable new products.
• We source and supply sustainable materials, with environmental
considerations being a key part of our strategy. Demand for the
Marshalls concrete brick is increasing significantly and, compared
with a clay alternative, this reduces the lifetime CO2 impact by
around 49 per cent.
CPA other new work
£10.3bn (17.4%)
CPA 2021
Other new work
Chain linked volume – 2018 prices
differences in house price inflation.
Response to market challenges – our strategic priorities
• We focus on our network of domestic installers to drive growth.
• We have invested further in digital technology to enhance the
customer experience.
Household savings ratio and
real household disposable income
ONS - 2020 Q2 and Q3
£161bn savings, gross
(seasonally adjusted, current prices)
Household savings ratio and
real household disposable income
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14
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Why is this important for Marshalls?
• Demand for Infrastructure products (e.g. for Road and Rail)
continues to grow.
• Water Management, Road and Rail are key strategic growth areas.
• Demand for new product innovation – e.g. Landscape Protection.
Response to market challenges – our strategic priorities
• Extended Water Management offering, following acquisition
of CPM.
• Expertise in Civils and Drainage solutions.
• Continued focus on product innovation, R&D and sustainability.
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Why is this important for Marshalls?
• DIY and RM&I demand has been buoyed by increased time spent
at home and less opportunity for spending on holidays and other
leisure activities. This has given rise to significant excess disposable
income, particularly within Marshalls’ main consumer groups.
• Growth in Domestic sales has been fuelled by a desire to invest in
outside garden spaces and home improvements and an increased
appetite for DIY.
• The Bank of England now estimates a significant buffer of “excess
savings” of around £1 billion.
Response to market challenges – our strategic priorities
• Continuing focus on exceeding the expectations of customers,
focusing on innovation and quality and the full “customer
experience” journey.
• Increase in capital investment to improve operational efficiency.
• Continuing focus on new product development in order to provide
a broader product choice and market leading aesthetics and design.
Marshalls plc
marshalls.co.uk
15
Strategic report
Business Model
Creating better spaces
and futures for everyone
Our business model is constantly developing through collaboration
with customers and feedback from stakeholders. Our customer-
focused investment in digital technology is transforming the
customer experience and advancing the business model.
Our capital
Our business
Human
The Group has an experienced workforce of approximately 2,500
employees with specialist skills and a high level of engagement.
Financial
Strong balance sheet and a conservative capital structure.
An efficient portfolio of bank facilities, with extended maturities,
provides prudent headroom.
Business
National coverage and sustainable operations across a
national network of manufacturing sites.
Long-standing relationships with customers and suppliers and
a diverse product range covering a number of end markets.
Intellectual
With over 130 years’ experience we have a reputation built
on transparency and long-standing core values. We focus
on innovation and strong R&D and NPD.
Natural resources
Marshalls has extensive reserves of UK natural stone. Strong
supply chain relationships ensure the ethical sourcing of natural
stone from India, China and Vietnam.
Technology
We are accelerating the development of our digital strategy
to enhance service and the overall customer experience, and
to improve operational efficiency and communication.
Social and relationships
We have strong stakeholder relationships through constructive
dialogue with local authorities, industry bodies and regulators.
Our stakeholder relationships are underpinned by a focus on
responsible business which is a key part of the Marshalls culture.
Sourcing
The Group’s main raw
materials are cement, sand,
aggregates, pigments, fuel oil
and utilities. We use the best
materials we can source.
Related risks
• Macro-economic and political
• Security of raw material supply
Manufacturing
The Group manufactures and
supplies landscape, driveway
and garden products from a
range of materials, principally
concrete and natural stone.
Marshalls has a world-class
Manufacturing, Innovation
and Development team.
• Cyber security risks
• Environmental
• Ethical
• Climate change
Related risks
• Competitive activity
• Threat from new
technologies and
business models
• IT infrastructure
• Legal and regulatory
Sustainability
Committed to ensuring our
ESG credentials are at the
heart of the Marshalls brand.
• Carbon reduction targets
• Science-based targets
• People commitment
• Diversity, Equality, Respect
and Inclusion (“DERI”) strategy
• Strong governance
Related risks
• Extreme weather
• Climate change
• Public perception
• Legal and regulatory
Doing things The Marshalls Way Read more on page 13
16
Marshalls plc
Annual Report and Accounts 2020
Strategic Report Our business
year Strategy – Read more on page 7
Customer centricity
We balance innovation and tradition and provide an
easy-to-use service in a complex and competitive
market. Our aim is always to deliver a customer
service that exceeds customer expectations.
In addition:
• Our Design Space offices in Central London and Birmingham
showcase the Group’s brand leading capabilities and
technical and design solutions for specifiers, designers
and clients.
• The Design Spaces showcase the continual development of
our product ranges and systems to ensure we remain at the
forefront of innovation and technology within our industry.
Distribution
Due to the scale of our
operations, and our national
network of regional centres,
97 per cent of our customers
are less than two hours
away. This continues to be a
key competitive advantage.
Customers
Our customers range from
Domestic homeowners
to Public Sector and
Commercial. We seek to
exceed the expectations
of customers in all our
end markets.
Related risks
• Macro-economic and political
Related risks
• Macro-economic
• Road infrastructure
• Cost inflation
• Environmental
• Climate change
and political
• Extreme weather
• Climate change
• Cyber security risks
• Competitor activity
• Legal and regulatory
Innovation
Innovative product solutions
for the Built Environment.
• Market innovation
• Product innovation
• Process innovation
• Materials innovation
• Digital innovation
Related risks
• Road infrastructure
• Cost inflation
• Environmental
• Climate change
Value creation
Shareholders
Suppliers
Progressive dividend policy,
targeting 2 times dividend cover
supported by non-recurring
and discretionary dividends
Dividend per share
4.30p
Customers
Industry leading customer
service – innovative new
products, quality, availability
and “on-time” delivery
New products
8% of sales (2019: 12%)
Employees
Promotion of professional
development, career
opportunities and competitive
benefit packages
Active apprenticeships
in 2020
99
Global supply chain, long-
term and mutually beneficial
partnerships and ethical trading
Suppliers trained on anti-
bribery and modern slavery
70%
Communities
and environment
Positive impact, with direct
investment in the community
and Fair Tax Mark
Commitment to reduce
greenhouse gas emissions
40% by 2030
Government and
regulatory bodies
R&D investment planned
for 2021
£5m
Links to strategy page 20
Organic expansion
Shareholder value
Brand development
Sustainable profitability
Relationship building
Effective capital structure
and control framework
Doing things The Marshalls Way Read more on page 13
Marshalls plc
marshalls.co.uk
17
Strategic report
Stakeholder Engagement
Engaging with our
stakeholders
Our Section 172(1) Statement
The Board of Directors of the Company consider that they,
both individually and collectively, have acted in a way that
would be most likely to promote the success of the Company
for the benefit of its members as a whole in the key decisions
they have taken during the year ended 31 December 2020.
In taking these key decisions, the Directors of the Company
considered the factors specified in Section 172(1) of the
Companies Act 2006 (the “Act”) including:
• the likely long-term impact of any decisions;
• the interests of the Company’s employees;
• the need to foster the Company’s business relationships
with suppliers, customers and others;
• the impact of the Company’s operations on the
communities in which it operates and the environment;
• the regulatory implications of any decisions;
• the importance of the Company maintaining a reputation
for high standards of business conduct; and
• the need to act fairly as between members of the Company.
The Directors fulfil their duty by ensuring that there is a strong
governance structure at Board level and throughout the
Group, supporting the delivery of our longer-term strategy.
The COVID-19 pandemic has been the key area of focus
during 2020 and the Board has taken a central role in deciding
the Group’s response. The Board governed with decisiveness
and agility, meeting much more frequently and considering
the interests of our key stakeholders and engaging with them.
A detailed COVID-19 case study is included on pages 56 and 57
which outlines the areas in which our response and decision
making were focused, how we engaged with stakeholders,
and the role governance and the Board played.
The fulfilment of the Board’s duty under Section 172(1) sits
alongside its consideration of the Group’s capital structure
and capital allocation policy and its resilience to existing
and emerging risks (pages 24 to 26), which have all been
reviewed in light of COVID-19. The Group’s culture continues to
be a particular focus of the Board (page 13) and is embodied
in The Marshalls Way.
The Board has continued to engage with the business in
specific areas such as new product development, digital
strategy and marketing as well as participating in a virtual
strategy day with the senior management team. In addition,
Janet Ashdown, in her role as the designated Non-Executive
Director for workforce engagement (page 82), continues to
attend our Employee Voice Group, which has evolved during
the year and and whose agenda covers diverse areas such
as the Group’s ESG strategy, and the delivery of key
engagement and development programmes.
The Group’s focus on sustainability and ESG issues is relevant to
our stakeholders and these are summarised in detail on pages
38 to 51. The Board is kept informed of all relevant issues by
means of a number of written reports against agreed KPIs.
18
Marshalls plc
Annual Report and Accounts 2020
Shareholders
Customers
• We generate value by
• We seek to exceed the
delivering sustainable growth
expectations of customers
• We maintain a progressive
dividend policy – targeting
two times dividend cover over
the business cycle
• We are transparent and seek
to give a clear, consistent
message across all
communication channels
• We emphasise personal
contact and individual dialogue
• We work with PR consultants
(MHP Communications) to
provide ongoing
communication support
Why we engage
• To ensure that our strategy
is aligned with the interests
of shareholders
• To explain the Group’s
5 year Strategy
• To explain the Group’s ESG
strategy and objectives
• To maintain a strong and
sustainable dividend policy
• To increase the share price
and total shareholder return
How we engage
• AGM, Annual Report, trading
updates and presentations
• Regular phone calls, face to
face meetings, site visits and
investor roadshows
• Investor relations website –
upgraded in 2020
Board engagement
• The Chair and Senior
Independent Director held
meetings with shareholders
in November 2020
• Through regular feedback to
the Board by the CEO and
Group Finance Director and
Investor Markets days
• Investor site visits and written
consultations (e.g. in relation
to policy)
• At the Company’s AGM
Links to strategy
• We target very high levels
of customer service
• We build customer service and
health and safety performance
into management and
employee reward schemes
• In adopting The Marshalls Way,
we embed customer
experience and customer
service into our business model
• We track all metrics and strive
to obtain a world-class net
promoter score
Why we engage
• To explain our strategy of
customer centricity
• To maintain very high quality
availability and delivery metrics
• To develop customer-focused
solutions
• To become the supplier of choice
• To drive improvement and
reduce complaints
How we engage
• Dedicated “customer
experience” team
• Service-level agreements and
quality standards
• New websites and digital
solutions focused on
the customer
• Customer surveys, customer
visits and a commitment to
deliver on feedback
• Customer experience
awareness campaign
Board engagement
• Board presentations on customer
centricity and customer initiatives
• Attending new product
development updates
• Customer visits and meetings
with sales teams
• Receiving updates on and
engaging with our customer
experience programme
Links to strategy
Strategic Report Links to strategy
Shareholder value
Sustainable profitability
Relationship building
Organic expansion
Brand development
Effective capital structure and control framework
Find our strategy on pages 20 and 21
year Strategy – Read more on page 6
Logistics excellence
We put customer wants and needs first with
direct, informed and professional deliveries.
Our logistics operation has played a major role in supporting
network changes and the full integration of both CPM
and Edenhall.
A major priority has been to develop the logistics customer
experience, and support the rollout of the E-commerce offer.
A nationwide training programme has equipped the logistics
team to better understand the signs of modern slavery.
Employees
Suppliers
Communities and
the environment
Government and
regulatory bodies
• We are a “Real Living
Wage” employer
• We support employee
progression through
professional development
• We encourage share ownership
and a significant, and increasing,
number of employees either
own, or have interests in,
shares from our various
schemes
Why we engage
• To ensure that all employees
are valued and have a “voice”
• To ensure we maintain a
motivated, skilled and technically
competent workforce
• To ensure staff development
• To ensure ongoing focus on
health and safety and
employee wellbeing
• To encourage equal
opportunities and diversity
How we engage
• Employee Voice Group represents
all business areas and levels
• Regular communication across
channels – supporting those
employees working from home
• Annual Director “communication
roadshow” programme of site
visits and presentations. In
2020 many have been virtual
• We are committed to
ethical and sustainable
procurement practice
• We balance economic
requirements with
environmental, social and
ethical considerations over the
whole lifecycle
• We have a global supply
chain and maintain
long-term partnerships
• We continue to focus
on human rights and
modern slavery
Why we engage
• To ensure use of the best
quality raw materials and
resources we can source
• To ensure security of supply
and high supplier standards
• To ensure that our materials
are sustainable and
ethically sourced
• To ensure our human rights
due diligence and monitoring
is robust and effective
How we engage
• Effective, regular communication
– underpinned by Code
of Conduct
• Formal tenders and fair terms
• Supply chain risk mapping
processes and regular audits
• Development training and
• ETI Base Code social and
succession planning
ethical audits
• People and culture strategy
• Strategic partnerships with
to unlock potential
Board engagement
• Board participation in the
Employee Voice Group via
Janet Ashdown, our
designated Director
• Board attended
strategy conference
• Regular reviews of HR and
Group reward strategy
• Monthly health and safety reports
• Active engagement in workforce
diversity, reward and recruitment
Links to strategy
NGOs, ethical regulators and
charities, e.g. “Hope for Justice”
Board engagement
• Feedback reports on supply
chain compliance
• Regular supply chain and
business continuity internal
audit reviews. Supplier tendering
internal audit in 2020
• Reports on ethical sourcing
and ETI Base Code
Links to strategy
• We do business responsibly
– The Marshalls Way
• We operate within a framework for
social and environmental policy
• We value our brand and a
• We have a strong compliance
reputation built on
transparency and proven
sustainability expertise
• We have strong environmental
objectives and targets –
driven by our strategic
commitments
• We are strongly committed
to human rights
Why we engage
• ESG principles and responsible
business provide the foundations
for sustainable growth
• To recognise our role in society
• To ensure that environmental
and social principles are
embedded at all our sites
• To maintain adherence to all
legislative and ISO
requirements for environmental
and energy management
How we engage
• Continue to support the
UN Global Compact’s
commitment to sustainable
development
• We work with the Carbon
Trust to analyse our business
footprint and develop
improvement strategies
• Regular dialogue with local
community groups
• £183,000 raised for charitable
and community causes in 2020
Board engagement
• Board actively engaged
with the Group’s ESG and
sustainability strategy –
including the setting of
science-based targets
• Receive regular updates
on sustainability and new
product development
Links to strategy
and governance culture
• We conduct business in
accordance with the principles
set out in the Bribery Act 2010
• We are a constituent of the
FTSE4Good index
• We maintain our Fair Tax Mark
Why we engage
• To ensure the highest standards
of corporate governance
• To ensure the Group’s ongoing
monitoring, training and
compliance procedures meet
best practice
• To ensure that we pay the right
amount of tax at the right time
• To ensure that our business
practices can deliver
sustainable growth
How we engage
• Regular dialogue with
Government, regulators
and industry groups
• Active membership of the
CPA and Mineral Products
Association (“MPA”)
• Effective and clear policies
against bribery and the
elimination of modern slavery
with training for staff and
business partners
Board engagement
• Board provides direction to
the support of the UN Global
Compact’s principles, and
policies relating to modern
slavery and anti-bribery
• Board has been heavily
engaged in the Group’s
business continuity and
COVID-19 planning
and response
Links to strategy
Marshalls plc
marshalls.co.uk
19
Strategic report
Strategy
Delivering sustainable growth
Our strategic pillars
Shareholder value
Sustainable profitability
Relationship building
To deliver sustainable
shareholder value by improving
the long-term operating
performance of the business.
ROCE above
20%
over last 5 years
ROCE in 2020
8.2%
Our objectives
• To make strategic investments for
organic growth and acquisitions.
• To strengthen the Marshalls brand by
developing systems-based solutions
and by promoting ESG values.
• To maintain a progressive dividend
policy and a dividend cover of 2 times
over the business cycle.
To maintain a strong market
position and grow the business’
profitability in all of the Group’s
end markets.
To develop relationships with key
stakeholders, installers and suppliers.
Domestic sales growth in HY2 of
Customers that recommend Marshalls
9%
Our objectives
• To outperform the market.
• To deliver new and innovative
product solutions.
• To invest in IT and lead the
digital transformation.
• To drive through sustainable
cost reductions.
83%
Our objectives
• To focus on stakeholder engagement
at all levels.
• Sustainable and ethical materials supply
– to enable manufacturing flexibility.
• To focus on customer satisfaction.
• To promote integrated product solutions.
• To focus on installer training, marketing
and sales support.
What we have achieved
• Market share gains during 2020.
• Improvements in operational efficiency
across the manufacturing network.
• Full integration of CPM and
Edenhall acquisitions.
• Strong growth in HY2 has supported
the Group’s market capitalisation
(£1,495 million at 31 December 2020).
• Continued to exceed CPA
growth forecasts.
What we have achieved
• Sustainable efficiency improvements
What we have achieved
• Dedicated “customer experience”
arising from the operational
restructuring programme in 2020.
• Continued to invest in R&D during 2020.
Sales of new products in the core business
were 8 per cent of total revenue in 2020.
• Increased the pace of the digital
strategy in 2020.
team with strengthened relationships.
• 94 per cent customer service KPI
in 2020, despite the impact of
COVID-19.
• New Commercial and Domestic websites.
• New investor relations and
sustainability websites.
• Increase in International sales of
• 1,900 registered installer teams.
16 per cent in 2020.
Future priorities
• To grow ROCE and EBITDA.
• To deliver long-term sustainable
shareholder value.
• Digital transformation.
• To promote strong ethical,
environmental and corporate social
responsibility principles.
Future priorities
• To focus on new product development
Future priorities
• To improve communication
to drive growth.
• To improve operational efficiency
across the manufacturing network.
• Logistics excellence.
and stakeholder engagement.
• To focus on the customer.
• To invest in digital technology
to improve customer experience.
• Sustainable materials supply.
Our 5 year Strategy Read more on page 6
Brand preference for
product specification
Read more on page 11
Logistics
excellence
Read more on page 19
Sustainable
materials supply
Read more on page 38
Customer
centricity
Read more on page 17
20
Marshalls plc
Annual Report and Accounts 2020
Strategic Report Organic expansion
Brand development
Effective capital
structure and control
framework
To invest in organic expansion in
existing and related markets and
product categories to expand
the business.
To strengthen and extend the
Marshalls brand by focusing on
innovation, service and new
product development.
Capital investment planned for 2021
R&D investment planned for 2021
£30m
£5m
Our objectives
• To target growth areas such as
New Build Housing, Road, Rail
and Water Management.
Our objectives
• To focus on The Marshalls Way and
our ESG priorities.
• Customer satisfaction – to be the
• To invest in capital expenditure
supplier of choice.
for organic growth.
• To lead the market on customer service
• To increase sustainable profitability
and product quality.
in the emerging businesses.
• To maintain the highest health and
• To increase new product development.
safety standards.
To ensure that the capital structure
remains aligned with the Group’s
corporate growth objectives.
Net debt:EBITDA*
Reported basis
Pre-IFRS 16
1.3 times
Our objectives
• To maintain a strong balance sheet,
0.6 times
a flexible capital structure and
a clear and fully aligned capital
allocation policy.
• To maintain a flexible capital structure
that recognises cyclical risk, focusing
on security, efficiency and liquidity.
• To pioneer the digital standard for
our industry.
What we have achieved
• Strong growth in Domestic sales
in 2020.
What we have achieved
• “Superbrand“ status.
• Continued development of the
• Significant growth in key focus areas
whilst maintaining operational flexibility.
Marshalls brand and product range.
• Introduced 132 new product ranges
• Strong growth in New Build
Housing revenue.
• Self-help capital investment of
£42 million over the last 5 years.
launched in the last 2 years.
• First company in the sector to have
emission targets approved by the
Science Based Targets initiative.
• Reopening of the Maltby site to provide
additional capacity.
Future priorities
• To optimise our national network
of manufacturing sites.
• To grow our emerging businesses
and increase their market share.
• To develop our global supply chain.
Future priorities
• To maintain the Group’s market
leading position.
• Responsible business and
The Marshalls Way.
• ESG principles and responsible business.
• To support the UN Sustainable
Development Goals.
• To increase brand preference to drive
product specification.
What we have achieved
• A conservative capital structure that
maintains significant headroom against
downside scenarios.
• Strong balance sheet with low gearing
(26.3 per cent (9.3 per cent pre-IFRS 16)).
• Efficient portfolio of bank facilities
with extended maturities and
realigned headroom.
• Continued focus on working capital
management and efficient
inventory control.
Future priorities
• To operate tight control over business,
operational and financial procedures.
• To maintain the target net debt:EBITDA
ratio (on a reported, post-IFRS 16 basis)
of between 0.5 and 1.5 times over the
cycle. On a pre-IFRS 16 basis, this
translates into a target of between
0 and 1 times.
* before operational restructuring costs
and asset impairments
Operational
excellence
Read more on page 12
New product
development
Read more on page 46
Growth in the
emerging businesses
Read more on page 36
Digital
transformation
Read more on page 26
Marshalls plc
marshalls.co.uk
21
Strategic report Key Performance Indicators
Measuring our performance
The Group’s KPIs monitor progress towards the achievement of its objectives.
Revenue (£’m)
£469.5m
Profit (£’m)
Profit before tax (before operational
restructuring costs and asset
impairments)
£22.5m
EPS (p)
EPS (before operational restructuring
costs and asset impairments)
8.60p
469.5
2020 22.5
2020 8.60
ROCE (%)
ROCE (before operational
restructuring costs and asset
impairments}
8.2%
2020
8.2
541.8
491.0
430.2
396.9
2019
2018
2017
2016
62.9
52.1
46.0
69.9
2019
2018
2017
2016
26.29
21.52
18.95
29.36
2019
2018
2017
2016
21.4
21.9
20.8
23.0
2020
2019
2018
2017
2016
Why is this KPI important?
Delivering sustainable growth is
key to the Group’s strategy. The
aim is to outperform the market
and grow market share.
Performance
Sales have recovered well in
HY2 particularly in Domestic
and International. Whilst Group
revenue for the full year is down
13 per cent on the prior period,
the decrease in total revenue
in HY2 had improved to be
only 1 per cent behind the
2019 comparative.
Why is this KPI important?
Sustainable improvement in
profitability is a strategic priority.
Why is this KPI important?
EPS growth is a strategic target.
Why is this KPI important?
ROCE is an important indicator
of sustainable shareholder value.
Performance
Profit before tax (before
operational restructuring costs
and asset impairments) was
£22.5 million which was ahead
of expectations. Trading in 2021
has started strongly.
Performance
Group EPS (before operational
restructuring costs and asset
impairments) was 8.60 pence.
Performance
Group ROCE for 2020 is 8.2
per cent (2019: 21.4 per cent).
ROCE is defined as EBITA /
shareholders’ funds plus net
debt (before operational
restructuring costs and
asset impairments).
Links to strategy
Links to strategy
Links to strategy
Links to strategy
Principal risks
• Further COVID-19 impact in 2021
• Macro-economic and political
• Customers
• Increased rate of digital change
Principal risks
• Cyber security risks
• Competitor activity
• Security of raw material supply
• Climate change
• Further COVID-19 disruption
Principal risks
• Cost inflation and strength
of supply chain
• Competitor activity
• Brand leadership
Principal risks
• Threat from new technologies
and business models
• Increased pace of
digital change
• Capital structure
Risk mitigation
• Close monitoring of trends
and lead indicators
• Diversity of business
• Customer centricity
• Digital Strategy
Risk mitigation
• Innovation and new
product development
• Focus on cyber
security controls
• Proactive supply
chain management
Risk mitigation
• Supply chain management
• Logistics excellence
Risk mitigation
• Digital transformation
• Operational excellence
• Flexible capital structure
• Capital allocation policy
Links to remuneration
AI
LTIP
Links to remuneration
AIAI
LTIPLTIP
Links to remuneration
AI
LTIP
Links to remuneration
AIAI
LTIPLTIP
Stakeholder linkage
• Customers
• Suppliers
• Employees
• Communities
Stakeholder linkage
• Shareholders
• Employees
Stakeholder linkage
• Shareholders
• Employees
Stakeholder linkage
• Shareholders
• Employees
22
Marshalls plc
Annual Report and Accounts 2020
Strategic Report Links to strategy
Shareholder value
Organic expansion
Sustainable profitability
Brand development
Relationship building
Effective capital structure
and control framework
Find our strategy on pages 20 and 21
Links to remuneration
AILTIP
Long-term Incentive Plan
LTIPAI
Annual incentive award
Net debt (£)
Pre-IFRS 16
Reported basis
£26.9m
£75.6m
Dividend per share
(recommended, p)
4.30p
Customer service index (%)
94%
Health and safety
(reduction in working
days lost since 2016, %)
12.2%
(26.9)
(18.7)
(24.3)
2020
2019
2018
2017
(37.4)
2016 5.4
2020 4.30
2019
4.70
2018
2017
2016
2020
2019
2018
2017
2016
12.00
10.20
8.70
94
2020
12.2
98
98
98
98
2019 14
2018
2017
2016
17
20
46
Why is this KPI important?
Marshalls continues to support a
prudent capital structure. The
strategic target is for the ratio of
net debt to EBITDA to be between
0.5 and 1.5 times over the business
cycle, on a reported basis.
Performance
Net debt was £75.6 million at
31 December 2020 (£26.9 million
on a pre-IFRS 16 basis). Gearing
remains low at 26.3 per cent (9.3
per cent on a pre-IFRS 16 basis).
Why is this KPI important?
A progressive dividend policy
remains a key objective. The
strategy is to maintain up to
two times cover over the
business cycle.
Why is this KPI important?
Customer centricity is a key
strategic priority. Customer
service lies at the heart of the
Marshalls brand.
Why is this KPI important?
Marshalls is committed to
meeting the highest health
and safety standards.
Performance
The Board is recommending the
reinstatement of a full final
dividend of 4.30 pence for the
year ended 31 December 2020.
Performance
Despite the impact of COVID-19,
the combined customer service
measure averaged 94 per cent
throughout 2020.
Performance
In 2020 there was a 12.2 per cent
reduction in days lost from
workplace incidents compared
with the target benchmark.
Links to strategy
Links to strategy
Links to strategy
Links to strategy
Principal risks
• Funding strategy
• Overpaying for acquisitions
• Cost inflation
Principal risks
• Macro-economic environment
• Reduction in revenue
and profitability
Principal risks
• Quality, service and reliability
• Brand reputation
• Further COVID-19 disruption
Risk mitigation
• Flexible capital structure
• Conservative financial profile
Risk mitigation
• Clear corporate strategy
• Capital allocation policy
Risk mitigation
• Customer centricity strategy
• Digital trading
Principal risks
• Consistency of standards
• Regulatory controls
• Investment in operation network
• Extended COVID-19 restrictions
• Mental health and
employee wellbeing
Risk mitigation
• Embedded culture –
The Marshalls Way
• Compliance procedures
and policies
• Employee training
Links to remuneration
AIAI
LTIPLTIP
Links to remuneration
AIAI
LTIPLTIP
Links to remuneration
AIAI
LTIPLTIP
Links to remuneration
AIAI
LTIPLTIP
Stakeholder linkage
• Shareholders
• Employees
• Customers
• Suppliers
Stakeholder linkage
• Shareholders
Stakeholder linkage
• Customers
• Communities
• Environment
Stakeholder linkage
• Employees
• Customers
• Communities
• Environment
Marshalls plc
marshalls.co.uk
23
Strategic report
Risk Management and Principal Risks
Managing risk to deliver
our strategic objectives
Managing risk to meet the challenge of
the COVID-19 pandemic and to deliver
long-term sustainable improvement in
shareholder value. All risks are aligned
with the Group’s strategic objectives.
Achievements in 2020
The Group’s risk function has focused on the impact of
COVID-19 on the business and its underlying risks. In each
of the following key risk areas mitigating controls have been
introduced, as appropriate, and additional scenario planning
has been undertaken:
• health and safety – frequent and consistent messaging with
mental and physical health prioritised, and social distancing
and health and safety procedures instigated;
• significantly reduced sales in Q2 – maximised efficiency and
operational flexibility in order to ensure that the vehicle fleet
could continue to operate safely and meet customer
demand;
• liquidity – new bank facilities arranged and covenant support
received from our partner banks in order to maintain
comfortable headroom against severe downside scenarios;
• information technology – business continuity maintained
throughout, with practical support and additional cyber
security training to facilitate home working;
• control environment – key financial and operational controls
maintained, and often enhanced, to meet the requirements
of working from home; and
• medium-term strategy – built-in flexibility in the strategy
ensured effective response to changing external circumstances.
KPMG completed a number of targeted internal audit projects
during 2020 including a specific review of the design, monitoring
and governance arrangements surrounding the controls which
operated in response to the COVID-19 restrictions. Other internal
audits during the year included the controls and governance
surrounding the integration of the Edenhall business, recruitment
procedures, commercial tendering and cyber security. Cyber
risk continues to increase despite the Group’s further extension
of mitigation controls. It has remained a major focus area for
risk assessment.
Priorities for 2021
The priorities for the Group’s risk function in 2021 include the
following areas:
• The potential impact of extended economic and political
uncertainty arising from both extended COVID-19 issues and
restrictions and from the changes and consequences arising
from Brexit. During 2020, proactive supply chain management
and contingency planning have continued to mitigate these risks.
• Health and safety remains a major focus area and 2021
will see additional governance and control reviews.
24
Marshalls plc
Annual Report and Accounts 2020
• The completion of a number of targeted projects will again
be a major focus for KPMG. In 2021, projects covering cyber
risk, business continuity, disaster recovery, general IT controls,
payroll systems and controls, the accounts receivable
function, GDPR compliance, digitalisation and ESG are
planned.
• Addressing the risk of climate change and the protection
of the environment continues to demand increased focus.
Our ESG agenda and the generation of detailed plans and
comprehensive policies is a key priority area.
Approach to risk management
Risk management is the responsibility of the Board and is a key
factor in the delivery of the Group’s strategic objectives. The
Board establishes the culture of effective risk management and
is responsible for maintaining appropriate systems and controls.
The Board sets the risk appetite and determines the policies
and procedures that are put in place to mitigate exposure to
risks. The Board plays a central role in the Group’s risk review
process, which covers emerging risks and incorporates scenario
planning and detailed stress testing.
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 Group Risk Register is reviewed and updated by the Board
and the full Executive Management team 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. KPMG, as the Group’s internal auditor, regularly attends
the risk review meetings. The conclusion of KPMG is that the
process continues to be a robust mechanism for monitoring
and controlling the Group’s principal risks and for challenging
the potential impact of new emerging risks. All risks are aligned
with the Group’s strategic objectives and each risk is analysed
in terms of likelihood and impact to the business and the
determination of a “gross risk score” enables risk exposure
to be prioritised.
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 detailed
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.
The Group has a formal framework for the ongoing assessment
of operational, financial and IT-based controls. The overriding
objective is to gain assurance that the control framework is
complete and that the individual controls are operating effectively.
Strategic Report Risk management framework
The Board:
• determines the Group’s approach to risk, its policies
and the procedures that are put in place to
mitigate exposure to risk.
The Audit Committee:
• has delegated responsibility from the Board to
oversee risk management and internal controls;
• reviews the effectiveness of the Group’s risk
management and internal control procedures; and
• monitors the effectiveness of the internal audit
function and the independence of the external audit.
Executive Directors:
• are responsible for the
effective maintenance of
the Group’s Risk Register;
• oversee the
Internal audit:
• independently reviews
the effectiveness of
internal control
procedures;
management of risk;
• reports on
• monitor risk mitigation
and controls; and
• monitor the effective
implementation of
action plans.
effectiveness of
management
actions; and
• provides assurance to
the Audit Committee.
Operational managers:
• are responsible for the identification of operational
and strategic risks;
• are responsible for the ownership and control of
specific risks;
• are responsible for establishing and managing the
implementation of appropriate action plans; and
• are responsible for the impact of controls (net basis).
Risk heatmap (net risk scores)
6
4
4
8
11
10
7
12
9
5
2 HY1
1
3
2 HY2
t
c
a
p
m
I
m
5
£
>
m
5
£
–
2
£
m
2
£
<
Low
Medium
Likelihood
High
1 Macro-economic and political
2* Further COVID-19 waves – risk of further
short-term disruption
3 Cyber security risks
4 Security of raw material supply
5* ESG focus and increasing requirements
6 Climate change (including the impact of weather events)
7 Threat from new technologies & business models
(increased pace of digital change)
8 Corporate, legal and regulatory
9 Competitor activity
10 Customers
11 Health and safety
12 People risks
* New to top 12.
Additional independent verification checking of key controls and
reconciliations is undertaken on a rolling basis. Such testing
includes key controls over access to, and changing permissions
on, base data and metadata.
Risk appetite
The Group is prepared to accept a certain level of risk to remain
competitive but continues to adopt a conservative approach
to risk management. The risk framework is robust and provides
clarity in determining the risks faced and the level of risk that we
are prepared to accept. Marshalls’ strategies are designed to
either treat, transfer or terminate the source of the identified risk.
There are well-established procedures to identify, monitor and
manage risk and, within the internal control framework, policies
and procedures are reviewed on an ongoing basis.
Viability Statement
After considering the principal risks on pages 24 to 31, the
Directors have assessed the prospects of the Group over a
longer period than the period of at least twelve months required
by the “going concern“ basis of accounting. The Directors
consider that the Group’s risk management process satisfies the
requirements of provision 31 of the UK Corporate Governance
Code.
The Board considers annually, and on a rolling basis, a strategic
plan, which is assessed with reference to the Group’s current
position and prospects, the strategic objectives and the operation
of the procedures and policies to manage the principal risks
that might threaten the business model, future performance and
target capital structure. In making this assessment the Board
considers emerging risks and longer-term risks and opportunities.
The aim is to ensure that the business model is continually
reviewed to ensure it is sustainable over the long term. Security,
flexibility and efficiency continue to be the guiding principles
that underpin the Group’s capital structure objectives. The
Group’s funding strategy is to ensure that headroom remains
at comfortable levels under all planning scenarios. The objective
continues to be to have a range of competitively priced funding
lines in place, at all times, with different maturity dates.
The Group’s 5 year Strategy confirms the objectives and
priorities over this five-year period and has addressed appropriate
risks and opportunities. For the purposes of the Viability Statement,
however, the Board continues to believe that three years is an
appropriate period of assessment and considers that it has
reasonable visibility of the market over a three-year period to
31 December 2023. The Group’s strategic plan includes an
integrated model that incorporates the Income Statement,
balance sheet and cash flow projections.
The stress testing reflects the principal risks that could
conceivably threaten the Group’s ability to continue operating
as a going concern and focuses on scenarios that might give
rise to sales volume reductions, deteriorating operating margins
and increases in interest rates. The impact of COVID-19, Brexit
uncertainty and a general background macro-economic and
political uncertainty all remain and combine to be the key risk
areas and all of the Group’s other principal risks are covered
within the same downside stress tests.
The stress testing applied in 2020 has taken full account of
COVID-19 and continuing Brexit uncertainty. After the lockdown
at the end of March, the Group prepared a series of downside
scenario models – comprising integrated P&L, balance sheet
and cash flow modelling covering the period until the end of
2021. A range of downside models were prepared covering
different levels of sales reduction, over different periods and
for different lengths of time. Certain models also had slower
degrees of recovery during 2021.
Marshalls plc
marshalls.co.uk
25
Strategic report Risk Management and Principal Risks continued
Principal risks and uncertainties
The Directors have undertaken a robust, systematic assessment
of the Group’s emerging and principal risks. These have been
considered within the timeframe of three years, which aligns with
our Viability Statement The risk process has increasingly
allocated greater focus on emerging risks and risk outlook.
The reporting includes more detailed assessments of proximity
(how far away in time the risk will occur) and velocity (the time
that elapses between an event occurring and the point at
which the effects are felt).
The COVID-19 pandemic has inevitably challenged the Group’s
risk framework and the effectiveness of mitigation controls.
Certain significant risks and uncertainties have changed in
comparison to prior years and the Group’s procedures and
controls have held up well. In August 2020, KPMG undertook
an internal audit review of the Group’s response to COVID-19 in
relation to controls and governance. The audit’s conclusion was
that Marshalls’ response to COVID-19 was underpinned by good
governance. Key controls in high risk areas, such as resource
planning, supplier terms, financial modelling and forecasting,
were supported by higher levels of scrutiny and stakeholders
were consulted throughout. Controls were redesigned in
response to the logistical challenges of home working.
year Strategy – Read more on page 6
Digital transformation
Accelerated progression of
digital transformation in 2020
Our digital investment is not only “future
proofing” the business, but has enabled core
functions to run efficiently during the pandemic.
Significant development in 5 key areas:
• workplace productivity – using digital technologies
to reduce face to face interactions and safeguard
employee health and wellbeing;
• operational improvement – automation and artificial
intelligence to digitise process;
• customer experience – visualisation and
QR technologies to provide on-line product
certainty and contactless delivery;
• digital revenue – supporting omni-channel sales
and the rise of E-commerce; and
• enterprise agility – cloud-based, real time
technologies to facilitate an agile mindset to
operate and innovate quickly.
The Group’s digital strategy is a key
growth driver but also provides an
important element of risk mitigation.
Viability Statement continued
Each downside scenario factored in the cash benefit of
expected short-term furlough arrangements and the utilisation
of the UK Government’s tax deferral schemes (covering VAT
and other taxes). In addition, the short-term cash forecasts
benefited from the impact of lower corporation tax payments,
assumed reductions in capital expenditure and no dividend
payments in both June 2020 and December 2020.
In each scenario model, there was significant headroom
(compared with the new bank committed facilities) at the
deepest downside point.
On 1 May 2020, the Group signed agreements with each
of NatWest, Lloyds and HSBC for an additional £30 million,
twelve-month committed revolving credit facility with each, with
a twelve-month extension option. These additional facilities
comprised £90 million and significantly strengthened the
Group’s headroom. All our banking partners continue to be
supportive and recognised that the impact of COVID-19 is a
short-term issue and going forward they remain of the opinion
that Marshalls will continue to be in a strong market position
once the short-term impacts of the pandemic are behind us.
Since the half year, trading has been significantly better.
A further significant stress test sensitivity has been run at the
end of 2020 against the base medium-term forecast. The stress
test assumes a sales revenue sensitivity of 20 per cent over each
of the next two years (cumulatively 64 per cent against forecast
2020 revenue) – with current growth rates assumed to apply on
the revised base position from 2023. In the wake of COVID-19,
the stress testing has used sales volume and margin sensitivities
that aim to replicate the impact of the last sustained recession
and are similar to the reductions that took place between 2007
and 2009. This sensitivity leads to a reduction in revenue of
around £300 million over 2021 and 2022 and, over the same
two-year period, leads to a reduction in operating margin to
5.5 per cent in 2022. This is well in excess of the reduced revenue
experienced in 2020 as a consequence of COVID-19.
None of the individual sensitivities applied impact the Directors’
assessment of viability.
Even under the deep stress test all bank covenants are met and
the gearing and net debt: EBITDA metrics remain sustainable.
The Group would undertake significant mitigation measures in
a deep downturn and this would create additional contingency.
In undertaking its review, the Board has considered the
appropriateness of any key assumptions, taking into account
the external environments and the Group’s strategy and risks.
Based on this assessment, and taking account of the Group’s
principal risks and uncertainties, the Directors confirm that they
have a reasonable expectation that the Group will be able to
continue in operation and meet its liabilities as they fall due for
the next three years.
In relation to Brexit, further delays in the transition process
or issues surrounding the negotiation of trade agreements
could trigger renewed weakness in Sterling, a reduction
in consumer confidence and a further slowdown in the UK
economy. Marshalls continues to have strong market positions
and a strategy of targeting those market areas where growth
prospects are greatest. The potential impact of wider economic
and political uncertainties has been considered in the
assessment of risk 1 on page 27. This assessment has included
significant stress testing of financial models and risk mitigation
measures within the Group’s supply chain. The Group has
developed a detailed Brexit plan to mitigate the risk of raw
material shortages.
26
Marshalls plc
Annual Report and Accounts 2020
Strategic Report Links to strategy
Shareholder value
Sustainable profitability
Relationship building
Organic expansion
Brand development
Effective capital structure and control framework
Find our strategy on page 20
Impact on business model
Sourcing
Manufacturing
Distribution
Customers
Innovation
Sustainability
Find our business model on page 16
Nature of risk and potential impact
Key risk indicators
Mitigating factors
Change
1. Macro-economic and political
The Group is dependent on the
level of activity in its end markets.
Accordingly, it is susceptible to
economic downturn, the impact
of Government policy, interest
rates, volatility in world markets
and any continuing issues
following the UK’s departure
from the EU.
Potential impact
The potential longer-term
impact of Brexit or wider global
macro-economic tension and
uncertainty could lead to lower
activity levels which could reduce
sales and production volumes.
This could have an adverse
effect on the Group’s financial
results. The impact of supply
chain issues, exchange rate
fluctuations and increased
interest rates could also have an
adverse impact on material costs.
• Delays in the
awarding of
and completion
of contracts.
• Reductions in
consumer
confidence and
order pipeline.
• 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 proactive
development of the product range
continues to offer protection.
• The Group has developed detailed plans
to support its supply chain following the
UK’s departure from the EU and to mitigate
the risk of raw material shortages.
• The Group undertakes scenario planning
to support improved business resilience.
• The Group continues to target those
market areas where growth prospects are
greatest, e.g. New Build Housing, Road, Rail
and Water Management.
• The Group focuses on its supplier
relationships, flexible contracts and the
use of hedging instruments.
2. Prolonged impact and further waves of the COVID-19 virus
• Government
policy and
delays in the full
implementation
of the vaccine
programme.
• Delays in
the awarding
and completion
of contracts.
• The Group closely monitors trends and
lead indicators.
• The Group has detailed business
continuity plans to maintain flexibility
and appropriate working practices
and procedures.
• The Group undertakes ongoing scenario
planning to assess business resilience
and risks that could lead to
business disruption.
• The Group focuses on communication
with employees and other stakeholders,
and maintains strong customer and
supplier relationships.
Continued disruption caused
by further longer-term effects
of COVID-19 giving rise to
further lockdowns and
Government restrictions.
Potential for further waves
caused by new virus variants.
Potential impact
Longer than expected disruption
could lead to prolonged
uncertainty and lower activity
levels which could reduce sales
and production volumes. This
could have an adverse effect on
the Group’s financial results.
The requirement for longer-term
home working could give rise to
increased wellbeing or mental
health issues.
No change in risk
The sharp reduction in sales due
to COVID-19 in the second quarter
of 2020 was reversed from quarter
three and the second half of the
year saw significant sales growth
and increase in activity levels
throughout the sector. The UK
Government’s stated objective is
to support construction and
manufacturing to fuel economic
growth and significant investment
support for infrastructure and
housing has been announced.
There continues to be volatility in
world markets and global
economic uncertainty continues
to be a risk.
Links to strategy
Impact on business model
Increased risk
Trading recovered strongly in the
second half of 2020 and this has
continued into the first quarter
of 2021. Construction and
manufacturing have been
designated as essential industries
and the Group has already
demonstrated strong business
resilience. However, further
delays could generate
renewed uncertainty.
Links to strategy
Impact on business model
Marshalls plc
marshalls.co.uk
27
Strategic report Risk Management and Principal Risks continued
Nature of risk and potential impact
Key risk indicators
Mitigating factors
Change
3. 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. Increasingly, all business
is becoming more IT dependent.
Potential impact
Risk of data loss causing
financial and reputational risk.
• Emergence
of new cyber
security risks.
• Increased
examples
of data loss
and security
breaches in the
wider market.
• Use of IT security policies.
• Regular cyber security risk audits
undertaken by specialists and the use of
mitigation controls and other recommended
procedure updates. The Group’s “cyber
maturity assessment” score has increased
during the last year and Marshalls is
accredited with “Cyber Essentials” approval.
• Restriction of sensitive data to selected
senior and experienced employees who
are used to handling such data.
• 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).
• A continuous programme of awareness
training for staff.
No change in risk
Cyber risk has increased during
the COVID-19 pandemic. This
remains a high profile area and
considerable focus continues to
be given to promoting awareness
of IT security policies. The risk is
mitigated by the extension of
controls. The risk is fast growing
and indiscriminate and the
perception is that the risk of data
loss through new (or as yet
unseen) security threats continues
to increase.
Links to strategy
Impact on business model
4. Security of raw material supply/raw material shortages
Although the UK has now left the
EU, there remains a risk to the
security of raw material supply
and the risk of shortages in some
areas. Changes in the market
for certain raw materials have
created an increased reliance
on imports.
The Group is susceptible to tariffs
for certain commodities and
significant increases in the price
of raw materials, utilities, fuel oil
and haulage costs and decreases
in vehicle availability. Longer-term
risk of “carbon taxation”.
Potential impact
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.
• Temporary
• The Group benefits from the diversity of its
shortages and
exchange rate
cost inflation.
• Decreases
in vehicle
availability and
labour/driver
shortages.
business and end markets.
• We are collaborating with all EU-based
Tier 1 and Tier 2 suppliers to ensure any
supply risks from the Brexit transition
process are minimised.
• A focus on governance and financial
controls including a rolling “material risk”
review process.
• The digitisation of the supply chain through
the implementation of a best-in-class
Supply Relationship Management System.
• The Group focuses on its supplier
relationships, flexible contracts and the
use of hedging instruments. Use of flexible
freight forwarding options.
• The Group utilises sales pricing and
purchasing policies designed to mitigate
the risks.
• The Group uses specialist delivery vehicles.
No change in risk
The risk of temporary shortages
is mitigated by proactive supply
chain management and the use
of alternative suppliers.
Cost inflation remains a risk
as demand for raw materials
increases against a backdrop
of continuing economic
uncertainty. All importers are
faced with the same issues.
Links to strategy
Impact on business model
28
Marshalls plc
Annual Report and Accounts 2020
Strategic Report Nature of risk and potential impact
Key risk indicators
Mitigating factors
Change
5. ESG focus and increasing requirements
• Negative
• The Group utilises experienced, specialist
feedback from
stakeholders
– loss of business
and investment
due to lack of
preparedness.
• Failure to meet
internal targets.
staff to support the Group’s focus in
this area.
• Agreed carbon reduction plan and a
set of KPIs established.
• The Group is committed to the Science
Based Targets initiative.
• Working groups established in all focus
areas and controls being progressively
embedded across the business.
Increased risk
Significantly heightened focus
from stakeholders, Government,
customers and investors and
increased operational and
reporting requirements.
Links to strategy
Impact on business model
Increasing focus on ESG and
the heightened awareness of
environmental challenge which
is translating into politics and
consumer behaviour.
Risk of allocating insufficient
resource and investment to
support the science-based
targets and other
environmental protocols.
Mandatory human rights
disclosure from 2022 and
increased focus on modern
slavery and diversity reporting.
Potential impact
Hardening targets and greater
consideration amongst investor
and stakeholder groups. Risk
that investors and customers
could reduce support if the
Group failed to improve
performance against targets or
did not report appropriately. Risk
of customers switching products
away from those with a higher
carbon footprint.
6. Climate change (including the impact of weather events)
• Prolonged
periods of bad
weather (e.g.
snow, ice and
floods) which
makes ground
working difficult
or impossible.
• Changing public
perceptions of
the longer-term
implications of
climate change.
• The Group utilises centralised specialist
functions to support mitigation plans
and the management of relationships
on commercial contracts.
• Climate change risk analysis in place.
• We are committed to water harvesting
and recycling schemes and have an
environmental target of not using any
mains schemes.
• The development of resilience strategies
for climate change is a key element of
the Group’s Climate Change Policy.
• The development of the Group’s Water
Management business and the continuing
focus on new product development.
No change in risk
Weather conditions continue
to be closely monitored but are
beyond the Group’s control.
Significant increase in public
awareness of climate change.
Links to strategy
Impact on business model
The increase in frequency
and impact of extreme weather
events such as flooding, drought
and coastal erosion.
The longer-term implications
of climate change give rise to
the transition risk to address
the challenges quickly enough.
Potential impact
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 cost impact of the
“Environmental Protocol“
and mitigation programmes
could lead to increasingly
expensive processes.
Financial risk caused by adverse
impact on margins and cash
flows as well as sales and
production volumes.
Marshalls plc
marshalls.co.uk
29
Strategic report Risk Management and Principal Risks continued
Nature of risk and potential impact
Key risk indicators
Mitigating factors
Change
7. Threat from new technologies and business models, and the increased pace of digital change in the market
• Less demand
for traditional
products and
routes to market.
• Emergence of
new competitors
and new digital
business models.
• More widespread
availability of
artificial
intelligence
technology.
Reduction in demand for
traditional products. Risk of new
competitors and new substitute
products appearing.
Failure to react to market
developments, including digital
and technological advances.
Potential impact
The increased competition
could reduce volumes and
margins on traditional products.
Despite significant additional
focus made by the Group in this
area in recent years, there
remains a risk that a new third
party could use emerging digital
technology to enter the market
and transition more quickly
and effectively.
8. Corporate, legal and regulatory
• Good market intelligence.
• Flexible business strategy able
to embrace new technologies.
• Significant focus on research and
development and new products.
• Development of the Group’s E-platform
and developing digital strategy.
No change in risk
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.
The pace of digital change in
the market continues to increase
and the risk is increasing. This
is now seen as a major risk by
the market.
Links to strategy
Impact on business model
Inadvertent failure to comply
with elements of a significantly
increased governance, legislative
and regulatory business
environment. 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.
Potential impact
Significant increases in the
penalty regime across all areas
of business (e.g. health and
safety, competition law, the
Bribery Act and GDPR) could
lead to significant fines in the
event of a breach.
A health and safety or
environmental incident
could lead to a disruption
to production and the supply
of products for customers.
Such incidents could lead to
prosecutions and increased costs
and have a negative impact
on the Group’s reputation.
9. Competitor activity
The Group has a number of
existing competitors which
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.
Potential impact
The increased competition
could reduce volumes and
margins on manufactured
and traded products.
• Increased
• Centralised legal and other specialist
regulatory and
compliance
requirements.
functions, the use of specialist advisers
and ongoing monitoring and training.
• The Group has a formal Group sustainability
• Integration
strategy focusing on impact reduction.
requirements for
new acquisitions.
• Significant
increases in the
penalty regime
for health and
safety and
environmental
incidents.
• The Group employs compliance
procedures, policies, ISO standards and
independent audit processes which seek
to ensure that local, national and
international regulatory and compliance
procedures are fully complied with.
• The Group uses professional specialists
covering carbon reduction, water
management and biodiversity.
No change in risk
The significant increase in
governance and regulation
continues to require additional
management focus and robust
compliance procedures within
all areas of the business.
Links to strategy
Impact on business model
• Threat from
new competitors
and new
technologies.
• Less demand
for traditional
products and
the increased
emergence of
new digital
business models
and product
solutions.
• 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 has a continuing focus
on new product development.
• The continued development of the
Group’s digital strategy and its focus
for customers and all stakeholders.
No change in risk
The more uncertain market
environment has not led to
any significant changes in
competitive pressure.
Links to strategy
Impact on business model
30
Marshalls plc
Annual Report and Accounts 2020
Strategic Report Nature of risk and potential impact
Key risk indicators
Mitigating factors
Change
10. 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.
Potential impact
The loss of a significant
customer may give rise to a
significant adverse effect on
the Group’s financial results.
11. Health and safety
Unexpected health and safety
incident, possibly caused by
human error or the actions
of a subcontractor.
Ongoing risks in relation to
COVID-19 and the need to
maintain safe working
environments.
Ongoing welfare and mental
health of employees.
Potential impact
Risk of harm to all stakeholders,
including on-site employees
and subcontractors.
Negative impact of working from
home for certain employees.
Significant increases in penalty
regime could lead to significant
fines and prosecution.
A major incident could lead to
a disruption to production and
a negative impact on the
Group’s reputation.
12. People risks
Ongoing risks and
requirements concerned
with training, development
and succession planning.
Implications of technological
change and automation.
Welfare and mental health
related risks associated with
the COVID-19 pandemic.
Potential impact
• Risk of reduced skills
and inadequate training
potentially leading to reduced
productivity and efficiency.
• Implications for employee
health and wellbeing and
overall workforce morale.
• Potential risk to the
Marshalls brand.
• Changes to
market structure
or trading
relationships.
• New customer
strategies.
• Customer
feedback and
changing
expectations.
• 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.
• We invest in market research to ensure
that we have a strong understanding of
end user requirements and the quality of
our distribution network.
No change in risk
Although the underlying risk
continues, the effective
management of key
relationships and the ongoing
diversification of the business
continue to mitigate the risk.
Links to strategy
Impact on business model
• Integration
• Centralised specialist functions.
requirements for
new acquisitions.
• Significant
increases in the
penalty regime.
• Regular communication and support for
employees, including those working from
home. Mental health first aiders. “Return
to work” strategy and policies in place.
• Comprehensive five-year health and
safety strategy.
• Ongoing monitoring, training and health
No change in risk
Health and safety continues
to be a high profile risk area.
Increased risks arising from
COVID-19, including mental
health and employee welfare.
and safety audits.
Links to strategy
• All senior managers receive the Marshalls
Health and Safety and Environmental
stage three training.
Impact on business model
• Skill shortages
and lack of
diversity within
the workforce.
• Increased stress
levels within
workforce
leading to
employee
absenteeism.
• Increased levels
of staff turnover.
• Focused Human Resources department
with experienced staff and specialist skills.
• Strong employee and trade
union relationships.
• Strong communication channels and
employee feedback through the
Employee Voice Group.
• Regular feedback questionnaires
supported by a third party provider.
• Independent “Safecall” employee helpline.
• Focus on training, apprenticeships and
ongoing staff development and
leadership potential.
No change in risk
The impact of COVID-19 has
created new challenges for
employees with changed
working requirements, health
and safety regulations and
operational working practices.
These include issues that could
give rise to heightened
employee wellbeing issues
and risks to mental health.
Links to strategy
Impact on business model
Marshalls plc
marshalls.co.uk
31
Strategic report Financial Review
Jack Clarke
Well placed to
return to growth
Trading summary
Revenue
In the early part of the COVID-19 outbreak, sales were hit
significantly. Group sales in April 2020 were down 66 per cent
compared with the prior year. By the half year trading had
improved, with sales in June down 7 per cent compared with
the prior year. Revenue growth in the second half of the year
recovered quickly and by the final quarter was ahead of the
comparative figures for 2019. Group revenue for the year ended
31 December 2020 was down 13 per cent at £469.5 million
(2019: £541.8 million).
Revenue
290.0
270.0
250.0
230.0
m
£
’
210.0
190.0
170.0
150.0
2018
2019
First half
Second half
2020
Linear (second half)
Revenue analysis
The Domestic end market has remained strong, with sales
up 9 per cent in the six months ended 31 December 2020
compared to the same period last year. Sales in the Public
Sector and Commercial end market for the six months ended
31 December 2020 were 6 per cent down compared with 2019.
This compares with the first six months of the year when sales
were down 28 per cent. Sales in the International business have
been particularly strong, and during the six months ended
31 December 2020 increased by 18 per cent, supported by
strong sales from Marshalls NV in Belgium.
“Marshalls’ liquidity remains strong
and will support investment priorities
going forward.”
Summary
• Domestic sales up 9% in second half of 2020
• Public Sector and Commercial improving –
focus on growth sectors
• International sales up 16% in the year
• Full year revenue of £469.5 million
(2019: £541.8 million)
• Strong cash flow – all Government COVID-19
financial support repaid
• Significant headroom against bank facilities
• Net debt:EBITDA of 0.6 times at 31 December
2020 (2019: 0.2 times) on a pre-IFRS 16 basis
• Capacity of investment – £20 million investment
in dual block plant at St Ives to commence
in 2021
• Reinstatement of dividend – 4.30 pence
for 2020
32
Marshalls plc
Annual Report and Accounts 2020
Strategic Report
Analysis of sales by end market
UK Domestic
Public Sector and Commercial
International
UK Domestic
Public Sector and Commercial
International
Revenue variance analysis
2019/2020
600
550
500
m
£
’
450
400
350
300
541.8
(67.6)
(9.1)
4.4
469.5
2019
revenue
Landscape
Products
Emerging UK
Businesses
International
2020
revenue
Public Sector and Commercial
Marshalls’ strategy continues to deliver sustainable integrated
solutions to customers, architects and contractors. The aim is to
generate demand through a brand and customer experience
that drive product specification. The Group’s technical and sales
teams use a full suite of digital technologies to make the
customer experience as frictionless as possible. Digital technology
is increasingly used to showcase new concepts and designs and
to facilitate the selection and specification of our ranges.
We remain focused on those market areas where future demand
is considered to be greatest including New Build Housing, Road,
Rail and Water Management. The Group continues to outperform
the market in these areas. Public Sector and Commercial
revenue represented approximately 66 per cent of Group sales.
Domestic
The strong sales reflect an increased demand for DIY projects,
with many Domestic customers now having increased capacity
to invest in home and garden projects. We continue to see an
increasing trend towards the “Don’t Move, Improve” part of the
Domestic end market. Sales to the UK Domestic end market
now represent approximately 27 per cent of Group sales.
Installer order books at the end of February 2021 were strong at
12.2 weeks (February 2020: 10.7 weeks), compared with 12.8
weeks at the end of October 2020. The Group’s industry leading
standards remained high during the year and we continue
to have market leading geographical coverage. Our strategy
continues to be to drive more sales through the Marshalls
Register of approved domestic installers which comprises
approximately 1,900 teams. The objectives continue to be
HY1
£’m
58.1
134.8
17.6
210.5
2020
HY2
£’m
70.6
174.7
13.7
259.0
Full year
£’m
128.7
309.5
31.3
469.5
%
%
%
27.4%
64.2%
8.4%
27.2%
67.5%
5.3%
27.4%
65.9%
6.7%
2019
Change
HY2
%
9%
-6%
18%
-1%
Full year
%
-9%
-17%
16%
-13%
HY1
£’m
76.5
188.2
15.4
280.1
%
27.3%
67.2%
5.5%
HY2
£’m
64.6
185.6
11.5
261.7
Full year
£’m
141.1
373.8
26.9
541.8
%
%
24.6%
71.0%
4.4%
26.0%
69.0%
5.0%
to develop the customer experience by digitalisation, including
the use of visualisation tools, and commitment to innovation.
The Group continues to receive good feedback for its
consistently high standard of quality, excellent customer service
and marketing support.
International
Sales to International markets increased by 16 per cent in the year
and are now 7 per cent of Group sales, supported by strong
sales from Marshalls NV in Belgium. Our Belgium business has
become profitable for the first time during 2020. We continue
to develop our global supply chains to ensure that they are
sustainable and aligned with market opportunities.
Revenue analysis: business area (%)
Domestic (27%)
Public Sector and Commercial (66%)
International (7%)
Revenue by area (%)
27+
81+
Landscape Products (81%)
Emerging UK Businesses (12%)
International (7%)
Operating profit
Operating profit, before operational restructuring costs and asset
impairments, was £27.2 million (2019: £73.7 million). After operational
restructuring costs and asset impairments of £17.8 million, the
reported operating profit was £9.4 million (2019: £73.7 million). The
restructuring exercise in the second quarter of the year included
the closure of manufacturing sites at Falkirk, Livingston and Llan
and other operational changes. A summary of these costs is set
out below and these measures taken will reduce annual costs by
approximately £12 million.
Restructuring costs
Works closure costs
Redundancy
Asset impairments
£’m
4.5
7.8
5.5
17.8
Marshalls plc
marshalls.co.uk
33
Strategic report66
+
7
+
L
12
+
7
+
L
Financial Review continued
Operating profit continued
Reported EBITDA, before operational restructuring costs and asset impairments, was £57.6 million, and basic earnings per share,
before operational restructuring costs and asset impairments, was 8.60 pence (2019: 29.36 pence) per share. The table below
illustrates the improved performance in the second half of the year.
Trading results
EBITDA*
Depreciation/amortisation
Operating profit*
Operational restructuring costs and
asset impairments
Operating (loss)/profit (reported)
2020
2019
HY1
£'m
18.2
(14.7)
3.5
(17.6)
(14.1)
HY2
£'m
39.4
(15.7)
23.7
(0.2)
23.5
Full year
£’m
57.6
(30.4)
27.2
(17.8)
9.4
HY1
£'m
54.9
(15.9)
39.0
—
39.0
HY2
£'m
49.0
(14.3)
34.7
—
34.7
Full year
£’m
103.9
(30.2)
73.7
—
73.7
Change
HY2
%
-20
Full year
%
-45
-32
-63
* Before operational restructuring costs and asset impairments.
Profit margins
The chart below illustrates that the Group’s operating profit
percentage decreased from 13.6 per cent in 2019 to 5.8 per cent
in 2020. However, in the second half of the year operating profit
is after charging £9.4 million in respect of the repayment of
furlough. The operating margin in H2 2020 increased to 12.8 per
cent, if calculated on a consistent, pre-furlough repayment
basis.
Margin analysis
2019
Landscape Products
Emerging UK Businesses
International
2020
Revenue Operating
profit
£’m
£’m
Margin
impact
%
541.8
(67.6)
(9.1)
4.4
73.7
(44.6)
(4.0)
2.1
469.5
27.2
13.6
(7.5)
(0.5)
0.2
5.8
The Group continues to drive through cost and efficiency
benefits arising from the restructuring programme implemented
in the second quarter of 2020 and aims to deliver additional
opportunities and synergy benefits arising from the integration
of CPM and Edenhall.
The Group’s Landscape Products business is a reportable
segment servicing both the UK Public Sector and Commercial
and UK Domestic end markets. Those businesses that are not
large enough to comprise separate operating segments include
Marshalls Landscape Protection and Mineral Products and they
continue to be a key strategic focus and a positive driver for growth.
Net financial expenses
Net financial expenses were £4.7 million (2019: £3.8 million),
including £1.6 million (2019: £1.3 million) of IFRS 16 lease interest.
On a reported basis interest was covered 5.8 times (2019:
19.2 times), before operational restructuring costs and asset
impairments. Interest charges on bank loans totalled £3.0 million
(not £3.1 million) and, including scheme administration costs,
there was an IAS 19 notional interest charge of £0.2 million (not
£0.3 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 deferred taxation liability at 31 December 2020 has been
calculated at 19 per cent, which is the rate at which the deferred
tax is expected to unwind in the future using rates enacted at
the balance sheet date. This rate change has given rise to an
increase to the deferred tax charge of £1.8 million. This has given
rise to the increase in the effective tax rate.
The Group has paid £4.6 million (2019: £9.0 million) of corporation
tax during the year. A deferred tax credit of £2.1 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.
For the seventh 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 but also
PAYE and NI paid on our employee wages, aggregate levy, VAT, fuel
duty and business rates, Marshalls has funded total taxation to the
UK economy of £69 million in the year ended 31 December 2020.
Dividends
The Group’s stated objective is that “the Group has a
progressive dividend policy with the objective of achieving
two 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.”
A progressive dividend policy remains a key objective.
The 2019 final and supplementary dividends that would have
been paid in June 2020 were withdrawn and an interim dividend
for 2020 was also not proposed. The Board has confirmed its
intention to reinstate dividend payments and is now
recommending that a final dividend of 4.30 pence be paid for
2020. This will be payable on 1 July 2021.
The Group intends to return to the stated policy of two times
cover for the year ending 31 December 2021. Supplementary
dividends are, by definition, discretionary and would only be
reintroduced once the economic outlook supported this.
Dividend payments will continue to be aligned with appropriate
caution and stewardship but reflect our stated strategy and
capital allocation policy.
Taxation
The effective tax rate was 23.1 per cent (2019: 17.1 per cent),
before operational restructuring costs and asset impairments.
The 2019 Budget announced that the UK corporation tax rate
will remain at 19 per cent from 2020 rather than reduce to 17 per
cent, which had previously been confirmed. This change was
substantively enacted on 17 March 2020 and, consequently,
Net debt
Net debt, on a pre-IFRS 16 basis, was £26.9 million at
31 December 2020 (2019: £18.7 million). This was significantly
better than expected and is after the repayment of £9.4 million
of furlough and £11.3 million of deferred VAT in the final quarter
of the year. All Government COVID-19 financial assistance
has been repaid. Reported net debt was £75.6 million at
34
Marshalls plc
Annual Report and Accounts 2020
Strategic Report 31 December 2020 (2019: £60.0 million). The ratio of net debt
to EBITDA was 1.3 times at 31 December 2020 (2019: 0.6 times) on
a reported basis, and 0.6 times (2019: 0.2 times) on a pre-IFRS 16
basis. Both are comfortably within our target ranges and well
below covenant levels.
Cash generation
Reported net cash flows from operating activities were £19.3 million
(2019: £88.1 million).
The Group’s strong cash generation has continued, with
operating cash flow in H2 2020 representing 93.6 per cent on
a pre-IFRS 16 basis The Group continues to prioritise the close
control of inventory and the effective management of working
capital. Debtor days remain industry leading due to continued
close control of credit management procedures. The Group
maintains credit insurance which provides excellent intelligence
to minimise the number and value of bad debts and ultimately
provides compensation if bad debts are incurred. We do not
engage in debt factoring. The Group complies with prompt
payment guidelines and best practice and abides by a clearly
defined payment policy which has been agreed with all major
suppliers.
been disclosed on a pre-IFRS 16 basis to ensure comparability.
Cash generated from operating activities was £251.2 million on a
pre-IFRS 16 basis. The Group has invested £101.4 million back
into the business to generate growth, improve productivity and
provide industry leading manufacturing facilities. The Group has
also invested £60.9 million in the targeted acquisitions of CPM
and Edenhall. Dividends to shareholders over the last five years
have totalled £105.5 million, which equates to 42 per cent of net
cash generated from operating activities.
Return on capital employed (“ROCE”)
ROCE was 8.2 per cent (2019: 21.4 per cent), before operational
restructuring costs and asset impairments, at 31 December 2020.
Over the last five years ROCE has been consistently above 20 per
cent, which reflects the Group’s tight control and management
of inventory and monetary working capital. ROCE was 8.9 per
cent on a pre-IFRS 16 basis (2019: 23.7 per cent).
Balance sheet
Net assets at 31 December 2020 were £287.8 million
(2019: £295.8 million). The Group has a strong balance sheet
with a range of medium-term bank facilities capable to fund
investment initiatives to generate growth.
Group cash flow
Net cash from operating activities
Net cash from investing activities
Net cash from financing activities
Movement in net debt in the year
Exceptional restructuring costs
Foreign exchange
IFRS 16 lease liabilities
Net debt at beginning of year
2020
£’m
19.3
(3.3)
(16.5)
(0.5)
(6.9)
(1.2)
(7.0)
(60.0)
2019
£’m
88.1
(22.4)
(47.2)
18.5
–
(0.1)
(41.0)
(37.4)
Net debt at end of year
(75.6)
(60.0)
Cash outflow on capital expenditure in the year was £14.7 million
(2019: £22.9 million). This included self-help growth expenditure
and the replacement of existing assets, business improvements
and new process technology.
Group cash flow
Net cash from operating
activities
Capital expenditure
Proceeds from the sale of surplus
property assets
Acquisition of subsidiary
undertakings
2020
£’m
2019
£’m
Last
5 years
(pre-IFRS 16)
£’m
19.3
(14.7)
88.1
(22.9)
251.2
(101.4)
11.4
—
0.5
—
21.2
(60.9)
Lease payments
(13.8)
(12.7)
—
Share issues/share-based
payments
Payments to acquire own shares
Dividends
—
(2.7)
—
0.2
(1.5)
(2.9)
(6.4)
(33.2)
(105.5)
Movement in net debt
(0.5)
18.5
(4.7)
The table above also provides a medium-term five-year
analysis of the cash generation capacity of the Group and how
cash has been invested to grow the business and also to show
the cash returned to shareholders. The five-year analysis has
Group balance sheet
Non-current assets
Current assets
Current liabilities
Non-current liabilities
Net assets
Net debt (pre-IFRS 16)
Net debt (reported)
Net debt:EBITDA (pre-IFRS 16)
Net debt:EBITDA (reported)
Gearing (pre-IFRS 16)
Gearing (reported)
2020
£’m
324.4
290.0
(157.2)
(169.4)
2019
£’m
350.0
212.5
(162.3)
(104.4)
287.8
295.8
(26.9)
(75.6)
0.6
1.3
(18.7)
(60.0)
0.2
0.6
9.3%
26.3%
6.3%
20.3%
Pension
The balance sheet value of the Group’s defined benefit pension
scheme was a surplus of £2.7 million (2019: £15.7 million). The
amount has been determined by the scheme actuary. The fair
value of the scheme assets at 31 December 2020 was £402.7
million (2019: £368.8 million) and the present value of the scheme
liabilities is £400.0 million (2019: £353.1 million).
These changes have resulted in an actuarial loss, net of deferred
taxation, of £10.6 million (2019: £2.4 million actuarial gain) and
this has been recorded in the Consolidated Statement of
Comprehensive Income. The last formal actuarial valuation of the
DB pension scheme was undertaken on 5 April 2018 and resulted
in a surplus of approximately £20 million which was a funding level
of 106 per cent. The scheme has continued to be in surplus, albeit
reduced from pre-COVID-19 levels. The scheme continues to
require no Company contributions. The scheme’s LDI asset
portfolio continues to hedge protection against volatility in
interest rates and inflation. The increase in scheme liabilities
is primarily due to the reduction in corporate bond yields.
Marshalls plc
marshalls.co.uk
35
Strategic report Financial Review continued
year Strategy – Read more on page 7
Growth in the
emerging businesses
We make selective acquisitions to complement
our business and help us advance into new and
untapped areas. Our acquisitions support the
overall Group strategy.
Our objective is to grow our emerging businesses to help
us expand into key growth areas. We aim to remove barriers
and lay solid foundations for growth.
The emerging businesses are working on a full range of
improvement projects, including a rebrand of the different
business areas to bring them into the Marshalls Group
brand family. We look to support our customers by focusing
on their solution requirements.
Capital allocation
The impact of COVID-19 during 2020 has illustrated the
importance and robustness of the Group’s capital allocation
policy. The Group’s capital allocation strategy is to maintain
a strong balance sheet and flexible capital structure. The key
elements of the strategy are:
• to prioritise organic capital investment, supported by an
increase in new product development and research and
development expenditure;
• to continue to target selective strategic acquisition
opportunities in New Build Housing, Water Management
and Minerals. Bolt-on acquisitions of up to £50 million are
considered to be the current strategy;
• to recommence the payment of dividends;
• to continue the policy of paying dividends on the basis of
a dividend cover of 2 times earnings in 2021 and beyond.
This will see dividends grow, in absolute terms, over the
medium term; and
• to maintain a target net debt:EBITDA ratio (on a reported,
post-IFRS 16 basis) of between 0.5 and 1.5 times over the
cycle. On a pre-IFRS 16 basis, this translates into a target
of between 0 and 1 times.
Banking facility headroom
Continued development of the Group’s growth strategy
Organic investment remains the priority for capital allocation
and the Group has a pipeline of significant capital expenditure
projects with good paybacks. Capital expenditure of £30 million
is planned for 2021. This represents an increase compared with
the last five years and includes projects to deliver new,
innovative products and to drive through sustainable cost
reductions and improvements in operational efficiency. It also
includes some significant projects, for example, the
commencement of a flagship dual block plant at our St Ives
manufacturing site. This is a significant capital investment, of
approximately £20 million over three years, which will enhance
capacity and improve efficiency.
During 2020, capital investment in property, plant and equipment
(including software) totalled £14.7 million (2019: £22.9 million).
This compares with pre-IFRS 16 depreciation of £18.4 million
(2019: £17.3 million). We have invested in the reopening of the
Maltby manufacturing site, which was mothballed in 2012, which
is now manufacturing the Marshalls concrete brick as well as
providing additional capacity for our block paving products.
Digital investment was £3 million in the year ended
31 December 2020 and has been £12 million over the last
four years. Further investment continues to be made to develop
our wide-ranging digital strategy, encompassing digital trading,
digital marketing and digital business. Our aim is to maintain
a “Digital First” strategy.
Our ESG agenda supports capital projects which improve
operational efficiency and better utilisation of resources and
raw materials. We are committed to reducing the environmental
impact of our products, reducing packaging and the recycling
of water at our sites. Our new Conservation X product range is
a versatile paving option with a contemporary granite look finish
and contains up to 65 per cent of recycled material.
In addition to capital expenditure, investment in new product
development remains an important element in the Group’s
organic growth agenda. Research and development revenue
expenditure of approximately £13.5 million has been invested
in the three years to December 2020 and a further £5 million is
planned for 2021. Investment in research and development
covers a number of areas including the development of the
Group’s project engineering and manufacturing capabilities,
concrete and other materials technology innovations and
extending the new product pipeline. New products are driven
by sustainability, performance, aesthetics, operational efficiency
and improvements in installation. Our Driveline Drain is a good
example of a more sustainable solution compared to metal or
plastic drainage alternatives. Revenue from new products
in 2020 in the core Landscape Products business represented
8 per cent (2019: 12 per cent) of total sales.
m
£
’
300
250
200
150
100
50
0
-50
Dec
2012
Jun
2013
Dec
2013
Jun
2014
Dec
2014
Jun
2015
Dec
2015
Jun
2016
Dec
2016
Jun
2017
Dec
2017
Jun
2018
Dec
2018
Jun
2019
Dec
2019
Jun
2020
Dec
2020
Committed
On demand
Seasonal
Net debt
36
Marshalls plc
Annual Report and Accounts 2020
Strategic Report
Organic growth
Capital investment
remains core to
strategic growth
Plan £30m in 2021
Priorities for capital
R&D and NPD
Continued focus on R&D
and NPD
New product ranges
Digital strategy
progressing well;
e-trading platform
now established
Ordinary
dividends
Furlough and deferred
VAT monies repaid
Selective
acquisitions
Good pipeline of
potential acquisitions
Dividend reinstated
Maintaining dividend
cover of 2 times earnings
over the business cycle
Target selective bolt-on
acquisition opportunities
in New Build Housing,
Water Management,
Landscape Protection
and Minerals
Supplementary
dividends
Supplementary dividends
when appropriate.
Discretionary and
non-recurring
2016 2017 2018 2019 2020
2016 2017 2018 2019 2020
2016 2017 2018 2019 2020
2016 2017 2018 2019 2020
2016 2017 2018 2019 2020
Capital structure
Marshalls continues to recognise the three guiding principles
of security, flexibility and efficiency in the determination of
its capital structure. The Group’s optimal capital structure
supports the Group’s current strategic objectives, but also
reflects the economic background and the cyclical nature
of the construction sector. Given the impact of the COVID-19
pandemic there is now increased economic uncertainty in
addition to continuing uncertainty with ongoing fragility of
UK and world markets. Against this backdrop a conservative
financial profile continues to be appropriate for Marshalls.
Borrowing facilities
On 1 May 2020, the Group signed agreements with each
of NatWest, Lloyds and HSBC for an additional £30 million,
12-month committed revolving credit facility with each, with
a 12-month extension option. These additional facilities
comprised £90 million and significantly strengthened the
Group’s headroom. These debt facilities will be reviewed during
2021 and the expectation is that these additional facilities will
be allowed to lapse upon maturity in May 2021. In addition,
we established a facility line with the COVID-19 Corporate
Financing Facility (“CCFF”) with an issuer limit of £200 million.
The continuing strategy is to ensure that headroom remains at
comfortable levels and that we have a range of competitively
priced funding lines in place (with different banks) at all times
and with different maturity dates. The Group’s committed bank
facilities have a spread of medium-term maturities that now
extends to 2024.
The total bank borrowing facilities at 31 December 2020
amounted to £255 million (2019: £155 million), of which £124.7 million
(2019: £83.7 million) remained unutilised. Interest cover and net
debt to EBITDA covenants in the facilities were comfortably met
at the year end. The bank facilities are unsecured save for
inter-company guarantees between the Group and its
subsidiary undertakings in favour of the facility banks.
Expiry date
Committed facilities
Q3 2024
Q1 2024
Q3 2023
Q2 2023
Q4 2022
Q3 2021
Q2 2021
On-demand facilities
Available all year
Seasonal (February to August inclusive)
Facility
£’m
Cumulative
facility
£’m
35
25
20
20
20
20
90
15
10
35
60
80
100
120
140
230
245
255
Conclusion
The financial outturn in 2020 was impacted by COVID-19.
However, the key pillars and priorities of our 5 year Strategy
remain unchanged. Trading continues to improve and order
books remain strong. The Group has a strong balance sheet
and a conservative capital structure, supported by significant
facility headroom. We will continue to monitor any risk to
demand due to further COVID-19 developments, and remain
well placed to introduce any necessary measures to mitigate
any adverse impact.
Jack Clarke
Group Finance Director
Marshalls plc
marshalls.co.uk
37
Strategic report What ESG Means to Marshalls
Creating better
futures for everyone
Social
At Marshalls, we respect and value the dignity, wellbeing and
rights of employees, their families and the wider community,
as well as their safety. This year has demonstrated all too clearly
the ongoing commitment of our people to the business and
in continuing to operate safely for our customers. You can find
more information on our commitment to respecting people in
our DERI strategy promoting diversity, equality, respect
and inclusion (on page 49).
Governance
Marshalls’ governance framework underpins all the Group's
operations. The Corporate Governance Statement on pages 54
to 63 provides further details of the Group's governance
framework and its importance for our ongoing relationship with
all stakeholders. Good governance requires effective leadership,
a healthy corporate culture and robust systems and processes.
Our internal system of practices, controls and procedures
enables us to operate to the highest standards of ethical
and responsible business. These principles are embedded
in the governance procedures that underpin our ESG and
sustainability operations.
Vanda Murray OBE
Chair
11 March 2021
year Strategy – Read more on page 7
Sustainable materials supply
Understanding the risks and opportunities
related to climate change.
We know the potential impacts of our operations, products
and services and by addressing the risks related to climate
change, we can better protect the environment and our
supply of materials. The next step in our assessment of
climate change risks and opportunities is environmental
profiling. Our climate risk reporting will identify our
environmental score by site and by
region, better enabling us to
mitigate climate change related
risks in the UK and
overseas. It will also
enable us to assess
the opportunities
available to us to
improve our
processes and
product offering.
Dear stakeholder
There is no doubt that 2020 has been a most challenging year,
but being a responsible business is what Marshalls is about.
Throughout the pandemic, we continued to operate safely
and in line with our commitment to creating better futures for
everyone. It is this commitment that drives our ESG strategy.
At its core is sustainability, which is embedded into our business
model and aligned with the Group’s 5 year Strategy.
We are guided by The Marshalls Way – "doing the right things,
for the right reasons, in the right way" – and it is clear to us that
in order to create better spaces and better futures, we have to
put people, communities and the environment first. In terms of
sustainability and resilience, we have a compelling story to tell.
Marshalls has a 130-year history of strong principles, based on
contributing to the world around us. These principles remain
today and sustainability is part of the fabric of the business.
In 2021, our focus is firmly on delivering our 5 year Strategy and
demonstrating how our approach to sustainability sets us apart
by showcasing our credentials to our stakeholders. We are
committed to making our environmental, social and governance
data and policies accessible, so that our customers can trust
the Marshalls brand, our investors can quantify our sustainability
progress and our people can be proud of where they work.
Environment
With COP26 taking place in the UK later this year, climate
change is rightly at the centre of the environmental agenda.
We take our environmental impact seriously and since 2008,
we have reduced our carbon footprint by 50 per cent. We have
also had our carbon emissions targets approved by the
Science Based Targets initiative. This is a huge achievement,
especially as we were the first in our industry to do so.
Our targets are ambitious but we are working on a range of
environmental initiatives which promote climate action and
responsibility throughout our operations. You can read
about some of our highlights in this section of the Annual
Report.
38
Marshalls plc
Annual Report and Accounts 2020
Environmental and Social Delivering sustainable growth
Marshalls’ sustainability strategy is
to create better futures for everyone –
socially, environmentally and economically
We are guided by the United Nations Global Compact and
its universally accepted ten principles which focus on the
four key areas of human rights, labour, the environment and
anti-corruption.
Practically, our strategy work addresses the challenges
and opportunities of the Sustainable Development Goals
– specifically Decent Work and Economic Growth,
Sustainable Cities and Communities, Responsible
Consumption and Production, and Climate Action.
All of our work is underpinned by strong risk-based analysis
and opportunity identification, based on international
standards and is always externally validated.
E
C
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V
O
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S
T
E
G
R
A
T
D
E
S
A
B
-
G O V ERNANCE
Environmental
• Carbon
reduction and
resource use
Social
• Human rights
and modern
slavery
• Water and energy
management
• Community and
diversity
• Biodiversity and
natural capital
• Ethics in the
supply chain
E
C
N
E
I
C
S
R
E
S
P
O
N
S
I
B
L
E
B
U
S
IN
E
S
S
G
O
V
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R
N
A
N
C
E
Doing things The Marshalls Way
GOVERNA N C E
Non-financial information statement
As required by the Companies Act 2006, the table below sets out where the key content requirements of the non-financial
statement can be found within this document (or required by Sections 414CA and 414CB of the Companies Act 2006).
Reporting requirements
Relevant policies
Section within Annual Report
Environmental
matters
Social
Governance
Employees
Principal risks
Business model
Non-financial KPIs
Environmental Policy Statement*
Climate Change Policy*
Timber and Paper Policy
Transport Policy
Code of Conduct Policy*
Social Community Investment Policy
Corporate Responsibility Policy*
Tax Policy*
Human Rights Policy*
Modern Slavery and Anti-Human
Trafficking Policy
Children’s Rights Policy
Anti-Bribery Code Policy*
Tax Policy*
Trading Policy*
Schedule of matters reserved for the Board*
Board Committee terms of reference*
Health and Safety Policy
Serious Concerns Policy
Diversity and Inclusion Policy
Drug and Alcohol Policy
Mental Health and Wellbeing Policy
Sustainability strategy (pages 42 and 43)
Sustainability commitments relating to the environment
(page 40)
Responsible business (page 38)
Charitable donations (page 48)
Health and safety (page 51)
Stakeholder engagement (pages 18 and 19)
Governance and compliance (pages 54 to 63)
Corporate Governance Statement (pages 54 to 63)
Corporate Governance Statement (pages 54 to 63)
Corporate Governance Statement (pages 54 to 63)
Headcount (page 51)
People engagement (pages 48 to 50)
Board diversity (pages 52 and 53)
Gender diversity (page 87)
Stakeholder engagement (pages 18 and 19)
Description of risk process (page 24 to 25)
Risk framework (page 25)
Principal risks and uncertainties (pages 26 to 31)
Our business model (page 16 and 17)
Key performance indicators (pages 22 and 23)
Strategy (pages 20 and 21)
Full versions of the policies referred to above form part of the Group’s Policy Framework that supports Marshalls’ Code of Conduct.
These can be found on the Group’s investor relations website at marshalls.co.uk/about-us/policies.
* Key policies referred to in this Annual Report.
Marshalls plc
marshalls.co.uk
39
Strategic report
What ESG Means to Marshalls continued
Sustainability – materiality matrix
Why do we use a materiality matrix?
We use a materiality matrix to identify the issues that matter most
to our stakeholders and that link to our strategic objectives. It
is based on our risk heatmap (on page 25), the SASB Standards
for Construction, the UN Sustainable Development Goals and
stakeholder engagement. It focuses on the areas that impact on
our business as well as the issues that are key to our stakeholders.
Stakeholder engagement
The matrix is based on our stakeholder engagement focus and
the issues that matter most to them. As part of our materiality
assessment, we have undertaken a series of workshops and
training sessions with our teams to discuss what matters most
to our customers, as well as regular communications and
engagement with our suppliers and partners. In 2021, we will
continue this process by carrying out a comprehensive review
involving a number of internal and external stakeholders,
including customers, staff, suppliers and partners.
Read more about Our Section 172(1) Statement on page 18
Outcomes
The matrix has identified a number of key material issues,
broadly falling in three categories: environment, people and
responsible business. These issues are material to our business
and feed into the development of our strategy. Though they are
individual and relate to different aspects of our operations, they
do not stand alone – they are interconnected and interlinked
and impact on one another.
h
g
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e
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e
d
o
h
e
k
a
t
S
12
a t e ri a lit y
16
M
10
11
17
8
15
14
7
13
18
5
19
9
6
1
4
2
3
Moderate
Significant
Major
Impact on business
1
2
3
4
5
6
7
8
9
Energy management
Water management
Waste management
Biodiversity impacts
Health and safety
Product innovation
Impact of climate change
Carbon reduction
Employee wellbeing
10
Supply chain resilience
11
12
13
14
15
16
17
18
19
Responsible sourcing
Community relations
Human rights due diligence
Modern slavery risk
Anti-corruption
Diversity and equality
Brexit
Regulatory environment
Circular economy
Reporting frameworks
As previously outlined, Marshalls’ governance framework underpins all the Group’s operations. The UN Global Compact and its ten principles is
our overarching sustainability framework, though we also use a variety of other guidelines and frameworks in order to report on our sustainability
performance. This promotes a transparent approach along with compliance, measurability and adoption of widely used standards.
Importance of governance
Reporting body
Why?
Objectives
Corporate Governance Code
Good governance is at the heart of The Marshalls
Way and is key to our promotion of responsible
business, acting in the interest of stakeholders.
• Have a governance framework that
supports the principles of integrity, strong
ethical values and professionalism
United Nations Global
Compact ("UNGC")
As a signatory to the UNGC since 2009,
Marshalls has aligned operations and strategies
with 10 universally accepted principles in the
areas of human rights, labour, environment and
anti-corruption and to take action in support of
UN goals and issues embodied in the
Sustainable Development Goals.
• Uphold the UNGC principles
• Report on progress through annual
Communication on Progress
• Use the UNGC principles to guide
sustainability strategy
• Collaborate with other businesses
as part of UNGC UK working groups
Task Force on Climate-related
Financial Disclosures ("TCFD")
As part of the Group’s climate change strategy
and commitment to science-based targets,
Marshalls supports the TCFD in order to be clear
about our approach to climate related risks.
• Report annually in line with TCFD guidelines
in terms of governance, strategy, risk
management, and metrics and targets
Streamlined Energy and
Carbon Reporting ("SECR")
Reporting to the SECR framework is a
mandatory requirement for Marshalls.
Global Reporting Initiative
("GRI")
GRI standards encourage transparency and we
use the standards as part of our reporting
process.
• Report annually in line with SECR framework
in terms of energy use, greenhouse gas
emissions, emissions intensity ratio,
methodology and energy efficiency action
• Ensure annual sustainability reporting
takes GRI standards into consideration
Sustainability Accounting
Standards Board ("SASB")
SASB industry-specific standards have been used
to guide our materiality analysis.
• Develop annual materiality analysis based
on SASB standards and stakeholder input
• Review materiality matrix on an annual basis
40
Marshalls plc
Annual Report and Accounts 2020
Environmental and Social
Sustainable Development Goals (“SDGs”)
Through our engagement with the UN Global Compact, Marshalls aims to continue to make a rich contribution to the United
Nations’ SDGs.
In 2020, we reviewed each of the 17 SDGs and their individual targets in order to identify the areas that best fit Marshalls’ strategic
objectives and materiality issues. Based on the UN Global Compact’s SDG Action Manager and stakeholder engagement, our review
identified the following priority SDGs. It should be noted that other individual SDG targets are pertinent to Marshalls’ work and
stakeholders. In 2021, we will take our review to its next iteration and analyse the potential risks of our business hindering the
achievement of the SDGs, in order to look at both positive and negative impacts.
Sustainable
Development Goal
Related strategic objectives
How we engage
• Digital transformation
• Paying a Real Living Wage based on the Living Wage Foundation
• Logistics excellence
• Customer centricity
• Operational excellence
• Growth in the emerging
businesses
• Embedding the ETI Base Code into our operations and ensuring fair
working conditions
• Engaging with stakeholders to uphold human rights principles
• Providing professional development opportunities to our employees via
our talent management strategy
• Ethical Risk Index based on ETI Base Code factors for imported stone products
• Brand preference for product
• Collaborating with industry peers on sustainable building practices
specification
• New product development
• Sustainable materials supply
• Investing in new product design for sustainability
• Cement reduction and replacement R&D programme
• Implementing road safety programmes for our drivers
• Digital transformation
• Logistics excellence
• Carbon labelling of our products
• Setting science-based targets for carbon emissions reduction
• Sustainable materials supply
• Investing in more sustainable ways of making our products and reducing plastic
• Operational excellence
• Setting targets for reducing waste and packaging
• Sustainable material supply
• Analysing risks and opportunities relating to climate change
• New product development
• Carbon reduction programme based on approved well below 2°C Science
• Operational excellence
Based Targets initiative targets
• Reporting Scope 1 and 2 emissions with reference to TCFD
recommendations
• Engaging with suppliers to manage and report Scope 3 emissions
Business and human rights
During 2020, the Group introduced a range of measures to support national and global efforts to help tackle the spread of
COVID-19 for business-critical suppliers. These measures included putting in place robust health and safety measures to ensure that
urgent construction products could continue to be delivered to NHS sites, staying connected and continuing to pay our suppliers to
ease the immediate financial impact upon them. We have also reviewed our business and human rights activities, enhanced our risk
analysis, information gathering and auditing processes and have brought forward programmes that were already in the pipeline.
Marshalls has continued to collaborate with sector peers, UN agencies, overseas governments and the UK Government throughout
the year. Collaboration is a key part of our broader human rights RESPECT strategy, covering remediation, engagement, supply
chain, processes, environment, collaboration and technology. The RESPECT strategy will be launched during the first half of 2021,
and reflects the trajectory of global human rights legislation, and also incoming mandatory human rights due diligence.
Traffik Analysis Hub
• Marshalls is the first in the construction
sector, and one of the first globally, to
be a private sector participant in Traffik
Analysis Hub.
• Traffik Analysis Hub is a true
collaboration across multiple sectors
– law enforcement, third sector,
finance, private sector, governments
– to prevent human trafficking and the
harm that it does.
Everyone’s Business app
• Marshalls has accelerated the
introduction of an innovative tech
solution – Everyone’s Business – to
enable all employees to flag quickly
any concerns regarding modern
slavery, health and safety, ethical
sourcing and the environment.
Safecall
• The Group is extending the use of
the whistleblowing hotline, Safecall,
to supplier operations in India, China,
Vietnam, Brazil and Portugal..
• This will enable workers and other local
stakeholders to report issues relating to
the working environment and operations
in a safe and secure way via phone
and web.
Marshalls plc
marshalls.co.uk
41
Strategic report
Sustainability Pillars
The Group’s sustainability pillars are aligned with the UN Global Compact principles. They sit alongside
the Group’s strategic objectives set out on pages 20 and 21 and ensure that the Group’s priorities and
actions take full account of the longer-term sustainability priorities.
T
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L
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O
S
Sustainability pillars
Environment
Climate change and
carbon reduction
Pollution and
resources
Water use
Priorities
Stakeholder engagement
Achievements
Targets
Governance
• Science-based targets
• Working with the Carbon Trust to update
• Approved science-based targets
• Reduce carbon intensity by 40%
• Task Force on Climate-related
• Energy reduction at all sites
• Climate and environmental
risk profiling
carbon labelling for all products
• Carbon reduction meetings with
key suppliers
• Sustainability training for staff
• Renewable energy projects
• Investigating solar energy projects
• Fleet replacement
• Plastic reduction
• Investigating new fuels and
transport methods
• Flood alleviation
• Water risk profiling
• Water harvesting and recycling
with local UK councils
• Independent compliance auditing
• Active membership on Mineral Products
Association ("MPA") committees
• Collaborating with SusDrain, Construction
Industry Research & Information Association
("CIRIA’s") SuDS working group
• Working with research partners on
infiltration testing for permeable paving
Labour
Labour, supply chain,
responsible sourcing and
community relations
• Children’s rights
• Elimination of child labour
• Responsible sourcing processes
• Community relations processes
• Chairing the Private Sector Strategic
Advisory Panel, part of the PACE Consortium,
working on the worst forms of child labour
• Engagement with internal stakeholders on
formalising community relations processes
Human rights
Human rights and
modern slavery
Anti-corruption
Anti-bribery
Responsible business
Responsible business
People
• Assessing impact of COVID-19 on
• Engagement with UNGC UK Modern Slavery
• Modern slavery awareness staff training
• Launch Everyone’s Business app
human rights
Working Group
• Human rights RESPECT programme
• Risk mapping
• Cross-sectoral collaboration in India and
multi-stakeholder programme in Vietnam
• Crimestoppers campaign
• Power of Logistics programme
• Launch Safecall whistleblowing hotline
to overseas supplier operations
• Human Rights Due Diligence
• UN Guiding Principles on
Business and Human Rights
• Engagement with Traffik Analysis Hub
to prevent human trafficking
Framework
• BES 6002
• Modern Slavery Act 2015
E
C
N
A
N
R
E
V
O
G
• Code of Conduct training for all staff
• Engagement with staff and suppliers
• Promotion of Safecall
whistleblowing hotline
to uphold Marshalls' Code of Conduct
and Anti-Bribery Code
• Marshalls Code of Conduct launch
• Marshalls Code of Conduct training
• UK Bribery Act 2010
• Plans for international launch of Safecall
for 100% of staff
• Marshalls’ Anti Bribery Code
whistleblowing hotline
• Review anti-bribery training processes
and Serious Concerns Policy
• Contribution to the SDGs
• Providing information on ESG performance
• Payback of £9.4m furlough money and
• Provide information on SDG alignment
• Corporate Governance Code
• Fair Tax Mark accreditation
• Materiality assessment
• Upholding responsible
business practices
to external stakeholders
• Charity partnership with Macmillan
• Product donation to Manchester
Nightingale Hospital
• Members of Made in Britain
• Internal communications
• Use of social media to stay connected
• Effective internal communications programme
• Implement DERI strategy, focusing on
• Employment and equality
• Employee wellbeing
• Gender equality
• Paying a Living Wage
during pandemic
• Actively asking for feedback via Your Voice
employee survey
• Engagement with the Social Mobility Pledge
Health and safety
• Health and safety of staff and
customers during pandemic
• Engaging with staff on behavioural safety
programme
• Reduction of major incidents
• Working with mental health first aiders
and days lost
to support our staff
• Mental health first aider process
42
Marshalls plc
Annual Report and Accounts 2020
• Re-baselining of relative targets
• Reduction of total C02e (including transport)
by 50% since 2008
by 2030 (from a 2018 base year)
Financial Disclosures ("TCFD")
• Setting an internal carbon price
• Development of Environmental
Product Declarations
• Streamlined Energy and
Carbon Reporting ("SECR")
• BSI verification of data
• 8,000 tonnes of CO2e saved from
• 3% reduction year on year of kWh/
• Streamlined Energy and
green electricity
tonne of concrete
Carbon Reporting ("SECR")
• Assessment of all sites for solar energy suitability
• ISO 50001:2018 auditor training
• Logistics UK
• Initiatives reducing plastic consumption by
• Focus on biodiversity
over 30% since 2017
• ISO 14001 and ISO 50001:2018 maintained
• Euro 6 standard for fleet
• Mineral planning legislation
• ISO 14001/ISO 50001:2018
• New KPIs set
• Permeable paving and sustainable drainage
systems ("SuDS") to alleviate flooding
• Continued monitoring of water
harvesting and recycling at sites
• Continued development of new
products and technologies
• Environment Agency
• Permits and consents
• Water stress areas
• ISO 14001
• BES 6001 Responsible Sourcing
of Construction Products
• Development of community
• ETI Base Code
relations programme
• Children’s Rights and Business
• BES 6002 Ethical Labour Sourcing
• Re-accreditation of BES 6001 and
• Maintaining order levels and supplier
payments during pandemic
BES 6002
• Impact review of children’s
rights programme
Principles
• BES 6001
• BES 6002
deferred VAT
• Set-up of ESG Committee
• £183,000 donated to Macmillan
• Fair Tax Mark accreditation
• 99 apprenticeships
• Living Wage employer
• Employee Voice Group
• Fair Tax Mark re-accreditation
• UN Sustainable Development
• Implementation of ISO 20400
Sustainable Procurement
Goals
• Fair Tax Mark
diversity, equality, respect and inclusion
legislation
• Introduce four employee networks:
• UNGC Target Gender
gender equality, multi-cultural, identity
Equality group
and ability
• Living Wage re-accreditation
• Social Mobility Pledge
• Living Wage Foundation
• Donation of PPE and managing health and
• Reduction of major incidents by 10%
• Health and safety legislation
safety processes throughout COVID-19
• 20% increase in health and safety training
hours per employee
• 34.5% reduction in lost time incidents
• ISO 45001 maintained
• Reduction in days lost of 10%
• Increase number of mental health
• ISO 45001
• RIDDOR
first aiders
• Introduction of SHEQ digital
management system
Environmental and Social
T
N
E
M
N
O
R
I
V
N
E
L
A
I
C
O
S
Sustainability pillars
Environment
Climate change and
carbon reduction
Pollution and
resources
Water use
Labour
Human rights
Human rights and
modern slavery
Anti-corruption
Anti-bribery
Responsible business
Responsible business
People
Priorities
Stakeholder engagement
Achievements
Targets
Governance
• Science-based targets
• Working with the Carbon Trust to update
• Energy reduction at all sites
• Climate and environmental
risk profiling
carbon labelling for all products
• Carbon reduction meetings with
key suppliers
• Sustainability training for staff
• Renewable energy projects
• Investigating solar energy projects
• Fleet replacement
• Plastic reduction
• Investigating new fuels and
transport methods
• Flood alleviation
• Water risk profiling
• Water harvesting and recycling
with local UK councils
• Independent compliance auditing
• Active membership on Mineral Products
Association ("MPA") committees
• Collaborating with SusDrain, Construction
Industry Research & Information Association
("CIRIA’s") SuDS working group
• Working with research partners on
infiltration testing for permeable paving
• Approved science-based targets
• Re-baselining of relative targets
• Reduction of total C02e (including transport)
by 50% since 2008
• Reduce carbon intensity by 40%
by 2030 (from a 2018 base year)
• Task Force on Climate-related
Financial Disclosures ("TCFD")
• Setting an internal carbon price
• Development of Environmental
Product Declarations
• Streamlined Energy and
Carbon Reporting ("SECR")
• BSI verification of data
• 8,000 tonnes of CO2e saved from
• 3% reduction year on year of kWh/
• Streamlined Energy and
green electricity
tonne of concrete
Carbon Reporting ("SECR")
• Assessment of all sites for solar energy suitability
• ISO 50001:2018 auditor training
• Logistics UK
• Initiatives reducing plastic consumption by
• Focus on biodiversity
over 30% since 2017
• ISO 14001 and ISO 50001:2018 maintained
• Euro 6 standard for fleet
• Mineral planning legislation
• ISO 14001/ISO 50001:2018
• New KPIs set
• Permeable paving and sustainable drainage
systems ("SuDS") to alleviate flooding
• Continued monitoring of water
harvesting and recycling at sites
• Continued development of new
products and technologies
• Environment Agency
• Permits and consents
• Water stress areas
• ISO 14001
Labour, supply chain,
• Children’s rights
responsible sourcing and
• Elimination of child labour
community relations
• Responsible sourcing processes
• Community relations processes
• Chairing the Private Sector Strategic
Advisory Panel, part of the PACE Consortium,
working on the worst forms of child labour
• Engagement with internal stakeholders on
formalising community relations processes
• BES 6001 Responsible Sourcing
of Construction Products
• Development of community
• ETI Base Code
relations programme
• Children’s Rights and Business
• BES 6002 Ethical Labour Sourcing
• Re-accreditation of BES 6001 and
• Maintaining order levels and supplier
payments during pandemic
BES 6002
• Impact review of children’s
rights programme
Principles
• BES 6001
• BES 6002
• Assessing impact of COVID-19 on
• Engagement with UNGC UK Modern Slavery
• Modern slavery awareness staff training
• Launch Everyone’s Business app
human rights
Working Group
• Human rights RESPECT programme
• Cross-sectoral collaboration in India and
• Risk mapping
multi-stakeholder programme in Vietnam
• Crimestoppers campaign
• Power of Logistics programme
• UN Guiding Principles on
Business and Human Rights
• Launch Safecall whistleblowing hotline
to overseas supplier operations
• Human Rights Due Diligence
• Engagement with Traffik Analysis Hub
to prevent human trafficking
Framework
• BES 6002
• Modern Slavery Act 2015
E
C
N
A
N
R
E
V
O
G
• Code of Conduct training for all staff
• Engagement with staff and suppliers
• Marshalls Code of Conduct launch
• Marshalls Code of Conduct training
• UK Bribery Act 2010
• Promotion of Safecall
whistleblowing hotline
to uphold Marshalls' Code of Conduct
and Anti-Bribery Code
• Plans for international launch of Safecall
for 100% of staff
whistleblowing hotline
• Review anti-bribery training processes
• Marshalls’ Anti Bribery Code
and Serious Concerns Policy
• Contribution to the SDGs
• Providing information on ESG performance
• Payback of £9.4m furlough money and
• Provide information on SDG alignment
• Corporate Governance Code
• Fair Tax Mark accreditation
• Materiality assessment
• Upholding responsible
business practices
to external stakeholders
• Charity partnership with Macmillan
• Product donation to Manchester
Nightingale Hospital
• Members of Made in Britain
deferred VAT
• Set-up of ESG Committee
• £183,000 donated to Macmillan
• Fair Tax Mark accreditation
• Fair Tax Mark re-accreditation
• UN Sustainable Development
• Implementation of ISO 20400
Sustainable Procurement
Goals
• Fair Tax Mark
• Internal communications
• Use of social media to stay connected
• Effective internal communications programme
• Implement DERI strategy, focusing on
• Employment and equality
• Employee wellbeing
• Gender equality
• Paying a Living Wage
during pandemic
employee survey
• Actively asking for feedback via Your Voice
• Engagement with the Social Mobility Pledge
• 99 apprenticeships
• Living Wage employer
• Employee Voice Group
diversity, equality, respect and inclusion
legislation
• Introduce four employee networks:
• UNGC Target Gender
gender equality, multi-cultural, identity
and ability
• Living Wage re-accreditation
Equality group
• Social Mobility Pledge
• Living Wage Foundation
Health and safety
• Health and safety of staff and
customers during pandemic
• Engaging with staff on behavioural safety
programme
• Reduction of major incidents
• Working with mental health first aiders
and days lost
to support our staff
• Mental health first aider process
• Donation of PPE and managing health and
• Reduction of major incidents by 10%
• Health and safety legislation
safety processes throughout COVID-19
• 20% increase in health and safety training
hours per employee
• 34.5% reduction in lost time incidents
• ISO 45001 maintained
• Reduction in days lost of 10%
• Increase number of mental health
• ISO 45001
• RIDDOR
first aiders
• Introduction of SHEQ digital
management system
Marshalls plc
marshalls.co.uk
43
Strategic report
Environment
Climate change
Climate change presents a risk for Marshalls (as highlighted
in our risk heatmap on page 25), as well as a number of
opportunities. Our challenge is in mitigating these risks whilst
finding ways to embrace the opportunities for us as a business,
but also for our customers and other stakeholders.
Risks
• Changing public perceptions of the longer-term implications
of climate change
• Unpredictable and extreme weather events
• Physical site-based climate change impact
Opportunities
• Product carbon footprints
• Water management products including permeable paving
and sustainable drainage systems
• Using weather trend data to mitigate impact
Carbon reduction
Decarbonisation is a commitment that Marshalls takes seriously.
By aligning greenhouse gas emission reduction targets, across all
relevant scopes, with well below 2°C emissions scenarios, Marshalls is
clear that positive action towards a net-zero future by 2050 makes
business sense.
2020 highlights
In 2020, Marshalls had its emissions reduction targets approved
by the Science Based Targets Initiative as consistent with levels
required to meet the goals of the Paris Agreement. Throughout the
global pandemic, Marshalls has forged ahead with its commitment
to carbon reduction with a variety of projects including reducing
plastic packaging, trialling new modes of transport to move
product, assessing site solar energy capabilities and new product
development to reduce cement content.
Priorities
Marshalls’ Energy and Climate Change Policy confirms the
Group’s commitment to reducing the energy and carbon impact
of its business. Since 2008, we have reduced the total CO2e of
the business (including transport) by 50 per cent. Further to
work undertaken in 2020 to re-baseline our targets (from a 2018
baseline), our new targets are to reduce absolute emissions
15 per cent by 2025 and 27 per cent by 2030. For relative
(intensity) emissions, the targets are 23 per cent by 2025 and
40 per cent by 2030 – in line with science-based targets.
Policies and governance
Marshalls has a mandatory duty to report its annual greenhouse
gas (“GHG”) emissions under the Companies Act 2006 (Strategic
Report and Directors’ Report) Regulations 2013. The Group uses
The Greenhouse Gas Protocol: A Corporate Accounting and
Reporting Standard (revised edition) and the June 2018
Department for Business, Energy and Industrial Strategy (“BEIS”)
published CO2e conversion factors to measure its GHG emissions.
Marshalls has achieved the Carbon Trust Standard and will seek
re-certification in 2021. The Group’s approach to the Energy
Savings Opportunity Scheme (“ESOS”) legislation was to define
its energy management in compliance with the international
standard for energy management, ISO 50001, gaining
re-accreditation in 2020. The Group continues to voluntarily
disclose data to the Carbon Disclosure Project (“CDP”),
receiving a B rating for its latest submission for 2019 data.
44
Marshalls plc
Annual Report and Accounts 2020
Our commitment
“We commit to reduce Scope 1 and 2 greenhouse gas
emissions 40 per cent per tonne of production by 2030 from
a 2018 base year. We also commit that 73 per cent of
suppliers by emissions, covering purchased goods and
services and upstream transport and distribution, will have
science-based targets by 2024.”
For Marshalls, Scope 1 refers to our fuel usage, including diesel,
petrol, gas oil, liquified petroleum gas ("LPG"), kerosene and
natural gas. Scope 2 refers to our electricity usage.
In 2020, Marshalls switched to green electricity so we are
reporting our Scope 2 emissions in two different ways – location
based and market based. Location-based measurement uses
Government emissions factors, which is the way we have
reported in the past. This year, however, we are taking into
consideration our market-based measurement, which uses
supplier emissions factors.
Absolute Scope 1 and 2 emissions (tonnes CO2e)
This chart illustrates the Group’s UK absolute CO2e emissions in
tonnes, including transport activities, and energy use in kilowatt
hours, between 2016 and 2020.
e
2
O
C
s
e
n
n
o
T
50,000
40,000
30,000
20,000
10,000
0
3
7
8
0
4
,
9
4
3
4
1
,
2
0
6
1
4
,
2
8
5
2
1
,
9
5
5
3
4
,
0
7
6
0
1
,
7
4
1
2
4
,
0
3
4
0
1
,
2
7
0
5
3
,
5
6
5
7
,
7
9
8
2
,
2016
2017
2018
2019
2020
Scope 1 (market based)
Scope 2 (location based)
Scope 2 (market based)
Relative Scope 1 and 2 emissions
(kg CO2e per tonne of production)
This chart illustrates the Group’s CO2e intensity emissions as a
proportion of production output, including transport activities
between 2016 and 2020.
t
u
p
t
u
o
n
o
i
t
c
u
d
o
r
p
e
n
n
o
t
r
e
p
e
2
O
C
g
k
14.00
12.00
10.00
8.00
6.00
4.00
2.00
0.00
10.57
10.24
9.92
9.21
5
6
8
.
0
7
7
.
2016
2017
2018
2019
2020
Scopes 1 and 2 (location based)
Scopes 1 and 2 (market based)
Note: Intensity ratio for 2020 is 8.63kg CO2e per tonne (location
based) and 7.70kg CO2e per tonne (market based).
We use an intensity ratio in order to define emissions data in
relation to our business – for Marshalls, this is tonnes of CO2e per
tonne of product. This allows us to benchmark ourselves, give
context to stakeholders and allows for business growth.
Environmental and Social
Task Force on Climate-related Financial Disclosures ("TCFD")
Marshalls has publicly committed to being a supporter of the TCFD and has this year decided to report with reference to
TCFD recommendations, ahead of it becoming mandatory.
Disclosure
Governance
• Marshalls’ CEO has overall responsibility for climate-related issues (including risks and opportunities) and
Marshalls’ Group FD has responsibility to the Board for reporting on climate related issues.
• Climate change is discussed at the annual Board strategy review and both the Energy and Climate
Change Policy and the Environmental Policy are signed off by the Board annually. Twice a year, the Board
reviews the Group Risk Register (a significant part of which is related to climate change).
• The Group Sustainability Director reports to the Board on progress against targets and provides strategic
input on the management of climate related risks and opportunities. He chairs the ESG Committee, which
was approved by the Board and is made up of 17 members of senior staff from different parts of the
business. The Committee meets quarterly to review ESG targets, update on performance to enable better
reporting and discuss cross-departmental ideas and initiatives.
• The Health, Safety and Environmental Director reports to the Board and has Group responsibility for
delivering the environmental strategy, and managing the Energy team which delivers operational
improvements, legal compliance and stakeholder reporting.
Strategy
• For carbon and energy data, an independent audit is carried out by BSI.
• In the short term (0–1 year), Marshalls has to meet its own carbon reduction performance targets and
respond to climate change related regulation and legislation. The potential impact of an unexpected
reputational event could lead to disruption in production. The Group employs compliance procedures and
independent auditing processes comprising of ISO 50001:2018 for energy management from BSI and the
Carbon Trust Standard for carbon management from the Carbon Trust.
• In the short term (0–1 year), Marshalls has to meet its own carbon reduction performance targets and
respond to climate change related regulation and legislation. The potential impact of an unexpected
reputational event could lead to disruption in production. The Group employs compliance procedures
and independent auditing processes. Independent auditing processes comprising of ISO 50001:2018 for
energy management from BSI and the Carbon Trust Standard for carbon management from the Carbon
Trust.
• In the short to medium term (1–5 years), changing public perceptions of the impact of climate change
are driving customers to become more interested in Marshalls’ sustainability credentials. This offers an
opportunity to showcase our work and our commitment to sustainability, including the full carbon labelling
of all products.
• Unpredictable and extreme weather patterns are a risk in the short, medium and long term (5–30 years).
Prolonged rainfall patterns disrupt the demand and installation of landscape products. We mitigate this
challenge by closely monitoring weather data and linking weather patterns to impact on sales. Our
centralised specialist functions support mitigation plans and the management of relationships on
commercial contracts. We focus on resilience strategies for climate change, as well as the development
of our Water Management business (including permeable paving and sustainable drainage solutions).
• Part of the work involved in setting science-based targets was to look at a suitable baseline year, suitable
sector plan, 2°C, beyond 2°C and 1.5°C scenarios to provide a pathway for Scope 1 and 2 emissions as
potential options, and investigating Scope 3 options.
• In order to define substantive impacts on the business, Marshalls has a formal ongoing process to identify,
assess and analyse risks and those of a potentially significant nature are included in the Group Risk
Register. All risks are aligned with the Group’s strategic objectives and each risk is analysed for impact and
likelihood to determine exposure and impact to the business. The register also looks at the financial impact
of reputational risk.
• The Board determines the Group’s approach to risk, its policies and the procedures that are put in place
to mitigate exposure to risk.
• All capital spend is assessed both economically and environmentally. Each project is evaluated through
an internal Capital Environmental Assessment process which assesses the risk of climate change in terms
of flood plan management and water stress, implementing flood protection or water harvesting/reduction
measures where appropriate. Assessments are also made in terms of energy intensity and carbon intensity
of projects.
• Working with Verisk Maplecroft, Marshalls has started to analyse climate risk using data to calculate
environmental risk score by environmental profile grouping by site and region. The score takes into account
a range of climate related issues including water stress, heat stress and sea level rise. A climate risk report
will be published in 2021.
Risk
Metrics and
targets
• Metrics used to assess climate related risks and opportunities include climate data, climate risk and
environmental profiling data, energy use and carbon emissions. These are in line with our strategy and risk
management process.
• See page 44 for Scope 1 and Scope 2 greenhouse gas ("GHG") emissions.
• See pages 42 and 43 for targets used by Marshalls to manage climate related risks and opportunities and
performance against targets.
Marshalls plc
marshalls.co.uk
45
Strategic report Environment continued
Streamlined Energy and Carbon Reporting
(“SECR”)
Marshalls continues to report its global Scope 1 and 2 GHG
emissions in tonnes of carbon dioxide equivalent. With the
introduction of the SECR framework, Marshalls is also reporting
underlying global energy use as well as the split between UK
and offshore energy use in other countries.
The two charts below show underlying global and UK energy use.
UK energy performance in kWh
)
s
n
o
i
l
l
i
m
(
h
W
k
250
200
150
100
50
0
205.530
209.167
217.868
215.836
178.682
2016
2017
2018
2019
2020
Belgium energy performance in kWh
year Strategy – Read more on page 7
New product development –
Maltby concrete Brick
At the beginning of 2021, Marshalls Bricks and
Masonry reopened the previously mothballed
Maltby site and commissioned a new
manufacturing plant to provide additional
capacity for 50 million concrete bricks annually.
The new Maltby concrete brick comprises multiple
ranges and has been specifically designed to
maximise the CO2 savings and to meet the needs
of bricklayers in terms of ease of use and speed
of build.
The formed perforations reduce the weight and the material
used to manufacture each brick which provides significant
installation benefits by providing a safer, quicker and easier build.
Substantial energy and emissions savings are made over
the traditional process still employed to "fire" clay bricks,
contributing to a carbon reduction of 49 per cent over
the lifetime of the brick or house.
Marshalls Bricks and Masonry concrete
perforated brick
• Innovative masonry product – unique manufacturing
technique and mix design
)
s
n
o
i
l
l
i
m
(
h
W
k
2.5
1.5
1
0.5
0
2.248
2.250
2.028
2.023
• Minimal energy input compared to traditional clay brick
1.717
– far smaller environmental footprint
• Produced by compacting a semi-dry concrete mix
• 100 per cent recyclable concrete mix
• Tighter production tolerances, very consistent and reliable
– BRE A+ rated
• Low water absorption and minimal efflorescence
49%
Lifetime carbon reduction compared with the clay alternative
2016
2017
2018
2019
2020
Relative energy performance in the UK in kWh per
tonne of product
This chart shows Marshalls' energy use in the UK in relation to
product. The intensity ratio for 2020 is 36.8kwh per tonne of
product and this is calculated by dividing our kWh (energy)
usage by our production output (tonnes).
Self-generated energy from renewables in kWh
This chart shows self-generated energy from the solar array at
our Sandy manufacturing site.
e
n
n
o
t
/
h
W
k
50
40
30
20
10
0
39.36
40.04
42.40
37.82
36.25
2016
2017
2018
2019
2020
250,000
200,000
150,000
h
W
k
100,000
50,000
0
238,237
197,294
201,635
199,453
209,551
2016
2017
2018
2019
2020
46
Marshalls plc
Annual Report and Accounts 2020
Environmental and Social
In 2020, Marshalls engaged in a variety of measures to improve the business’ energy efficiency. The table below shows the actions
taken by different parts of the business to increase energy efficiency, reduce carbon and meet our emissions reduction targets.
Project
Green electricity
Reduced plastic packaging
Actions
Outcomes
Purchasing of green electricity supply.
Reduced plastic consumption by over a
third since 2018 and significantly reduced
thickness on all remaining plastic packaging.
Carbon reduction of 8,000 tonnes from
green electricity.
Reducing energy consumption without
affecting pack integrity or branding.
Renewable energy
Assessment of all major sites for solar
energy capabilities.
Commitment to have one major solar
energy project per year.
Building management systems
Installation/upgrade of heating
management systems at several sites.
Carbon savings of over 1,272 tonnes
of carbon.
Cement reduction
Natural gas
Carbon labelling
Fleet emissions
Ongoing investigation and product
development involving reduced
cement content.
Change of carbon fuel for all heating
applications (production, curing, comfort
heating and hot water).
Working with the Carbon Trust to update
our carbon labelling information for
Marshalls products.
Several projects that are being trialled and
tested with suppliers.
Greenhouse gas emission reduction of
403 tonnes of carbon per year.
Verification of product carbon footprints.
Ongoing upgrading of vehicles in our fleet
to comply with Euro 6 standards.
Limit exhaust of harmful pollutants and
improve fuel economy.
Ratings agency
Marshalls engages with a variety of different ESG ratings agencies and projects. Here we report on our performance and progress
in order to promote transparency in ESG disclosure for our stakeholders.
Index/rating
Description
Performance
Progress
Carbon Disclosure Project
("CDP")
A global disclosure system that enables companies
to manage their environmental impacts.
FTSE4Good
ISS
MSCI
Sustainalytics
B (Management Level
which demonstrates
taking coordinated action
on climate issues)
FTSE4GOOD constituent
C
AAA
Designed to measure the performance of companies
demonstrating strong ESG practices.
Provides investors with the insight to effectively
incorporate sustainability in their investment decision.
Designed to measure a company’s resilience to
long-term, industry material ESG risks.
Based on a framework that measures a company’s
exposure to industry-specific material ESG risks
and how well a company is managing those risks.
23.4 ESG risk rating
year Strategy – Read more on page 7
New product focus – Sustainable Drainage Systems ("SuDS")
Climate change and extreme weather events have an impact on flooding and, though excessive rain
is a risk to the business, developing products that tackle flooding also offers an opportunity.
SuDS mitigate many of the adverse impacts of storm water
run-off on the environment in terms of both volume and
pollutants. Marshalls’ range of permeable paving provides
real benefits to our environment in terms of both performance
and aesthetics.
Our approach enables us to create drainage systems that
provide natural water quality treatment, encourage infiltration,
reduce the impact of peak flows and minimise impact on local
habitats of both communities and wildlife.
Driveline Drain® is a unique one-piece concrete drainage system that provides a more attractive and
sustainable solution compared to metal or plastic drainage alternatives.
Marshalls plc
marshalls.co.uk
47
Strategic report Social
“Engaging with the people at Marshalls
continues to be an important focus for the
Board and a key part of the people
strategy, highlighted further by the
challenges of COVID-19. I’m proud to see
how the Employee Voice Group has evolved
into an elected representative body, as
chosen by Marshalls’ employees. We value
the incredible role the elected EVG is
playing in helping us to shape key initiatives
to improve employee experience. We’ve
made real progress, and while there is still
more to do to enhance our position, we are
confident in our plans. We’re excited by the
people journey we are on.”
Janet Ashdown
Non-Executive Board sponsor for employee engagement
Employee experience
Wellbeing & Me
A three-year focused employee wellbeing strategy
has been created using employee feedback. Our
mission is to enable employees to be their best at
work by creating a wellbeing culture. Our “Wellbeing
& Me” offering includes four key focus areas: physical,
mental, financial and social.
Your Voice
In 2020, we launched a new employee engagement
listening strategy, partnering with Peakon. Throughout
the year, we have actively asked employees for
feedback on life at Marshalls, their wellbeing
and how we handled COVID-19.
We have maintained an employee net promoter
score of 7.6, which is 0.2
above our industry
benchmark. We look
forward to building
on this in 2021.
Talent and
recruitment
Annual talent reviews
enable Marshalls to
identify high potential
people and succession plans to build talent pools for
the future. Marshalls' in-house Talent team attracts,
sources and engages talent directly from the market
to promote our employer brand and ensure quality of
hire. Over 30 per cent of our hiring is as a result of
internal moves and promotion.
Living Wage
employer
We have maintained our
Living Wage accreditation
in 2020. We recognise the
value that this brings to
creating better futures
for our people.
2,500
employees
Fair Tax Mark
As a sustainable and
responsible business,
Marshalls pays its fair share
of tax. The Fair Tax Mark is
given to businesses which
display a transparency in
their tax affairs and which
are proud to state the fact
they are good tax payers.
7
years running
Charitable and
community
donation
We continue to support our
charity partner, Macmillan,
and have extended this
partnership for a further year
in recognition of the impact
that COVID-19 has had on
its fundraising.
£183k
donated
48
Marshalls plc
Annual Report and Accounts 2020
Environmental and Social Bringing The Marshalls Way to life
The Marshalls Way
The Marshalls Way is how we do business morally, ethically
and legally. To bring this to life for our people, we have
worked with the business to co-create a behavioural
framework on what it means to act and work in The
Marshalls Way.
To support this we have started a programme of four
strategically focused upskilling sessions across the whole
business – The Marshalls Way Team Talks. These sessions
are led by people managers, and are aimed at opening
meaningful dialogue on The
Marshalls Way and our
5 year Strategy.
Apprenticeships
We have launched our new targeted apprenticeships
strategy following a thorough needs analysis considering
present and future strategy-driven skills needs. Focus
areas include management and leadership, business
administration, information technology, digital
marketing and engineering. Among our 99 active
apprentices we have employees at the start of
their careers at entry level, but also experienced
employees expanding their skills and knowledge
up to degree level qualifications. 12 employees
have achieved qualifications as part
of an apprenticeship scheme in 2020.
Diversity, Equality, Respect
and Inclusion ("DERI")
We have built the Marshalls DERI strategy with
the ambition to further influence the culture, behaviour
and awareness of our employees and leaders. The
three-year change programme will start with a tactical
plan to open the conversation, involve and educate
our people and address what we discover.
Gender
Disability
Ex-forces
Focus areas for DERI
The initial focus will be on developing gender equality
and social mobility, and
engaging people from ethnic
backgrounds without
excluding the need to
recognise intersectionality.
14+
Women’s
Empowerment
Principles
In 2020, Marshalls began
working with the United
Nations Global Compact
on our target for gender
equality, taking action to
advance women's leadership
and representation in our
business. We have an action plan
in place to further our commitment to
supporting and promoting the rights of women and
girls by becoming Women’s Empowerment Principles
("WEPs") signatories. With this public commitment we
will be working towards upholding and implementing
the principles across our own business and our full
global supply chain.
Sexual
orientation
Religious
belief
Race /
ethnicity
Social
mobility
Apprentices
In 2020, we increased
our number of active
apprenticeships by 98 per
cent (vs 2019), bringing our
total number of apprentices
to 99. Our commitment to
supporting professional
development at Marshalls
fosters talent and skills growth.
Total number of
apprentices in 2020
99
+98%
Employee
development
Focus on health and safety
and employee wellbeing
during 2020, delivering a
combined 14,000+ hours of
training. We utilised the
expertise of our employee
assistance programme
partner, CiC, to deliver
webinars focused on mental
health and wellbeing during
the pandemic, with an
excellent employee uptake.
Cumulative hours,
training
14,000+
Employee Voice Group
We have evolved our
Employee Voice Group into an
elected representative body
of 19 employees. It acts as a
sounding board for change
and developments at Marshalls,
ensuring they represent the
voice of their employees while
being champions of our culture
change mission.
ENPS score of
7.6
(0.4 above the
industry benchmark)
Marshalls plc
marshalls.co.uk
49
Strategic report14
+
15
+
14
+
15
+
14
+
14
Social continued
The Marshalls Code of Conduct
Culture and communications
Through a collaborative working group of experts
from across the Group, the Marshalls Code of
Conduct was redesigned in 2019. Throughout the
early part of 2020, a training programme to support
the rollout of the new Marshalls Code of Conduct
was co-created with the same business experts. The
training programme was launched to the full business
in September 2020, with the aim of all employees
completing the in-depth training by March 2021. All
new employees will be asked to complete this
training as part of their induction programme.
To support the rollout, booklet copies of the Marshalls
Code of Conduct have been delivered to all
Marshalls leaders. A condensed version of the
booklet, created as
a pocket guide, is
being delivered to all
Marshalls Operations
employees as part
of their training.
The Marshalls Story and the Marshalls history timeline have
been created with support from more than 100 employees. The
Marshalls Story brings our history and strategy to life, while the
history timeline gives a visual representation of our 130 years in
business. Both The Marshalls Story and the timeline are used as
key collateral in the engagement of current and future employees
into the 5 year Strategy.
Throughout 2020, we maintained a vital communications pipeline
to employees, which is ongoing today. We prioritised providing
regular updates, guidance and support, as well as being quick
to react to new local, NHS and UK Government guidance. We
recognise that our people place trust in the communications we
share and have looked to us as a major source of information
throughout the pandemic.
Our collaborative approach engaged employees from
different functions, working together to ensure we could
communicate quickly and consistently. Throughout the
pandemic, we used a variety of communications channels
to keep in touch, including text message alerts, letters,
posters for our sites and our dedicated Facebook page.
Case study
Engagement
Mental health and wellbeing
In 2020, looking after the mental
health of our people has been a
priority. Mental health conversations
with our dedicated mental health
and wellbeing service increased by
over 60 per cent this year (based on
like-for-like data). During the
national lockdown, our increased use
of internal communications channels
ensured we were able to stay
connected and promote our
employee assistance programme.
We also introduced wellbeing
focused posts on our Marshalls social
media accounts, offering useful
advice, webinars and support.
Development
Marshalls is keen to promote learning
and development. We work with
several colleges and training
providers offering work experience
placements and apprenticeship
opportunities for people starting
out on their career journey. We
also offer leadership programmes
to provide our leaders with the
practical tools they need to lead
and inspire their teams. In 2020,
despite the pandemic, Marshalls
invested over 50 per cent more on
different apprenticeships compared
to 2019.
Community support
Our ability to operate safely and
efficiently enabled us to also
contribute to our local communities.
We delivered face shields to social
care workers, along with a donation
of our own PPE to Calderdale Royal
Hospital ICU, 100 tonnes of screed for
the Manchester Nightingale Hospital
and paving to Blackpool Victoria
Hospital. Outside the UK, we shared
our health and hygiene messaging
with our overseas supply chain,
maintained order levels and
continued to pay suppliers
throughout the pandemic.
50
Marshalls plc
Annual Report and Accounts 2020
Environmental and Social Health and safety
The Group Finance Director, Jack Clarke, is
the Board Director responsible for the health
and safety performance of the Group. The
Group’s Health and Safety Policy is approved
by the Board and reviewed at least annually.
Marshalls’ five-year Health and Safety
Strategy is aligned with the business strategy
with set objectives, and clearly demonstrates
the commitment of the business to take the
safety and wellbeing of its employees to the
highest level. The Board is fully committed
to the continuous development and
improvement of the business’ safety
processes and the importance of engaging
and developing a competent workforce.
The achievement of annual health and safety improvement
targets is directly linked to the remuneration of the Executive
Directors and senior management, as explained in the
Remuneration Report on pages 70 to 89.
The headline target for 2020 was to maintain days lost resulting
from workplace incidents at a figure no higher than the 2015
actual result (excluding the impact of acquisitions within
a period of three years from purchase).
The table below shows the KPIs used by the Group to monitor
performance, and progress against those KPIs over the last five years.
Accident frequency and severity rates
(per 1 million hours worked) 2015–2020 Marshalls UK
2015
2016
2017
2018
2019
2020
All accidents
48.8
49.2
43.4
50.5
41.4
15.9
All lost time accidents
All RIDDORs
All days lost
5.1
1.6
5.6
2.3
4.1
1.4
3.2
2.9
2.9
0.9
1.9
0.6
45.8
38.0
24.6
38.1
32.8
28.8
Average UK headcount 2,237 2,253 2,307 2,302 2,348 2,417
Note: The data for Edenhall is not included for 2018-2020 as it is still within the
integration period of three years from purchase.
Note: The above data covers employees and contractors.
The actual results achieved against the 2016 target were:
Reduction in days lost
resulting from all accidents
frequency rate
Reduction in lost time
incidents (“LTIs”)
frequency rate
12.2%
34.5%
Reduction in incidents
reportable to the HSE under
the Reporting of Injuries,
Diseases and Dangerous
Occurrences Regulations
(“RIDDOR”)
Reduction in all incident
frequency rate
61.5%
33.3%
In 2020, 100 per cent of sites had ISO 45001:2018 for
Occupational Health and Safety Management Systems in place
(this does not include Edenhall as it is still within the integration
period of three years from purchase). This internationally recognised
standard provides a framework to increase safety, reduce
workplace risks and enhance health and wellbeing at work.
In 2020, Marshalls demonstrated its commitment to meeting the
highest standards of safety, health and wellbeing by continuing
to operate safely during national lockdown restrictions. The year
saw the introduction of a variety of initiatives to ensure the
continued safety of employees, customers and suppliers during
the pandemic:
• creation and implementation of detailed COVID-19 risk
assessments and procedures across the business;
• support and advice from the SHE team during the pandemic,
including monthly COVID-19 audits to ensure effectiveness
of control measures; and
• using technology to reduce the need for people to travel.
Our behavioural safety programme began in 2020, with a focus
on empowerment and positive reinforcement. The programme
also involved the rollout of the use of the SLAM technique,
encouraging our people to Stop, Look, Assess and Manage
any workplace risks and hazards.
Enabling our people to become health and safety ambassadors
through coaching and upskilling, we are promoting positive
safety and working together to develop a culture of shared
responsibility to enable safe behaviour.
Along with a primary target to achieve an accident rate lower
than the previous three-year average (average of 2018, 2019
and 2020, excluding acquisitions) and continuing to navigate
the impacts of the pandemic on our people, customers and
suppliers, 2021 will see the following health and safety initiatives:
• introduction of SHEQ digital management system;
• continued focus on behavioural safety; and
• training of new mental health first aiders and mental
health instructors.
Safety at sites during COVID-19
There is no doubt that the global pandemic brought many
challenges to the Health and Safety team in 2020. Putting the
safety and wellbeing of staff and customers first, Marshalls’
logistics, dispatch and operational sites have continued to
prepare and deliver Marshalls' products to keep the business
running and orders fulfilled. Responding to Government
guidelines and Marshalls’ own robust health and safety protocol,
additional processes were introduced including specialised
COVID-19 safety training, regular risk assessments, site signage,
floor markings and additional ways to sanitise. All sites underwent
unannounced COVID-19 audits to ensure controls were working.
Marshalls plc
marshalls.co.uk
51
Strategic report Board of Directors
A committed, agile
and experienced Board
The Board is diverse, well
balanced, experienced,
committed and agile. 2020
has brought all of these
characteristics to the fore.
It has great depth of experience
and skill covering leadership,
construction, finance,
M&A, product development,
technology, marketing and retail.
The Board has acted decisively,
and as a cohesive collective
unit, throughout 2020, applying
its skill and knowledge in
ensuring the long-term
sustainability of the Group.
Clear strategic, and innovative,
thinking and planning have
been critical to ensuring: the
health and safety of our
employees; the Group’s
financial viability; continued
engagement with our key
stakeholders; and that we
learn from the challenges
of 2020 in implementing
our strategic plan, improving
operational effectiveness
and driving cultural change.
Vanda Murray OBE
Chair
Martyn Coffey
Chief Executive
Jack Clarke
Group Finance Director
N
R
I
Term of office
Appointed as Non-Executive
Director and Chair in May 2018.
Last re-elected in May 2020.
Length of service
2 years 8 months
Skills and experience
Fellow of the Chartered Institute
of Marketing with extensive
experience of corporate
leadership in both executive and
non-executive roles with a wide
range of UK and international
businesses. Previous executive
roles include Chief Executive
of Blick plc from 2001 until its
successful sale to Stanley Works
Inc. in 2004 and Managing
Director of Ultraframe plc
between 2004 and 2006.
External appointments
Senior Independent
Non-Executive Director and
Chair of the Remuneration
Committee of Bunzl plc.
Non-Executive Director and
Chair of the Remuneration and
CSR Committees of Manchester
Airports Group.
Term of office
Joined the Company and
appointed to the Board in
September 2013. Last re-elected
in May 2020.
Term of office
Joined the Company and
appointed to the Board on
1 October 2014. Last re-elected
in May 2020.
Length of service
7 years 4 months
Length of service
6 years 3 months
Skills and experience
Wide executive leadership
experience: previously Divisional
Chief Executive Officer of BDR
Thermea Group BV, a leading
manufacturer and distributor of
domestic and industrial heating
and hot water systems operating
in 70 countries and with a turnover
of €1.8 billion, formed in 2009 from
the merger of Baxi and De Dietrich
Remeha. Prior to the merger, he
was Chief Executive of the private
equity-owned Baxi Group. Also
held the position of Managing
Director of Pirelli Cables where
he spent 14 years in the UK,
Australia and North America.
Holds a BSc in Mathematics.
External appointments
Director of the Mineral Products
Association. Non-Executive
Director and Chair of the
Remuneration Committee
of Eurocell plc.
Skills and experience
Chartered Accountant. Joined
Marshalls from AMEC Foster
Wheeler plc, where he was
Executive Vice President and
Director of Change Management.
Extensive experience
in managing international
operations, having previously
served as CFO of AMEC’s £850
million power and process division
and its US$1.5 billion environment
and infrastructure division.
Extensive M&A experience.
Previous experience includes
senior finance and operational
management roles with
Halliburton and Mobil Oil. Holds
an MSc (Civil Engineering) and BA
(Economics and Management).
External appointments
None.
Committee membership
A
Audit Committee
N
R
Nomination Committee
Remuneration Committee
Chair of the Committee
I
Independent Director
52
Marshalls plc
Annual Report and Accounts 2020
Governance
58+
Male (4)
Female (3) 28+
L Gender composition
Length of service
1–2 years (2)
3–4 years (2)
5+ years (3)
Janet Ashdown
Senior Independent
Non-Executive Director,
designated Non-Executive
Director for employee
engagement
A
N
R
I
Term of office
Appointed in March 2015.
Last re-elected in May 2020.
Length of service
5 years 9 months
Skills and experience
Non-executive experience
includes serving on the boards
of SIG plc (until May 2019) and
Coventry Building Society
(until 2017). Previous executive
experience included 30 years
with BP plc, most recently as
Director, BP Oil UK Limited, and
Head of UK Retail and Commercial
Fuels. Between 2010 and 2012
she was CEO of Harvest Energy.
External appointments
Non-Executive Director and Chair
of the Remuneration Committee of
Victrex plc. Non-Executive Director
of the Nuclear Decommissioning
Authority. Non-Executive Director
and Chair of the Corporate
Sustainability Committee of
RHI Magnesita N.V.
Graham Prothero
Non-Executive Director
Tim Pile
Non-Executive Director*
Angela Bromfield
Non-Executive Director
A
N
R
I
A
N
R
I
A
N
R
I
Term of office
Appointed in May 2017.
Last re-elected in May 2020.
Term of office
Appointed in October 2010.
Last re-elected in May 2020.
Term of office
Appointed in October 2019.
Elected in May 2020.
Length of service
3 years 5 months
Length of service
10 years 3 months
Length of service
1 year 3 months
Skills and experience
Leadership roles in a number
of different industries such
as banking, retail, marketing and
consumer goods, as well as in
the charity and public sectors
– for organisations big and
small. Formerly Chair of Cogent
(the leading independent
marketing agency), President
of the Greater Birmingham
Chambers of Commerce, CEO
of Sainsbury’s Bank and a member
of the operating board and
Non-Executive Director
at Cancer Research UK.
External appointments
Chair of the Royal Orthopaedic
Hospital. Chair of Greater
Birmingham and Solihull LEP.
2022 Organising Committee
Commonwealth Games.
* The Nomination Committee considered
Tim Pile to be independent in thought and
judgement in spite of his length of service.
Skills and experience
Experienced corporate finance
lawyer by trade with nearly
20 years’ experience, the last
seven of which have been in
industry at FTSE businesses.
Extensive leadership and legal
experience. Responsible for
transforming the legal team’s
role in the business.
Skills and experience
Broad based international
career in manufacturing,
distribution and construction
and extensive commercial
strategy, marketing and
communications executive
experience. Formerly, Strategic
Marketing and Communications
Director at Morgan Sindall plc
until 2013 and prior to that
held senior roles at the Tarmac
Group, Premier Farnell plc
and ICI plc.
External appointments
Non-Executive Director and
Chair of the Remuneration
Committee of Churchill China
PLC. Non-Executive Director
and Chair of the Remuneration
Committee of Harworth
Group PLC.
Formerly a corporate partner
with international law firm
Womble Bond Dickinson LLP,
focused on supporting public
companies. Also spent more
than eight years working for
international law firm Pinsent
Masons LLP and qualified
with international law firm CMS.
Skills and experience
Chartered Accountant and Chief
Operating Officer of Vistry Group
PLC (appointed January 2020).
Previously Chief Executive of
Galliford Try plc. Also on the
board of the Jigsaw Trust,
a charitable trust. Extensive
senior management experience
in the sector, including with
leading property developer
Development Securities PLC (now
U+I), Taylor Woodrow, the listed
contractor/developer, and
Blue Circle Industries plc. Also
spent seven years as a partner
in the Real Estate, Hospitality
and Construction Group of
Ernst & Young LLP.
External appointments
Chief Operating Officer
of Vistry Group PLC.
Shiv Sibal
Group General Counsel and
Company Secretary
Term of office
Appointed in May 2020.
Length of service
7 months
Marshalls plc
marshalls.co.uk
53
Governance 42
+
28
+
44
+
L
Corporate Governance Statement
A solid platform for future growth
with our culture, purpose and
stakeholders at the fore
Dear shareholder
The last year, more than any other in recent times, has brought
into sharp focus the importance of strong and decisive leadership
with our shared purpose and culture as its driving forces. This
shines through in all of the decisions we have taken this year and
I am proud of what the business has achieved through this
challenging period.
Our commitment to The Marshalls Way – to do the right things,
for the right reasons, in the right way - underpinned the Board’s
ability to act decisively but in a measured and thoughtful way,
taking into account the interests of all stakeholders. This is at the
heart of what “good governance” means to Marshalls albeit we
acknowledge that we have taken some tough decisions to ensure
the long-term sustainability of the Group.
The case study on pages 56 and 57 details how we engaged
with, and had regard to, the interests of our key stakeholders in
the decisions taken as part of our response to the COVID-19
pandemic.
This Corporate Governance Statement explains how Marshalls’
governance framework supports the principles of integrity, strong
ethical values and professionalism integral to our business.
The Board recognises that we are accountable to shareholders
for good corporate governance, and this report, together with
the Reports of the Audit, Nomination and Remuneration
Committees on pages 64 to 89, seeks to demonstrate our
commitment to high standards of governance that are
recognised and understood by all.
54
Marshalls plc
Annual Report and Accounts 2020
Governance Achievements in 2020
• We have guided and supported the business through the
challenges of the pandemic providing a solid platform for the
delivery of our 5 year Strategy, announced last year.
• We have been agile, meeting frequently and evolving our
approach in the face of a continually evolving pandemic.
Decisions have been taken within the framework of the
matters reserved for the Board’s judgement ensuring
appropriate operational flexibility for the business to respond
to the day-to-day challenges it faced.
• We have maintained, albeit virtually, frequent and open
engagement between the Board and the business on specific
business areas and developments where the Board’s
experience and knowledge could make a positive and
constructive contribution.
• We have evolved our Employee Voice Group, through which
we engage with employees, to ensure broader representation
from across the Group and a more focused agenda.
• Having regard to stakeholder interests remained implicit within
all of our decision making with the COVID-19 crisis putting this
to the test and a summary of our approach being set out on
pages 56 and 57.
• We continued to invest in our people and products to drive
the evolution of our environmental, social and governance
agendas. Our strong commitment to ethical and sustainable
business through The Marshalls Way and our Code of Conduct
has been reinforced through a Group-wide training programme.
Priorities in 2021
• The Board will continue to support the business through
the challenges the pandemic presents whilst ensuring we
have appropriate momentum to, and investment in, the
achievement of our longer-term strategic priorities.
• To give additional focus to our customers, through product
and service innovation that drives brand loyalty and
profitable growth, and to factor in the potential for
market disruption.
• To support and enable clearer and wider communication
of our environmental, social and governance ("ESG")
commitments, which underpin our purpose to all of our
stakeholders, and particularly our customers.
• To continue to invest in our people and our culture focusing
on health and safety, succession, diversity and talent
identification and development, these being critical to the
long-term success of the Group.
• To establish further measurable goals to reduce our emissions
and improve the sustainability of our products and operations.
• To develop our engagement with suppliers that support our
commitment to doing business responsibly.
• To continue to ensure we do everything in The Marshalls Way:
the right things, for the right reasons, in the right way.
Environmental, social and governance ("ESG") priorities
The Board views our approach to ESG as central to the
achievement of our strategic objectives and the long-term
sustainability of the business. The Marshalls Way guides
everything we do and our ESG commitments and credentials
demonstrate this clearly.
• Environmental — we take our environmental impact
seriously and, in 2020, we had our carbon emissions
targets approved by the Science Based Targets initiative.
• Social — we respect and value the dignity, wellbeing
and rights of employees, their families and the wider
community, as well as their safety.
• Governance — strong governance supported by effective
leadership helps nurture our healthy corporate culture and
our processes and controls enable us to operate ethically
and responsibly.
Diversity
The Board recognises the opportunity greater diversity
throughout the business represents and the challenge this
presents in our sector. Ensuring we promote equality and
diversity and prevent discrimination through the application
of our policies is key as well as ensuring there is equality of
opportunity for every role we recruit. Our commitment is
supported by our Code of Conduct and central to our Group
HR strategy.
At Board level, we have achieved greater gender balance but
recognise the opportunity greater ethnic diversity presents. As
members of the UN Global Compact, we have, during the last
year, agreed to participate in Target Gender Equality, which
is a gender equality accelerator programme that involves
setting and reaching ambitious corporate targets for women’s
representation and leadership, starting with the Board and
Executive Management levels. Challenging ourselves in this
way is at the heart of The Marshalls Way.
Board evaluation
The Chair, with the support of the Company Secretary,
conducted an internal evaluation of the Board and its
Committees using a tailored online questionnaire that
considered both performance during the year and future
priorities for the Board. The Board also reflected on the findings
of the externally facilitated review in 2019, taking into account
the challenges presented by the pandemic. Page 62 of this
report gives more detail on the most recent evaluation and
the extent to which the objectives from 2019 were achieved.
Responsibility statement
In the opinion of the Directors these Annual Financial Statements
present a fair, balanced and understandable assessment of the
Group’s position and prospects and provide the information
necessary for shareholders to assess the Group’s position and
performance, business model and strategy. The respective
responsibilities of the Directors and the auditor in connection with
the Financial Statements are explained in the Statement of
Directors’ Responsibilities and the Auditor’s Report on pages 92
and 94 to 100 respectively.
Vanda Murray OBE
Chair
11 March 2021
Marshalls plc
marshalls.co.uk
55
Governance Corporate Governance Statement continued
Our response to COVID-19
The Group implemented an agile, operational plan to manage all parts
of the business safely, whilst continuing to support customers. The Board
provided oversight, support and challenge in ensuring the interests
of all stakeholders were considered with appropriate prioritisation.
Key challenges and decisions and how we responded
Key challenges
How we considered stakeholders
Outcomes
Role governance played
Role of the Board
Health and safety
• Safety and welfare of employees
• Safety of customers and suppliers
• Working from home challenges –
wellbeing of employees and
mental health
• Regular communication with
employees, unions and employee
representatives, customers
and suppliers
• Increased briefing and training
for managers to ensure consistent
and frequent messaging
• Regular shareholder communication
• Virtual meetings with shareholders,
analysts and investors
Business continuity
• IT systems and cyber security
• Operation of plants and fleet
• Managing customer relationships
• Working from home
• Additional sales channels
• Maintaining control environment
• Regular detailed dialogue with
employees, customers and suppliers
• Additional training and awareness
• Regular shareholder communication
• Virtual meetings with shareholders
and analysts
• Virtual customer relationship
management established
Liquidity and scenario planning
• Ensuring adequate liquidity
• Scenario planning and
financial modelling
• Risk of bank covenant breach
Operational issues
• Significant drop in sales in March,
April and May
• Employees on furlough during
this period
• Managing “return to work”
• Balancing inventory, supply and
demand during second half of year
sales growth
• Early and frequent dialogue with
banking partners (RBS, Lloyds
and HSBC)
• Regular shareholder communication
• Virtual meetings with shareholders
and analysts – including discussions
about the suspension of dividends
and participation in Government
furlough and tax deferral schemes
• Detailed dialogue with employees,
unions, customers and suppliers
• Regular shareholder communication
• Virtual meetings with shareholders
and analysts
• New risk assessments
• Additional standards and
procedures introduced (going
beyond Government guidelines)
• Controlled by dedicated specialist
• Attending several additional
health and safety employees
Board meetings
• Approval of new policies and
• More frequent dialogue with
procedures
senior management
• Regular, and significantly increased
• Approved training protocols
• Reviewed all policies and procedures
• Formal risk reviews reflecting evolving
• NEDs attended Risk Committee
risk environment
meetings during this period
communication and messaging
using a variety of channels
• Identified all vulnerable employees
• Dedicated, independent
helpline service
• Establishing new frameworks for
customer relationship management
• Plants operating safely
• Fleet delivering to customers
throughout
• Rapid provision of additional IT
to enable home working
• Additional/enhanced financial
controls introduced
• Receiving and fulfilling orders
• Maximising sales and leveraging fleet
• Voluntary Board and senior
management pay reductions
• Range of financial models for
different scenarios
• Range of measures introduced to
reduce/defer cost and cash spend
• New bank facilities arranged
(£90 million)
• Variations to bank
covenants agreed
• CCFF facility established (issuer limit
of £200 million)
• Janet Ashdown leads Employee Voice
Group – frequent meetings, feedback
and communications, including
consideration of the Group's response
to COVID-19
• Central system introduced to identify
• Attending several additional
“business critical” employees
Board meetings
• Process adopted to identify and
address issues relating to home
working
• More frequent dialogue with
senior management
• Reviewed the Group's approach
• Appropriate facilities introduced for
and challenged key decisions
“virtual meetings” for all employees
• NEDs attended Risk Committee
• Additional cyber controls and training
meetings during this period
for home workers
• Additional financial
controls established
• Review and approval of
shareholder communications
• Detailed review of financial models
• Attending several additional
and assumptions (including review
by third party professional advisers)
Board meetings
• More frequent dialogue with
• Use of professional advisers where
senior management
appropriate
• Virtual meetings with
major shareholders
• Critical review of financial
model assumptions
• Meetings with external
professional advisers
• Review and approval of all
shareholder communication
• Restructuring implemented to
• Central control system used to monitor
• Attending several additional Board
control costs and maintain efficiency
and track furlough
meetings
• Certain site closures and changes to
• Full consultation process led by
• More frequent dialogue with senior
shift patterns
Group HR
management
• Focus on mitigating redundancies
• Tracking of daily sales
• Reviewed all policies and procedures
while satisfying customer needs
• Ongoing “Executive Management”
• NEDs attended Risk Committee
• Inventory management – detailed
review of detailed production planning
meetings during this period
production planning
process and systems
• Board focus on customer centricity
The impact of the COVID-19 pandemic
on the business continues to be assessed
on an ongoing basis. The Board sets the
culture for effective risk management and
has been actively engaged in the process
throughout, providing regular and frequent
oversight and assessing the adequacy of
our systems and controls, particularly in
light of some of the dramatic changes in
the way we work that have been driven by
the pandemic. Dynamic plans have been
established, with specific risk assessments
and carefully designed new operating
procedures, all of which have the health
and safety of our employees as the top
priority. Our key stakeholders have been
considered throughout and the Board has
assessed mitigating controls and scenario
planning that have been introduced by
management. Consideration of our people,
performance, capital structure and controls
has been central to the Board’s decision
making throughout the pandemic.
Despite the disruption to normal working
practices, we have maintained a strong
focus on control and governance
throughout the year. A specific internal
audit project undertaken in 2020
confirmed that control integrity had been
maintained. The business as a whole and
the Board have acted with agility, and
decisively, to bring stability to the Group.
56
Marshalls plc
Annual Report and Accounts 2020
Governance Key challenges and decisions and how we responded
Key challenges
Health and safety
• Safety and welfare of employees
• Safety of customers and suppliers
• Working from home challenges –
wellbeing of employees and
mental health
• Regular communication with
employees, unions and employee
representatives, customers
and suppliers
• Increased briefing and training
for managers to ensure consistent
and frequent messaging
• Regular shareholder communication
• Virtual meetings with shareholders,
analysts and investors
Business continuity
• IT systems and cyber security
• Operation of plants and fleet
• Managing customer relationships
• Working from home
• Additional sales channels
• Maintaining control environment
• Regular detailed dialogue with
employees, customers and suppliers
• Additional training and awareness
• Regular shareholder communication
• Virtual meetings with shareholders
and analysts
• Virtual customer relationship
management established
Liquidity and scenario planning
• Ensuring adequate liquidity
• Early and frequent dialogue with
banking partners (RBS, Lloyds
• Scenario planning and
financial modelling
• Risk of bank covenant breach
and HSBC)
• Regular shareholder communication
• Virtual meetings with shareholders
and analysts – including discussions
about the suspension of dividends
and participation in Government
furlough and tax deferral schemes
Operational issues
• Significant drop in sales in March,
• Detailed dialogue with employees,
unions, customers and suppliers
• Regular shareholder communication
• Employees on furlough during
• Virtual meetings with shareholders
April and May
this period
and analysts
• Managing “return to work”
• Balancing inventory, supply and
demand during second half of year
sales growth
How we considered stakeholders
Outcomes
Role governance played
Role of the Board
• New risk assessments
• Additional standards and
procedures introduced (going
beyond Government guidelines)
• Regular, and significantly increased
communication and messaging
using a variety of channels
• Identified all vulnerable employees
• Dedicated, independent
helpline service
• Establishing new frameworks for
customer relationship management
• Plants operating safely
• Fleet delivering to customers
throughout
• Rapid provision of additional IT
to enable home working
• Additional/enhanced financial
controls introduced
• Receiving and fulfilling orders
• Maximising sales and leveraging fleet
• Voluntary Board and senior
management pay reductions
• Range of financial models for
different scenarios
• Range of measures introduced to
reduce/defer cost and cash spend
• New bank facilities arranged
(£90 million)
• Variations to bank
covenants agreed
• CCFF facility established (issuer limit
of £200 million)
• Controlled by dedicated specialist
• Attending several additional
health and safety employees
• Approval of new policies and
procedures
Board meetings
• More frequent dialogue with
senior management
• Approved training protocols
• Formal risk reviews reflecting evolving
• Reviewed all policies and procedures
• NEDs attended Risk Committee
risk environment
meetings during this period
• Janet Ashdown leads Employee Voice
Group – frequent meetings, feedback
and communications, including
consideration of the Group's response
to COVID-19
• Central system introduced to identify
• Attending several additional
“business critical” employees
• Process adopted to identify and
address issues relating to home
working
• Appropriate facilities introduced for
“virtual meetings” for all employees
• Additional cyber controls and training
for home workers
• Additional financial
controls established
• Detailed review of financial models
and assumptions (including review
by third party professional advisers)
• Use of professional advisers where
appropriate
• Virtual meetings with
major shareholders
Board meetings
• More frequent dialogue with
senior management
• Reviewed the Group's approach
and challenged key decisions
• NEDs attended Risk Committee
meetings during this period
• Review and approval of
shareholder communications
• Attending several additional
Board meetings
• More frequent dialogue with
senior management
• Critical review of financial
model assumptions
• Meetings with external
professional advisers
• Review and approval of all
shareholder communication
• Restructuring implemented to
• Central control system used to monitor
• Attending several additional Board
control costs and maintain efficiency
• Certain site closures and changes to
and track furlough
meetings
• Full consultation process led by
• More frequent dialogue with senior
shift patterns
Group HR
management
• Focus on mitigating redundancies
while satisfying customer needs
• Inventory management – detailed
production planning
• Tracking of daily sales
• Ongoing “Executive Management”
• Reviewed all policies and procedures
• NEDs attended Risk Committee
review of detailed production planning
process and systems
meetings during this period
• Board focus on customer centricity
Marshalls plc
marshalls.co.uk
57
Governance Corporate Governance Statement continued
Compliance statement
This Corporate Governance Statement has been prepared in
accordance with the principles of the UK Corporate Governance
Code dated July 2018 (the “UK Code”) which applies to the
financial year 2020. We have complied with the principles and
provisions of the UK Code throughout 2020. Our Governance
sections over the following pages explain how the Group has
applied the principles throughout the year and throughout the
year and up to the date of this Annual Report.
1
Board leadership and Company purpose
• Led by strong and experienced Chair
• Entrepreneurial, diverse and decisive Board
with clear strategic focus
• 2020 focus on sustainability in the face of
the COVID-19 pandemic
• The Marshalls Way at the core of all
decision making
Read more on page 59
2
Division of responsibilities
• Clear communication and information
supporting effective decision making
• Constructive relationship between Board
and senior management
• Challenge and support provided and well
received by management
• Renewed emphasis on processes and resources
driving efficiency
Read more on page 60
3
Composition, succession and evaluation
• Majority of independent Directors
• Diverse Board with relevant experience,
knowledge and skills
• Exceptional term extension providing stability,
supported by shareholders
• Annual effectiveness review
Read more on page 62
4
Audit, risk and internal control
• Structured oversight of external and internal
audit functions and planning
• Oversight and participation in Risk Register
reviews and determination of risk appetite
• Detailed consideration of pandemic’s impact
on Group’s control environment
• Actions and outcomes monitored to ensure
benefits realisation
Read more on page 63
5
Remuneration
• Revised, UK Code compliant, Policy supported
by shareholders
• Alignment of outcomes with interests of all
stakeholders
• Non-financial ESG measures embedded
in incentive schemes
• Committee discretion to override
formulaic outcomes
Read more on page 63
58
Marshalls plc
Annual Report and Accounts 2020
Role of the Board
The Board currently comprises an Independent Non-Executive
Chair, 4 Non-Executive Directors and 2 Executive Directors.
Their biographical details are on pages 52 and 53.
Our Schedule of Matters Reserved for the Board, reviewed
annually and available on our website, includes:
Culture,
governance and
remuneration
Group strategy
and budgets
Approving major
transactions
Terms of Reference
and key policies
Group operations
and management
and control
structure
Changes to capital
or corporate
structure or
constitution
Board
composition and
succession
Approving
financial reports,
internal control
and risk
management
Delegation to Board Committees
The Board delegates specific responsibilities to the Audit,
Remuneration and Nomination Committees. The Audit
Committee Report on pages 66 to 69 provides details of the
Board’s application of UK Code principles in relation to
financial reporting, audit, risk management and internal
controls. The Nomination Committee Report on pages 64
and 65 reports how Board and senior management
composition, succession and development are managed to
reflect UK Code principles. The Remuneration Report on
pages 70 to 89 explains how the Group’s Remuneration Policy
has been implemented, and shows Directors’ remuneration
for 2020. The Remuneration Report also provides gender pay
and balance information. Ad hoc Board Committees are
established for particular purposes: for example, during 2020
Board Committees were established to approve preliminary
and half year results.
Delegation to the Executive and management
Day-to-day management and the implementation of
strategies agreed by the Board are delegated to the
Executive Directors. The Group’s reporting structure and
controls below Board level are designed so that decisions
are made by the most appropriate people in an effective
and timely manner. Management teams report to members
of the Executive Committee (comprised of senior managers,
including the 2 Executive Directors). The Executive Directors
and other Executive Committee members give regular
briefings to the Board in relation to business issues and
developments. Clear and measurable KPIs are in place to
enable the Board to monitor progress. This structure, our
controls and our transparency enable the Board to make
informed decisions on key issues including strategy, capital
structure and our risk appetite taking into account the
interests of all of our key stakeholders.
Governance
1
Board leadership and Company purpose
Leadership and purpose
Effective leadership and a healthy corporate culture are key
enablers for good governance, supported by robust systems and
processes and a good understanding of risk and risk appetite.
Our Strategic Report on pages 1 to 37 explains how we seek
to fulfil our purpose, how this is supported by our policies and
procedures and how we identify and manage our key risks.
The reports of our Board Committees give further detail on how
our policies and processes have been applied and developed
during the year in particular areas and how this relates to our
values and strategy.
Being agile and resilient and ensuring we have a safe and
stable platform for the execution of our long-term strategy have
been core to the Board’s leadership during the last year. Our
culture and purpose have ensured there was a collective will
to take difficult decisions to support the long-term sustainability
of the business and ensure we are able to capitalise on
opportunities that we are confident the execution of our
strategic plan will bring.
In spite of the challenges the pandemic has presented, the
results of our annual employee engagement survey, various
smaller “pulse” surveys conducted during the year and,
importantly, the Board’s direct engagement with employees
throughout the year give the Board confidence that the Group’s
purpose, values and strategy remain aligned with our culture.
The Group’s dynamic management of the crisis is testament to
its culture and to the credit of all employees across the Group
who have been led by a strong senior leadership team. We are
not complacent and recognise that there is more work to do to
build on this, particularly having completed a comprehensive
restructuring exercise as part of our management of the impact
of the pandemic.
The Board is confident the Group’s application of the UK Code
principles during 2020 will drive its long-term sustainable
success by providing a platform to execute the strategic plan
the Board approved in 2019. That strategic plan remains well
balanced and considers the interests of all of our key stakeholders.
Our environmental and social reports on pages 38 to 51
demonstrate that the execution of our strategy addresses
our impact on these areas and some of the benefits we hope
to bring to them.
The Group HR Director, supported by the HR and senior
management teams, has supplemented the work on our culture
and the Code of Conduct with a comprehensive training
programme through which our leaders engage directly with
their teams to help them understand the role each employee
plays in maintaining and building on our culture.
The Board receives regular updates from the Executive Directors
on the agreed KPIs set out on pages 22 and 23 that enable it
to determine whether the Group’s objectives are being met and
provide additional challenge and support where necessary.
The Group’s control and risk management frameworks are
reviewed annually and have, during the year, been critically
reviewed in light of the additional challenges presented by the
pandemic. The Group’s Risk Register is reviewed at least twice a
year and our internal audit plan takes into account the results
of these reviews. The Board and the Audit Committee receive
periodic reports from the internal auditor on a range of topics
each year that are approved by the Audit Committee.
Further details of our approach to risk identification and
management are set out in the Strategic Report on pages 24
to 31.
The Board has continued to regularly engage with shareholders
and employees not allowing the practical challenges to be an
obstacle. The use of technology has enhanced the Board’s
ability to schedule meetings with shareholders in particular and
is likely to be combined with in-person meetings in the future.
Our Employee Voice Group has evolved and gained momentum
developing into a more representative and active format which
understands the benefits of regular engagement with our Board,
through our designated Non-Executive Director for employee
engagement, Janet Ashdown, who participated in a number
of the EVG meetings in 2020. Further details of how we engage
with employees are set out in the Environmental, Social,
Governance section on pages 48 to 50; building on this success
will be an area of focus in 2021.
The implementation of our HR strategy and the development
of our HR team are central to the delivery of our Group strategy.
Our Group HR Director engages with the Board on our progress
with improving recruitment, retention, development and
progression supported by an aligned reward strategy that is
fair and with diversity and inclusion being the central themes
guiding us in these areas.
Central to progress this year has been an incredibly effective
communication programme that has supported our
management of the impact of the pandemic and ensured
all employees, including those operational employees not
connected through technology, have the information they
need to work safely and in line with Government guidelines.
Additionally, we have implemented a substantial number
of additional processes and procedures to support our
management of the pandemic, all of which reflect our values.
Conflicts and concerns
The Board maintains a conflicts register that identifies situations
in which conflicts may arise, and which is reviewed regularly.
In situations where an actual conflict is identified, the affected
Director may be excluded from participating in relevant Board
meetings or voting on decisions. There is no shareholder with
a holding of sufficient significance to exercise undue influence
over the Board or compromise independent judgement.
Concerns about the running of the Company or proposed
action would be recorded in the Board minutes. On resignation,
if a Non-Executive Director did have any such concerns, the
Chair would invite the Non-Executive Director to provide
a written statement for circulation to the Board.
Whistleblowing
The Group’s Serious Concerns Policy sets out the principles
under which employees can raise concerns in confidence.
This is supported by an independent whistleblowing telephone
and online reporting service, through which concerns may be
reported anonymously if preferred. The Board and the Audit
Committee receive reports on matters raised under this policy
and the outcome of investigations. Any concerns raised are
investigated appropriately by individuals whose judgement
is independent and who are not directly involved with the
matters raised.
Read more about diversity on page 55
Read more about sustainability, ethics and climate change
from page 38
Marshalls plc
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Governance Corporate Governance Statement continued
2
Division of responsibilities
Roles and division of responsibilities
There is a clear division between Executive leadership and leadership of the Board expressed in the written Terms of Reference
of the Chair and Chief Executive.
The Chair leads the Board and sets the tone and is responsible for its overall effectiveness. She was independent on
appointment in 2018 and brings her objective judgement to the role. The internal Board evaluation, among other issues, focused
on the quality, constructiveness and robustness of Board debates, the relevance and clarity of Board information and how the
Board works as a unit (including relationships within the Board). No issues were identified in these areas.
The Chief Executive has responsibility for all operational matters which include the implementation of strategy and policies
approved by the Board.
The Senior Independent Director provides a sounding board for the Chair and also acts as an intermediary for other Directors
and shareholders.
The Board has determined each of the Non-Executive Directors to be independent in accordance with Section 2, Provision 10
of the UK Code. Although Tim Pile’s term of office has been extended for a further year. This has not affected his independence
and further details of how we made this judgement are set out on page 61.
At least once a year the Chair meets the Non-Executive Directors without the Executive Directors being present. The Senior Independent
Director meets the other Non-Executive Directors annually without the Chair to appraise the Chair’s performance.
On appointment, the expected time commitment for Board members is made clear. The Chair and other Non-Executive Directors
disclosed their other commitments prior to appointment and agreed to allocate sufficient time to the Company to discharge their
duties effectively and ensure that these other commitments do not affect their contribution. The current commitments of the Chair
and other Directors are shown on pages 52 and 53.
Board meetings and attendance*
Key =
Present
Absent
Board
COVID-19 Board meetings
Audit
Committee
Remuneration
Committee
Nomination
Committee
Vanda Murray OBE (Non-Executive Chair)
Martyn Coffey
Jack Clarke
Janet Ashdown (Non-Executive)
Graham Prothero (Non-Executive)
Tim Pile (Non-Executive)
Angela Bromfield (Non-Executive)
–
–
–
–
–
–
–
* The Board held 18 meetings during the year. The normal Board calendar includes eight meetings per year; however, ten additional meetings were held during the year, in
connection with the Group’s management of the impact of the COVID-19 pandemic. These meetings considered health and safety, employees, adequacy of funding
arrangements, financial and operational performance, shareholder communication, customers, suppliers, key risks and controls and facilitated all key Board decisions in
connection with the management of the pandemic.
The Chief Executive and the Group Finance Director are not members of the Audit Committee but normally attend Audit Committee meetings by invitation. The Non-Executive
Directors also meet the auditor in private. The Chief Executive attends Remuneration Committee meetings by invitation. The Company Secretary attends Board and
Committee meetings as Secretary. Board members also participate in site visits, training sessions and events such as the Group’s annual management conference.
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Governance
Tim Pile’s independence
We consider Tim Pile to be independent even though he has
served more than 10 years as a Non-Executive Director. We are
mindful that the UK Code directs that this length of service is
likely to impair, or could appear to impair, his judgement but we
strongly believe this not to be the case given Tim’s track record
with the business.
Tim continues to bring invaluable support and experience
to the business whilst, together with the Chair and the other
Non-Executive Directors, effectively holding the Executive
Directors to account on behalf of shareholders. He remains
independent in thought and judgement and the extension
of his term will enable us to apply the necessary rigour to the
appointment of his successor whilst continuing to benefit
from the constructive challenge and objective judgement he
provides. Aside from his length of service, there are no other
relevant factors (as set out in UK Code Provision 10) that would
affect his independence. The Chair has conducted an individual
performance evaluation of all the Directors, including Tim,
and has concluded that Tim’s contribution remains extremely
valuable, particularly given his knowledge and experience of
the Group and that his independence has been maintained.
Board meetings
There is an established format and programme for Board meetings,
which, for the most part, were held virtually during the last year.
This has been supplemented by a forward-looking planner that
gives focus to Board business for the year ahead and ensures
an appropriate balance between the Board’s consideration of
strategy, operations and governance. This planner is flexible and
regularly updated to ensure any urgent matters can be escalated
to the Board at the earliest opportunity.
The Chief Executive and the Group Finance Director report on
operational and financial performance respectively at each
Board meeting. Health and safety is also considered by the
Board, and reported against, on a standalone basis at every
scheduled Board meeting given its central importance to safely
operating a manufacturing business.
The Board also attended the Group’s strategy day in November
2020, which was held virtually and involved engagement with key
members of the senior management team and other senior leaders
in the business in considering the Group’s eight strategic priorities.
In addition to the standing items on the Board’s agenda, the
principal areas of focus discussed by the Board in 2020 were:
Strategy
• Group strategy including culture and purpose
• COVID-19 response
• Sustainability and climate change
• 2021 budget
• Capital adequacy, structure and dividends
• HR strategy
• Operations strategy (including supply chain, manufacturing
and logistics)
• Digital strategy
• New product development
• Emerging businesses
• Marketing strategy
• Market, sector and competitor updates
Operations
• COVID-safe operating processes and procedures
• Management of major customer projects
• Customer specification
• Brexit planning
• Group restructuring
• Employee engagement, morale and succession planning
Governance and risk
• COVID-19 crisis response
• Culture and Code of Conduct
• Board composition, succession and diversity
• Investor feedback
• Employee Voice Group feedback
• Whistleblowing
• Ethical sourcing and modern slavery
• Cyber security and data protection
• Stakeholder engagement
• AGM voting and guidance
Marshalls plc
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Governance Corporate Governance Statement continued
3
Composition, succession and evaluation
There is a transparent and formal process for appointments led
by the Nomination Committee supported by external specialist
recruiters. Board succession planning is reviewed at least
annually by the Nomination Committee, while succession
planning at Executive level is reviewed by the Board. The Board
also reviews succession planning for senior management and is
able to consider and challenge, as appropriate, the Group’s
recruitment policies and how they promote diversity. The policies
and process are commented on further in the Nomination
Committee Report.
We believe our Board is diverse and has a good combination
of skills, experience and knowledge. The Board reviews its own
composition each year and assesses whether the current skills,
experience and knowledge are aligned with the Group’s
strategy and expected future leadership needs.
How Board priorities were addressed
during the year
Culture
• Group-wide rollout of our new Code of Conduct, setting
our purpose and defining The Marshalls Way. Supported by
comprehensive trainee programme.
• Board engaged extensively with the business, in spite of
the challenges presented by the pandemic, in areas such
as: risk identification and management with the senior
management team and other senior leaders; marketing
and digital strategy; and new product development.
• Reviewing the scores and written feedback from the
employee engagement survey and agreeing objectives
for both participation and overall engagement.
Stakeholder engagement
• Board has received presentations on our customer and
product initiatives and engagement.
• Our Employee Voice Group has evolved with Janet
Ashdown, in her capacity as designated Director for
employee engagement, participating in a number of
sessions with the Group and providing feedback to the
Board throughout the year.
• Business engagement and regular dialogue with suppliers
have been critical to our management of the impact of
the pandemic and Brexit with further emphasis to be
placed on this in 2021.
• Board engagement with shareholders has been
maintained with regular formal announcements during the
year combined with customary post half year and full year
investor roadshows. In addition, the Chair and the Senior
Independent Director have engaged with shareholders
on governance and their areas of focus.
Succession planning
• Implemented senior management team changes following
the restructuring exercise implemented during the year.
• New Group Director for Emerging Businesses and General
Counsel and Company Secretary recruited and appointed
to the senior management team.
• Board conducted a detailed review of performance and
succession for the senior management team including
consideration of the Group’s talent pipeline, diversity and
opportunities for development and progression.
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The Board acknowledges the benefit of refreshment and has a
clear succession plan designed to ensure that Board members’
terms expire or they retire over clearly defined periods, normally
not exceeding nine years. There is an annual effectiveness review
which, for 2020, was conducted internally by the Chair and the
Company Secretary (as referenced in the Chair’s introduction).
All Directors stand for election or re-election (as appropriate)
at every Annual General Meeting, and all current Directors will stand
for re-election or election at the 2021 Annual General Meeting. The
Directors’ biographical details on pages 52 and 53 show their
roles, date of of appointment and length of service on the Board.
Directors have access to the advice and services of the
Company Secretary who is responsible for ensuring that Board
procedures are complied with and, through the Chair, advises
the Board on governance matters. The appointment or removal
of the Company Secretary are matters for the whole Board.
Focus areas and actions to enhance
effectiveness in 2021 (from 2020 review)
The 2020 Board evaluation was conducted internally by
the Chair and Company Secretary using a comprehensive
tailored questionnaire that evaluated Board behaviour
and processes as well as providing the Board an opportunity
to reflect openly on the Board and Group’s strengths,
weaknesses and opportunities, threats and strategic
priorities. The evaluation concluded that the Board,
throughout the year, has been focused, agile, collaborative
and decisive. Our strong culture has helped us weather the
COVID-19 storm, but we must be mindful of maintaining this
given the challenges and extra pressure all of our employees
have faced during the last year.
Board engagement and visibility, both at meetings and
with the wider business, remain strong even though limited
to virtual sessions for most of the year. Areas identified for
further development were:
Board and Executive succession planning
• The pandemic has, to a degree, frustrated this but it
remains the highest priority item with an improvement
in diversity being a key recruitment objective.
ESG
• A clear articulation of what ESG means at Marshalls and
its position in the context of our strategic priorities, and as
a foundation of our long-term sustainability, is important
to all of our stakeholders. Investors, customers, suppliers
and employees alike want to understand our credentials
and, most importantly, our objectives and how we measure
our performance against these.
• Ensuring our ESG credentials drive competitive advantage
and provide returns not only to society but to shareholders
by driving business performance and supporting our ability
to attract and retain the best talent.
Capitalising on strategic opportunities
• Ensuring our strategic priorities continue to enable us to
capitalise on the strong markets in which we operate and
are mindful of market disruption, which remains a key threat.
• Whilst an operational restructuring exercise was
completed during the year, there remains more to do,
particularly by leveraging technology to drive efficiency
in our manufacturing and logistics. Selective acquisitions
in complementary areas may provide an opportunity
to capitalise on a strong market but more focus needs
to be given to the integration of new businesses.
Governance 5
Remuneration
The current Remuneration Policy was approved by shareholders
in 2020 and is set out in the Directors’ Remuneration Report on
pages 70 to 89. It addresses the relevant requirements of the
UK Code and was prepared in consultation with the Company’s
top 20 shareholders and external voting agencies.
The Remuneration Committee Report describes how the
Remuneration Policy has been implemented during 2020 and
the outcomes achieved. It also describes how the Remuneration
Committee has carried out its responsibilities during the year.
The Remuneration Committee continues to effectively discharge
the duties delegated to it by the Board under the leadership of
the Committee Chair, ensuring outcomes reflect performance
and taking a holistic view of remuneration across the Group,
having consulted employees appropriately, the importance
of which is recognised by the Board.
Read the Remuneration Committee Report on pages 70 to 89
Vanda Murray OBE
Chair
11 March 2021
4
Audit, risk and internal control
The Board has established written policies and procedures
for external and internal audit functions designed to ensure
that they remain independent and effective and these are
regularly reviewed. Annual questionnaire based evaluations
are conducted of both our internal and external audit partners
with the Board and members of the senior management team
participating. The Board scrutinises financial and narrative
statements in accordance with best practice supported by
the advice of the auditor.
The Board has a well-established procedure to identify, monitor
and manage risk, and has carried out reviews of the Group’s risk
management and internal control systems and the effectiveness
of: all material controls, including financial, operational and
compliance controls; and the mitigation of material risks.
The Strategic Report comments in detail (pages 1 and 37) on the
principal risks facing the Group, in particular those that would
threaten our business model, future performance, solvency or
liquidity, and the controls in place to mitigate them. The Board
conducts a rigorous assessment of these risks, particularly
operational risks that might affect the Group’s viability in the
short term and emerging risks that might impact the medium to
longer term.
The Board’s risk and viability review incorporates stress testing,
by envisaging scenarios that might arise during the financial
year and/or the planning cycle, and considering, with financial
impact modelling where appropriate, the likely effect on the
business and its prospects. Additionally, the outcomes of our risk
reviews drive our internal audit planning ensuring our resources
are being directed at the most appropriate areas.
The Board reviewed the Group’s risk management system and
the system of internal control at risk review meetings in July and
November 2020. The Risk Register was reviewed by the Audit
Committee in December 2020 and the Non-Executive Directors
carried out a standalone risk review in December 2020, the
outcome of which has been incorporated into the Risk Register.
In addition, our internal and external auditors participated
in our most recent risk review meeting in November 2020.
Our approach underpins our commitment to transparency
in managing risk and internal controls and lends additional
efficacy to our procedures.
In addition to our scheduled reviews, our risks and controls have
all been carefully assessed to take into account the continuing
impact of the COVID-19 pandemic. Internal audits carried out
during the year have also specifically challenged whether we
have made appropriate adjustments to the controls in the
areas being reviewed to address the pandemic’s impact.
The Audit Committee Report on pages 66 to 69 describes the
internal control system, how the Board assures itself of the
independence and effectiveness of internal and external audit
functions and how they are managed and monitored.
The Board acknowledges that such systems are designed to
manage, rather than eliminate, the risk of failure to achieve
business objectives and can only provide reasonable and not
absolute assurance against material misstatement or loss.
Read the Audit Committee Report on pages 66 to 69
Marshalls plc
marshalls.co.uk
63
Governance Nomination Committee Report
Focusing on succession and
our commitment to diversity
and inclusion
Dear shareholder
I am pleased to report to shareholders on
the main activities of the Committee and
how it has performed its duties during
2020. I chair Nomination Committee
meetings, but would not do so where the
Committee was dealing with my own
reappointment or replacement as Chair.
2020 highlights
• Secured an extension to Tim Pile’s term of office beyond his
previously announced retirement date at a time when a
stable, experienced Board with a proven record of working
cohesively was critical to navigating the Group through the
COVID-19 pandemic. A further one-year extension to Tim's
term has been agreed to facilitate a comprehensive search
for his successor.
• Reviewed and approved the Group’s Nominations Policy
including the importance of introducing, and our resolve to
introduce, even greater diversity at both a Board and senior
management team level, by thinking differently given the
sector-wide challenge this presents.
• Received updates on the Group’s restructuring exercise in
the first half of 2020 which was separately considered and
approved by the Board.
• Reviewed individual Director performance identifying areas
for development.
• Reviewed succession planning, both for the Board and senior
management team, particularly in light of changes following the
restructuring exercise with a focus on providing clear development
opportunities for the Group’s high performing employees.
2021 priorities
• Providing support to the reinvigoration of the business
following the pandemic that will drive the Group’s
long-term strategy.
• Management of Board succession, including the appointment
of a successor to Tim Pile.
• Supporting strategy and initiatives to promote diversity
and cultural values, including the application of our policy
principles and the creation of the Group’s Equality Taskforce,
whose mission is to make Marshalls an inclusive employer
where everyone can thrive and belong.
• Focus on succession, development and progress below
Board level.
“Our experienced, multi-skilled and
agile Board has effectively supported
the Group’s handling of the pandemic
whilst not losing sight of the importance
of effective succession in delivering the
Group’s longer-term strategy.”
Members and attendance
Vanda Murray OBE – Chair
Meetings
Janet Ashdown – SID
Graham Prothero
Tim Pile
Angela Bromfield
Find our Terms of Reference and
Nominations Policy at marshalls.co.uk/
about-us/corporate-governance
64
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Governance Marshalls' Nominations Policy
The table below summarises the key features of our Nominations Policy and how it is applied.
Policy principle
Supporting measures
How implemented in 2020
• Recruitment and succession
reflect the strategic needs
of the business
• Recruitment contributes to
desired values and culture
• Nomination Committee carries
out an annual skills review
aligned with 3–5 year strategic
plans
• New Directors agree commitment
to strategic direction and
Group policies
• Extension of Tim Pile’s term reflecting strategic needs
at a time when experience and stability were critical
• New appointment designated to add skills,
experience and diversity appropriate for the Group’s
strategic ambitions; Norman Broadbent Solutions
(independent recruiter with no other connection to
the Company) instructed to conduct this search to
find a successor to Tim Pile
• Recruitment to achieve
diversity in widest sense
• Policy sets direction and
gives leadership
• Revised Diversity and Inclusion Policy reviewed in 2020
• Briefs to Norman Broadbent Solutions set diversity as
• Brief for search consultants
for new Board and senior
management appointments
• Diversity initiatives/succession
plans at Executive level reviewed
and targets monitored
a key objective
• Further development of our HR reporting framework
to include corporate culture, employee engagement
and gender diversity statistics
• Detailed review of senior management team
succession and identifying the creation of
development opportunities for the Group’s talent
pipeline as an area for improvement
• There should be a clear
formal Board succession
plan based on
objective criteria
• Annual review of terms of office
• Annual individual evaluation
• Use of independent external
• Review completed in 2020
• Individual evaluations January 2020
• Norman Broadbent Solutions retained for Board and
search advisers
senior management recruitment
• Directors must devote
• Limit on other Board
• Recruitment process addresses existing commitments
sufficient time to perform
effectively and familiarise
themselves with the business
appointments
and risk of “over boarding”
• Detailed induction, site visits,
training and employee
engagement programme
• Included in letters of appointment
• Board training and visit programme as part
of Director induction
• Site visits have been suspended but the Directors have
engaged virtually on risk, new product development,
digital progression and marketing as well as participating
in our annual strategy day (which was held virtually)
• Compliance/good
governance
• Conflicts policy and register
reviewed no less than 6 monthly
• Reviews in June and December 2020
• All Directors stood for election/re-election
• Annual re-election of Directors
in May 2020
The performance of the Committee was evaluated as part of
the Board evaluation process in 2020 described on page 62.
The Committee Terms of Reference were reviewed and updated
in December 2020 and reflect the requirements of the UK
Corporate Governance Code published in July 2018 (the “UK
Code”), which applies from 1 January 2019.
During the year the Nomination Committee held three
scheduled meetings, and there were additional meetings and
discussions in connection with succession planning and
recruitment held by telephone.
Evaluation and reappointment of Directors
Each Non-Executive Director was, on joining, provided with a
detailed description of his or her role and responsibilities, and
received a detailed business induction. All Directors have an
annual one-to-one development review meeting with the Chair
to appraise performance, set personal objectives and discuss
any development and training needs to enable them to
continue to add value to the Board.
Before any Director is proposed for re-election, or has their
appointment renewed, the Committee considers the outcome of
the reviews to ensure that the Director continues to be effective
and demonstrates commitment to the role. The Chair provides
an explanation to shareholders as to why the Director should be
re-elected and confirming that a formal performance evaluation
has taken place when the resolution to re-elect is circulated.
It is the Company’s policy that Executive Directors can only hold
one external listed company non-executive directorship.
Voluntary service on the governing board of a social, trade or
charitable organisation is also permitted. Details of the external
appointments held by the Executive Directors are included
in the biographical notes on pages 52 and 53.
Governance
The Committee has acted throughout 2020 in accordance with
the principles of the UK Code. In addition, the Committee has
assessed its effectiveness during 2020 against the UK Code as
part of the annual Board evaluation process. The evaluation
concluded that the Committee has been successful in securing
a diverse range of skills and experience in the current Board. The
framework for the refreshment of skills, experience and diversity
to support the needs of the business and its stakeholders in the
future is transparent and well understood.
Vanda Murray OBE
Chair of the Nomination Committee
11 March 2021
Marshalls plc
marshalls.co.uk
65
Governance Audit Committee Report
Reinforcing our control
environment in a
turbulent year
Dear shareholder
In this report I set out the Audit Committee’s
objectives and responsibilities and also
explain the activities undertaken during
2020 and the priorities for 2021. This report,
which is part of the Directors’ Report,
explains how the Audit Committee has
discharged its responsibilities during 2020
and provided focus and governance in
response to the impact of COVID-19.
2020 highlights
• Provided assurance to the Board on whether the 2020 Annual
Report and Financial Statements, taken as a whole, is fair,
balanced and understandable.
• Reviewed the measures taken to ensure the maintenance
of sufficient liquidity within the Group’s capital structure.
This included the establishment of £90 million of new bank
facilities and a facility line of £200 million under the
Government’s CCFF commercial paper programme.
• Reviewed the stress test financial modelling, forecasts and
sensitivity analyses, including the scenario planning and
assumptions used, to conclude on the Group’s going concern
assessment and Viability Statement.
• Provided assurance to the Board in relation to the
maintenance of appropriate financial control systems and
procedures during the pandemic and the adequacy of
additional procedures introduced as a consequence of the
majority of office staff working from home for most of the year.
• Carried out a detailed review of the outcomes of cyber
security audits undertaken by KPMG LLP in order to improve
cyber security controls and to ensure that IT controls remain
appropriate and robust.
• Commissioned a number of other internal audit reviews by
KPMG LLP in relation to the Group’s response to COVID-19,
business continuity and IT disaster recovery, the integration
of Edenhall, recruitment processes and supplier tendering.
2021 priorities
• To focus on transparency, the clarity of reporting and the
consistency of messaging across all communication and
regulatory channels and over all areas of the business.
• To review the delivery of the external and internal audit,
to monitor progress and to monitor changes in external
regulatory environment and best practice. The Committee
“Despite the disruption to normal
working practices, Marshalls
maintained a strong focus on control,
risk management and governance
throughout the year.”
Members and attendance
Meetings
Graham Prothero — Chair
Janet Ashdown – SID
Tim Pile
Angela Bromfield
Find our Terms of Reference and
Nominations Policy at marshalls.co.uk/about-us/
corporate-governance
66
Marshalls plc
Annual Report and Accounts 2020
Governance will continue to oversee the disclosure of significant financial
judgements made by management.
• To assess and improve cyber security controls and ensure that
IT controls remain appropriate and robust. This will involve
further cyber security audits.
The Chair of the Committee is a Chartered Accountant and
the Board is satisfied he is independent and has recent and
relevant financial experience as required by the Code. Other
members also have relevant sectoral and financial experience.
Their biographical details are on pages 52 and 53.
• To review the findings from internal audit reviews to be
undertaken by KPMG LLP and monitor the implementation
of recommendations made in these reports and progress with
actions from previous reviews. There are additional internal
audit reviews planned for 2021, including a review of the Group’s
crisis management plans, focusing on the lessons learnt from
the Group’s planning and response during the critical phases of
the COVID-19 pandemic in the second quarter of 2020. Further
audits planned for 2021 include payroll controls and processes,
the accounts receivable function and a maturity assessment
of the delivery of the Group’s ESG strategy.
How the Audit Committee operates
During the year, the Audit Committee held four formal meetings
and there were also meetings between the Audit Committee
Chair, the Group Finance Director and the external auditor.
The Committee meets both the external and internal auditor
independently of management, ensuring it has full visibility of
matters that have been the subject of particular discussions. The
Committee also reports to the Board in relation to the going concern
statement and the Viability Statement and whether the accounts
are fair, balanced and understandable.
The Committee’s role in advising the Board
in response to the impact of COVID-19
In response to COVID-19, the Group took decisions to control costs
and maintain cash liquidity. An operational restructuring programme
was completed to reduce fixed costs and improve operational
efficiency. The Group signed agreements with its banking partners
for additional short-term facilities amounting to £90 million, which
significantly strengthened the Group’s headroom. In addition, the
Group entered into a facility line under the Government’s COVID-19
Corporate Financing Facility (“CCFF”) with an issuer limit of £200 million.
The Board and Executive Management of Marshalls volunteered
to take a 20 per cent reduction in remuneration. Senior managers
in the business also took a 15 per cent reduction in their
remuneration. Additionally, the Group utilised the Government’s
scheme which allowed the deferral of tax payments and also
utilised the Government’s Coronavirus Job Retention Scheme
(“CJRS”) to furlough employees. In the final quarter of 2020, all
funding assistance received under these schemes was repaid
in full and the remuneration saved, amounting to £120,000, was
paid to Marshalls’ nominated charities. The Board also withdrew
the previously announced 2019 final dividend and supplementary
dividend to preserve cash. Despite the disruption to normal
working practices, Marshalls maintained a strong focus on control,
risk management and governance throughout the year. Health
and safety has remained the key area of focus throughout.
The Audit Committee provided advice and assurance to the
Board in respect of all of the key decisions taken to address
these issues. The combination of these actions has enabled the
Group to maintain a strong balance sheet and a flexible capital
structure containing significant liquidity headroom.
Effectiveness of the Audit Committee
During the year, an external evaluation of the Committee’s
performance was undertaken as part of the Board evaluation
process. This is explained in detail in the Corporate Governance
Statement on pages 54 to 63. The review found the Committee
to be well composed, effective and well run. No areas of
concern were highlighted during this review although a number
of agreed actions have been taken forward.
External audit
Deloitte LLP was appointed in May 2015 as statutory auditor,
following a tender process. The Committee has adopted policies
to safeguard the independence of its external auditor, Deloitte
LLP. It is the policy of the Company that the external auditor
should not provide non-audit services, other than those that
are “de minimis“ in value, of less than £5,000 in aggregate in any
financial year. Any other non-audit services require the specific
approval of the Committee. Where the Committee perceives
that the independence of the auditor could be compromised,
the work will not be awarded to the external auditor. Details
of amounts paid to the external auditor, and its entire network,
for audit and non-audit services in 2020 are analysed in Note 3
on page 118. Other than the half-yearly review of Marshalls plc, for
which a fee of £30,000 was charged (2019: £20,000), no amounts
were paid for non-audit work during 2020. The aggregate
amount paid to other firms of accountants for non-audit
services in the same period was £222,000 (2019: £240,000).
Effectiveness of the external audit
An annual review of external audit effectiveness was undertaken
by the Committee in 2020. The conclusion of the review was that
the external auditor had conducted a comprehensive, appropriate
and effective audit. Communication, at all levels, had been open
and constructive and areas where the external auditor could work
more effectively, in respect of each phase of the audit, were identified.
Internal audit
The internal audit process is carried out by KPMG LLP, and the
annual internal audit programme uses a risk-based assessment that
takes into account the Risk Register and management input. KPMG
attends the Group’s Risk Register review meeting on a regular basis.
This risk-based assessment is reviewed and approved by the Audit
Committee, and the process is overseen by the Group Finance
Director. KPMG LLP is independent from the Company’s external
auditor and has no other connection with the Group.
The Company operates a self-certification internal control
process to support the internal audit process throughout the
year. The internal audit programme includes both regular audit
checks and assignments to look at areas of critical importance.
These assignments form part of a much wider programme of
independently audited aspects of the Group’s operations. Any
areas of weakness that are identified through this process
prompt a detailed action plan and a follow-up audit check to
establish that actions have been completed. Instances of fraud
or attempted fraud (if any) and preventative action plans are
also reported to the Committee and recorded in a fraud register.
During the year, in addition to the regular internal control process,
KPMG LLP conducted specific reviews on the Group’s response
to COVID-19, business continuity and IT disaster recovery, cyber
security, the integration of Edenhall, recruitment processes and
supplier tendering.
The Committee is pleased to report that, although the wider risk of
cyber fraud continues to increase, no significant failings or weaknesses
were identified during the year and the Group’s significant investments
in enhanced cyber security measures and systems have enhanced
its maturity in this area. There were no incidences of fraud that
significantly affected the Group’s business during 2020. A rolling
programme of cyber security awareness training is undertaken and
external presentations are made periodically to selected groups of
employees by specialists from the Group’s banking partners.
Marshalls plc
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67
Governance Audit Committee Report continued
The Committee’s roles and responsibilities
During 2020, the Committee focused on a range of significant issues and other accounting judgements relating to the Group’s Financial
Statements. The Committee also provided oversight over the external and internal audit functions as well as reviewing the Group’s risk
management and internal control systems and procedures. An overview of the Committee’s activities over the year is set out in the table below.
Responsibility area Primary responsibilities
Activities undertaken during 2020
Financial reporting • To review, with both management
and the external auditor, the more
significant judgements made and the
quality and appropriateness of the
Group’s accounting policies.
• To review the assumptions
and disclosures made in the
Financial Statements.
• To assess the clarity of disclosures and
compliance with stock exchange and
regulatory requirements.
• To provide assurance to support the
long-term Viability Statement and the
procedures for evaluating the Group’s
going concern assessment.
• To review the integrity of formal
announcements relating to the Group’s
financial performance, including the
half year and full year Financial
Statements.
• Monitored the integrity of the full year and half year Financial
Statements and assessed critical accounting policies and
practices, and compliance with accounting standards.
• Assessed key areas of judgement in relation to significant issues
relating to the Financial Statements. The main area of judgement
was the disclosure of the accounts charge for “operational
restructuring costs and asset impairments” as a separate item on
the face of the Income Statement due to its scale and exceptional
nature. The Committee reviewed the findings of the external
auditor and considered the assessments and conclusions made
by management.
• Reviewed the additional trading updates issued during the year
which provided regular communication to shareholders in relation
to financial performance and the Group’s response to COVID-19.
• Approved the Viability Statement – and reviewed the assumptions
and financial modelling underpinning the assessment, including
the adequacy of scenario planning.
• Reviewed the Group’s capital structure in light of COVID-19
together with both the capital allocation and dividend policies.
• Approved the going concern statement – and advised the Board
that the Group is able to continue in operation and meet its
liabilities as they fall due for at least the next 12 months.
• Reviewed ESG disclosures, including the Group’s climate
change strategy and objectives and its commitment to
science-based targets.
Risk management
• To assess and review the effectiveness
• Reviewed the operation of the Group’s Risk Committee, which
of the Group’s risk management
framework and procedures.
• To advise the Board on current and
emerging risks.
comprises the Executive Directors and members of senior
management. During 2020, Board members attended both of the
half-yearly risk meetings. The Risk Register process is set out in more
detail on pages 24 and 25.
• Played a central role in the Group’s risk reviews during 2020 and the
risks associated with the COVID-19 pandemic have been the subject
of detailed review by the Committee. Changes in the control
environment as a consequence of the COVID-19 crisis have been a
particular focus of the Committee and KPMG was commissioned to
include a targeted internal audit project covering this area.
• Provided oversight into the risk process. Actions have been reported
and detailed plans have been formulated to improve financial
control, compliance and governance.
Internal control
• To review the internal control
• Reviewed the underlying policies and procedures.
framework to ensure that the checks
and balances in the processes
effectively reduce risk and the
likelihood of material error or fraud.
• To review the effectiveness of the
Group’s internal control systems,
covering financial, operational
and compliance controls.
• Assessed the risk of management override of controls including
authorisation controls and segregation of duties. The Committee
considered those areas where management applies judgement in
determining the appropriate accounting and discussed this with the
external auditor. The external auditor presented its findings and its
use of data analytics.
• Reviewed the Group’s processes for the ongoing assessment of
operational, financial and IT-based controls. A rolling programme
of independent checking is undertaken focusing on key controls,
reconciliations and access to, and changing permissions on,
base data.
68
Marshalls plc
Annual Report and Accounts 2020
Governance Responsibility area Primary responsibilities
Activities undertaken during 2020
External audit
Internal audit
• To make recommendations to
the Board on the appointment,
reappointment and removal of
the external auditor.
• To consider the independence and
objectivity of the external auditor –
and to approve the external auditor’s fees.
• To agree the nature and scope of the
audit with Deloitte LLP.
• To review the external auditor’s findings
and its key focus areas.
• The Group’s current auditor, Deloitte LLP, has processes in place
designed to maintain independence, including regular rotation
of the audit partner. The Committee advised on the appointment
of Dave Johnson as the audit partner for Deloitte LLP in May 2020,
following the retirement, by rotation, of Christopher Robertson.
The Company has complied with the Competition and Markets
Authority’s Order for the financial year under review.
• Provided focus and challenge in relation to materiality and
effectiveness of planning. The Committee also challenged
the sufficiency and appropriateness of audit evidence.
• To review the effectiveness of the
• Reported on actions and detailed plans that have been formulated
internal audit function and the work
of KPMG, as internal auditor, and the
internal audit programme.
• To review the recommendations of
KPMG and the responses and action
plans of management.
Other matters
• To oversee and review the
effectiveness of the following policies:
• Serious Concerns Policy and
whistleblowing procedure;
• Anti-Bribery Policy; and
• Cyber Security Policy.
to improve financial control, compliance and governance. No
significant weaknesses have been identified during the year.
• The KPMG internal audit confirmed that Marshalls’ response to
COVID-19 was underpinned by good governance. Key controls in
high risk areas, such as resource planning, supplier terms, financial
modelling and cash flow forecasts, were redesigned to adapt to
changing and emerging risks. KPMG also concluded that the
logistical challenges of remote working were well considered
in the Group’s COVID-19 response.
• Reviewed the Committee’s Terms of Reference.
• Ensured that the procedures in place in relation to
each of these policies are appropriate.
• Reviewed the effectiveness of procedures underlying
the Serious Concerns helpline and for handling allegations
from whistleblowers.
Effectiveness of the internal audit
An annual review of internal audit effectiveness and of the
performance of KPMG LLP as independent internal auditor
was undertaken by the Committee in 2020.
The conclusion was very positive and was that the current
internal audit process continues to be an efficient and effective
means of managing the internal audit function. The Committee
has considered, with KPMG LLP, how this process can be
developed further and further improvements have been
reflected in the 2021 plan.
Fair, balanced and understandable
The Committee has considered whether, in its opinion, the 2020
Annual Report and Financial Statements is, taken as a whole,
fair, balanced and understandable, and whether it provides the
information necessary for shareholders to assess the Group’s
position, performance, business model and strategy. As part of
its review the Committee considered the disclosures in the
Strategic Report relating to the Group’s 5 year Strategy together
with the enhanced disclosures relating to the Group’s ESG
objectives, sustainability and climate change risks and
opportunities and targets. The Committee also considered the
adequacy of the disclosures made in relation to the
consequences of COVID-19 and the measures undertaken by
the Group to mitigate risk. In making this assessment, the
Committee has advised the Board in relation to the statement
required by the UK Corporate Governance Code.
The Committee has concluded that the disclosures, and the
process and controls underlying their production, were appropriate
to enable it to determine that the 2020 Annual Report and
Financial Statements is fair, balanced and understandable.
Whistleblowing and bribery
The Audit Committee monitors on behalf of the Board any reported
incidents under the Serious Concerns Policy (our Whistleblowing
Policy), which is available to all employees. A third party
organisation, Safecall, has been appointed to handle all concerns
independently and confidentially on behalf of the Group. These
procedures are embedded into the Code of Conduct and are
relevant to all stakeholders including suppliers, partners and
employees. The policy and the Safecall process are displayed on
operating site noticeboards and on the Company’s intranet, and
set out the procedure for employees to raise legitimate concerns
about any wrongdoing without fear of criticism, discrimination or
reprisal. The Committee is satisfied that arrangements are in place
for the proportionate and independent investigation of such
matters and for appropriate follow-up action. The outcome of any
investigation and recommended action is reported to the Board.
The Company is committed to a zero-tolerance position with
regard to bribery, made explicit through its Anti-Bribery Code
and supporting guidance on hospitality and gifts. The policy
and procedures are published on the Company website and
displayed on operating site noticeboards. Online training is
available to all employees to reinforce the Anti-Bribery Code and
procedures, and (when circumstances permit) classroom-based
training sessions are also held periodically. There is a maintained
register of employee interests and a gifts and hospitality record.
I would like to thank our shareholders for their continued support
during the year. I will be available at the Company's 2021 AGM
to answer any questions in relation to this report.
The Audit Committee Report has been approved by the Board
and signed on its behalf by:
Graham Prothero
Chair of the Audit Committee
11 March 2021
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69
Governance Remuneration Committee Report
Resilience through
a challenging year
2020 highlights
• New Remuneration Policy approved by shareholders at our
2020 AGM following a comprehensive shareholder consultation.
• Board and senior management team voluntary pay reduction
of 20 per cent in April and May.
• In light of the continuing uncertainty associated with the
pandemic, any decision regarding changes to Executive Director
and senior management remuneration packages for 2021, and
indeed changes for the wider workforce, was deferred.
• Incentive plan targets set for 2021 using robust financial and
non-financial measures designed to align with strategic
objectives and shareholder interests and which take into account
current expectations and the continuing market uncertainty.
• Employee Voice Group now well established as the forum
through which Janet Ashdown (the designated Non-Executive
Director for workforce engagement) engages with employees
and stakeholders on pay and benefits with some changes to
its structure being implemented during the year to make it
even more representative.
• Reviewed the success of the 2020 action plan for engagement
with employees and other stakeholders on remuneration.
• Reviewed alignment with wider workforce pay policies and
incentives as part of a wider review of Group reward strategy.
2021 priorities
• Determine whether any changes to Executive Director and
senior management remuneration packages for 2021 are
appropriate, having taken into account the pay and benefits
of the wider workforce and the comparator group.
• Determine incentive outcomes for 2021.
• Set incentive scheme targets for 2022, having reflected on the
continuing impact of the pandemic.
• Assess whether our engagement plan with employees and
other stakeholders on remuneration remains effective.
• Monitor alignment of Executive remuneration with wider
workforce pay policies and incentives.
• Continue to monitor and support the development of reward
strategy across the Group ensuring it is competitive and fair.
“Our Remuneration Policy continues
to be strongly aligned with our
shareholders’ interests.”
Members and attendance
Meetings
Janet Ashdown - Chair
Vanda Murray OBE
Tim Pile
Graham Prothero
Angela Bromfield
The CEO attends the Committee meetings by
invitation but may not participate in discussions
about his own remuneration. The Company
Secretary acts as secretary to the Committee and
attends Committee meetings, along with the Group
Human Resources Director.
Find our Terms of Reference at marshalls.co.uk/
about-us/corporate-governance
70
Marshalls plc
Annual Report and Accounts 2020
Governance Dear shareholder
I am writing to you as the Chair of Marshalls
Remuneration Committee and am pleased
to set out in this report how the Committee
has carried out its objectives and
responsibilities during 2020.
This report is divided into two sections: firstly, this letter and at
a glance “summary” of our Policy and activities; and secondly,
our Annual Remuneration Report showing how our Policy was
applied during the year and outcomes for our Executives and
how it is proposed to be implemented for 2021.
2020 was the first year of operation of our new Remuneration
Policy which was approved by a substantial majority of 93 per
cent of shareholders at the May 2020 AGM. The Remuneration
Committee continues to believe that the Remuneration Policy
approved at the 2020 AGM is the best structure to provide
strong alignment with shareholders' interests and therefore is
not planning any changes to its operation. It should be noted
that the 2020 Remuneration Policy was in most respects
a continuation of the 2017 Policy.
Business performance and outcomes for 2020
The Group’s KPIs monitor progress towards the achievement of
the Group’s objectives. The Group's key strategic KPIs are shown
on pages 22 and 23 of the Strategic Report. The Company
operates a single long-term incentive plan, the Management
Incentive Plan (“MIP”), which focuses directly and indirectly on
aligning the reward of Executive Directors and senior
management with delivery of these KPIs. EPS, net debt,
customer service and health and safety are the measures
expressly used to determine awards under the MIP.
2020 performance was overshadowed by the COVID-19
pandemic and as a result the Company did not achieve the
performance conditions set at the beginning of the year. This
has resulted in no amounts being earned under the MIP in
respect of 2020.
Group revenue was £469.5 million (2019: £541.8 million), reported
EPS before operational restructuring costs and asset
impairments, was 8.60 pence (2019: 29.36 pence), and reported
return on capital employed was 8.2 per cent (2019: 21.4 per cent).
MIP A outcomes for 2020
As a result of Company performance during the year the
performance conditions for MIP A were not achieved and as
such no contribution to MIP A will be made in respect of 2020.
MIP B awards allocated in respect of 2020
The performance conditions that determine the allocation of
MIP B awards are the same as the performance conditions for
MIP A. As a result of Company performance, similar to MIP A,
there will be no allocation of awards under MIP B in respect
of 2020.
2020 MIP performance conditions
The table below shows how the Group performed against
targets for the MIP in 2020. Performance measures and targets
are linked to the key strategic objectives highlighted on pages
22 and 23 of the Strategic Report.
MIP Element A: 0 per cent of maximum (2019: 99.6 per cent
of maximum) was awarded to the CEO and Group FD.
MIP Element B: 0 per cent of maximum (2019: 99.6 per cent
of maximum) was awarded to the CEO and Group FD.
EPS (75% of maximum)
29.03p
32.29p
Threshold
(0% payable)
Maximum
(100% payable)
Actual
(2020)
8.60p
Operating cash flow (“OCF”)
to EBITDA ratio (25% of
maximum)
Non-financial targets
(customer service/health
and safety)
£80.2m
£97.3m
£28.4m
Weighting
outcome
(% total award)
0%
0%
CEO
£’000
Group FD
£’000
£940,305 max
£0 actual
£581,167 max
£0 actual
£313,435 max
£0 actual
£193,722 max
£0 actual
No
deduction
No
deduction
No
deduction
Performance conditions were set at the beginning of 2020 and the Committee took account of both internal budgets and external
factors such as the market consensus of investors for the full year 2020. No discretion was exercised in determining bonus outcomes and
no adjustments were made to the targets to reflect the impact of COVID-19 or any other factors affecting the Company during the year.
Definitions
Other than in respect of IFRS 16, the EPS and OCF ratio for 2020 were measured using IFRSs based on the audited results of the
Group and subject to the discretion of the Committee with regard to one-off items. The Committee determined that pre-IFRS 16
targets were to be used in 2020.
EPS
EPS relates to our strategic objective to grow profits. Reported EPS, before operational restructuring costs and asset impairments,
was 8.60 pence (2019: 29.36 pence) in 2020.
OCF/EBITDA
OCF/EBITDA ratio relates to our strategic objective to convert earnings into cash flow and to use cash responsibly. OCF before
operational restructuring costs paid was £28.4 million in 2020.
Marshalls plc
marshalls.co.uk
71
Governance Remuneration Committee Report continued
Non-financial targets
Our customers are at the heart of our business model, and our
measurement of customer service uses factors such as product
availability, on-time delivery performance and administrative
and delivery accuracy to assess performance. The Group’s
average customer service performance is assessed monthly.
Due to the challenges caused by COVID-19 and the longer lead
times experienced by the whole construction sector, the Group's
average customer service score was 94 per cent during 2020.
This compared with the target score of 95 per cent. The Group
continued its excellent performances against its stated health
and safety objective of keeping days lost to accidents to a
minimum, by reference to the 2017 rate. Days lost to accidents
year on year actually reduced by a further 12.2 per cent. As no
bonus was earned in 2020 no adjustment was necessary.
COVID-19 remuneration decisions
The COVID-19 pandemic has created a seismic shift in the way
that all businesses must operate, and in particular in the way
that we must work, including where we work, how we work and
when we work. At Marshalls we have been committed to
ensuring that our customers continue to be able to access our
products safely during this turbulent time, whilst also supporting
our employees by providing the guidance and resources to
enable them to safely and efficiently operate the business.
Further details on our response to COVID-19 are set out below
and on pages 56 and 57.
The following table summarises the key components of
Executive remuneration and the decisions made by the
Committee to take into account COVID-19:
Element of remuneration
Committee decision
Rationale
2020 Executive
Director salaries
Between 1 April 2020 and 31 May 2020 the salary
of the Executive Directors was reduced by 20 per
cent, including pension contributions and salary
supplement. Other members of senior management
also voluntarily agreed similar reductions.
The CEO's employer pension contribution was
reduced by 2.5% to 17.5% of salary in 2020.
The Executive Directors felt this was appropriate both
to reflect the fact that a number of employees were
furloughed and received job retention scheme money
and to preserve cash during a period when trading
was materially impacted. The salaries of the
Executive Directors were restored to their normal
levels once the initial lockdown was complete and
the Company had a better understanding of the
potential impact of COVID-19.
2020 Non-Executive
Director fees
Between 1 April 2020 and 31 May 2020 the annual
fees of the Chair and Non-Executive Directors were
reduced by 20 per cent.
The basis of the reduction for the Non-Executive
Director fees was the same as set out above for the
Executive Directors.
2020 MIP operation
The Committee determined that there should be no
contribution earned in respect of the 2020 financial
year due to the fact that the Company failed to
achieve the performance conditions set at the
beginning of the year prior to the impact of
COVID-19.
2020 MIP B vesting
The MIP Element B awards which were awarded in
2017 vested in full. The underpin condition applying
to 50 per cent of the award was 14.32 pence.
The actual average EPS over the period was
21.42 pence.
The Committee determined that it would make no
adjustment to the performance conditions to take
into account COVID-19 because:
• this was consistent with the operation of bonus
arrangements throughout the Company;
• this approach ensured alignment between the
Executive Directors and the Company’s stakeholders;
• this approach aligned with our decision not to pay
the final dividend for 2019 and to reduce dividend
payments in respect of 2020; and
• of the wider societal impact of COVID-19.
The Committee did not exercise any discretion to
depart from the formulaic outcomes on vesting as
the performance conditions for Element B were
satisfied on grant and the underpin met over the
deferral period; the Committee therefore took the
view that the vesting was in line with the business,
individual and wider Company factors over the
relevant period.
2021 Executive
Director salaries
The Company has taken the decision to delay
the next round of pay awards (which would have
taken place in January) to later in the year.
The Company did not feel it was appropriate to
make any adjustments at the present time given
the ongoing impact of COVID-19.
The employer pension contribution for the CEO will
be reduced by 2.5% to 15% of salary. Pension
Contributions for both the CEO and Group FD will
be aligned with the majority workforce contribution
by the end of 2022.
72
Marshalls plc
Annual Report and Accounts 2020
Governance Element of remuneration
Committee decision
Rationale
2021 Non-Executive
Director fees
The Company has taken the decision to delay the
next round of pay awards until later in the year.
2021 MIP operation
“Windfall gains”
The Committee is intending to operate the 2021 MIP
on the same basis as historically, namely:
the maximum opportunities for the Executive
Directors will remain the same;
the performance conditions will remain the same; and
the performance targets will continue to be based
on internal Company budgets and external
consensus forecasts.
Equity awards (under MIP B) were granted in March
2020 in respect of MIP performance in 2019. The
Committee will not be granting equity awards
(under MIP B) to the Executive Directors during 2021
as a result of the 2020 MIP performance conditions
not being achieved.
The Company did not feel it was appropriate to
make any adjustments at the present time given
the ongoing impact of COVID-19.
The Committee does not intend to change the
operation of the MIP in 2021 and is proposing to set
stretching but achievable targets in line with its
normal policy. The Committee does not believe that
it is appropriate to reduce the maximum award level
given that the challenge in the targets remain the
same for 2021 as they did in 2020 and 2019.
At the time of the 2020 awards the Committee did
not consider windfall gains. For 2021 there will be
no need to consider the share price on grant and
whether it would lead to windfall gains as no awards
will be granted, When the 2020 awards vest the
Committee will consider the actual share price
at that time compared to historic levels before
determining whether any adjustments to the grant
size or protection against windfall gains is required.
Wider workforce considerations
Marshalls is committed to creating an inclusive working
environment and to rewarding its employees in a fair manner.
In making decisions on Executive pay, the Remuneration
Committee considers wider workforce remuneration and
conditions. This report includes information on our wider
workforce pay conditions, our CEO to employee pay ratio,
our gender pay statistics and our diversity initiatives. The
Committee’s role in monitoring and reporting on such issues is
key to the promotion and development of our values and culture.
Shareholders
We are pleased by the continued support shown by our
shareholders through the vote on the Annual Remuneration
Report and the new Remuneration Policy at the 2020 AGM:
93+
94+
Remuneration Policy
For – 93.0%
Against – 7.0%
Withheld – n/a
Votes cast: 154,260,365
Remuneration Report
For – 94.2%
Against – 5.8%
Withheld – n/a
Votes cast: 151,049,910
As part of our annual shareholder engagement programme,
the Chair and I met with key shareholders in November 2020.
In response to shareholder interest we are planning to work with
management in 2021 to enhance our ESG scorecard, adding to
the health and safety and customer service measures that we
apply to our incentives.
In conclusion
In spite of the impact of the COVID-19 pandemic on
performance, the Committee continues to believe the
Remuneration Policy adopted by shareholders in 2020 is
the right one for the business. Notwithstanding the outcomes
on incentive arrangements, the Executive Directors, the senior
management team and the wider workforce have made
exceptional contributions and shown great resilience to
support the business through a challenging year.
I would like to thank our shareholders for their continued support
during the year. I will be available at the Company’s 2021 AGM
to answer any questions in relation to this Remuneration Report.
Janet Ashdown
Chair of the Remuneration Committee
11 March 2021
Our Remuneration Report has been prepared in accordance
with the Companies Act 2008 and Schedule 8 of the Large and
Medium-sized Companies and Groups (Accounts and Reports)
(Amendment) Regulations 2013. It meets the requirements of the
2018 UK Corporate Governance Code (the “UK Code”) and is
also prepared in accordance with the UK Listing Authority’s
Listing Rules and Disclosure and Transparency Rules.
Marshalls plc
marshalls.co.uk
73
Governance 7
+
0
+
L
6
+
0
+
L
Remuneration Committee Report continued
At a glance
Link to Company strategy
The following table sets out the Group’s KPIs and how they are reflected in the operation of the MIP:
Strategic KPI
Revenue
Profit
ROCE
Net debt
Customer service Health and safety
Measure
EPS/OCF
EPS/OCF
EPS/OCF
OCF
Index KPI
Target KPI
The use of EPS under the MIP as the main performance condition ensures that the Executive Directors are focused on driving
profitable growth in accordance with the Company strategy. The OCF to EBITDA ratio ensures that this growth in profit is not at
the expense of its quality and sustainability. The customer metric and health and safety performance conditions are one way we
incorporate environmental, social and governance measures into our incentive framework and reflect our commitment to service
and employee wellbeing. This ensures that growth and profitability are not achieved in a way that is detrimental to the Company’s
customers and employees nor in a way that promotes short-term, high risk behaviour.
Full details of the Company’s strategy are set out in the Strategic Report on pages 20 and 21.
2020 remuneration outcomes
Long-term performance
The following chart shows the single figure of remuneration for the CEO over the last five financial years compared to the Company’s
EPS and OCF over the same period. The EPS and OCF for 2020 have been disclosed on a pre-IFRS 16 basis in order to be consistent
with prior periods. The chart demonstrates the correlation between Company performance demonstrated by these measures and
the remuneration paid to the CEO.
350
300
250
200
150
100
50
0
2014
2015
2016
2017
2018
2019
2020
— CEO single figure — EPS — OCF (£’m)
2020 single figure
The following charts summarise the single figure of remuneration for 2020 in comparison with 2019 and with the minimum, target and
maximum remuneration scenarios from the 2020 Remuneration Policy to show how the actual remuneration compares to the Policy
remuneration. For those elements of remuneration provided in shares in 2019 and 2020, we have separated out their original value
on grant and the additional value generated due to share price growth over the vesting period. It is the Committee’s view that one
of the key objectives of equity-based remuneration is to align Executives’ interests and those of shareholders. With such a high
proportion of MIP awards expressed in or linked to shares, the impact of share price movement on overall Executive reward can
be significant.
Explanatory notes on the single figure can be found in the Annual Remuneration Report (page 82).
Martyn Coffey
(CEO)
2020
-115
2019
518
493
85
92
1,207
1,695
602
229
342
455
2,213
Jack Clarke
(Group FD)
2020
-76
304
60
792
1,080
2019
315
60
394
150
224
299
1,442
0
500
1,000
£’000
1,500
2,000
2,500
Salary and other benefits
Long-term incentives (MIP A and MIP B)
Proportion due to share price reduction (2019: growth)
Salary supplement in lieu of employer pension
MIP Element A
MIP Element B
74
Marshalls plc
Annual Report and Accounts 2020
Governance 2020 remuneration outcomes continued
Total remuneration opportunity under the 2020 Policy for each of the Executive Directors at three different levels of performance is shown
below:
Martyn Coffey (CEO)
Jack Clarke (Group Finance Director)
Outperformance plus 50% share price appreciation
Outperformance plus 50% share price appreciation
603
Outperformance
603
Target
728
728
603
364
213
Below threshold
603
485
243
364
450
300
150
485
Outperformance
364
Target
450
300
364
225
150
Below threshold
364
0
200
400
600
800 1,000 1,200 1,400 1,600 1,800 2,000 2,200
0
200
400
600
800
1,000
1,200
1,400
1,600
£’000
£’000
Salary, benefits and pension contribution
MIP Element A
MIP Element B
Proportion due to share price growth
Notes:
a)
Base salary, benefits and pension information is taken from the single figure remuneration table in the 2020 Annual Remuneration Report. The benefits value reflects a fully expensed
company car, medical insurance and any other taxable benefits, and pension includes the level of salary supplement paid instead of contractual employer pension contributions.
b) At target, 50 per cent of the annual award under the MIP pays out.
c) The minimum assumes a performance that fails to meet the threshold for Element A and Element B so is the level below which no variable pay under the MIP is earned.
d) The maximum represents the full 250 per cent of salary potential under the MIP.
e) The maximum +50 per cent share price increase represents the full 250 per cent of salary potential under the MIP, as well as the maximum value assuming a 50 per cent
increase in share price for MIP B awards.
Comparison to peers
The following chart shows the relative position of base salary and total compensation for our Executive Directors compared to our peers.
2,500
2,000
1,500
1,000
500
0
0
0
0
£
’
)
O
E
C
(
y
e
ff
o
C
n
y
t
r
a
M
Base salary
Total compensation
1,600
1,400
1,200
1,000
800
600
400
200
0
0
0
0
£
’
)
D
F
p
u
o
r
G
(
l
e
k
r
a
C
k
c
a
J
Base salary
Total compensation
Lower quartile to median
Median to upper quartile
Martyn Coffey (CEO)/Jack Clarke (Group FD)
The charts demonstrate the Committee’s policy that salary and benefits should be set at or below the market level, with variable
incentives allowing an overall above-market positioning when the Company has performed well. The variable element assumes
an “on-target” performance under relevant incentive schemes.
Shareholding requirement
The minimum shareholding requirement for Executive Directors and their actual holding are set out below. It must be built up over
a five-year period and then subsequently held at an equivalent of 200 per cent of base salary.
Martyn Coffey
(CEO)
Jack Clarke
(Group FD)
200%
200%
397%
649%
0%
100%
200%
300%
400%
500%
600%
700%
Actual shareholding
Shareholding requirement
Under the 2020 Policy, the full shareholding requirement of 200 per cent of salary will continue to apply for one-year post cessation
of employment and half of the requirement (being 100 per cent) for a further year.
Any vested MIP shares that remain subject to the holding requirement are held in an EBT until the holding period is complete.
Marshalls plc
marshalls.co.uk
75
Governance
Remuneration Committee Report continued
At a glance continued
2020 remuneration outcomes continued
Impact of share price change
It is the Committee’s view that it is important when considering the remuneration paid in the year under the single figure to take a
holistic view of the Director’s total reward linked to the performance of the Company. In the Committee’s opinion, the impact on the
total reward of the Director is more important than the single figure in any one year. This approach encourages Directors to take a
long-term view of the sustainable performance of the Company, which is critical in a cyclical business. The ability for the Directors to
gain and lose, dependent on the share price performance of the Company, at a level which is material to their total remuneration is
a key facet of the Company’s Remuneration Policy. The Committee has discretion to adjust remuneration as a result of share price
appreciation or depreciation, but this has not been required given the 2020 outcomes. The following charts set out the single
figure for 2020 and the impact the movement in share price has had on the value, and the share interests held by the Executive
Directors at the end of the financial year and the impact on the value of these share interests taking into consideration the share
price movement over the year.
Impact of share price change on single figure remuneration
Impact of share price change on value of shares held
Martyn Coffey
(CEO)
Jack Clarke
(Group FD)
1,695
1,810
1,080
1,156
4,406
5,062
1,224
1,406
(500)
0
500
1,000
1,500
2,000
2,500
0
1,000
2,000
3,000
4,000
5,000
6,000
Full impact with share price change
Assuming no share price change
£’000
Implementation of the Policy in 2020 and 2021 for Executive Directors
The table below sets out the following information:
• a summary of the Policy approved at the 2020 AGM. The full policy can be found on pages 64 to 76 of the Company’s 2019 Annual
Report and Accounts (www.marshalls.co.uk/investor/results-reports-and-presentations);
• how the Company implemented the 2020 Remuneration Policy in 2020; and
• how the Company proposes to implement the 2020 Remuneration Policy in 2021.
Element of pay
Summary of Policy
How we implemented the Policy in 2020
How we will implement the Policy in 2021
Salary
An Executive Director’s base salary is set on
appointment and reviewed annually or when
there is a change in position or responsibility.
When determining an appropriate level of
salary, the Committee considers:
• general salary rises for employees;
• remuneration practices within the Group;
• any change in scope, role and
responsibilities;
• the general performance of the Group;
• the experience of the relevant Director;
• the economic environment; and
• whether a benchmarking exercise is
appropriate (using salaries within the ranges
paid by the companies in the comparator
groups for remuneration benchmarking).
Executive Director salaries for
2020 were as follows:
• CEO – £501,000; and
• Group FD – £310,000.
Salary increases were 9% and
2.7% for the CEO and Group
FD respectively in 2020;
increases for UK employees
generally were 2.7%.
A decision has been taken to
delay any decision on salary
changes. Until any such
decision is taken salaries will
remain unchanged from 2020:
• CEO – £501,000 (0%
increase); and
• Group FD – £310,000
(0% increase).
76
Marshalls plc
Annual Report and Accounts 2020
Governance
Element of pay
Summary of Policy
How we implemented the Policy in 2020
How we will implement the Policy in 2021
Benefits and
pension
Benefits include car or car allowance, health
insurance, life assurance and membership of the
Group’s employee share plans.
The CEO’s employer pension
contribution was reduced by
2.5% to 17.5% of salary.
The CEO's employer pension
contribution will be reduced
by 2.5% to 15% of salary.
Executive Directors are entitled to join the
defined contribution scheme operated by
Marshalls. The Company contributes at an
agreed percentage of basic salary.
The Group FD’s employer
pension contribution was
20% of salary.
MIP Element A
Executive Directors may take a pension
allowance in place of the Company’s
contribution to the scheme. Pension allowances
are excluded for the purposes of calculating any
other element of remuneration based on a
percentage of salary. The maximum Company
contribution is 20% of salary; however, this will be
reduced to align with the majority of employees
(currently 5%) by the end of 2022.
For any new Executive Director appointments,
the maximum employer pension contribution or
allowance will be in line with the majority
contribution to UK employees.
Annual performance conditions and targets
are set at the beginning of the Plan year by
reference to financial, strategic and
operational objectives by the Remuneration
Committee.
Upon assessment of performance by the
Committee, a contribution will be made by the
Company into the participant’s Plan Account
and 50% of the cumulative balance will be paid
in cash. Any remaining balance will be
converted into shares or share-linked units.
100% of the balance in the final year of the Plan
will normally be settled in the form of shares
transferred or allotted to the participant.
During the Plan period, 50% of the retained
balance is at risk of forfeiture based on a
minimum performance measure determined
annually by the Committee.
The Committee may award dividend
equivalents on shares or share-linked units held
under the Plan to plan participants to the
extent that they vest.
Maximum opportunity of 150%
of salary.
Outcome level in 2020 was
as follows:
• CEO – 0% of base salary;
and
• Group FD – 0% of base
salary.
The performance
measures were:
• EPS (75%); and
• ratio of OCF to EBITDA (25%).
Non-financial performance
conditions to reflect our focus
on brand, customers
and employees:
• customer service
(must remain at or above
95%); and
• health and safety incidence:
the rate of accidents must
not fall below an agreed
threshold, benchmarked by
reference to the “base”
year (2017).
If they are not met, there is
a reduction of award value
earned by the satisfaction
of the financial performance
conditions by 10% in relation
to each of these
additional conditions.
See page 80 for details
of the targets, their level
of satisfaction and the
corresponding bonus earned.
A final reduction in 2022 will be
implemented to align with the
majority workforce contribution
(currently 5%).
The Group FD’s pension
contribution will be aligned with
the majority workforce
contribution by the end of 2022.
Maximum opportunity of 150%
of salary with target set at 50%
of opportunity and threshold
at 0% of opportunity.
The performance measures are:
• EPS (75%); and
• ratio of OCF to EBITDA (25%).
Non-financial performance
conditions to reflect our focus
on brand, customers and
employees will continue
to apply:
• customer service (must
remain at or above
95%); and
• health and safety incidence:
the rate of accidents must
not fall below an agreed
threshold, benchmarked
by reference to the “base”
year.
If they are not met, there is
a reduction of award value
earned by 10% in relation
to each of these
additional conditions.
Marshalls plc
marshalls.co.uk
77
Governance Remuneration Committee Report continued
At a glance continued
Implementation of the Policy in 2020 and 2021 for Executive Directors continued
Element of pay
Summary of Policy
How we implemented the Policy in 2020
How we will implement the Policy in 2021
MIP Element B
Annual performance conditions and targets are
set by reference to financial, strategic and
operational objectives by the Remuneration
Committee.
Maximum opportunity of 100%
of salary.
Contribution level for 2020 was
as follows:
Maximum opportunity of 100%
of salary with target set at 50%
of opportunity and threshold
at 0% of opportunity.
Awards are granted retrospectively in shares
based on the achievement of performance
targets for the relevant year. Awards vest
(subject to continued employment) 3 years
from grant.
• CEO – 0% of base
salary; and
• Group FD – 0% of
base salary.
The performance measures
are the same as for Element A.
The performance measures
were the same as for Element A.
Sale restrictions apply to awards that have
vested: normally vested awards may not be
sold for a further two years after vesting or post
cessation of employment.
There is a financial underpin which, if not
achieved over the three-year vesting period,
results in the loss of up to 50% of unvested
awards.
Minimum
shareholding
requirement
Minimum shareholding requirement of 200% of salary. Executive Directors are required to retain 50% of the post-tax
number of vested shares from the Company incentive plans until the minimum shareholding requirement is met and
maintained. Adherence to these guidelines is a condition of continued participation in the incentive arrangements.
Post-cessation holding period of 200% of salary for the first year and 100% of salary for a further year. Where their
actual shareholding at departure is below the minimum shareholding requirement, the Executive Director’s actual
shareholding is required to be retained on the same terms and for the same periods.
Implementation of Non-Executive Directors fees in 2020 and 2021
In line with the wider workforce and Executive Directors, the Company has taken the decision to delay the next round of pay awards
(which would have taken place in January) to later in the year. The table below reflects the 0 per cent increase.
Director
Vanda Murray (Chair)
Janet Ashdown (SID, Chair of Remuneration Committee)
Graham Prothero (Chair of Audit Committee)
Tim Pile
Angela Bromfield
1 January 2021
£’000
1 January 2020
£’000
Percentage
increase
175.0
64.8
57.6
49.1
49.1
175.0
64.8
57.6
49.1
49.1
—%
—%
—%
—%
—%
78
Marshalls plc
Annual Report and Accounts 2020
Governance Annual Remuneration Report
This report covers the reporting period from 1 January 2020 to 31 December 2020 and explains how the Remuneration Policy has
been implemented. Comparative figures for the 2019 financial year have also been provided.
Single total figure of remuneration in 2020 – Executive Directors (audited)
Fixed £’000
Performance related £’000
Salary
Other
benefits
Salary
supplement
in lieu of
pension
Annual bonus
MIP Element A
MIP Element B
Long-term
incentives
MIP Element
A and B
Total
Total fixed
Total variable
2020
£’000
2019
£’000
2020
£’000
2019
£’000
2020
£’000
2019
£’000
2020
£’000
2019
£’000
2020
£’000
2019
£’000
2020
£’000
2019
£’000
2020
£’000
2019
£’000
2020
£’000
2019
£’000
2020
£’000
2019
£’000
Martyn Coffey
Jack Clarke
485 460
300 302
Total
785
762
33
4
37
33
13
46
85
60
92
60
-
-
810
531
145
152
- 1,341
-
-
-
229 1,092
150
716
589 1,695 2,213
386 1,080 1,442
603
364
585 1,092 1,628
716 1,067
375
379 1,808
975 2,775 3,655
967
960 1,808 2,695
Notes:
Note a
Note b
Note c
Note c
Note d
a) Benefits are car/car allowance, fuel/fuel allowance, private medical insurance and travel and accommodation expenses.
b) The Executive Directors each received a salary supplement in lieu of contributions into the Group’s pension scheme throughout the year. No Director had any entitlement
under the defined benefit section of the pension scheme and no additional benefit was received as a result of early retirement.
c) No MIP awards for 2020. The annual bonus column shows 50 per cent of the total bonus contribution earned under the MIP Element A in respect of 2019 performance, and 50
per cent of the total value of Element B shares awarded which are deferred but are not subject to further performance conditions (other than continued employment). The
remaining 50 per cent in respect of 2019 Element A is deferred into shares in the MIP account which are subject to performance and employment-based forfeiture for a further
holding period. The remaining 50 per cent of 2019 Element B shares is subject to underpins and employment-based forfeiture for a 3-year deferred period. These deferred
elements will be disclosed in the long-term incentives column when the conditions are satisfied. The deferred shares in relation to both Element A and Element B may change
in value during the holding period depending on Marshalls’ share price.
d) The long-term incentives column shows the aggregate value of sums released from MIP account balances from earlier years that are no longer subject to deferral and
forfeiture risk. The reduction in the MIP account balances because of share price reduction is £115,000 for Martin Coffey and £76,000 for Jack Clarke.
Setting pay in context
The following graphs illustrate the relationship between total expenditure on remuneration and other disbursements from profit over
the past three years.
The four elements represent the most significant outgoings for the Company during the financial year. In addition to staff pay and
shareholder distributions, capital investment and taxation are shown for the following reasons:
• investment – the Company’s strategy is to increase capital investment to take advantage of market demand and in order
to ensure that the business grows in a sustainable manner with a corresponding long-term benefit for all stakeholders; and
• tax – the Company is a UK taxpayer and feels that it is beneficial to demonstrate to all its stakeholders its total UK tax
contribution. The most significant elements of the Company’s UK tax contribution are VAT, employer’s NI, corporation tax,
fuel duty and aggregates levy. As profitability increases, corporation tax will also increase. In 2020 the Group was re-accredited
with the Fair Tax Mark.
Relative importance of spend on pay (percentage change)
Staff pay
(£’m)
+1.5%
98.0
105.4
Distributions to
shareholders (£’m)
-100%
Capital investment
(£’m)
-35.6%
106.9
33.2
29.2
29.2
Tax
(£’m)
-26.1%
93.6
83.4
22.9
69.2
14.7
2018
2019
2020
2018
2019
0.0
2020
2018
2019
2020
2018
2019
2020
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79
Governance Remuneration Committee Report continued
Annual Remuneration Report continued
Outcomes of incentive schemes in 2020 (audited)
See page 71 for details of the satisfaction of the performance conditions under the MIP for 2020.
MIP awards 2020
Element A (historic plan account)
Plan accounts
Opening balance (number of shares) (Note a)
Value of closing balance (Note c)
Number of shares represented by closing balance (Note c)
Martyn Coffey
Jack Clarke
98,546
£714,189
98,546
64,644
£468,491
64,644
2020 was the final year of the historical MIP and therefore 100 per cent of the closing balance vested. The value of the closing
balance is included in the long-term incentives column of the single total figure of remuneration table.
A new MIP started in 2020. The opening balance is therefore zero. As performance conditions were not met in 2020 there will be
no contribution to the plan account in respect of 2020 and therefore the closing balance will be zero.
Element A (new plan account)
Plan accounts
Opening balance (number of shares)
2020 contribution (% of salary earned)
Value
2020 element released (Note b)
Closing balance (deferred into shares)
Number of shares represented by closing balance (Note c)
Martyn Coffey
Jack Clarke
-
-%
-
-
-
-
-
-%
-
-
-
-
Element B (2018 award in respect of 2017 performance)
The EPS forfeiture threshold applicable to the 2018 award was 14.32. The actual average EPS performance was 21.42 and therefore
the forfeiture threshold was met and 100% of the award will vest.
Number of shares awarded
Value of shares vesting
Value of dividends accrued over vesting period
Value included in single figure table (Note e)
Element B (2021 award in respect of 2020 performance)
Number of shares awarded
Percentage of salary
Value
EPS forfeiture threshold (Note d)
Notes:
Martyn Coffey
Jack Clarke
97,788
£695,791
£30,240
£378,135
64,146
£456,418
£19,837
£248,046
Martyn Coffey
Jack Clarke
-
-%
-
n/a
-
-%
-
n/a
a) 50 per cent of the earned Element A award is released to the participant as annual bonus; the remaining 50 per cent is deferred into the participant’s MIP account and
converted into shares. The previously deferred proportion of the 2019 Element A award was converted into shares by reference to the mid-market average value for the
30-day period ending on 31 December 2019. Dividends paid during the year are also added to the carried-forward plan account. The table above shows the resulting closing
balance value calculated by reference to the mid-market average value for the 30-day period ended 31 December 2020.
b) If Element A had been earned for 2020 it would be added to the individual’s plan account, and 50 per cent of the resulting balance would be released to the participant
as an annual bonus; the remaining 50 per cent would be deferred into the participant’s MIP account and converted into shares. The deferral is repeated in each subsequent
year up to the final year. In the final year, subject to any forfeiture provisions, 100 per cent of any balance in the MIP account is released.
c) The carried-forward balance is converted back into shares by reference to the mid-market average value for the 30-day period ended 31 December 2020 (724.72 pence).
d) If the actual EPS falls below the forfeiture threshold over the three years before vesting, 50 per cent of the balance of the award is forfeited. Once Element B shares have
vested, they must normally be held for a further two years. Element B shares lapse on cessation of employment except in “good leaver” circumstances, in which case they
vest on leaving and must be held for two years from the date of leaving.
e) In accordance with the regulations, 50% of the Element B award is included in the single figure table on grant. The remaining 50% plus any dividends accrued are included
on vesting.
Single total figure of remuneration: Non-Executive Directors (audited)
Non-Executive Directors do not participate in any of the Company’s incentive arrangements. Their fees are reviewed periodically
and were last reviewed in October 2020. The Chair’s fees are set by the Committee; other Non-Executive Directors’ fees are set by
the Board as a whole. The Non-Executive Directors reclaim travel and accommodation expenses incurred in the performance of
their duties, and where this is a taxable benefit it is shown below as a grossed-up taxable amount.
80
Marshalls plc
Annual Report and Accounts 2020
Governance Single total figure of remuneration: Non-Executive Directors (audited) continued
Board fee
£’000
Committee fees
£’000
Expenses
£’000
Total
£’000
2019
2020
2019
2020
2019
2020
2019
Vanda Murray
Chair and Chair of Nomination Committee
Janet Ashdown
Senior Independent Director, Chair of Remuneration
Committee and member of Audit and Nomination
Committees
Tim Pile
Member of Audit, Remuneration and Nomination
Committees
Graham Prothero
Chair of Audit Committee and
member of Remuneration and Nomination Committees
Angela Bromfield
Member of Audit, Remuneration and Nomination
Committees (from 1 October 2019)
2020
169
170
49
48
47
48
47
48
47
12
—
17
—
8
—
—
15
—
8
—
Total
359
326
25
23
Directors’ shareholdings and share interests
The following table sets out, in respect of each of the Directors:
• the number of shares the Director holds unconditionally; and
• the number of shares subject to unvested incentive awards as at 31 December 2020.
8
—
1
—
—
9
6
1
177
176
66
64
2
48
50
2
55
58
—
47
12
11
393
360
Shares
that will
vest
following
2020
results
(Note c)
Deferred and
contingent
share
interests
(Note e)
Deferred
shares
(Note d)
Total
interests
in shares
(including
contingent
interests)
Beneficially
owned
(Note b)
Number of
shares
Number of
shares
Number of
shares
Number of
shares
Number of
shares
Shareholding requirement
(Note a)
% of
salary
Number of
shares
required
200
200
129,533
82,821
486,580
96,505
102,038
66,934
76,752
50,347
175,298
114,991
840,668
328,777
—
—
—
—
—
—
—
—
—
—
22,000
11,210
43,140
2,417
3,000
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
22,000
11,210
43,140
2,417
3,000
Director
Executive
Martyn Coffey
Jack Clarke
Non-Executive
Vanda Murray
Janet Ashdown
Tim Pile
Graham Prothero
Angela Bromfield
Notes:
a) The closing price on 31 December 2020 of 748.5 pence per share has been used to measure the number of shares required.
b)
c)
d)
e)
As at the date of this report the number of shares beneficially owned by Martyn Coffey was 486,644 and by Jack Clarke was 96,569. Changes were due to share purchases
under the Share Purchase Plan and changes to their “persons closely associated”.
This comprises Element B awards granted in March 2018 (based on 2017 performance) that will vest three years from grant (i.e. March 2021) before deduction of any tax and
NIC. This must be held for a minimum of two further years.
This column includes the 50 per cent proportion of share interests awarded 2018 and 2019 under Element B of the MIP in the form of nil-cost options or conditional shares
that may be exercised after the three-year deferral period but where vesting is only dependent on continuing employment throughout the three-year deferral period with
no other performance conditions. No awards were made under Element B in 2020.
This column comprises share interests awarded under the MIP (Element A deferred shares and Element B deferred shares) that remain subject to a financial performance
condition as well as to continued employment over the relevant deferral period. 50 per cent of Element A awards and 100 per cent of Element B awards shown in this
column may be forfeited if the financial condition is not satisfied.
f)
Share interests under Element A and Element B of the MIP are calculated by reference to the mid-market average value for the 30-day period ended 31 December 2020
(724.72 pence).
g)
The table above includes the interests of “persons closely associated” as defined under the Financial Services and Markets Act (Market Abuse) Regulations 2016.
It should be noted that both Executive Directors have met their minimum shareholding requirements.
Marshalls plc
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81
Governance Remuneration Committee Report continued
Annual Remuneration Report continued
Statement of implementation of Remuneration Policy in the following financial year (2021)
See pages 76 to 78.
Payments to past Directors/payments for loss of office
There were no payments to past Directors.
There were no payments to Directors or former Directors for loss of office.
Annual Remuneration Report
The following table sets out the part of the report where the relevant information can be found:
Element
Payment for loss of office or payments to past Directors
Performance graph and table
Percentage change in remuneration of the Director undertaking the role of CEO
Relative importance of pay
Statement of implementation of the Policy in the following financial year
Consideration by the Directors of matters relating to Directors’ remuneration
Statement of voting at General Meeting
Fairness, diversity and wider workforce considerations
Introduction
This section of the Remuneration Report deals with the following:
Reference
Page 82
Page 74
Page 85
Page 79
Pages 76 to 78
Pages 71 to 73
Page 93
• the Committee’s approach to the review of wider workforce pay policies and how it has taken these into consideration in setting
remuneration;
• the alignment of the incentives operated by the Company with its culture and strategy;
• general pay and conditions in the Company;
• gender and diversity; and
• comparison metrics relating to Executive and employee remuneration.
Process
The Committee fulfils its responsibility for the oversight and review of wider workforce pay, policies and incentives through a formal
process. Reporting is prepared on an annual basis to show details of all elements of remuneration for all members of the workforce
(excluding temporary and agency staff and consultants). The reports include data on:
• salary and salary increases:
• general positioning of remuneration packages (benchmarking);
• bonus (total eligible population, target and maximum range, performance conditions, payment method, and scope for discretion/
recovery under malus and clawback provisions);
• sales and commission plans;
• long-term incentive plans (total eligible population, target and maximum range, performance conditions, payment method,
scope for discretion/recovery under malus and clawback provisions, and vesting and holding periods); and
• pension schemes and other benefits (defined contribution plan, total eligible population, Company contribution and
employee contribution).
This information is used to inform the overall reward strategy and action plans for the wider UK workforce.
As Senior Independent Director, Chair of the Remuneration Committee and designated Non-Executive Director for workforce
engagement, Janet Ashdown attends employee forums within a planned engagement framework. This forum, the Employee Voice
Group (“EVG”), meets on at least a quarterly basis and provides valuable input into new policy development around a range of
topics including Directors’ reward and remuneration policy. The meetings are chaired by the Group Human Resources Director and
attended by a mixed group of employees from across the different parts of the Group. Other Non-Executive Directors may also
attend EVG meetings. The attendees of the meeting are now elected by their employees to be their representatives.
The Committee also receives feedback from regular employee surveys and the Executive roadshows which are a series of regular
site visits made by the Executive Directors and senior management.
The Committee has the authority to ask for additional information from the Company in order to carry out its responsibilities.
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Annual Report and Accounts 2020
Governance Process continued
The levels of remuneration and the packages offered vary across the Company depending on the employee’s level of seniority
and role. The Committee, when conducting its review, pays particular attention to:
• whether the element of remuneration is consistent with the Company’s remuneration principles;
• whether incentive structures are designed in a way that promotes the Company’s strategy, values and culture;
• if there are differences in remuneration, whether they are objectively justifiable; and
• whether the approach seems fair and equitable in the context of other employee packages.
The Committee uses its review of the wider workforce remuneration and incentives to inform the approach applied to the
remuneration of the Executive Directors and senior management. In particular, the Committee is focused on whether, within the
framework set out above, the approach to the remuneration of the Executive Directors and senior management is consistent with
that applied to the wider workforce.
Progress during 2020
During 2020, the Committee conducted a full audit of wider workforce pay and conditions. The Group has a clear strategy in place
to develop this process and rectify any disparities revealed as a result of the review over the coming years.
Overview of findings
The key findings of the Committee’s review for 2020 were as follows:
• there was support for the planned extension of the Company’s wellbeing strategy and support services to employees;
• the development of competency-driven pay models was recognised as a fair and transparent way of managing pay for skills
and capability – these are being rolled out across various parts of the business;
• benefits remain competitive, but more is needed to ensure full awareness across the employee populations of exactly what
is open to them; and
• participation in certain benefits is becoming more standardised against the size and scale of an individual’s role.
In summary, the Committee is satisfied that the approach to remuneration across the wider workforce is consistent with the
Company’s Remuneration Policy and the wider principles of fairness and sustainability that are fundamental to the Group’s culture.
Further, in the Committee’s opinion the approach to Executive remuneration aligns with wider Company pay policy and there are
no anomalies specific to the Executive Directors.
The Company expects to develop its engagement and communication channels in relation to remuneration during 2021, and
to report in more detail to shareholders on how this has been achieved.
• Dependent on role and level of seniority, employees are able to share in the success of the Company through incentive
compensation. In line with market practice the level of incentive compensation and whether it is paid solely in cash or in a mixture
of cash and deferred shares depends on the level of seniority of the employee. The incentive approach applied to the Executive
Directors aligns with the wider Company policy on incentives, which is to associate a higher percentage of at-risk performance
pay with the seniority of the role, and to increase the amount of incentive deferred, provided in equity and/or measured over the
longer term for roles with greater seniority.
• The following table shows the cascade of incentives throughout the Company:
Level (number)
Executive Directors (2)
Executive Committee (7)
Senior management (10)
Employees in BSP (54)
Employees in other job-related bonus
or commission schemes (559)
Participation
in Element A
of the MIP
(percentage range)
Participation
in Element B
of the MIP
(percentage range)
150% of salary
55% to 85% of salary
45% of salary
100% of salary
35% to 80% of salary
45% of salary
Participation in
other bonus or
commission plans
X
X
X
15% to 55% of salary
+5% bonus shares
Sales bonuses
Participation in
all-employee
equity plans
(Sharesave/SPP)
In summary, the Committee is satisfied that the approach to remuneration across the Company is consistent with the Company’s
principles of remuneration. Further, in the Committee’s opinion, the approach to Executive remuneration aligns with wider Company
pay policy and there are no anomalies specific to the Executive Directors.
Marshalls plc
marshalls.co.uk
83
Governance Remuneration Committee Report continued
Fairness, diversity and wider workforce considerations continued
Widening employee share ownership
Equity participation is offered to all employees of the Company through the Share Purchase Plan and SAYE schemes and to
managers and the Executives through the MIP or the BSP, each of which involves the award of shares. It is the Company’s policy
to allow employees to share in Company success by means of equity participation. Employees can become shareholders through
employee share plans including:
Bonus Share Plan ("BSP")
The BSP approved in 2015 provides the opportunity for participants to earn “free” bonus shares of up to 5 per cent of salary, which
vest after three years subject to performance conditions and continued employment; performance conditions are usually aligned
with those set for the MIP.
Sharesave Scheme/Share Purchase Plan
The Marshalls Sharesave Scheme was introduced in 2015 to encourage wider ownership of Marshalls plc shares across the entire
workforce, so that the employees are able to participate in the Group’s success in a way that aligns their interests with those of
shareholders. The Share Purchase Plan is an “evergreen” scheme under which employees may purchase shares in the market on
a monthly basis out of gross salary.
The Group intends to launch another three-year SAYE scheme for employees in 2021.
Real Living Wage employer
Marshalls is proud to be a Real Living Wage employer, underscoring its commitment to its employees. Marshalls achieved Living
Wage accreditation in 2018 and has maintained its status throughout 2020.
Pay comparisons
CEO ratio
The ratio of CEO pay (based on the single total figure of remuneration) to that of UK employees for the last three years is shown in the
table below. The calculation has been performed using the methodology in Option A of the Large and Medium-sized Companies and
Groups (Accounts and Reports) Regulations 2008 (as amended) in line with best practice and is based on the total single figure of
remuneration.
Financial year
2020
2019
2018
CEO pay ratio
Employee salary
Employee total pay and benefits
25th
percentile
50th
percentile
75th
percentile
CEO
salary
£’000
25th
percentile
£’000
50th
percentile
£’000
75th
percentile
£’000
CEO
total
pay and
benefits
£’000
25th
percentile
£’000
50th
percentile
£’000
75th
percentile
£’000
70.6:1
77.6:1
58.1:1
46.3:1
60.6:1
44.1:1
38.2:1
51.0:1
37.1:1
485
460
445
23
35
42
1,695
24
37
44
The 25th, 50th and 75th percentiles have been calculated using actual pay for the year ended 31 December 2020, increased where
appropriate to give full time equivalent remuneration for part time workers or those working only part of the year.
To give context to this ratio, we have included below a chart tracking CEO pay and average employee pay since Martyn Coffey’s
appointment alongside Marshalls’ TSR performance over the same period. The Remuneration Committee has always been
committed to ensuring that CEO reward is commensurate with performance. The chart shows a clear alignment between
shareholder returns and CEO single figure pay.
Shareholders expect the CEO to have a significant proportion of pay based on performance and paid in shares. It is this element of the
package which provides the volatility in CEO remuneration and the variations in the ratio. The Committee is satisfied that the underlying
picture does not show a divergence trend between the CEO remuneration and employees generally, i.e. excluding share price volatility, the
relationship with employee pay is consistent. This is supported by the percentage change in CEO remuneration table in the next section.
Ratio of single figure total remuneration to
average employee
25.2x
50.1x
37.5x
48.9x
31.9x
41.2x
35.9x
2014
2015
2016
2017
2018
2019
2020
• Our CEO pay is made up of a higher proportion of performance related incentives than that of our employees, in line with the
expectations of our shareholders. This introduces a higher degree of variability in CEO pay each year which affects the ratio.
• The value of long-term incentives which measure performance over three years is disclosed in pay in the year it vests; this affects
historical years up to 2017. This increases the CEO pay in that year, again impacting the ratio for that year.
• Long-term incentives are provided in shares, and therefore an increase in share price during any deferral or vesting period
magnifies the impact of a long-term incentive award in the year in which it vests.
• We recognise that the ratio is driven by the different structure of the pay of our CEO versus that of our employees, as well as the
make-up of our workforce. This ratio varies between businesses even in the same sector. What is important from our perspective is that
this ratio is influenced only by the differences in structure, and not by divergence in fixed pay between the CEO and wider workforce.
• Where the base structure of remuneration is similar, for example on comparison between the Executive Committee pay and that
of the CEO, the ratio is much more stable over time.
84
Marshalls plc
Annual Report and Accounts 2020
Governance CEO/average pay against TSR
1,200.0
1,000.0
800.0
600.0
400.0
200.0
0
2014
2015
2016
2017
2018
2019
2020
— CEO single figure — Average pay — Total shareholder return
Percentage change in Directors’ remuneration
In accordance with The Companies (Directors’ Remuneration Policy and Directors’ Remuneration Report) Regulations 2019, the table
below shows the percentage change in Executive Director and Non-Executive Director total remuneration compared to the change
for the average of UK-based employees of the Group excluding Executive Directors and Non-Executive Directors.
Martyn Coffey (Chief Executive Officer)
Jack Clarke (Group Finance Director)
Vanda Murray OBE (Chair)
Janet Ashdown (Non-Executive Director)
Tim Pile (Non-Executive Director)
Graham Prothero (Non-Executive Director)
Angela Bromfield (Non-Executive Director)
Employees
Notes:
Salary/fees
Taxable benefits
Short-term variable pay*
2020
5.4%
-0.7%
-0.7%
-0.7%
-0.7%
-0.7%
-0.7%
5.4%
2019
3.3%
3.3%
3.3%
3.3%
3.3%
3.3%
n/a
1.6%
2020
2019
2020
2019
-%
n/a
n/a
n/a
n/a
n/a
n/a
-8.8%
3.1%
n/a
n/a
n/a
n/a
n/a
n/a
23.8%
-100.0%
n/a
n/a
n/a
n/a
n/a
n/a
-85.1%
45.3%
n/a
n/a
n/a
n/a
n/a
n/a
22.2%
a) Martyn Coffey's salary was increased on 1 January 2020 by 9 per cent in line with the new Remuneration Policy for 2020 as described in the 2019 Remuneration Committee
Report. Please see Note f below for further detail.
b) The bonus is the non-deferred amount earned for the relevant year taken from the single figure remuneration table on page 79.
c) A 2.7 per cent increase was awarded to the workforce on 1 January 2020. The table above shows that the average salary increase per employee for 2020 was slightly higher.
This was due to changes in the workforce following a restructure in the first half of the year.
d) The table above shows that the average bonus per employee decreased by 85.1 per cent. This was caused by the changes in market conditions created by the COVID-19
outbreak.
e) UK employees have been used as the number of overseas employees is not significant (69) and pay conditions in the non-UK locations (Belgium, China, USA and Dubai) are
different from those prevailing in the UK.
f) The Directors and Non-Executive Directors took a 20 per cent voluntary reduction in pay for part of 2020, in response to the COVID-19 pandemic. This temporary reduction
has caused Martyn Coffey's overall salary increase to be 5.4 per cent rather than the 9% expected (Note a) and the Non-Executives to suffer a drop in pay for the year overall
rather than the 2.7 per cent increase that was applied to the workforce (Note c) and the Non-Executives.
CEO pay in the last ten years
This table shows how pay for the CEO role has changed in the last 10 years:
Year
2011a
£’000
2012a
£’000
2013a, b
£’000
2014
£’000
2015
£’000
2016
£’000
2017
£’000
Single figure remuneration
% of maximum annual bonus earned
% of maximum LTIP/MIP awards vesting
752
78.1%
–
938
33.0%
–
3,143
63.6%
63.0%
Notes:
a) The years up to 2013 show the previous CEO’s (Graham Holden’s) remuneration.
1,101
2,064
99.3% 100.0%
2,383
96.9% 100.0%
– 100.0% 100.0% 100.0%
1,913
2018
£’000
1,602
98.0%
98.0%
2019
£’000
2,213
99.6%
99.6%
2020
£'000
1,695
—
—
b) The 2013 single figure is made up of the previous CEO’s base salary and benefits up to 10 October 2013 and Martyn Coffey’s proportionate entitlement to salary, benefits and
annual bonus for his period of service in 2013. It also includes the various incentive payments that crystallised as a result of Graham Holden being a “good leaver” by reason
of retirement in 2013 (see 2013 Remuneration Report for full details).
Marshalls plc
marshalls.co.uk
85
Governance
Remuneration Committee Report continued
Fairness, diversity and wider workforce considerations continued
Total shareholder return
1,600
1,400
1,200
1,000
800
600
400
200
0
Dec
2011
Dec
2012
Dec
2013
Dec
2014
Dec
2015
Dec
2016
Dec
2017
Dec
2018
Dec
2019
Dec
2020
— Marshalls plc — FTSE 250 Index — FTSE Small Cap Index
This chart shows the Group’s total shareholder return (“TSR”) performance compared to (i) the FTSE Small Cap Index and (ii) the
FTSE 250. TSR is defined as share price growth plus reinvested dividends. Marshalls plc was a constituent of the FTSE Small Cap
Index for the period from January 2010 to August 2015 and became a constituent of the FTSE 250 in August 2015. This chart shows
the value at 31 December 2020 of £100 invested in Marshalls plc on 1 January 2010 compared with the value of £100 invested in
(i) the FTSE Small Cap Index and (ii) the FTSE 250. The other plotted points are the intervening financial year ends.
Gender pay versus equal pay
While Marshalls has a duty to report on the gender pay gap — the difference between the average hourly pay of women compared
to the average hourly pay of men – it is something that we embrace as we are wholly committed to promoting equality and
preventing discrimination at work, especially when it comes to pay. However, gender pay and equal pay are not the same.
Gender pay is the difference between the gross hourly earnings for all men and the gross hourly earnings for all women, irrespective
of their role or seniority, and expressed as a percentage of men’s earnings. It therefore captures any pay differences between men
and women on an organisational level.
Equal pay is where a man and a woman are paid the same for like-for-like work, or work rated as equivalent of equal value. Equal
pay issues occur when one person (usually a woman) is paid less for carrying out the same or a similar job than the other.
Whilst both measures share the same broad objective of eliminating sex discrimination in relation to pay, the two are frequently
confused. The intention behind equal pay is to ensure that men and women are not paid differently for doing the same or similar
work, but this on its own does not prevent a gender pay gap. Gender pay gaps generally exist where the majority of men are in
higher paid roles and the majority of women are in lower paid roles.
Gender balance and pay
On the snapshot date of 5 April 2020 the Group’s total UK workforce comprised 2,659 employees with the following gender balance:
Total workforce
Senior managers*
Directors**
* Senior managers comprises the Executive Committee and Company Secretary.
** Directors includes the NEDs, CEO and Group FD.
Male
2,236
5
4
Female
423
2
3
Our gender pay gap disclosure is based on amounts paid in the April 2020 payroll for UK employees. The gender bonus gap is
based on incentives paid in the year to 31 March 2020. Our disclosures are made pursuant to UK Government equalities legislation.
The two main employer entities in the Group during 2020 were Marshalls Group Limited, which employs the vast majority of
employees, and Marshalls plc, which has fewer than 250 employees, mostly at Director/senior manager level.
86
Marshalls plc
Annual Report and Accounts 2020
Governance Gender balance and pay continued
The overall figures shown in the table below are the combined results for Marshalls Group Limited, Marshalls plc and Edenhall Holdings
Limited. The Marshalls Group acquired Edenhall Holdings Limited in December 2018 and its employees remained employed by that group
until 1 July 2019. As the total workforce within Edenhall is less than 250 employees, there was no previous requirement to disclose
gender pay differences. Former Edenhall employees, having transferred to Marshalls Group Limited in 2019, are therefore included in the
disclosed results for Marshalls Group Limited, but shown separately for comparison purposes below.
2020 results
Marshalls Group Limited
CPM Group Limited
Edenhall Holdings Limited
Consolidated (Marshalls plc and Marshalls Group Limited)
2019 results
Marshalls Group Limited
CPM Group Limited
Consolidated (Marshalls plc and Marshalls Group Limited)
2018 results
Marshalls Group Limited
CPM Group Limited
Consolidated (Marshalls plc and Marshalls Group Limited)
Mean gender
pay gap
Median gender
pay gap
Mean bonus
gender pay gap
Median bonus
gender pay gap
15.9%
18.3%
-4.5%
3.2%
14.6%
11.3%
4.3%
15.2%
20.6%
15.7%
22.7%
17.4%
-13.1%
20.1%
18.7%
14.1%
17.0%
21.2%
23.1%
21.8%
65.2%
39.2%
-45.3%
54.0%
63.7%
52.4%
71.4%
85.0%
69.3%
79.1%
25.1%
51.3%
8.2%
21.8%
48.6%
54.8%
67.0%
20.0%
69.7%
73.9%
In the previous 12 months, the overall mean gender pay gap has reduced by 1.1 per cent to 3.2 per cent. This reduction is partly
reflected by the appointment of an additional female Non-Executive Director to the Board. However, the median gender pay gap
has widened by 3.0 per cent indicating that overall the pay for females is not keeping pace with that of males.
The gender split is showing a marginal improvement from the previous year (female workers at 15.4 per cent compared to 16.0 per
cent) signalling that more women are joining the business; however, this low ratio is typical of the manufacturing and construction
sector generally.
The charts below show the proportion of men and women in each of the four pay quartiles. These figures are broadly similar to the
previous year in that approximately 31 per cent of people paid in the lower quartile are women, who conversely make up less than
13 per cent of people paid in the upper quartile. There has been a positive 2 per cent increase in the number of women paid in the
upper middle quartile compared to the previous year; however, the two lower quartiles both reflect an adverse change in relation
to the proportion of women.
Upper quartile
Upper middle quartile
Lower middle quartile
87+87+
9090+
93+93+
F 9595+
88+88+
F 9191+
69+69+
F 7171+
Consolidated
Male 93%
Consolidated
Male 69%
Consolidated
Male 88%
Consolidated
Male 87%
Female 31%
Female 12%
Female 13%
Female 7%
Lower quartile
Marshalls Group Limited
Marshalls Group Limited
Marshalls Group Limited
Marshalls Group Limited
Male 90%
Female 10%
Male 95%
Female 5%
Male 91%
Female 9%
Male 71%
Female 29%
Marshalls plc
marshalls.co.uk
87
Governance
13
13
+
+
I
I
7
7
+
+
I
I
12
12
+
+
I
I
31
31
+
+
I
I
+
10
10
+
+
F
+
5
5
+
+
F
+
9
9
+
+
F
+
29
29
+
+
F
F
Remuneration Committee Report continued
Fairness, diversity and wider workforce considerations continued
Bonus gender pay gap
Both the mean and median bonus gender pay gap have seen an improvement from the previous year. The overall mean bonus
gender pay gap has narrowed to 54.0 per cent from 71.4 per cent the previous year, whereas the median measure has more than
halved to 21.8 per cent from 67.0 per cent in the previous year.
Percentage receiving bonus
Consolidated
Marshalls Group Limited
Mean bonus gap
Consolidated
Marshalls Group Limited
Median bonus gap
Consolidated
Marshalls Group Limited
Male
Female
32.4%
15.3%
36.2%
32.5%
54.0%
65.2%
21.8%
25.1%
The proportion of women receiving a bonus has reduced from 41.6 per cent to 36.2 per cent. The largest contributor to this reduction
was in CPM, which has changed from 97.4 per cent of women receiving a bonus last year to 68.4 per cent this year. Prior to transitioning
fully into Marshalls, CPM operated a business performance related "Annual Staff Bonus Scheme" for employees not working in a
production role (production based employees received a monthly productivity bonus scheme). There are a higher proportion of
women working in these non-production areas, which subsequently results in proportionally more women not receiving a bonus
when performance targets are not achieved.
Marshalls Group Limited
Marshalls plc
CPM Group Limited
Edenhall Holdings Limited
Overall
Proportion receiving a bonus
Male
15.3%
37.1%
92.4%
100%
32.4%
Female
32.5%
15.2%
68.4%
100%
36.2%
During this time the UK was in the midst of the COVID-19 pandemic and most of the UK had entered the first period of lockdown, which
had a profound and direct effect on many UK businesses. Marshalls was no exception and in April 2020, over three-quarters of the UK
workforce was placed on furlough. To support furloughed employees the Government introduced the Coronavirus Job Retention
Scheme ("CJRS") wage support measure, designed to protect jobs in the wake of the pandemic. The scheme allowed employers to
reclaim up to 80 per cent of the wage costs of furloughed employees up to a cap of £2,500 per month per employee. At this time
Marshalls took the decision to ‘"top up" furloughed employees, pay to 100 per cent of their normal pay. For variable paid workers (who
are predominantly male workers in production, engineering and logistics) this was based on their average earnings from the previous
year, which were invariably higher than they would have been in April 2020. These exceptional circumstances taking place on and
around the gender pay snapshot date will no doubt have had an influence on the average hourly rates for these groups of people and
subsequently the gender pay gap itself.
Equality and diversity initiatives
The Group has policies that promote equality and diversity in the workforce as well as prohibiting discrimination in any form.
We are committed to promoting equality and preventing discrimination at work. We recognise that everyone is different, and we
are passionate about creating an inclusive environment, where everyone can contribute their best work and develop to their full
potential. The Group’s Code of Conduct clearly states its commitment to these principles and requires a similar commitment from
its business partners.
Initiatives and progress during 2020 include:
• The appointment of Angela Bromfield as Non-Executive Director further improved gender balance at Board level.
• We have updated and relaunched the Group’s Diversity and Inclusion Policy and ensured that briefs for recruitment aim to attract
a diverse range of applicants.
• We have updated the Group’s Code of Conduct which is currently being launched to all employees, suppliers and stakeholders.
• Marshalls has signed the Social Mobility Pledge which represents our commitment to:
• partnership – partnering with schools and colleges to provide coaching through careers advice and mentoring people from
disadvantaged backgrounds or circumstances;
• access – providing structured work experience and apprenticeship opportunities; and
• recruitment – promoting policies that do not distinguish on grounds of background.
• We have launched a Women’s Talent Network that meets quarterly to support diversity in the workplace and provide
development opportunities.
88
Marshalls plc
Annual Report and Accounts 2020
Governance
Directors’ service contracts
Element
Executive Directors
Non-Executive Directors
Date of contract/
appointment
Martyn
Coffey
September
2013
Jack
Clarke
October
2014
Vanda
Murray
Janet
Ashdown
May 2018
March
2015
(renewed
in March
2018)
Tim Pile
October
2010
(renewed
in 2013,
2016 and
May 2019)
Graham
Prothero
May 2017
Angela
Bromfield
October
2019
Notice period in months
Company
Director
12
6
12
6
6
6
6
6
6
6
6
6
6
6
In accordance with Policy, Executive Directors’ service contracts do not contain liquidated damages clauses, nor any contractual
arrangements that would guarantee a pension with limited or no abatement on severance or early retirement or providing for
compensation for loss of office or employment that occurs because of a takeover bid. The maximum notice period for an Executive
Director is 12 months. Executive Directors are permitted to hold one external plc board appointment and may retain any
remuneration received in that capacity.
Non-Executive Directors, including the Chair, are appointed under letters of appointment, usually for a term of three years. Either the
Company or the Non-Executive Director may terminate the appointment before the end of the current term on six months’ notice.
If the unexpired term is less than six months, notice does not need to be served. No compensation is payable if a Non-Executive
Director is required to stand down. All Directors are subject to annual re-election.
External advisers
The Remuneration Committee was advised during the year by external remuneration adviser PricewaterhouseCoopers LLP (“PwC”).
PwC attends meetings of the Committee by invitation.
PwC’s fees are agreed by the Remuneration Committee according to the work performed. PwC was appointed after a tender process
by the Committee in 2017, and its terms of engagement are available on request from the Company Secretary. PwC also provided
general consulting services to the Company during the year on pension matters. The Committee is satisfied that the remuneration
advice from PwC is objective and independent based on the separation of the team advising the Committee from any other work
undertaken by PwC for the Group and the fact that PwC is a signatory to the Remuneration Consultants Group’s Code of Conduct.
PwC’s work relating to Executive remuneration during 2020 included assistance with the preparation of the Remuneration
Committee Report; advice on the operation of the MIP; total remuneration benchmarking of Non-Executive and Executive Directors
and senior Executives; and general advice on remuneration trends, regulations and best practice. The amount paid to PwC in
respect of remuneration advice received during 2020 was £42,500 (2019: £62,500).
Janet Ashdown
Chair of the Remuneration Committee
11 March 2021
Marshalls plc
marshalls.co.uk
89
Governance Directors’ Report – Other Regulatory Information
The information required by the Listing Rules (DTR 4.1.8R) is contained in the Strategic Report and the Directors’ Report. Marshalls plc
is registered with company number 5100353.
The Directors of the Company are listed on pages 52 and 53.
Political donations: The Group made no donations during the year to any political party or political organisation or to any
independent election candidate, whether in the European Union or elsewhere (2019: £nil).
Risk management: The Group’s risk management objectives, its approach to managing risk generally and its use of financial
instruments are described in the Strategic Report on pages 1 to 37. Further details of the Group’s risk management in relation to
financial risks and its use of financial instruments to mitigate such risks are set out in Note 19 on pages 126 to 131.
Greenhouse gas emissions: The Group’s response to Streamlined Energy and Carbon Reporting can be found in the Strategic Report
on page 47.
Employees: Details of how the Directors have engaged with employees are set out on page 19. Further information is provided in
relation to the engagement channels used and the outcomes from the engagement. The Company’s policies in relation to diversity
and inclusion and employee involvement and communication are explained in the Strategic Report on pages 48 to 50.
Stakeholders: Details of how the Directors have developed relationships with customers, suppliers and other stakeholder groups are
set out on pages 18 and 19, along with engagement channels used. Details of the Group’s stakeholder engagement strategy are
explained on pages 18 and 19. The statement by the Directors in relation to their strategy duly in accordance with S172(1) Companies
Act 2006 is found on page 18.
Corporate governance: Details of how the Group complies with the UK Corporate Governance Code are set out on pages 58 to 63.
Post-balance sheet events of importance since 31 December 2020: There have been no important events affecting the Group since
the end of the financial year.
Research and development: Activity and likely future developments for the business are described in the Strategic Report on
pages 46 to 47.
Dividends
The Board is recommending a final dividend of 4.30 pence (2019: nil pence) per share. No interim dividend was declared. Payment of
the final dividend, if approved at the Annual General Meeting, will be made on 1 July 2021 to shareholders registered at the close of
business on 4 June 2021. The ex-dividend date will be 3 June 2021.
No dividends were paid in the year to 31 December 2020.
Share capital and authority to purchase shares
The Company’s share capital at 1 January 2021 was 200,052,157 Ordinary Shares of 25 pence each. No new Ordinary Shares were
issued during the year ended 31 December 2020. Details of the share capital are set out in Note 23 on page 136 and 137.
The Ordinary Shares of the Company carry equal rights to dividends, voting and return of capital on the winding up of the
Company, as set out in the Company’s Articles of Association. There are no restrictions on the transfer of securities in the Company
and there are no restrictions on any voting rights or deadlines, other than those prescribed by law, nor is the Company aware of any
arrangement between holders of its shares which may result in restrictions on the transfer of securities or voting rights, nor any
arrangement whereby a shareholder has waived or agreed to waive dividends (other than the EBT – see below).
The Marshalls plc Employee Benefit Trust (“EBT”) holds shares for the purposes of satisfying future awards that may vest under the
Company’s share-based incentive schemes. The EBT may purchase shares in the Company from time to time to satisfy awards
granted to Directors and senior Executives subject to the achievement of performance targets under the Company’s incentive
schemes. At 31 December 2020 the EBT held 1,289,376 Ordinary Shares in the Company (2019: 1,689,986 shares) in respect of future
incentive awards under the Company’s employee share schemes. Details of outstanding awards are set out in Note 20 on page 134.
The EBT has waived its right to receive dividends on shares that it holds beneficially in respect of future awards. The Trustee of the
EBT exercises any voting rights on such shares in accordance with the Directors’ recommendations.
UK-based employees of the Group with more than 6 months’ service may participate in the Marshalls plc Share Purchase Plan
during any offer period. Employees purchase Ordinary Shares in the Company with their pre-tax salary. The shares are purchased
in the market and then held in trust by Yorkshire Building Society. Employees receive dividends on these shares and may give voting
instructions to the Trustee.
At the Annual General Meeting in May 2020 shareholders gave authority to the Directors to purchase up to 29,987,818 shares,
representing approximately 14.99 per cent of the Company’s issued share capital in the Company, in the market during the period
expiring at the next Annual General Meeting at a price to be determined within certain limits. No Ordinary Shares in the Company
were purchased during the year or between 31 December 2020 and 11 March 2021 under this authority, which will expire at the 2021
Annual General Meeting. The Directors will seek to renew the authority at that meeting.
Contracts of significance and related parties
There were no contracts of significance between any member of the Group and (a) any undertaking in which a Director has a
material interest, or (b) a controlling shareholder (other than between members of the Group). There have been no related party
transactions between any member of the Group and a related party since the publication of the last Annual Report.
There are a number of agreements that take effect, alter or terminate upon a change of control of the Group. None of these are
considered to be significant in terms of their likely impact on the business of the Group as a whole.
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Governance Articles of Association
The Company’s Articles of Association give powers to the Board to appoint Directors. Newly appointed Directors are required
to retire and submit themselves for re-election by shareholders at the first Annual General Meeting following their appointment.
The Board of Directors may exercise all the powers of the Company, subject to the provisions of relevant laws and the Company’s
Memorandum and Articles of Association. These include specific provisions and restrictions regarding the Company’s power to
borrow money. Powers relating to the issuing and buying back of shares are included in the Articles of Association and such
authorities are renewed by shareholders each year at the Annual General Meeting.
The Articles of Association may be amended by Special Resolution of the shareholders.
The Group has granted indemnities to its Directors to the extent permitted by law (which one qualifying party indemnities of Section
236 of the Companies Act 2006) and these remained in force during the year in relation to certain losses and liabilities that the
Directors may incur to third parties in the course of action as Directors or employees of the Company, any subsidiary or associated
company, or a Director of the pension scheme trustee board. Neither the liability insurance nor the indemnities provide cover in the
event of proven fraudulent or dishonest activity. The Group has not indemnified any Director under the indemnities currently in place.
Directors’ interests
Details of Directors’ remuneration, their interests in the share capital of the Company and the share-based payment awards are
contained in the Remuneration Committee Report on pages 70 to 89.
Listing Rule requirements
The applicable requirements of Listing Rule 9.8.4R in respect of long-term incentive schemes (pages 134 and 135) and contracts
of significance (page 90) are included in this Annual Report.
Substantial shareholdings
The Company has no controlling shareholder. As at 11 March 2021, the Company had been notified, in accordance with DTR 5, of the
following disclosable interests of 3 per cent or more in its voting rights:
Aberdeen Standard Investments
BlackRock
Majedie Asset Management
Royal London Asset Management
Montanaro Investment Managers
Vanguard Group
Lansdowne Partners
RWC Partners
JP Morgan Asset Management
As at
11 March
2021
%
As at
31 December
2020
%
14.72
6.28
6.05
4.95
4.76
4.18
3.98
3.73
3.39
15.44
5.93
6.61
5.03
4.28
4.04
3.97
3.69
3.34
The Directors’ Report, comprising the Strategic Report, the Corporate Governance Statement and the Reports of the Audit,
Remuneration and Nomination Committees, has been approved by the Board and signed on its behalf by:
Shiv Sibal
Group Company Secretary
11 March 2021
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91
Governance 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 international accounting standards in
conformity with the requirements of the Companies Act 2006 and International Financial Reporting Standards adopted pursuant to
Regulation (EC) No 1606/2002 as it applies in the European Union 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.
Responsibility statement of the Directors on the Annual Report and Accounts
The Directors who held office at the date of approval of this Directors’ Report and whose names and functions are listed on pages
40 and 41 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.
Disclosure of information to the auditor
The Directors who held office at the date of approval of this Directors’ Report confirm that, so far as they are each aware, there is no
relevant audit information of which the Company’s auditor is unaware, and each Director has taken all the steps that he/she ought
to have taken as a Director to make himself/herself aware of any relevant audit information and to establish that the Company’s
auditor is aware of that information.
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Governance Going concern
The Directors have adopted the going concern basis in preparing these Financial Statements in accordance with the Financial
Reporting Council’s “Guidance on Risk Management, Internal Control and Related Financial and Business Reporting”, issued in
September 2014. The Directors considered that it was appropriate to do so, having reviewed any uncertainties that may affect
the Company’s ability to continue as a going concern for at least the next 12 months from the date these Financial Statements
were approved.
Cautionary statement and Directors’ liability
This Annual Report 2020 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 Landscape House, Premier Way, Lowfields Business Park, Elland
HX5 9HT, together with explanatory notes on the resolutions to be proposed, is contained in a circular to be sent to shareholders
with this Annual Report. Due to the continuing impact of COVID-19, and in accordance with the current Government measures
restricting public gatherings and non-essential travel, we do not currently intend to admit any shareholders in person at the AGM.
As we did last year, we have made arrangements for the AGM to be a "hybrid" meeting allowing shareholders to participate
electronically and have made arrangements for the quorum (which is any two shareholders or their proxies/corporate representatives)
to be satisfied by the presence of two employee shareholders present in person. Shareholders are encouraged to submit their votes
by proxy in accordance with the instructions in the enclosed documents. Given the constantly evolving nature of the pandemic, if
the position changes we will update shareholders by announcement on a Regulatory Information Service and on our website at
www.marshalls.co.uk/investor/agm-details.
By Order of the Board:
Shiv Sibal
Group Company Secretary
11 March 2021
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93
Governance Governance
Independent Auditor’s Report
to the members of Marshalls plc
Report on the audit of the Financial Statements
1. Opinion
In our opinion:
• the Financial Statements of Marshalls plc (the "Parent Company") and its subsidiaries (the "Group") give a true and fair view of the state
of the Group’s and of the Parent Company’s affairs as at 31 December 2020 and of the Group’s profit for the year then ended;
• the Group Financial Statements have been properly prepared in accordance with international accounting standards in conformity
with the requirements of the Companies Act 2006, International Financial Reporting Standards ("IFRSs") as adopted by the European
Union and IFRSs as issued by the International Accounting Standards Board ("IASB");
• the Parent Company Financial Statements have been properly prepared in accordance with United Kingdom Generally Accepted
Accounting Practice, including Financial Reporting Standard 101 “Reduced Disclosure Framework”; and
• the Financial Statements have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the Financial Statements which comprise:
• the Consolidated Income Statement;
• the Consolidated Statement of Comprehensive Income;
• the Consolidated and Parent Company Balance Sheets;
• the Consolidated and Parent Company Statements of Changes in Equity;
• the Consolidated Cash Flow Statement; and
• the related Notes 1 to 43.
The financial reporting framework that has been applied in the preparation of the Group Financial Statements is applicable law,
international accounting standards in conformity with the requirements of the Companies Act 2006, and IFRSs as adopted by the
European Union and as issued by the IASB. The financial reporting framework that has been applied in the preparation of the Parent
Company Financial Statements is applicable law and United Kingdom Accounting Standards, including FRS 101 “Reduced Disclosure
Framework” (United Kingdom Generally Accepted Accounting Practice).
2. Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) ("ISAs (UK")), and applicable law. Our responsibilities
under those standards are further described in the Auditor’s responsibilities for the audit of the Financial Statements section of our report.
We are independent of the Group and the Parent Company in accordance with the ethical requirements that are relevant to our audit
of the Financial Statements in the UK, including the Financial Reporting Council’s ("FRC’s") Ethical Standard as applied to listed public
interest entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. The non-audit services
provided to the Group and Parent Company for the year are disclosed in Note 3 to the Financial Statements. We confirm that the
non-audit services prohibited by the FRC’s Ethical Standard were not provided to the Group or the Parent Company.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
3. Summary of our audit approach
Key audit matter
The key audit matter that we identified in the current year was:
• Presentation of restructuring costs as exceptional
Within this report, key audit matters are identified as follows:
Newly identified
Increased level of risk
Similar level of risk
Decreased level of risk
Materiality
Scoping
The materiality that we used for the Group Financial Statements was £2.9 million which was determined
taking into consideration a number of metrics, but with particular focus on net assets, revenue and profit
before tax. Our selected materiality represents approximately 1 per cent of net assets for the year.
Full scope audits were performed on all UK components. This accounts for 95 per cent of Group revenue,
100 per cent of Group net assets and 93 per cent of profit before tax generated by profit making entities.
Significant changes
in our approach
We identified a new key audit matter in relation to the presentation of restructuring costs as exceptional
as a result of the significant one-off restructuring exercise carried out during the year.
We no longer have a key audit matter in relation to valuation of inventory provisions reflecting that the
amounts of inventory provision that relate to areas subject to significant management judgement are not
material. We also no longer have a key audit matter relating to revisions to provisional fair values for the
Edenhall acquisition in 2018 as the hindsight period for fair value revisions ended in 2019 and the extent
of judgement relating to such provisions and accruals has reduced.
Our approach to determining materiality has changed from 5 per cent of profit before tax to a
consideration of a number of metrics including net assets, revenue and profit before tax due to the
significant adverse impact on trading and reported profits during 2020 arising from the COVID 19 pandemic.
There have been no other significant changes to our approach since the prior year.
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4. Conclusions relating to going concern
In auditing the Financial Statements, we have concluded that the Directors’ use of the going concern basis of accounting in the
preparation of the Financial Statements is appropriate.
Our evaluation of the Directors’ assessment of the Group’s and Parent Company’s ability to continue to adopt the going concern
basis of accounting included:
• evaluating the level of borrowing including consideration of undrawn facilities and compliance with covenants;
• assessing the assumptions used in forecasts, including performing sensitivity analysis and the impact of Brexit, COVID-19 and
climate change;
• assessing the historical accuracy of forecasts prepared by management against actuals achieved; and
• testing of clerical accuracy of the model used to prepare the forecasts.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that,
individually or collectively, may cast significant doubt on the Group's and Parent Company’s ability to continue as a going concern
for a period of at least twelve months from when the Financial Statements are authorised for issue.
In relation to the reporting on how the Group has applied the UK Corporate Governance Code, we have nothing material to add
or draw attention to in relation to the Directors’ Statement in the Financial Statements about whether the Directors considered it
appropriate to adopt the going concern basis of accounting.
Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant sections
of this report.
5. Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the Financial
Statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to
fraud) that we identified. These matters included those which had the greatest effect on: the overall audit strategy, the allocation
of resources in the audit and directing the efforts of the engagement team.
These matters were addressed in the context of our audit of the Financial Statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on these matters.
5.1 Recognition of restructuring costs as exceptional
Key audit matter
description
The Group Income Statement set out on page 101 of the Annual Report and Accounts separately
presents exceptional costs of £14.7 million, net of tax (2019: £nil) when arriving at the results for the year
with additional information disclosed in Note 5.
The Group’s policy on the presentation of exceptional items can be found on page 108. The Audit
Committee also discusses this area in its report on pages 66 to 69.
Business performance is a critical measure for the stakeholders and therefore the classification of items
as exceptional and presentation of performance metrics excluding exceptional items is important for
users of the accounts and is a key audit matter.
Exceptional costs relate to the one-off operational restructuring within the business that was carried
out during the year, primarily as part of the Group’s response to the adverse trading consequences
experienced in the year as a result of the COVID-19 pandemic.
The key items recognised as exceptional are as follows:
1) £7.8 million redundancy payments for affected employees;
2) asset impairments of £5.5 million for assets no longer expected to be used; and
3) £4.5 million of closure costs relating to closure of certain operating sites.
Marshalls plc
marshalls.co.uk
95
Governance Governance
Independent Auditor’s Report continued
to the members of Marshalls plc
5. Key audit matters continued
5.1 Recognition of restructuring costs as exceptional continued
How the scope of our
audit responded to the
key audit matter
Audit procedures applicable:
• We obtained an understanding of relevant controls around the presentation of items as exceptional.
• We assessed the Group’s policy on classification of items as exceptional and considered whether
this policy was appropriate against guidance issued by the Financial Reporting Council ("FRC") and
the European Securities and Markets Authority ("ESMA").
• We challenged management on the presentation of exceptional items within the “middle column” and
whether these had been correctly presented in the correct column and in line with the Group’s policy.
• We agreed costs classified as exceptional to amounts paid, asset carrying values for items impaired
and to other external documentation including valuation reports, where appropriate, and
recalculated the amount of exceptional costs identified and separately presented as exceptional.
• We assessed the appropriateness of the disclosure in the Financial Statements relating to the
reconciliations between alternative performance measures ("APMs") and their closest statutory measure.
• We evaluated the presentation and disclosure of management’s conclusions in the Annual Report
and Accounts to assess whether disclosures are consistent with the Group’s policy and relevant
accounting standards.
Key observations
Based on our procedures we concur that the judgements made by management in presenting certain
restructuring costs as exceptional are reasonable.
6. Our application of materiality
6.1 Materiality
We define materiality as the magnitude of misstatement in the Financial Statements that makes it probable that the economic
decisions of a reasonably knowledgeable person would be changed or influenced. We use materiality both in planning the scope
of our audit work and in evaluating the results of our work.
Based on our professional judgement, we determined materiality for the Financial Statements as a whole as follows:
Materiality
Basis for
determining
materiality
Rationale for the
benchmark applied
Group Financial Statements
Parent Company Financial Statements
£2.9 million (2019: £3.5 million)
£1.4 million (2019: £1.4 million)
Parent Company materiality equates to 0.5 per cent
of net assets (2019: 0.5 per cent of net assets).
As a holding company, net assets are considered
to be the primary benchmark.
We have determined materiality by considering
a range of possible benchmarks with a particular
focus on net assets, revenue and profit before tax,
as well as the scale of the balance sheet and the
overall size of the business.
Our selected materiality represents approximately
1 per cent of net assets. Materiality in the prior year
was determined based on 5 per cent profit before tax.
When determining materiality, we have considered
the size and scale of the business and the nature
of its operations. We have also considered which
benchmarks would be of relevance to the users
of the Financial Statements and those applied to
the audit of similar businesses.
The downturn in revenues, profits and cash flows
experienced during 2020 as a consequence of
COVID-19 and the UK lockdown means that we do
not consider profit before tax to be the most
appropriate metric for determining materiality for
FY20. Our materiality is based upon a range of
possible benchmarks and represents approximately 1
per cent of net assets and represents 0.6 per
cent of revenue.
We consider that net assets represents a more stable
benchmark and indicator of financial strength and
that revenue provides a measure of current activity
levels.
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6. Our application of materiality continued
6.2. Performance materiality
We set performance materiality at a level lower than materiality to reduce the probability that, in aggregate, uncorrected and
undetected misstatements exceed the materiality for the Financial Statements as a whole.
Group Financial Statements
Parent Company Financial Statements
Performance materiality
70% (2019: 70%) of Group materiality
70% of Parent Company materiality
(2019: 70% of Parent Company materiality)
Basis and rationale
for determining
performance materiality
In determining performance materiality, we considered the following factors:
a.
our risk assessment, including our assessment of the quality of the control environment and
whether we were able to rely on controls;
b. the impact of COVID-19 on the business and its operating environment; and
c.
the history of there being no quantitatively or qualitatively significant corrected or uncorrected
misstatements in prior periods.
6.3. Error reporting threshold
We agreed with the Audit Committee that we would report to the Committee all audit differences in excess of £145,000 (2019: £171,000),
as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds. We also report to the Audit
Committee on disclosure matters that we identified when assessing the overall presentation of the Financial Statements.
7. An overview of the scope of our audit
7.1. Identification and scoping of components
Our Group audit was scoped by obtaining an understanding of the Group and its environment, including Group-wide controls,
and assessing the risks of material misstatement both at the Group and component level.
The Group audit team performed the entire audit of the significant UK component of the Group. The UK component accounted
for 95 per cent (2019: 96 per cent) of Group revenue, 100 per cent (2019: 100 per cent) of Group net assets and 93 per cent
(2019: 100 per cent) of Group profit before tax generated by profit making entities.
At the Group level, we also tested the consolidation process. The Group audit team carried out analytical procedures to confirm
our conclusion that there were no significant risks of material misstatement of the aggregated financial information of the remaining
components not subject to audit.
Net assets
Revenue 93+93+
95+95+
Profit before tax 100100+
Review at Group level
Review at Group level
Review at Group level
Full audit scope
Full audit scope
Full audit scope
95%
93%
5%
7%
100%
0%
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97
Governance 5
5
+
+
I
I
7
7
+
+
I
I
+
I
I
Governance
Independent Auditor’s Report continued
to the members of Marshalls plc
Report on the audit of the Financial Statements continued
7. An overview of the scope of our audit continued
7.2. Our consideration of the control environment
IT systems
To support the audit testing performed we have involved our IT specialists to consider the relevant IT systems used by the Group
to generate information which supports the amounts recognised in the Financial Statements. In order to evaluate the IT environment
of the Group we have obtained an understanding of relevant IT systems and the automated controls within these systems.
In evaluating the IT environment, we have:
• tested the IT systems within the main finance IT system. This system is used for the entity’s financial reporting process and covers
all finance, payroll and HR modules. We have also tested the Data Warehouse system which houses the inventory database;
• tested General IT Controls for each of these systems: Access Security (Joiners, Movers, Leavers (“JML”), Passwords, Privileged
Access and User Access Reviews (“UARs”)), Change Management (Change Process and Segregation of Duties) and Batch Jobs
(Access to Amend, and Monitoring of Batch Jobs);
• performed sample testing, where applicable, in order to determine operating effectiveness (JML, UARs, Change Management
and Batch Job Monitoring); and
• taken reliance on all IT controls associated with these systems.
Controls reliance
In addition to our substantive testing performed during our audit we obtained an understanding of the relevant controls in key
business cycles. In the current year we have taken controls reliance over the revenue and customer rebates business cycles as
these are the key accounts that impact the Group’s profit.
8. Other information
The other information comprises the information included in the Annual Report other than the Financial Statements and our
Auditor’s Report thereon. The Directors are responsible for the other information contained within the Annual Report.
Our opinion on the Financial Statements does not cover the other information and, except to the extent otherwise explicitly stated
in our report, we do not express any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent
with the Financial Statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated.
If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise
to a material misstatement in the Financial Statements themselves. If, based on the work we have performed, we conclude that
there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
9. Responsibilities of Directors
As explained more fully in the Directors’ Responsibilities Statement, the Directors are responsible for the preparation of the Financial
Statements and for being satisfied that they give a true and fair view, and for such internal control as the Directors determine is
necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the Financial Statements, the Directors are responsible for assessing the Group’s and the Parent Company’s ability
to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis
of accounting unless the Directors either intend to liquidate the Group or the Parent Company or to cease operations, or have
no realistic alternative but to do so.
10. Auditor’s responsibilities for the audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the Financial Statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance
is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or
in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these
Financial Statements.
A further description of our responsibilities for the audit of the Financial Statements is located on the FRC’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms part of our Auditor’s Report.
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11. Extent to which the audit was considered capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our
responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which
our procedures are capable of detecting irregularities, including fraud, is detailed below.
11.1. Identifying and assessing potential risks related to irregularities
In identifying and assessing risks of material misstatement in respect of irregularities, including fraud and non-compliance with laws
and regulations, we considered the following:
• the nature of the industry and sector, control environment and business performance including the design of the Group’s
remuneration policies, key drivers for Directors’ remuneration, bonus levels and performance targets;
• results of our enquiries of management, internal audit and the Audit Committee about their own identification and assessment
of the risks of irregularities;
• any matters we identified having obtained and reviewed the Group’s documentation of their policies and procedures relating to:
• identifying, evaluating and complying with laws and regulations and whether they were aware of any instances of non-compliance;
• detecting and responding to the risks of fraud and whether they have knowledge of any actual, suspected or alleged fraud; and
• the internal controls established to mitigate risks of fraud or non-compliance with laws and regulations; and
• the matters discussed among the audit engagement team and relevant internal specialists, including tax, pensions and IT,
regarding how and where fraud might occur in the Financial Statements and any potential indicators of fraud.
As a result of these procedures, we considered the opportunities and incentives that may exist within the organisation for fraud and
identified the greatest potential for fraud in the following areas: presentation of restructuring costs as exceptional. In common with
all audits under ISAs (UK), we are also required to perform specific procedures to respond to the risk of management override.
We also obtained an understanding of the legal and regulatory frameworks that the Group operates in, focusing on provisions
of those laws and regulations that had a direct effect on the determination of material amounts and disclosures in the Financial
Statements. The key laws and regulations we considered in this context included the UK Companies Act, Listing Rules, pensions
legislation and tax legislation.
In addition, we considered provisions of other laws and regulations that do not have a direct effect on the Financial Statements
but compliance with which may be fundamental to the Group’s ability to operate or to avoid a material penalty.
11.2. Audit response to risks identified
As a result of performing the above, we identified presentation of restructuring costs as exceptional as a key audit matter related
to the potential risk of fraud. The key audit matters section of our report explains the matter in more detail and also describes the
specific procedures we performed in response to that key audit matter.
In addition to the above, our procedures to respond to risks identified included the following:
• reviewing the Financial Statement disclosures and testing to supporting documentation to assess compliance with provisions
of relevant laws and regulations described as having a direct effect on the Financial Statements;
• enquiring of management, the Audit Committee and in-house and external legal counsel concerning actual and potential
litigation and claims;
• performing analytical procedures to identify any unusual or unexpected relationships that may indicate risks of material
misstatement due to fraud;
• reading minutes of meetings of those charged with governance, reviewing internal audit reports and reviewing correspondence
with HMRC; and
• in addressing the risk of fraud through management override of controls, testing the appropriateness of journal entries and other
adjustments; assessing whether the judgements made in making accounting estimates are indicative of a potential bias; and
evaluating the business rationale of any significant transactions that are unusual or outside the normal course of business.
We also communicated relevant identified laws and regulations and potential fraud risks to all engagement team members
including internal specialists and remained alert to any indications of fraud or non-compliance with laws and regulations
throughout the audit.
Report on other legal and regulatory requirements
12. Opinions on other matters prescribed by the Companies Act 2006
In our opinion the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the
Companies Act 2006.
In our opinion, based on the work undertaken in the course of the audit:
• the information given in the Strategic Report and the Directors' Report for the financial year for which the Financial Statements
are prepared is consistent with the Financial Statements; and
• the Strategic Report and the Directors’ Report have been prepared in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the Group and the Parent Company and their environment obtained in the
course of the audit, we have not identified any material misstatements in the Strategic Report or the Directors’ Report.
Marshalls plc
marshalls.co.uk
99
Governance Governance
Independent Auditor’s Report continued
to the members of Marshalls plc
Report on other legal and regulatory requirements continued
13. Corporate Governance Statement
The Listing Rules require us to review the Directors' statement in relation to going concern, longer-term viability and that part of the
Corporate Governance Statement relating to the Group’s compliance with the provisions of the UK Corporate Governance Code
specified for our review.
Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate
Governance Statement is materially consistent with the Financial Statements and our knowledge obtained during the audit:
• the Directors’ statement with regards to the appropriateness of adopting the going concern basis of accounting and any
material uncertainties identified set out on page 108;
• the Directors’ explanation as to their assessment of the Group’s prospects, the period this assessment covers and why the period
is appropriate set out on pages 25 and 26;
• the Directors' statement on fair, balanced and understandable set out on page 55;
• the Board’s confirmation that it has carried out a robust assessment of the emerging and principal risks set out on page 26;
• the section of the Annual Report that describes the review of effectiveness of risk management and internal control systems set
out on pages 68 and 69; and
• the section describing the work of the Audit Committee set out on pages 68 and 69.
14. Matters on which we are required to report by exception
14.1. Adequacy of explanations received and accounting records
Under the Companies Act 2006 we are required to report to you if, in our opinion:
• we have not received all the information and explanations we require for our audit; or
• adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have not been
received from branches not visited by us; or
• the Parent Company Financial Statements are not in agreement with the accounting records and returns.
We have nothing to report in respect of these matters.
14.2. Directors’ remuneration
Under the Companies Act 2006 we are also required to report if in our opinion certain disclosures of Directors’ remuneration have not
been made or the part of the Directors’ Remuneration Report to be audited is not in agreement with the accounting records and returns.
We have nothing to report in respect of this matter.
15. Other matters which we are required to address
15.1. Auditor tenure
Following the recommendation of the Audit Committee, we were appointed by the shareholders on 20 May 2015 to audit the
Financial Statements for the year ending 31 December 2015 and subsequent financial periods. The period of total uninterrupted
engagement including previous renewals and reappointments of the firm is 6 years, covering the years ending 31 December 2015
to 31 December 2020.
15.2. Consistency of the Audit Report with the additional report to the Audit Committee
Our audit opinion is consistent with the additional report to the Audit Committee we are required to provide in accordance with ISAs (UK).
16. Use of our report
This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act
2006. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to
state to them in an Auditor’s Report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Company and the Company’s members as a body, for our audit work, for this report, or for
the opinions we have formed.
David Johnson FCA (Senior Statutory Auditor)
for and on behalf of Deloitte LLP
Statutory Auditor
Leeds, United Kingdom
11 March 2021
100
Marshalls plc
Annual Report and Accounts 2020
Consolidated Income Statement
for the year ended 31 December 2020
Revenue
Net operating costs
Operating profit
Financial expenses
Financial income
Profit before tax
Income tax expense
Profit for the financial year
Profit for the year
Attributable to:
Equity shareholders of the Parent
Non-controlling interests
Earnings per share
Basic
Diluted
Dividend
Pence per share
Dividends declared
All results relate to continuing operations.
Before operational
restructuring costs
and asset
impairments
2020
£’000
Operational
restructuring costs
and asset
impairments
2020
£’000
Notes
2
3
2
6
6
2
7
8
8
9
9
—
(17,809)
(17,809)
—
—
(17,809)
3,101
(14,708)
(14,708)
—
(14,708)
469,454
(442,272)
27,182
(4,730)
10
22,462
(5,196)
17,266
17,078
188
17,266
8.60p
8.53p
4.30p
—
Year ended
2020
£’000
469,454
(460,081)
9,373
(4,730)
10
4,653
(2,095)
2,558
2,370
188
2,558
1.19p
1.18p
Year ended
2019
£’000
541,832
(468,151)
73,681
(3,835)
7
69,853
(11,942)
57,911
58,240
(329)
57,911
29.36p
29.14p
16.70p
33,113
Marshalls plc
marshalls.co.uk
101
Financial Statements
Consolidated Statement of Comprehensive Income
for the year ended 31 December 2020
Profit for the financial year before operational restructuring costs and
asset impairments
Operational restructuring costs and asset impairments
Profit for the financial year
Other comprehensive (expense)/income
Items that will not be reclassified to the Income Statement:
Remeasurements of the net defined benefit surplus
Deferred tax arising
Impact of the change in rate of deferred tax on defined benefit plan actuarial loss
Total items that will not be reclassified to the Income Statement
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
Fair value of cash flow hedges transferred to the Income Statement
Deferred tax arising
Exchange difference on retranslation of foreign currency net investment
Exchange movements associated with borrowings designated as a hedge
against net investment
Foreign currency translation differences – non-controlling interests
Total items that are or may be reclassified to the Income Statement
Other comprehensive (expense)/income for the year, net of income tax
Total comprehensive (expense)/income for the year
Attributable to:
Equity shareholders of the Parent
Non-controlling interests
Notes
20
22
22
24
2020
£’000
17,266
(14,708)
2,558
(12,741)
2,421
(314)
(10,634)
(1,526)
1,238
42
(1,117)
922
39
(402)
(11,036)
(8,478)
(8,705)
227
(8,478)
2019
£’000
57,911
—
57,911
2,847
(484)
—
2,363
231
113
(58)
992
(869)
(42)
367
2,730
60,641
61,012
(371)
60,641
102
Marshalls plc
Annual Report and Accounts 2020
Financial Statements
Consolidated Balance Sheet
at 31 December 2020
Assets
Non-current assets
Property, plant and equipment
Right-of-use assets
Intangible assets
Employee benefits
Deferred taxation assets
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Assets classified as held for sale
Derivative financial instruments
Total assets
Liabilities
Current liabilities
Trade and other payables
Corporation tax
Short-term lease liabilities
Interest-bearing loans and borrowings
Non-current liabilities
Long-term lease liabilities
Interest-bearing loans and borrowings
Provisions
Deferred taxation liabilities
Total liabilities
Net assets
Equity
Capital and reserves attributable to equity shareholders of the Parent
Called-up share capital
Share premium account
Own shares
Capital redemption reserve
Consolidation reserve
Hedging reserve
Retained earnings
Equity attributable to equity shareholders of the Parent
Non-controlling interests
Total equity
Approved at a Directors’ meeting on 11 March 2021.
On behalf of the Board:
Martyn Coffey
Chief Executive
Jack Clarke
Finance Director
The Notes on pages 107 to 139 form part of these Consolidated Financial Statements.
Notes
2020
£’000
2019
£’000
10
11
12
20
22
13
14
15
10
19
16
18
17
18
17
21
22
23
24
179,401
44,990
94,679
2,726
2,620
324,416
89,782
95,742
103,707
450
332
290,013
614,429
119,816
7,277
10,065
20,000
157,158
38,926
110,282
3,149
17,066
169,423
326,581
287,848
50,013
24,482
(806)
75,394
(213,067)
313
350,569
286,898
950
287,848
195,554
40,014
95,799
15,721
2,947
350,035
89,238
69,418
53,258
—
620
212,534
562,569
121,379
11,234
9,736
20,000
162,349
32,224
51,274
2,649
18,307
104,454
266,803
295,766
50,013
24,482
(1,391)
75,394
(213,067)
559
359,053
295,043
723
295,766
Marshalls plc
marshalls.co.uk
103
Financial Statements
Consolidated Cash Flow Statement
for the year ended 31 December 2020
Cash flows from operating activities
Profit before operational restructuring costs and asset impairments
Operational restructuring costs and asset impairments
Profit for the financial year
Income tax expense on continuing operations
Income tax credit on operational restructuring costs and asset impairments
Profit before tax
Adjustments for:
Depreciation of property, plant and equipment
Asset impairments
Depreciation of right-of-use assets
Amortisation
Gain on sale of property, plant and equipment
Equity settled share-based payments
Financial income and expenses (net)
Operating cash flow before changes in working capital
(Increase)/decrease in trade and other receivables
Increase in inventories
Increase/(decrease) in trade and other payables
Operational restructuring costs paid
Acquisition costs paid
Cash generated from operations
Financial expenses paid
Income tax paid
Net cash flow from operating activities
Cash flows from investing activities
Proceeds from sale of property, plant and equipment
Financial income received
Acquisition of property, plant and equipment
Acquisition of intangible assets
Net cash flow from investing activities
Cash flows from financing activities
Proceeds from issue of share capital
Payments to acquire own shares
Repayment of borrowings
New loans
Cash payment for the principal portion of lease liabilities
Equity dividends paid
Net cash flow from financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Effect of exchange rate fluctuations
Cash and cash equivalents at the end of the year
104
Marshalls plc
Annual Report and Accounts 2020
Notes
2020
£’000
7
7
10
10
11
12
3
17,266
(14,708)
2,558
5,196
(3,101)
4,653
15,657
5,489
12,060
2,719
(1,103)
2,998
4,720
47,193
(26,031)
(180)
7,442
(6,946)
—
21,478
(4,475)
(4,631)
12,372
11,450
10
(13,158)
(1,599)
(3,297)
—
(2,705)
(10,009)
67,900
(13,780)
—
41,406
50,481
53,258
(32)
103,707
2019
£’000
57,911
—
57,911
11,942
—
69,853
14,903
—
12,868
2,423
(306)
3,024
3,828
106,593
10,645
(5,262)
(10,151)
(1,109)
(375)
100,341
(3,193)
(9,023)
88,125
523
7
(20,488)
(2,420)
(22,378)
225
(1,470)
(60,736)
49,809
(12,723)
(33,203)
(58,098)
7,649
45,709
(100)
53,258
Financial Statements
Consolidated Statement of Changes in Equity
for the year ended 31 December 2020
Attributable to equity holders of the Company
Share
capital
£’000
Share
premium
account
£’000
Capital
Own
shares
£’000
redemption Consolidation
reserve
£’000
reserve
£’000
Hedging
reserve
£’000
Retained
earnings
£’000
Non-
controlling
interests
£’000
Total
£’000
Total
equity
£’000
50,013 24,482
(1,391)
75,394
(213,067)
559 359,053 295,043
723 295,766
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
— (2,705)
3,290
—
—
—
585
585
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
2,370
2,370
188
2,558
—
(195)
(195)
39
(156)
(1,526)
—
(1,526)
—
(1,526)
1,238
—
—
42
— (12,741)
2,421
—
1,238
42
(12,741)
2,421
—
1,238
42
—
— (12,741)
2,421
—
—
(314)
(314)
—
(314)
(246)
(10,829)
(11,075)
39
(11,036)
(246)
(8,459)
(8,705)
227
(8,478)
—
—
2,998
2,998
(104)
(104)
371
—
—
—
— (3,290)
371
(2,705)
—
—
—
2,998
(104)
—
371
— (2,705)
—
—
—
(25)
560
—
560
(246)
(8,484)
(8,145)
227
(7,918)
Current year
At 1 January 2020
Total comprehensive (expense)/
income for the year
Profit for the financial year
attributable to equity
shareholders of the Parent
Other comprehensive
(expense)/income
Foreign currency
translation differences
Effective portion of changes in fair
value of cash flow hedges
Net change in fair value of cash
flow hedges transferred to the
Income Statement
Deferred tax arising
Defined benefit plan actuarial loss
Deferred tax arising
Impact of the change in rate of
deferred tax on defined benefit
plan actuarial loss
Total other comprehensive
(expense)/income
Total comprehensive (expense)/
income for the year
Share-based payments
Deferred tax on
share-based payments
Corporation tax on
share-based payments
Purchase of own shares
Disposal of own shares
Total contributions by and
distributions to owners
Total transactions with owners
of the Company
At 31 December 2020
50,013 24,482
(806)
75,394
(213,067)
313 350,569 286,898
950 287,848
Marshalls plc
marshalls.co.uk
105
Financial Statements
Consolidated Statement of Changes in Equity continued
for the year ended 31 December 2020
Attributable to equity holders of the Company
Share
capital
£’000
Share
premium
account
£’000
Capital
Own
shares
£’000
redemption Consolidation
reserve
£’000
reserve
£’000
Hedging
reserve
£’000
Retained
earnings
£’000
Non-
controlling
interests
£’000
Total
£’000
Total
equity
£’000
Prior year
At 1 January 2019
Effect of initial application
of IFRS 16
49,998
24,326
(888)
75,394
(213,067)
273 329,585
265,621
1,094 266,715
–
–
–
–
–
–
(1,842)
(1,842)
–
(1,842)
At 1 January 2019 – as restated
49,998
24,326
(888)
75,394
(213,067)
273 327,743
263,779
1,094 264,873
Total comprehensive income/
(expense) for the year
Profit for the financial year
attributable to equity
shareholders of the Parent
Other comprehensive
income/(expense)
Foreign currency translation
differences
Effective portion of changes in fair
value of cash flow hedges
Net change in fair value of cash
flow hedges transferred to the
Income Statement
Deferred tax arising
Defined benefit plan
actuarial gain
Deferred tax arising
Total other comprehensive
income/(expense)
Total comprehensive income/
(expense) for the year
Transactions with owners,
recorded directly in equity
Contributions by and distributions
to owners
Share-based payments
Deferred tax on
share-based payments
Corporation tax on
share-based payments
Dividends to equity shareholders
Shares issued
Purchase of own shares
Disposal of own shares
Total contributions by and
distributions to owners
Total transactions with owners
of the Company
–
–
–
–
–
–
–
–
–
–
–
–
–
15
–
–
15
15
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
156
–
–
–
–
54
(1,470)
913
156
(503)
156
(503)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
– 58,240
58,240
(329)
57,911
–
123
231
113
(58)
–
–
–
123
231
113
(58)
–
–
2,847
(484)
2,847
(484)
(42)
–
–
–
–
–
81
231
113
(58)
2,847
(484)
286
2,486
2,772
(42)
2,730
286
60,726
61,012
(371)
60,641
–
–
3,024
3,024
1,219
1,219
–
457
– (33,203)
–
–
–
–
(913)
–
457
(33,203)
225
(1,470)
–
–
–
3,024
1,219
–
457
– (33,203)
225
–
(1,470)
–
–
–
– (29,416)
(29,748)
– (29,748)
286
31,310
31,264
(371) 30,893
At 31 December 2019
50,013
24,482
(1,391)
75,394
(213,067)
559 359,053 295,043
723 295,766
106
Marshalls plc
Annual Report and Accounts 2020
Financial Statements
Notes to the Consolidated Financial Statements
1 Accounting policies
Significant accounting policies
Marshalls plc (the “Company”) is a public company limited by shares, incorporated in the United Kingdom under the Companies Act,
and is registered in England and Wales. The Consolidated Financial Statements of the Company for the year ended 31 December 2020
comprise the Company and its subsidiaries (together referred to as the “Group”).
The Consolidated Financial Statements were authorised for issue by the Directors on 11 March 2021.
The Company’s registered address is Landscape House, Premier Way, Lowfields Business Park, Elland HX5 9HT.
The following paragraphs summarise the significant accounting policies of the Group, which have been applied consistently
in dealing with items which are considered material in relation to the Group’s Consolidated Financial Statements.
The Consolidated Financial Statements have been prepared in accordance with international accounting standards in conformity with the
requirements of the Companies Act 2006 and International Financial Reporting Standards adopted pursuant to Regulation (EC) No
1606/2002 as it applies in the European Union. 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.
Adoption of new standards in 2020
The accounting policies have been applied consistently throughout the Group for the purpose of the Consolidated Financial
Statements. The accounting policies are set out on the Company’s website.
The following other standards, interpretations and amendments to existing standards became effective on 1 January 2020
and have not had a material impact on the Group:
• Amendments to IAS 1 and IAS 8 – “Definition of Material”;
• Amendments to IFRS 3 – “Definition of a Business”;
• Amendments to IFRS 9, IAS 39 and IFRS 7 – “Interest Rate Benchmark Reform”;
• Amendments to IFRS 16 “Leases” in relation to COVID-19 related rent concessions; and
• Amendments to References to the Conceptual Framework in IFRS Standards.
The following other standards, interpretations and amendments to existing standards have been issued but were not mandatory
for accounting periods beginning 1 January 2020 and are not expected to have a material impact on the Group.
• IFRS 17 “Insurance Contracts”, effective from 1 January 2021;
• Amendments to IFRS 10 and IAS 28 – “Sale or Contribution of Assets between an Investor and its Associate or Joint Venture”,
effective date deferred indefinitely;
• Amendments to IAS 1 – “Classification of Liabilities as Current or Non-current”;
• Amendments to IFRS 3 – “Reference to the Conceptual Framework”;
• Amendments to IFRS 16 – “Property, Plant and Equipment – Proceeds before Intended Use”;
• Amendments to IFRS 37 – “Onerous Contracts – Cost of Fulfilling a Contract”; and
• Annual Improvements to IFRS Standards 2018 – 2020 cycle - Amendments to IFRS 1 “First-time Adoption of International Financial
Reporting Standards”, IFRS 9 “Financial Instruments”, IFRS 16 “Leases”, and IAS 41 “Agriculture”.
The Directors do not expect that the adoption of the standards listed above will have a material impact on the Financial
Statements of the Group in future periods.
(a) Statement of compliance
The Group Consolidated Financial Statements have been prepared and approved by the Directors in accordance with International
Financial Reporting Standards as adopted by the European Union (“adopted IFRSs”). The Parent Company has elected to prepare
its Financial Statements in accordance with FRS 101 and these are presented on pages 140 to 147.
(b) Basis of preparation
The Group’s business activities, together with the factors likely to affect its future development, performance and position, are set
out in the Strategic Report on pages 1 to 37. The financial position of the Group, its cash flows, liquidity position and borrowing
facilities are also set out in the Strategic Report. In addition, Note 19 includes the Group’s policies and procedures for managing its
capital; its financial risk management objectives; details of its financial instruments; and its exposures to credit risk and liquidity risk.
Details of the Group’s funding position are set out in Note 19. On 1 May 2020, the Group signed agreements with each of NatWest,
Lloyds and HSBC for an additional £30 million, twelve-month committed revolving credit facility with each. These additional facilities
totalled £90 million and significantly strengthened the Group’s headroom. Including these additional facilities, Marshalls has total
bank facilities of £255 million, of which £230 million are committed. Temporary covenant waivers have been established for the
period to 30 June 2021, during which there is an ongoing agreement with each partner bank that net debt (excluding lease liabilities
under IFRS 16) will not exceed £200 million. In addition, the Group established a facility line with the COVID-19 Corporate Financing
Facility (“CCFF”) with an issuer limit of £200 million. The Group’s on-demand overdraft facility is reviewed on an annual basis and the
current arrangements were renewed and signed on 9 September 2020.
In assessing the appropriateness of adopting the going concern basis in the Consolidated Financial Statements, the Board
reviewed a range of severe downside scenarios to stress test the further potential impact of COVID-19 and other uncertainties.
The stress testing applied in 2020 has taken full account of COVID-19 and the continuing uncertainty over Brexit transition. After
the lockdown at the end of March 2020, the Group prepared a series of downside scenario models in relation to revenue, profit and
cash flow over a 2-year period. These models have been reviewed and updated during the last year, with additional sensitivities
being applied against the Group’s base medium-term forecast. The latest stress tests reviewed by the Board in relation to the
completion of these Consolidated Financial Statements assumed a further sales revenue sensitivity of 20 per cent over each of
Marshalls plc
marshalls.co.uk
107
Financial Statements Notes to the Consolidated Financial Statements continued
1 Accounting policies continued
Significant accounting policies continued
(b) Basis of preparation continued
the next two years, cumulatively 64 per cent against 2020 revenue. None of the stress tests applied impact the Directors’ opinion
that 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. However, the
potential impact of wider political and economic uncertainties has been considered, including issues or delays as a consequence
of the Brexit transition process and a reduction in consumer confidence due to a further slowdown in the UK economy. Based on
current expectations and as consequence of significantly improved recent trading, the Group’s latest cash forecasts continue
to meet half year and year-end bank covenants and there is adequate headroom that is not dependent on facility renewals.
At 31 December 2020, on a covenant test basis (pre-IFRS 16), the relevant ratios were comfortably achieved and were as follows:
• EBITA: interest charge – 10.2 times (covenant test requirement – to be greater than 2.5 times).
• Net debt: EBITDA – 0.6 times (covenant test requirement – to be less than 3.0 times).
After considering the risks associated with COVID-19 and other relevant uncertainties, the Directors believe that the Group is well placed
to manage its business risks successfully. The Board considers that the facilities now available to the Group are sufficient to meet
significant downside liquidity scenarios over a prolonged period and that there are sufficient unutilised facilities held which mature after
12 months. Accordingly, the Directors 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 cash settled share-based payments.
Other than in relation to “operational restructuring costs and asset impairments”, 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/investor/financial-performance). Operational restructuring costs and asset impairments
have been disclosed separately on the face of the Income Statement due to their scale and exceptional nature and to provide
a better understanding of the Group’s results.
The Consolidated Financial Statements are presented in Sterling, rounded to the nearest thousand. Sterling is the currency of the
primary economic environment in which the Group operates.
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. These are set
out in Note 30 on page 139. 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.
Judgements made by management in the application of adopted IFRSs that have a significant effect on the Consolidated
Financial Statements and estimates with a significant risk of material adjustment in the next year are discussed in Note 30.
(c) Basis of consolidation
(i) Subsidiaries
Subsidiaries (which are set out in detail in Note 34 on pages 144 and 145) are entities controlled by the Company. Control is achieved
when the Company:
• has power over the investee;
• is exposed, or has rights, to variable returns from its involvement with the investee; and
• has the ability to use its power to affect its returns.
The Company reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one
or more of the three elements of control listed above. When the Company has less than a majority of the voting rights of an investee,
it considers that it has power over the investee when the voting rights are sufficient to give it the practical ability to direct the
relevant activities of the investee unilaterally. The Company considers all relevant facts and circumstances in assessing whether
or not the Company’s voting rights in an investee are sufficient to give it power, including:
• the size of the Company’s holding of voting rights relative to the size and dispersion of holdings of the other vote holders;
• potential voting rights held by the Company, other vote holders or other parties;
• rights arising from other contractual arrangements; and
• any additional facts and circumstances that indicate that the Company has, or does not have, the current ability to direct the
relevant activities at the time that decisions need to be made, including voting patterns at previous shareholders’ meetings.
Consolidation of a subsidiary begins when the Company obtains control over the subsidiary and ceases when the Company loses
control of the subsidiary. Specifically, the results of subsidiaries acquired or disposed of during the year are included in the Consolidated
Income Statement from the date the Company gains control until the date when the Company ceases to control the subsidiary.
(ii) Associates (equity-accounted investees)
Associates are those entities in which the Group has significant influence, but not control, over the financial and operating policies.
Significant influence is presumed to exist when the Group holds between 20 and 50 per cent of the voting power of another entity.
Associates are accounted for using the equity method (equity-accounted investees) and are recognised initially at cost.
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Financial Statements 1 Accounting policies continued
Significant accounting policies continued
(c) Basis of consolidation continued
(ii) Associates (equity-accounted investees) continued
The Group’s investment includes goodwill identified on acquisition, net of any accumulated impairment losses. The Consolidated
Financial Statements include the Group’s share of the income and expenses and equity movements of equity-accounted investees,
after adjustment to align the accounting policies with those of the Group, from the date that significant influence commences until
the date that significant influence ceases. When the Group’s share of losses exceeds its interest in an equity-accounted investee,
the carrying amount of that interest (including any long-term investments) is reduced to £nil and the recognition of further losses
is discontinued except to the extent that the Group has an obligation or has made payments on behalf of the investee.
(iii) Transactions eliminated on consolidation
Intra-group balances, and any unrealised gains and losses or income and expenses arising from intra-group transactions, are
eliminated in preparing the Consolidated Financial Statements.
(iv) Non-controlling interests
Non-controlling interests in subsidiaries are identified separately from the Group’s equity therein. Those interests of non-controlling
shareholders that are present ownership interests, entitling their holders to a proportionate share of net assets, are initially measured
at the non-controlling interests’ proportionate share of the acquiree’s identifiable net assets. Subsequent to acquisition, the carrying
amount of non-controlling interests is the amount of those interests at the initial recognition plus the non-controlling interests’ share
of subsequent changes in equity. Total comprehensive income is attributed to non-controlling interests even if this results in the
non-controlling interests having a deficit balance.
(d) Foreign currency transactions
Transactions in foreign currencies are translated to Sterling at the foreign exchange rate ruling at the date of the transaction.
Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated to Sterling at the foreign
exchange rate ruling at that date. Foreign exchange differences arising on translation are recognised in the Consolidated Income
Statement. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated
using the exchange rate at the date of the transaction.
For the purposes of presenting Consolidated Financial Statements, the assets and liabilities of the Group’s foreign operations are
translated at exchange rates prevailing on the balance sheet date. Income and expense items are translated at the average
exchange rates for the period, unless exchange rates fluctuate significantly during that period, in which case the exchange rates
at the date of transactions are used.
(e) Derivative financial instruments
The Group uses derivative financial instruments to hedge its exposure to foreign exchange, fuel pricing and interest rate risks arising
from operational, financing and investment activities. In accordance with its treasury policy, the Group does not hold or issue
derivative financial instruments for speculative purposes. However, derivatives that do not qualify for hedge accounting are
accounted for as trading instruments.
Derivative financial instruments are recognised at fair value and transaction costs are recognised in the Income Statement
when incurred. The gain or loss on remeasurement to fair value is recognised immediately in the Consolidated Income Statement.
However, where derivatives qualify for hedge accounting, recognition of any resultant gain or loss depends on the nature of the
item being hedged (see accounting policy (f)).
Classification and measurement
The classification of financial assets is based both on the business model within which the asset is held and the contractual cash
flow characteristics of the asset. There are 3 principal classification categories for financial assets that are debt instruments:
(i) amortised cost; (ii) fair value through other comprehensive income (“FVTOCI”); and (iii) fair value through profit or loss (“FVTPL”).
Equity investments in scope of IFRS 9 are measured at fair value with gains and losses recognised in profit or loss unless an
irrevocable election is made to recognise gains or losses in other comprehensive income. Under IFRS 9, derivatives embedded
in financial assets are not bifurcated but instead the whole hybrid contract is assessed for classification.
Under IFRS 9, financial assets can be designated as at FVTPL to mitigate an accounting mismatch.
In respect to classification and measurement of financial liabilities, changes in the fair value of a financial liability designated
as at FVTPL due to credit risk are presented in other comprehensive income unless such presentation would create or enlarge
an accounting mismatch in profit or loss.
The change in the classification and measurement of listed redeemable notes has not had a material impact on the Group
Financial Statements.
Impairment
Credit losses and expected credit losses are recognised in accordance with IFRS 9. The amount of expected credit losses is updated
at each reporting date.
The IFRS 9 impairment model has been applied to the Group’s financial assets that are debt instruments measured at amortised
cost or FVTOCI as well as the Group’s finance lease receivables, contract assets and issued financial guarantee contracts.
The Group has applied the simplified approach to recognise lifetime expected credit losses for its trade receivables, finance lease
receivables and contracts assets as required or permitted by IFRS 9. The loss allowance for these assets as at 1 January 2020 was
not significantly different to that under IAS 39.
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109
Financial Statements Notes to the Consolidated Financial Statements continued
1 Accounting policies continued
Significant accounting policies continued
(f) Hedging
The Group has elected to apply the IFRS 9 hedge accounting requirements because they align more closely with the Group’s risk
management policies. An assessment of the Group’s hedging relationships under IAS 39 was performed and it was determined that
the relationships will qualify as continuing hedging relationships under IFRS 9.
(i) Cash flow hedges
Where a derivative financial instrument is designated as a hedge of the variability in cash flows of a recognised asset or liability,
or a highly probable forecast transaction, the effective part of any gain or loss on the derivative financial instrument is recognised
directly in equity. When the forecast transaction subsequently results in the recognition of a non-financial asset or non-financial
liability, the associated cumulative gain or loss is removed from equity and included in the initial cost or other carrying amount of
the non-financial asset. For cash flow hedges, other than those covered by the preceding policy statement, the associated
cumulative gain or loss is removed from equity and recognised in the Consolidated Income Statement in the same period or periods
during which the hedged forecast transaction affects the income or expense. The ineffective part of any gain or loss is recognised
immediately in the Consolidated Income Statement.
When a hedging instrument expires or is sold, terminated or exercised, or the entity revokes designation of the hedge relationship,
but the hedged forecast transaction is still expected to occur, it no longer meets the criteria for hedge accounting. The cumulative
gain or loss at that point remains in equity and is recognised in accordance with the above policy when the transaction occurs.
If the hedged transaction is no longer expected to take place, the cumulative unrealised gain or loss recognised in equity is
recognised immediately in the Consolidated Income Statement and cash flow hedge accounting is discontinued prospectively.
(ii) Economic hedges
Where a derivative financial instrument is used to hedge economically the foreign exchange exposure of a recognised monetary
asset or liability, no hedge accounting is applied and any gain or loss on the hedging instrument is recognised in the Consolidated
Income Statement.
(g) Property, plant and equipment
(i) Owned assets
Items of property, plant and equipment are stated at cost less accumulated depreciation (see (iii) below) and impairment losses
(see accounting policy (m)). The cost of self-constructed assets includes the cost of materials and direct labour and an appropriate
proportion of directly attributable production overheads.
Certain items of property, plant and equipment that had been revalued to fair value on or prior to 1 January 2004, the date of
transition to adopted IFRSs, are measured on the basis of deemed cost, being the revalued amount at the date of that revaluation.
Where parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items
of property, plant and equipment.
(ii) Subsequent costs
The Group recognises in the carrying amount of an item of property, plant and equipment the cost of replacing part of such an item when
that cost is incurred if it is probable that the future economic benefits embodied within the item will flow to the Group and the cost of the
item can be measured reliably. All other costs are recognised in the Consolidated Income Statement as an expense as incurred.
(iii) Depreciation
Depreciation is charged to the Consolidated Income Statement on a straight line basis over the estimated useful lives of each part
of an item of property, plant and equipment. Depreciation on quarries is based on estimated rates of extraction. This is based on a
comparison between the volume of relevant material extracted in any given period and the volume of relevant material available
for extraction. Depreciation on leased assets is charged over the shorter of the lease term and their useful economic life. Freehold
land is not depreciated. The rates are as follows:
Freehold and long leasehold buildings
Short leasehold property
Fixed plant and equipment
Mobile plant and vehicles
Quarries
–
–
–
–
–
2.5 per cent to 5 per cent per annum
over the period of the lease
3.3 per cent to 25 per cent per annum
14 per cent to 30 per cent per annum
based on rates of extraction
The residual values, useful economic lives and depreciation methods are reassessed annually. Assets under construction are not
depreciated until they are ready for use.
Site preparation costs associated with the development of new stone reserves are capitalised. These costs would include:
• costs of clearing the site (including internal and outsourced labour in relation to site workers);
• professional fees (including fees relating to obtaining planning consent);
• purchase, installation and assembly of any necessary extraction equipment; and
• costs of testing whether the extraction process is functioning properly (net of any sales of test products).
Depreciation commences when commercial extraction commences and is based on the rate of extraction.
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Financial Statements
1 Accounting policies continued
Significant accounting policies continued
(g) Property, plant and equipment continued
(iii) Depreciation continued
In accordance with IAS 37, provision is made for quarry restoration where a legal or constructive obligation exists, it is probable that
an outflow of economic benefits will occur and the financial cost of restoration work can be reliably measured. The lives of quarries
are almost always long and it is difficult to estimate the length with any precision. The majority of quarry restoration work is undertaken
while extracting minerals from new areas (backfilling) and therefore work can be completed without additional cost. As a result of
the particular characteristics of the Group’s quarries, the IAS 37 criteria have not been met to date based on the assets so far
acquired and, therefore, no provisions have been recognised.
(h) Intangible assets
(i) Goodwill
All business combinations are accounted for using the acquisition method as at the acquisition date, which is the date on which
control is transferred to the Group.
For acquisitions on or after 1 January 2004, the Group measures goodwill at the acquisition date as:
• the fair value of the consideration transferred; plus
• the recognised amount of any non-controlling interests in the acquiree; plus
• the fair value of the existing equity interest in the acquiree; less
• the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed.
When the excess is negative, a bargain purchase gain is recognised immediately in the Consolidated Income Statement.
Costs relating to the acquisition, other than those associated with the issue of debt or equity securities, are expensed as incurred.
Any contingent consideration payable is recognised at fair value at the acquisition date. If the contingent consideration is classified
as equity, it is not remeasured and settlement is accounted for within equity. Otherwise, subsequent changes to the fair value of the
contingent consideration are recognised in profit or loss.
On a transaction-by-transaction basis, the Group elects to measure non-controlling interests either at their fair value or at their
proportionate interest in the recognised amount of the identifiable net assets of the acquiree at the acquisition date.
In respect of business acquisitions that have occurred since 1 January 2004, goodwill represents the difference between the cost of
the acquisition and the fair value of the net identifiable assets and contingent liabilities acquired. The classification and accounting
treatment relating to the acquisition of Edenhall Holdings Limited on 11 December 2018 was adjusted in preparing the Group’s
opening IFRS balance sheet at 1 January 2019. Further details of this business combination are included in Note 25.
In respect of acquisitions prior to 1 January 2004, goodwill is included on the basis of its deemed cost, which represents the amount
recorded under the Group’s previous accounting framework. The classification and accounting treatment of business combinations
that occurred prior to 1 January 2004 were not adjusted in preparing the Group’s opening IFRS balance sheet at 1 January 2004.
Goodwill is subsequently stated at cost less any accumulated impairment losses. Goodwill is allocated to cash generating units and
is tested annually for impairment (see accounting policy (m)). In respect of equity-accounted investees, the carrying amount of
goodwill is included in the carrying amount of the investment in the investee.
In respect of acquisitions where there is a contingent consideration element, an accrual is created for the estimated amount payable
if it is probable that an outflow of economic benefits will be required to settle the obligation and this can be measured reliably.
(ii) Research and development
Expenditure on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and
understanding, is recognised in the Consolidated Income Statement as an expense as incurred.
Expenditure on development activities, whereby research findings are applied to a plan or design for the production of new
or substantially improved products and processes, is capitalised if the product or process meets the recognition criteria for
development expenditure as set out in IAS 38 “Intangible Assets”. The expenditure capitalised includes all directly attributable costs,
from the date which the intangible asset meets the recognition criteria, necessary to create, produce and prepare the asset to be
capable of operating in the manner intended by management. Other development expenditure is recognised in the Consolidated
Income Statement as an expense as incurred. Capitalised development expenditure is stated at cost less accumulated
amortisation (see (v) overleaf) and impairment losses (see accounting policy (m)).
(iii) Other intangible assets
Other intangible assets that are acquired by the Group are stated at cost less accumulated amortisation (see (v) overleaf) and
impairment losses (see accounting policy (m)).
Expenditure on internally generated goodwill and brands is recognised in the Consolidated Income Statement as an expense as incurred.
(iv) Subsequent expenditure
Subsequent expenditure on capitalised intangible assets is capitalised only when it increases the future economic benefits
embodied in the specific asset to which it relates. All other expenditure is expensed as incurred.
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111
Financial Statements Notes to the Consolidated Financial Statements continued
1 Accounting policies continued
Significant accounting policies continued
(h) Intangible assets continued
(v) Amortisation
Amortisation is charged to the Consolidated Income Statement on a straight line basis over the estimated useful lives of intangible
assets unless such lives are indefinite. Goodwill is systematically tested for impairment at each balance sheet date. Other intangible
assets are amortised from the date they are available for use. The rates applied are as follows:
Customer and supplier relationships
Patents, trademarks and know-how
Development costs
Software
–
–
–
–
5 to 20 years
2 to 20 years
10 to 20 years
5 to 10 years
(i) Trade and other receivables
Trade and other receivables are stated at initial recognition, at their transaction price (as defined in IFRS 15) if the trade receivables
do not contain a significant financial component in accordance with IFRS 15 (or when the entity applies the practical expedient
in accordance with paragraph 63 of IFRS 15).
(j) Inventories
Inventories are stated at the lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary
course of business, less the estimated costs to completion and of selling expenses.
The cost of inventories is based on the first-in, first-out principle and includes expenditure incurred in acquiring the inventories and bringing
them to their existing location and condition. In the case of manufactured inventories and work in progress, cost includes an appropriate
share of overheads based on normal operating capacity, which were incurred in bringing the inventories to their present location and condition.
(k) Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call deposits. Bank overdrafts that are repayable on demand and form
an integral part of the Group’s cash management are included as a component of cash and cash equivalents for the purpose
of the Consolidated Cash Flow Statement.
(l) Assets classified as held for sale
Assets classified as held for sale are measured at the lower of carrying amount and fair value less costs to sell. Assets are classified
as held for sale if their carrying amount will be recovered through a sale transaction rather than through continuing use. This
condition is regarded as met only when the sale is highly probable and expected to be completed within one year from the date
of classification, and the asset is available for immediate sale in its present condition.
(m) Impairment
(i) Impairment review
The carrying amounts of the Group’s assets, other than inventories (see accounting policy (j)), are reviewed at each balance sheet date
to determine whether there is any indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated.
For goodwill, assets that have an indefinite useful life and intangible assets that are not yet available for use, the recoverable
amount is estimated at each balance sheet date.
An impairment loss is recognised whenever the carrying amount of an asset or its cash generating unit exceeds its recoverable
amount. Impairment losses are recognised in the Consolidated Income Statement.
Impairment losses recognised in respect of cash generating units are allocated first to reduce the carrying amount of any goodwill
allocated to cash generating units and then to reduce the carrying amount of the other assets in the unit on a pro-rata basis.
A cash generating unit is the group of assets identified on acquisition that generate cash inflows that are largely independent
of the cash inflows from other assets or groups of assets.
The recoverable amount of assets or cash generating units is the greater of their fair value less costs to sell and value in use.
In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that
reflects current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate
largely independent cash inflows, the recoverable amount is determined for the cash generating unit to which the asset belongs.
(ii) Reversals of impairments
An impairment loss in respect of goodwill is not reversed. In respect of other assets, an impairment loss is reversed if there has been
a change in the estimates used to determine the recoverable amount.
An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would
have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.
(n) Share capital
(i) Share capital
Share capital is classified as equity if it is non-redeemable and any dividends are discretionary, or if it is redeemable but only at the
Company’s option. Dividends on share capital classified as equity are recognised as distributions within equity. Non-equity share
capital is classified as a liability if it is redeemable on a specific date or at the option of the shareholders or if dividend payments
are not discretionary. Dividends thereon are recognised in the Consolidated Income Statement as a financial expense.
(ii) Dividends
Dividends on non-equity shares are recognised as a liability and accounted for on an accruals basis. Equity dividends are recognised
as a liability in the period in which they are declared (appropriately authorised and no longer at the discretion of the Company).
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Annual Report and Accounts 2020
Financial Statements
1 Accounting policies continued
Significant accounting policies continued
(o) Interest-bearing borrowings
Interest-bearing borrowings are recognised initially at fair value less attributable transaction costs. Subsequent to initial recognition,
interest-bearing borrowings are stated at amortised cost with any difference between cost and redemption value being recognised
in the Consolidated Income Statement over the period of the borrowings on an effective interest basis.
(p) Leases
IFRS 16 distinguishes leases and service contracts on the basis of whether an identified asset is controlled by a customer. A right-of-use
asset and a corresponding liability are recognised for all leases by lessees (i.e. all on balance sheet) except for short-term leases
and leases of low value assets.
The right-of-use asset is initially measured at cost and subsequently measured at cost (subject to certain exceptions) less
accumulated depreciation and impairment losses, adjusted for any remeasurement of the lease liability. The lease liability is initially
measured at the present value of the lease payments that are not paid at that date. Subsequently, the lease liability is adjusted for
interest and lease payments, as well as for the impact of lease modifications, amongst others.
In adopting IFRS 16 from 1 January 2019, the Group has applied the modified retrospective transition approach. Right-of-use assets
of £45,022,000 and lease liabilities of £46,520,000 were recognised as at 1 January 2019. For certain leases the Group has elected to
measure the right-of-use asset as if IFRS 16 had been applied since the start of the lease, but using the incremental borrowing rate
at 1 January 2019, with the difference between the right-of-use asset and the lease liability taken to retained earnings. In other
cases, the Group has elected to measure right-of-use assets at the amount of the lease liability on adoption (adjusted for any
lease prepayments or accrued lease expenses, onerous lease provisions and leased assets which have subsequently been sub
leased). The Group has elected to adopt the following practical expedients on transition:
• where an onerous lease provision is in existence, to utilise this provision to reduce the right-of-use asset value rather than
undertaking an impairments review;
• to use hindsight in determining the lease term;
• to exclude initial direct costs from the measurement of the right-of-use asset; and
• to apply the portfolio approach where a group of leases has similar characteristics.
The Group’s leases principally comprise commercial vehicles and trailers, fork lift trucks, motor vehicles, certain property assets and
fixed plant.
Short-term leases, with a duration of less than 12 months, are accounted for in accordance with the recognition exemption in IFRS 16 and
hence related payments are expensed as incurred. The Group also utilises the option to apply the recognition exemption for low value
assets (with a value of less than the equivalent of $5,000), which means that related payments have been expensed as incurred.
(q) Pension schemes
(i) Defined benefit schemes
The net obligation in respect of the Group’s defined benefit pension scheme is calculated by estimating the amount of future
benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to
determine its present value and the fair value of any scheme assets is deducted. The discount rate is the yield at the balance
sheet date on AA credit-rated corporate bonds that have maturity dates approximating to the terms of the Group’s obligations.
The calculation is performed by a qualified actuary using the projected unit credit method.
If the calculation results in a surplus, the resulting asset is measured at the present value of any economic benefits available in
the form of refunds from the plan, or reductions in future contributions to the plan. The present value of these economic benefits
is discounted by reference to market yields at the balance sheet date on high quality corporate bonds.
When the benefits of the scheme are improved, the portion of the increased benefit relating to past service by employees is
recognised as an expense in the Income Statement in the period of the scheme amendment.
Actuarial gains and losses that arise in calculating the Group’s obligation in respect of a plan are recognised immediately within the
Consolidated Statement of Comprehensive Income.
(ii) Defined contribution schemes
Obligations for contributions to defined contribution schemes are recognised as an expense in the Income Statement as incurred.
(r) Share-based payment transactions
The Group enters into equity settled share-based payment transactions with its employees. In particular, annual awards are made
to employees under the Company’s Management Incentive Plan (“MIP”).
The fair value of options granted is recognised as an employee expense with a corresponding increase in equity. The fair value is
measured at grant date and spread over the period during which the employees become unconditionally entitled to the options.
Where appropriate, the fair value of the options granted is measured using the Black-Scholes option valuation model, taking into
account the terms and conditions upon which the options were granted. The amount recognised as an expense is adjusted to
reflect the actual number of awards for which the related service and non-market vesting conditions are expected to be met, such
that the amount ultimately recognised as an expense is based on the number of awards that do meet the related service and
non-market performance conditions at the vesting date.
Current tax relief is available as shares vest based on the value at the date of vesting. A deferred tax asset is recognised at grant
date based on the number of shares expected to be issued, at the value at which they are expected to be issued, proportioned
in line with the vesting period.
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113
Financial Statements Notes to the Consolidated Financial Statements continued
1 Accounting policies continued
Significant accounting policies continued
(s) Own shares held by the Employee Benefit Trust
Transactions of the Group-sponsored Employee Benefit Trust are included in the Group Financial Statements. In particular, the
Trust’s purchases of shares in the Company are debited directly to equity.
(t) Provisions
A provision is recognised in the Consolidated Balance Sheet when the Group has a present legal or constructive obligation as a
result of a past event, it can be measured reliably and it is probable that an outflow of economic benefits will be required to settle
the obligation. If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate
that reflects current market assessments of the time value of money and the risks specific to the liability.
A provision for restructuring is recognised when the Group has approved a detailed and formal restructuring plan, and the
restructuring has either commenced or has been announced publicly. Future operating costs are not provided for.
(u) Trade and other payables
Trade and other payables are stated at initial recognition, at their fair value and subsequently at amortised cost.
(v) Revenue
Revenue from the sale of goods is recognised in the Consolidated Income Statement upon the despatch of goods, when the
performance obligations to customers have been satisfied. Revenue represents the invoiced value of sales to customers less returns,
allowances, rebates and value added tax.
Revenue is recorded typically on despatch of the Group’s products, when performance obligations to customers are satisfied.
Products are usually delivered using the Group’s fleet of delivery vehicles. Amounts due from customers are payable by customers on
standard credit terms and there is no significant financing component or variable consideration within amounts due from customers.
There are no significant obligations arising in relation to returns, refunds, warranties or similar obligations.
No revenue is recognised if there are significant uncertainties regarding recovery of the consideration due or the possible return
of goods or continuing management involvement with the goods.
(w) Expenses
(i) Operating lease payments
Payments made under operating leases are recognised in the Consolidated Income Statement on a straight line basis over the term
of the lease. Lease incentives received are recognised in the Consolidated Income Statement over the life of the lease.
(ii) Finance lease payments
Minimum lease payments are apportioned between the finance charge and the reduction of the outstanding liability. The finance
charge is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining
balance of the liability.
(iii) Financial expenses
Net financial expenses comprise interest on obligations under the defined benefit pension scheme, the expected return on scheme
assets under the defined benefit pension scheme, interest payable on borrowings (including finance leases) calculated using the
effective interest rate method, dividends on non-equity shares, interest receivable on funds invested, dividend income, foreign
exchange gains and losses and gains and losses on hedging instruments that are recognised in the Consolidated Income
Statement (see accounting policy (f)).
(x) Income tax
Income tax on the profit or loss for the year comprises current and deferred taxation. Income tax is recognised in the Consolidated
Income Statement except to the extent that it relates to items recognised directly in other comprehensive income or in equity,
in which case it is recognised accordingly.
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at
the balance sheet date, and any adjustment to tax payable in respect of previous years.
Deferred taxation is provided using the balance sheet liability method, providing for temporary differences between the carrying
amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The following
temporary differences are not provided for: the initial recognition of goodwill, the initial recognition of assets or liabilities that affect
neither accounting nor taxable profit, other than in a business combination, and differences relating to investments in subsidiaries
to the extent that they will probably not reverse in the foreseeable future. The amount of deferred taxation provided is based on
the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates that are expected
to apply when the temporary difference reverses, based on rates that have been enacted or substantively enacted at the balance
sheet date.
A deferred taxation asset is recognised only to the extent that it is probable that future taxable profits will be available against
which the asset can be utilised. Deferred taxation assets are reduced to the extent that it is no longer probable that the related tax
benefit will be realised.
Additional income taxes that arise from the distribution of dividends are recognised at the same time as the liability to pay the
related dividend.
114
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Annual Report and Accounts 2020
Financial Statements 1 Accounting policies continued
Significant accounting policies continued
(y) Segment reporting
IFRS 8 “Operating Segments” requires operating segments to be identified on the basis of discrete financial information about
components of the Group that are regularly reviewed by the Group’s Chief Operating Decision Maker (“CODM”) to allocate resources
to the segments and to assess their performance. As far as Marshalls is concerned, the CODM is regarded as being the Executive
Directors. The Directors have concluded that the Group’s Landscape Products business is a single reportable segment, which
includes the UK operations of the Marshalls Landscape Products hard landscaping business, servicing both the UK Domestic and
the Public Sector and Commercial end markets. Financial information for Landscape Products is now reported to the Group’s CODM
for the assessment of segment performance and to facilitate resource allocation.
(z) Alternative performance measures
The Group uses alternative performance measures (“APMs”) which are not defined or specified under IFRS. The Group believes
that these APMs, which are not considered to be a substitute for IFRS measures, provide additional helpful information. APMs are
consistent with how business performance is planned, reported and assessed internally by management and the Board and provide
more meaningful comparative information.
Results before operational restructuring costs and asset impairments
Operational restructuring costs and asset impairments have been disclosed separately on the face of the Income Statement due to the
scale and exceptional nature and to provide a better understanding of the Group’s results. Further details have been included in Note 5.
Pre-IFRS 16 basis
Disclosures required under IFRS are referred to as either on a post-IFRS 16 basis or on a reported basis. Disclosures referred to on a
pre-IFRS 16 basis are restated to those that applied before the adoption of IFRS 16 and are used to provide additional information
and a more detailed understanding of the Group results. A summarised Income Statement on both a reported basis and a pre-IFRS
16 basis is set out below. Both are disclosed before operational restructuring costs and asset impairments.
Revenue
Net operating costs
Operating profit
Finance charges (net)
Profit before tax
Income tax
Profit after tax
Profit before tax (£’000)
EBITDA (£’000)
EPS (pence)
Net debt (£’000)
ROCE (%)
Net debt: EBITDA
Gearing (%)
Pre-IFRS 16
December
2020
£’000
469,454
(443,992)
25,462
(3,116)
22,346
(5,196)
17,150
Pre-IFRS 16
December
2020
22,346
43,838
8.54
26,945
8.9
0.6
9.3
Impact of
IFRS 16
£’000
—
1,720
1,720
(1,604)
116
—
116
Impact of
IFRS 16
116
13,780
0.06
48,621
(0.7)
0.7
17.0
Post-IFRS 16
December
2020
£’000
469,454
(442,272)
27,182
(4,720)
22,462
(5,196)
17,266
Post-IFRS 16
December
2020
22,462
57,618
8.60
75,566
8.2
1.3
26.3
Pre-IFRS 16
December
2019
£’000
541,832
(469,252)
72,580
(2,486)
70,094
(11,942)
58,152
Pre-IFRS 16
December
2019
£’000
70,094
90,115
29.48
18,654
23.7
0.2
6.3
Impact of
IFRS 16
£’000
—
1,101
1,101
(1,342)
(241)
—
(241)
Impact of
IFRS 16
£’000
(241)
13,760
(0.12)
41,322
(2.3)
0.4
14.0
Post-IFRS 16
December
2019
£’000
541,832
(468,151)
73,681
(3,828)
69,853
(11,942)
57,911
Post-IFRS 16
December
2019
69,853
103,875
29.36
59,976
21.4
0.6
20.3
EBITA and EBITDA
EBITA represents earnings before interest, tax and the amortisation of intangibles. This is a component of the ROCE calculation.
EBITDA is calculated by adding back depreciation to EBITA. Both EBITA and EBITDA are disclosed before operational restructuring
costs and asset impairments.
EBITDA
Depreciation
EBITA
Amortisation of intangible assets
Operating profit
Pre-IFRS 16
2020
£’000
Post-IFRS 16
2020
£’000
Pre-IFRS 16
2019
£’000
43,838
(15,657)
28,181
(2,719)
25,462
57,618
(27,717)
29,901
(2,719)
27,182
90,115
(15,112)*
75,003
(2,423)
72,580
Post-IFRS 16
2019
£’000
103,875
(27,771)
76,104
(2,423)
73,681
* Pre-IFRS 16 depreciation of £15,112,000 comprises depreciation of £14,903,000 in respect of tangible fixed assets (Note 3) and £209,000 relating to assets previously classified
as finance leases but now reclassified as right-of-use assets.
Marshalls plc
marshalls.co.uk
115
Financial Statements
Notes to the Consolidated Financial Statements continued
1 Accounting policies continued
Significant accounting policies continued
(z) Alternative performance measures continued
ROCE
Reported ROCE is defined as EBITA divided by shareholders’ funds plus net debt. ROCE is disclosed before operational restructuring
costs and asset impairments.
EBITA
Shareholders’ funds
Net debt
Reported ROCE
Pre-IFRS 16
2020
£’000
28,181
289,816
26,945
Post-IFRS 16
2020
£’000
29,901
287,848
75,566
316,761
363,414
8.9%
8.2%
Pre-IFRS 16
2019
£’000
75,003
297,850
18,654
316,504
23.7%
Post-IFRS 16
2019
£’000
76,104
295,766
59,976
355,742
21.4%
Net debt
Net debt comprises cash at bank and in hand, bank loans and leasing liabilities. An analysis of net debt is provided in Note 26.
The ratio of operating cash flow to EBITDA
The ratio of operating cash flow to EBITDA is calculated as set out below:
Net cash flows from operating activities
Operational restructuring costs paid
Net financial expenses paid
Taxation paid
Operating cash flow
EBITDA
Ratio of operating cash flow to EBITDA
2 Segmental analysis
Segment revenues and results
Total revenue
Inter-segment revenue
Landscape
Products
£’000
381,304
(314)
2020
Other
£’000
90,903
(2,439)
Total
£’000
472,207
(2,753)
External revenue
380,990
88,464
469,454
Segment operating profit
32,413
1,517
33,930
Landscape
Products *
£’000
448,972
(362)
448,610
75,013
Operational restructuring
costs and asset impairments
Unallocated administration costs
Operating profit
Finance charges (net)
Profit before tax
Taxation
Profit after tax
(17,809)
(6,748)
9,373
(4,720)
4,653
(2,095)
2,558
2020
£’000
12,372
6,946
4,475
4,631
28,424
57,618
49.3%
2019
Other *
£’000
96,965
(3,743)
93,222
3,369
2019
£’000
88,125
—
3,193
9,023
100,341
103,875
96.6%
Total
£’000
545,937
(4,105)
541,832
78,382
—
(4,701)
73,681
(3,828)
69,853
(11,942)
57,911
* Following a change to the way in which information is reported internally, the comparative figures are being restated to ensure consistent classification with the analysis
reported for the year ended 31 December 2020.
The Group has 2 customers which each contributed more than 10 per cent of total revenue in the current and prior year.
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 one integrated production, logistics and distribution network supporting both end markets.
116
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Annual Report and Accounts 2020
Financial Statements
2 Segmental analysis continued
Segment revenues and results continued
Included in “Other” are the Group’s Landscape Protection, Mineral Products, Premier Mortars and International operations, which
do not currently meet the IFRS 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 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
Property, plant and equipment, right-of-use assets and inventory:
Landscape Products
Other
Total segment property, plant and equipment, right-of-use assets and inventory
Unallocated assets
Consolidated total assets
2020
£’000
2019 *
£’000
248,245
65,928
314,173
300,256
614,429
249,764
75,042
324,806
237,763
562,569
* Following a change to the way in which information is reported internally, the comparative figures are being restated to ensure consistent classification with the analysis
reported for the year ended 31 December 2020.
For the purpose of monitoring segment performance and allocating resources between segments, the Group’s CODM monitors the
property, plant and equipment, right-of-use assets and inventory. Assets used jointly by reportable segments are not allocated to
individual reportable segments.
Other segment information
Landscape Products
Other
Depreciation
and amortisation
Property, plant and equipment and
right-of-use asset additions
2020
£’000
23,707
6,729
30,436
2019 *
£’000
23,133
7,061
30,194
2020
£’000
24,723
6,528
31,251
2019
£’000
24,550
5,027
29,577
* Following a change to the way in which information is reported internally, the comparative figures are being restated to ensure consistent classification with the analysis
reported for the year ended 31 December 2020.
Geographical destination of revenue
United Kingdom
Rest of the world
2020
£’000
438,173
31,281
469,454
2019
£’000
514,905
26,927
541,832
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.
Marshalls plc
marshalls.co.uk
117
Financial Statements
Notes to the Consolidated Financial Statements continued
3 Net operating costs
Raw materials and consumables
Changes in inventories of finished goods and work in progress
Personnel costs (Note 4)
Depreciation of property, plant and equipment
Depreciation of right-of-use assets
Amortisation of intangible assets
Own work capitalised
Other operating costs
Redundancy and other restructuring costs
Operating costs
Other operating income
Net gain on asset and property disposals
Net operating costs before operational restructuring costs and asset impairments
Operational restructuring costs and asset impairments (Note 5)
Net operating costs
Net operating costs include:
Auditor’s remuneration (see below)
Short-term and low value lease costs
Research and development costs
In respect of the year under review, Deloitte LLP carried out work in relation to:
Audit of Financial Statements of Marshalls plc
Audit of Financial Statements of subsidiaries of the Company
Half-yearly review of Marshalls plc
2020
£’000
183,361
(378)
122,260
15,657
12,060
2,719
(2,991)
112,603
356
445,647
(2,272)
(1,103)
442,272
17,809
460,081
2020
£’000
286
4,551
3,109
2020
£’000
45
211
30
286
2019
£’000
198,124
847
128,221
14,903
12,868
2,423
(4,216)
116,135
1,396
470,701
(2,244)
(306)
468,151
—
468,151
2019
£’000
248
3,769
5,535
2019
£’000
30
198
20
248
118
Marshalls plc
Annual Report and Accounts 2020
Financial Statements
4 Personnel costs
2020
£’000
2019
£’000
Personnel costs (including amounts charged in the year in relation to Directors):
Wages and salaries
Social security costs
Share-based payments
Contributions to defined contribution pension scheme
Included within net operating costs (Note 3)
Personnel costs relating to restructuring (Note 3)
Personnel costs relating to operational restructuring and asset impairments (Note 5)*
Total personnel costs
99,082
10,650
2,630
9,898
122,260
52
7,818
130,130
* Personnel costs relating to operational restructuring asset impairments of £7,818,000 includes £368,000 in relation to share-based payments.
Remuneration of Directors:
Salary
Other benefits
MIP Element A bonus
MIP Element B bonus
Amounts receivable under the MIP at the end of the first cycle
Salary supplement in lieu of pension
Non-Executive Directors’ fees and fixed allowances
2020
£’000
785
37
—
—
1,808
145
393
3,168
104,338
12,367
3,024
8,492
128,221
1,076
—
129,297
2019
£’000
762
46
1,341
379
975
152
360
4,015
The aggregate of emoluments and amounts receivable under the MIP of the highest paid Director was £1,695,000 (2019: £2,213,000),
including a salary supplement in lieu of pension of £85,000 (2019: £92,000).
There are no Directors to whom retirement benefits are accruing in respect of qualifying services. As set out in the Annual Remuneration
Report on page 79, the Executive Directors receive a salary supplement in lieu of pension equal to their contractual entitlements.
Further details of Directors’ remuneration, share options, long-term incentive plans and Directors’ pension entitlements are disclosed
in the Remuneration Committee Report on pages 70 to 89.
The average monthly number of persons employed by the Group during the year was:
Continuing operations
5 Operational restructuring costs and asset impairments
Works closure costs
Redundancy
Asset impairments
6 Financial expenses and income
(a) Financial expenses
Net interest expense on defined benefit pension scheme
Interest expense on bank loans
Interest expense on lease liabilities
(b) Financial income
Interest receivable and similar income
Net interest expense on the defined benefit pension scheme is disclosed net of Company recharges (Note 20).
2020
Number
2,579
2020
£’000
4,502
7,818
5,489
17,809
2020
£’000
154
2,972
1,604
4,730
2019
Number
2,816
2019
£’000
—
—
—
—
2019
£’000
542
1,951
1,342
3,835
10
7
Marshalls plc
marshalls.co.uk
119
Financial Statements
Notes to the Consolidated Financial Statements continued
7 Income tax expense
Current tax expense
Current year
Adjustments for prior years
Deferred taxation expense
Origination and reversal of temporary differences:
Current year
Adjustments for prior years
Before operational
restructuring costs
and asset
impairments
2020
£’000
Operational
restructuring costs
and asset
impairments
2020
£’000
5,072
(1,768)
3,304
918
974
(2,341)
—
(2,341)
(760)
—
Year ended
2020
£’000
Year ended
2019
£’000
2,731
(1,768)
963
158
974
13,214
(1,577)
11,637
556
(251)
Total tax expense
5,196
(3,101)
2,095
11,942
Reconciliation of effective tax rate
Profit before tax
Tax using domestic corporation tax rate
Impact of capital allowances in excess of depreciation
Short-term timing differences
Adjustment to tax charge in prior year
Expenses not deductible for tax purposes
Corporation tax charge for the year
Impact of capital allowances in excess of depreciation
Short-term timing differences
Pension scheme movements
Other items
Adjustment to tax charge in prior year
Impact of the change in the rate of corporation tax
on deferred taxation
Total tax charge for the year
2020
%
100.0
19.0
3.7
13.9
(38.0)
22.1
20.7
(34.1)
1.1
(2.7)
0.4
20.9
38.7
45.0
2020
£’000
4,653
884
173
645
(1,768)
1,029
963
(1,585)
52
(124)
18
974
1,797
2,095
2019
%
100.0
19.0
(0.7)
0.6
(2.3)
0.1
16.7
0.9
–
(0.2)
0.4
(0.4)
(0.3)
17.1
2019
£’000
69,853
13,272
(523)
386
(1,577)
79
11,637
648
–
(109)
261
(251)
(244)
11,942
The net amount of deferred taxation credited to the Consolidated Statement of Comprehensive Income in the year was £2,149,000
(2019: debited £542,000).
The majority of the Group’s profits are earned in the UK with the standard rate of corporation tax being 19 per cent for the year
to 31 December 2020. The 2019 Budget announced that the UK corporation tax rate will remain at 19 per cent from 2020 rather
than reduce to 17 per cent, which had previously been confirmed. This change was substantively enacted on 17 March 2020;
consequently, the deferred taxation liability at 31 December 2020 has been calculated at 19 per cent, which is the rate at which
the deferred tax is expected to unwind in the future using rates enacted at the balance sheet date. The rate change has given
rise to an increase to the deferred tax charge of £1.6 million. This has given rise to the increase in the effective tax rate.
Capital allowances are tax reliefs provided in law for the expenditure the Group makes on fixed assets. The rates are determined
by Parliament annually, and spread the tax relief due over a number of years. This contrasts with the accounting treatment for such
spending, where the expenditure on fixed assets is treated as an investment with the cost then being spread over the anticipated
useful life of the asset, and/or impaired if the value of such assets is considered to have reduced materially.
The different accounting treatment of fixed assets for tax and accounting purposes is one reason why the taxable income of the
Group is not the same as its accounting profit. During the year ended 31 December 2020 the capital allowances due to the Group
exceeded the depreciation charge for the year.
Short-term timing differences arise on items such as depreciation in stock and share-based payments because the treatment of
such items is different for tax and accounting purposes. These differences usually reverse in the years following those in which they
arise, as is reflected in the deferred tax charge in the Financial Statements.
Adjustments to tax charges arising in earlier years arise because the tax charge to be included in a set of accounts has to be
estimated before those Financial Statements are finalised. Such charges therefore include some estimates that are checked
and refined before the Group’s corporation tax returns for the year are submitted to HM Revenue & Customs, which may reflect
a different liability as a result.
120
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Annual Report and Accounts 2020
Financial Statements
7 Income tax expense continued
Some expenses incurred may be entirely appropriate charges for inclusion in the Financial Statements but are not allowed
as a deduction against taxable income when calculating the Group’s tax liability for the same accounting period. Examples
of such disallowable expenditure include business entertainment costs and some legal expenses.
The prior year adjustment in corporation tax includes the reversal of some tax provisions made on acquisition of subsidiaries
in prior years which are no longer required.
As can be seen from the tax reconciliation, the process of adjustment that can give rise to current year adjustments to tax charges arising in
previous periods can also give rise to revisions in prior year deferred tax estimates. This is why the current year adjustments to the current year
charge for capital allowances and short-term timing differences are not exactly replicated in the deferred taxation charge for the year.
The Group’s overseas operations comprise a manufacturing operation in Belgium and sales and administration offices in the
USA and China. The sales of these units, in total, were less than 7 per cent of the Group’s turnover in the year ended 31 December 2020.
In total, the trading profits were not material and no tax was due.
8 Earnings per share
Basic earnings per share from total operations of 1.19 pence (2019: 29.36 pence) per share is calculated by dividing the profit
attributable to Ordinary Shareholders for the financial year, after adjusting for non-controlling interests, of £2,370,000
(2019: £58,240,000) by the weighted average number of shares in issue during the period of 198,642,224 (2019: 198,346,723).
Basic earnings per share before operational restructuring costs and asset impairments of 8.60 pence (2019: 29.36 pence) per share
is calculated by dividing the profit attributable to Ordinary Shareholders for the financial year, after adjusting for non-controlling interests,
of £17,078,000 (2019: £58,240,000) by the weighted average number of shares in issue during the period of 198,642,224 (2019: 198,346,723).
Profit attributable to Ordinary Shareholders
Profit before operational restructuring and asset impairments
Operational restructuring costs and asset impairments
Profit for the financial year
(Profit)/loss attributable to non-controlling interests
Profit attributable to Ordinary Shareholders
Weighted average number of Ordinary Shares
Number of issued Ordinary Shares
Effect of shares transferred into Employee Benefit Trust
Weighted average number of Ordinary Shares at the end of the year
2020
£’000
17,266
(14,708)
2,558
(188)
2,370
2019
£’000
57,911
—
57,911
329
58,240
2020
Number
2019
Number
200,052,157
(1,409,933)
200,052,157
(1,705,434)
198,642,224
198,346,723
Diluted earnings per share from total operations of 1.18 pence (2019: 29.14 pence) per share is calculated by dividing the profit for
the financial year, after adjusting for non-controlling interests, of £2,370,000 (2019: £58,240,000) by the weighted average number
of shares in issue during the period of 198,642,224 (2019: 198,346,723) plus potentially dilutive shares of 1,614,132 (2019: 1,496,678), which
totals 200,256,356 (2019: 199,843,401).
Diluted earnings per share before operational restructuring costs and asset impairments of 8.53 pence (2019: 29.14 pence)
per share is calculated by dividing the profit for the financial year, after adjusting for non-controlling interests, of £17,078,000
(2019: £58,240,000) by the weighted average number of shares in issue during the period of 198,642,224 (2019: 198,346,723) plus
potentially dilutive shares of 1,614,132 (2019: 1,496,678), which totals 200,256,356 (2019: 199,843,401).
Weighted average number of Ordinary Shares (diluted)
Weighted average number of Ordinary Shares
Potentially dilutive shares
Weighted average number of Ordinary Shares (diluted)
2020
Number
2019
Number
198,642,224
1,614,132
198,346,723
1,496,678
200,256,356
199,843,401
9 Dividends
After the balance sheet date, a final dividend of 4.30 pence was proposed by the Directors. This dividend has not been provided for
and there are no income tax consequences. Due to the impact of COVID-19, the Board withdrew the previously announced 2019
final and supplementary dividends. In addition, the Board did not propose an interim dividend during 2020.
2020 final
2019 interim
Pence per
qualifying share
4.30
4.70
2020
£’000
8,542
—
2019
£’000
—
9,323
Marshalls plc
marshalls.co.uk
121
Financial Statements
Notes to the Consolidated Financial Statements continued
9 Dividends continued
The following dividends were approved by the shareholders and recognised in the Financial Statements:
2019 interim
2018 supplementary
2018 final
Pence per
qualifying share
4.70
4.00
8.00
16.70
2020
£’000
—
—
—
—
2019
£’000
9,323
7,930
15,860
33,113
The Board recommends a 2020 final dividend of 4.30 pence per qualifying Ordinary Share (amounting to £(8,542,000), to be paid on
1 July 2021 to shareholders registered at the close of business on 4 June 2021.
10 Property, plant and equipment
Cost
At 1 January 2019
Exchange differences
Additions
Reclassified as right-of-use assets
Disposals
At 31 December 2019
At 1 January 2020
Exchange differences
Additions
Reclassified as held for sale
Reclassifications
Disposals
At 31 December 2020
Depreciation and impairment losses
At 1 January 2019
Depreciation charge for the year
Exchange differences
Reclassified as right-of-use assets
Disposals
At 31 December 2019
At 1 January 2020
Depreciation charge for the year
Exchange differences
Impairments
Reclassified as held for sale
Reclassifications
Disposals
At 31 December 2020
Net book value
At 1 January 2019
At 31 December 2019
At 31 December 2020
Land and
buildings
£’000
102,738
(472)
3,326
–
(167)
96,492
105,425
414
407
(1,114)
(523)
(8,117)
Quarries
£’000
Plant, machinery
and vehicles
£’000
Total
£’000
500,865
(851)
20,994
(2,474)
(2,201)
369,438
(379)
17,278
(2,072)
(2,034)
382,231
516,333
382,231
351
12,424
—
—
(6,327)
516,333
765
13,158
(1,114)
—
(14,497)
28,689
–
390
(402)
–
29,474
28,677
—
327
—
523
(53)
96,492
29,474
388,679
514,645
40,573
1,927
(15)
–
(167)
42,318
42,318
1,822
17
597
(664)
819
(408)
44,501
62,165
63,107
51,991
8,634
349
–
–
–
8,983
8,983
350
—
—
—
5
(53)
9,285
259,597
12,627
(294)
(777)
(1,675)
308,804
14,903
(309)
(777)
(1,842)
269,478
320,779
269,478
13,485
296
4,892
—
(824)
(5,869)
320,779
15,657
313
5,489
(664)
—
(6,330)
281,458
335,244
20,055
19,694
20,189
109,841
112,753
192,061
195,554
107,221
179,401
Mineral reserves and associated land have been separately disclosed under the heading of “Quarries”.
Impairments relate to fixed assets held at certain sites which have been closed during the year. The impairment represents the
assets being written down to fair value less cost to sell. In respect of the impairments of £5,489,000, the amount relating to the
Landscape Products operating segment is £3,446,000, with £2,043,000 relating to Other.
122
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Annual Report and Accounts 2020
Financial Statements
10 Property, plant and equipment continued
During the year ended 31 December 2020, land and buildings with a book value of £450,000 (2019: £nil) have been reclassified
as held for sale in accordance with IFRS 5 “Non-current Assets Held for Sale and Discontinued Operations”.
At 1 January 2019, the carrying amount of tangible fixed assets included £402,000 of land assets and £1,295,000 of plant and machinery held
under finance leases. These have been reclassified as right-of-use assets on transition to IFRS 16. Group cost of land and buildings and plant
and machinery includes £73,000 (2019: £178,000) and £4,495,000 (2019: £3,385,000) respectively for assets in the course of construction.
Capital commitments
2020
£’000
2019
£’000
Capital expenditure that has been contracted for but for which no provision has been made in the
Consolidated Financial Statements
3,496
3,868
Depreciation charge
The depreciation charge is recognised in the following line items in the Consolidated Income Statement:
Net operating costs (Note 3)
11 Right-of-use assets
Cost
New leases recognised
Reclassification of finance lease assets
At 1 January 2019
Additions
At 31 December 2019
At 1 January 2020
Additions
Disposals
Modifications
At 31 December 2020
Depreciation and impairment losses
At 1 January 2019
Depreciation charge for the year
At 31 December 2019
At 1 January 2020
Depreciation change for the year
Disposals
At 31 December 2020
Net book value
At 31 December 2019
At 31 December 2020
Depreciation charge
The depreciation charge is recognised in the following line items in the Consolidated Income Statement:
Net operating costs (Note 3)
Lease commitments
Lease commitments that have been contracted for but have not yet commenced
2020
£’000
15,657
Land and
buildings
£’000
Plant and
equipment
£’000
20,508
402
20,910
74
20,984
20,984
4,135
(188)
—
24,931
—
2,057
2,057
2,057
2,176
(188)
4,045
18,927
20,886
24,514
1,295
25,809
6,089
31,898
31,898
12,359
(3,428)
542
41,371
—
10,811
10,811
10,811
9,884
(3,428)
17,267
21,087
24,104
2020
£’000
12,060
2020
£’000
2,963
2019
£’000
14,903
Total
£’000
45,022
1,697
46,719
6,163
52,882
52,882
16,494
(3,616)
542
66,302
—
12,868
12,868
12,868
12,060
(3,616)
21,312
40,014
44,990
2019
£’000
12,868
2019
£’000
1,764
Marshalls plc
marshalls.co.uk
123
Financial Statements
Notes to the Consolidated Financial Statements continued
12 Intangible assets
Cost
At 1 January 2019
Additions
At 31 December 2019
At 1 January 2020
Additions
At 31 December 2020
Amortisation and impairment losses
At 1 January 2019
Amortisation for the year
At 31 December 2019
At 1 January 2020
Amortisation for the year
At 31 December 2020
Carrying amounts
At 1 January 2019
At 31 December 2019
At 31 December 2020
Goodwill
£’000
Customer
relationships
£’000
Supplier
relationships
£’000
and Development
costs
£’000
know-how
£’000
Software
£’000
Total
£’000
Patents,
trademarks
87,426
–
87,426
87,426
—
12,811
–
12,811
12,811
—
87,426
12,811
8,912
–
8,912
8,912
—
8,912
78,514
78,514
78,514
3,001
1,060
4,061
4,061
1,060
5,121
9,810
8,750
7,690
1,629
–
1,629
1,629
—
1,629
960
103
1,063
1,063
103
1,166
669
566
463
1,760
–
1,760
1,760
—
1,760
1,474
42
1,516
1,516
42
1,558
286
244
202
159
–
159
159
—
159
117
8
125
125
8
133
42
34
26
16,355
2,420
120,140
2,420
18,775
122,560
18,775
1,599
122,560
1,599
20,374
124,159
9,874
1,210
24,338
2,423
11,084
26,761
11,084
1,506
26,761
2,719
12,590
29,480
6,481
95,802
7,691
95,799
7,784
94,679
All goodwill has arisen from business combinations. The carrying amount of goodwill is allocated across cash generating units
(“CGUs”) and these CGUs are independent sources of income streams and represent the lowest level within the Group at which the
associated goodwill is monitored for management purposes. The Group tests goodwill annually for impairment, or more frequently
if there are indications that goodwill might be impaired. The recoverable amounts of the CGUs are determined from value-in-use
calculations and at both 31 December 2020 and 31 December 2019 the full amount of goodwill in the Group Balance Sheet related
to the Landscape Products CGU. These calculations use cash flow projections based on a combination of individual financial
three year forecasts, containing assumptions for revenue growth and operational gearing, and appropriate long-term growth rates
of 2.6 per cent. The long-term growth rate assumption reflects the long-term average growth rate for the UK economy. To prepare
value-in-use calculations, the cash flow forecasts are discounted back to present value using an appropriate market-based
discount rate. The pre-tax discount rate used to calculate the value in use was 10.5 per cent (2019: 7.4 per cent). The Directors have
reviewed the recoverable amounts of the CGUs, and considered possible impacts from the Brexit transition process and other
principal risks and uncertainties. The potential longer-term impacts of climate change continue to be taken into account as a key
focus area, along with market changes driven by advances in technology. The Directors do not consider that any reasonable
change in the assumptions would give rise to the need for further impairment.
Included in software additions is £1,414,000 (2019: £1,438,000) of own work capitalised.
Amortisation charge
The amortisation charge is recognised in the following line items in the Consolidated Income Statement:
Net operating costs (Note 3)
2020
£’000
2,719
2019
£’000
2,423
124
Marshalls plc
Annual Report and Accounts 2020
Financial Statements
13 Inventories
Raw materials and consumables
Finished goods and goods for resale
2020
£’000
21,335
68,447
89,782
2019
£’000
19,956
69,282
89,238
Inventories stated at a net realisable value less than cost at 31 December 2020 amounted to £3,553,000 (2019: £3,465,000). The write
down of inventories made during the year amounted to £1,036,000 (2019: £1,151,000). There were £167,000 of reversals of inventory
write downs made in previous years in 2020 (2019: £201,000).
14 Trade and other receivables
Trade receivables
Other receivables
Prepayments and accrued income
2020
£’000
73,290
13,408
9,044
95,742
2019
£’000
48,039
12,123
9,256
69,418
Included within other receivables is a reimbursement asset of £4,149,000 (2019: £5,142,000) which is held in escrow in relation to the
acquisitions made in prior years.
Ageing of trade receivables
Neither impaired nor past due
Not impaired but overdue by less than 30 days
Not impaired but overdue by between 30 and 60 days
Not impaired but overdue by more than 60 days
2020
£’000
37,604
29,295
2,634
3,757
73,290
2019
£’000
24,484
15,282
2,938
5,335
48,039
There were no receivables due after more than one year (2019: £nil). All amounts disclosed above are considered recoverable and
are disclosed net of a provision for expected credit losses of £899,000 (2019: £533,000). This provision has been determined using a
lifetime expected credit loss calculation. Assumptions made regarding the recoverability of balances have been determined with
reference to past default experiences in line with our policies and understanding. Balances are only written off if deemed
irrecoverable after all credit control procedures have been exhausted.
15 Cash and cash equivalents
Bank balances
Cash in hand
Cash and cash equivalents in the Consolidated Cash Flow Statement
16 Trade and other payables
Current liabilities
Trade payables
Taxation and social security
Other payables
Accruals
All trade payables are due in 6 months or less.
2020
£’000
103,690
17
103,707
2020
£’000
59,282
10,998
20,786
28,750
2019
£’000
53,242
16
53,258
2019
£’000
54,920
12,718
26,692
27,049
119,816
121,379
Marshalls plc
marshalls.co.uk
125
Financial Statements
Notes to the Consolidated Financial Statements continued
17 Loans
Current liabilities
Bank loans
Non-current liabilities
Bank loans
Bank loans
The bank loans are secured by intra-group guarantees with certain subsidiary undertakings.
18 Lease liabilities
Analysed as:
Amounts due for settlement within 12 months (shown under current liabilities)
Amounts due for settlement after 12 months
Less than 1 year
1 to 2 years
2 to 5 years
In more than 5 years
Minimum
lease
payments
£’000
11,579
8,605
12,350
28,598
61,132
2020
Interest
£’000
1,514
1,287
2,036
7,304
12,141
Principal
£’000
10,065
7,318
10,314
21,294
48,991
Minimum
lease
payments
£’000
10,835
8,322
12,469
21,225
52,851
2020
£’000
2019
£’000
20,000
20,000
110,282
51,274
2020
£’000
10,065
38,926
48,991
2019
Interest
£’000
1,099
1,476
2,080
6,236
10,891
2019
£’000
9,736
32,224
41,960
Principal
£’000
9,736
6,846
10,389
14,989
41,960
As at 31 December 2020, the total minimum lease payments (above) comprised property of £32,122,000 (2019: £30,323,000) and
plant, machinery and vehicles of £29,010,000 (2019: £22,528,000).
On 10 September 2020 the Group completed a sale and leaseback transaction in relation to its site in Rumst, Belgium. The net cash
proceeds of €12,481,000 have been used to pay down the inter-company indebtedness between Marshalls NV and Marshalls Mono
Limited. The net profit for the Group of £1,484,000 has been disclosed within the net gain on asset and property disposals (Note 3).
The lease has a 10-year term, with an option to extend after 5 years. It has currently not been assumed that the option to extend
will be exercised as the Directors do not believe that this is reasonably certain.
Certain leased properties have been sublet by the Group. Sublease payments of £239,003 (2019: £214,068) are expected to be
received during the following financial year. An amount of £225,786 (2019: £229,034) was recognised as income in the Consolidated
Income Statement within net operating costs in respect of subleases.
The Group does not face a significant liquidity risk with regard to its lease liabilities. For the year ended 31 December 2020, the
interest expense on lease liabilities amounted to £1,604,000 (2019: £1,342,000). Lease liabilities are calculated at the present value
of the lease payments that are not paid at the commencement date.
For the year ended 31 December 2020, the average effective borrowing rate was 2.8 per cent. Interest rates are fixed at the contract
date. All leases are on a fixed repayment basis and no arrangements have been entered into for contingent rental payments.
The vast majority of lease obligations are denominated in Sterling.
19 Financial instruments
The Group holds and uses financial instruments to finance its operations and to manage its interest rate, liquidity and currency risks.
The Group primarily finances its operations using share capital, retained profits and borrowings. The Group’s bank loans are
non-equity funding instruments, further details of which are set out on pages 129 and 130.
As directed by the Board, the Group does not engage in speculative activities using derivative financial instruments. Group cash
reserves are held centrally to take advantage of the most rewarding short-term investment opportunities. Forward foreign currency
contracts are used in the management of currency risk.
The main risks arising from the Group’s financial instruments are interest rate risk, liquidity risk, foreign currency risk and pricing risk.
The Board reviews and agrees the policies for managing each of these risks and they have remained unchanged since 2019.
126
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Annual Report and Accounts 2020
Financial Statements
19 Financial instruments continued
Capital management
The Group defines the capital that it manages as its total equity and net debt balances. The Group manages its capital structure
in light of current economic conditions and its strategic objectives to ensure that it is able to continue as a going concern whilst
maximising the return to stakeholders through the optimisation of debt and equity balances.
The Group manages its medium-term bank debt to ensure continuity of funding and the policy is to arrange funding ahead of
requirements and to maintain sufficient undrawn committed facilities. A key objective is to ensure compliance with the covenants set
out in the Group’s bank facility agreements.
From time to time the Group purchases its own shares on the market; the timing of these purchases depends on market prices.
Primarily the shares are intended to be used for issuing shares under the Group’s incentive schemes. Buy and sell decisions are
made on a specific transaction basis by the Board.
There has been no change in the objectives, policies or processes with regard to capital management during the years ended
31 December 2020 and 31 December 2019.
Financial risks
The Group has exposure to a number of financial risks through the conduct of its operations. Risk management is governed by the
Group’s operational policies, guidelines and authorisation procedures, which are outlined in the Strategic Report on pages 1 to 37.
The key financial risks resulting from financial instruments are liquidity risk, interest rate risk, credit risk, foreign currency risk and
pricing risk.
In managing interest rate and currency risks the Group aims to reduce the impact of short-term fluctuations on the Group’s
earnings. Over the longer term, however, permanent changes in foreign exchange and interest rates would have an impact on
consolidated earnings. For instance, a weakening of Pound Sterling on the foreign currency market would increase the cost of
certain raw materials, whereas a strengthening would have the opposite effect.
(a) Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Board is responsible for
ensuring that the Group has sufficient liquidity to meet its financial liabilities as they fall due and does so by monitoring cash flow
forecasts and budgets. Cash resources are largely and normally generated through operations and short-term flexibility is achieved
by bank facilities. Bank debt is raised centrally and the Group aims to maintain a balance between flexibility and continuity of
funding by having a range of maturities on its borrowings. Details of the Group borrowing facilities are provided on pages 129 and 130.
(b) Interest rate risk
The Group’s policy is to review regularly the terms of its available short-term borrowing facilities and to assess individually and
manage each long-term borrowing commitment accordingly. The Group borrows principally at floating rates of interest and, where
appropriate, uses interest rate swaps to generate the desired interest rate profile, thereby managing the Group’s exposure to
interest rate fluctuations.
Sensitivity analysis
A change of 100 basis points in interest rates at the balance sheet date would have decreased equity and profit by the amounts
shown below. The sensitivity analysis has been undertaken before the effect of tax. The sensitivity analysis of the Group’s exposure
to interest rate risk has been determined based on the change taking place at the beginning of the financial year and held
constant throughout the reporting period.
This analysis assumes that all other variables, in particular foreign currency rates, remain constant and considers the effect of
financial instruments with variable interest rates, financial instruments at fair value through profit or loss or available for sale with
fixed interest rates and the fixed rate element of interest rate swaps. The analysis was performed on the same basis for 2019.
Increase of 100 basis points
Decrease of 100 basis points
2020
£’000
(652)
652
2019
£’000
(753)
753
(c) Credit risk
Management has a credit policy in place and the exposure to credit risk is monitored on an ongoing basis. Credit evaluations are
performed on all customers requiring credit over a certain amount and, where appropriate, credit insurance cover is obtained. This
provides excellent intelligence to minimise the number and value of bad debts and ultimately provides compensation if bad debts
are incurred. An ageing of trade receivables is shown in Note 14 on page 125.
Investments are allowed only in liquid securities and only with counterparties that have a credit rating equal to or better than the
Group. Transactions involving derivative financial instruments are with counterparties with which the Group has a signed netting
agreement as well as sound credit ratings. Given their high credit ratings, management does not expect any counterparty to fail
to meet its obligations.
At the balance sheet date there were no significant concentrations of credit risk. The maximum exposure to credit risk is represented
by the carrying amount of each financial asset, including derivative financial instruments, in the balance sheet.
Marshalls plc
marshalls.co.uk
127
Financial Statements
Notes to the Consolidated Financial Statements continued
19 Financial instruments continued
Financial risks continued
(d) Foreign currency risk
The Group is exposed to foreign currency risk on sales and purchases that are denominated in a currency other than Sterling.
The currencies giving rise to this risk are primarily Euros and US Dollars.
The Group’s policy is to cover all significant foreign currency commitments in respect of trade receivables and trade payables by
using forward foreign currency contracts. All the forward exchange contracts have maturities of less than 1 year after the balance
sheet date. Where necessary, the forward exchange contracts are rolled over at maturity.
The Group classifies its forward exchange contracts as cash flow hedges and states them at fair value. The fair value of forward exchange
contracts is £28,000 liability (2019: £99,000 liability) and is adjusted against the hedging reserve on an ongoing basis. During the year
£71,000 (2019: £129,000) has been recognised in other comprehensive income for the year with £nil (2019: £nil) being reclassified from equity
to the Income Statement. At 31 December 2020 all outstanding forward exchange contracts had a maturity date within 6 months.
The foreign currency profile of monetary items was:
2020
2019
Sterling
£’000
Euro
£’000
US Dollar
£’000
AED
£’000
Total
£’000
Sterling
£’000
Euro
£’000
US Dollar
£’000
AED
£’000
Total
£’000
Cash and cash equivalents
Trade receivables
Secured bank loans
Lease liabilities
Trade payables
Derivative financial instruments
101,177
71,501
(122,400)
(42,742)
(50,294)
304
1,185
1,549
(7,882)
(6,249)
(8,509)
18
1,316
360
—
—
(477)
10
29 103,707 50,049
(120) 73,290 44,553
(54,500)
(41,658)
(45,588)
521
— (130,282)
— (48,991)
(2) (59,282)
332
—
839
3,206
(16,774)
(302)
(8,091)
90
2,344
280
–
–
(1,213)
9
26
53,258
– 48,039
– (71,274)
– (41,960)
(54,920)
620
(28)
–
Balance sheet exposure
(42,454)
(19,888)
1,209
(93)
(61,226)
(46,623)
(21,032)
1,420
(2)
(66,237)
A 10 per cent strengthening and weakening of the following currencies against the Pound Sterling at 31 December 2020 would have
increased/(decreased) equity and profit or loss by the amounts shown below. This calculation assumes that the change occurred at
the balance sheet date and had been applied to risk exposures existing at that date.
This analysis assumes that all other variables, in particular other exchange rates and interest rates, remain constant. The analysis
was performed on the same basis for 2019:
10 per cent strengthening of £ against €
10 per cent weakening of £ against €
10 per cent strengthening of £ against $
10 per cent weakening of £ against $
10 per cent strengthening of £ against Dhs
10 per cent weakening of £ against Dhs
2020
£’000
1,768
(1,446)
(107)
88
8
(7)
2019
£’000
1,843
(1,508)
(126)
103
–
–
(e) Pricing risks
Where appropriate the Group uses hedging instruments to mitigate the risks of significant forward price rises of fuel in relation to expected
consumption. The current hedges held are in place until 31 December 2021. The Group classifies its fuel hedges as cash flow hedges and
states them at fair value. The fair value of the fuel hedges is a £304,000 asset (2019: £521,000 asset) and is adjusted against the hedging
reserve on an ongoing basis. The period that the fuel hedges cover is matched against future expected purchases in order to fix the
impact on the Income Statement. During the year £1,455,000 (2019: £102,000) has been recognised in other comprehensive income, with
£1,238,000 (2019: £113,000) being reclassified from equity to the Income Statement. The fuel hedges have been fully effective in the period.
When combining fuel hedges and forward contracts this gives a total of £1,526,000 debit (2019: £231,000 credit) recognised in other
comprehensive income for the year with £1,238,000 credit (2019: £113,000 credit) being reclassified from equity to the Income Statement.
128
Marshalls plc
Annual Report and Accounts 2020
Financial Statements
19 Financial instruments continued
Financial risks continued
(f) Other risks
Further information about the Group’s strategic and financial risks is contained in the Strategic Report on pages 1 to 37.
Effective interest rates and maturity of liabilities
At 31 December 2020 there were £48,991,000 (2019: £41,960,000) of Group borrowings on a fixed rate. The interest rate profile of the
financial liabilities is set out below. The tables also disclose cash and cash equivalents in order to reconcile to net debt (Note 26).
31 December 2020
Cash and cash equivalents (Note 15)
Bank loans (Note 17)
Lease liabilities (Note 18)
31 December 2019
Cash and cash equivalents (Note 15)
Bank loans (Note 17)
Lease liabilities (Note 18)
Fixed or
variable
rate
Effective
interest rate
%
Total
£’000
6 months
or less
£’000
6 – 12
months
£’000
1 – 2
years
£’000
2 – 5
years
£’000
More than
5 years
£’000
Variable
Variable
Fixed
2.30
2.30
2.82
(103,707)
130,282
48,991
(103,707)
—
5,422
—
20,000
4,643
—
10,591
7,318
—
99,691
10,314
—
—
21,294
75,566
(98,285)
24,643
17,909
110,005
21,294
Fixed or
variable
rate
Effective
interest rate
%
Total
£’000
6 months
or less
£’000
6 – 12
months
£’000
1 – 2
years
£’000
2 – 5
years
£’000
More than
5 years
£’000
Variable
Variable
Fixed
1.81
1.81
2.97
(53,258)
71,274
41,960
(53,258)
–
4,363
–
20,000
5,373
–
39,405
6,846
–
11,869
10,389
–
–
14,989
59,976
(48,895)
25,373
46,251
22,258
14,989
At 31 December the undiscounted outstanding contractual payments (including interest) of financial liabilities were as follows:
31 December 2020
Bank loans
Trade and other payables
Lease liabilities
Derivative financial assets
31 December 2019
Bank loans
Trade and other payables
Lease liabilities
Derivative financial assets
Fixed or
variable
rate
Carrying
value
£’000
Total
£’000
6 months
or less
£’000
6 – 12
months
£’000
1 – 2
years
£’000
2 – 5
years
£’000
More than
5 years
£’000
Variable
Variable
Fixed
Fixed
130,282
110,039
48,991
(332)
134,044
110,039
61,132
(332)
710
110,039
6,169
(166)
20,637
—
5,410
(166)
11,809
—
8,605
—
100,888
—
12,350
—
—
—
28,598
—
288,980
304,883
116,752
25,881
20,414
113,238
28,598
Fixed or
variable
rate
Carrying
value
£’000
Total
£’000
6 months
or less
£’000
6 – 12
months
£’000
1 – 2 years
£’000
2 – 5 years
£’000
Variable
Variable
Fixed
Fixed
71,274
108,621
41,960
(620)
72,658
108,621
52,851
(620)
522
108,621
4,888
(487)
20,369
–
5,947
(133)
39,842
–
8,322
–
11,925
–
12,469
–
More than
5 years
£’000
–
–
21,225
–
221,235
233,510
113,544
26,183
48,164
24,394
21,225
Borrowing facilities
The total bank borrowing facilities at 31 December 2020 amounted to £255.0 million (2019: £155.0 million), of which £124.7 million
(2019: £83.7 million) remained unutilised. The undrawn facilities available at 31 December 2020, in respect of which all conditions
precedent had been met, were as follows:
Committed:
Expiring in more than 5 years
Expiring in more than 2 years but not more than 5 years
Expiring in 1 year or less
Uncommitted:
Expiring in 1 year or less
2020
£’000
—
9,718
90,000
25,000
124,718
2019
£’000
–
68,726
–
15,000
83,726
Marshalls plc
marshalls.co.uk
129
Financial Statements
Notes to the Consolidated Financial Statements continued
19 Financial instruments continued
Borrowing facilities continued
On 1 May 2020, the Group signed agreements with each of NatWest, Lloyds and HSBC for an additional £30 million, 12-month
committed revolving credit facility with each. These additional facilities comprise £90 million and significantly strengthen the
Group’s headroom. These additional facilities have not been drawn down and there is no current expectation that they will be
utilised before maturity. In addition, the seasonal on demand facility of £10 million was extended from 31 August 2020 to 31 January 2021.
Including these additional facilities, Marshalls has total bank facilities of £255 million, of which £230 million is committed. In addition,
the Group established a facility line with the COVID-19 Corporate Financing Facility (“CCFF”) with an issuer limit of £200 million. This
has not been utilised. The Group’s committed bank facilities are all revolving credit facilities with interest charged at variable rates
based on LIBOR. The Group’s bank facilities continue to be aligned with the current strategy to ensure that headroom against
available facilities remains at appropriate levels. On 9 September 2020, the Group signed an agreement with HSBC to extend its
existing four year, £35 million facility for a further year until August 2024. The maturity profile of borrowing facilities is structured to
provide balanced, committed and phased medium-term debt. The Group’s on-demand overdraft facility is reviewed on an annual
basis and the current arrangements were renewed and signed on 9 September 2020.
The current facilities are set out as follows:
Committed facilities
Q3: 2024
Q1: 2024
Q3: 2023
Q2: 2023
Q4: 2022
Q3: 2021
Q2: 2021
On-demand facilities
Available all year
Seasonal (February to August inclusive)
Facility
£’000
35,000
25,000
20,000
20,000
20,000
20,000
90,000
15,000
10,000
Cumulative
facility
£’000
35,000
60,000
80,000
100,000
120,000
140,000
230,000
245,000
255,000
Fair values of financial assets and financial liabilities
A comparison by category of the book values and fair values of the financial assets and liabilities of the Group at 31 December 2020
is shown below:
Trade and other receivables
Cash and cash equivalents
Bank loans
Lease liabilities
Trade payables, other payables and provisions
Interest rate swaps, forward contracts and fuel hedges
Contingent consideration
Financial instrument assets and liabilities – net
Non-financial instrument assets and liabilities – net
2020
2019
Book amount
£’000
Fair value
£’000
Book amount
£’000
86,699
103,707
(130,282)
(48,991)
(110,039)
332
(1,800)
(100,374)
388,222
287,848
86,699
103,707
(126,010)
(61,132)
(110,039)
332
(1,800)
60,162
53,258
(71,274)
(41,960)
(108,621)
620
(2,420)
(110,235)
406,001
295,766
Fair value
£’000
60,162
53,258
(69,936)
(52,851)
(108,621)
620
(2,420)
Estimation of fair values
The following summarises the major methods and assumptions used in estimating the fair values of financial instruments reflected
in the table. Other than contingent consideration, which uses a level 3 basis, all use level 2 valuation techniques.
(a) Derivatives
Derivative contracts are either marked to market using listed market prices or by discounting the contractual forward price at the
relevant rate and deducting the current spot rate. For interest rate swaps, broker quotes are used.
(b) Interest-bearing loans and borrowings
Fair value is calculated based on the expected future principal and interest cash flows discounted at the market rate of interest
at the balance sheet date.
(c) Finance lease liabilities
The fair value is estimated as the present value of future cash flows, discounted at market interest rates for homogeneous lease
agreements. The estimated fair values reflect changes in interest rates.
130
Marshalls plc
Annual Report and Accounts 2020
Financial Statements
19 Financial instruments continued
Borrowing facilities continued
(d) Trade and other receivables/payables
For receivables/payables with a remaining life of less than 1 year, the notional amount is deemed to reflect the fair value. All other
receivables/payables are discounted to determine the fair value.
(e) Contingent consideration
The basis of calculating contingent consideration is set out in Note 25 on page 137.
(f) Fair value hierarchy
The table below analyses financial instruments, measured at fair value, into a fair value hierarchy based on the valuation techniques
used to determine fair value.
• Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
• Level 2: inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly
(i.e. as prices) or indirectly (i.e. derived from prices).
• Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
31 December 2020
Derivative financial assets
31 December 2019
Derivative financial assets
Level 1
£’000
—
–
Level 2
£’000
332
620
Level 3
£’000
—
–
Total
£’000
332
620
20 Employee benefits
The Company sponsors a funded defined benefit pension scheme in the UK (the “Scheme”). The Scheme is administered within
a trust which is legally separate from the Company. The Trustee Board is appointed by both the Company and the Scheme’s
membership and acts in the interest of the Scheme and all relevant stakeholders, including the members and the Company.
The Trustee is also responsible for the investment of the Scheme’s assets.
The defined benefit section of the Scheme provides pension and lump sums to members on retirement and to dependants on
death. The defined benefit section closed to future accrual of benefits on 30 June 2006 with the active members becoming entitled
to a deferred pension. Members no longer pay contributions to the defined benefit section. Company contributions to the defined
benefit section after this date are used to fund any deficit in the Scheme and the expenses associated with administering the
Scheme, as determined by regular actuarial valuations.
The 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 defined benefit section of the Scheme poses a number of risks to the Company, for example longevity risk, investment risk,
interest rate risk, inflation risk and salary risk. The Trustee is aware of these risks and uses various techniques to control them. The
Trustee has a number of internal control policies, including a Risk Register, which are in place to manage and monitor the various
risks it faces. The Trustee’s investment strategy incorporates the use of liability-driven investments (“LDIs”) to minimise sensitivity
of the actuarial funding position to movements in interest rates and inflation rates.
The defined benefit section of the Scheme is subject to regular actuarial valuations, which are usually carried out every 3 years.
The next actuarial valuation is expected to be carried out with an effective date of 5 April 2021. These actuarial valuations are
carried out in accordance with the requirements of the Pensions Act 2004 and so include deliberate margins for prudence.
This contrasts with these accounting disclosures which are determined using best estimate assumptions.
A formal actuarial valuation was carried out as at 5 April 2018. The results of that valuation have been projected to 31 December 2020
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:
Present value of Scheme liabilities
Fair value of Scheme assets
2020
£’000
(399,938)
402,664
2019
£’000
(353,136)
368,857
2018
£’000
(330,222)
343,738
Net amount recognised at the year end (before any adjustments for deferred tax)
2,726
15,721
13,516
Marshalls plc
marshalls.co.uk
131
Financial Statements
Notes to the Consolidated Financial Statements continued
20 Employee benefits continued
The current and past service costs, settlements and curtailments, together with the net interest expense for the year, are included in
the employee benefits expense in the Consolidated Statement of Comprehensive Income. Remeasurements of the net defined
benefit surplus are included in other comprehensive income.
2020
£’000
254
(40,151)
52,491
1,209
(808)
12,741
12,995
2020
£’000
1.40%
2.85%
2.20%
n/a
2.20%
2019
£’000
642
(33,362)
38,367
(13,017)
5,165
(2,847)
(2,205)
2019
£’000
2.10%
2.95%
2.05%
n/a
2.10%
2.20%
3.25%
1.95%
0%
80%
Same as post-
retirement
S2PXA tables
110%
Year of birth
CMI_2019
1.0%
S2PXA tables
110%
Year of birth
CMI_2019
1.0%
2.10%
3.20%
1.90%
0%
80%
Same as post-
retirement
S2PXA tables
110%
Year of birth
CMI_2018
1.0%
S2PXA tables
110%
Year of birth
CMI_2018
1.0%
85.7
87.7
86.7
88.9
85.6
87.5
86.6
88.7
Net interest expense recognised in the Consolidated Income Statement
Remeasurements of the net liability:
Return on scheme assets (excluding amount included in interest expense)
Loss arising from changes in financial assumptions
Loss/(gain) arising from changes in demographic assumptions
Experience (gain)/loss
Debit/(credit) recorded in other comprehensive income
Total defined benefit debit/(credit)
The principal actuarial assumptions used were:
Liability discount rate
Inflation assumption – RPI
Inflation assumption – CPI
Rate of increase in salaries
Revaluation of deferred pensions
Increases for pensions in payment:
CPI pension increases (maximum 5% p.a.)
CPI pension increases (maximum 5% p.a., minimum 3% p.a.)
CPI pension increases (maximum 3% p.a.)
Proportion of employees opting for early retirement
Proportion of employees commuting pension for cash
Mortality assumption – before retirement
Mortality assumption – after retirement (males)
Loading
Projection basis
Mortality assumption – after retirement (females)
Loading
Projection basis
Future expected lifetime of current pensioner at age 65:
Male aged 65 at year end
Female aged 65 at year end
Future expected lifetime of future pensioner at age 65:
Male aged 45 at year end
Female aged 45 at year end
132
Marshalls plc
Annual Report and Accounts 2020
Financial Statements
20 Employee benefits continued
Changes in the present value of assets over the year
Fair value of assets at the start of the year
Interest income
Return on assets (excluding amount included in net interest expense)
Benefits paid
Administration expenses
Fair value of assets at the end of the year
Actual return on assets over the year
Changes in the present value of liabilities over the year
Liabilities at the start of the year
Past service cost
Interest cost
Remeasurement losses/(gains):
Actuarial losses arising from changes in financial assumptions
Actuarial losses/(gains) arising from changes in demographic assumptions
Experience (gain)/loss
Benefits paid
2020
£’000
368,857
7,600
40,151
(13,366)
(578)
2019
£’000
343,738
9,228
33,362
(16,457)
(1,014)
402,664
368,857
47,751
42,590
2020
£’000
353,136
—
7,276
52,491
1,209
(808)
(13,366)
2019
£’000
330,222
–
8,856
38,367
(13,017)
5,165
(16,457)
Liabilities at the end of the year
399,938
353,136
The split of the Scheme’s liabilities by category of membership is as follows:
Deferred pensioners
Pensioners in payment
Average duration of the Scheme’s liabilities at the end of the year (in years)
The major categories of Scheme assets are as follows:
Return-seeking assets
UK equities
Overseas equities
Other equity type investments
Total return-seeking assets
Other
Insured pensioners
Cash
Property
Liability-driven investments and bonds
Total matching assets
Total market value of assets
2020
£’000
222,830
177,108
399,938
18
2020
£’000
1,850
40,199
34,038
76,087
769
4,384
34,110
287,314
326,577
402,664
2019
£’000
185,341
167,795
353,136
18
2019
£’000
2,019
35,172
34,796
71,987
679
5,161
—
291,030
296,870
368,857
The return-seeking assets and LDI assets have quoted prices in active markets. The valuation of the insured pensions has been
taken as the value of the corresponding liabilities assessed using the assumptions set out above.
The Scheme has no investments in the Company or in property occupied by the Company.
The Company expects to pay no contributions to the defined benefit section of the Scheme during the year ended 31 December 2021.
Marshalls plc
marshalls.co.uk
133
Financial Statements
Notes to the Consolidated Financial Statements continued
20 Employee benefits continued
Sensitivity of the liability value to changes in the principal assumptions
If the discount rate were 0.5 per cent higher/(lower), the defined benefit section Scheme liabilities would decrease by approximately
£37.2 million (increase by £37.2 million) if all the other assumptions remained unchanged.
If the inflation assumption were 0.1 per cent higher/(lower), the Scheme liabilities would increase by £2.8million (decrease by £2.8 million).
In this calculation all assumptions related to the inflation assumption have been appropriately adjusted, that is salary, the deferred
pension and pension in payment increases. The other assumptions remain unchanged.
If life expectancies were to increase/(decrease) by 1 year, the Scheme liabilities would increase by £19.8 million (decrease by
£19.8 million) if all the other assumptions remained unchanged.
Management Incentive Plan (“MIP”)
Share-based payment awards have been made during the year in accordance with the rules of the MIP. Full details of the
performance criteria and the basis of operation of the MIP are set out in the Remuneration Committee Report on pages 70 to 89.
Equity settled awards are settled by physical delivery of shares. The following equity settled awards have been granted:
Equity settled awards granted to Directors of Marshalls plc
Equity settled awards granted to other employees
Equity settled awards granted to Directors of Marshalls plc
Equity settled awards granted to other employees
Equity settled awards granted to Directors of Marshalls plc
Equity settled awards granted to other employees
Equity settled awards granted to Directors of Marshalls plc
Equity settled awards granted to other employees
Analysis of closing balance (deferred into shares):
Equity settled awards granted to Directors of Marshalls plc
Equity settled awards granted to other employees
Outstanding at 1 January
Granted
Change in value of notional shares
Lapsed
Element released
Outstanding at 31 December
Number of
instruments
193,939
187,634
223,795
254,988
161,586
206,495
—
—
1,228,437
£’000
945
929
1,172
1,351
1,261
1,603
—
—
7,261
Plan year
Vesting date
2017
2017
2018
2018
2019
2019
2020
2020
March 2021
March 2021
March 2022
March 2022
March 2023
March 2023
March 2024
March 2024
2020
2019
£’000
3,378
3,883
7,261
Shares
579,320
649,117
1,228,437
£’000
4,213
5,148
9,361
2020
2019
Value
£’000
9,361
—
(361)
(249)
(1,490)
Number of
options
1,767,118
—
—
(39,469)
(499,212)
Value
£’000
8,240
3,189
1,602
(168)
(3,502)
Shares
814,861
952,257
1,767,118
Number of
options
2,166,851
388,240
195,052
(54,585)
(928,440)
7,261
1,228,437
9,361
1,767,118
The total expenses recognised for the period arising from share-based payments were as follows:
Awards granted and total expense recognised as employee costs
2020
£’000
3,679
2019
£’000
3,846
Further details in relation to the Directors are set out in the Remuneration Committee Report on pages 70 to 89. Included in the total
expense of £3,679,000 (2019: £3,846,000) is an amount of £1,980,000 (2019: £1,696,000) settled as interim cash payments under the
terms of the Scheme and which has been included within wages and salaries in Note 3.
Employee Bonus Share Plan
A Bonus Share Plan was approved by shareholders in May 2015 under which a number of senior management employees were
granted performance related bonuses with an element of this bonus being in the form of shares. The bonus performance criteria
are the same as those applicable to the MIP awards. The bonus shares take the form of nil-cost options to acquire shares at the end
of a 3-year vesting period from the date of grant, and vesting is conditional on continued employment at the end of the vesting
period. Awards are made to participants following publication of the Group’s year-end results. In addition, special Bonus Share
Awards were granted to qualifying CPM employees following its acquisition on 19 October 2017 and to qualifying Edenhall employees
following its acquisition on 11 December 2018. These took the form of nil-cost options to acquire Ordinary Shares in Marshalls plc
at the end of a 3-year period. Awards outstanding at 31 December 2020 were over 420,633 shares (31 December 2019: 840,096).
The total expenses recognised for the year arising from share-based payments were £931,000 (2019: £874,000).
134
Marshalls plc
Annual Report and Accounts 2020
Financial Statements
20 Employee benefits continued
Sensitivity of the liability value to changes in the principal assumptions continued
All-employee Sharesave (“SAYE”) scheme
On 5 October 2015 options were granted over up to 1,000,000 shares to employees who had subscribed to the SAYE scheme. The
options were exercisable by relevant employees after a period of 3 years and during 2019 58,724 Ordinary Shares were issued to
those employees whose options had reached maturity. During 2019 a further 18,741 shares were transferred from the Employee
Benefit Trust.
Employee profit sharing scheme
At 31 December 2020 the scheme held 42,287 (2019: 42,287) Ordinary Shares in the Company.
21 Provisions
At 1 January 2019
Utilised in the year
Additional provisions made in the period
Unused amounts reversed during the period
At 31 December 2019
At 1 January 2020
Additional provisions made in the period
At 31 December 2020
Legal and
regulatory
provisions
£’000
7,935
(5,086)
800
(1,000)
2,649
2,649
500
3,149
Provisions comprise the estimated cost of settlement of certain legal and regulatory matters relating to the CPM business acquired
on 19 October 2017 and the Edenhall business acquired on 11 December 2018, and reflect the Directors’ estimate of the likely outflow
from settlement of these matters.
22 Deferred taxation
Recognised deferred taxation assets and liabilities
Property, plant and equipment
Intangible assets
Inventories
Employee benefits
Equity settled share-based payments
IFRS 16 transition adjustment
Other items
Tax assets/(liabilities)
Assets
Liabilities
2020
£’000
—
—
—
—
2,241
379
—
2,620
2019
£’000
–
–
–
–
2,550
397
–
2,947
2020
£’000
(12,506)
(1,594)
(499)
(519)
—
—
(1,948)
(17,066)
2019
£’000
(11,321)
(1,909)
(337)
(2,674)
–
–
(2,066)
(18,307)
The deferred taxation liability at 31 December 2020 has been calculated at 19 per cent based on the rate at which the deferred tax
is expected to unwind in the future using rates enacted at the balance sheet date.
The deferred taxation liability of £519,000 (2019: £2,674,000) in relation to employee benefits is in respect of the net surplus for
the defined benefit obligations of £2,726,000 (2019: £15,721,000) (Note 20) calculated at 19 per cent (2019: 17 per cent).
Deferred tax assets on capital losses and overseas trading losses have not been recognised due to uncertainty around the
future use of the losses.
Deferred taxation liabilities represent sums that might become payable as tax in future years as a result of transactions that have
occurred in the current year. The explanation as to why such liabilities may arise is included in the notes to the tax reconciliation (Note 7).
The deferred tax liabilities disclosed in the year ended 31 December 2020 include the deferred tax relating to the Group’s pension
scheme assets. Deferred tax assets on capital losses and overseas trading losses have not been recognised due to uncertainty
around the future use of the losses.
Marshalls plc
marshalls.co.uk
135
Financial Statements
Notes to the Consolidated Financial Statements continued
22 Deferred taxation continued
Movement in temporary differences
Year ended 31 December 2020
Property, plant and equipment
Intangible assets
Inventories
Employee benefits
Equity settled share-based payments
IFRS 16 transition adjustment
Other items
Year ended 31 December 2019
Property, plant and equipment
Intangible assets
Inventories
Employee benefits
Equity settled share-based payments
IFRS 16 transition adjustment
Other items
1 January
2020
£’000
(11,321)
(1,909)
(337)
(2,674)
2,550
397
(2,066)
(15,360)
1 January
2019
£’000
(10,924)
(1,985)
(337)
(2,299)
1,406
—
(2,008)
(16,147)
Recognised
in income
£’000
Recognised
in other
comprehensive
income
£’000
Recognised
in statement
of changes
in equity
£’000
(1,185)
315
(162)
48
(205)
(18)
76
(1,131)
—
—
—
2,107
—
—
42
2,149
—
—
—
—
(104)
—
—
(104)
Recognised
in income
£’000
Recognised
in other
comprehensive
income
£’000
Recognised
in statement
of changes
in equity
£’000
(397)
76
—
109
(75)
(18)
—
(305)
—
—
—
(484)
—
—
(58)
(542)
—
—
—
—
1,219
415
—
1,634
31 December
2020
£’000
(12,506)
(1,594)
(499)
(519)
2,241
379
(1,948)
(14,446)
31 December
2019
£’000
(11,321)
(1,909)
(337)
(2,674)
2,550
397
(2,066)
(15,360)
The deferred tax balances on short-term timing differences are expected to reverse within 1 to 3 years.
Based on the current investment programme of the Group and assuming that current rates of capital allowances on fixed asset
expenditure continue into the future, there is little prospect of any significant part of the deferred taxation liability of the Company
becoming payable over the next three years. It is not realistic to make any projection after a three-year period.
On 3 March 2021 the Chancellor of the Exchequer announced that legislation will be introduced in the Finance Bill 2021 to set the
main rate of corporation tax at 25 per cent for Financial Year 2023. This change will impact on the Group’s future tax charges and
the deferred tax balances recognised. The Company has not yet been able to undertake a full analysis of the changes to
accurately quantify the possible impact.
23 Capital and reserves
Called-up share capital
As at 31 December 2020, the authorised, issued and fully paid up Ordinary Share Capital was as follows:
Authorised
2020 and 2019
Ordinary Shares
At 1 January
Issued in year
Number
300,000,000
—
Value
£’000
75,000
—
2020
Number
200,052,157
—
Issued and paid up
2020 nominal
value
£’000
2019
Number
50,013
—
199,993,433
58,724
At 31 December
300,000,000
75,000
200,052,157
50,013
200,052,157
2019 nominal
value
£’000
49,998
15
50,013
On 5 October 2015 options were granted up to 1,000,000 shares to employees who had subscribed to the SAYE scheme (Note 20).
The options were exercisable by relevant employees after a period of three years and consequently during the year 31 December
2019 58,724 Ordinary Shares were issued to those employees whose options had reached maturity.
Consolidation reserve
On 8 July 2004 Marshalls plc was introduced as the new holding company of the Group by way of a court-approved Scheme of
Arrangement under Section 425 of the Companies Act 1985. The restructuring was accounted for as a capital reorganisation and
accounting principles were applied as if the Company had always been the holding company of the Group. The difference between
the aggregate nominal value of the new shares issued by the Company and the called-up share capital, capital redemption reserve
and share premium account of Marshalls Group plc (the previous holding company) was transferred to a consolidation reserve.
136
Marshalls plc
Annual Report and Accounts 2020
Financial Statements
23 Capital and reserves continued
Hedging reserve
This represents the gains and losses arising on derivatives used for cash flow hedging, principally from the Group’s interest rate
swaps, energy price contracts and forward exchange contracts.
Dividends
After the balance sheet date, the following dividends were proposed by the Directors. The dividends have not been provided for
and there were no income tax consequences.
4.30 pence final dividend per Ordinary Share
24 Non-controlling interests
At 1 January
Share of profit/(loss) for the year
Foreign currency transaction differences
At 31 December
2020
£’000
8,542
2020
£’000
723
188
39
950
2019
£’000
—
2019
£’000
1,094
(329)
(42)
723
25 Acquisition of subsidiary undertaking in previous accounting periods
On 11 December 2018, Marshalls Mono Limited acquired 100 per cent of the issued share capital of Edenhall Holdings Limited,
a concrete brick manufacturer. The initial cash consideration paid to the vendors was £10,759,000 and, in addition, a further
£1,000,000 was paid into an escrow account in relation to certain ongoing legal and regulatory matters identified during the course
of due diligence carried out prior to concluding the acquisition. On 21 December 2020, all outstanding issues were agreed with the
principal vendor shareholders and £853,000 was reimbursed from the amounts held in escrow. In addition, £134,000 was paid to
certain former shareholders, with all escrow monies being released. The reimbursement asset of £1,000,000 that was recognised
within other debtors was consequently distributed.
In addition, deferred consideration of £1,900,000 was also paid to the principal vendor shareholders on 21 December 2020, along
with an agreed element of the outstanding potential additional consideration. Additional amounts remain payable to other former
shareholders and employees, dependent on the achievement of performance targets in the periods post-acquisition. These
post-acquisition performance periods are up to 3 years in duration and will be settled in cash on their payment date on achieving
the relevant targets. The range of these additional payments are estimated to be between £nil and £1,800,000. The Group
continues to record a creditor for these contingent payments, representing the fair value at the year-end date.
26 Analysis of net debt
Cash at bank and in hand
Debt due within 1 year
Debt due after 1 year
Lease liabilities
1 January
2020
£’000
53,258
(20,000)
(51,274)
(41,960)
(59,976)
Cash flow
£’000
50,481
—
(57,891)
13,780
6,370
New leases
£’000
—
—
—
(20,811)
(20,811)
* Other changes include foreign currency movements on cash and loan balances.
Reconciliation of net cash flow to movement in net debt
Net increase in cash equivalents
Leases recognised on adoption of IFRS 16
Cash (inflow)/outflow from (increase)/decrease in bank borrowings
Cash outflow from lease repayments
New leases entered into
Effect of exchange rate fluctuations
Movement in net debt in the year
Net debt at 1 January
Net debt at 31 December
Other
changes *
£’000
(32)
—
(1,117)
—
(1,149)
2020
£’000
50,481
—
(57,891)
13,780
(20,811)
(1,149)
(15,590)
(59,976)
(75,566)
31 December
2020
£’000
103,707
(20,000)
(110,282)
(48,991)
(75,566)
2019
£’000
7,649
(45,579)
10,927
12,723
(8,163)
(100)
(22,543)
(37,433)
(59,976)
Marshalls plc
marshalls.co.uk
137
Financial Statements
Notes to the Consolidated Financial Statements continued
27 Changes in liabilities arising from financing activities
The table below details changes in the Group’s liabilities arising from financing activities, including both cash and non-cash
changes. Liabilities arising from financing activities are those for which cash flows were, or future cash flows will be, classified in the
Group’s Consolidated Cash Flow Statement as cash flows from financing activities.
Bank loans (Note 17)
Lease liabilities (Note 18)
Total liabilities from financing activities
Bank overdrafts (Note 16)
Bank loans (Note 16)
Finance lease liabilities (Note 16)
Lease liabilities (Note 17)
Total liabilities from financing activities
1 January
2020
£’000
(71,274)
(41,960)
(113,234)
1 January
2019
£’000
(2,673)
(79,528)
(941)
—
(83,142)
Financing
cash flows *
£’000
(57,891)
13,780
(44,111)
Financing
cash flows *
£’000
2,673
8,254
—
12,723
23,650
Other changes **
£’000
(1,117)
(20,811)
(21,928)
Other changes **
£’000
—
—
—
(8,163)
(8,163)
Non-cash changes
IFRS 16
transition
£’000
—
—
—
Non-cash changes
IFRS 16
transition
£’000
—
—
941
(46,520)
31 December
2020
£’000
(130,282)
(48,991)
(179,273)
31 December
2019
£’000
—
(71,274)
—
(41,960)
(45,579)
(113,234)
*
The cash flows from bank loans, overdrafts and other borrowings make up the net amount of proceeds from borrowings and repayments of borrowings in the Consolidated Cash
Flow Statement.
** New leases and foreign currency movements.
28 Contingent liabilities
Royal Bank of Scotland plc has issued, on behalf of Marshalls plc, the following irrevocable letters of credit relating to the Group’s
cap on self-insurance for employer’s liability and vehicle insurance:
Beneficiary
M S Amlin Limited
HDI Global SE — UK
AIOI Nissay Dowa Insurance UK Limited
Aviva Insurance Limited
M S Amlin Limited
Amount
£540,000
£300,000
£400,000
£100,000
£340,000
Period
Purpose
23 Dec 2011 to 30 Oct 2021
8 Dec 2020 to 30 Oct 2021
8 Dec 2020 to 30 Oct 2021
19 Mar 2014 to 29 Oct 2021
30 Oct 2016 to 30 Oct 2021
Employer’s liability
Employer’s liability
Vehicle insurance
Vehicle insurance
Vehicle insurance
29 Related parties
Identity of related parties
The Group has a related party relationship with its Directors.
Transactions with key management personnel
Other than the Directors, there are no senior managers in the Group who are relevant for establishing that Marshalls plc has
the appropriate expertise and experience for the management of its business.
Directors of the Company and their immediate relatives control 0.2915 per cent (2019: 0.2428 per cent) of the voting shares
of the Company.
In addition to their salaries and pension allowances, the Group also provides non-cash benefits to Directors. Further details
in relation to Directors are disclosed in the Remuneration Committee Report on pages 70 to 89.
138
Marshalls plc
Annual Report and Accounts 2020
Financial Statements
30 Accounting estimates and judgements
Management discussed with the Audit Committee the development, selection and disclosure of the Group’s critical accounting
policies and estimates and the application of these policies and estimates. The accounting policies are set out in Note 1 on pages
107 to 116. As stated in the accounting policies, revenue is disclosed net of rebates. Whilst the Directors do not regard the
determination of accruals for rebates as a key area of estimation uncertainty, the estimation of appropriate accruals for rebates
requires commercial assessment. Note 13 contains details of the Group’s inventory. Whilst not considered by the Directors to be a key
source of estimation uncertainty, the carrying value of the Group’s finished goods inventory has been reviewed using commercial
judgement with regard to the assessment of the appropriate level of provisioning against inventory obsolescence and for net
realisable value. The Directors consider the following to be the only key source of estimation uncertainty:
• Note 20 contains information about the principal actuarial assumptions used in the determination of defined benefit pension
obligations. These key assumptions include discount rates, the expected return on net assets, inflation rates and mortality rates
and have been determined following advice received from an independent qualified actuary. Sensitivity analysis is disclosed in
Note 20 on page 134.
The Directors have concluded that critical accounting judgements, apart from those involving estimations, have been made in relation
to the following issue during the preparation of the Financial Statements:
• Operational restructuring costs and asset impairments have been disclosed separately on the face of the Income Statement due
to their scale and exceptional nature and to provide a better understanding of the Group’s results. The determination of whether
items merit treatment as exceptional is a matter of judgement. Operational restructuring costs and asset impairments comprise costs
associated with restructuring programmes and the closure of certain sites, including redundancy payments and asset impairments.
Marshalls plc
marshalls.co.uk
139
Financial Statements Parent Company Statement of Changes in Equity
for the year ended 31 December 2020
Current year
At 1 January 2020
Total comprehensive expense for the year
Loss for the financial year
Total comprehensive expense for the year
Transactions with owners, recorded directly
in equity
Contributions by and distributions to owners
Share-based payments
Deferred tax on share-based payments
Dividends to equity shareholders
Shares issued
Purchase of own shares
Disposal of own shares
Total contributions by and distributions to owners
Total transactions with owners of the Company
Share
capital
£’000
Share
premium
account
£’000
Own
shares
£’000
Capital
redemption
reserve
£’000
Equity
reserve
£’000
Retained
earnings
£’000
Total
equity
£’000
50,013
24,482
(1,391)
75,394
10,780
202,285
361,563
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(2,705)
3,290
585
585
—
—
—
—
—
—
—
—
—
—
—
—
(4,760)
(4,760)
(4,760)
(4,760)
2,199
31
—
—
—
—
799
—
—
—
—
(3,290)
2,998
31
—
—
(2,705)
—
2,230
(2,491)
324
2,230
(7,251)
(4,436)
At 31 December 2020
50,013
24,482
(806)
75,394
13,010
195,034
357,127
There were no items of other comprehensive income/(expense) in the year other than the profit for the financial year recorded above.
Prior year
At 1 January 2019
Total comprehensive income for the year
Profit for the financial year
Total comprehensive income for the year
Transactions with owners, recorded directly
in equity
Contributions by and distributions to owners
Share-based payments
Deferred tax on share-based payments
Dividends to equity shareholders
Shares issued
Purchase of own shares
Disposal of own shares
Total contributions by and distributions to owners
Total transactions with owners of the Company
Share
capital
£’000
Share
premium
account
£’000
Own
shares
£’000
Capital
redemption
reserve
£’000
Equity
reserve
£’000
Retained
earnings
£’000
Total
equity
£’000
49,998
24,326
(888)
75,394
9,304
44,594
202,728
–
–
–
–
–
15
–
–
15
15
–
–
–
–
–
156
–
–
156
156
–
–
–
–
–
54
(1,470)
913
(503)
(503)
–
–
–
–
–
–
–
–
–
–
–
–
190,796
190,796
190,796
190,796
2,013
(537)
–
–
–
–
1,011
–
(33,203)
–
–
(913)
3,024
(537)
(33,203)
225
(1,470)
–
1,476
(33,105)
(31,961)
1,476
157,691
158,835
At 31 December 2019
50,013
24,482
(1,391)
75,394
10,780
202,285
361,563
There were no items of other comprehensive income/(expense) in the year other than the loss for the financial year recorded above.
140
Marshalls plc
Annual Report and Accounts 2020
Financial Statements
Company Balance Sheet
at 31 December 2020
Fixed assets
Investments
Deferred taxation assets
Current assets
Debtors
Net current assets
Net assets
Capital and reserves
Called-up share capital
Share premium account
Own shares
Capital redemption reserve
Equity reserve
Profit and loss account
Equity shareholders’ funds
Notes
2020
£’000
2019
£’000
34
35
36
37
351,352
1,058
352,410
4,717
4,717
349,153
1,464
350,617
10,946
10,946
357,127
361,563
50,013
24,482
(806)
75,394
13,010
195,034
50,013
24,482
(1,391)
75,394
10,780
202,285
357,127
361,563
The Company reported a loss for the financial year ended 31 December 2020 of £4,760,000 (2019: profit of £190,796,000).
Approved at a Directors’ meeting on 11 March 2021.
On behalf of the Board:
Martyn Coffey
Chief Executive
Jack Clarke
Finance Director
The Notes on pages 142 to 147 form part of these Company Financial Statements.
Marshalls plc
marshalls.co.uk
141
Financial Statements
Notes to the Company Financial Statements
31 Accounting policies
The following paragraphs summarise the main accounting policies of the Company, which have been applied consistently in
dealing with items which are considered material in relation to the Company’s Financial Statements. The Company is exempt from
the requirement to give its own disclosures as the entity forms part of the Consolidated Financial Statements of Marshalls plc, which
has included disclosures under IFRS 7 “Financial Instruments: Disclosures”.
(a) Authorisation of Financial Statements and Statement of Compliance with FRS 101
The Parent Company Financial Statements of Marshalls plc for the year ended 31 December 2020 were authorised for issue by
the Board of Directors on 11 March 2021. Marshalls plc is a public limited company that is incorporated and domiciled and has its
registered office in England and Wales. The Company’s Ordinary Shares are publicly traded on the London Stock Exchange and
the Company is not under the control of any single shareholder.
These Financial Statements were prepared in accordance with the historical cost basis of accounting and Financial Reporting
Standard 101 “Reduced Disclosure Framework” (“FRS 101”).
No profit and loss account is presented by the Company as permitted by Section 408 of the Companies Act 2006.
(b) Basis of preparation
The Company has adopted FRS 101 from the UK Generally Accepted Accounting Practice for all periods presented.
The accounting policies which follow set out those policies which apply in preparing the Financial Statements for the year ended
31 December 2020.
In these Financial Statements, the Company has applied the exemptions available under FRS 101 in respect of the following disclosures:
• the requirements of paragraphs 45(b) and 46 – 52 of IFRS 2 “Share-based Payments”;
• the requirements of IFRS 7 “Financial Instruments: Disclosures”;
• the requirements of paragraphs 91 – 99 of IFRS 13 “Fair Value Measurement”;
• the requirement in paragraph 38 of IAS 1 “Presentation of Financial Statements” to present comparative information in respect
of paragraph 79(a)(iv) of IAS 1;
• the requirements of paragraphs 10(d), 10(f), 16, 39(c), 40A, 40B, 40C, 40D, 111 and 134 – 136 of IAS 1 “Presentation of Financial Statements”;
• the requirements of IAS 7 “Statement of Cash Flows”;
• the requirements of paragraphs 30 and 31 of IAS 8 “Accounting Policies, Changes in Accounting Estimates and Errors”;
• the requirements of paragraph 17 of IAS 24 “Related Party Disclosures”;
• the requirements in IAS 24 “Related Party Disclosures” to disclose related party transactions entered into between 2 or more
members of a group, provided that any subsidiary which is a party to the transaction is wholly owned by such a member; and
• the requirements of paragraphs 134(d) – 134(f) and 135(c) – 135(e) of IAS 36 “Impairment of Assets”.
The Company also intends to take advantage of these exemptions in the Financial Statements to be issued in the following year.
Objections may be served in the Company by shareholders holding in aggregate 5 per cent or more of the total allocated shares
in the Company. Where required, additional disclosures are given in the Consolidated Financial Statements.
(c) Investments
Fixed asset investments in subsidiaries and associates are shown at cost less provision for impairment. The Directors consider
annually whether a provision against the value of investments on an individual basis is required.
(d) Share capital
(i) Share capital
Share capital is classified as equity if it is non-redeemable and any dividends are discretionary, or if it is redeemable but only at the
Company’s option. Dividends on share capital classified as equity are recognised as distributions within equity. Non-equity share
capital is classified as a liability if it is redeemable on a specific date or at the option of the shareholders or if dividend payments
are not discretionary. Dividends thereon are recognised in the profit and loss account as a financial expense.
(ii) Dividends
Dividends on non-equity shares are recognised as a liability and accounted for on an accruals basis. Equity dividends are recognised
as a liability in the period in which they are declared (appropriately authorised and no longer at the discretion of the Company).
(e) Pension schemes
(i) Defined benefit scheme
The Company participates in a Group-wide pension scheme providing benefits based on final pensionable pay. The defined benefit
section of the Scheme was closed to future service accrual in July 2006.
The assets of the Scheme are held separately from those of the Company. The defined benefit cost and contributions payable are
borne by Marshalls Group Limited and, therefore, the defined benefit surplus or deficit is recorded in Marshalls Group Limited. Full
details are provided in Note 20 on pages 131 to 135.
(ii) Defined contribution scheme
Obligations for contributions to defined contribution schemes are recognised as an expense as incurred.
142
Marshalls plc
Annual Report and Accounts 2020
Financial Statements 31 Accounting policies continued
(f) Share-based payment transactions
The Company enters into equity settled share-based payment transactions with its employees. In particular, annual awards are
made to employees under the Company’s Management Incentive Plan (“MIP”) and the Employee Bonus Share Plan (“BSP”).
These schemes allow employees to acquire shares in Marshalls plc. The fair value of options granted is recognised as an employee
expense with a corresponding increase in equity. The fair value is measured at grant date and spread over the period during which
the employees become unconditionally entitled to the options. Where appropriate, the fair value of the options granted is
measured using the Black-Scholes option valuation model, taking into account the terms and conditions upon which the options
were granted. The amount recognised as an expense is adjusted to reflect the actual number of awards for which the related
service and non-market vesting conditions are expected to be met, such that the amount ultimately recognised as an expense
is based on the number of awards that do meet the related service and non-market performance conditions at the vesting date.
Current tax relief is available as shares vest based on the value at the date of vesting. A deferred tax asset is recognised at grant
date based on the number of shares expected to be issued, at the value at which they are expected to be issued, proportioned
in line with the vesting period.
(g) Own shares held by the Employee Benefit Trust
Transactions of the Company-sponsored Employee Benefit Trust are included in the Group Financial Statements. In particular,
the Trust’s purchases of shares in the Company are debited directly to equity.
(h) Trade and other payables
Trade and other payables are stated at nominal amount (discounted if material).
(i) Income tax
Income tax on the profit or loss for the year comprises current and deferred taxation. Income tax is recognised in the Income
Statement except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted
at the balance sheet date, and any adjustment to tax payable in respect of previous years.
Deferred taxation is provided using the balance sheet liability method, providing for temporary differences between the carrying
amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The following
temporary differences are not provided for: the initial recognition of goodwill, the initial recognition of assets or liabilities that affect
neither accounting nor taxable profit, other than in a business combination, and differences relating to investments in subsidiaries
to the extent that they will probably not reverse in the foreseeable future. The amount of deferred taxation provided is based on the
expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates that are expected to
apply when the temporary difference reverses, based on rates that have been enacted or substantively enacted at the balance
sheet date.
A deferred taxation asset is recognised only to the extent that it is probable that future taxable profits will be available against
which the asset can be utilised. Deferred taxation assets are reduced to the extent that it is no longer probable that the related tax
benefit will be realised.
Additional income taxes that arise from the distribution of dividends are recognised at the same time as the liability to pay the
related dividend.
32 Operating costs
The audit fee for the Company was £45,000 (2019: £30,000). This is in respect of the audit of the Financial Statements. Fees paid to
the Company’s auditor for services other than the statutory audit of the Company are not disclosed in the Notes to the Company
Financial Statements since the consolidated accounts of the Group are required to disclose non-audit fees on a consolidated basis.
Details of Directors’ remuneration, share options, long-term incentive plans and Directors’ pension entitlements are disclosed on
pages 79 to 81 of the Remuneration Committee Report.
The average monthly number of employees of Marshalls plc (including Executive Directors) in the year ended 31 December 2020 was
175 (2019: 188). The personnel costs for the majority of these employees are borne by Marshalls Group Limited. The personnel costs
charged to Marshalls plc in the year were £4,261,000 (2019: £4,214,000) in relation to 16 employees (2019: 17), including the Directors.
Marshalls plc
marshalls.co.uk
143
Financial Statements Notes to the Company Financial Statements continued
33 Ordinary dividends: equity shares
2019 interim: paid 4 December 2019
—
—
4.70
2020
2019
Pence per share
£’000
Pence per share
£’000
9,323
Due to the impact of COVID-19, the Board withdrew the previously announced 2019 final and supplementary dividends. In addition,
the Board did not propose an interim dividend during 2020.
After the balance sheet date the following dividends were proposed by the Directors. The dividends have not been provided and
there were no income tax consequences.
2020 final: 4.30 pence per Ordinary Share
34 Investments
At 1 January 2020
Additions
At 31 December 2020
2020
£’000
8,542
2019
£’000
—
£’000
349,153
2,199
351,352
Investments comprise shares in the subsidiary undertaking, Marshalls Group Limited. The Directors have considered the carrying
value of the Company’s investments and are satisfied that no provision is required.
The increase in the year of £2,199,000 represents adjustments to the number of shares expected to vest in respect of share-based
payment awards granted to employees of Marshalls Group Limited.
Pursuant to Sections 409 and 410(2) of the Companies Act 2006, the subsidiary undertakings of Marshalls plc at 31 December 2020
are set out below.
Subsidiaries
Acraman (418) Limited
Alton Glasshouses Limited
Bollards Direct Limited
Capability Brown Garden Centres Limited
Capability Brown Landscaping Limited
Classical Flagstones Limited
CPM Group Limited
Dalestone Concrete Products Limited
Edenhall Limited
Edenhall Building Products Limited
Edenhall Concrete Limited
Edenhall Concrete Products Limited
Edenhall Holdings Limited
Principal activities
Non-trading
Non-trading
Non-trading
Non-trading
Non-trading
Non-trading
Non-trading
Non-trading
Non-trading
Non-trading
Non-trading
Non-trading
Non-trading
Edenhall Technologies Limited
Locharbriggs Sandstone Limited
Lloyds Quarries Limited
Marshalls Building Materials Limited
Marshalls Building Products Limited
Marshalls Concrete Products Limited
Marshalls Directors Limited
Marshalls Dormant No. 30 Limited
Marshalls Dormant No. 31 Limited
Marshalls EBT Limited*
Marshalls Estates Limited
Marshalls Group Limited*
Marshalls Landscape Products Limited
Marshalls Landscape Products (North America) Inc.
Marshalls Mono Limited
Marshalls Natural Stone Limited
144
Marshalls plc
Annual Report and Accounts 2020
Non-trading
Non-trading
Non-trading
Non-trading
Property management
Non-trading
Non-trading
Non-trading
Non-trading
Non-trading
Non-trading
Intermediate holding company
Non-trading
Landscape Products supplier
Landscape Products manufacturer and supplier
and quarry owner supplying a wide variety of
paving, street furniture and natural stone products
Non-trading
Class of share
% ownership
Ordinary/
preference
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary/
preference
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
Ordinary
100
Financial Statements
34 Investments continued
Subsidiaries
Principal activities
Class of share
% ownership
Marshalls NV
Marshalls Profit Sharing Scheme Limited
Marshalls Properties Limited
Marshalls Register Limited
Marshalls Stone Products Limited
Marshalls Street Furniture Limited
Ollerton Limited
Panablok (UK) Limited
Paver Systems (Carluke) Limited
Paver Systems Limited
PD Edenhall Holdings Limited
PD Edenhall Limited
Premier Mortars Limited
Quarryfill Limited
Rhino Protec Limited
Robinson Associates Stone Consultants Limited
Robinsons Greenhouses Limited
Rockrite Limited
S Marshall & Sons Limited
Scenic Blue Limited
Scenic Blue Landscape Franchise Limited
Scenic Blue (UK) Limited
Stancliffe Stone Company Limited
Stoke Hall Quarry Limited*
Stone Shippers Limited
Stonemarket (Concrete) Limited
Stonemarket Limited
The Great British Bollard Company Limited
The Stancliffe Group Limited
The Yorkshire Brick Co. Limited
Town & Country Paving Limited
Urban Engineering Limited
Woodhouse Group Limited
Woodhouse UK Limited
Xiamen Marshalls Import Export Company Limited Sourcing and distribution of natural stone products
Landscape Products manufacturer and supplier
Non-trading
Property management
Non-trading
Non-trading
Non-trading
Non-trading
Non-trading
Non-trading
Non-trading
Intermediate holding company
Non-trading
Non-trading
Non-trading
Non-trading
Non-trading
Non-trading
Non-trading
Non-trading
Non-trading
Non-trading
Non-trading
Non-trading
Non-trading
Non-trading
Non-trading
Non-trading
Non-trading
Non-trading
Non-trading
Non-trading
Non-trading
Non-trading
Non-trading
* Held by Marshalls plc. All others held by subsidiary undertakings.
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
66.7
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
Marshalls NV is largely dependent on the continued support of Marshalls Mono Limited, which has indicated that it intends
to continue providing this support for the foreseeable future.
All the other companies excluding the ones below operate within the United Kingdom and are registered in England and Wales at the
following address: Landscape House, Premier Way, Lowfields Business Park, Elland HX5 9HT. Marshalls NV is registered in Belgium, Xiamen
Marshalls Import Export Company Limited is registered in China and Marshalls Landscape Products (North America) Inc. is registered
in the USA. Paver Systems Limited, Paver Systems (Carluke) Limited and Locharbriggs Sandstone Limited are registered in Scotland.
The respective registered offices are:
Paver Systems Limited and Paver Systems (Carluke) Limited
Roadmeetings, Carluke, Lanarkshire ML8 4QG
Marshalls NV
Nieuwstraat 4, 2840 Rumst, Belgium
Locharbriggs Sandstone Limited
Locharbriggs, Dumfries, Dumfriesshire DG1 1QS
Marshalls Landscape Products (North America) Inc.
1209 Orange Street, Wilmington, County of New Castle,
Delaware 19801, USA
Xiamen Marshalls Import Export Company Limited
12 A4, Xiangyu Building, No. 22, 4th Xiangxing Road,
Xiangyu Free Trade Zone, Xiamen, China
Marshalls plc
marshalls.co.uk
145
Financial Statements Notes to the Company Financial Statements continued
35 Deferred taxation
Recognised deferred taxation assets and liabilities
Equity settled share-based payments
Movement in temporary differences
Equity settled share-based payments
Equity settled share-based payments
36 Debtors
Corporation tax
Amounts owed from subsidiary undertakings
No debtors were due after more than 1 year.
Assets
Liabilities
2020
£’000
1,058
2019
£’000
1,464
2020
£’000
—
2019
£’000
–
1 January
2020
£’000
1,464
1 January
2019
£’000
735
Recognised
in income
£’000
Recognised
in other
comprehensive
income
£’000
31 December
2020
£’000
(375)
(31)
1,058
Recognised
in income
£’000
192
Recognised
in other
comprehensive
income
£’000
31 December
2019
£’000
537
1,464
2020
£’000
890
3,827
4,717
2019
£’000
1,348
9,598
10,946
37 Capital and reserves
Called-up share capital
As at 31 December 2020, the authorised, issued and fully paid up Ordinary Share capital was as follows:
Authorised
2020 and 2019
Ordinary
At 1 January
Issued in the period
2020
Number
300,000,000
—
Value
£’000
75,000
—
2020
Number
200,052,157
—
Issued and paid up
2020 nominal
value
£’000
2019
Number
50,013
—
199,993,433
58,724
At 31 December
300,000,000
75,000
200,052,157
50,013
200,052,157
2019 nominal
value
£’000
49,998
15
50,013
On 5 October 2015 options were granted up to 1,000,000 shares to employees who had subscribed to the SAYE scheme (Note 20).
The options were exercisable by relevant employees after a period of three years and during 2019, 58,724 Ordinary Shares were
issued to those employees whose options had reached maturity. During 2019 a further 18,741 shares were transferred from the
Employee Benefit Trust.
Distributable reserves
The Company’s distributable reserves amount to £195 million (2019: £202 million) at the end of the period. Upstream dividends
of £197,145,000 were received during 2019 in order to increase the distributable reserves in Marshalls plc.
Equity reserve
The equity reserve represents the number of shares expected to vest in respect of share-based payment awards granted
to employees of the Company.
38 Capital and leasing commitments
The Company had no capital or leasing commitments at 31 December 2020 or 31 December 2019.
146
Marshalls plc
Annual Report and Accounts 2020
Financial Statements
39 Bank facilities
The Group’s banking arrangements are in respect of Marshalls plc, Marshalls Group Limited and Marshalls Mono Limited with each
company being nominated borrowers. The operational banking activities of the Group are undertaken by Marshalls Group Limited
and the Group’s bank debt is largely included in Marshalls Group Limited’s balance sheet.
40 Contingent liabilities
Royal Bank of Scotland plc has issued, on behalf of Marshalls plc, the following irrevocable letters of credit relating to the Group’s
cap on self-insurance for employer’s liability and vehicle insurance:
Beneficiary
Amount
Period
Purpose
M S Amlin Limited
HDI Global SE — UK
AIOI Nissay Dowa Insurance UK Limited
Aviva Insurance Limited
M S Amlin Limited
£540,000
£300,000
£400,000
£100,000
£340,000
23 Dec 2011 to 30 Oct 2021
8 Dec 2020 to 30 Oct 2021
8 Dec 2020 to 30 Oct 2021
19 Mar 2014 to 29 Oct 2021
30 Oct 2016 to 30 Oct 2021
Employer’s liability
Employer’s liability
Vehicle insurance
Vehicle insurance
Vehicle insurance
41 Pension scheme
The Company is the sponsoring employer of the Marshalls plc pension scheme (the “Scheme”) which is primarily a closed defined
benefit scheme with a small defined contribution element (mainly AVCs). The assets of the Scheme are held in separately managed
funds which are independent of the Group’s finances.
Full details of the Scheme are provided in Note 20. The Company is unable to identify its share of the Scheme assets and liabilities
on a consistent and reasonable basis.
The latest funding valuation of the defined benefit section of the Scheme was carried out as at 5 April 2018 and was updated for
the purposes of the 31 December 2020 Financial Statements by a qualified independent actuary.
42 Accounting estimates and judgements
The preparation of the Financial Statements requires management to make judgements, estimates and assumptions. Although these
judgements and estimates are based on management’s best knowledge, actual results ultimately may differ from these estimates.
The key sources of estimation uncertainty that have a significant risk of causing material adjustments to the carrying value of assets
and liabilities within the next financial year are disclosed below.
There are no critical accounting judgements or key sources of estimation uncertainty.
43 Related parties
Related party relationships exist with other members of the Group. All operating costs are borne by Marshalls Group Limited and are
recharged to Marshalls plc in respect of specifically attributable costs. All related party transactions were made on terms equivalent
to those that prevail in arm’s length transactions.
Marshalls plc
marshalls.co.uk
147
Financial Statements Financial History – Consolidated Group
Consolidated Income Statement
Revenue
Net operating costs
Operating profit (before operational
restructuring costs and asset impairments)
Operational restructuring costs and asset
impairments
Operating profit
Financial income and expenses (net)
Profit before tax (before operational
restructuring costs and asset impairments)
Profit before tax
Income tax expense
Profit for the financial year
Profit for the year attributable to:
Equity shareholders of the Parent
Non-controlling interests
EBITA****
EBITA (before operational restructuring costs
and asset impairments)
EBITDA****
EBITDA (before operational restructuring costs
and asset impairments)
Basic earnings per share (pence)
Basic earnings per share (before operational
restructuring costs and asset impairments)
Dividends per share (pence) – IFRS
Dividends per share (pence) – traditional
Dividends per share (pence) – supplementary
Year-end share price (pence)
Tax rate (%)
Consolidated Balance Sheet
Non-current assets
Current assets
Total assets
Current liabilities
Non-current liabilities
Net assets
Net borrowings
Gearing ratio
Year ended
31 December 2016
£’000
Year ended
31 December 2017
£’000
Year ended
31 December 2018
£’000
Year ended **
Year ended **
31 December 2019
£’000
31 December 2020
£’000
396,922
(349,283)
430,194
(376,755)
490,988
(426,154)
541,832
(468,151)
469,454
(442,272)
47,639
53,439
64,834
73,681
27,182
—
47,639
(1,593)
46,046
46,046
(8,539)
37,507
37,350
157
37,507
48,648
48,648
60,794
60,794
18.95
18.95
9.65
8.70
3.00
292.5
18.5
2016
£’000
—
53,439
(1,388)
52,051
52,051
(9,925)
42,126
42,503
(377)
42,126
54,581
54,581
67,895
67,895
21.52
21.52
12.20
10.20
4.00
454.9
19.1
—
64,834
(1,899)
62,935
62,935
(11,307)
51,628
51,958
(330)
51,628
66,593
66,593
80,792
80,792
26.29
26.29
14.80
12.00
4.00
464.8
18.0
—
(17,809)
73,681
(3,828)
69,853
69,853
(11,942)
57,911
58,240
(329)
57,911
76,104
76,104
103,875
103,875
29.36
29.36
16.70
4.70
—
860.0
17.1
9,373
(4,720)
22,462
4,653
(2,095)
2,558
2,370
188
2,558
12,092
29,901
45,298
57,618
1.19
8.60
—
4.30
—
748.5
45.0
2017 *
£’000
2018 *
£’000
2019 **
£’000
2020 **
£’000
193,393
139,685
333,078
(87,068)
(28,889)
248,055
166,372
414,427
(109,507)
(67,293)
302,785
210,776
513,561
(141,190)
(105,656)
350,035
212,534
562,569
(162,349)
(104,454)
324,416
290,013
614,429
(157,158)
(169,423)
217,121
237,627
266,715
295,766
287,848
5,413
(2.5%)
(24,297)
(37,433)
(59,976)
(75,566)
10.2%
14.0%
20.3%
26.3%
* The comparatives have been restated as a result of a reassessment of the fair value of assets and liabilities acquired.
**
The Group applied IFRS 16 “Leases” with effect from 1 January 2019 and consequently the information disclosed above includes the impact of adoption.
*** Before operational restructuring costs and asset impairments.
**** EBITA is defined as earnings before interest, tax and amortisation of intangibles. EBITDA is defined as earnings before interest, tax and amortisation of intangibles
and depreciation.
148
Marshalls plc
Annual Report and Accounts 2020
Financial Statements
Shareholder Information
Shareholder analysis at 31 December 2020
Size of shareholding
1 to 500
501 to 1,000
1,001 to 2,500
2,501 to 5,000
5,001 to 10,000
10,001 to 25,000
25,001 to 100,000
100,001 to 250,000
250,001 to 500,000
500,001 and above
Number of
shareholders
1,897
497
548
350
234
152
135
57
41
88
3,999
%
47.43
12.43
13.70
8.75
5.85
3.80
3.38
1.43
1.03
2.20
Number of
Ordinary Shares
276,380
376,083
928,397
1,248,945
1,661,356
2,380,309
6,915,253
9,282,193
14,882,181
162,101,060
%
0.14
0.19
0.46
0.62
0.83
1.19
3.46
4.64
7.44
81.03
100.00
200,052,157
100.00
Financial calendar
Preliminary announcement of results for the year ended 31 December 2020
Final dividend for the year ended 31 December 2020
Announced
11 March 2021
Payable
1 July 2021
Half-yearly results for the year ending 31 December 2021
Announcement
19 August 2021
Half-yearly dividend for the year ending 31 December 2021
Payable
1 December 2021
Results for the year ending 31 December 2021
Announcement
Early March 2022
Advisers
Stockbrokers
Numis Securities Limited
Peel Hunt
Auditor
Deloitte LLP
Legal advisers
Herbert Smith Freehills LLP
Pinsent Masons LLP
Financial adviser
N M Rothschild & Sons Limited
Bankers
HSBC Bank plc
Lloyds Bank plc
Royal Bank of Scotland plc
Registrars
Computershare Investor Services PLC
The Pavilions
Bridgwater Road
Bristol BS99 6ZZ
Shareholders’ enquiries should be addressed to the registrars
at the above address (tel: 0870 707 1134)
Registered office
Landscape House
Premier Way
Lowfields Business Park, Elland
Halifax HX5 9HT
West Yorkshire
Telephone: 01422 312000
Website: www.marshalls.co.uk
Registered in England and Wales: No. 5100353
CBP006259
The Group’s commitment to environmental issues is reflected in this Annual
Report which has been printed on Galerie Satin which is a mixed source
FSC® certified and ECF (Elemental Chlorine Free) material. This is a certified
CarbonNeutral® publication. Printed in the UK by Park Communications,
using their environmental printing technology; vegetable inks were used
throughout. Both the manufacturing mill and the printer are registered
to the Environmental Management System ISO14001 and are Forest
Stewardship Council® (FSC) chain-of-custody certified.
Marshalls plc
marshalls.co.uk
149
Financial Statements
Marshalls plc, Landscape House,
Premier Way, Lowfields Business Park,
Elland HX5 9HT