Annual Report
and Accounts 2021
Creating better
futures for
everyone.
Socially,
environmentally
and economically.
We create better spaces by
putting people, communities
and the environment first
Our Group operates quarries and
manufacturing sites throughout the UK and
a manufacturing and trading operation in
Belgium. We are committed to quality in
everything we do, including environmental
and ethical best practice.
Strategic Report
Highlights
1
Our Purpose Roadmap
2
4
Our Investment Case
8 Marshalls at a Glance
10 Chair’s Statement
12 Chief Executive’s
Statement
14 Q&A with the
Chief Executive
16 Growth Markets
18 Business Model
20 Our Section 172(1)
Statement
22 Stakeholder Engagement
30 Strategy
32 Key Performance
Indicators
34 Risk Management
and Principal Risks
44 Financial Review
50 What ESG Means
to Marshalls
Governance
70 Board of Directors
72 Corporate Governance
Statement
84 Nomination
Committee Report
88 Audit Committee Report
92 Remuneration
Committee Report
96 At a glance
101 Annual Remuneration
Report
105 Fairness, diversity
and wider workforce
considerations
113 Directors’ Report – Other
Regulatory Information
115 Statement of Directors’
Responsibilities
117 Independent
Auditor’s Report
Financial Statements
125 Consolidated Income
Statement
126 Consolidated Statement
of Comprehensive
Income
127 Consolidated
Balance Sheet
128 Consolidated Cash
Flow Statement
129 Consolidated Statement
of Changes in Equity
131 Notes to the Consolidated
Financial Statements
166 Company Statement of
Changes in Equity
167 Company Balance Sheet
168 Notes to the Company
Financial Statements
174 Financial History –
Consolidated Group
175 Glossary
177 Shareholder Information
Stay up to date with the
latest investor news at
www.marshalls.co.uk
Highlights
Strong growth – positive trading outlook
Financial highlights
• Record sales and adjusted profitability
• Full-year revenue of £589.3 million (2020: £469.5 million;
2019: £541.8 million) – up 26% on 2020 and 9% on 2019
Operational highlights
• Strong trading in first two months of 2022 – healthy order books
• Continued focus on customer service and satisfying
increased demand
• Adjusted EBITDA of £107.1 million (2020: £57.6 million; 2019:
• Proactive supply chain management to mitigate raw material
£103.9 million)
shortages and cost inflation
• Adjusted profit before tax up 3% against 2019 at £72.1 million
• Focus on flexibility within manufacturing and logistics and
(up 221% on 2020)
short‑term labour availability
• Profit before tax on a statutory basis was £69.3 million (2020:
• Sustained emphasis on growth opportunities arising from
£4.7 million; 2019: £69.9 million)
ESG leadership
• Net debt of £41.1 million (2020: £75.6 million). Pre-IFRS 16 net
• Capital investment of around £35 million planned for 2022 –
positive cash of £0.1 million
• Strong balance sheet, with a flexible capital structure and a clear
construction of St Ives on track
• Priority given to health and safety
capital allocation policy
• Recovery in adjusted ROCE of 20.6% (2020: 8.2%; 2019: 21.4%)
• Proposed final dividend of 9.6 pence giving rise to a total dividend
for the year of 14.3 pence
Revenue (£’m)
£589.3m
(up 9% against 2019)
0
.
1
9
4
8
1
0
2
2
.
0
3
4
7
1
0
2
Adjusted EBITDA (£’m)
£107.1m
(up 3% against 2019)
8
.
0
8
8
1
0
2
9
.
7
6
7
1
0
2
8
.
1
4
5
9
1
0
2
9
.
3
0
1
9
1
0
2
5
.
9
6
4
0
2
0
2
6
.
7
5
0
2
0
2
3
.
9
8
5
1
2
0
2
1
.
7
0
1
1
2
0
2
Adjusted operating profit (£’m)
£76.2m
(up 3% against 2019)
8
.
4
6
8
1
0
2
4
.
3
5
7
1
0
2
Profit before tax (£’m)
£72.1m
(before adjusting items)
(up 3% against 2019)
£69.3m
(on a reported basis)
7
.
3
7
9
1
0
2
2
.
7
2
0
2
0
2
2
.
6
7
1
2
0
2
Basic EPS (p)
28.6p
(before adjusting items)
27.5p
(on a reported basis)
Return on capital employed (%),
before adjusting items
Full year dividend
recommended (p)
20.6%
(2020: 8.2%)
14.3p
(2x cover)
Notes
1 Alternative performance measures are used consistently throughout this Annual Report. These relate to EBITA, EBITDA, return on capital employed (“ROCE”), net
debt and results before adjusting items. Following the transition to IFRS 16, reference has been made to “pre-IFRS 16”, “pre-IFRS 16 net debt” 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 4.
2 In order to provide a more relevant performance commentary, comparison in this Annual Report has been made to the corresponding period for both 2020 and
2019, the latter considered to represent a more meaningful pre-COVID-19 baseline for performance comparison.
3 The results for the year ended 31 December 2021 have been disclosed before adjusting items. These are set out in Note 4.
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Marshalls plc | Annual Report and Accounts 2021
1
Strategic Report
Our Purpose Roadmap
Doing the right things,
for the right reasons,
in the right way
Our purpose is to create
better spaces and futures
for everyone: socially,
environmentally and
economically
Read more about our purpose on page 3
Our mission is to deliver
sustainable growth through
a brand that drives customer
specification of innovative
product solutions for the
built environment
Read more about our mission on pages 4 to 6
Our strategic goal is to
become the UK’s leading
manufacturer of products
for the built environment
Read more about our strategic goal on pages 30
and 31
The Marshalls Way
Do the right things
• We have high standards
• We deliver market leading quality
to our customers
• We strive to meet the needs and
expectations of our customers
• We are continually developing the
business and our people
For the right reasons
• We consider the long-term impact of
every decision we make
• 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 set clear expectations
• We anticipate and embrace change
• We put people, communities and the
environment first
• We work as a team to proactively
propose solutions
2
Marshalls plc | Strategic Report
Read more about The Marshalls Way on page 22
Our purpose in action
Strategic goal underpinned
by eight growth pillars
1. Brand preference for
product specification
2. Customer centricity
3. Growth in the
emerging businesses
St Ives dual block plant investment
Read more on page 28
4. Logistics excellence
5. Operational excellence
6. Sustainable supply
Investment in new vehicles
Read more on page 29
7. New product development
and innovation
8. Digital transformation
Enabled by people and talent development
Read more about our strategic priorities on pages 30
and 31
Sustainable new product development –
The Marshalls Concrete Cycle Segregation Unit
Read more on page 15
Marshalls plc | Annual Report and Accounts 2021
3
Strategic Report Our Investment Case
Proven, differentiated business model
We believe Marshalls is an attractive investment
opportunity for the following reasons:
1
2
3
Strong
track record
• From 2016 to 2021 we have
seen strong cumulative annual
growth rates
• We have shown resilience throughout
the pandemic and have made a
strong recovery from COVID-19
Revenue
8.2%
compound annual growth rate
2016–2021
Adjusted profit before tax
9.4%
compound annual growth rate
2016–2021 (before adjusting items)
Adjusted EPS
8.6%
compound annual growth rate
2016–2021 (before adjusting items)
Pre-supplementary dividends
10.4%
compound annual growth rate
2016–2021
Supportive UK construction
market fundamentals
• Winter 2021 forecast of total
construction output continues to
anticipate robust recovery from
COVID-19 challenges in 2020
• New Build Housing and Infrastructure
are key sectors for Marshalls. Private
Housing RM&I is the main driver
for UK Domestic
• COVID-19 impacted working
patterns, have increased demand
for home and garden improvements
underpinned by unprecedented
savings values
• Domestic demand remains at
historically high levels
Total construction
4.3%
CPA output growth forecast for 2022
Private housing
3.0%
CPA output growth forecast for 2022
Infrastructure
9.7%
CPA output growth forecast for 2022
Diversified group with strong
market position
• Diversified end markets, including
Public Sector and Commercial,
Domestic and International.
• Leading market share in UK
hard landscaping
• Specification selling in Public
Sector and Commercial
• Marshalls’ register of approved
domestic installers creates
“pull” demand
• Building on 15 years of experience
in digital visualisation, the new
augmented reality app gives
architects, garden designers,
installers and consumers
state‑of‑the‑art solutions
2021 revenue %
6%
28%
66+
Public Sector and Commercial
Domestic
66%
International
Read more about our key performance
indicators on pages 32 and 33
Read more about our strong market
position on pages 16 and 17
Read more on our strong market
position on page 9
4
Marshalls plc | Strategic Report
28
+
6
+
F
What we do
Marshalls is a complete external landscaping product business from design, planning
and engineering to guidance and delivery. We supply to the domestic and commercial
hard landscaping markets and our products include paving, block paving, kerbs and
edgings, drainage and water management solutions, protective street furniture,
lighting, concrete bricks, masonry, walling and mortar.
4
5
6
Efficient, nationwide
manufacturing network
Logistics excellence and
sustainable supply strategy
ESG
market leadership
• The Group operates manufacturing
plants, quarries and distribution sites
across the UK and in Belgium
• Unique national network ensures
proximity to customers and an
efficient logistics footprint
• Well-invested sites with
expansion opportunities
• Significant investments underway:
• To upgrade our concrete block
paving capability and capacity
• New flag presses being installed
with capability to double output
from same footprint
• Longer‑term capital plans underpin
future growth potential
• Significant barriers to entry for
new competitors
c.95%
of UK population within
two hours delivery time
Health and safety
• Marshalls is committed to
meeting the highest health
and safety standards
• Health and Employee Wellbeing
Strategy launched in 2021
16.9%
reduction in working days lost (%)
compared with the target benchmark
Logistics excellence
• Flexibility to meet the delivery lead-
time requirements of our customers
• Customer order tracking service
via online portal and text
message service
• Highly-trained drivers who are also
Marshalls’ customer ambassadors
• Brand promotion/recognition on
the roads
230+
fleet of vehicles with a broad range
of capability to meet every delivery
requirement
Sustainable supply strategy
• Centralised procurement enables
optimal buying power
• Majority of raw materials
sourced in UK
• Outstanding supplier relationships
deliver industry leading levels
of availability
• Co‑ordinated innovation in concrete
mix designs
60%
cement substitution for block
paving products
Sustainability and carbon
reduction commitments
embedded in strategy
Responsible business practices
100%
of natural stone products now have
Ethical Risk Index scores
Sustainable product development
30%+
reduction in plastic consumption
since 2013
Focus on reducing waste
and recycling
100%
of concrete and natural stone products
are now fully-recyclable
Strong track record of delivery
30%
total reduction in carbon in the last
five years
Verified carbon footprints –
first in sector to commit
5,000+
individual product carbon footprints
Read more about where we operate on
page 8
Read more about our investment in new
vehicles on page 29
Read more about our ESG strategy
on page 50 to 67
Marshalls plc | Annual Report and Accounts 2021
5
Strategic Report Our Investment Case continued
7
8
9
Strong balance sheet
and cash generation
Strong cash generation
80%
OCF:EBITDA
Gearing
11.9%
(reported)
0%
(pre-IFRS 16)
Reported net debt
£41.1m
(reported)
Net positive cash
£0.1m
(pre-IFRS 16)
Total bank facilities
£165m
of which £140m are committed
Significant capacity to fund
organic investment and
selective acquisitions
Clear and consistent
capital allocation policy
Focused
growth strategy
Organic growth investment –
St Ives dual block plant
• Designed to manufacture
walling, block paving and paving
simultaneously doubling the
output with the same labour
as a single plant
• Creates multiple product
combinations from one
primary product
c.£24m
investment incorporating the latest
advanced technologies
New product development strategy
• New facing bricks have significantly
lower product carbon footprints
• The current trend for outdoor living
spaces and kitchen gardens is one
Marshalls has long anticipated and
provides growth opportunity
142
new product ranges developed
in the last 3 years
Mergers and acquisitions strategy
• Objective is to support
organic growth with earnings
accretive acquisitions
• Pipeline of opportunities
under review
Strategic goal
• To become the UK’s leading
manufacturer of products for
the built environment
Strategic corporate objectives
• Shareholder value
• Sustainability
• Relationship building
• Organic expansion
• Brand development
• Effective capital structure
and control framework
Strategic goal underpinned
by eight growth pillars
• Brand preference for
product specification
• Customer centricity
• Growth in the Emerging Businesses
• Logistics excellence
• Operational excellence
• Sustainable supply
• New product development
and innovation
• Digital transformation
Enabled by people and
talent development
Policy that dividends will grow in
line with earnings – 2 times cover
Read more about our financial strength
on pages 44 to 49
Read more about our capital allocation
policy on page 7
Read more about our strategy on
pages 30 to 31
6
Marshalls plc | Strategic Report
Clear and consistent capital allocation
policy, with good organic and
acquisition investment opportunities
Priorities for capital
Organic growth
2017
2018
2019
2020
2021
• Capital investment remains core
• Plan c.£35 million in 2022
to strategic growth
R&D and NPD
2017
2018
2019
2020
2021
• Continued focus on R&D and NPD
• New product ranges
• Digital strategy progressing well;
e-trading platform now established
Ordinary dividends
• 2021 final dividend of 9.6 pence per share
• Total dividend (interim and final)
of 14.3 pence per share
2017
2018
2019
2020
2021
Selective acquisitions
• Good pipeline of potential acquisitions
2017
2018
2019
2020
2021
• Target selective bolt-on acquisition
opportunities in New Build Housing
and Water Management
Supplementary dividends
• Supplementary dividends when
appropriate. Discretionary and
non-recurring
2017
2018
2019
2020
2021
Marshalls plc | Annual Report and Accounts 2021
7
Strategic Report Marshalls at a Glance
The UK’s leading manufacturer
of hard landscaping products
Marshalls is a complete external landscaping product business from
design, 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. We also have a manufacturing and
trading operation in Belgium.
Businesses
Marshalls
Landscape Products
Minerals
Marshalls Landscape
Protection
Civils and Drainage
Mortars and Screeds
Bricks and Masonry
Natural Stone
Head Office
Marshalls NV
St Ives
dual block plant
To find out more, scan the
QR code or visit the following:
www.marshalls.co.uk/about-us
8
Marshalls plc | Strategic Report
Our markets
Domestic
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.
Public Sector
and Commercial
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.
International
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 6 per cent of
Group sales.
Domestic revenue
Public Sector and
Commercial revenue
International revenue
28%
66%
6%
(2020: 27%)
(2020: 66%)
(2020: 7%)
Marshalls plc | Annual Report and Accounts 2021
9
Strategic Report Chair’s Statement
We have a clear
vision for the future
and for how we will
get there
Summary
• Record sales and adjusted profit
• Continued focus on health, safety
and employee wellbeing
• Strong trading recovery despite
supply chain challenges
• Revenue up 9% compared with 2019
• Final dividend proposed of
9.6 pence per share
• Clear strategy with
sustainability embedded
• Trading continues to improve and
order books remain strong
Overview
The Group has delivered a strong trading performance in 2021,
despite it being a challenging year. Lockdown restrictions remained
in place and the business continued to deploy remote working
and social distancing. We have consistently adopted appropriate
COVID-19 measures, and throughout the last two years the health,
safety and wellbeing of our employees, suppliers and customers
has been at the very top of our agenda. Throughout this period,
our health and safety policies have been more stringent than the
Government’s recommended guidelines. Your Board has continued
to take an active role in the Group’s response to the pandemic.
Recovery has been strong: sales and operating profit for the year
ended 31 December 2021 both exceeded 2019 results. This is
despite operational challenges, such as labour and raw material
shortages, HGV driver availability and significant
cost inflation.
We have collectively risen to all these challenges with a “can do”
spirit, and a focus on collaboration that epitomises The Marshalls
Way. Teamwork is at the core of our culture and we continue to
support colleagues, customers and all other stakeholders. I am very
proud of the Group’s response and performance during this period,
and how we have continued to do “the right things, for the right
reasons, in the right way”. Demand remains high and order books
continue to be strong.
Results
Group revenue for the year ended 31 December 2021 was
£589.3 million (2020: £469.5 million; 2019: £541.8 million), an
increase of 26 per cent against the 2020 comparative and an
increase of 9 per cent compared with 2019. At the half year point,
revenue was up by 6 per cent compared with 2019. Since the half
year, the trend of sales growth has progressively increased, and
in the second half of the year sales were 11 per cent ahead of the
comparative period for 2019.
The Group’s adjusted operating profit was £76.2 million
(2020: £27.2 million; 2019: £73.7 million) and was 3 per cent ahead
of the 2019 comparative. Statutory operating profit was £76.2
million (2020: £9.4 million; 2019 £73.7 million). Adjusted EBITDA
was £107.1 million (2020: £57.6 million; 2019: £103.9 million).
Earnings per share was 28.6 pence (2020: 8.6 pence), before
adjusting items, and on a reported basis, earnings per share was
27.5 pence (2020: 1.2 pence).
Marshalls continues to have strong cash generation, with year-end
net debt, on a reported basis, of £41.1 million (2020: £75.6 million;
2019: £60.0 million).
Dividends
The Group maintains a progressive dividend policy with the
objective of achieving up to two times dividend cover over the
business cycle. The aim of this policy is to increase returns for
shareholders whilst at the same time recognising an appropriate
degree of caution and stewardship.
The Board is now proposing a final dividend of 9.6 pence which,
when combined with the interim dividend of 4.7 pence, gives rise
to a total dividend for the year of 14.3 pence. This compares with
adjusted earnings per share of 28.6 pence for the year ended
31 December 2021, and represents two times cover.
10
Marshalls plc | Strategic Report
Marshalls’ strategy
Marshalls has a clear vision for the future and our strategic
direction is supported by The Marshalls Way. We have an ambitious
strategic agenda, which is focused around our eight strategic
growth pillars. These are set out in detail on pages 30 and 31, and
we have clear objectives for improvement and growth in every
area of the business. Our ultimate aim is to create better outdoor
spaces for everyone, and to do this in a way that supports our
Company values of doing the right things, for the right reasons,
in the right way. Our strategy for long-term success is based on
active communication with all our stakeholders. A strong company
looks after its customers, looks after its employees and works in
collaboration with its stakeholders to fulfil its environmental and
social responsibilities.
At the centre of our strategy is sustainability, which is embedded
into our business model. Our ESG agenda is explained in more
detail on pages 50 to 69 and also in a Q&A format on pages 14 and
15. The Group is committed to promoting strong environmental,
social and governance objectives.
The Board will continue to focus on culture and people
engagement. Our priorities include work on employee wellbeing
and safety, succession and development planning, diversity, equity,
respect and inclusion.
Angela Bromfield leads the Board’s engagement with the Employee
Voice Group which includes employees from all parts of the Group.
This initiative has proved successful, and has contributed to
multiple positive new initiatives in the last year – further details can
be found on page 67. The group of elected employees continue to
represent their colleagues in a meaningful and constructive way.
Environmental
COP26 reminded us all how companies need to adapt to mitigate
climate change. Marshalls has led this sustainable journey for over
20 years. We have worked hard to reduce our carbon footprint
throughout this period. Since 2008 the Group has reduced its
footprint by 50 per cent and we are on target to make a further 50
per cent reduction by 2030, in line with our commitment to net zero
emissions by this date.
Our commitment is 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. Our emission reduction targets
have been approved by the Science Based Targets initiative as
consistent with levels required to meet this net-zero commitment.
We were the first company in our sector to achieve this accreditation
and we have a published roadmap to support these targets.
We continue to make and plan operational changes, with a focus
on our fleet using lower emission fuels and installing solar panels
across our manufacturing sites.
Social
We continue to take the lead in supporting and upholding human
rights at home and overseas in our supply chains. We aim to ensure
that all our products and services are ethically sourced and sustainable.
We joined the Ethical Trading Initiative in 2006, and continue to
support the UN Global Compact sustainable development goals.
Marshalls has again been awarded the Fair Tax Mark accreditation.
This recognises social responsibility and transparency in our
tax affairs.
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 72 to 83. We maintain a detailed
framework and comprehensive policies covering the environment,
human rights, labour and governance.
A strong company looks
after its customers,
looks after its employees
and works in collaboration
with its stakeholders to fulfil
its environmental and social
responsibilities.”
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. Your Board continues to provide 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 the case study
about our major dual block plant investment at St Ives on page 28.
Board changes
Janet Ashdown retired from the Board following the Annual General
Meeting in May 2021 having served on the Board since May 2015
as Senior Independent Non-Executive Director and Chair of the
Remuneration Committee. Following Janet’s retirement, Graham
Prothero was appointed Senior Independent Non-Executive
Director and Angela Bromfield was appointed as Chair of the
Remuneration Committee. Avis Darzins was appointed as a Non-
Executive Director in June 2021. Philip Rogerson joined the Board
as a Non-Executive Director in September 2021, but in December
2021 stepped down due to health reasons. Jack Clarke retired as
Group Finance Director in March 2021 and Justin Lockwood was
appointed Chief Financial Officer in July 2021.
Our people
It continues to be a privilege to serve as your Chair. We have an
excellent management team supported by a talented workforce of
committed and professional colleagues. Our employees are a major
strength of the business, and I would like to thank every member
of our team for their commitment, hard work and continuing
dedication to Marshalls. We should all be proud of what we have
achieved during 2021.
In recognition of this combined effort, the Board was pleased
to award a special COVID-19 thank you bonus of £600 to all
employees across the Group, which was paid in December 2021.
Outlook
Trading remains strong and has continued to improve since
the start of the year, notwithstanding the ongoing supply chain
challenges. At the end of February, revenues were up 13 per cent
and order volumes up 5 per cent compared to the same period in
2021. Despite the terrible situation in Ukraine and the current geo-
political uncertainties that prevail, the outlook for the construction
market remains positive. This continues to be supported by strong
forward indicators, particularly in our key target markets in New
Build Housing, Road, Rail and Water Management.
Our strong market positions, focused investment plans and
established brand underpin the Group’s business strategy. We
remain confident that our strategy will deliver profitable long-term
growth and that we will be able to mitigate new material shortages
and cost inflation through the effective management of the
supply chain.
Given the strength of recent and current trading the Board’s
expectations for the current year are now ahead of its previous view.
Vanda Murray OBE
Chair
Marshalls plc | Annual Report and Accounts 2021
11
Strategic Report Chief Executive’s Statement
Strong trading performance
in 2021 with record sales and
adjusted profit exceeding the
pre-pandemic levels from 2019
Market conditions remain
supportive, despite challenging
supply chain pressures.”
Summary
• Strong trading performance with
adjusted and statutory operating
profit of £76.2 million (2019:
£73.7 million)
• Adjusted EBITDA of £107.1 million, 3%
ahead of 2019
• Net debt of £41.1 million (2020:
£75.6 million; 2019: £60.0 million)
• Dual block plant investment at St Ives
progressing well in line with plan
• ESG strategy generating good
sustainable commercial opportunities
• Trading in 2022 has continued
strongly with healthy order books
Introduction
Market conditions have remained supportive over the last
year, despite increasingly challenging supply chain pressures.
The Group has performed well and delivered a record trading
performance, despite experiencing issues with both raw material
and labour shortages. These operational challenges have given
rise to significant cost inflation, additional overtime costs to cover
COVID-19 related absenteeism and some customer project delays.
Nevertheless, demand for our products has remained strong, and
cost increases were recovered through a mid-year price increase
and a further price increase has been implemented successfully
in January 2022. We have strong supplier relationships, and our
centralised procurement team is actively managing our supply
chain to create flexibility and reduce risk. Trading in the first two
months of 2022 has continued to be positive, with revenue growth
of 13 per cent, and the order books remain strong.
We have continued to prioritise health and safety, and we are
committed to taking the safety and wellbeing of our employees
and other stakeholders to the highest possible level. We have
maintained robust health and safety procedures throughout our
manufacturing, logistics and office-based operations. In 2021,
we launched our Health and Employee Wellbeing Strategy and
in 2022 we will be introducing a new mental health and wellbeing
programme. Our goal is to recognise employee ill health as early as
possible and to provide the best support that we can. Our dedicated,
external and confidential Employee Assistance Helpline has actively
supported colleagues who have been working from home.
2021 trading summary
Group revenue for the year ended 31 December 2021 was £589.3 million
(2020: £469.5 million; 2019: £541.8 million), which is 26 per cent
ahead of the 2020 comparative and 9 per cent ahead of the same
period in 2019. Revenue growth in the second half of the year was
increasingly strong and was 11 per cent ahead of the comparative
figures for 2019.
Revenue in the Domestic end market, which represented
approximately 28 per cent of Group sales, was £167.0 million.
This represents an increase of 30 per cent compared with the prior
year, and is up 18 per cent compared with the same period in 2019.
Marshalls’ register of approved installers at the end of February
2022 revealed order books of 17.4 weeks (2021: 19.4 weeks) which
compared with 16.7 weeks at the end of October 2021 and remains
at historically high levels. Private Housing “repair, maintenance and
improvement” continues to be strong and is the main driver in the
UK Domestic end market. There continues to be strong demand
for DIY projects, with customers spending more time at home
and investing in home and garden improvements. This demand
is underpinned by unprecedented savings accumulated during
the pandemic.
Revenue in the Public Sector and Commercial end market was
£389.1 million and 66 per cent of Group revenue. This represents an
increase of 26 per cent compared with the prior year, and is up 4 per
cent compared with the same period in 2019. The comparison with
2019 increases to 6 per cent after adjusting for the impact on sales
caused by the planned reduction in Marshalls Mortars and Screeds
sites in the first half of 2020. The Group continues to focus on those
market areas where future demand is expected to be greatest,
including New Build Housing, Road, Rail and Water Management.
Infrastructure is also expected to be a key element of medium-term
construction growth. The ABI lead indicator indicates a strong
outlook for commercial contract work in 2022.
12
Marshalls plc | Strategic Report
There continues to be a focus on innovation and new product
development across all parts of the Group. The development
pipeline continues to be strong, and the Group is committed
to providing sustainable, high‑performance product solutions.
Investment is being driven by our sustainability agenda and by
anticipating future trends. Two examples are our new facing
concrete bricks which have significantly lower product carbon
footprints and new granite choices which have lower Ethical Risk
Index scores. We have further reduced carbon emissions in 2021,
well in line with our net zero target.
Another example of sustainable product development is our new
Concrete Cycle Segregation Unit, which is a solution that allows
the public to cycle and walk safely in an urban environment. This
product encourages both methods of commuting whilst enabling
local authorities to plan the public transport systems more
efficiently and to reduce the overall carbon footprint. We continue
to bring new products to market which are less carbon intensive to
produce or made from recycled materials.
Organic growth will continue to be supported by targeted
acquisitions. We will continue to focus on acquisition targets in our
key growth areas of Water Management and New Build Housing.
Health and safety
We continue to be committed to ensuring the health, safety and
wellbeing of everyone who works with us and for us. Marshalls’ five-
year health and safety strategy is aligned with the business strategy
and clearly demonstrates the commitment of the business to take
the safety and wellbeing of its people 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.
Marshalls’ 5 year Strategy and ESG agenda
Our overall strategy continues to focus on the maintenance of a strong
balance sheet, a flexible capital structure and a clear capital allocation
policy. The Group’s strong ESG agenda is fully integrated into our
business operations and our eight strategic growth pillars. We believe
that our ESG strategy continues to generate opportunities which,
going forward, will be a source of significant competitive advantage.
We are the first company in our sector to have emission reduction
targets approved by the Science Based Targets initiative and we
have a clear, published roadmap to achieve net zero by 2030. Our
roadmap includes the following specific targets:
• bio LPG for all our forklift trucks by 2022;
• removal of packaging ovens by 2025;
• all company cars to be electric or hybrid by 2027; and
• all manufacturing sites to use solar panels by 2030.
This is set out in more detail in the ESG section of the Strategic
Report on pages 50 to 69.
Martyn Coffey
Chief Executive
Revenue in the International business, which includes Marshalls NV
in Belgium, was up 6 per cent compared with the prior period and
23 per cent compared with 2019. International revenue represented
6 per cent of Group sales in the period. The Group continues to
develop its international supply chains to ensure that they remain
sustainable and aligned with market risks and opportunities. Freight
costs from overseas have been particularly challenging, with the
cost of container transport increasing significantly in the last year.
The breadth of our operations continues to be a strength and we
continue to be able to balance the demand for imported stone with
quality materials from our UK‑based quarries.
2021 results
Adjusted EBITDA was £107.1 million (2020: £57.6 million;
2019: £103.9 million). The Group’s adjusted operating profit was
£76.2 million (2020: £27.2 million; 2019: £73.7 million) and was
3 per cent ahead of the 2019 comparative. The operating profit
margin of 12.9 per cent for the year ended 31 December 2021
(2020: 5.8 per cent; 2019: 13.6 per cent) has been adversely
impacted by the temporary effect of supply chain issues and by
increased levels of overtime required as a consequence of labour
shortages and absenteeism during the COVID-19 pandemic.
The reported operating profit for the year ended 31 December 2021
is after a number of adjusting items. Once combined, the net impact
on the reported operating profit was not material. The adjusting
costs are explained in more detail in the Financial Review on pages
44 to 49 and in Note 4 on pages 142 and 143.
Adjusted profit before tax was £72.1 million, before a non-cash
pension interest charge of £2.8 million required under IAS 19. The
additional pension liability is explained in more detail on page 46.
Statutory profit before tax was £2.8 million lower than the adjusted
result at £69.3 million, reflecting the additional pension interest
charge of £2.8 million (2020: £22.5 million; 2019: £69.9 million).
Earnings per share was 27.5 pence (2020: 1.2 pence), which
increases to 28.6 pence on an adjusted basis after adding back
the impact of the pension interest adjustment.
Capital discipline remains a key priority, and the Group’s strong
cash generation has continued. Reported net debt at 31 December
2021 was £41.1 million (2020: £75.6 million; 2019: £60.0 million).
On a pre-IFRS 16 basis, there was net positive cash of £0.1 million
at 31 December 2021 (2020: £26.9 million net debt; 2019: £18.7 million
net debt). Due to the supply chain challenges and raw material
shortages experienced, we increased our investment in inventory
driven by higher shipping costs on imported product lines and
our desire to improve availability and customer service. Inventory
at 31 December 2021 was £107.4 million (2020: £89.8 million;
2019: £89.2 million).
Operational initiative
During the year ended 31 December 2021, capital expenditure has
amounted to £21.9 million, which has fallen short of the £30 million
originally planned for 2021. Supply chain issues experienced during
the year have led to delays in certain of our capital expenditure
projects. We continue to generate a good pipeline of capital
investment projects that will drive future organic growth, and we are
now planning for capital investment of around £35 million in 2022.
The construction of our flagship dual block plant at our St Ives site
is progressing in line with plan and the overall three-year investment
will be around £24 million, and will incorporate the latest advanced
technologies. It will be the first facility of its kind in the UK, and
the project will significantly increase capacity, improve efficiency,
enable multiple secondary finishing and facilitate the launch of new
products. The plant is being designed to manufacture walling, block
paving and paving simultaneously which will double the output with
the same labour as a single plant. Further details of this project are
included in the case study on page 28.
Marshalls plc | Annual Report and Accounts 2021
13
Strategic Report Q&A with the Chief Executive
Sustainability is embedded in our
strategy and is a driver for growth
We have committed
to reaching net zero
by 2030 and becoming
a net positive company.”
1. What are the key challenges that Marshalls has
5. How has Marshalls been working to enhance the
encountered on the journey to meeting its carbon
reduction targets?
We started on our sustainability journey over 20 years
ago – and we started reporting our carbon emissions
back in 2004. A key challenge has been the speed at which
governments and our industry have moved in order to make
carbon reduction a priority. We set science‑based targets
in 2020, and remain the only UK business in our sector to
have done this.
2. Is there any scope to increase Marshalls’ carbon
reduction ambitions?
We have committed to reaching net zero by 2030 and to
becoming a net positive company. I would of course like
to see us reach our target earlier, but our carbon reduction
targets are already aligned to a 1.5°C pathway. We have
a plan in place and, though our goal to be net positive is
ambitious, we strongly believe that putting people and
planet first is the right way to operate as a business.
3. Can you highlight any new successes in how
Marshalls has tapped into opportunities for
sustainable product development?
Our product carbon footprints have recently been updated,
and they show that some of our products are low or ultra-
low carbon. We have worked hard to reduce our carbon
emissions, and our product portfolio includes permeable
paving that alleviates flooding and concrete bricks that
have a much lower carbon footprint.
4. What is Marshalls doing to respond to the growing
emphasis on biodiversity and nature-related risk?
Biodiversity is an area of focus for us. We operate a number
of stone quarries across the UK, and we adhere to minerals
planning and environmental legislation to provide quality
quarry restoration. Whether it’s planting trees or developing
species-rich meadows, it is part of what we do to protect
the natural environment.
experience of its employees?
People and talent development is a priority in our 5 year
Strategy. It is the people that make our business, and I believe
that our employees are key to future success. Our aim is to
continue being an employer of choice by creating a workplace
where people can develop and achieve. Our people plan covers
recruitment, diversity and inclusion, training and progression,
through to employee experience and communications. During
2021, we have increased the number of apprenticeships,
introduced our own Driver Academy, and significantly enhanced
our benefits, wellbeing and reward programmes.
6. What progress has been made to improve on
Marshalls’ approach to diversity and inclusion within
the business?
The aim of our Diversity, Equity, Respect and Inclusion (“DERI”)
strategy is to open up dialogue and engage with all of our
people. We want to continue making Marshalls a diverse and
inclusive organisation. Our DERI plan has many different focus
areas, covering everything from gender equality through to
protecting and respecting different beliefs. As part of our work
on gender equality, in 2021 we submitted data to the Workforce
Disclosure Initiative (“WDI”) in order to improve corporate
transparency and accountability in this area. We continue to
work with the UN Global Compact on our Target for Gender
Equality, and as signatories of the Women’s Empowerment
Principles (“WEPs”) we are working to support and promote the
rights of women and girls. Like the rest of the industry, we have
more work to do. We have further increased our DERI focus
for 2022 and beyond because we recognise and believe in the
value of being an inclusive and diverse organisation.
7. Does Marshalls see any opportunity in adopting
a circular economy approach to the business?
The circular economy makes business sense. Our approach
is to look at our processes and the materials we use in order
to minimise our overall impact. This ranges from using
secondary materials in our concrete block paving right through
to the processes at our new dual block plant and our plastic
packaging reduction project.
14
Marshalls plc | Strategic Report
8. How is Marshalls working together with its
suppliers and partners to improve sustainability
in its supply chains?
Working with our supply chain is really important to us,
especially with the challenges we have faced in the last
couple of years. Our procurement systems, human rights
due diligence and risk analysis processes ensure we
have open dialogue with all our suppliers. We continue
to maintain a high level of engagement with customers
and stakeholders to further the sustainability agenda
in our sector.
9. What impact has COVID-19 had on your human
rights due diligence activities in higher-risk
overseas supply chains?
We have built a strong network of trusted partners and
human rights actors globally over many years, including the
United Nations International Labour Organisation and the
International Organisation for Migration. The challenges
presented by the pandemic have meant that we’ve drawn
upon our networks, enabling us to understand the impact
upon workers and communities, and how we can best
respond, even though we haven’t been able to be there
ourselves. COVID-19 has also fuelled further enhancements
in our internal human rights due diligence systems and
processes, and driven us to better harness technology to
help us undertake enhanced supply chain mapping and
develop a live monitoring app.
10. What initiatives does Marshalls have in place to
prevent complacency around its health and safety
standards in the workplace?
The global pandemic continues to bring challenges, and we
continue to work with our teams to ensure the safety and
wellbeing of our colleagues – whether in our manufacturing
sites or working from home. We launched our Health and
Employee Wellbeing Strategy, and our work on behavioural
safety continues to move forward with the SLAM (“Stop,
Look, Assess, Manage”) toolkit in our Logistics division and
our new Fair & Just Approach Framework which is key to
developing and sustaining a positive safety culture.
Case study
The Marshalls Concrete Cycle
Segregation Unit
Manufactured in Britain, our versatile concrete kerb unit is
designed to act as a demarcation tool to safely segregate
cyclists from trafficked areas.
Its 45-degree splayed kerb profile on the cycleway side
provides a soft transition between the carriageway and the
cycle lane. This means that cyclists of all abilities can use
the cycleway without the fear of colliding with a steep kerb
or catching a pedal.
The outside kerb offers a bullnose profile designed to stop
vehicles mounting the unit and potentially endangering
the cyclist.
Designed to be installed in new or existing schemes where
the highway requires a redesign, the Cycle Segregation Unit
ensures that cyclists feel safe and at ease when commuting,
and consequently encouraging an increase in this mode
of transport.
Marshalls plc | Annual Report and Accounts 2021
15
Strategic Report Growth Markets
We continue to operate in those market
areas where demand is forecast to be
strongest
The CPA forecasts that construction demand will remain strong including in
Infrastructure, Housing and Housing RM&I.
Construction market overview
The CPA winter forecast showed a slight weakening in forecast
construction output for 2022 and 2023 compared with its previous
forecast. The CPA also estimates that total construction output will
have risen by 13.3 per cent in 2021. Construction demand looks set
to remain strong with investment commitments already made in
Housing and RM&I. However, as shown by the graph below, Marshalls
continues to operate in those market sectors where demand is
forecast to be strongest. These include Infrastructure, Private
New Housing and Private Housing RM&I. In its forecast the CPA
reported that demand continues to be strong across these sectors.
Private Housing RM&I activity is forecast to be broadly flat due to
being constrained by supply. The capacity of small contractors that
primarily carry out the RM&I work is already being severely tested
from the perspective of labour and availability.
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Public Sector and Commercial
Strong outlook for commercial contract work
Whilst the COVID-19 pandemic caused significant decline in
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predicted to decline, but industrial units and warehousing remain
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Strong outlook for
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Total MAT growth % v. MLY
There continue to be supply chain uncertainties and constraints
that may restrict growth over the medium term. These include
raw material and energy cost inflation together with reduced raw
material and labour availability and skills shortages. The CPA
predicts that these issues will persist in the short term and may
lead to delays in completing projects. The supply issues have been
particularly affecting small contractors as they have less ability to
plan or purchase in advance and are impacted more by inflation.
Skilled labour shortages continue to be a concern across the sector.
As a consequence of these uncertainties, the CPA has revised down
its construction output forecast for 2022 from 6.3 per cent in the
summer of 2021 to 4.3 per cent in the winter forecast. This still
represents robust growth and with this increase, total construction
output in 2022 would be 2.5 per cent higher than in 2019.
In the medium term, rising inflation concerns increase the
probability that the Bank of England will continue to raise interest
rates, which may increase household costs and suppress
confidence and consumer demand.
16
Marshalls plc | Strategic Report
NHBC – new dwelling registrations by type
MAT share of total registrations by type of dwelling
This chart shows that while residential housing is growing, the mix
of dwelling types is moving towards traditional housing and away
from flats. This is beneficial to Marshalls products.
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Key sector for Marshalls
Opportunities and challenges
Our strategic priorities
Private Housing
• Key strategic growth area
• Growth of 17 per cent in 2021
• Strong brand presence and
breadth of offer
Private Housing RM&I
• Main driver for UK Domestic
• Wealth and savings remain strong in the
key over-55 age category
• Consumer confidence and price inflation
are key factors
Infrastructure
• Expected to be a key driver for UK
construction growth
• Infrastructure activity forecast to
increase by approximately 10 per
cent in 2022
• Private housing starts expected to grow
• Strategic relationships with
by 7 per cent in 2022
housebuilders and merchants
• Sustainable materials and innovative
new products (e.g. the Marshalls
concrete brick)
• NPD and the supply of quality products
• Predicted 201,000 dwellings to be
completed in 2022
• Focus likely to be on houses with
outside spaces, rather than flats
• ABI residential contract awards
increased during 2021 HY2
• House price inflation may impact
consumer confidence and spending
• Planning issues continue to be a
potential constraint
• Forecast output flat for 2022 and
• Network of domestic installers to
slightly down for 2023; however, this is
from a very high growth figure of 17 per
cent in 2021
drive growth
• Digital investment to drive the
customer experience
• High demand for better “outdoor
spaces” is continuing
• Risk that inflation may start to
impact demand
• Households have accumulated £200bn
of savings in the last 18 months (“BOE”)
• Capacity of small contractors
may be tested due to material and
labour shortage
• Growth to be driven by major projects
(such as HS2) although there is a risk
that such projects may exacerbate
supply issues for other parts of
the industry
• High levels of activity envisaged for
Road and Rail
• We aim to lead the social and
environmental agenda
UK Domestic
Domestic demand remains strong. COVID-19 impacted working patterns have increased demand for home and garden improvements
underpinned by unprecedented savings values. The GfK Consumer Confidence amongst £50k+ households was +5 in December 2021,
a -7 point increase from -2 in November 2021 and the highest level since February 2019.
GfK consumer intentions
– household income £50k+
Registered installer order book – October 2021
Recalculated order books with increased spread data
after October 2017
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Marshalls plc | Annual Report and Accounts 2021
17
Strategic Report
Business Model
Creating better futures for everyone
Our capital
Our business
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
Human
The Group has an experienced workforce
of 2,643 employees with specialist skills and
a high level of engagement
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
Innovation
We are committed to the
development of innovative
processes and equipment
and to the delivery of
innovative product solutions
Related risks
• Competitive markets
• Cost inflation
• Security of raw materials supply
• Climate change
D i g i t a l transformation
I n novation
urcing
o
S
M
a
n
u
f
a
c
t
u
r
i
n
g
Customers
Distribu t i o n
Sustainab i
i
l
t y
Digital transfor m a t
i o n
Sustainability
We are committed to
ensuring that our ESG
credentials are at the heart
of the Marshalls brand
Related risks
• Security of raw materials supply
• Cost inflation
• Ethical
• Climate change
Doing things The Marshalls Way Read more on page 22
18
Marshalls plc | Strategic Report
Our business
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.
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
• Weather
• Cyber security risks
• Competitor activity
• Legal and regulatory
Sourcing
Our main raw materials are
cement, sand, aggregates and
pigments – the majority of
which are UK sourced
Distribution
Our operations are part of a
national network and 95 per
cent of our customers are less
than two hours away. We have
our own fleet
Manufacturing
We have well-invested sites
and manufacture landscape,
driveway and garden products
from a range of materials,
principally concrete and
natural stone
Digital transformation
Related risks
• Macro-economic and political
• Security of raw material supply
• Cyber security risks
• Environmental
• Ethical
• Climate change
Related risks
• Macro-economic and political
• Road infrastructure
• Labour availability
• Cost inflation
• Environmental
• Climate change
Related risks
• Competitive activity
• Threat from new technologies
and business models
• IT infrastructure
• Legal and regulatory
Our customer focused
investment in digital technology
is transforming the customer
experience and advancing the
business model
Related risks
• Macro-economic and political
• Cyber security risks
• IT infrastructure
• Legal and regulatory
Outcomes
Stakeholder outcomes
Shareholders
Cumulative growth of
dividends of 10.4% (pre-
supplementary) over the
last five years
Dividend per share
14.3p
Customers
We aim to provide an
outstanding customer
experience at every step
in the customer journey
Customer
service index
98%
Employees
DERI strategy and
employee engagement
measurement
Active apprenticeships
in 2021
102
Suppliers
Active membership of
Supply Chain Sustainability
School – leading role in
upholding human rights at
home and overseas in our
supply chains
Suppliers trained
on anti-bribery and
modern slavery
70%
Communities
and environment
Positive impact, with
direct investment in
the community
Reduction in carbon
footprint since 2008
50%
Government and
regulatory bodies
Responsible business
commitments (e.g.
Living Wage)
8 years
of being Fair Tax
Mark certified
Read more about our stakeholder
engagement on pages 22 to 29
Strategic corporate
objective outcomes
• Shareholder value
• Sustainable profitability
• Relationship building
• Organic expansion
• Brand development
• Effective capital structure
and control framework
Read more about our strategy
on pages 30 and 31
Doing things The Marshalls Way Read more on page 22
Marshalls plc | Annual Report and Accounts 2021
19
Strategic Report
Our Section 172(1) Statement
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 2021.
Pages 24 and 29 provide details of who our stakeholders are, and how the Board and the business engage with them, and examples of the
influence this has on our strategy, day-to-day business management and the way the Board makes decisions.
The Board directly engages with our employees and shareholders throughout the year. This is through well-established mechanisms for
engagement, details of which are set out on pages 24 and 25. The Board occasionally engages directly with customers on site visits but, in
general, its engagement with our other stakeholders is mainly indirect. The Executive Directors ensure the Board is kept fully informed of any
material issues with other stakeholders and the Board receives presentations and reports from senior management as part of updates on
how the business is progressing with its strategic priorities. Further details of how we engage with our stakeholders are set out on page 22.
It is through this combination of direct and indirect engagement that the Board is able to fulfil its Section 172(1) duties and ensures decision
making is driven by a balanced consideration of what makes us successful in the short term and sustainable in the long term. Although
there are established parameters for decisions that are reserved for the Board, the business engages openly and transparently with the
Board, to ensure that key decisions that are technically outside these established parameters have the benefit of the Board’s knowledge
and experience.
In taking key decisions, the Directors of the Company considered the factors specified in Section 172(1) of the Companies Act 2006
(the “Act”) including:
S172
Relevant disclosure
Reference
The likely long-term
impact of any decisions
The Board sets the Group’s purpose, mission and strategy and ensures they are
aligned with our culture and look to the future: “to create better spaces and futures for
everyone: socially, environmentally and economically”.
Page 2
The annual strategic reviews conducted by the Board (the most recent being in
November 2021), and the consideration of at least one of our strategic growth pillars
at each Board meeting, focus on the long‑term sustainable success of the Group and
our impact on key stakeholders.
Pages 30 and 31
The Board’s risk management procedures identify the potential consequences of
decisions in the short, medium and long term so that mitigation plans can be put in
place to prevent, reduce or eliminate risks to our business and wider stakeholders.
Consideration of risk is integral to, and not separate from, all business decisions.
Pages 34 to 43
The Board has adopted a clear and consistent capital allocation policy, with good
organic and acquisition investment opportunities. This demonstrates its commitment
to the development of the business over the medium to longer term.
Page 7
The interests of the
Company’s employees
Our business is underpinned by people and talent development and is committed to
diversity, equity, respect and inclusion. These are central to The Marshalls Way but we
acknowledge this as a key area of development for our business.
Pages 64 to 67
Health, safety and wellbeing within our operations is our top priority, with this being
a standing and separate item on the agenda at every scheduled Board meeting. Our
goal is continuous improvement with the achievement of annual health and safety
targets being linked to the remuneration of our Executive Directors and our senior
management team.
Pages 68 to 69
The Board monitors culture through our engagement mechanisms, namely our
Employee Voice Group which, in addition to being attended by our designated Director
for employee engagement, Angela Bromfield, is regularly attended by other Board and
senior management team members.
Page 67
Our Group Human Resources Director presents the results of our annual employee
engagement survey to the Board, together with details of the actions being taken to
address the feedback received.
Page 67
20
Marshalls plc | Strategic Report
S172
Relevant disclosure
Reference
The need to foster the
Company’s business
relationships with
suppliers, customers
and others
Customer centricity and sustainable materials supply are both strategic growth pillars
of the business.
Pages 30 and 31
Our record performance during 2021 was underpinned by regular engagement with
our customers and suppliers as we navigated the ongoing supply chain challenges
in the face of strong customer demand and the continuing impact of the pandemic.
Pages 24 and 25
We are committed to operating sustainably and ethically and, within our sector, seek
to show leadership in these areas.
Pages 50 to 67
The impact of the
Company’s operations
on the communities in
which it operates and
the environment
Our sustainability journey began more than 20 years ago and is at the heart of how
we operate our business.
Pages 52 and 53
The Board receives regular updates on our ESG programme from the Group
Sustainability Director and engages directly with shareholders through our annual
programme of meetings with shareholder governance teams.
We have an established materiality matrix based on stakeholder engagement, the
SASB Standards for Construction and the UN Sustainable Development Goals. This
supports prioritisation within our ESG programme. We have established a business
ESG Committee, with representation from across the business, that has conducted
a review of this materiality matrix during 2021. Pages 59 to 61 set out, in detail,
our ESG programme and activities, including our roadmap to net zero by 2030.
Pages 56 and 57
Pages 56 and 57
The regulatory
implications of
any decisions
Board decisions are taken with the benefit of prior consideration by experienced, well-
established, specialist functional teams and with the guidance of the Group’s General
Counsel and Company Secretary.
Page 82
Where more specialist advice is required, the Board seeks guidance from its
professional advisers.
The importance of the
Company maintaining
a reputation for
high standards of
business conduct
The Marshalls Way defines our brand and all business decisions are driven by
achieving this standard.
Page 22
Our prioritisation of the health, safety and wellbeing of our colleagues and our clear
ESG commitments underpin our goal of creating better spaces, by putting people,
communities and the environment first.
Pages 68 and 69
Our strategic growth pillars underpin our purpose, mission and strategy.
Pages 30 and 31
The need to act fairly
as between members
of the Company
The Executive Directors engage with shareholders following the publication of our
interim and final results (and periodically throughout the year) and the Board receives
detailed, real-time, investor and market feedback from the Executive Directors, our
brokers and PR advisers.
Pages 26 to 29
The Chair and the Remuneration Committee Chair meet annually with the governance
teams of our key shareholders to ensure their views are reflected in how we make
decisions, operate our business and evolve our strategy.
Pages 92 to 95
Although conducted as a hybrid meeting, our AGM provided members the opportunity
to ask questions and vote in real time to ensure maximum engagement opportunity.
Pages 113 and 114
Equality of rights attaching to members’ ensures we meet the obligation to act fairly
between them.
Pages 113 and 114
Marshalls plc | Annual Report and Accounts 2021
21
Strategic Report
Stakeholder Engagement
Our stakeholders:
Who they are, what we do and how
we benefit
The Marshalls Way
Shareholders
Communication and dialogue build
confidence in our purpose, mission and
strategy from investors
Customers
Engaging with our customers drives
specification of our innovative product
solutions for the built environment
Employees
Our two-way dialogue helps Marshalls attract,
develop and retain talented people who will
help us achieve our purpose and mission
Generate value
by sustainable
growth
Investment,
strategic guidance
and stewardship
We deliver market
leading product
innovation
Customer
loyalty, brand
preference and
profitable sales
A stretching,
exciting,
supportive and
inclusive working
environment
Diverse, talented,
engaged and
productive
colleagues
Our purpose
To create better spaces and futures for everyone: socially, environmentally and economically
We treat suppliers
fairly, building
long‑term
relationships
High-quality
goods and
services resulting
in products our
customers love
and specify
We act in
support of the
commitments
we make to
doing business
responsibly
We see the
business through
the lenses
of others
We share
knowledge and
sector-specific
expertise
Government
policy, regulatory
frameworks and
recognition
Suppliers
Dynamic dialogue has built a strong
supportive supplier base which supports
our purpose and which shares in
our success
Communities and
the environment
We have open and honest dialogue,
sharing our goals and progress in creating
better futures for everyone
Government and
regulatory bodies
We engage to build confidence in
how we operate and to support our
continuous improvement
We do the right things, for the right reasons, in the right way
Key
What we do
How we benefit
22
Marshalls plc | Strategic Report
2021 in focus
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.
During 2021, the business operated against the backdrop of the
continuing COVID-19 pandemic but benefited from the decisions
that were made during 2020 to manage its initial impact and the
medium‑term threat it presented. The processes and procedures
put in place at that time have continued to support the Board and
senior management team’s decision making throughout 2021.
Although, Section 172(1) of the Act, as a whole, sits at the top of
each Board agenda and is considered in taking key decisions, the
Board, and the business as a whole, have, during 2021, prioritised
the health and wellbeing of our colleagues and the safety of our
operations. In addition, our sustainability and ESG commitments
(pages 50 to 67), which are relevant to all our stakeholders and
increasingly important in attracting and retaining talented people,
have been an area of real focus for the Board during 2021.
The significant additional time committed by the Board and the
senior management team during the first wave of the pandemic
in 2020 has enabled the completion of a more comprehensive
strategic review in 2021. This has given us a clear vision for the
future and of how we will get there. The record performance of the
Group during 2021 validates the, at times difficult and challenging,
decisions that were made during 2020.
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 34 to 43), which have all been reviewed in light of
the Group’s performance during the year and its future growth
aspirations.
The Board has continued to engage collaboratively with the senior
management team, providing the challenge and support that
only comes where there is transparency of information and open
communication. The business has benefited from the Board’s
experience in specific areas such as marketing and employee
relations and from its increased diversity, with the Non-Executive
Directors sharing their experiences with some of our more focused
internal colleague forums. Angela Bromfield has succeeded
Janet Ashdown (following her retirement from the Board) as the
designated Non-Executive Director for workforce engagement
(page 64) and attends our Employee Voice Group, which has
evolved further during 2021. Recognising the criticality of logistics
excellence, as one of our strategic growth pillars, a Drivers’ Working
Party was also established during 2021 to enable our drivers to have
their say in the decisions we take that impact them in their roles.
Marshalls plc | Annual Report and Accounts 2021
23
Strategic Report Stakeholder Engagement continued
Our stakeholders:
How and why we engaged
Marshalls’ purpose, to create better
spaces and futures for everyone: socially,
environmentally and economically, can
only be achieved if we consider and
engage with our stakeholders.
Marshalls’ stakeholder relationships
The way we do business and make decisions in support of
our purpose and strategy can have an impact on people, both
inside and outside the business. They can affect the communities,
companies and other organisations we deal with or which
are otherwise interested in what we do and how we do it. It is
by considering these things that we have identified who our
stakeholders are.
The way in which we engage with and consider the interests
of our stakeholders is guided by The Marshalls Way. Doing
“the right things, for the right reasons, in the right way” means our
relationships with them involve open and transparent two-way
communication over a long period of time. This builds trust and
confidence which, in the long term, strengthen our brand, drive
loyalty and generate value for all stakeholders, whether it be by
operating in a more sustainable way, reducing our impact on the
environment or supporting the business with long-term capital
investment that drives our growth and shareholder value.
Marshalls engages with stakeholders in many different ways and
these interactions influence what we do every day but also how
we plan for the future. It is vital that our strategy looks inwards
and outwards to ensure the products and solutions we make
and sell have regard to the interests of all of our stakeholders.
Details of who our stakeholders are, how and why we engage
with them and examples of how we have considered their interests
in taking two key strategic decisions during 2021 are set out on
pages 28 and 29.
Links to strategic corporate objectives
Shareholder value
Sustainable profitability
Relationship building
Organic expansion
Brand development
Effective capital structure and control framework
24
Marshalls plc | Strategic Report
How we engaged
Shareholders
Business engagement
• AGM, Annual Report, trading updates and presentations
• Regular phone and video calls, face to face meetings, site visits and
investor roadshows
Investor relations website – refreshed during 2021
•
• Group Sustainability Director engages regularly on ESG and sustainability
Board engagement
• The Chair and Remuneration Committee Chair held meetings with
shareholders in November 2021
• Through regular feedback to the Board by the CEO, CFO, brokers and
PR advisers
Investor site visits and written consultations (e.g. in relation to policy)
•
• At the Company’s AGM
Links to strategic corporate objectives
Suppliers
Business engagement
• Centralised procurement for the entire Group enabling optimal buying
power and attention from suppliers
• Effective, regular and honest communication with suppliers – underpinned
by Code of Conduct and other core Marshalls policies
• Payment of invoices made consistently in accordance with agreed
payment terms
• Transparent formal tenders and negotiations
• Contracts agreed on mutually beneficial terms
• Focus on total end‑to‑end supply chain including inbound and outbound
logistics, materials, manufacturing processes and efficiency, network
design, packaging, indirect costs, etc.
• Supply chain risk mapping processes and regular audits of the highest
supply risks based on the ETI Base Code
• Strategic partnerships with NGOs, governmental institutions, ethical
regulators and charities
Board engagement
• Board presentations on growth pillars dependent on our engagement and
relationships with key suppliers
• Board participation in our strategic review
• Feedback reports on supply chain compliance
• Regular supply chain and business continuity internal audit reviews
• Annual consideration and approval of our Modern Slavery Act statement
• Reports on ethical sourcing and ETI Base Code
Links to strategic corporate objectives
Customers
Employees
Business engagement
• Dedicated customer experience team and improvement plan supported
by third party professionals
• Service‑level agreements and quality standards in customer agreements
• Further development of our websites and digital solutions focused on the
customer to aid ease of purchase
• Consumer support to find an installer and find a stockist
• Customer surveys, customer visits and a commitment to deliver
on feedback
• Sustainability awareness training educating customers on our
commitments and products
• Awards ceremonies for professional installers and design competitions
for commercial specifiers
• Design and engineering support for Domestic and Commercial customers
• Continuous professional development (“CPD”) for specifiers and influencers
• Training sessions for professional installers and resellers
• Research sessions and focus groups to help with product development
• On-site discovery to watch how our products are used to help us develop
new solutions
Business engagement
• Employee Voice Group represents all business areas and levels
• Creation of Drivers’ Working Party to engage on decisions and actions
impacting these colleagues
• Regular communication across channels – supporting those employees
working remotely and those without access to Company email
• Senior management team site visits, when permitted, and engagement
through our Leadership Connected Group
• Development training and succession planning
• People and culture strategy to unlock potential
Board engagement
• Board participation in the Employee Voice Group via Angela Bromfield,
our designated Director. Chaired by Group HR Director, with other Board
and senior management team members attending regularly
• Board site visits
• Board attended strategy review
• Annual reviews of HR and Group reward strategy
• Review of senior management team succession planning and wider talent
• Significant and constant research on our brand preference
development initiatives
Board engagement
• Board presentations on customer centricity and brand preference
• Participation in our strategic review
• Customer visits and meetings with sales teams
• Receiving updates on and engaging with our customer experience programme
•
Installer and site visits seeing practical application of our products
Links to strategic corporate objectives
• Monthly health and safety Board reviews
• Active engagement in workforce diversity, reward and recruitment
Links to strategic corporate objectives
Communities and the environment
Government and regulatory bodies
Business engagement
• Continue to support the UN Global Compact’s commitment
to corporate sustainability
• Work with the Carbon Trust to analyse our product footprint
• Regular dialogue with local community groups
• £103,500 raised for charitable and community causes in 2021
Board engagement
• Board is actively engaged with the Group’s ESG and sustainability strategy,
including the setting of science‑based targets
• Board receives regular updates on our ESG programme, commitments
and progress against targets
• Chair, with our Group Sustainability Director, held ESG focused meetings
with shareholders in November 2021
• ESG measures included within Executive Director incentives
Links to strategic corporate objectives
Business engagement
• Regular dialogue with Government, regulators and industry groups
• Active membership of the CPA and Mineral Products Association
• 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 strategic corporate objectives
Marshalls plc | Annual Report and Accounts 2021
25
Strategic Report Stakeholder Engagement continued
Our stakeholders:
How and why we engaged
The influence this has
Strategy
Effect
• Engagement with our stakeholders ensures that our strategy
has regard to their interests and reflects how these change
over time.
• It ensures our customers understand that a relentless pursuit
of achieving the highest possible customer satisfaction is at
the core of our “customer centricity” programme, which is one
of our eight strategic pillars.
• Our ESG principles and responsible business practices
provide the foundation for long-term sustainable growth and
are central to our purpose.
Board decision making
Effect
• The Board made a number of key decisions during 2021 that
required a balanced consideration of our strategic growth
pillars, the long-term sustainable growth of our business and
the interests of stakeholders.
• Whilst a number of these decisions have been driven by
those matters which are formally reserved for the Board, the
Executive Directors, exercising their judgement, and in the
spirit of transparency, engage the Board on other business
critical decisions. This is consistent with The Marshalls Way
and we feel this ensures we are operating with the highest
standards of governance at all times.
Outcome
• We completed a strategic review in November 2021, reflecting
not only on the impact of the pandemic but on whether our
business is positioned to meet the big societal challenges
of the future. We committed to a 2030 net zero target.
• We have achieved record performance during 2021 in spite
of the supply chain and people challenges we have faced.
We have continued to listen to our customers, acknowledging
their disappointment at times regarding availability and
price rises.
• Our ESG Report on pages 50 to 67 articulates our transparent
approach to sharing details of our progress with our ESG
objectives. We have provided details of how we measure
progress but acknowledge that we need to re-evaluate
this annually to ensure the measures we choose provide
meaningful indications of our commitments and progress.
Outcome
• The Board approved the recommencement of dividends to
shareholders for both the final dividend for the year ended
31 December 2020 and the interim dividend for the year
ended 31 December 2021. This decision was taken only after
the repayment in full by the Company of the money claimed
from the Government’s Coronavirus Job Retention Scheme
and with the Board having assessed the capital requirements
of the Group at the time the dividends were declared.
• The Board approved the Group’s multi‑million‑pound
investment in a new dual block plant at our St Ives
manufacturing site that underpins a number of our strategic
growth pillars including our commitment to new product
development. The investment secures the long‑term future
of the site and will predominantly serve our customers in the
South of England. It also supports our supply chain partners
which will provide the machinery and raw materials for
production. Further details are set out on page 28.
• The Board approved the Group’s multi‑million‑pound
investment in the purchase of new commercial fleet vehicles
where the key considerations were whether to buy or lease the
vehicles and the opportunities to maximise new technology
and reduce carbon emissions, where viable. Further details
are set out on page 29.
26
Marshalls plc | Strategic Report
Dynamic business management
Effect
• During 2021, regular engagement with our customers has
managed their expectations in the face of strong demand
for our products and mitigated complaints.
• The Board and senior management team have listened to
colleagues throughout 2021, recognising the challenges they
have faced whether as a result of working conditions during
the pandemic or market pressures or as a result of the impact
on them of the way in which we have managed the business.
• Ensuring all colleagues have a voice is critical to the
achievement of our purpose and to the preservation of our
culture and values.
• We reinstated our dividends to shareholders following a
period of careful capital management by the Board, ensuring
the business remained on sound financial footing during the
height of the pandemic, our focus being not only short‑term
cash flow security but ensuring we continued to invest in the
future growth and development of the business.
• Throughout 2021, we have worked hard to ensure we have
the best quality and value raw materials and resources we
can source. In addressing security of supply, we maintained
high supplier standards to ensure that our materials are
sustainable and ethically sourced. We continued to undertake
robust and effective human rights due diligence and
monitoring in the high-risk areas of our supply chain.
Outcome
• We achieved record performance during the year despite
the challenging environment. We have sought additional
feedback from customers through targeted pulse surveys
so we could respond quickly to these challenges. In the short
term, we have provided explanations to customers regarding
root causes and, in the long term, we have reflected on how
these challenges impact our long‑term objectives under our
customer centricity growth pillar.
• We achieved an employee Net Promoter Score of 7.6
(0.3 above industry benchmark).
• Our Employee Voice Group has contributed to decisions
and discussion on people change at Marshalls, most
notably our “standardisation programme”, which aims to
create fairness and consistency in the terms and conditions
of employment. Implementing this programme attracted
a great deal of, sometimes negative, attention from both
colleagues and trade unions. At each stage, we listened and
engaged further, ultimately helping us to navigate this major
change programme.
• We created a Drivers’ Working Party, responding to the
specific concerns of our drivers regarding pay and working
conditions. We introduced enhanced training, joining and
retention bonuses and significantly increased driver pay
reflecting our desire to attract, retain and develop the
best employees.
• We have retained a stable and supportive shareholder base
and, unlike many in the sector, we have done so without
having to seek any additional financial support from them.
• The Board has supported the Group entering into longer‑
term supply contracts during the year for key materials
that support sustainable production in the medium to long
term. The availability of materials underpins our ability to
meet customer demand and, as a general rule, contracts are
with trusted, long-term, suppliers which have a track record
of delivering and also benefiting from their relationship
with Marshalls. Securing key materials for our sites gives
us greater assurance around the viability of the sites and
greater job security for our employees.
Marshalls plc | Annual Report and Accounts 2021
27
Strategic Report Stakeholder Engagement continued
Board decision:
Dual block plant investment
Background
Production expertise, capacity, innovation and sustainability
are what drive our competitive advantage and brand preference.
Throughout our history, we have looked for opportunities to
invest in new, efficient manufacturing techniques supported
by our in-house technical expertise. We have evolved our offer
to meet changing customer tastes and specifications and the
need for innovative solutions.
Our c.£24 million investment in a dual block plant at our St Ives
manufacturing site represents one of the most significant
capital investments in Marshalls’ history. This investment
delivers a unit capable of manufacturing twice the volume
of a traditional plant with the same number of people.
Board role
The Board considered the proposed investment in April 2021.
The Board challenged every key aspect of the project including
our approach to health and safety, the environmental impact
(including the extent to which allowance had been made
for new “green” technology), the supplier risks (given the
proposed configuration of the plant would involve machines
being supplied from a number of international suppliers),
and our consideration of other key stakeholders, including
our employees, together with the overall financial viability of
the project.
Stakeholder considerations and impacts
Employees – We consulted with key employees
(including machine operators) who influenced many technical
improvements and requirements, including the final design of
the plant’s batching system. A 3D model was created facilitating
full participation in creating the specified design and layout.
Communities and the environment – Reflecting the Group’s
sustainability commitments, the design enables the Company
to take advantage of new technologies, including carbon
capture, meaning we can offer alternative, lower-carbon, more
environmentally responsible and differentiated products.
Customers – This investment enables us to improve our
offer and service to our customers. Engagement with our
sales and marketing teams ensured the investment addresses
current and future customer product requirements. We also
worked with product development specialists and customer
focus groups to incorporate product finishing technology,
allowing us to replicate the aesthetics of a number of globally
sourced products, bringing with it the opportunity for us
and our customers to significantly reduce our respective
carbon footprints.
Suppliers – We engaged at length with each of the suppliers
whose machines are integral to the processes incorporated
within the dual block plant design (e.g. batching, curing
and secondary processing) to ensure maximum flexibility
and efficiency in the designs, in addition to supporting the
product innovation that drives our competitive advantage and
brand preference.
Shareholders – With the Board, we considered the scale
of the investment and the projected benefits and financial
returns in order to assess whether it was an effective use of
our capital and supported our strategic objectives. In seeking
approval from the Board, measurable performance targets and
benefits were included in the proposal supporting the Board’s
assessment of whether this investment is good value for our
shareholders and supports long-term sustainable growth.
The Company worked with energy specialists in incorporating
the installation of a solar array system at our St Ives site.
We estimate this will contribute over 17 per cent of the site’s
current electricity usage. This fits with Marshalls’ aim to install
renewable power on all major production facilities by 2030.
Outcomes and decisions
The Board unanimously approved the proposed investment in
April 2021 with a request that it receives regular updates on
progress with the project including on the realisation of the
returns and benefits anticipated in the proposal.
Links to strategic
corporate objectives
Impact on
business model
Shareholder value
Customers
Sustainable profitability
Sustainability
Organic expansion
Manufacturing
Brand development
Distribution
Find our strategy
on page 30 and 31
Find our business model
on pages 18 and 19
28
Marshalls plc | Strategic Report
Board decision:
Investment in new vehicles
Background
Our ability to deliver our own products to our customers is a
key part of our service proposition and sits within our logistics
excellence strategic growth pillar. We operate our own fleet,
supplemented by third‑party logistics contractors as needed.
As part of our fleet replacement strategy, we regularly assess
future business requirements, looking not only at fleet that
requires renewal, but also opportunities to increase our owned
fleet. Within our Marshalls Mortars and Screeds business, the
requirement was for thirteen replacement and two additional
vehicles for delivery in 2022. Within Marshalls’ Landscape
Products business, we were seeking an additional ten vehicles.
In addition, we wanted to replace four short-term hire vehicles
with Marshalls owned equipment. The choice between
buying or leasing the vehicles was a key consideration, as
were opportunities to maximise new technology and reduce
carbon emissions.
Board role
The Board considered the proposed investment in May
2021, challenging our stakeholder considerations and how
we proposed to finance the vehicles. In particular, the Board
challenged whether these vehicles represented the latest
technology, in terms of reduced carbon emissions, and whether
our capital allocation policy needed to be reviewed in light of
our change in approach to financing our vehicle requirements.
Stakeholders’ considerations and impacts
Employees – We actively engaged with our employees
seeking their input into the vehicle specification, and looking at
alternative fuels as well as overall driver comfort, which resulted
in the loan of a demonstrator vehicle for a four-week period.
Communities and the environment – This investment supports
our policy to reduce vehicle carbon emissions within our
communities and meets the requirement of the Ultra-Low
Emission Zones (“ULEZ”) which are now very prevalent within
the towns and cities in which we operate.
Shareholders – We received proposals with a range of
financing options, including for the vehicles alone and for the
vehicles and repairs and maintenance. Careful consideration
was given to whether we should include these within contracts
or pay for servicing and maintenance when required. We
considered self-funding the acquisition of the fleet or securing
a lease with one of our suppliers. Reviewing the different criteria
against our internal measures and assessing the impact on
our cash flow were both important considerations, which could
ultimately affect shareholder value.
Customers – The vehicles we use to make deliveries to our
customers, particularly those deployed within our Mortars
and Screeds business, are highly specialised and not readily
available to hire. With new vehicle lead-times being more than
twelve months, we had to make decisions during 2021, based
on projected customer sales, to ensure that we could meet
future customer demand.
Outcomes and decisions
The Board approved the proposed investment in May 2021
but supported our decision to defer an element of what we
proposed, providing us the opportunity to take advantage of
any subsequent developments in vehicle technology without
compromising our customer offer.
Links to strategic
corporate objectives
Impact on
business model
Sustainable profitability
Organic expansion
Brand development
Effective capital structure
Customers
Distribution
Find our strategy
on pages 30 and 31
Find our business model
on pages 18 and 19
Marshalls plc | Annual Report and Accounts 2021
29
Strategic Report
Strategy
Focused strategy to deliver
sustainable growth
Growth pillars
Our objectives
What we have achieved
Future priorities
Brand preference for product specification
We aim to create product specifications by using our strong
brand, communicating well with our customer segments and
early involvement in any project
• To build relationships and increase engagement with consumers,
developers, builders and architects.
• To widen our presence and increase product specification, project
pipeline and project conversion.
• To build brand preference through NPD, marketing and innovation.
Logistics excellence
We put customer wants and needs first with direct, informed
and professional deliveries
• To deliver logistics excellence with more efficient, lower emission
vehicles and new technology across our full fleet.
Sustainable materials supply
We source and supply sustainable materials, products
and solutions
• To create a sustainable and ethical supply chain that enables
headroom for changes in demand and operates within our
carbon targets.
• Improved process mapping and measurement.
• To target greater penetration of all market sectors.
• Improved capability to leverage NPD with additional capability
• To increase our range of innovative and sustainable products.
and capacity from the dual block plant project at St Ives.
• Reintroduction of a strong marketing campaign.
• Own fleet of over 230 vehicles, with a broad range of capability to meet
• To attract and retain talent.
• To create a Driver Academy to attract and retain HGV drivers.
• To optimise our delivery systems and processes.
every delivery requirement.
• Highly trained drivers.
• Acted swiftly in response to market challenges in driver availability
and wage inflation to ensure fleet stability.
• Customer order tracking service via online portal.
• Flexibility to meet delivery lead-time needs of customers.
• Continued to source materials, despite the many supply chain
• To prioritise carbon reduction programmes.
challenges, introducing alternative sourcing, flexibility and security.
• The majority of raw materials are sourced from within the UK.
• Centralised procurement team to optimise buying power and relationships.
• To reduce reliance on cement.
• To ensure long‑term material supply availability.
• To ensure our ESG commitments are embedded
• Our ethics, human rights and environmental commitments are
in the supply chain.
never compromised.
Customer centricity
We want to have the best customer experience in the buildings
material industry
• To grow the business by providing an outstanding customer
• Extensive communication to manage the challenges of COVID-19
• To improve our customer service scores across all
service experience.
and raw material shortages.
business areas (target is to achieve a 90 per cent customer
• To improve customer ease and embed an improvement culture.
• Effective project management to measure improvement and
recommendation metric).
• To embed our “customer centric” culture.
deliver results.
• Reduction in quality complaints.
Operational excellence
We invest in our manufacturing facilities and industrial network
and use the best tools, processes and systems
• To deliver operational excellence by improving how we work
and delivering new ways of thinking.
• To effectively manage our cost base and add value.
• To improve competitive advantage whilst providing market leading
products and service.
Innovation and new product development
We deliver market leading product innovation
• To create new, innovative products that will drive the
market forward.
• To develop best‑in‑class facilities, processes and products.
• Increased output in response to high demand despite the challenges
• To continue to standardise our operations and processes
of COVID-19 and material/labour availability.
across the Group and to improve asset utilisation.
• Ongoing network development programme to improve
• To improve workforce skills and attract and retain the
operational efficiency.
best people.
• Wet press development – new investment in Scotland.
• Quality programme and ongoing reduction in waste.
• To reduce rectification and transportation costs.
• Further wet press development in other sites.
• Dual block plant project at St Ives on track – two additional CBP
• To deliver dual block plant project completion by end of 2022.
face mix lines with advanced secondary processing.
• Established Enterprise Project Management Office to co-ordinate
all project activity, efficiency and delivery.
Growth in the emerging businesses
We make selective acquisitions to complement our business
and help us advance into new and untapped areas
Digital transformation
We are continuing to invest in digital and forward-thinking
technology
• To grow our emerging businesses to help us expand into key
• Using our commercial excellence framework, plans were created
• Continuation in sales and profit growth plans.
growth areas.
• To develop clear plans for each business and deliver margin growth.
and deployed that delivered growth in both sales and profitability.
• Renewed focus on marketing, and rebranding the businesses and
focusing on the solutions they deliver.
• Development of service offer to improve ease of doing business.
• To provide an end‑to‑end digital offering and to pioneer the digital
• D365 implementation project in progress – incorporating process
• To migrate all business units from our on‑premise ERP system
standard for the industry.
• To move to B2B digital trading where this is possible with
our customers.
• To ensure the planned upgrade and move of our ERP system to
the cloud. This will bring with it a platform to digitise our processes
optimising and transforming our ways of working.
improvement and optimisation.
to the cloud.
• E-commerce platform now established – creating a cohesive,
• To develop automation and AI processes.
frictionless user experience and a new complementary sales channel.
• To further improve our B2B web offering.
• Product augmented reality experience now live on the website.
• To develop visualisation and QR technologies to enhance
• Developed digital solutions to allow for improved self-service.
customer experience.
• To optimise and digitise any offline processes.
Strategic goal to become the UK’s leading manufacturer of products for the built environment
Strategic corporate objectives
Strategic corporate objectives
Shareholder value
To deliver sustainable shareholder value
by improving the long-term operating
performance of the business.
Relationship building
To develop relationships with key
stakeholders, installers and suppliers.
Sustainable profitability
To maintain a strong market position and
grow the business’ profitability in all of the
Group’s end markets.
30
Marshalls plc | Strategic Report
Growth pillars
Our objectives
What we have achieved
Future priorities
Brand preference for product specification
We aim to create product specifications by using our strong
brand, communicating well with our customer segments and
early involvement in any project
• To build relationships and increase engagement with consumers,
developers, builders and architects.
• To widen our presence and increase product specification, project
pipeline and project conversion.
• To build brand preference through NPD, marketing and innovation.
Logistics excellence
and professional deliveries
We put customer wants and needs first with direct, informed
• To deliver logistics excellence with more efficient, lower emission
vehicles and new technology across our full fleet.
Sustainable materials supply
We source and supply sustainable materials, products
and solutions
• To create a sustainable and ethical supply chain that enables
headroom for changes in demand and operates within our
carbon targets.
• Improved process mapping and measurement.
• Improved capability to leverage NPD with additional capability
and capacity from the dual block plant project at St Ives.
• Reintroduction of a strong marketing campaign.
• To target greater penetration of all market sectors.
• To increase our range of innovative and sustainable products.
• Own fleet of over 230 vehicles, with a broad range of capability to meet
every delivery requirement.
• Highly trained drivers.
• Acted swiftly in response to market challenges in driver availability
and wage inflation to ensure fleet stability.
• Customer order tracking service via online portal.
• Flexibility to meet delivery lead-time needs of customers.
• To attract and retain talent.
• To create a Driver Academy to attract and retain HGV drivers.
• To optimise our delivery systems and processes.
• Continued to source materials, despite the many supply chain
challenges, introducing alternative sourcing, flexibility and security.
• The majority of raw materials are sourced from within the UK.
• Centralised procurement team to optimise buying power and relationships.
• Our ethics, human rights and environmental commitments are
• To prioritise carbon reduction programmes.
• To reduce reliance on cement.
• To ensure long‑term material supply availability.
• To ensure our ESG commitments are embedded
in the supply chain.
never compromised.
We want to have the best customer experience in the buildings
service experience.
Customer centricity
material industry
• To grow the business by providing an outstanding customer
• Extensive communication to manage the challenges of COVID-19
• To improve our customer service scores across all
• To improve customer ease and embed an improvement culture.
• Effective project management to measure improvement and
and raw material shortages.
deliver results.
• Reduction in quality complaints.
business areas (target is to achieve a 90 per cent customer
recommendation metric).
• To embed our “customer centric” culture.
Operational excellence
We invest in our manufacturing facilities and industrial network
and use the best tools, processes and systems
• To deliver operational excellence by improving how we work
and delivering new ways of thinking.
• To effectively manage our cost base and add value.
• To improve competitive advantage whilst providing market leading
products and service.
Innovation and new product development
We deliver market leading product innovation
• To create new, innovative products that will drive the
market forward.
• To develop best‑in‑class facilities, processes and products.
Growth in the emerging businesses
We make selective acquisitions to complement our business
and help us advance into new and untapped areas
• To grow our emerging businesses to help us expand into key
growth areas.
• To develop clear plans for each business and deliver margin growth.
• Increased output in response to high demand despite the challenges
• To continue to standardise our operations and processes
of COVID-19 and material/labour availability.
across the Group and to improve asset utilisation.
• Ongoing network development programme to improve
• To improve workforce skills and attract and retain the
operational efficiency.
best people.
• Wet press development – new investment in Scotland.
• Quality programme and ongoing reduction in waste.
• To reduce rectification and transportation costs.
• Further wet press development in other sites.
• Dual block plant project at St Ives on track – two additional CBP
• To deliver dual block plant project completion by end of 2022.
face mix lines with advanced secondary processing.
• Established Enterprise Project Management Office to co-ordinate
all project activity, efficiency and delivery.
• Using our commercial excellence framework, plans were created
and deployed that delivered growth in both sales and profitability.
• Renewed focus on marketing, and rebranding the businesses and
focusing on the solutions they deliver.
• Continuation in sales and profit growth plans.
• Development of service offer to improve ease of doing business.
Digital transformation
We are continuing to invest in digital and forward-thinking
technology
• To provide an end‑to‑end digital offering and to pioneer the digital
• D365 implementation project in progress – incorporating process
• To migrate all business units from our on‑premise ERP system
• To move to B2B digital trading where this is possible with
standard for the industry.
our customers.
• To ensure the planned upgrade and move of our ERP system to
the cloud. This will bring with it a platform to digitise our processes
optimising and transforming our ways of working.
improvement and optimisation.
to the cloud.
• E-commerce platform now established – creating a cohesive,
frictionless user experience and a new complementary sales channel.
• Product augmented reality experience now live on the website.
• Developed digital solutions to allow for improved self-service.
• To develop automation and AI processes.
• To further improve our B2B web offering.
• To develop visualisation and QR technologies to enhance
customer experience.
• To optimise and digitise any offline processes.
Enabled by people and talent management
Strategic corporate objectives
Organic expansion
To invest in organic expansion in existing
and related markets and product categories
to expand the business.
Brand development
To strengthen and extend the Marshalls
brand by focusing on innovation, service and
new product development.
Effective capital structure
and control framework
To ensure that the capital structure
remains aligned with the Group’s
corporate growth objectives.
Marshalls plc | Annual Report and Accounts 2021
31
Strategic Report
Key Performance Indicators
Measuring our performance
The Group’s KPIs monitor progress towards the achievement of its objectives.
All of the Group’s strategic KPIs have moved forward strongly during 2021.
Revenue (£’m)
Profit (£’m)
ROCE (%)
Net debt (£’m)
£589.3m
(up 9% against 2019)
Profit before tax
(before adjusting items)
£72.1m
ROCE (before adjusting items)
20.6%
Pre-IFRS 16
£0.1m
(net positive
cash)
Reported basis
£41.1m
2021
2020
2019
2018
2017
589.3
2021
72.1
2021
20.6
(41.1)
2021
469.5
2020
22.5
2020 8.2
(75.6)
541.8
491.0
430.2
2019
2018
2017
69.9
62.9
52.1
2019
2018
2017
21.4
20.9
20.8
(60.0)
2020
2019
(37.4)
2018
(24.3)
2017
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.
Why is this KPI important?
Sustainable improvement in
profitability is a strategic priority.
Why is this KPI important?
ROCE is an important indicator of
sustainable shareholder value.
Why is this KPI important?
Marshalls continues to support
a prudent capital structure.
Performance
Sales have been strong and
market conditions have remained
supportive. We continue to focus
on those market areas where
demand is expected to be greatest.
Performance
Strong profit performance despite
increasingly challenging supply
chain pressures. Cost increases
have been recovered through sales
price increases. Trading in 2022
has started strongly.
Performance
Adjusted ROCE for 2021 is 20.6 per
cent (2019: 21.4 per cent). ROCE
is defined as EBITA/shareholders’
funds plus net debt.
Performance
Net debt was £41.1 million at
31 December 2021 (£0.1 million
net positive cash on a pre‑IFRS
16 basis). Gearing remains low
at 12.1 per cent.
Links to strategic
corporate objectives
Links to strategic
corporate objectives
Links to strategic
corporate objectives
Links to strategic
corporate objectives
Principal risks
• Continued cost inflation
impacts demand
• Macro‑economic and political
• Raw material and
labour shortages
• Increased rate of digital change
Risk mitigation
• Close monitoring of trends
and lead indicators
• Diversity of business
• Customer centricity
• Digital strategy
Principal risks
• Cyber security risks
• Cost inflation
• Security of raw material supply
• Climate change
Principal risks
• Threat from new technologies
and business models
• Increased pace of
digital change
• Capital structure
Principal risks
• Funding strategy
• Overpaying for acquisitions
• Cost inflation
Risk mitigation
• Innovation and new
product development
• Focus on cyber
security controls
• Proactive supply
chain management
Risk mitigation
• Digital transformation
• Operational excellence
• Flexible capital structure
• Capital allocation policy
Risk mitigation
• Close monitoring of trends
and lead indicators
• Diversity of business
• Customer centricity
• Digital strategy
Links to remuneration
Links to remuneration
Links to remuneration
Links to remuneration
AIAI
LTIPLTIP
AIAI
LTIPLTIP
AIAI
LTIPLTIP
AIAI
LTIPLTIP
Stakeholder linkage
• Customers
• Suppliers
• Employees
• Communities
Stakeholder linkage
• Shareholders
• Employees
Stakeholder linkage
• Shareholders
• Employees
Stakeholder linkage
• Shareholders
• Employees
• Customers
• Suppliers
32
Marshalls plc | Strategic Report
Links to strategic corporate objectives
Shareholder value
Sustainable profitability
Relationship building
Find our strategy on pages 30 and 31
Organic expansion
Brand development
Effective capital structure
and control framework
Links to remuneration
AILTIP
Long‑term Incentive Plan
LTIPAI
Annual incentive award
Operating cash
flow (“OCF”)
80%
OCF:EBITDA
(rolling annual basis)
2021
80
2020
49
2019
2018
2017
Customer service
Climate change
Health and safety
(lost time accident rate)
98%
customer
service index
16%
16.9%
carbon reduction per tonne
of production output in 2021
reduction in working days lost (%)
compared with the target benchmark
2021
2020
2019
2018
96
94
103
2017
98
2021
6.46
2021
17
94
98
98
98
2020
2019
2018
2017
7.70
2020
12
9.21
2019 14
9.92
2018
17
10.24
2017
46
Why is this KPI important?
The conversion of profit to cash
is key to our growth strategy
and for delivering increased
shareholder value.
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?
The Group’s continued
commitment to our sustainability
strategy is that our annual carbon
reduction targets must be achieved
– target is to be net zero by 2030.
Why is this KPI important?
Marshalls is committed to
meeting the highest health
and safety standards.
Performance
Operating cash flow was 80 per
cent of EBITDA. This was lower
than usual due to increased
investment in imported inventory
due to significant increases in
shipping costs. This action was
taken to ensure ongoing availability.
Performance
The Group’s manufacturing
operations are responding to
market demand and changing
trading patterns. The focus
remains on quality, on‑time delivery
and order accuracy.
Performance
Although our absolute emissions
increased in 2021, due to increased
production, our relative (intensity)
performance has decreased.
Performance
In 2021 there was a 16.9 per
cent reduction in days lost from
workplace incidents compared
with the target benchmark.
Links to strategic
corporate objectives
Links to strategic
corporate objectives
Links to strategic
corporate objectives
Links to strategic
corporate objectives
Principal risks
• Supply shortages requiring
increased investment in
working capital
• Cost inflation
Principal risks
• Quality, service and reliability
• Brand reputation
• Further COVID-19 disruption
Risk mitigation
• Excellent customer service
and quality
• Customer relationships and
brand value
Risk mitigation
• Customer centricity strategy
• Digital strategy
Principal risks
• Physical risks from climate
change, such as wind and water
• Rising energy prices and
carbon taxes
• Changing product requirements
in the built environment
Principal risks
• Consistency of standards
• Regulatory controls
• Investment in operation network
• Extended COVID-19 restrictions
• Mental health and
employee wellbeing
Risk mitigation
• Climate site risk analysis
• Market price increases
• Mitigation and
adaptation strategy
Risk mitigation
• Embedded culture –
The Marshalls Way
• Compliance procedures
and policies
• Employee training
Links to remuneration
Links to remuneration
Links to remuneration
Links to remuneration
AIAI
LTIPLTIP
AIAI
LTIPLTIP
AIAI
LTIPLTIP
AIAI
LTIPLTIP
Stakeholder linkage
• Shareholders
• Customers
• Suppliers
Stakeholder linkage
• Customers
• Communities
• Environment
Stakeholder linkage
• Shareholders
• Employees
• Customers
• Suppliers
• Environment
• Regulators
Stakeholder linkage
• Employees
• Customers
• Communities
• Environment
Marshalls plc | Annual Report and Accounts 2021
33
Strategic Report
Risk Management and Principal Risks
Managing risk is a key factor
in the delivery of the Group’s
strategic objectives
The Group seeks to mitigate exposure to all forms of strategic, financial
and operational risk, both external and internal.
Priorities for 2022
The priorities for the Group’s risk function in 2022 include the
following areas:
• Health and safety remains a major focus area and 2022
will see additional governance and control reviews.
• The completion of a number of targeted projects will again be a
major focus for KPMG. In 2022, projects covering cyber security,
general IT controls, project delivery and inventory are planned.
• During 2022 the Group will commence a project to review the
adequacy, completeness and effectiveness of the underlying
control environment to ensure that it continues to be robust and
suitably documented.
• Our ESG agenda continues to embrace risk management
and governance and the generation of detailed climate risk
assessments and scenario planning continues to be a priority.
• We also intend to review our approach to identifying the risk
appetite for each significant risk area. The aim is to have
a structural approach to aligning internal controls and risk
mitigation initiatives with our risk appetite.
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.
Achievements in 2021
The impact of COVID-19 continues to have implications for the
business and its underlying risks. This is particularly true in the
areas of health and safety, cyber security and the security of
raw materials supply. All these areas are considered in more
detail on pages 37 to 43. In all these cases specific assessments
continue to be reviewed and certain new operating procedures
have been developed. Mitigating controls continue to be reviewed
as appropriate. The Group’s risk function has placed particular
emphasis on the following areas during the year:
• Health and safety – the Group has used frequent and consistent
messaging with mental and physical health prioritised for
all employees and stakeholders. We have maintained our
established COVID-19 workplace protocols throughout the
last year.
• IT and cyber risk – the Group has continued to ensure
business continuity during the COVID-19 restrictions. Practical
support and guidance, together with additional cyber security
training, has been provided to facilitate home working and
this has remained a priority as the focus has shifted to a more
“business as usual” environment.
• Security of raw materials supply – the Group has continued to
ensure that product and distribution can continue to meet the
increased levels of demand.
KPMG completed a number of targeted internal audit projects
during 2021 covering the following areas:
• Business continuity/IT disaster recovery;
• Payroll systems and controls;
• Accounts receivable;
• Digitalisation/digital maturity;
• GDPR compliance;
• ESG maturity; and
• Cyber risk – ransomware.
The internal audits include “risk-based” audits, identified as a
result of assessing the Group’s key risks. They also include audits
identified to cover key operational, financial, IT and regulatory areas
subject to routine cyclical coverage.
34
Marshalls plc | Strategic Report
Risk management framework
Risk heatmap (net risk scores)
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
management of risk;
• monitor risk mitigation
and controls; and
• monitor the effective
implementation of
action plans.
Internal audit:
• independently reviews
the effectiveness
of internal control
procedures;
• reports on 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).
10
m
5
£
>
t
c
a
p
m
I
m
5
£
–
m
2
£
m
2
£
<
Low
3
1
2
6
3
4
5
7
9
8
11
12
Medium
Likelihood
High
1 Macro‑economic and political
2 Cyber risks
3 Security of raw material supply
4 Long‑term impacts of climate change
5 Human rights consideration
6 Short-term impacts of weather events
7 Threat from new technologies and business models/
increased pace of digital change
8 Corporate, legal and regulatory
9 Competitor activity
10 Project delivery of major strategic business projects and
change management
11 Health and safety
12 People risk
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 updated by the full Executive
Management team at least every six months and the overall
process is the subject of regular review by the Board. 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, 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 subject 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.
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. In assessing risk appetite, the aim is to
ensure that internal controls and risk mitigation measures are
designed to reduce the net risk score to a point that aligns with
the identified risk appetite. The aim is to ensure that we continue
to channel resources to those mitigation measures and controls
that specifically reduce risk to areas where we have a net risk score
that lies outside our acceptable risk appetite. 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.
Marshalls plc | Annual Report and Accounts 2021
35
Strategic Report Risk Management and Principal Risks continued
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 £350 million over 2022 and 2023 and, over the
same two-year period, leads to a reduction in operating margin to
5.8 per cent in 2023. This is well in excess of the reduced revenue
experienced in 2020 as a consequence of COVID-19.
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.
The risk of cyber-attack continues to be one of the Group’s highest
rated risks. The Group maintains a comprehensive response and
recovery plan to ensure critical business systems can be restored
within a designated period in the event of an attack. In respect to
cyber protection, we employ a multi-layered approach to ensure
we have more than one level of defence. We also employ an
independent IT security company to perform regular penetration
tests and vulnerability scans on our internal and external facing IT
environment. From a detection perspective we employ a tier one IT
managed security service company to provide a 24/7 detection and
response to ensure we react quickly and effectively to any security
incidents. A detailed Risk Register is maintained to assess both the
likelihood of an incident occurring and its impact on the business.
This register is reviewed on a six-monthly basis to ensure it is kept
current and we undertake independent annual cyber security audits
to ensure we keep abreast of the ever increasing and changing
threat landscape.
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.
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
below. 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 plan to mitigate
the risk of raw material shortages.
Viability Statement
After considering the principal risks on pages 37 to 43, 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.
For the purposes of the Viability Statement, the Board continues to
believe that three years is an appropriate period of assessment as
this aligns with the current planning horizon. Although our central
forecasting models cover a five-year period, it remains the case
that there is less visibility beyond three years. The Construction
Products Association’s forecasts currently go out to 2023. This
remains compatible with the 5 year Strategy and the longer-term
objectives for our strategic growth pillars over a five-year period.
The Group’s financial forecast 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. Alongside the current supply chain challenges that
are causing shortages of both materials and labour, the current
Risk Register identifies external market demand as being the key
medium-term risk. None of the individual sensitivities applied
impact the Directors’ assessment of viability.
A significant stress test sensitivity has been run at the end of
2021 against the base medium-term forecast. Material and labour
shortages are currently leading to significant cost inflation and,
consequently, it is possible that if this continues and leads to
increases in interest rates this could lead to a softening in market
demand. The impact on demand of external market factors
continues to be a key medium-term risk. The stress test assumes
a sales revenue sensitivity of 20 per cent over each of the next
two years (cumulatively 60 per cent against 2021 revenue) – with
current growth rates assumed to apply on the revised base position
from 2024.
36
Marshalls plc | Strategic Report
Links to strategic corporate objectives
Impact on business model
Shareholder value
Sustainable profitability
Relationship building
Organic expansion
Brand development
Effective capital structure
and control framework
Sourcing
Manufacturing
Distribution
Customers
Find our strategy on pages 30 and 31
Find our business model on pages 18 and 19
Scenario
Nature of scenario planning process
Outcome of scenario stress testing
1. Macro-
economic factors
A prolonged downturn in
economic conditions leading
to reduced consumer and
business confidence and
a consequent reduction
in demand.
Stress test modelling uses severe downside
assumptions. These include:
• 20 per cent reduction in sales revenue over
two years.
• This amounts to around £350 million in lost
revenue, which is greater than the 2008/09
downturn and significantly more severe
than that experienced during the COVID-19
pandemic in 2020.
• Interest rates increase to 5 per cent.
Outcomes
• PBT reduces to around £20 million in year two.
• Operating margin reduces to 5.8 per cent.
• Net debt increases to around £100 million
– which is well within current facility limits –
with gearing increasing to around 30 per cent.
• Bank covenants continue to be met.
2. Cyber
security breach
A cyber security breach
leading to an immediate
and unexpected disruption
to essential IT systems and
infrastructure.
The main elements of our stress testing are
as follows:
• Penetration tests and vulnerability scans
are performed by independent IT security
companies. These are changed on an
annual basis.
• We run cyber-attack “play-book” exercises
against different cyber-attack scenarios.
Outcomes
• The “play-book” scenarios that we run
on a regular basis ensure that we continue
to be as ready as we can be to respond to
security incidents.
• All systems are categorised to ensure that the
business critical systems can be recovered first
in the event of an incident occurring.
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 on page 36. 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).
1. Macro-economic and political
Nature of risk and potential impact
Key risk indicators
Mitigating factors
Change
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 associated
with COVID-19. Material shortages
and labour availability are causing
significant cost inflation. Other factors
include the increasing impact of wider
geo‑political factors (including the
conflict in Ukraine) and unprecedented
levels of Government borrowings.
Potential impact
The potential longer‑term impact of
macro‑economic uncertainty and
continued cost inflation could reduce
consumer confidence and demand and
lead to lower activity levels. This could
have an adverse effect on the Group’s
financial results. There continues to be
volatility in world markets and global
economic uncertainty continues to
be a risk. geo-political issues give rise
to energy shortages, inflation and
disrupted markets. Ongoing risk of
interest rate increases.
• Further COVID-19
uncertainty and
the emergence of
new virus variants.
• Government policy
failing to contain
inflation.
• 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, maintain
inventory levels and 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 cost
reduction and operational efficiency
initiatives.
No change in risk
The UK Government’s stated
objective is to support
construction and significant
investment support for
infrastructure and housing
has been planned. Economic
slowdown would result
in a loss of business and
consumer confidence, leading
to delays in investment
decisions. However, demand
in construction continues to
be very strong and the outlook
is positive.
Priorities
• Regular scenario planning
to assess various market
risks and disruptive events.
• Strategic reviews focusing
on business resilience.
Links to strategic corporate objectives
Impact on business model
Marshalls plc | Annual Report and Accounts 2021
37
Strategic Report
Risk Management and Principal Risks continued
Principal risks and uncertainties continued
2. Cyber security risks
Nature of risk and potential impact
Key risk indicators
Mitigating factors
Change
• Emergence
of new cyber
security risks.
• Increased
examples of data
loss and security
breaches in the
wider market.
Fast growing and indiscriminate risk
of cyber risk. 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 threat of
ransomware attacks and new cyber
threats. Increasingly, all business is
becoming more IT.
Potential impact
Operational disruption and
financial loss.
Risk of data loss causing financial and
reputational risk.
• Use of IT security policies.
• Regular cyber security risk audits
undertaken by specialists and the
use of mitigation controls and other
recommended procedure updates.
Annual penetration tests are undertaken,
and during 2021 an internal audit was
undertaken by KPMG in respect of
the Group’s controls in relation to a
ransomware attack. The Group’s “cyber
maturity assessment” score has continued
to increase, 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
campaigns and training for staff.
No change in risk
Cyber risk has increased
during the COVID-19
pandemic and remains a
high-profile area. Considerable
focus continues to be given
to promoting awareness of
IT security policies, and we
continue to extend mitigation
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.
Priorities
• Constant review and
ongoing challenge to
procedures – use of
external experts.
• Continue to develop cyber
risk strategy.
Links to strategic corporate objectives
Impact on business model
3. Security of raw material supply/raw material and labour shortages
Nature of risk and potential impact
Key risk indicators
Mitigating factors
Change
• Temporary
shortages and
cost inflation,
impacting
materials
and labour.
• Decreases in
vehicle availability
and labour/driver
shortages.
The post-COVID-19 recovery in market
demand has significantly increased
pressure on raw material and labour
availability. There are increasing risks
in relation to economic volatility, the
security of raw material supply and
the impact of shortages leading to
cost inflation.
There are significant market capacity
stresses for sand, cement and other
raw materials and energy supplies.
In addition, there continues to be
a shortage of HGV drivers causing
distribution and logistics challenges.
Longer term there is a risk of
“carbon taxation”.
Potential impact
Cost inflation could reduce margins and
create 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.
Increased risk
The impact of raw material
shortages and cost inflation
has increased during the
last year.
The risk of temporary
shortages is mitigated
by proactive supply chain
management and the use
of alternative suppliers.
Priorities
• Increasing productivity and
manufacturing efficiency.
• Continue to develop
supply chain strategies
to reduce risk.
• The Group benefits from the diversity
of its business and end markets.
• Maintaining adequate, but not
excessive, stocks.
• Continued development of our own
haulage fleet which covers around two-
thirds of deliveries from the Landscape
Products business.
• Collaboration with all EU-based tier one
and tier two suppliers to ensure any supply
risks are minimised.
• 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
long‑term supply agreements, the use of
hedging instruments and the use of flexible
freight forwarding options.
• The Group utilises sales pricing and
purchasing policies designed to mitigate
the risks.
• Consideration of alternative technologies,
including the reduction of cement content.
Links to strategic corporate objectives
Impact on business model
38
Marshalls plc | Strategic Report
Links to strategic corporate objectives
Impact on business model
Shareholder value
Sustainable profitability
Relationship building
Organic expansion
Brand development
Effective capital structure
and control framework
Sourcing
Manufacturing
Distribution
Customers
Find our strategy on pages 30 and 31
Find our business model on pages 18 and 19
4. Long-term impacts of climate change
Nature of risk and potential impact
Key risk indicators
Mitigating factors
Change
• Negative feedback
from stakeholders
– loss of business
and investment
due to lack of
preparedness.
• Failure to meet
internal targets.
• The Group utilises experienced, specialist
staff to support the Group’s focus in
this area.
• Specialist third parties including The
Carbon Trust and Verisk Maplecroft.
• Climate risk analysis.
• 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.
Increased expectation
of clarity over financial
impact of strategic plans
and transition risk. TCFD
disclosure requirements.
Priorities
• Ongoing assessment of
climate change and risks
for production, facilities,
products and distribution.
• Develop comprehensive
strategic covering
targets, products and
business processes.
Links to strategic corporate objectives
Impact on business model
Increasing focus on ESG and the
heightened awareness of the
environmental challenge, with
increased operational and reporting
requirements, hardening targets and
greater consideration by investor and
stakeholder groups.
Risk of allocating insufficient resource
and investment to support the Science
Based Targets initiative and other
Environmental Protocols.
A summary of more specific
environmental risks is included in the
Sustainability section on pages 54 to 61.
Potential impact
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.
Cost impact of the “Environmental
Protocols” and mitigation programmes
could lead to increasingly
expensive processes.
5. Human rights
Nature of risk and potential impact
Key risk indicators
Mitigating factors
Change
Mandatory human rights disclosure
from 2022 and increased focus on
modern slavery and diversity reporting.
The continuing requirement to identify
risk across the whole supply chain
and the need to maintain reliable and
consistent internal systems, processes
and procedures.
A summary of more specific social
risks is included in the Sustainability
section on pages 62 and 63.
Potential impact
Risk that stakeholders could reduce
support if the Group failed to address
issues around modern slavery and
diversity appropriately.
• Negative feedback
from stakeholders
– loss of business
and investment.
• Increase in general
level of disclosure
required and
administrative
compliance.
• The Group utilises experienced, specialist
staff to support the Group’s focus in
this area and the development of a
comprehensive strategy.
• Regular internal cross‑functional
meetings to discuss progress, issues
and focus areas.
• Annual analysis of sourcing country risk.
• Strategic partnerships with external
agencies – UNGC framework.
• Focus on ethical sourcing processes
with BES 6001 and ISO 20400.
• Working groups established in all
focus areas.
Increased risk
Significantly heightened
focus from stakeholders,
Government, customers
and investors and
increased operational and
reporting requirements.
Priorities
• Develop strategic
partnerships.
• Increase focus on the
development of the Group’s
comprehensive strategy.
Links to strategic corporate objectives
Impact on business model
Marshalls plc | Annual Report and Accounts 2021
39
Strategic Report
Risk Management and Principal Risks continued
Principal risks and uncertainties continued
6. Impact of weather events
Nature of risk and
potential impact
Increasingly unpredictable
weather conditions and extreme
weather events.
The longer‑term implications of
climate change give rise to the
transition risk to address the
challenges quickly enough.
Potential impact
Disruption to supply chain and
operations that might reduce short‑
term activity levels.
Financial risk caused by adverse
impact on margins and cash
flows as well as sales and
production volumes.
Key risk indicators
Mitigating factors
Change
• Prolonged periods
of bad weather (e.g.
snow, ice and floods)
which make ground
working difficult or
impossible.
• Changing public
perceptions of
the longer‑term
implications of
climate change.
• Diversity of the business.
• The Group utilises centralised specialist
functions to support mitigation plans
and the management of relationships
on commercial contracts.
• Climate change risk analysis in place.
• Commitment to water harvesting and
recycling 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.
Priorities
• Continue to develop
resilience strategies.
• Development of Civils
and Drainage business.
Links to strategic corporate objectives
Impact on business model
7. Threat from new technologies and business models, and the increased pace of digital change in the market
Nature of risk and potential impact
Key risk indicators
Mitigating factors
Change
• 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,
new manufacturing processes 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.
Increased costs and
production capacity tied up
in redundant technologies.
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.
• Good market intelligence and ongoing
monitoring of competitive threats.
• Flexible business strategy able to embrace
new technologies.
• Significant focus on research and
development and new products.
• Development of the Group’s e‑commerce
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.
Priorities
• Collaboration with
universities to develop new
products and processes.
• Increase pace of digital
change and technological
solutions.
Links to strategic corporate objectives
Impact on business model
40
Marshalls plc | Strategic Report
Links to strategic corporate objectives
Impact on business model
Shareholder value
Sustainable profitability
Relationship building
Organic expansion
Brand development
Effective capital structure
and control framework
Sourcing
Manufacturing
Distribution
Customers
Find our strategy on pages 30 and 31
Find our business model on pages 18 and 19
8. Corporate, legal and regulatory
Nature of risk and potential impact
Key risk indicators
Mitigating factors
Change
• Increased
regulatory and
compliance
requirements.
• Integration
requirements for
new acquisitions.
• Centralised legal and other specialist
functions, the use of specialist advisers
and ongoing monitoring and mandatory
compliance training programmes.
• The Group has a formal Group
sustainability strategy focusing
on impact reduction.
• Significant
• The Group employs compliance
increases in the
penalty regime for
health and safety
and environmental
incidents.
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.
Priorities
• Continue to renew all
compliance processes and
controls effectiveness.
• Develop stress tests and
crisis planning procedures.
Links to strategic corporate objectives
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
Nature of risk and potential impact
Key risk indicators
Mitigating factors
Change
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.
Competitive risk increases if we
fail to maintain high levels of
customer service.
Potential impact
Increased competition could reduce
volumes and margins on manufactured
and traded products.
Reputational damage if the Group loses
competitive advantage.
• 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.
Priorities
• New product development.
• Research into green
technologies.
• Review marketing and
communications.
• Continue to review
all elements of
customer service.
Links to strategic corporate objectives
Impact on business model
Marshalls plc | Annual Report and Accounts 2021
41
Strategic Report
Risk Management and Principal Risks continued
Principal risks and uncertainties continued
10. Project delivery
Nature of risk and potential impact
Key risk indicators
Mitigating factors
Change
• Delays to
• Robust and standardised project
project delivery.
appraisal process.
• Inefficiencies
in resource
utilisation.
• Change management framework
and process in place.
• Programmes are continually
reviewed with strong governance
and executive oversight.
No change in risk
Although the underlying risk
continues, effective control
and the ongoing development
of an appropriate
management framework
continue to mitigate the risk.
Priorities
• Develop strategies
to manage growth.
• Ongoing reviews of
acquisition strategy and
the business model.
Links to strategic corporate objectives
Impact on business model
Growth outstrips our ability to manage
and stress test all aspects of our
business model.
Ineffective management of major
development projects, from initial
scoping to final delivery and benefits
management, due to constraints that
might impact the Group’s ability to
absorb change.
Potential impact
The extent and complexity of projects
may cause delays and inefficiency.
Potential failure to realise
expected benefits from strategic
business projects.
Reputational damage, service under‑
delivery and staff retention risks.
11. Health and safety
Nature of risk and potential impact
Key risk indicators
Mitigating factors
Change
• Integration
• Centralised specialist functions and clear
requirements for
new acquisitions.
• Significant
increases in the
penalty regime.
policies in place.
• Regular communication and support for
employees, including those working from
home. Mental health first aiders.
• Comprehensive five-year health and
safety strategy.
• Ongoing monitoring, training and health
and safety audits.
• Introduction of a digital management
system for enhanced data collection
and analysis.
• All senior managers receive the Marshalls
Health and Safety and Environmental
stage 3 training.
No change in risk
Health and safety continues to
be a high-profile risk area.
Continuing risks arising from
COVID-19, including mental
health and employee welfare.
Development in risk profiling
procedures leading to
improved root cause analysis.
Priorities
• Ensure health and safety
embedded in the “day-to-
day” culture.
• Improve reporting
structures.
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.
Links to strategic corporate objectives
Impact on business model
42
Marshalls plc | Strategic Report
Links to strategic corporate objectives
Impact on business model
Shareholder value
Sustainable profitability
Relationship building
Organic expansion
Brand development
Effective capital structure
and control framework
Sourcing
Manufacturing
Distribution
Customers
Find our strategy on pages 30 and 31
Find our business model on pages 18 and 19
12. People risks
Nature of risk and potential impact
Key risk indicators
Mitigating factors
Change
Availability of labour diversity
– with risks around core skills,
demographics, capability and changing
working patterns.
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
Inability to recruit and retain people with
required skills, calibre and potential.
Risk of reduced skills and inadequate
training potentially leading to reduced
productivity and efficiency.
Companies are changing their
“employment position” and creating
a more competitive landscape.
Implications for employee health and
wellbeing and overall workforce morale.
Potential risk to the Marshalls brand.
• 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.
• Group People and Organisational Plan.
• Strong employee and trade union
relationships.
• Strong communication channels and
employee feedback through the Employee
Voice Group and the newly-established
Drivers’ Working Party.
• Regular feedback questionnaires
supported by a third‑party provider.
• Independent “Safecall” employee helpline.
• Focus on training, apprenticeships and
ongoing staff development and leadership
potential – “Early Talent Programme”.
Increased risk
Increasingly competitive
labour market.
The emergence of 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.
Priorities
• Develop retention and
recruitment strategies.
• Effective marketing and
communications.
• Focus on succession
planning, internal
development and
diversification in the
leadership teams.
Links to strategic corporate objectives
Impact on business model
Marshalls plc | Annual Report and Accounts 2021
43
Strategic Report
Financial Review
Trading continues to
improve and order books
remain strong
The Group has a strong
balance sheet and a
robust capital structure,
supported by significant facility
headroom.”
Trading summary
Revenue
Group revenue for the year ended 31 December 2021 was
£589.3 million (2020: £469.5 million; 2019: £541.8 million), which
is 26 per cent ahead of the 2020 comparative. This represents an
increase of 9 per cent compared with the same period in 2019, being
the last comparative period which was unaffected by COVID-19.
Revenue growth in the second half of the year was increasingly strong,
and was 11 per cent ahead of the comparative figures for 2019.
Revenue
310.0
290.0
270.0
250.0
m
£
’
230.0
210.0
190.0
170.0
150.0
2018
First half
2019
Second half
2020
2021
Linear (second half)
Revenue analysis
Sales in the Domestic end market, which represented approximately
28 per cent of Group sales, were £167.0 million. This represents
an increase of 30 per cent compared with the prior year, and is up
18 per cent compared with the same period in 2019. The survey of
domestic installers at the end of February 2022 revealed a healthy
order book of 17.4 weeks (2020: 19.4 weeks). This compares with
16.7 weeks at the end of October 2021.
Summary
• Full year revenue of £589.3 million –
9% increase on 2019
• Domestic sales up 18% on 2019
• Public Sector and Commercial sales
up 4% on 2019
• International sales up 23% on 2019
• Strong cash generation – debt free
on a pre-IFRS 16 basis
• Significant headroom against
bank facilities
• Capacity for investment – around
£35 million planned for 2022
• Recommended dividend of 9.6 pence
– 14.3 pence for the full year
44
Marshalls plc | Strategic Report
Revenue variance analysis
2019–2021
541.8
79.6
64.3
4.4
12.4
469.5
1.9
38.3
589.3
600
550
500
m
£
’
450
400
350
300
2019
revenue
Public Sector
and Commercial
UK Domestic
International
2020
revenue
Public Sector
and Commercial
UK Domestic
International
2021
revenue
Domestic
Our Domestic customers comprise DIY enthusiasts, professional landscapers and driveway installers. Our aim is to generate sales through
the Marshalls Register of approved domestic installers which continues to provide competitive advantage. This comprises around 1,700
installer teams and the Group continues to receive good feedback for its consistently high standard of quality, excellent customer service
and marketing support.
Private Housing “repair, maintenance and improvement” remains strong with consumers continuing to spend more time at home and
choosing to invest in home and garden projects. Many households continue to have increased levels of saving due to lower cash outflows
due to pandemic related restrictions. The GfK consumer confidence index has been improving steadily during 2021. The index for £50k+
households has increased by 7 points since November 2022 and is now at its highest level since February 2019.
Public Sector and Commercial
Sales in the Public Sector and Commercial end market were £389.1 million and represented 66 per cent of Group sales. This represents
an increase of 26 per cent compared with the prior year, and is up 4 per cent compared with the same period in 2019. The comparison
with 2019 increases to 6 per cent after adjusting for the impact on sales caused by the planned reduction in Marshalls Mortars and Screeds
sites in the second quarter of 2020. We have a diverse end-customer base spanning local authorities, commercial architects, specifiers,
contractors and housebuilders. The Group continues to focus on those market areas where future demand is expected to be greatest
including New Build Housing, Road, Rail and Water Management. Infrastructure is expected to be a key element of construction growth
in 2022 and 2023, driven by larger projects such as HS2 and additional focus on medium-term investment programmes. Housing demand
remains strong with Private Housing starts forecast to increase by 5 per cent in 2022 and 3 per cent in 2023. Our aim is to generate demand
through a brand and customer experience that drives product specification, and this is increasingly being used to underpin customers’
commitments to sustainability, especially for lower embedded carbon, flood prevention and human rights.
Analysis of sales by end market
UK Domestic
Public Sector and Commercial
International
UK Domestic
Public Sector and Commercial
International
Change
21/20
%
30%
26%
6%
26%
21/19
%
18%
4%
23%
9%
2021
£’m
167.0
389.1
33.2
589.3
%
28%
66%
6%
2020
£’m
128.7
309.5
31.3
469.5
%
27%
66%
7%
2019
£’m
141.2
373.8
26.9
541.9
%
26%
69%
5%
A key part of our strategy, in both the Domestic and Public Sector and Commercial end markets, is to develop the customer experience
by digitalisation, including the use of visualisation tools, and to promote and invest in innovation. Building on 15 years of experience in
digital visualisation, our new augmented reality app gives architects, garden designers, installers and consumers state-of-the-art solutions.
We increasingly use digital technology to communicate new concepts and designs and to facilitate the selection and specification of our
ranges. Digital tools are a key feature of our new housebuilders website.
International
Sales in the International business, supported by strong growth from Marshalls NV in Belgium, were up 6 per cent compared with the prior
period and 23 per cent compared with 2019. International sales represented 6 per cent of Group sales in the period. The Group continues to
develop its global supply chains to ensure that international operations are sustainable and aligned with market risks and opportunities.
Revenue analysis: business area (%)
28+
Revenue by area (%)
84+
Domestic (28%)
Public Sector and Commercial (66%)
International (6%)
Landscape Products (84%)
Emerging UK Businesses (10%)
International (6%)
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.
Marshalls plc | Annual Report and Accounts 2021
45
Strategic Report
66
+
6
+
L
10
+
6
+
L
Financial Review continued
EBITDA and operating profit
Adjusted EBITDA was £107.1 million (2020: £57.6 million; 2019: £103.9 million). This represents an increase of 3 per cent compared with 2019.
Adjusted operating profit increased to £76.2 million (2020: £27.2 million; 2019: £73.7 million).
Trading results
EBITDA*
Depreciation/amortisation
Operating profit*
Adjusting items
Operating profit (reported)
* Before adjusting items.
2021
£'m
107.1
(30.9)
76.2
—
76.2
2020
£'m
57.6
(30.4)
27.2
(17.8)
9.4
2019
£'m
103.9
(30.2)
73.7
—
73.7
Change
21/20
%
86%
21/19
%
3%
180%
3%
The reported operating profit for the year ended 31 December 2021 was £76.2 million after a number of adjusting items.
These adjusting costs combine to give a net charge of £8.8 million, which approximately aligns with the profit on the sale of the site at Ryton.
The profit on the disposal of property, plant and equipment is disclosed in Note 4 on pages 142 and 143 and the main element of this related
to the Ryton site. The site was sold in October 2021 for £13.5 million and generated a net profit on disposal of £8.8 million. The table below
summarises the impact of the separately disclosed adjusting item costs, which are disclosed in Note 4 on pages 142 and 143.
Disclosed adjusting costs
The write-off of assets arising at our St Ives site to allow the construction of the dual block plant.
The cost of closure of Edenhall’s site at Stoke following a network review. The site was used to manufacture cast stone and the Group has
decided to exit this market.
The additional consideration payable to the CPM vendors represents a charge relating to the acquisition of CPM following the
agreement reached with the vendors to release funds initially set aside in escrow, following the identification of an under-funded
pension scheme of a related company. The risk is now considered to be remote and £3.7 million will be released from escrow
and paid to the vendors as additional consideration. This results in a charge to the Income Statement because it falls outside
the hindsight review period of twelve months as set out under IAS.
Payment of a special bonus to employees as a thank you for their support during the pandemic.
Net total of disclosed adjusting costs
£’m
1.7
1.2
3.7
2.2
8.8
The construction of the dual block plant at St Ives is a major capital project for the Group, and represents a significant growth opportunity. The
scale of the project has necessitated a significant reorganisation of the St Ives site, and certain buildings and equipment assets have needed
to be scrapped in the initial phase of the project. These additional costs have amounted to £1.7 million and the project remains on track to be
commissioned at the end of 2022.
In the final quarter of 2021, the decision was made, following a detailed review of Edenhall’s product range and manufacturing network,
to cease operations at its manufacturing site at Stoke. The total closure cost is £1.2 million, of which £0.8 million is a cash outflow.
In December 2021, agreement was reached with the former owners of CPM to release an amount of £3.7 million from the monies set
aside in escrow to reflect the additional consideration payable to the CPM vendors.
A special bonus of £600 was paid to all employees in December 2021 in recognition of the tremendous effort and contribution made
by all colleagues across the Group over the last 18 months. The total cost for these bonus payments is £2.2 million.
Profit margins
The operating profit margin was 12.9 per cent in the year ended 31 December 2021, which compares with 13.6 per cent for the same period
in 2019. This result was adversely impacted by the temporary effect of supply chain issues and by additional manning and increased levels
of overtime required as a consequence of labour shortages and absenteeism during the COVID-19 pandemic. Proactive management
continues to mitigate the impact of material shortages.
Margin analysis
2020
Landscape Products
Other
2021
2019
46
Marshalls plc | Strategic Report
Revenue
£’m
469.5
111.2
8.6
589.3
541.8
Operating
profit
£’m
27.2
45.4
3.6
76.2
73.7
Margin
impact
%
5.8%
6.7%
0.4%
12.9%
13.6%
Profit before tax
Adjusted profit before tax was £72.1 million (2020: £22.5 million; 2019: £69.9 million).
Profit before taxation
Operational profit before adjusting items
Adjusting items
Operating profit (reported)
Net finance costs
Profit before taxation
Taxation
Profit after taxation
Earnings per share – pence
Adjusted
2021
£'m
Reported
2021
£'m
76.2
—
76.2
(4.1)
72.1
(15.1)
57.0
28.6
76.2
—
76.2
(6.9)
69.3
(14.4)
54.9
27.5
2020
£'m
27.2
(17.8)
9.4
(4.7)
4.7
(2.1)
2.6
1.2
2019
£'m
73.7
—
73.7
(3.8)
69.9
(11.9)
58.0
29.4
Change
21/19
%
3%
3%
3%
—
—
The reported profit before tax of £69.3 million is after charging the pension adjustment which has arisen as a consequence of a legal
opinion received from leading Counsel in relation to the payment of certain specific member benefits. This is a non-cash adjustment to
financial expenses, required under IAS 19, and does not impact the Group’s operational trading performance. After adjusting items, including
the additional interest cost of £2.8 million, adjusted profit before tax for the year ended 31 December 2021 is £72.1 million (2019: £69.9
million), which represents an increase of 3 per cent against the 2019 comparative.
Earnings per share was 27.5 pence (2020: 1.2 pence), which increases to 28.6 pence after adding back the impact of the adjustment to
recognise an additional “non-cash” pension liability, required under IAS 19.
Net financial expenses
Net financial expenses were £6.9 million (2020: £4.7 million;
2019: £3.8 million), including £1.9 million (2020: £1.6 million) of
IFRS 16 lease interest. This is after taking a charge to recognise an
additional pension liability of £2.8 million. Net financial expenses were
£4.1 million for the year ended 31 December 2021, before charging
this item. The additional pension liability is a non‑cash adjustment but,
under IAS 19, leads to the requirement to book an additional finance
charge to the Income Statement.
On a rolling annual basis interest, before the adjusting items,
was covered 18.6 times (2020: 5.8 times). Interest charges on
bank loans totalled £1.8 million (2020: £3.0 million) and, including
scheme administration costs, there was a normal IAS 19 notional
interest charge of £0.4 million (2020: £0.2 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.
Taxation
The adjusted effective tax rate was 20.8 per cent (2020: 23.1 per
cent). The 2021 Budget announced that the UK corporation tax rate
would increase to 25 per cent from 2023, and this rate change was
substantively enacted on 10 June 2021. Consequently, the deferred
tax liability at 31 December 2021 has been calculated at 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 in the deferred tax charge of £4.9 million. The
impact of this on the tax charge has been partially mitigated by the
temporary increases in capital allowances in the year arising from
the announcement of a 130 per cent first year allowance for plant
and machinery and the reversal of certain tax provisions made in
prior years which are no longer required.
The Group has paid £13.5 million (2020: £4.6 million) of corporation
tax during the year. A deferred tax charge of £6.6 million in relation
to the actuarial gain arising on the defined benefit pension scheme
in the year has been taken to the Consolidated Statement of
Comprehensive Income.
For the eighth 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 £124 million.
Dividends
The Group’s stated objective is that “the Group has a progressive
dividend policy with the objective of achieving up to 2 times
dividend cover over the business cycle. As earnings increase
we plan to share the increase between strengthening cover and
progressively raising the rate of dividend.” A progressive dividend
policy remains a key objective.
The Board is recommending that a final dividend of 9.6 pence be
paid for 2021. This will be payable on 1 July 2022. When combined
with the interim dividend of 4.7 pence, this results in a full-year
dividend of 14.3 pence per share. Dividend payments will continue
to be aligned with appropriate caution and stewardship but reflect
our stated strategy and capital allocation policy.
Net debt
Reported net debt was £41.1 million at 31 December 2021
(2020: £75.6 million; 2019: £60.0 million). On a pre-IFRS 16 basis,
the Group was cash positive at 31 December 2021 at £0.1 million
(2020: £26.9 million net debt; 2019: £18.7 million net debt). The
strong cash generation reflects the continuing focus given to capital
discipline. Operating cash flow for the twelve months to 31 December
2021 represented 80 per cent of EBITDA. This is lower than usual due
to the operating decision to increase investment in imported inventory
as a result of significant increases in shipping costs to ensure ongoing
availability and maintain the desired high levels of customer service.
Strong cash management continues to be a high‑priority area.
The continuing strategy is to ensure that facility and covenant
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 has total
bank facilities of £165 million, of which £140 million are committed.
Marshalls plc | Annual Report and Accounts 2021
47
Strategic Report Financial Review continued
Net debt continued
The committed bank facilities have a spread of medium-term
maturities that now extends to 2025.
The ratio of net debt to EBITDA was 0.4 times at 31 December 2021
(2020: 1.3 times) on a reported basis, and zero (2020: 0.6 times) on
a pre-IFRS 16 basis. Both are comfortably within our target ranges,
and well below covenant levels.
Cash generation
Cash generation remains strong, and reported net cash flows
from operating activities were £68.3 million. Operating cash flow
(before interest and taxation) was 80 per cent of EBITDA on a rolling
annual 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, but do have access to a supplier
finance facility entered into by one of our major customers with one
of our partner banks. This provides an additional short-term facility
that can be utilised to facilitate the management of mid‑month
cycles. 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.
The chart 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.
Cash generated from operating activities was £259.0 million. The Group
has invested £109.4 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 £104.4 million, which equates to
40 per cent of net cash generated from operating activities.
Return on capital employed (“ROCE”)
ROCE was 20.6 per cent (2020: 8.2 per cent; 2019: 21.4 per cent), on
a reported basis, at 31 December 2021. The consistently high ROCE
reflects the Group’s tight control and management of inventory and
monetary working capital.
Balance sheet
Net assets at 31 December 2021 were £344.3 million
(2020: £287.8 million). The Group has a strong balance sheet
with a good range of medium-term bank facilities available 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
Adjusting items
Foreign exchange
IFRS 16 lease liabilities
Net debt at beginning of year
Group balance sheet
Non‑current assets
Current assets
Current liabilities
Non‑current liabilities
Net assets
Net cash/(debt) (pre-IFRS 16)
Net debt (reported)
Net debt: EBITDA (pre-IFRS 16)
Net debt: EBITDA (reported)
Gearing (pre-IFRS 16)
2021
£’m
68.3
(7.1)
(32.2)
29.0
(2.8)
0.6
7.7
2020
£’m
19.3
(3.3)
(16.5)
(0.5)
(6.9)
(1.2)
(7.0)
(75.6)
(60.0)
Gearing (reported)
2021
£’m
332.7
263.2
(150.6)
(101.0)
2020
£’m
324.4
290.0
(157.2)
(169.4)
344.3
287.8
0.1
(41.1)
—
0.4
—
11.9%
(26.9)
(75.6)
0.6
1.3
9.3%
26.3%
Net debt at end of year
(41.1)
(75.6)
Cash outflow on capital expenditure in the year was £21.9 million
(2020: £14.7 million). This is lower than the £30 million of planned
capital expenditure for 2021, due to delays to certain capital projects
during the year caused by ongoing supply chain issues and material
availability. We are now targeting £35 million of capital investment
for 2022 due to significant cash outflows in respect of the dual block
plant at our St Ives facility.
Analysis of cash utilisation
Net cash from operating activities
Capital expenditure
Proceeds from the sale of surplus
property assets
Lease payments
Last
5 years
(pre-IFRS 16
basis)
£’m
2020
£’m
19.3
259.0
(14.7)
(109.4)
2021
£’m
68.3
(21.9)
14.9
11.4
(10.8)
(13.8)
32.3
—
Acquisition of subsidiary undertakings
—
—
(60.9)
Payments to acquire own shares/
share issues
Dividends
(3.6)
(17.9)
(2.7)
(11.8)
—
(104.4)
Movement in net debt in the year
29.0
(0.5)
4.8
Pension
The balance sheet value of the Group’s defined benefit pension
scheme was a surplus of £25.8 million (2020: £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 2021
was £392.1 million (2020: £402.7 million; 2019: £368.9 million)
and the present value of the scheme liabilities is £366.3 million
(2020: £400.0 million; 2019: £353.1 million). The surplus was
determined by the scheme actuary using appropriate assumptions
which are in line with current market expectations. The surplus
is after allowing for the additional pension liability of £2.8 million
referred to previously. During the last year the AA corporate bond
rate has increased from 1.40 per cent to 1.90 per cent and this is
the primary driver of the increased surplus. The expected rate of
CPI inflation has increased from 2.20 per cent to 2.70 per cent. The
scheme’s LDI asset portfolio continues to hedge protection against
volatility in interest rates and inflation.
These changes have resulted in an actuarial gain, net of deferred
taxation, of £19.8 million (2020: £10.6 million actuarial loss) and this
has been recorded in the Consolidated Statement of Comprehensive
Income. The last formal actuarial valuation of the defined benefit
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 actuarial valuation as at 5 April 2021 is currently in
progress, and the expectation is that this will continue to be in surplus
and that the scheme continues to require no Company contributions.
48
Marshalls plc | Strategic Report
Capital allocation
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.
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 (£35 million investment
planned for 2022), 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, but larger acquisitions would be considered if there was
a suitable strategic driver;
• to continue the payment of dividends on the basis of a dividend
cover of two times earnings in 2022 and beyond. This will see
dividends grow, in absolute terms, over the medium term;
• to maintain a capital structure that recognises cyclical risk and
volatility by continuing to maintain an appropriate level of bank
headroom; and
• to maintain a target net debt:EBITDA ratio of up to 1.5
times EBITDA on a pre-IFRS 16 basis. This will be subject
to ongoing review.
Clear and consistent capital allocation policy
1 Organic growth
2 R&D new product development
3 Ordinary dividends
4 Selective acquisitions
5 Supplementary dividends
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 £35 million is planned
for 2022. This includes the flagship dual block plant project at our
St Ives site, which will be the first facility of its kind in the UK, and
the planned investment over the next three years will be around
£24 million. This project will significantly increase capacity, improve
efficiency, enable multiple secondary finishing and facilitate the
launch of added-value new products.
We are committed to providing sustainable, high‑performance
product solutions. These include investment in technologies to
enhance the development of cement‑free product solutions. We
are already using up to 60 per cent cement replacement in our
paving. Our ESG strategy 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 plastic consumption has reduced by over 30 per cent
since 2013 and 100 per cent of concrete and natural stone products
are now fully recyclable. In the last five years our permeable paving
has prevented 322,000 cubic metres of flood water, which is
equivalent to 192 Olympic sized swimming pools.
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. In the last
three years the Group has developed 142 new product ranges.
Further investment continues to be made to develop our wide-
ranging digital strategy, encompassing digital trading, digital
marketing and digital business.
Borrowing facilities
The total bank borrowing facilities at 31 December 2021 amounted
to £155 million, of which £114 million remained unutilised. The bank
facilities are unsecured save for inter-company guarantees between
the Group and its subsidiary undertakings in favour of the facility
banks. 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 extend to 2025.
At 31 December 2021, on a covenant test basis (pre-IFRS 16), the
relevant ratios were achieved comfortably and were as follows:
• EBITA: interest charge – 54.0 times (covenant test requirement –
to be greater than 2.5 times); and
• net debt: EBITDA – 0 times (covenant test requirement – to be
less than 3.0 times).
Banking facilities
Committed facilities
Q3 2025
Q3 2024
Q1 2024
Q3 2023
Q2 2023
Q4 2022
On-demand facilities
Available all year
Seasonal (February to August inclusive)
Facility
£’m
Cumulative
facility
£’m
20
35
25
20
20
20
15
10
20
55
80
100
120
140
155
165
Conclusion
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 the continuing
impact of cost inflation and further developments in relation to raw
material and labour shortages. We are well placed to introduce any
necessary measures to mitigate any adverse impact.
Justin Lockwood
Chief Financial Officer
Marshalls plc | Annual Report and Accounts 2021
49
Strategic Report What ESG Means to Marshalls
Creating better net
positive futures
Dear stakeholder
When we say sustainability is at the heart of what we do, we mean
it. We have been on our sustainability journey for over 20 years,
and we are committed to the principles of running a responsible
business. That’s why we joined the Ethical Trading Initiative in
2006 and became a signatory of the UN Global Compact in 2009.
We knew that the rights of all workers should be respected and
that having a values-based approach was key to our future. When
carbon wasn’t part of the conversation more than 15 years ago, we
started reporting our carbon emissions and labelling our products
with carbon footprint information. Four years ago, we listened to the
leading climate scientists and started working on setting science-
based carbon reduction targets, which were approved by the Science
Based Targets initiative. Sustainability is simply part of The Marshalls
Way of doing the right things, for the right reasons, in the right way.
Here we are in 2022, after a challenging couple of years and with
much global focus on how we shape our world and the places
around us. The evolution of our purpose is to create better net
positive futures. A net positive business puts back more into
society, the environment and the global economy than it takes out.
For Marshalls, it’s about better understanding the net impact of our
actions and having a net positive mindset in the decisions we take.
Our science-based targets
“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.”
50
Marshalls plc | Strategic Report
Environment
Last year’s COP26 served as a timely reminder that we need to take
climate change seriously and that we need to act now. Business
has its part to play and I’m proud to say that Marshalls is well
placed to take on the challenge. Last year, we committed to being
a net zero business by 2030 as part of our plan and we are well on
our way to achieving this. We’re already making changes, with focus
on reducing plastic packaging, using lower emission fuels in our
manufacturing sites and installing more solar panels.
Social
The global pandemic reminded us of the value of our public
services – and why it’s so important to pay our fair share of tax.
It also shone a light on the need to work together in respecting
all people and we continue to take the lead in supporting and
upholding human rights at home and overseas in our supply chains.
In 2021, we were proud to play an active part in the International
Year for the Elimination of Child Labour. Our CEO, Martyn Coffey,
spoke out against child labour at two global United Nations
leadership events. He also engaged with a former child labourer,
and now youth advocate, in an open discussion about the role
of business in tackling child labour. This is true leadership which
demonstrates the firm stance we take on human rights.
Governance
As focus on ESG rightly continues to gain momentum, we ensure
we have structures in place so that our environmental, social and
governance processes are at the core of our decision making
and reporting. In 2021, an ESG internal audit was undertaken by
a third party to look at our processes and controls. It also looked
at our preparedness for the future and our alignment to reporting
frameworks. The feedback was positive and we are in a strong
position to embrace the changes in this space.
Vanda Murray OBE
Chair
Sustainability at Marshalls is at the heart of what
we do – you can see it in our products, in our
commitments and in our actions.
The UN Global Compact’s principles continue to
guide us and provide our framework for reporting
on our activities in the key areas of human rights,
labour, the environment and anti-corruption.
The Marshalls Way of doing the right things, for
the right reasons, in the right way underpins our
sustainability model along with the UN Sustainable
Development Goals.
Our three pillars of Respecting People, Climate
Action and Made to Last demonstrate our areas
of focus through becoming a Better Workplace,
contributing to a Better World and giving our
customers a Better Product.
UN Global Compact
Purpose:
Creating BETTER Net Positive Futures
Values:
Courageous, Inspiring, Purposeful
The Marshalls Way:
Doing the right things, for the
right reasons, in the right way
Respecting
People
BETTER
Workplace
Climate
Action
BETTER
World
Made
to Last
BETTER
Product
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
Environmental Policy Statement*
Sustainability strategy (pages 56 and 57)
Energy and Climate Change Policy*
Timber and Paper Policy
Sustainability commitments relating to the
environment (page 54)
Social
Transport Policy
Code of Conduct*
Responsible business (page 50)
Social Community Investment Policy
Charitable donations (page 64)
Corporate Responsibility Policy*
Health and safety (pages 68 and 69)
Tax Policy*
Human Rights Policy*
Modern Slavery and Anti-Human
Trafficking Policy
Children’s Rights Policy
Anti‑Bribery Code*
Tax Policy*
Trading Policy*
Stakeholder engagement (pages 22 to 29)
Governance and compliance (pages 72 to 83)
Corporate Governance Statement (pages 72 to 83)
Schedule of matters reserved for the Board*
Corporate Governance Statement (pages 72 to 83)
Board Committee Terms of Reference*
Corporate Governance Statement (pages 72 to 83)
Health and Safety Policy
Serious Concerns Policy
Diversity and Inclusion Policy
Drug and Alcohol Policy
Headcount (pages 68 and 69)
People engagement (pages 64 to 67)
Board diversity (pages 70 and 71)
Gender diversity (pages 110 and 111)
Mental Health and Wellbeing Policy
Stakeholder engagement (pages 22 to 29)
Description of risk process (page 35)
Risk framework (page 35)
Principal risks and uncertainties (pages 37 to 43)
Our business model (pages 18 and 19)
Key performance indicators (pages 32 and 33)
Strategy (pages 30 and 31)
Governance
Employees
Principal risks
Business model
Non-financial KPIs
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 | Annual Report and Accounts 2021
51
Strategic Report What ESG Means to Marshalls continued
Our sustainability journey
How our journey began...
2 0 0 0
2 0 0 9
2 0 1 0
Began trading
in imported stone
Marshalls became UN
Global Compact signatory
First disclosure to Carbon
Disclosure Project (“CDP”)
2 0 0 4
2 0 0 8
2 0 1 1
Carbon reporting started
Product carbon
footprint started
First time achievement of BES 6001
for sustainable procurement
2 0 0 5
2 0 0 6
2 0 1 4
Marshalls joined the FTSE4Good
index of sustainable shares
Joined the Ethical
Trading Initiative
First time
Living Wage employer
52
Marshalls plc | Strategic Report
2 0 1 7
2 0 1 9
First to achieve Ethical
Labour Standard BES 6002
Superbrand status
for ten years running
2 0 1 6
2 0 2 0
To find out more, please visit
www.marshalls.co.uk/sustainability
Joined UNGC UK Modern
Slavery Working Group
Carbon Reduction Plan approved
by Science Based Targets initiative
2 0 1 5
2 0 2 1
First Fair Tax
Mark accreditation
Signatory to Women’s
Empowerment Principles (“WEPs”)
2022...
Moving into the
future, Marshalls
aims to create
better net positive
futures.
Marshalls plc | Annual Report and Accounts 2021
53
Strategic Report What ESG Means to Marshalls continued
Sustainability – materiality matrix
Materiality matrix
We base our materiality matrix on stakeholder engagement,
the SASB Standards for Construction and the UN Sustainable
Development Goals. The ESG materiality matrix complements
our risk heatmap (on page 35) and whereas the heatmap looks
at impact and likelihood, the materiality matrix focuses more
specifically on sustainability and ESG stakeholder interest and
impact on the business.
Review process
Building on the process we put in place in 2020, we started with
a review of materiality topics through desk research, analysis
of industry issues, and feedback from stakeholders including
customers and colleagues. A quantitative process was then taken
to our ESG Committee, a group of 19 senior colleagues from
different areas of the business, in order to review the positions
of each materiality topic. This was followed by consultation with
our Employee Voice Group.
Outcome of review
Further to the review, our key material issues still broadly fall into
the categories of environment, people and responsible business.
However, there have been additions and changes. We have added
talent and development, as well as natural capital in order to
differentiate from biodiversity. Circular economy now encompasses
waste management, and responsible sourcing has become
sustainable procurement. With the impact of climate change
becoming more prevalent, human rights due diligence has evolved
into human rights and environmental due diligence.
In 2022, we will revisit and update the ESG materiality assessment
procedures by defining each material issue in the context of
Marshalls and developing a process where each material issue is
assessed on a risk basis and appropriately linked and recorded
within the risk registers (where appropriate).
Materiality review process
h
g
H
i
w
o
L
t
s
e
r
e
t
n
i
l
r
e
d
o
h
e
k
a
t
S
8
6
9
18
14
11
10
3
1
16
12
7
2
17
15
5
4
13
Moderate
Significant
Major
Impact on business
1
2
3
4
5
6
7
8
9
Energy management
Water management
Circular economy
Biodiversity impacts
Natural capital
Health and safety
Product innovation
Impact of climate change
Carbon reduction
10
Employee wellbeing
11
12
13
14
15
16
17
18
Supply chain resilience
Sustainable procurement
Community relations
Human rights and
environmental
due diligence
Anti‑corruption
Diversity and equity
Talent and development
Regulatory environment
Stage 1
Desk research
SASB Standards for Construction
Analysis of industry issues
Feedback from customers
Stage 2
Quantitative and qualitative review
process with ESG Committee
Stage 3
Final review
Review process with customer-facing
colleagues
Presentation to Executive team
and Board
Consultation with Employee
Voice Group (“EVG”)
Publication in Annual Report
ESG audit
In 2021, the Audit Committee commissioned KPMG to undertake an audit in order to assess the controls in place in relation to
ESG at Marshalls. This also included consideration of our preparedness for the future, particularly in relation to aligning reporting
frameworks and meeting the challenges associated with future changes. Following this audit, areas of focus for 2022 include
formalising processes, completing skill assessments and aligning ESG metrics and reporting.
“Overall, the control environment in relation to ESG processes was found
to be working well. With a dedicated sponsor appointed and a steering
group in place, the governance, oversight and reporting of ESG matters
and activities have significantly improved.”
54
Marshalls plc | Strategic Report
Sustainable Development Goals (“SDGs”)
Materiality
Last year, we outlined our engagement with each of the four UN
SDGs that we have identified as material to our business and
our strategic objectives – SDG 8 for Decent Work and Economic
Growth, SDG 11 for Sustainable Cities and Communities, SDG 12 for
Responsible Consumption and Production and SDG 13 for Climate
Action. While we understand the SDGs are very much aimed at
countries and nations globally, we also know that business has a
role to play in contributing to the future of the planet and its people.
Contribution to the SDGs
In 2021, we undertook a review to further delve into the goals at
target level as each of the 17 goals have associated targets and
indicators. This process enabled us to see where we contribute,
focusing on tangible actions. In our commitment to being
transparent, we wanted to be clear and specific about the elements
of each SDG we do and don’t contribute to.
Reporting
Our review also encouraged us to put a process in place for SDG
reporting. By the end of 2021, we have further understood the
SDGs and their targets, prioritised the SDGs that are material
to our business, and analysed our contribution at target level.
We look forward to taking our process further in 2022, where we
will be setting objectives and defining metrics, selecting disclosures
and starting the process of collecting and analysing relevant
data. We will also be joining the UNGC Network UK Global Goals
Working Group.
Case study
Goal 8.4: Improve progressively, through 2030, global resource
efficiency in consumption and production and endeavour to
decouple economic growth from environmental degradation
Though this is a global goal, our contribution is based
on our ongoing move towards circularity. We have waste
management strategies and metrics to measure our waste to
landfill. In 2021, we further reduced our reliance on plastic by
removing plastic packaging from some of our kerb and edging
products. We continue to monitor our water use by measuring
water harvesting and recycling at our manufacturing sites, and
we have processes in place for quarry restoration.
Link to strategic objective: Sustainable materials supply
SDG
Targets
How we contribute positively
Related strategic priorities
8.2, 8.4,
8.5, 8.6,
8.7, 8.8
11.2, 11.3,
11.4, 11.5,
11.6, 11.7,
11.7a 11.7b
12.1, 12.2,
12.5, 12.6,
12.7, 12.8
• Business and human rights roadmap
• Code of Conduct and ETI Base Code
• Living Wage and Fair Tax employer
• UN Target for Gender Equality and signatory to Women’s
Empowerment Principles (“WEPs”)
• Apprenticeship programme
• Safecall independent whistleblowing service
• Digital transformation
• Logistics excellence
• Customer centricity
• Operational excellence
• Growth in the emerging businesses
• Net zero commitment and climate change mitigation
• Brand preference for product
and adaptation strategy
specification
• Tactile paving, natural stone and permeable
• New product development
paving products
• Product information including carbon footprints and
Environmental Product Declarations (“EPDs”)
• Focus on placemaking and social value
• Landscape protection products and anti-terrorism kerbs
and innovation
• Sustainable supply
• Renewable energy at sites
• Water monitoring programme, including water
harvesting and recycling at sites
• Focus on biodiversity and natural capital
• Waste management and move towards circularity
• Active participant of UN Global Compact
• Ethical Risk Index for natural stone products
• Digital transformation
• Logistics excellence
• Sustainable supply
• Operational excellence
13.1, 13.3
• Net zero commitment and climate change mitigation
• Brand preference for product
and adaptation strategy
• Science‑based targets for carbon reduction
• Product carbon footprints for over 5,000 products
• Permeable paving products
specification
• Sustainable supply
• New product development
and innovation
• Operational excellence
Marshalls plc | Annual Report and Accounts 2021
55
Strategic Report • 2.7 per cent reduction year on year of kWh/tonne of product
• FORS (Fleet Operators Recognition Scheme)
What ESG Means to Marshalls continued
Sustainability progress
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 30 and 31, and ensure that the Group’s priorities and actions take full account of the longer-term
sustainability priorities.
Theme
Achievements in 2021
Stakeholder engagement
Targets
Progress
Climate change
and carbon reduction
• Mitigation and adaptation strategy
• Reporting progress on TCFD reporting
recommendations
• Working with the Carbon Trust to update product
carbon footprints
• Climate change awareness education and training
• Recognised as European Climate Leader by Financial
with colleagues and customers
Times and Statista
• CDP B score
• Re‑accreditation to Carbon Trust Standard
• Engagement with UNGC Network UK TCFD
Working Group
Pollution
and resources
• Solar panels at second manufacturing site
• Removal of non-essential packaging on standard
• Active membership of Mineral Products
Association (“MPA”) and MPA Precast
kerb and edging ranges
• Launch of virtual sample service
• Collaboration with Cambridgeshire County Council
on renewable energy project
• Executive remuneration for carbon reduction targets
• Reduce absolute emissions by 15 per cent by 2025 (from a
2018 base year)
• Commitment to net zero by 2030
• Certification to the Carbon Trust’s Route to Net
Zero Standard
• Updated product carbon footprints
• Solar panels at every major manufacturing site
• Euro 6 standard for entire fleet
• Implementation of ISO 9001 Circular Economy
• Re-accreditation to ISO 50001
Biodiversity
• Working towards providing biodiversity net gain
• Quarry restoration
• Move to FSC®-certified wood in the products
we design and manufacture
• Working with the Royal Society for the Protection
of Birds (“RSPB”) on twite project
• Community engagement for geodiversity projects
• Biodiversity roadmap
• Tree planting project
t
n
e
m
n
o
r
i
v
n
E
Water use
• Focus on water monitoring (including harvesting
• Collaborative working as members of
and recycling)
• Permeable paving and Sustainable Drainage Systems
(“SuDS”) product solutions to alleviate flooding
Construction Industry Research & Information
Association (“CIRIA”) and susdrain
• Water product footprints
• Rollout of automatic meter reading for water usage
• Re-accreditation to ISO 14001
Supply chain and
responsible sourcing
• Re-accreditation of BRE BES 6001 and BRE ELS 6002
• Sustainable procurement human rights due diligence
• Active membership of Supply Chain
Sustainability School
system and processes
• Gold membership of Supply Chain
Sustainability School
• Collaboration with UK and overseas suppliers
• Engagement forum with solar panel suppliers
Human rights
and modern slavery
Anti-corruption
and anti-bribery
l
i
a
c
o
S
Responsible business
People
Health and safety
56
Marshalls plc | Strategic Report
• Active engagement with the International Year for
• Active engagement with the UN and ILO Child
the Elimination of Child Labour
• Independent Modern Slavery Threat
Assessment programme
• Enhanced supply chain mapping using Traffik Analysis
Hub big data
Labour Platform
• Engagement with UK Government on aligning
overseas aid with private sector modern
slavery efforts
• Engagement with UNGC Network UK Modern
Slavery and Child Labour Working Groups
• Code of Conduct cumulative training for
• Collaboration with internal teams
80 per cent of staff
• Core programme of compliance training on
modern slavery, anti-bribery and GDPR
• Corporate Criminal Offence (“CCO”)
training programme
• Sustainability materiality review
• Review of internal ESG processes
• £103,500 donated to Macmillan and Mind
• Fair Tax Mark
• Disclosure to Workforce Disclosure Initiative
• Drug and Alcohol Policy training programme
to review policies
• Charity partnership with Macmillan
• Member of Made in Britain
• Engagement with UNGC Network UK Global Goals
Working Group
• Women’s Empowerment Principles (“WEPs”) signatory
• 102 apprenticeships
• Over 8,200 training courses completed
• Over 72 per cent of colleagues using Marshalls NOW
employee benefits
• Living Wage employer
• Engagement with UNGC UK Network on Diversity
and Inclusion
• Actively asking for feedback via Your Voice
employee survey
• Accredited new driver apprenticeship programme
• Employee Voice Group
• Drivers’ Working Party
• Over 18,000 hours spent on health, safety and
• Working with Mental Health First Aiders to support
• Set up of Steering Committee for Mental Health
environmental training
our people
• 53 new Mental Health First Aiders
• 7.8 score for health and wellbeing in employee survey
• Highly Commended for the Safer Through
Improvements in Health and Wellbeing Award at the
MPA and British Precast Health and Safety Awards
• Cross‑team development of mental health
support process
• Implementation of SLAM (“Stop, Look, Assess,
Manage”) with colleagues
• ETI Base Code video for overseas suppliers in
• Implementation of ISO 20400 Sustainable Procurement
• Re-accreditation of BRE ELS 6002 for ethical
four languages
labour sourcing
• Continue to deliver pledge in support of the International
Year for the Elimination of Child Labour
• Launch Everyone’s Business app
• Launch Safecall whistleblowing hotline to overseas
supplier operations
• Code of Conduct training for 100 per cent of staff
• Set up of Compliance Steering Group
• Compliance training refresher
• Development of CCO training programme
• Fair Tax Mark re-accreditation
• Social value measurement and reporting
• Reporting alignment to Global Reporting Initiative (“GRI”)
• Reporting to Ethical Trading Initiative (“ETI”) and UNGC
Communication on Progress revised frameworks
• Re-accreditation to ISO 9001
• Living Wage re‑accreditation
• Strengthen and evolve the Driver Academy
• Increase number of apprentices
• Rollout of inclusive leadership and diversity awareness
programme for Marshalls leaders
and Wellbeing
• Rollout of Fair & Just Approach framework
• Recruit and train more Mental Health First Aiders
• Re-accreditation to ISO 45001
Legislation, certification and
membership
• Science Based Targets initiative
• Carbon Trust Standard
• Carbon Trust Route to Net Zero Standard
• ISO 50001:2018
membership
• ISO 14001:2015
• ISO 50001:2018
• ISO 8001
• FSC certification for Landscape
Protection products
• Mineral planning legislation
• Environment Agency
• ISO 14001:2015
• BRE BES 6001
• BRE ELS 6002
• ISO 20400
• Modern Slavery Act 2015
• Modern Slavery Statement
• UK Bribery Act 2010
• Corporate Governance Code
• Fair Tax Mark
• UN Sustainable Development Goals
• UNGC Communication on Progress
• Sustainability reporting frameworks
• ISO 9001:2015
• Employment and equality legislation
• Living Wage
• Gender pay gap reporting
• Health and safety legislation
• ISO 45001:2018
• RIDDOR
• SafeContractor
• Achilles BuildingConfidence
On track = meeting regulation and mandatory requirements
Exceeding = engaging in activity that goes beyond regulation and mandatory requirements
Theme
Achievements in 2021
Stakeholder engagement
Targets
Progress
Climate change
• Mitigation and adaptation strategy
• Reporting progress on TCFD reporting
and carbon reduction
recommendations
• Recognised as European Climate Leader by Financial
with colleagues and customers
Times and Statista
• CDP B score
• Re‑accreditation to Carbon Trust Standard
• Working with the Carbon Trust to update product
carbon footprints
• Climate change awareness education and training
• Engagement with UNGC Network UK TCFD
Working Group
Pollution
and resources
• Solar panels at second manufacturing site
• Active membership of Mineral Products
• Removal of non-essential packaging on standard
Association (“MPA”) and MPA Precast
kerb and edging ranges
• Launch of virtual sample service
• Collaboration with Cambridgeshire County Council
on renewable energy project
• Executive remuneration for carbon reduction targets
• Reduce absolute emissions by 15 per cent by 2025 (from a
2018 base year)
• Commitment to net zero by 2030
• Certification to the Carbon Trust’s Route to Net
Zero Standard
• Updated product carbon footprints
• 2.7 per cent reduction year on year of kWh/tonne of product
• Solar panels at every major manufacturing site
• Euro 6 standard for entire fleet
• Implementation of ISO 9001 Circular Economy
• Re-accreditation to ISO 50001
Biodiversity
• Working towards providing biodiversity net gain
• Working with the Royal Society for the Protection
• Quarry restoration
of Birds (“RSPB”) on twite project
• Move to FSC®-certified wood in the products
• Community engagement for geodiversity projects
we design and manufacture
• Biodiversity roadmap
• Tree planting project
Water use
• Focus on water monitoring (including harvesting
• Collaborative working as members of
and recycling)
Construction Industry Research & Information
• Permeable paving and Sustainable Drainage Systems
Association (“CIRIA”) and susdrain
(“SuDS”) product solutions to alleviate flooding
• Water product footprints
• Rollout of automatic meter reading for water usage
• Re-accreditation to ISO 14001
Supply chain and
responsible sourcing
• Re-accreditation of BRE BES 6001 and BRE ELS 6002
• Active membership of Supply Chain
• Sustainable procurement human rights due diligence
Sustainability School
system and processes
• Gold membership of Supply Chain
Sustainability School
• Collaboration with UK and overseas suppliers
• Engagement forum with solar panel suppliers
Human rights
and modern slavery
the Elimination of Child Labour
• Independent Modern Slavery Threat
Assessment programme
• Active engagement with the International Year for
• Active engagement with the UN and ILO Child
• Enhanced supply chain mapping using Traffik Analysis
slavery efforts
Hub big data
Labour Platform
• Engagement with UK Government on aligning
overseas aid with private sector modern
• Engagement with UNGC Network UK Modern
Slavery and Child Labour Working Groups
Anti-corruption
and anti-bribery
• Code of Conduct cumulative training for
• Collaboration with internal teams
to review policies
80 per cent of staff
• Core programme of compliance training on
modern slavery, anti-bribery and GDPR
• Corporate Criminal Offence (“CCO”)
training programme
Responsible business
• Sustainability materiality review
• Review of internal ESG processes
• Charity partnership with Macmillan
• Member of Made in Britain
• £103,500 donated to Macmillan and Mind
• Engagement with UNGC Network UK Global Goals
• Fair Tax Mark
• Disclosure to Workforce Disclosure Initiative
• Drug and Alcohol Policy training programme
Working Group
People
Health and safety
• Women’s Empowerment Principles (“WEPs”) signatory
• Engagement with UNGC UK Network on Diversity
• 102 apprenticeships
and Inclusion
• Over 8,200 training courses completed
• Actively asking for feedback via Your Voice
• Over 72 per cent of colleagues using Marshalls NOW
employee survey
employee benefits
• Living Wage employer
• Accredited new driver apprenticeship programme
• Employee Voice Group
• Drivers’ Working Party
environmental training
• 53 new Mental Health First Aiders
our people
• Cross‑team development of mental health
• 7.8 score for health and wellbeing in employee survey
support process
• Highly Commended for the Safer Through
• Implementation of SLAM (“Stop, Look, Assess,
Improvements in Health and Wellbeing Award at the
Manage”) with colleagues
MPA and British Precast Health and Safety Awards
• ETI Base Code video for overseas suppliers in
four languages
• Implementation of ISO 20400 Sustainable Procurement
• Re-accreditation of BRE ELS 6002 for ethical
labour sourcing
• Continue to deliver pledge in support of the International
Year for the Elimination of Child Labour
• Launch Everyone’s Business app
• Launch Safecall whistleblowing hotline to overseas
supplier operations
• Code of Conduct training for 100 per cent of staff
• Set up of Compliance Steering Group
• Compliance training refresher
• Development of CCO training programme
• Fair Tax Mark re-accreditation
• Social value measurement and reporting
• Reporting alignment to Global Reporting Initiative (“GRI”)
• Reporting to Ethical Trading Initiative (“ETI”) and UNGC
Communication on Progress revised frameworks
• Re-accreditation to ISO 9001
• Living Wage re‑accreditation
• Strengthen and evolve the Driver Academy
• Increase number of apprentices
• Rollout of inclusive leadership and diversity awareness
programme for Marshalls leaders
• Over 18,000 hours spent on health, safety and
• Working with Mental Health First Aiders to support
• Set up of Steering Committee for Mental Health
and Wellbeing
• Rollout of Fair & Just Approach framework
• Recruit and train more Mental Health First Aiders
• Re-accreditation to ISO 45001
Legislation, certification and
membership
• Science Based Targets initiative
• Carbon Trust Standard
• Carbon Trust Route to Net Zero Standard
• ISO 50001:2018
• FORS (Fleet Operators Recognition Scheme)
membership
• ISO 14001:2015
• ISO 50001:2018
• ISO 8001
• FSC certification for Landscape
Protection products
• Mineral planning legislation
• Environment Agency
• ISO 14001:2015
• BRE BES 6001
• BRE ELS 6002
• ISO 20400
• Modern Slavery Act 2015
• Modern Slavery Statement
• UK Bribery Act 2010
• Corporate Governance Code
• Fair Tax Mark
• UN Sustainable Development Goals
• UNGC Communication on Progress
• Sustainability reporting frameworks
• ISO 9001:2015
• Employment and equality legislation
• Living Wage
• Gender pay gap reporting
• Health and safety legislation
• ISO 45001:2018
• RIDDOR
• SafeContractor
• Achilles BuildingConfidence
G
o
v
e
r
n
a
n
c
e
Marshalls plc | Annual Report and Accounts 2021
57
Strategic Report What ESG Means to Marshalls continued
Task Force on Climate-related Financial Disclosures (TCFD)
Marshalls has publicly committed to being a supporter of the TCFD and last year we reported our progress on compliance for the first
time. According to TCFD recommendations, we are reporting on climate-related governance, strategy, risks and opportunities, and
metrics and targets.
We believe our disclosure is consistent with the TCFD’s recommendations. Information on our disclosures can be found in this Annual
Report and in our recently published Climate Action Report. In both reports, we provide more detail on our strategy and processes,
and the risks and opportunities related to climate change for our business. Next year’s disclosure will include more detail on scenario
analysis, financial impact of climate change and reporting of Scope 3 emissions. In compliance with FCA LR 9.8.6 (8), our disclosure is
consistent with the four recommendations and eleven recommended disclosures.
We continue to disclose to the CDP Climate Questionnaire, which is aligned with TCFD, and we scored a B for our 2021 disclosure
for 2020 data.
Recommendation
Recommended disclosures
Additional
information
Governance
Disclose the organisation’s
governance around
climate-related risks
and opportunities
Strategy
Disclose the actual and
potential impacts of
climate-related risks
and opportunities on the
organisation’s business,
strategy and financial
planning where such
information is material
Risk
Disclose how the
organisation identifies,
assesses and manages
climate-related risks
Metrics and
targets
Disclose the metrics and
targets used to assess
and manage relevant
climate-related risks and
opportunities where such
information is material
The Board has ultimate responsibility for climate-related risks and
opportunities. The CEO has overall responsibility for climate‑related issues
and has responsibility to the Board for reporting on climate‑related issues.
Climate Action Report
(pages 4–5)
The Sustainability and Energy teams, led by the Group Sustainability Director
and the Group Operations Director, work collaboratively with other teams
and sites to identify risks and opportunities, monitor performance, report
on progress and share best practice.
2021 progress: Appointment of Sustainability Improvement Director to
drive implementation of our sustainability strategy, and plans for executive
remuneration for carbon reduction.
Our mitigation and adaptation strategy focuses on the actions we need to
take to both reduce our emissions and adapt to climate change. We continue
to focus on reducing our carbon emissions and driving manufacturing
efficiencies, whilst ensuring our product offering evolves. This strategy is
aligned to our purpose of creating better net positive futures for everyone.
We recognise that customers are interested in low-carbon products and more
sustainable solutions, and there are opportunities for our industry to work
together to achieve carbon reduction targets.
2021 progress: Mitigation and adaptation strategy and appointment of
Head of Product Sustainability to identify opportunities in product portfolio.
Climate Action Report
(pages 6–9, 10)
Climate change is a principal risk and we have a formal ongoing process to
identify, assess and analyse risks. These form part of the Group Risk Register,
which is compiled by the Executive team.
Climate Action Report
(pages 5–9)
Using Verisk Maplecroft data, we have identified acute and chronic physical
risks which could affect our sites. We have also looked at risk in terms
of our products and availability of materials, along with risks relating to
reputation and the market. There are, however, also opportunities around
our sustainability credentials, the development of our water and flood
management business and our drive to give our customers the information
they need to make informed buying decisions.
2021 progress: Climate risk analysis of all sites and creation of first
Climate Action Report.
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.
Climate Action Report
(pages 5 and 11)
We continue to report our greenhouse gas (“GHG”) emissions – see page 60
for Scope 1 and Scope 2 GHG emissions and science-based targets.
See pages 56–57 and 60–61 for targets used by Marshalls to manage
climate-related risks and opportunities and performance against targets.
2021 progress: SECR reporting and ESG data sheet in Sustainability Report
covering carbon emissions data.
58
Marshalls plc | Strategic Report
Net zero by 2030
When we started our sustainability journey over 20 years ago,
we understood that sustainability would play a big part in how
companies do business. We watched and learned – and we
believed the climate science. So in 2018, we gathered our data
in order to set science-based targets for carbon reduction.
These targets were approved by the Science Based Targets
initiative in 2020 and we are still the only construction materials
listed company in the UK to have approved targets.
In 2021, we were proud to announce that Marshalls has committed
to being net zero by 2030. Our original science-based target was
based on a well-below 2°C scenario. As part of our commitment to
net zero, we have updated this to a 1.5°C pathway and alignment
with the Paris Agreement. This target is due to be approved by the
Science Based Targets initiative in 2022.
Mitigation and adaptation
As we aim for net zero by 2030, our journey focuses on the twin
goals of mitigation – actions needed to reduce emissions that
cause climate change – and adaptation – actions we need to take
to manage the risks of climate change impacts.
In order to mitigate against the effects of climate change, we are
focusing on manufacturing efficiencies, our product mix design
and achieving our science-based targets. Adaptation will look
much more at the products and infrastructure required to alleviate
flooding and heat in urban environments.
Our journey to net zero by 2030
• Green energy for all forklift trucks
• Removal of packaging ovens
• All company cars powered by electric or green energy
• All major manufacturing sites with solar power
• Net zero by 2030
Our journey to net zero
We pledge our commitment to become a net zero business by 2030.
Manufacturing efficiency
Water conservation
Disaster and risk management
Mitigation
Actions to reduce
emissions that cause
climate change
Mix design
Renewable energy systems
Flood protection
Product choice
Infrastructure upgrades
Adaptation
Actions to manage
the risks of climate
change impacts
Science-based targets
Placemaking
Urban heat island
Marshalls plc | Annual Report and Accounts 2021
59
Our Journey to Net ZeroWe pledge our commitment tobecome a net zero business by 2030.Set out on becoming a 1.5oC net zero business20222024202620282030204020202018Meet our pledgeto become a netzero businessRemoval ofpackagingovensCO2Bio LPG & electric for all fork lift trucksCO2BIOLPGAll company cars are electric or hybridCO2All manufacturingsites with solarpanels.CO250% reduction in carbon footprintCO2Switch to greenelectricity forall sitesCO2Removal of all gas oil fork lift trucksCO2Strategic Report What ESG Means to Marshalls continued
Carbon reduction
Our Energy and Climate Change Policy Statement confirms
our commitment to reducing the energy and carbon impact
of the business.
As we reported last year, we reduced our total carbon footprint by
50 per cent between 2008 and 2020. We re-baselined our targets in
2018 and our interim science-based targets are to reduce absolute
emissions by 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. Next year, we will report on our new
targets aligned with our net zero commitment.
Marshalls has a mandatory duty to report annual greenhouse gas
(“GHG”) emissions under the Companies Act 2006 (Strategic Report
and Directors’ Report) Regulations 2013. We use 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 GHG emissions.
This year, in line with mandatory requirements, we have reported
according to recommendations from the Task Force on Climate-
related Financial Disclosures (“TCFD”), which can be found on
pages 58–60 and in our Climate Action Report.
In 2021, we achieved re-certification of the Carbon Trust Standard
for all UK and Belgium operations. In 2022, we will work on
certification to the Carbon Trust’s Route to Net Zero Standard.
Our approach to the Energy Savings Opportunity Scheme (“ESOS”)
legislation was to define our energy management in compliance
with the international standard for energy management, ISO 50001,
and we were re-accredited in 2021.
Measuring carbon emissions
We measure carbon emissions by looking at Scopes 1, 2 and 3.
Scope 1 refers to all direct emissions of carbon. For Marshalls, this
means our fuel usage and includes diesel, petrol, gas oil, liquefied
petroleum gas (“LPG”), bio LPG, kerosene and natural gas.
Scope 2 covers our indirect emissions of carbon, so this would
be electricity that we have purchased. In 2021, we reported our
Scope 2 emissions in two different ways – location based (using
Government emission factors) and market based (using supplier
emission factors) – and we continue to do so.
Scope 3 refers to supplier emissions including cement, aggregates,
shipping and transport.
Our carbon and energy data has been externally verified.
Absolute Scope 1 and 2 emissions
This chart illustrates the Group’s absolute CO2e emissions in tonnes
(including Belgium).
e
2
O
C
s
e
n
n
o
T
50,000
40,000
30,000
20,000
10,000
0
2
0
6
1
4
,
2
8
5
2
1
,
9
5
5
3
4
,
7
4
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2
4
,
0
7
6
0
1
,
0
3
4
0
1
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2
7
0
5
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,
5
6
5
7
,
7
9
8
2
,
0
4
5
7
3
,
2
3
2
8
,
2
3
2017
2018
2019
2020
2021
Scope 1 (market based)
Scope 2 (location based)
Scope 2 (market based)
As production has increased in 2021 so have our Scope 1 and
2 absolute emissions; however, they remain within our science-
based target.
60
Marshalls plc | Strategic Report
Marshalls has used bio LPG rather than condition LPG for heating
and to power some of the forklift truck fleet since September
2021. While we can declare these using the lower emission factor
published via DEFRA, we must also declare the possible outside
of scope emissions (215 tonnes CO2e) from using this fuel source.
Relative Scope 1 and 2 emissions
This chart illustrates the Group’s CO2e intensity emissions as
a proportion of production output (including Belgium).
t
u
p
t
u
o
n
o
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t
c
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o
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10.24
9.92
9.21
5
6
.
8
0
7
.
7
8
8
.
7
6
4
.
6
2017
2018
2019
2020
2021
Scopes 1 and 2 (location based) Scopes 1 and 2 (market based)
Though our absolute emissions have increased in 2021, our
intensity emissions have reduced.
Scope 3 target
Our Scope 3 science-based target is that 73 per cent of suppliers by
emissions, covering purchased goods and services and upstream
transport and distribution, have science-based targets by 2024.
Case study
The carbon footprints we provide for all of our concrete and
natural stone products are calculated for us by the Carbon Trust
according to methodology outlined in PAS 2050. We were the
first company in our sector to provide such data back in 2008 and
we revised the numbers in 2011 and 2016. We are in the process
of updating the footprints to include all of our new products. We
have always published full cradle to grave analysis which reflects
all emissions across the full lifecycle of the product. This includes
material extraction, production, packaging, transportation to site,
emissions in installation and use, and even end of life treatment.
We believe that this is the most honest and transparent approach,
giving our customers a true and easily comparable reflection of
the carbon impact of the products they buy from us.
Link to strategic objective: Brand preference for
product specification
Streamlined Energy and Carbon
Reporting (“SECR”)
In accordance with the SECR framework, we are reporting
underlying energy use, which includes self-generated energy from
renewables.
Energy performance in the UK
The chart below shows underlying UK energy use. Belgium’s energy
use for 2021 was 1.936 mkWh (2020: 1.717 mkWh).
)
s
n
o
i
l
l
i
m
(
h
W
k
250
200
150
100
50
0
209.167
217.868
215.836
199.016
178.682
2017
2018
2019
2020
2021
Relative energy performance in the UK
This chart shows Marshalls’ energy use in the UK in relation to
product. Whilst our energy use has increased in 2021, our relative
performance remains strong.
e
n
n
o
t
/
h
W
k
50
40
30
20
10
0
40.04
42.40
37.82
36.25
34.24
2017
2018
2019
2020
2021
Note: The intensity ratio for 2021 is 34.24 kWh per tonne of product and
this is calculated by dividing our kWh (energy) usage by our production
output (tonnes).
Self-generated energy from renewables
This chart shows self-generated energy from the solar arrays at our
Sandy and Sittingbourne manufacturing sites.
500,000
400,000
300,000
h
W
k
200,000
100,000
0
413,449
197,294
201,635
199,453
209,551
2017
2018
2019
2020
2021
Energy reduction
Energy reduction is a big part of our plans to get to net zero. As well
as engineering high-emission fuels like gas oil out of the business,
we are focusing on operational controls and building management
systems to reduce energy.
Since 2018, we have installed eleven building management systems
saving over 4 GWh and over 1,000 tonnes of CO2. We have also
ensured that our 18 packaging ovens, which are fuelled by a mixture
of LPG and natural gas, switch off automatically when not in use.
We continue to work on reducing plastic packaging and in 2021,
we announced plastic reduction for our kerb and edging products,
which reduces gas consumption. We also installed solar panels
at a second site, increasing solar energy to 10 per cent of all major
manufacturing sites. We continue to upgrade our fleet to comply
with Euro 6 standards and in 2022, we are updating our product
carbon footprints.
10%
Solar energy at major manufacturing sites in 202115+
90%
Sites with solar panels
Sites without solar panels
Case study
For some years, we have investigated different types of energy
for our business operations, including wind and solar. Our
solar energy project is now well underway and in 2021, we
installed solar panels at our Sittingbourne site in Kent. All our
major manufacturing sites have had solar energy assessments
in order to evaluate potential for solar panel installation
and we have a target of one major solar panel project every
year. Our new dual block plant project in St Ives has been
designed to be compatible with solar energy supply with the
aim of using solar power for all forklift trucks and electric car
charging points.
Link to strategic objective: Operational excellence
Marshalls plc | Annual Report and Accounts 2021
61
Strategic Report
85
+
K
What ESG Means to Marshalls continued
Business and human rights
We have been an active member of the International Labour
Organisation (“ILO”) Child Labour Platform since 2015. This dynamic
platform gives us the opportunity to join other global brands and
organisations committed to eliminating child labour in supply chains.
We convene to share experience, knowledge and challenges in order
to gain new perspective and recommit to doing all that we can as
businesses to accelerate progress and take action.
UN Global Compact Leaders Summit
Our CEO, Martyn Coffey, stood together
with leaders from Coca Cola, Ferrero
and Louis Dreyfus to speak out in
support of children’s rights. The session
marked the tenth anniversary of the
UN Guiding Principles on Business
and Human Rights and spoke to the
imperative of businesses to respect
human rights and the requirement for
human rights due diligence.
The World Day Against Child Labour
As members of the ILO Child Labour Platform and an Alliance
8.7 partner – the global partnership for eradicating forced labour,
modern slavery, human trafficking and child labour around the
world – we made a public International Year for the Elimination
of Child Labour Action Pledge in 2021.
As part of the World Day Against Child Labour, a series of
connections were made between high-level speakers and youth
advocates on highlighting efforts made to implement International
Year pledges. Our CEO, Martyn Coffey, addressed a question
from Amar Lal, a youth advocate and former child labourer in
the sandstone sector in Rajasthan, and now a child rights lawyer.
The focus of the conversation was on sharing perspectives and
finding solutions to accelerate the elimination of child labour
in the sandstone sector in Rajasthan.
BRE Ethical Labour Sourcing 6002
Marshalls has achieved BRE Ethical Labour Sourcing Standard
6002 for the fifth consecutive year. We have opted to engage with
the accreditation to drive our continual improvement and to deliver
back on our Modern Slavery Statement KPIs and commitments.
Against the trajectory of business and human rights milestones,
legal developments, and the introduction of goods sanctions firmly
linked to “hot goods” with high risk of child and forced labour, the
global pandemic has most definitively presented a tipping point
for business and human rights. For us, independent third‑party
assurances are an integral part of our journey.
Advanced supply chain mapping
We were the first in our sector, and one of the first globally, to
engage with Traffik Analysis Hub (“TAH”) in 2019. TAH is a multi-
partner global big data platform, initially funded by IBM but now
a not-for-profit enterprise in its own right. The platform consumes
information on human trafficking and instances of modern slavery
which can then be analysed in multiple ways.
Marshalls has been working with TAH to develop a specific supply
chain tool which allows organisations to view their own supply
chain data in the global, national, regional and local contexts. This
in turn can be harnessed to help inform business and human rights
strategy, as well as human rights due diligence approaches. It also
makes plain the context in which an organisation’s supply chain,
and the wider sector, operates.
Children’s Rights and Business Principles Report
As part of our work on promoting children’s rights, we
commissioned an independent agency to undertake an audit of
the impact of our business operations on children in India, China,
Vietnam and the UK, against the Children’s Rights and Business
Principles Framework. This is the third such report that we have
undertaken and we will share our findings in 2022.
Offering job opportunities to victims of modern
slavery in the UK
Marshalls has been a member of Bright Future, now a co-operative
of which we are a founding member, since 2018. We continue to
make available work placements, with the opportunity of full time
employment. We are also looking at the possibility of ring-fencing
opportunities specifically for survivors of modern slavery.
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Marshalls plc | Strategic Report
Human rights due diligence
S
T
H
RI G
D U E D ILIGENCE
Bespoke
Programmes
with UN
Agencies
Verisk
Maplecroft
Analysis
AN
M
U
H
Safecall Whistle
Blowing/Grievance
Mechanisms
A I N
H
C
SUP P L Y
Everyone’s
Business Live
Monitoring
AIN
H
C
Y
L
P
P
U
S
Children’s Rights
& Business
Principles
Framework
AIN
H
C
SUPPLY
SUP
P
LY
C
H
A
I
N
S
U
P
P
L
Y
C
H
A
I
N
S
U
P
P
L
Y
CHAIN
Traffik Analysis
Hub Mapping
Country/Sector/
Product Risk
Profiles
e
c
n
a
r
u
s
s
A
t
n
e
d
n
e
p
e
d
n
I
-
e
n
Li
3rd
3
L
I
N
E
S
O
F
D
E
F
E
N
C
E:
‘Know & Show’
HRDD Operational
Systems and
Procedures
Ethical Audit
Programme
Goods for
Resale
1stLine
-Operational M a n a g e m e
d
n
2
t
n
ETI Base Code
Implementation
Oversight
Risk
Lin e - Oversee
Our human rights due diligence approach is thorough and
incorporates rigorous analysis via Verisk Maplecroft, enhanced
supply chain mapping using the Traffik Analysis hub platform, and
our own country risk analysis using the best available global data.
This information is supplemented with knowledge gained from our
extensive networks and partners in the UK and overseas.
We work continuously with higher risk suppliers to embed and
implement the Ethical Trading Initiative Base Code. We recently
produced a training film in Mandarin, Chinese, Vietnamese as well
as English, which is currently being rolled out, together with further
supplier training on our Code of Conduct.
During 2021 we introduced a human rights due diligence ‘filter’
within our procurement process based on the Slavery & Trafficking
Risk Template (“STRT”). This has allowed us to further understand
and manage our risks. We also utilise the full STRT within our audit
process, and in tender processes.
A revised and enhanced ten‑stage ethical audit process has been
put in place and our business & human rights team is being
strengthened in the UK and the EU. We have committed to further
human rights programmes in both India and Vietnam to continue
our human rights due diligence work and support suppliers.
We continue to look at all of our activities through a child rights
lens and have made good strides in delivering against our
International Year for the Elimination of Child Labour
Action Pledge.
Live monitoring will become increasingly important alongside our
Safecall grievance mechanism for supply chain workers.
We continue to make our annual Modern Slavery Statement in
accordance with the spirit of the act, which for us is a platform to
further the human rights agenda.
Marshalls plc | Annual Report and Accounts 2021
63
Strategic Report What ESG Means to Marshalls continued
Underpinned by people
and talent development
2,700
7 years
employees (2020: 2,500)
of Living Wage accreditation
102
8,287
colleagues in apprenticeship
programmes (2020: 99)
training courses completed
(2020: 5,648)
£103,500
raised for Macmillan and
Mind (2020: £183,000)
7.6
eNPS score – 0.3 above
the industry benchmark
(2020: 7.6)
761
35%
new people in 2021
of women in leadership roles
A message from our EVG Board sponsor
I’m really pleased to have taken over as the Board sponsor of
the Employee Voice Group (“EVG”) at Marshalls, and to help the
business further its focus on employee engagement and the
Marshalls people agenda. This focus continues to be an important
topic for the Board, which is essential while businesses continue to
work through the challenges of COVID-19 and Brexit.
I’ve seen first-hand the valuable role the EVG plays, and have
witnessed this elected group represent its colleagues in a meaningful
and constructive way. This team has grown to be a valuable asset
to Marshalls, providing a sounding board and feedback on the key
topics outlined in this section of the report.
In other areas, work continues to enhance our position as an
employer of choice through the development and growth of the
people strategy. We’ve made further strides in 2021, and we’re
confident in our plans to shift the dial even more in 2022.
Angela Bromfield
Non-Executive Director
COVID-19
As the COVID-19 pandemic continues to pose challenges to
everyday life and to businesses, we maintained our support
for employees and continued to put health and safety first.
Our health and safety protocols at all sites exceeded the
minimum UK Government requirements – for example,
maintaining two-metre social distancing and mask wearing
around all of our sites, and no mandated return to the office.
Our communications gave clear information on working
safely and staying safe outside of work, and received positive
feedback from employees. We recognised not everyone
wanted to return to the office spaces, and our ambition is to
create a more modern and hybrid-working environment, so
we also introduced an Agile Working Policy and issued hybrid
working guidance. To succeed in our new hybrid-working
world, we supported managers and leaders to empower
and enable their teams to work effectively through utilising
technology and providing relevant guidance and advice.
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Marshalls plc | Strategic Report
Diversity, equity, respect and
inclusion (“DERI”)
We are focused on developing our DERI agenda and formulating
our ambitions in this area. While we have started measurement
activities, we have not yet set measurable targets.
In 2021, we collected diversity data from our existing employees
and new starters. Around 40 per cent of our employee base
voluntarily shared details about their gender identity, sexual
orientation, ethnicity, religious beliefs, generation, caring
responsibilities and disabilities.
In 2022, we plan to increase measurement activity with the
introduction of new HR technology.
Although the majority of our workforce is white, cis and male,
we do have representation from diverse minority communities:
• colleagues who identify as non-binary and trans;
• 13 different beliefs;
• 24 different countries of origin/nationality;
• colleagues who identify as asexual, bisexual, gay, lesbian,
queer, heterosexual and pansexual; and
• 2 per cent of our colleagues have shared that they have a disability.
Generations at Marshalls (%)
18+
Gen Z (1995–2012)
8%
18% Baby Boomer Generation (1946–1964)
40%
Generation X (1965–1979)
34%
Millennials/Gen Y (1980–1994)
0%
The Silent Generation (1925–1945)
All of our job advertisements
now include our very clear equal
opportunities statement:
Whoever you are and whatever your background, at Marshalls
you’ll find a fair and supportive workplace. You are unique
and we want you to bring every part of who you are to work,
every day.
We’re committed to ensuring equal opportunities for everyone. To
us, this is more than a legal, moral or ethical necessity – it’s the
right thing to do! We call this doing business The Marshalls Way.
We want our team to reflect the diverse nature of society and
the communities we serve. Marshalls is a workplace where
you are valued for the contribution you make, and where you
can grow and develop by being entirely yourself!
We have built the Marshalls DERI strategy with the aim of influencing
the culture, behaviour and awareness of our employees and leaders.
This change programme started in 2020 with a tactical plan to open
the conversation, involve and educate our people and address what
we discover. The initial focus was on developing gender equality
and social mobility, and engaging people from ethnic backgrounds
without excluding the need to recognise intersectionality.
We have continued working with the United Nations Global
Compact (“UNGC”) on our Target for Gender Equality, taking action
to advance women’s leadership (defined as Executive team and
their direct reports) and representation in our business. We put in
place an action plan to further our commitment to supporting and
promoting the rights of women and girls by becoming a Women’s
Empowerment Principles (“WEPs”) signatory. With this public
commitment, we are working towards upholding and implementing
the principles across our own business and our supply chain. Our
Talent Director also sits on the UNGC Network UK Diversity and
Inclusion Working Group. Our DERI agenda is sponsored by Shiv
Sibal, Marshalls’ General Counsel and Company Secretary.
In our most recent employee engagement survey, we included a
DERI-specific question about being treated fairly and our employees
scored this at 8.5 out of 10, which is 0.8 above the industry benchmark.
In 2022, we plan to grow our DERI agenda through the rollout of a
comprehensive education and cultural change programme for all
Marshalls leaders focusing on inclusive leadership and diversity
awareness. We are also working to create additional Employee
Resource Groups to represent the different diverse groups within
our business and within the communities we serve.
Early careers
Attracting and developing early talent
We encourage and support young people into fulfilling careers at
Marshalls through our various apprenticeship and development
programmes. We know that workforce sustainability is essential to
our long-term success, and we have an ambitious plan to focus on
early talent and promote our industry as a destination of choice for
younger people.
Marshalls took part in the summer 2021 issue
of Jobs & Careers magazine to showcase the
diverse career opportunities in manufacturing.
The magazine aims to appeal to young people
and gives a great insight to those starting
out on their career path. A study of 520
young people who had read the magazine
placed Marshalls in eighth place out of
97 organisations.
Marshalls plc | Annual Report and Accounts 2021
65
Strategic Report8
+
40
+
34
+
L
Addressing industry challenges through our
new Driver Academy
In response to industry challenges, and as part of our apprenticeship
and workforce sustainability strategies, towards the end of 2021
we introduced a Driver Academy with the goal of increasing our
driver population through growing the skillset of existing employees.
This development programme is a collaboration between Logistics,
Operations, HR and Health and Safety. Despite a tough and
competitive market, six people have been recruited so far as apprentice
drivers and they are on track to be qualified by June 2022. As part of this
training, the apprentice drivers are learning how to operate key
equipment such as forklift trucks and lorry cranes and are proving to be
valuable assets by covering a variety of roles within the Logistics team.
This approach to driver training will give them a breadth of knowledge
that will be invaluable when qualified and fulfilling a driver role.
Our 2022 goal will be to strengthen and evolve the Driver Academy
in line with our strategic objectives and with input from the
Drivers’ Working Party representatives.
What ESG Means to Marshalls continued
Leading the Marshalls Way
Throughout 2021, 202 leaders have attended our “Leading The
Marshalls Way” development course. This development programme
focuses on equipping leaders with the skills they need to manage
in The Marshalls Way at all times.
Working with best in class external training providers, we delivered
a bespoke learning and development plan that gave leaders an
immersive training opportunity to understand how to excel at
leading and managing. Leaders who attended this training said that
they saw a 46 per cent increase in their knowledge and ability, and
now feel more confident as a Marshalls leader.
Leadership development apprenticeship
We launched our leadership development apprenticeship
programme last year with 62 aspiring, frontline and
departmental leaders undertaking an apprenticeship
qualification to improve their knowledge, skills and
behaviours around being a great leader. Each programme
not only focuses on the models and tools required to be a
great leader and manager, but also tailors that content to The
Marshalls Way. In 2021, we have seen 16 people graduate
with more to come in 2022. Of those graduating, 94 per cent
felt that the programme had really helped them improve their
leadership skills within The Marshalls Way framework.
Some of the comments from the graduates’ line managers
cited an increase in confidence and a controlled,
thoughtful approach to handling problems, which has
significantly boosted their teams and outputs.
Growing talent through apprenticeships
2021 has been another successful year for apprenticeships
at Marshalls, with 102 employees engaged in apprenticeship
programmes (Levels 3 to 7), and 19 employees successfully
graduating from their apprenticeship programme. These graduates
have excelled in their learning, not just compared to the Marshalls
standard, but also when compared to their peers nationally.
Our Apprenticeship Development Programme has focused on
engineering, digital and technology solutions, digital marketing,
leadership and management, LGV drivers (new) and business
administration. This proactive development strategy has enabled
us to build career development pathways that are underpinned by
apprenticeships. This has helped us to bring new talent into the
business while growing existing talent and creating internal mobility.
Our ambition for 2022 is to continue growing our own talent through
increasing the number of apprentices. We are working to ensure
apprenticeships are a recognised and valued development option for all
employees, regardless of age, tenure or skillset. Future apprenticeship
programmes will further align to our business strategy and workforce
sustainability strategy, and will continue to be a commercially funded
initiative to ensure equal access to development for all employees.
66
Marshalls plc | Strategic Report
Employee engagement and experience
Putting employee wellbeing first
In 2021, we expanded our focus on employee wellbeing to create
a more holistic strategy that caters for the diverse needs of our
workforce. We know the pandemic and other wellbeing issues have
affected our people in different ways, and so our wellbeing strategy
aims to provide support that meets our people where they are. This
strategy has been formulated with input, needs and wants from our
colleagues via a number of feedback channels.
In May 2021, we further enhanced our regular employee wellbeing
communications through the introduction of Marshalls NOW, a
news, employee benefits and wellbeing platform. The wellbeing
resources available through Marshalls NOW cover four key topics of
move, munch, money and mind. The resources available have been
accessed more than 3,000 times by employees and have received
excellent feedback.
The employee benefits and reward strategy has been boosted by
the implementation of Marshalls NOW and we have been able to
offer colleagues benefits that encourage better overall personal
wellbeing. Our Cycle to Work scheme and Healthcare Cash Plan
have seen record uptake numbers, and our focus on pensions
has increased knowledge on saving for later life – this is evident
in the colleague comments we receive through our numerous
feedback channels.
Employee engagement measurement
Our programme of measuring employee engagement continued
throughout 2021, with surveys conducted in April and October.
We continued to ensure a broad depth of questions within the
surveys to help us measure and understand employee engagement
across key topics such as wellbeing and Company strategy. We are
pleased to report a significant increase in participation rate, with
74 per cent of colleagues now giving us their feedback. The most
recent survey gave us an employee net promoter score (“eNPS”)
of 7.6, which is 0.3 above the benchmark for our industry.
Employee Voice Group (“EVG”)
Throughout the year, we have continued to engage with our elected
Employee Voice Group (“EVG”) representatives. Executive team
member Louise Furness and Board member Angela Bromfield
(taking over from Janet Ashdown) sponsor this activity to ensure
it is a valuable forum for all employees.
The EVG has held eight official meetings during 2021 and it has been
invited to steer the business on a number of areas including our
ESG activity, our employee engagement strategy, and our HR and
people activity.
The EVG has also contributed to decisions and discussion on
people change at Marshalls, most notably the “standardisation
programme”, which aims to create fairness and consistency
in the terms and conditions of employment at Marshalls.
Drivers’ Working Party (“DWP”)
We employ our own fleet of HGV drivers, which gives us a strategic
advantage. While Marshalls has been affected by the nationwide
shortage of HGV drivers, we have also taken significant steps to
ensure this impact was minimal. We formed a Drivers’ Working Party
where we invited Marshalls drivers to input into decisions and give
their feedback on what it means to be a driver in our business and
industry. Through this group, we were able to put steps in place to
improve the driving role and set a new standard of what it means to
be a Marshalls driver. These steps included retention bonuses for
drivers, a significant pay increase of 21.58 per cent, as well as other
changes to improve driver wellbeing, engagement and development.
Marshalls was shortlisted for an Engagement Excellence
Award under the category of “Most impactful business
transformation to support their workforce”. This is
in recognition of the work we have done to improve
engagement for all Marshalls employees and to develop
our culture.
It has been another significant year for the development of our people agenda at Marshalls. I’m proud of how the
Marshalls HR team and the wider business have focused on delivering changes and developments that really make
a difference for employees. While we continued to work through the impact of COVID-19, we were also able to make
significant strides in other key areas.
Talent attraction is a top priority, and winning the battle to attract and retain employees in a volatile job market has been a
constant focus for us. Our people strategy sets the foundations for developing Marshalls into an employer of choice, so that
we create a sustainable and future-fit workforce. As part of our drive to develop a sustainable workforce, we’ve increased our
diversity, equity, respect, inclusion (“DERI”) activity to create a more modern and diverse place to work.
2021 also saw us introduce new technology and people resource to increase the focus on our wellbeing, communications and
total reward offerings. Wellbeing – including financial, physical and mental wellbeing – has been more important than ever in
recent years. We recognise the part we play in supporting employees to have all-round healthier lifestyles.
We’ve continued to make progress on modernising the way we engage and reward colleagues. Towards the end of 2021,
we started a programme of work to create consistent employment terms across Marshalls and to introduce new and modern
contracts of employment. The employee experience was a leading priority for this programme of change. The developments in
how we engage employees have been crucial in helping us accelerate change and build trust in everything we do. The ways in
which we support agility and change will accelerate in 2022 to help us drive innovation and improvements for our colleagues,
customers and key stakeholders.
We firmly believe that purpose fuels performance. We continue to ensure that we are creating a sense
of purpose across the Group in everything we do to grow our Marshalls culture. Our ongoing investment
in developing The Marshalls Way, and the underpinning behaviours, has helped us to define our culture
further. This investment into learning and development, as well as in other career growth areas, sets us
up for a strong and successful future where individuals can find career satisfaction and thrive.
We’re well placed for another successful year of people strategy development and delivery in 2022.”
Louise Furness
Group HR Director
Marshalls plc | Annual Report and Accounts 2021
67
Strategic Report What ESG Means to Marshalls continued
Health, safety and wellbeing
Health and safety performance
Marshalls’ CEO, Martyn Coffey, is the Board Director responsible
for the health and safety performance of the Group.
Our Health and Safety Policy is approved by the Board and reviewed
at least annually. Our 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 people 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 92 to 112.
The headline target for 2021 was to maintain days lost resulting
from workplace incidents at a figure no higher than the average over
three years (2018–2020). This excludes the impact of acquisitions
within a period of three years from purchase, therefore our Bricks
and Masonry division is excluded.
23.31
lost days injury frequency rate per million hours
worked (target: 28.05)
Managing risk and wellbeing through the pandemic
2021 presented all industries with risk management challenges
during the COVID-19 pandemic and Marshalls was no different.
We stood firm when faced with making tough decisions to balance
operations and people safety, with our absolute priority being the
welfare of all people involved in our activities.
We closed the majority of our office-based operations during
2020 and 2021, and homeworking became the norm. We provided
all homeworkers with digital communications and home office
equipment as well as ensuring they had the right support from
peers and managers to continue to work effectively in a very
different environment.
The majority of our factories and logistical operations have
continued to operate under the strictest COVID-19 protocols,
including the use of Government testing schemes. We continue to
regularly monitor our controls and track infection rates so that we
can act swiftly on any hotspots.
68
Marshalls plc | Strategic Report
2021 achievements
• Trained 16 new Mental Health First Aiders (“MHFAs”)
• Wellbeing section on our intranet with a dedicated
area for MHFAs
• Implementation of SLAM in Logistics division
• 7.8 score for health and wellbeing on employee survey
(0.2 above manufacturing benchmark)
2022 targets
• Recruiting and training more MHFAs
• Set up Steering Committee for mental health and wellbeing
• Rollout of Fair & Just Approach Framework
Lost days injury frequency rate
(per million hours worked)
2019
32.8
2020
2021
28.8
23.3
Fatalities
0
0
0
Note: the above data covers employees and contractors.
Accreditation
The Group has maintained accreditation to the Health and Safety
Management System Standard ISO 45001:2018 and Environmental
Management Systems Standard ISO 14001:2015. In 2022, we will
be starting the implementation of these standards to our Bricks and
Masonry division, formerly known as Edenhall. This was scheduled
for completion in 2021 but the global pandemic meant this fell behind
schedule and will now commence in 2022.
53 Mental Health
First Aiders (2020: 42)
Mental health and wellbeing
We recognise the mental and physical challenges to homeworkers
who may at times feel isolated and lonely or struggle to juggle their
working time with family responsibilities, home life distractions and
working longer hours.
In 2021, we launched our Health and Employee Wellbeing Strategy
with a vision to provide and deliver a holistic approach to wellbeing,
which creates an employee experience that enables people to be at
their best.
In 2022, we will be introducing a new mental health and wellbeing
programme. This includes setting up a new Steering Committee
represented by a member of the Executive team to help steer the
strategic direction of employee wellbeing, as well as collaborating
with our HR team to review how we best manage the mental health
support and resources for our colleagues.
Our goal is to ensure that we work together to identify early
recognition of employee ill health and provide the best support
to helping our colleagues manage their recovery and return
to the workplace.
Highly commended
for the Safer Through Improvements in Health and
Wellbeing Award at the MPA and British Precast
Health and Safety Awards 2021
Behavioural safety
Our work on behavioural safety continued throughout 2021 with a
clearer understanding of human behaviours and root cause analysis.
We have been working on a new Fair & Just Approach Framework
that sets out how to deal with acceptable and unacceptable
behaviour which is key to developing and sustaining a positive
safety culture. We will be rolling out this programme in 2022.
SLAM (“Stop, Look, Assess, Manage”) programme
In early 2021, we rolled out a new safety programme called SLAM
in our Logistics division. SLAM is a recognised toolkit in our industry
and was developed by the construction industry’s Leadership
and Worker Engagement Forum, hosted by the Health and Safety
Executive. The technique acts as a reminder to workers to stop
work and take action if they think their health and safety is at risk.
Case study
2021 has been a challenging year for our logistics operation,
with driver shortages and supply chain disruption. We continue
to focus efforts on the many different elements of the logistics
operation in order to drive excellence and efficiency. The
Driver Academy has demonstrated our support for drivers
joining the business, and our attention to safety through our
SLAM programme has resulted in raising awareness with our
colleagues, who are much more likely to stop work if a task
appears unsafe. Environmentally, we are close to achieving our
target of having all our fleet adhering to Euro 6 standards, which
reduces harmful emissions.
Link to strategic objective: Logistics excellence
Marshalls plc | Annual Report and Accounts 2021
69
Strategic Report Board of Directors
A diverse, experienced
and well-balanced Board
The Board is diverse, well-
balanced, experienced, committed,
forward thinking and agile.
It has great depth of experience
and skill covering leadership,
construction, finance, M&A,
product development, technology,
marketing, business change
and retail.
The Board acts boldly, decisively
and collectively, applying its
skill, knowledge and experience
in ensuring the long‑term
sustainability and profitability
of the Group whilst bringing
constructive challenge and debate
to the table. Driving the strategic
plan in The Marshalls Way, doing
the right things, for the right
reasons, in the right way, enables
the Board to continually improve
operational effectiveness, drive
culture change, invest in new sites
to deliver long‑term sustainable
shareholder value and maintain the
Group’s market leading position.
Committee membership
Audit Committee
Nomination Committee
Remuneration Committee
Chair of the Committee
Independent Director
Strategic corporate
objectives
Shareholder value
Sustainable profitability
Relationship building
Organic expansion
Brand development
Effective capital structure
and control framework
* The Nomination Committee considered
Tim Pile to be independent in thought and
judgement in spite of his length of service.
70
Marshalls plc | Governance
Vanda Murray OBE
Chair
Martyn Coffey
Chief Executive
Date of appointment
9 May 2018. Re-elected in May 2021.
Date of appointment
9 September 2013. Re-elected in May 2021.
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.
Key skills
Leadership, manufacturing, construction, marketing
and international
Alignment with strategic corporate objectives
Experience
Former 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 with a turnover of €1.8 billion,
formed in 2009 from the merger of Baxi and De Dietrich
Remeha. Prior to the merger, Martyn was Chief Executive
of the private equity-owned Baxi Group. He 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.
Key skills
Leadership, finance, manufacturing, distribution
and international
Alignment with strategic corporate objectives
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 and Non‑
Executive Director and Chair of Yorkshire Water.
External appointments
Director of the Mineral Products Association.
Non-Executive Director and Chair of the Remuneration
Committee of Eurocell plc.
Tim Pile
Non-Executive Director*
Angela Bromfield
Non-Executive Director
Date of appointment
5 October 2010. Re-elected in May 2021.
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.
Key skills
Leadership, banking, retail, FMCG, charities and
public sector
Alignment with strategic corporate objectives
Date of appointment
1 October 2019. Re-elected in May 2021.
Designated Non-Executive Director for
employee engagement.
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.
Key skills
Leadership, marketing, manufacturing and distribution
Alignment with strategic corporate objectives
External appointments
Chair of the Royal Orthopaedic Hospital.
External appointments
Non-Executive Director and Chair of the Remuneration
Committee of Churchill China PLC. Non-Executive Director
and Chair of the Remuneration and ESG Committees of
Harworth Group PLC.
14%
57%
43%
Committee Chair.
* Female Chair and Remuneration
Gender composition
Female (3)
Male (4)*
43+
86+
42+
White (6)
Mixed Asian and white (1)
Length of service
Ethnic diversity
28.5%
28.5%
43%
86%
0–2 years (3)
3–4 years (2)
5+ years (2)
Justin Lockwood
Chief Financial Officer
Date of appointment
26 July 2021.
Experience
Previously Chief Financial Officer of International Personal
Finance plc, having held senior financial roles for seven
years prior to his appointment as CFO in 2017. Justin
spent four years at Associated British Ports in senior
financial roles and worked in a variety of business and
head office roles for Marshalls between 2002 and 2006.
Chartered Accountant having qualified and worked for
PwC during the first ten years of his career.
Key skills
Leadership, finance and manufacturing
Alignment with strategic corporate objectives
External appointments
None.
Graham Prothero
Senior Independent Non-Executive Director
Date of appointment
10 May 2017. Re-elected in May 2021.
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. Spent seven
years as a partner in the Real Estate, Hospitality and
Construction Group of Ernst & Young LLP.
Key skills
Leadership, finance, construction, property, operations,
professional and charities
Alignment with strategic corporate objectives
External appointments
Chief Operating Officer of Vistry Group PLC.
Avis Darzins
Non-Executive Director
Date of appointment
1 June 2021.
Experience
A management consultant with expertise in retail business
change, digital channel expansions and transformation.
Formerly a partner at Accenture focusing on the retail and
consumer products sector. Delivered successful profitable
growth engagements with many well-known national and
international brands. Previously worked as Director of
Business Transformation at Sky in addition to leadership
roles at Arcadia, BHS, Mothercare and Littlewoods. Most
recently served as a Non-Executive Director at Moss Bros
Group PLC.
Key skills
Leadership, retail, business transformation, change
management, digital and management
Alignment with strategic corporate objectives
External appointments
Non-Executive Director of Grafton Group plc. Co-chair
of the Ambassadors Group of retailTRUST. Senior
Independent Trustee and Trustee Board Member of
Barnardo’s. Director of Avis Business Consulting, a
provider of industry leading technological solutions.
Shiv Sibal
Group General Counsel and Company Secretary
Date of appointment
26 May 2020.
Experience
Experienced corporate finance lawyer by trade with nearly
20 years’ experience, the last eight 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. 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.
Key skills
Corporate finance, M&A, equity capital markets,
governance, legal, leadership and retail
Alignment with strategic corporate objectives
External appointments
None.
Marshalls plc | Annual Report and Accounts 2021
71
Governance
+
57
+
+
G
G
+
14
+
+
G
G
+
29
+
29
+
+
G
G
Corporate Governance Statement
Dynamically navigating change
with a clear focus on the
longer-term sustainability of
the business
We thank Jack and Janet for their commitment to the business
during a period of strong performance and growth. These
retirements have provided us with the opportunity to introduce
further diversity and new skills to the Board through the
appointment of our new CFO, Justin Lockwood, and our new
Non-Executive Director, Avis Darzins. We provide further detail in
our Nomination Committee Report on pages 84 to 87, but these
appointments mean the composition of our Board complies with
anticipated changes to the Listing Rules that will require UK listed
companies to disclose on a “comply or explain” basis against set
diversity targets.
Balanced decision making reflective of our culture and purpose
is what “good governance” means to Marshalls. This is central
to our application of the UK Corporate Governance Code. Our
commitment to The Marshalls Way – to do the right things, for
the right reasons, in the right way – underpins everything we do.
This Corporate Governance Statement explains how Marshalls’
governance framework supports the principles of integrity,
strong ethical values and professionalism which are integral to
our business.
The Board recognises that we are accountable to shareholders for
good corporate governance. This report, together with the Reports
of the Audit, Nomination and Remuneration Committees on pages
84 to 112, seeks to demonstrate our commitment to high standards
of governance that are recognised and understood by all.
The Board’s approval
of a multi‑million‑pound
investment in the new
dual block plant at our St Ives
factory supports the Group’s
priority of driving innovation in
our product ranges.”
Dear shareholder
2021 has been another challenging year but one in which, I’m
proud to say, the business has shown great resilience and
delivered a record performance. Our culture and our people
have successfully steered the Group through the challenges
the COVID-19 pandemic continues to present, whilst keeping
a close eye on the longer‑term sustainability of the Group,
particularly its ESG commitments.
Dynamic decision making at both Board and senior
management team level has been critical to our success
during a time of significant external challenges. Consideration
of COVID-19 is now embedded into Board and day-to-day
business processes.
The Board has continued to support the strategic ambitions
of the business. The Board’s approval of a multi-million-pound
investment in the new dual block plant at our St Ives factory
supports the Group’s priority of driving innovation in our product
ranges. As we’ve set out on page 28, the Board’s consideration
of this investment was measured and thoughtful, ensuring the
business considered the interests of all relevant stakeholders.
In addition to supporting evolution and investment in
the business, the Board has changed during 2021, with
the retirement of our former Group Finance Director,
Jack Clarke, and our Senior Independent Non-Executive
Director and Remuneration Committee Chair, Janet Ashdown.
72
Marshalls plc | Governance
Our governance framework
Programme of activities
Board
• Board meetings
• AGM
• Annual
strategy day
• Regular
business
engagement
• Designate
NED for EVG
• Investor
engagement
Audit
Committee
Read more on
pages 88 to 91
Nomination
Committee
Read more on
pages 84 to 87
Remuneration
Committee
Read more on
pages 92 to 112
• Committee meetings
Executive Committee
• Monthly meetings
• Weekly update calls
Diversity
and Equity
Taskforce
ESG
Committee
Business
Unit
Management
Teams
Employee
Voice
Group
Read more on
page 67
• Monthly
business reviews
• Bi‑monthly
ESG Committee
meetings
• Regular
EVG
meetings
G
o
v
e
r
n
a
n
c
e
Governance at Marshalls
Our Culture is at the heart of everything
we do. Our Purpose drives our Mission,
which in turn drives our Strategy.
These operate as a virtuous circle
with regular reflection by the Board
and the business. The operation of
our business and the decisions we
make have regard to the interests of
our Stakeholders. This approach to
governance enables Dynamic Decision
Making but ensures we never lose sight
of the elements within that drive our
long‑term sustainability.
D y n a m i c Decision Making
S t a keholders
P u rpose
Culture
S
t
r
a
t
e
g
y
n
Missio
Dynamic Decisio n M a k i n
g
Marshalls plc | Annual Report and Accounts 2021
73
Corporate Governance Statement continued
Achievements in 2021
• We’ve driven and supported the business to a record year of performance, navigating unprecedented raw materials inflation,
HGV driver shortages and soaring shipping costs, all amid an ongoing pandemic.
• In November, we comprehensively reviewed the Group’s 5 year Strategy, ensuring it positions us to capitalise on high-growth sectors,
having considered the contextual, societal and macro-economic trends that may be risks or opportunities to the business.
• We’ve successfully managed the succession of our CFO and Senior Independent Non-Executive Director (“SINED”). Whilst the Board
retained a core, experienced, multi-skilled group of Directors, notably benefiting from Tim Pile agreeing to further extend his term, we
acted on the opportunity to further strengthen our Board by introducing new skills, experience and diversity through the appointments
of Justin Lockwood and Avis Darzins.
• Having reported extensively in 2020 on our ESG commitments and having made disclosure against the TCFD recommendations
ahead of these becoming mandatory, we’ve listened to our shareholders and other stakeholders. We’ve refined our ESG programme
and disclosures to show how the programme will drive competitive advantage and the measures we’ll use to monitor our
progress. Annual targets supporting our commitment to being net zero by 2030 are now incorporated in the measures in our
incentive schemes.
• When Government guidance permitted, we combined virtual engagement with the business with the recommencement of “in
person” engagement predominantly through site visits. These provide the Board with very valuable insight into the opportunities and
challenges presenting themselves to the Group. They also enable the Board to listen to the thoughts and views of those colleagues
working at our manufacturing sites, which are the “beating heart” of our business.
• We’ve continued to reflect on the Board’s performance. Our internal evaluation concluded that the Board has been engaged, resilient
and supportive during the last year, dynamically navigating change whilst not losing sight of our longer-term strategy. In addition, we
have addressed the objectives we set ourselves last year, with further objectives in place for the current year based on the responses
we received during the evaluation. See page 82 for further details.
• The Board has reflected upon and updated the matters reserved for the Board’s judgement to ensure they reflect the growth of the
business in recent years. This will provide appropriate and proportionate operational flexibility for the business to respond to the
day-to-day challenges it faces, whilst continuing to ensure the Board has appropriate oversight to give assurances over the Group’s
internal control and risk management frameworks.
• There has been Board representation at each of the Employee Voice Group (“EVG”) meetings with Angela Bromfield succeeding
Janet Ashdown as our designated Director for employee engagement. The EVG has broad representation and its agenda continues
to evolve and now supports discussion of some of the Group-wide challenges we face.
• We’ve invested in our people, making a number of senior hires, to drive the change agenda the business faces. In addition to our new
CFO and Chief Information Officer, these investments include a new Health and Safety Director, the creation of a process optimisation
team and investment in our legal and company secretarial team. These investments support the evolution of our environmental,
social and governance agendas.
Priorities in 2022
• To support the execution of our strategic plan as the impact
of the pandemic hopefully subsides. Measuring progress will
be critical to the long‑term sustainability of the Group.
• To challenge the business to be relentless in its customer
focus given the criticality of maintaining our strong brand
preference, which is a key differentiator.
• To ensure that our ESG programme and commitments
drive not only commercial and competitive advantage but
also our ability to attract and retain the best talent. How we
communicate these and measure performance against our
targets, and link these to our incentive schemes, will be areas
of focus.
• To give additional focus and time to succession planning.
The “war” for talent means recruiting and retaining the best
people will be extremely challenging, particularly when trying
to build a more representative and diverse business.
• To carefully monitor the implementation and impact of
the fundamental audit and corporate governance reforms
proposed by the Government, which will have implications for
the operation and expectations of the Board.
• To continue to ensure we do everything in The Marshalls
Way: the right things, for the right reasons, in the right way,
and at all times with our stakeholders in mind.
Ensuring we promote
diversity, equity, respect
and inclusion and
maintaining a zero-tolerance
approach to 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.”
74
Marshalls plc | 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 2021, we published our roadmap to net zero by 2030.
• 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.
Our continuing response to COVID-19
The Group’s response to COVID-19 during 2020 has enabled
both the Board and senior management team to manage its
considerable continuing impact within our existing governance
framework. The Board has been committed and made itself
available throughout the year to support the business and to act
decisively where needed. Safety has remained our number one
priority, with a number of the measures put in place during 2020
retained during 2021 even though Government guidance had
been relaxed.
The Health and Safety Executive has conducted a number of
unannounced COVID-19 audits at our sites with the business being
commended for its management of COVID-19 related risks and for
putting the safety of colleagues first. The nature of the pandemic
has meant that we’ve not been immune to the challenges, which
include increased absence and self-isolation in the workforce,
particularly during spikes in case numbers and transmission.
Although these have impacted our operations, the Board has given
the senior management team its full backing in implementing
measures to ensure we can continue to serve our customers
safely, including the temporary recommencement of operations
at our factory in Falkirk (which has been earmarked for closure)
and additional investment in short-term labour to manage peaks
in demand when colleague absence was high.
These steps clearly demonstrate how dynamic decision making
is central to the way the Board and senior management team
have managed the ongoing impact of the pandemic, alongside
ensuring the Group is well positioned for future growth. The Board
sets the culture for effective risk management and, together with
the senior management team, ensures that we’re having regard to
our key stakeholders when making decisions. As part of our initial
response to the pandemic during 2020, the consideration of our
people, performance, capital structure and controls was central to
the Board’s decision making. This structured approach has been
the foundation for our resilient performance during 2021.
Diversity
The Board recognises the opportunity greater diversity in the
business represents but acknowledges the challenge this presents
in our sector. Ensuring we promote diversity, equity, respect
and inclusion and maintaining a zero-tolerance approach to
discrimination through the application of our policies is key, as is
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.
G
o
v
e
r
n
a
n
c
e
At Board level, we have achieved greater gender and ethnic diversity
during 2021 and, in addition to myself, a female Chair, we have
43 per cent female representation on our Board overall and one
Director from an ethnic minority background. Whilst we have acted
upon the opportunity that greater Board diversity presents, we
recognise there is much more work to do at senior management
team level and throughout the business to realise the benefits that
greater diversity brings. This will take time, particularly given the
challenges in our sector, but the Board has approved the Group‑
wide Diversity and Inclusion Policy and will work closely with the
CEO and Group HR Director as we begin to implement our longer-
term strategy. This will be supported by our newly created Diversity
and Equity Taskforce, which has broad colleague representation
from across the Group, including our Group Trading Director and
General Counsel and Company Secretary, who are both members
of our senior management team.
Following our agreement during 2020 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) our General Counsel, Shiv
Sibal, participated in a UN Global Compact Roundtable at which
we gave an open and transparent account of our progress and the
challenges we face. Challenging ourselves in this way is at the heart
of The Marshalls Way.
Board evaluation
I conducted, with the support of the Company Secretary, 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. It measured both Board
behaviours and process. Having redesigned the internal evaluation
in 2020 with the Company Secretary’s support, I conducted this
year’s evaluation on a consistent basis to enable the Board to reflect
on its year‑on‑year performance and on the achievement against
the specific objectives agreed last year. As required by the UK
Corporate Governance Code, the Board will conduct an externally
facilitated evaluation during 2022. Page 82 of this report gives more
detail on the most recent evaluation and the extent to which the
objectives from 2020 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 115
and 116 and 117 to 124 respectively.
Vanda Murray OBE
Chair
17 March 2022
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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
2021. We have complied with the principles and provisions of the
UK Code throughout 2021.
1. Board leadership and Company purpose
Our Governance sections over the following pages explain how the
Group has applied the principles throughout the year and up to the
date of this Annual Report.
• Led by an experienced female Chair who drives collaboration
and challenge
• Experienced, diverse and multi-skilled Board with clear focus
• 2021 focus on our culture, ESG, strategy and succession
• Our culture, “The Marshalls Way”, and purpose, “creating better
spaces for everyone”, are at the heart of all decision making
on long-term sustainability
Read more on pages 78 and 79
2. Division of responsibilities
• Effective, transparent communication and information
• Robust challenge and support provided and well received
supporting dynamic decision making
by management
• Collaborative and constructive relationship between Board
• Clear, proportionate decision-making parameters balance
and senior management team
Read more on pages 79 and 81
Board control and operational flexibility
3. Composition, succession and evaluation
• More diverse Board with greater breadth of experience,
• Renewed and more consistent approach to internal
knowledge and skills
• Majority of independent Directors
• Further term extension providing stability, strongly supported
by shareholders
Read more on pages 81 and 82
effectiveness review enabling measurement of progress
and reflection
• Engagement with shareholders ensuring the Board evolves
to reflect their priorities
4. Audit, risk and internal control
• Clear oversight of external and internal audit functions
• Oversight and participation in Risk Register reviews and
and planning
determination of risk appetite
• Strong focus on effectiveness of internal control environment,
with prospective governance reforms in mind
• Ensuring clear accountability for actions with outcomes
monitored to preserve continuous improvement culture
• Detailed consideration of climate related financial disclosures,
addressing new regulatory requirements
Read more on page 83
5. Remuneration
• Well‑established, UK Code compliant, Remuneration Policy
• Incorporated annual target, forming part of our 2030 net zero
• Remuneration outcomes aligned with interests
of all stakeholders
roadmap, into our incentive schemes
• Committee discretion to override formulaic outcomes
• Engaged with shareholders to understand their views on our
application of the Remuneration Policy
Read more on page 83
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Role of the Board
The Board currently comprises an Independent Non-Executive
Chair, four independent Non-Executive Directors and two
Executive Directors. Their biographical details are on pages
70 and 71.
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
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Delegation to Board Committees
The Board delegates specific responsibilities to the Audit,
Remuneration and Nomination Committees. The Audit
Committee Report on pages 88 to 91 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 84 to
87 reports how Board and senior management composition
(including diversity), succession and development are
managed to reflect UK Code principles. The Remuneration
Report on pages 92 to 112 explains how the Group’s
Remuneration Policy has been implemented and shows
Directors’ remuneration for 2021. The Remuneration Report
also provides gender pay and balance information. Ad hoc
Board Committees are established for particular purposes: for
example, during 2021, Board Committees were established to
approve preliminary and half year results.
Delegation to the Executive and management
The day‑to‑day management of the business and the
execution of the Group’s strategy are delegated to the
Executive Directors. The Group’s reporting and governance
structure (see page 73) and controls below Board level are
designed so that decisions are made by the most appropriate
people in an effective and timely manner. In deciding what
is “appropriate” for these purposes, we consider the scale
and complexity of our business and reflect how this has
grown over time. Management teams report to members of
the Executive Committee which is comprised of the senior
management team, including the two Executive Directors.
The Executive Directors and other Executive Committee
members give regular briefings to the Board in relation
to business issues, developments and, most importantly,
progress against our strategic priorities. Clear and measurable
KPIs are in place to enable the Board to monitor progress.
This structure, our controls and open and transparent
information and communication enable the Board to make
informed decisions on key issues including our strategy,
capital structure, internal control and risk frameworks and
our risk appetite whilst having regard to the interests of all
of our key stakeholders.
Marshalls plc | Annual Report and Accounts 2021
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Corporate Governance Statement continued
1
Board leadership and Company purpose
Leadership and purpose
Our resilient corporate culture and strong leadership, both at Board
and senior management team level, are the driving forces behind
our approach to governance at Marshalls and underpinned the
Group’s record performance during the year.
The Board is committed to building its understanding of how our
business model creates value and how our strategy must evolve
to ensure the long‑term success and viability of the business. This
understanding comes from working collaboratively with the senior
management team, engaging with the business and applying the
Board’s skills and experience to provide the robust challenge that
helps shape that strategic evolution.
The Board has continued to regularly engage with shareholders
and employees, not allowing the practical challenges of COVID-19
to be an obstacle. Technology has supported and enhanced
Board engagement, particularly when combined with in-person
meetings that took place during 2021, when Government
guidelines permitted.
Our Strategic Report on pages 1 to 69 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. Transparency and
openness between management and the Board have built trust
and confidence in how the business is operated on a day-to-day
basis, enabling the Board to steer our strategy and business model
towards a sustainable future.
The reports of our Board Committees give further detail on how
our policies and processes, and the principles of the UK Corporate
Governance Code, have been applied during the year in particular
areas and how this relates to our culture and strategy.
Dynamic decision making in volatile market conditions has enabled
us to respond to the challenges we’ve faced whilst ensuring we
have a stable platform for the execution of our long-term strategy.
We’ve given renewed focus to our long-established sustainability
programme, with our commitment to a 2030 net zero target
epitomising our sector leadership in ensuring our business
minimises its environmental impact.
Having emerged from a difficult period during 2020 in which we
restructured the business, we’ve made significant investments in
our operations and our people. Most notably, we approved a multi-
million-investment in the installation of a dual block plant at our St
Ives site, further details of which are set out on page 28.
Having completed a review of the Group’s strategy in November,
the Board is confident the Group’s application of the UK Code
principles during 2021 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. The Board and
senior management team do recognise, however, the importance
of ensuring our ESG and commercial objectives operate in harmony
to drive competitive advantage and differentiation. This will, in turn,
drive brand preference. Our environmental and social reports on
pages 50 to 69 provide further information of our progress and
commitments in this respect.
The Board receives regular updates from the Executive Directors
on the agreed KPIs set out on pages 32 and 33 that enable it to
determine whether the Group’s objectives are being met and to
provide additional challenge and support where necessary.
Our people strategy is core to our long‑term sustainability and
we’ve continued with its implementation in spite of the challenges
during the last year. Our Group HR Director engages regularly with
the Board on our progress with improving recruitment, retention,
development and progression. This is supported by an aligned
reward strategy centred around diversity and inclusion.
During the year, we undertook a Group-wide project to standardise
employment terms and introduced more user‑friendly employment
documentation. Fairness and transparency were at the heart of this
exercise, the goal being to provide certainty as to terms and how
these progress as careers develop in the business. We undertook a
full consultation exercise as part of this. This project epitomises our
commitment to The Marshalls Way.
We’ve introduced new benefits such as a Healthcare Cash Plan
and a Cycle to Work scheme in addition to awarding a grant under
our Sharesave Scheme. We made a thank you award of £600
in December 2021 to all employees (with the exception of the
Executive Directors) with colleagues able to take the award as cash,
shares or a contribution to their pensions. Facilitating all of these
developments and awards has been our Group reward platform
that acts as a central hub for all key employment and reward
related information.
Our internal communications team has worked tirelessly to develop
this channel and our social media channels to ensure we create
forums in which colleagues feel empowered to speak up and
share their views about any aspect of the business. The team has
helped colleagues navigate the ever-changing COVID-19 guidance
throughout the year, ensuring we operate safely and legally.
The development of our Employee Voice Group as an effective and
representative colleague engagement forum, the outcome of our
annual employee engagement survey and the Board’s engagement
have given the Board confidence that the Group’s purpose, values
and strategy remain aligned with our culture. Further details of how
we engage with employees are set out in the ESG section on pages
64 to 67. Further developing the EVG’s agenda and reach will be an
area of focus in 2022.
We’ve consolidated our work on culture and begun to implement
our diversity and inclusion strategy; the creation of our Diversity and
Equity Taskforce is a major step. Greater diversity and becoming
representative of the communities in which we operate are
important components of our long‑term success.
Good governance is supported at Marshalls by robust systems and
processes and a good understanding of risk and risk appetite. The
Group’s control and risk management frameworks are reviewed
annually and have been critically reviewed during the year in light
of the additional challenges we’ve experienced during the last
year including materials availability and inflation, labour shortages
and logistics. Occupying the ground around all of our risks is the
existential threat climate change presents, not only to Marshalls but
to all of society. We review our Risk Register at least twice a year
and our internal audit plan factors in 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 34 to 43.
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Conflicts and concerns
The Board maintains a conflicts register that identifies situations in
which conflicts may arise, 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 Audit Committee receives 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 65
Read more about sustainability, ethics and climate change from
pages 50 to 63
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 is responsible for its overall effectiveness. She was independent on appointment in 2018 and brings
her judgement, experience and skills to the role. Our internal Board evaluation assesses the behaviours and processes of the Board
including the quality, constructiveness and robustness of Board debates, the relevance and clarity of Board information and how
the Board works as a team (including relationships within the Board). Our evaluation concluded that the Board continues to operate
effectively and as a unit.
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 until 2023, we are confident this has not affected his independence
and further details of why we believe this to be the case are set out on page 80.
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 70 and 71.
Marshalls plc | Annual Report and Accounts 2021
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Governance Corporate Governance Statement continued
2
Division of responsibilities continued
Board meetings and attendance*
Key =
Present
Absent
Board
Audit
Committee
Remuneration
Committee
Nomination
Committee
Vanda Murray OBE (Non-Executive Chair)
Martyn Coffey
Jack Clarke
Justin Lockwood
Janet Ashdown (Non-Executive)
Graham Prothero (Non-Executive)
Tim Pile (Non-Executive)
Angela Bromfield (Non-Executive)
Avis Darzins (Non-Executive)
Philip Rogerson (Non-Executive)
–
–
–
–
–
–
–
–
–
–
–
–
* The Board held eight meetings during the year, with the management of the ongoing impact of the COVID-19 pandemic, and any decision in connection with it,
forming part of the Board’s scheduled meetings.
The Chief Executive and the Chief Financial Officer (formerly the Group Finance Director) are not members of the Audit Committee but normally attend Audit
Committee meetings by invitation. Tim Pile stepped down from the Audit Committee in March 2021. The Non-Executive Directors, excluding Tim Pile, also meet
the auditor in private.
The Chief Executive attends Remuneration and Nomination Committee meetings by invitation. The Company Secretary attends Board and Committee meetings
as Secretary. Board members also participate in the Group’s annual strategy day with the senior management team, which during 2021 was held over two days
in November. In addition, the Board participates in site visits, training sessions, the Employee Voice Group and other activities with operational teams where they
have relevant expertise and experience. Historically, the Board has attended events like the Group’s annual management conference but COVID-19 guidance at
the time meant this was cancelled in 2021.
Justin Lockwood joined the Company as Chief Financial Officer in July 2021 (with Jack Clarke having stepped down as Group Finance Director in March 2021).
Janet Ashdown retired from the Board at the end of the Group’s 2021 AGM in May. Avis Darzins and Philip Rogerson joined the Board in June and September
respectively, with Philip subsequently stepping down in December 2021 for health reasons.
Tim Pile’s independence
We consider Tim Pile to be independent even though he has served
more than eleven years as a Non-Executive Director. Tim originally
intended to step down during 2021 but agreed to continue in light
of the challenges presented by the pandemic, with the Board
recognising the value of his skills and extensive knowledge and
experience of the Group. Further details of these are set out in his
biography on page 70.
With his intended successor, Philip Rogerson, stepping down
for health reasons shortly after his appointment in September
2021, Tim has agreed to extend his appointment by a further
year until 2023.
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 and senior management team to account on behalf of
shareholders. He remains independent in thought and judgement
and provides unique insight and challenge given his experience
of how the business has evolved over a number of years. As we
pursue a significant change and transformation agenda, we think
his knowledge and experience will act a bridge to the Group’s
development in the short to medium term and this continuity will
benefit his successor. In addition, we’ve listened to shareholder
feedback, with Tim stepping down as a member of the Audit
Committee in March 2021.
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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. He has no associations with management
or otherwise that might compromise his ability to exercise
independent judgement or act in the best interests of the Group.
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 that his
independence has been maintained. The Nomination Committee
will again, during 2022, plan for Tim’s succession.
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 programme is supported by a forward-looking planner that
focuses on Board business for the year ahead and ensures an
appropriate balance between the Board’s consideration of strategy,
operations and governance. The Board’s agenda is flexible,
enabling dynamic consideration of any urgent matters. The Board’s
consideration of the continuing impact of the COVID-19 pandemic has
been within its existing schedule of meetings but the Board remains
committed to ensuring it is always available to convene if urgent
matters need to be addressed.
The Chief Executive and the Chief Financial Officer report on
operational and financial performance respectively at each Board
meeting. The Chief Executive also updates the Board, at each
meeting, on wider industry, sector and competitor considerations
that are relevant to ensuring that decision making has regard to all
stakeholder interests.
3
Composition, succession and evaluation
There is a transparent and formal process for appointments led by
the Nomination Committee and 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
and inclusion. During 2021, the Board considered the Group’s wider
talent pipeline and the initiatives supporting their development. The
policies and process are commented on further in the Nomination
Committee Report.
Organic development of future leaders is an important element of
our Group-wide people strategy and something we see as critical
to the long-term sustainability of the Group.
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. Further details of the Board and
their skills are set out on pages 70 and 71.
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In the same way the business recognises the importance of change,
the Board acknowledges the importance of continually evolving and
has a succession plan designed to ensure that Board members’
terms expire or they retire over clearly defined periods, normally
not exceeding nine years. We’ve explained the circumstances
surrounding Tim Pile’s term and, as we’ve explained, feel the value
Tim brings, particularly given that his successor had to step down
suddenly, far outweighs the fact he has served more than nine
years. During 2021, we conducted an internal Board effectiveness
review led by the Chair and the Company Secretary (as referenced
in the Chair’s introduction). We will carry out an externally facilitated
effectiveness review during 2022.
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 2022 Annual General Meeting. The
Directors’ biographical details on pages 70 and 71 show their roles,
date 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.
Health and safety remains a top priority and is reported on and
considered on a standalone basis at every scheduled Board meeting.
The safe operation of our sites and our safety culture are constantly
monitored to ensure they are aligned with The Marshalls Way, i.e. we
are doing the right things, for the right reasons, in the right way.
The Board participated fully in the Group’s strategy day which was
held across two days in November 2021. This involved engagement
with key members of the senior management team and other senior
leaders in the business in considering the continuing relevance and
appropriateness of the Group’s strategy particularly in light of the
existential climate change challenges that affect all of society.
In addition to the standing items on the Board’s agenda, the principal
areas of focus discussed by the Board in 2021 were:
Strategy
• Group strategy including culture and purpose
• ESG: embedding good practice and measuring performance
• 2022 budget
• Major investments including our dual block plant
• Capital structure and dividends
• Customer experience and specification selling
• People and culture including succession and talent
development review
• Operations strategy including a full manufacturing
network review
• IT strategy including digital
• Emerging businesses strategy
• Market, sector and competitor updates and outlook
Operations
• Supply chain planning including procurement and logistics
• Manufacturing capacity
• Process optimisation and project management
• Health and safety
• COVID-19 maintaining operational safety and
monitoring impact
• Management of major customer projects
• Employee engagement and morale
Governance and risk
• COVID-19 oversight of monitoring and management of risk
• Risk and internal control
• Board composition including diversity, skills and succession
• Board and Committee performance
• Annual shareholder governance meetings
• Employee Voice Group feedback
• Whistleblowing
• Ethical sourcing and modern slavery
• Cyber security and data protection
• Stakeholder engagement
• AGM voting and guidance
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Corporate Governance Statement continued
3
Composition, succession and evaluation continued
How Board priorities were addressed during the year
Board and Executive succession planning
• We have successfully managed the succession of
our Group Finance Director with the appointment of
Justin Lockwood as Chief Financial Officer.
• We appointed two new independent NEDs, achieving
our objective of bringing additional diversity, skill and
experience to the Board.
• We secured the services of Tim Pile for another year, with
shareholders almost unanimously supporting our belief
that he remains independent even though he had served
over ten years. Following the unexpected resignation of
Philip Rogerson for health reasons, Tim has agreed to
extend his term by another year until 2023.
ESG
• We have clearly and cohesively articulated our ESG
programme, credentials and, most importantly, objectives
and KPIs. This has been externally recognised by various
ratings agencies.
• The importance of commercialising our ESG credentials
to drive competitive advantage and margin is embedded
in our 5 year Strategy. This will ensure our investments
provide returns not only to society but to shareholders
by driving business performance. It is also vital to attracting
and retaining talent.
• We have included an annual carbon reduction commitment
target, which is part of our 2030 net zero commitment, in
the performance measures in our management incentive
schemes.
Market-facing strategy
• We continue to operate in a strong market. 2021 has
presented us with many significant operational challenges
and cost headwinds, with Brexit and the prolonged impact
of COVID-19 each playing a part.
• Our supply chain has, in particular, presented a number of
challenges such as materials inflation, shipping costs and
availability of HGV drivers.
• The Board has remained focused on ensuring the business is
resilient in the face of these challenges and has undertaken
an “in-flight” review of the Group’s strategy to ensure it
remains relevant given the turbulence of the last 18 months.
• The strategic review considered all investment and growth
opportunities, both organic and through acquisitions,
together with the enablers that underpin these.
Focus areas and actions to enhance effectiveness in 2022 (from 2021 review)
The 2021 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. This year’s
review was carried out immediately after the Board’s annual
strategy review to ensure it captured the Board’s view.
Having redesigned the internal evaluation in 2020 with the
Company Secretary’s support, the Chair conducted this year’s
evaluation on a consistent basis to enable the Board to reflect
on its year-on-year performance and on the achievement
against the specific objectives agreed last year.
During 2021, the Board made good progress against the priorities
identified in 2020 against a backdrop of prolonged COVID-19
and Brexit related disruption. This was reflected in the scoring in
the review. As previously outlined, succession, ESG and strategic
development have all been on the Board’s agenda this year with
significant progress made but with a recognition that building on
the momentum in ESG and effective execution of our strategic
priorities are critical to capitalising on this.
The Board has remained focused and agile, balancing
both short-term decision-making requirements and the
need to reassess the longer-term strategic priorities of the
business, ensuring they address, in particular, our approach
and commitment to addressing global climate related
challenges. The Board has continued to support the Group’s
investment programme with the approval of the £23 million
plus dual block plant investment at St Ives being the best
example of this.
2021 has also seen a welcome return to “in person” Board
meetings and site visits, both of which remain critical to
the Board’s engagement with, and understanding of, the
business. The induction process for new Directors has been
comprehensively refreshed by the Company Secretary.
The specific areas identified for focus during 2022 are:
Executing our strategic plan
• Executing our plan and measuring progress are critical
to the long-term sustainability of the Group.
• Additional time will be allocated so the performance,
challenges and opportunities can be continually reviewed.
ESG
• In its most complete sense, ESG remains a key priority and
will drive not only commercial and competitive advantage
but our ability to attract and retain the best talent.
• Investors will focus on our objectives, how we measure
performance against these and the link to pay.
• Given developing practice and increased stakeholder focus,
the Board will consider whether a separate ESG Board
Committee is required.
Customers
• Given the criticality of maintaining our brand preference,
a relentless focus on the customer is required.
• Part of this will be ensuring we are future-fit. Being low
carbon and digitally enabled are key parts of this.
Succession planning
• The “war” for talent means recruiting and retaining the best
people will be extremely challenging, particularly when
trying to build a more representative and diverse business.
• Comprehensive succession planning for our senior
management team is a key priority in the medium term.
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5
Remuneration
The current Remuneration Policy was approved by shareholders in
2020 and is set out in the Directors’ Remuneration Report on pages
64 to 76 of our 2019 Annual Report and Accounts. 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 2021 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 92 to 112
Vanda Murray OBE
Chair
17 March 2022
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 34 to 43) 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 Audit Committee reviews the effectiveness of the Group’s
risk management system and the system of internal control
annually. The Risk Register was reviewed by the Audit Committee
in March 2021 and the Non-Executive Directors carried out a
standalone risk review in December 2021, 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 2021. 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 challenged whether the adjustments we made to
the controls in the areas being reviewed (to address the pandemic’s
impact) remain effective.
The Audit Committee Report on pages 88 to 91 describes the
Group’s 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 is
also considering the requirements set out in proposed changes to
the UK corporate governance regime and the changes we need to
make to ensure our control environment supports the assurances
the Board needs to provide.
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 88 to 91
Marshalls plc | Annual Report and Accounts 2021
83
Governance Nomination Committee Report
Managing
succession and
change and
delivering on
our diversity
commitment
2021 has seen a
number of changes
to the Board which
have broadened its experience
and skills base and enhanced
Board diversity. These changes
have supported the Board’s
re‑evaluation of the Group’s
long‑term strategy in light of
the dynamic and challenging
environment in which
we’re operating.”
Meetings
Members and attendance
Vanda Murray OBE – Chair
Graham Prothero – SID
Tim Pile
Angela Bromfield
Avis Darzins*
Janet Ashdown**
* Avis Darzins joined the Board in June 2021.
**
Janet Ashdown retired from the Board at the end of the Group’s AGM
in May 2021.
Find our Terms of Reference and Nominations Policy at
marshalls.co.uk/
about-us/corporate-governance
84
Marshalls plc | Governance
Dear shareholder
I am pleased to report to shareholders on
the main activities of the Committee and
how it has performed its duties during
2021. I chair Nomination Committee
meetings, but would not do so where the
Committee was dealing with my own
reappointment or replacement as Chair.
2021 highlights
• Following Jack Clarke’s decision to step down and retire from the
Board, the Committee conducted a comprehensive search for
his successor with the support of executive search firm, Norman
Broadbent (which is an independent executive search firm with
no other connection to the Company), and with diversity as a core
search objective. Following a thorough selection and assessment
process, and interviews with members of the Board and Executive
Management team, Justin Lockwood was appointed to the Board
as Chief Financial Officer and joined in July 2021.
• With our Senior Independent Director and Remuneration
Committee Chair, Janet Ashdown, also deciding to retire in May
2021, Graham Prothero was appointed Senior Independent
Director, with Angela Bromfield being appointed as Chair of the
Remuneration Committee. Graham is an extremely experienced
Director, having served four years on the Board, and is also Chair
of our Audit Committee. Angela is an experienced Remuneration
Committee Chair and was also appointed as our designated
Director for employee engagement.
• The Committee recommended the appointment of Avis Darzins
to the Board and to each of our Board Committees. Avis is an
experienced executive and brings valuable new skills to the Board.
These include business transformation and change management
skills that are relevant to our longer-term strategic goals. Avis was
appointed following a comprehensive, and very focused, search
process conducted by Norman Broadbent. Enhancing the Board’s
cognitive diversity was a critical component of the search mandate.
Avis was interviewed by all of the continuing Board members.
• In the knowledge that the Company’s longest-serving, and
most experienced, Director, Tim Pile, intended to retire in 2022,
the Committee also recommended the appointment of Philip
Rogerson to the Board as a Non-Executive Director. Philip joined
the Board in September 2021 and brought extensive listed
company and cross-sector leadership and strategic experience,
in both executive and non-executive roles, as well as financial
acumen, which were key attributes in our search mandate.
Philip’s appointment was supported by executive search firm
Warren Partners (which is an independent executive search
firm with no other connection to the Company). Unfortunately,
we announced in December 2021 that Philip was stepping
down from the Board for health reasons. We thank Philip for his
contribution and wish him well for the future.
• In light of the challenges of our current operating environment
and the macro-economic and strategic challenges we face, and
given that Philip Rogerson has stepped down for health reasons,
Tim Pile has agreed to extend his term of office until 2023. Retaining
Tim’s experience and knowledge, which are great assets to the
Board and the Group, is of great value to the Group, particularly
as we continue to pursue and develop our longer-term strategy.
• We reviewed and approved the Group’s Nominations Policy,
which includes our desire to introduce even greater diversity, at
both a Board and senior management team level, by thinking
differently given the sector-wide challenge this presents.
• We reviewed individual Director performance identifying areas
for development.
• We reviewed succession planning, both for the Board and senior
management team. Over the course of the last two years, a number
of new appointments have been made to the senior management
team that have addressed succession challenges, with significant
planning and thought in advance to ensure we took the opportunity
to not only acquire the skills we needed to achieve our strategic
priorities but also to enhance the diversity of the team.
• We supported the establishment of the Group’s Diversity and
Equity Taskforce, whose mission is to make Marshalls an
inclusive employer where everyone can thrive and belong.
This initiative is a key part of the Group’s strategy to promote
diversity and inclusion and will ensure there is a broad
representation of views and ideas from across the Group.
2022 priorities
• Supporting the people strategy which underpins and acts as
an enabler to the Group’s long‑term strategy and includes the
development of colleagues in our high‑performing category,
as well as our approach to recruitment for new, strategically
significant, roles which will prioritise promoting colleagues
from within.
• Management of Board succession, including a further search
for a successor to Tim Pile (with Philip Rogerson, who was
appointed to succeed Tim, having stood down from the
Board for health reasons in December 2021).
• Continuing to support the Group’s diversity and inclusion
strategy and the initiatives underpinning this which will include
setting meaningful targets for greater gender diversity at the
senior management team level and in key roles that report
into this team. Greater gender, cultural and cognitive diversity
are seen as key areas of opportunity for the Board and the
Group, particularly as it looks to tackle its considerable change
agenda. The Board currently comprises 43 per cent women
and 57 per cent men, with a female Chair and one Board
member from a non-white ethnic minority background.
Although not yet implemented, we currently comply with the
anticipated amendment to the Listing Rules that will require
us to publish an annual “comply or explain” statement regarding
the achievement of the proposed targets on Board diversity.
• Focus on succession, development and progression below
Board level, particularly given a number of anticipated senior
management team retirements in the next couple of years.
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 2021
• 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 three to five-year
strategic plans.
• New Directors agree
commitment to
strategic direction and
Group policies.
• Appointment of Avis Darzins to the Board as a Non-Executive Director
bringing additional business transformation, change management and
technology skills to the Board, these being critical to our strategic agenda.
• Appointment of Philip Rogerson to the Board as a Non-Executive Director
bringing extensive cross-sector leadership and strategic experience to the
Board. Philip was intended as Tim Pile’s successor but unfortunately had
to step down for health reasons.
• Further one-year extension of Tim Pile’s term reflecting strategic needs at a
time when experience and stability are critical and also the unexpected and
unfortunate retirement of Philip Rogerson from the Board.
• Recruitment to
• Policy sets direction and
• Reviewed progress with the initial phase of the execution of the Group’s
achieve diversity
in widest sense.
gives leadership.
• Brief for search
consultants for
new Board and
senior management
appointments.
• Diversity initiatives/
succession plans at
Executive level reviewed
and targets monitored.
diversity and inclusion strategy including our approach to recruitment and
seeking to understand and improve the sector profile by becoming a founding
signatory to a sector-wide diversity initiative.
• All briefs to Norman Broadbent and Warren Partners emphasised the
importance of diversity.
• Began gathering more granular and specific, Group-wide, diversity related
data on a voluntary basis.
• Number of new appointments to the senior management team over the
last two years with our new CFO and a new Chief Information Officer being
appointed during 2021.
• Carefully monitoring senior management team succession given number of
potential retirements in the next couple of years. Carefully assessing any internal
candidates and ensuring that, in the longer term, development opportunities
for our high performers are identified and supported with investment.
Marshalls plc | Annual Report and Accounts 2021
85
Governance Nomination Committee Report continued
Marshall's Nominations Policy continued
Policy principle
Supporting measures
How implemented in 2021
• There should be
a clear formal
Board succession
plan based on
objective criteria.
• Annual review of terms
• Succession under continuous review. There were a number of Board changes
of office.
• Annual individual
evaluation.
• Use of independent
external search advisers.
during 2021.
• Individual Director evaluations were carried out in January 2022.
• We select external search advisers for Board appointments based on relevant
expertise and usually having asked them to participate in a competitive tender
process for each role. Norman Broadbent is retained for senior management
team recruitment and was appointed following a formal tender process.
• Directors must
• Limit on other Board
• Recruitment process addresses existing commitments and risk
devote sufficient
time to perform
effectively and
familiarise
themselves with
the business.
appointments.
• Detailed induction,
site visits, training and
employee engagement
programme.
• Compliance/good
• Conflicts policy and
governance.
register reviewed no less
than six-monthly.
• Annual re‑election of
Directors.
of “overboarding”.
• Included in letters of appointment.
• Director induction process comprehensively reviewed and revised by the
Company Secretary and well received by incoming Directors. See page 87.
• Board training is included as part of Director induction together with site
visits which recommenced during the year.
• The Directors continued to engage: on risk; through attendance at Employee
Voice Group and People Steering Group meetings; with our marketing team;
through attendance at Lunch and Learn sessions; and by participating in
our annual strategy day. Engagement has been through a combination of
in person and virtual meetings having assessed the circumstances and
Government guidance at the relevant time.
• Reviews in June and December 2021.
• All Directors stood for election/re-election in May 2021 with the exception of
Janet Ashdown, who stepped down from the Board at the end of the 2021 AGM.
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 70 and 71.
Governance
The Committee has acted throughout 2021 in accordance with the
principles of the UK Code. In addition, the Committee has assessed
its effectiveness during 2021 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
17 March 2022
The performance of the Committee was evaluated as part of
the Board evaluation process in 2021 described on page 82.
The Committee Terms of Reference were reviewed in December
2021. No material changes were made, and the terms continue
to 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 four 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 their role and responsibilities,
and received a detailed business induction (which was
comprehensively reviewed and revised by our Company
Secretary during the year). 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.
86
Marshalls plc | Governance
Director induction
Our induction process was comprehensively reviewed by our Company Secretary during 2021 and focuses on informing,
engaging and supporting new Directors when they join the business to ensure they understand the Group’s culture, business,
strategy and stakeholders.
We feel this knowledge, combined with their skills and experience, provides the right foundation for them to make an effective
contribution to the Group and to fulfil their statutory duties as Directors. This induction process is a key building block of
effective governance and reflects The Marshalls Way – we do the right things, for the right reasons, in the right way.
Our Director induction
The Marshalls Way
We do the right things, for the right reasons, in the right way
Inform
Engage
Support
• Summary of the
Group’s history
• Introduction to the
5 year Strategy
• Biographies of the
Executive team
• Employee Engagement Survey
• UNGC Sustainability Report
• ESG update
• Latest Board evaluation
• Access to key corporate
documents
• Market Indicators and
Drivers Report
• Board one-to-ones
• Executive Management
one-to-ones
• Site Visit programme
customer visits
• Introduction to our markets
• Introduction to investor
relations
• Introduction to
Remuneration Policy
• Employee Voice Group
attendance
• Core compliance training
• Appointment
documentation support
• Company Secretary support
• Organograms
• Key contacts
• Details of key advisers
• Payroll and administration
support
Marshalls has a well-constructed and thorough induction
programme that gave me the business insight needed to be
effective in my role and to contribute to the sustainable long‑term
success of the business.”
Avis Darzins
Non-Executive Director
Marshalls plc | Annual Report and Accounts 2021
87
Governance Audit Committee Report
Delivering a robust
control environment,
a focus on transparency
and an ethos of
continuous
improvement
Marshalls continues
to maintain a strong
focus on control, risk
management and governance.”
Meetings
Members and attendance
Graham Prothero — Chair
Tim Pile*
Angela Bromfield
Avis Darzins**
Janet Ashdown***
* Tim Pile stepped down from the Audit Committee in March 2021.
** Avis Darzins joined the Audit Committee in June 2021.
*** Janet Ashdown retired from the Audit Committee at the end of the
Group’s AGM in May 2021.
Find our Terms of Reference and Nominations Policy at
marshalls.co.uk/about-us/corporate-governance
88
Marshalls plc | Governance
Dear shareholder
In this report I set out the Audit
Committee’s objectives and
responsibilities and also explain the
activities undertaken during 2021 and
the priorities for 2022. This report, which
is part of the Directors’ Report, explains
how the Audit Committee has discharged
its responsibilities during 2021 and
provided focus and governance in
relation to risk management, financial
control and financial reporting.
2021 highlights
• Provided assurance to the Board on whether the 2021
Annual Report and Financial Statements, taken as a whole,
is fair, balanced and understandable. In addition, assessed
the adequacy of new financial disclosures and enhanced
reporting in relation to ESG matters, including the reporting
of the Task Force on Climate-related Financial Disclosures.
• Assessed the results and effectiveness of the 2021 final audit.
• Reviewed the measures taken to ensure the maintenance
of sufficient liquidity within the Group’s capital structure.
• 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.
• Reviewed and assessed the Group’s risk management
process and provided assurance to the Board in relation to
the maintenance of appropriate financial control systems and
procedures. This included the continued assessment of the
adequacy of additional procedures introduced as a consequence
of the majority of office staff working from home for most of
the year.
• Continued to monitor progress with the implementation of key
projects for the Group, including the new dual block plant at St
Ives and the commencement of the implementation of the D365
ERP systems update, to ensure that the control environment
surrounding these projects remains appropriate.
• 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 business continuity, IT disaster
recovery, GDPR compliance, payroll systems and controls,
accounts receivable, digitalisation and ESG maturity.
• Justin Lockwood joined the Board as Chief Financial Officer in
July 2021 and, since his appointment, has been undertaking
a review of the Group’s operations, considering both areas of
strength and areas for potential improvement in financial control
and reporting. This has included a review of inventory accounting
and control. Justin has consulted with the Audit Committee and
the Board to review and improve the quality of management
information and reporting to the Board. The Committee is
delighted with Justin’s swift and effective integration into the
Executive team and the Board.
2022 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 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.
• 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 2022, including projects covering cyber
security, general IT controls, project delivery and inventory.
• The Committee will continue to monitor progress of the
implementation of the D365 ERP systems update and the
commencement of the UK phase of this project.
• The Committee is supportive of the objectives of the BEIS White
Paper which set out options for strengthening the UK’s internal
controls framework. To this end the Committee will oversee a
project to review the adequacy, completeness and effectiveness
of the Group’s control environment to ensure that it continues
to be robust and suitably documented and any gaps have been
identified and addressed. KPMG has been engaged to ensure
ongoing best practice and assurance and the Committee will
monitor progress during the year.
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 Chief Financial Officer 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 Group has
maintained a strong balance sheet and a flexible capital structure
containing significant liquidity headroom.
Despite the disruption to normal working practices, Marshalls
maintained a strong focus on control, risk management and
governance throughout the year.
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 72 to 83. 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.
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 70 and 71.
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 142. Other than the half-
yearly review of Marshalls plc, for which a fee of £25,000 was
charged (2020: £30,000), 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
£236,000 (2020: £222,000).
Effectiveness of the external audit
An annual review of external audit effectiveness was undertaken
by the Committee in 2021. 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 Chief Financial Officer. 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 business
continuity, IT disaster recovery, GDPR compliance, payroll
systems and controls, accounts receivable, digitalisation and
ESG maturity.
Marshalls plc | Annual Report and Accounts 2021
89
Governance Audit Committee Report continued
Internal audit continued
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 2021. 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.
The Committee’s roles and responsibilities
During 2021, 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 2021
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 areas of judgement in relation to significant issues relating
to the Financial Statements. The main areas of judgement were:
• disclosure of alternative performance measures, including the
•
separate disclosure of adjusting items, in the Financial Statements;
and
judgements made in assessing the carrying value of inventory.
The Committee reviewed the findings of the external auditor and
considered the assessments and conclusions made by management.
• Reviewed the 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 going concern statement – and made a recommendation
to the Board that the Group is able to continue in operation and meet
its liabilities as they fall due for at least the next twelve months.
• Reviewed ESG disclosures, including the Group’s climate change
strategy and objectives, commitment to science‑based targets and
Task Force on Climate-related Financial Disclosures.
Risk management
• To assess and review the effectiveness
of the Group’s risk management
framework and procedures.
• To advise the Board on current and
• Reviewed the operation of the Group’s Risk Committee, which comprises
the Executive Directors and members of senior management. The Risk
Register process is set out in more detail on pages 34 to 43.
• The Audit Committee reviewed and challenged management’s
emerging risks.
assessment of the key risks during 2021.
Internal control
• To review the internal control 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.
• Provided oversight into the risk process. Actions have been reported
and detailed plans have been formulated to improve financial control,
compliance and governance.
• Reviewed the underlying policies and procedures.
• 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.
• Inventory valuation continues to be a key focus area and internal
controls have been reviewed during the year. This has included a review
of stock counting procedures which has resulted in improvements to
internal controls in certain areas.
External 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 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.
• The Group’s policy on the independence, selection and rotation of
auditors was approved during the year. The policy is in line with current
legal requirements.
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Marshalls plc | Governance
Responsibility area
Primary responsibilities
Activities undertaken during 2021
Internal audit
Other matters
• To review the effectiveness of the
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.
• To oversee and review the effectiveness of
the following policies:
• Serious Concerns Policy and
Whistleblowing Procedure;
• Anti-Bribery Policy; and
• Cyber Security Policy.
• Reported on actions and detailed plans that have been formulated to
improve financial control, compliance and governance. No significant
weaknesses have been identified during the year.
• 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 2021.
The Committee has concluded that the disclosures, and the
process and controls underlying their production, were appropriate
to enable it to determine that the 2021 Annual Report and Financial
Statements is fair, balanced and understandable.
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
2022 plan.
The Department of Business, Energy and Industrial
Strategy (“BEIS”) White Paper
The proposed reforms set out how the Government plans to
address the findings of a number of independent reviews, and
include a range of new proposals in relation to directors, auditors
and audit firms, the audit regulator and shareholders. The period
of consultation has been extended by the UK Government, but
the Audit Committee is supportive of the objectives of the White
Paper and the benefits of strengthening the UK’s internal controls
framework. To this end the Committee will oversee a project to
review the adequacy, completeness and effectiveness of the
Group’s control environment to ensure that it continues to be
robust and suitably documented and any gaps have been identified
and addressed. KPMG has been engaged to ensure ongoing best
practice and assurance and the Committee will monitor progress
during the year. The aim will be to ensure that the Group has a
better understanding of its control risks and will be well placed to
simplify, improve and automate controls and to align effectiveness
with the D365 ERP implementation project.
Fair, balanced and understandable
The Committee has considered whether, in its opinion, the 2021
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: (i) the disclosures in the
Strategic Report together with the enhanced disclosures relating to
the Group’s ESG objectives, sustainability and climate change risks
and opportunities and targets; (ii) the disclosures relating to the
selection and presentation of APMs. The Committee has concluded
that the APMs used in the Financial Statements are both helpful
and necessary to aid the reader’s understanding of performance
without distorting the regulatory reporting; (iii) the adequacy of the
disclosures made in relation to the measures undertaken by the
Group to mitigate risk; (iv) the appropriate reporting of disclosed
estimates and judgements.
In making this assessment, the Committee has advised the
Board in relation to the statement required by the UK Corporate
Governance Code.
Whistleblowing and bribery
The Audit Committee monitors, on behalf of the Board, any reported
incidents under the Serious Concerns Policy (our Whistleblowing
Policy), which all employees have the benefit of. A third-party
organisation, Safecall, has been appointed by the Group to provide an
independent and confidential channel for reporting and monitoring
all concerns. This process for reporting serious concerns and our
policy 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. We clearly set out
the procedure for employees to raise legitimate concerns about
any wrongdoing and emphasise that they can do this without fear
of criticism, discrimination or reprisal. The Committee receive bi‑
annual updates on matters reported under the Serious Concerns
Policy via the Safecall service together with an annual report on the
claims received during the year and details of how they have been
investigated and resolved. In the financial year ending 31 December
2021, eight reports were received. This represented one report for
every 325 employees compared with a construction industry average
of one for every 379 employees and demonstrates the success
we have had in raising awareness of Safecall. The reports cover a
broad range of concerns but all are investigated thoroughly, involving
subject matter experts where appropriate. If a material matter were
reported and substantiated, the Board would be made aware of
this as soon as possible rather than waiting for the next Committee
meeting. 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 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
17 March 2022
Marshalls plc | Annual Report and Accounts 2021
91
Governance Remuneration Committee Report
Rewarding strong
performance that
supports our vision
for the future
Our Remuneration Policy
rewards strong
performance with a
balanced set of measures
that reflect our commitment to
create better futures for everyone:
socially, environmentally and
economically.”
Members and attendance
Angela Bromfield – Chair
Meetings
Vanda Murray OBE
Tim Pile
Graham Prothero
Avis Darzins*
Janet Ashdown**
Philip Rogerson***
* Avis Darzins joined the Committee in June 2021.
**
Janet Ashdown retired from the Board and as Chair of the Committee
at the end of the Group’s AGM in May 2021.
*** Philip Rogerson joined the Committee in September 2021 and stepped
down in December 2021 for health reasons.
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
92
Marshalls plc | Governance
2021 highlights
• Agreed incentive plan targets for 2022 using robust financial
and non-financial measures designed to align with strategic
objectives and stakeholder interests. These measures take
into account current expectations and the continuing market
uncertainty, and include meaningful ESG measures.
• Undertook a comprehensive review of Executive and
Non-Executive Director remuneration, taking into account
the growth in size and complexity of the business, the pay
and benefits of colleagues across the Group and relevant
comparator groups.
• Committee Chair consulted with the governance teams of key
shareholders on remuneration matters as part of the Board
Chair’s annual programme of shareholder meetings.
• Oversight of a review of the wider Group remuneration and
reward strategy looking at the alignment of pay policies and
terms and conditions.
• Oversight of a targeted review of pay and conditions for HGV
drivers across the Group in light of prevailing market conditions
and to ensure the Group has the ability to attract and retain the
drivers we need.
• Continued with the Employee Voice Group (“EVG”), holding eight
virtual meetings in the year. EVG also now operates as a forum
for feedback and consultation on wider business change. Board
and Executive team members rotate attendance during the year to
listen to and understand colleague viewpoints. Angela Bromfield is
the Company’s designated Non-Executive Director for employee
engagement, having taken over from Janet Ashdown when
she retired.
2022 priorities
• Communicate change in measures for the 2022
incentive programme.
• Commence Remuneration Policy review (in readiness for this to
be put to shareholders for voting at the Company’s 2023 AGM).
• Set incentive scheme targets for 2023.
• Assess whether our engagement plan with employees and other
stakeholders on remuneration remains effective.
• Continue to monitor alignment of Executive remuneration with
pay policies and incentives for colleagues across the Group.
• Continue to monitor and support the development of reward
strategy across the Group ensuring it is competitive and fair.
• Continue to use EVG to gauge organisational climate and
engagement levels as well as how change programmes
are implemented.
Dear Shareholder
As the new Chair of Marshalls’
Remuneration Committee, I am pleased
to set out in this report how the
Committee has carried out its objectives
and responsibilities during 2021.
I also want to thank my predecessor, Janet Ashdown, for her
contribution in leading the oversight of the remuneration and
engagement agendas in a professional way, and welcome Avis
Darzins to the Remuneration Committee.
We have updated our Annual Remuneration Report to make accessing
the key points of information as straightforward as possible.
The content consists of:
• this Annual Statement from me as the Committee Chair;
• an “at a glance” summary setting out key remuneration
information for our shareholders; and
• the Annual Report on Remuneration setting out additional
detail on the remuneration for the Executive Directors,
disclosures required by the remuneration reporting regulations,
and considerations in respect of pay for colleagues across
the Group.
The Remuneration Committee continues to believe that the
Remuneration Policy approved at the 2020 AGM provides
strong alignment with shareholders’ interests and therefore is
not planning any changes to its operation during 2022, with the
exception of a modification to the non-financial metrics for our
incentive schemes.
Business performance and outcomes for 2021
The Group’s KPIs monitor progress towards the achievement
of the Group’s objectives. The Group’s key strategic KPIs are
shown on pages 32 and 33 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 currently used to
determine awards under the MIP.
The Group has delivered a strong trading performance in 2021
with record sales and adjusted profit in a very challenging market.
The resilience of the business in the face of significant supply
chain challenges, and the continuing impact of the pandemic, is a
credit to colleagues across the Group. Group revenue was £589.3
million (2020: £469.5 million; 2019: £541.8 million), adjusted EPS
was 28.6 pence (2020: 8.6 pence; 2019: 29.4 pence), and adjusted
return on capital employed was 20.6 per cent (2020: 8.2 per cent;
2019: 21.4 per cent).
MIP A outcomes for 2021
As a result of Company performance during the year the
performance conditions for MIP A were fully achieved and as
such a contribution to MIP A will be made in respect of 2021,
equivalent to 100 per cent of maximum. Full details of the
performance conditions, targets set, and level of achievement are
set out in the “at a glance” section on page 96.
MIP B awards allocated in respect of 2021
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 an allocation of awards under MIP B in respect of 2021,
equivalent to 100 per cent of maximum.
2021 MIP performance conditions
The table below shows how the Group performed against targets
for the MIP in 2021. Performance measures and targets are linked
to the key strategic objectives highlighted on pages 30 and 31
of the Strategic Report.
MIP Element A: 100 per cent of maximum (2020: 0 per cent of
maximum) was awarded to the CEO, CFO and former Group FD.
MIP Element B: 100 per cent of maximum (2020: 0 per cent of
maximum) was awarded to the CEO and CFO. The former Group
FD is not eligible to receive a grant under the 2021 MIP Element B,
in line with his leaver arrangements.
Threshold
(0% payable)
Maximum
(100% payable)
EPS (75% of maximum)
20.26p
24.34p
Actual
(2021)
28.6p
Weighting
outcome
(% total award)
CEO
£’000
CFO
£’000
Former
Group FD
£’000
100% £996,724 max
£310,577 max
£88,396 max
Operating cash flow (“OCF”)
to EBITDA ratio (25% of
maximum)
Non‑financial targets
(customer service/health
and safety)
£59.6m
£76.1m
£85.4m
100% £332,241 max
£103,526 max
£29,465 max
100% No deduction
No deduction
No deduction
Performance conditions were set at the beginning of 2021 and the Committee took account of both internal budgets and external factors
such as the market consensus of investors for the full year 2021. No discretion was exercised in determining incentive outcomes.
Definitions
Other than in respect of IFRS 16, the EPS and OCF ratio for 2021 were measured using IFRSs based on the audited results of the Group and subject
to the discretion of the Committee with regard to adjusting 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. Adjusted EPS was 28.6 pence in 2021 (2020: 8.6 pence; 2019: 29.4 pence).
OCF/EBITDA
OCF/EBITDA ratio relates to our strategic objective to convert earnings into cash flow and to use cash responsibly. OCF before adjusting
items paid was £85.4 million in 2021.
Marshalls plc | Annual Report and Accounts 2021
93
Governance Remuneration Committee Report continued
Non-financial targets
Our customers are at the heart of our business model, and our
measurement of customer service has, in prior years, included
factors such as product availability, on‑time delivery performance
and administrative and delivery accuracy, to assess performance.
The supply chain and people challenges the Group (and others
throughout the sector) faced during 2021, when combined with
strong demand, meant that the Group moved from being a
“make to stock” business to a “make to order” business. Product
availability was therefore not a meaningful or relevant factor
in measuring customer service as a whole. The Committee
accordingly approved the inclusion of a quality factor in the
customer service measurement in substitution for the stock
availability factor. As with stock availability, the quality measure
had a 25 per cent weighting in calculating the overall achievement
of the customer service measure.
The Group’s average customer service performance is assessed
monthly. Taking into account the new quality factor, the Group’s
average customer service score was 98 per cent during 2021.
This compared with the target score of 95 per cent. The Group
continued to make good progress 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 21 per cent. Given this performance,
no adjustment was necessary.
COVID-19 remuneration decisions
The COVID-19 pandemic continues to have implications for the
business and how we operate, albeit, as set out in more detail in
the Strategic Report on pages 1 to 69, our performance has now
returned to, and indeed exceeded, pre-pandemic levels. Despite the
impact that COVID-19 had on performance in 2020, the Committee
set challenging targets for our MIP awards in 2021. These targets
have remained in operation without the need for any adjustments,
despite the significant, sometimes unexpected, cost headwinds the
business absorbed during the last year. The Committee is satisfied
that the outcomes for the 2021 awards are appropriate in light
of the overall business performance, and reward the Executives
for their resilient performance during the year.
Executive Director changes
As announced earlier in the year, the Group Finance Director,
Jack Clarke, stepped down and retired from the Board and as
Group Finance Director with effect from 1 April 2021. As previously
announced, and in accordance with his service agreement, Jack
will remain with the Group until 31 March 2022 to ensure a smooth
and orderly handover and will be classified as a “good leaver”. A
summary of Jack’s leaving remuneration arrangements is set out
on page 100.
Justin Lockwood was appointed to the Board as Chief Financial
Officer on 26 July 2021. The table below sets out a summary of the
remuneration arrangements on appointment, which are in line with
our Remuneration Policy:
Element of remuneration
Details
Base salary
£380,000
Benefits and pension
Benefits include car or car allowance, health insurance, life assurance and membership of the Group’s employee
share plans.
Employer pension contribution was set at 5% of salary on appointment, in line with that of the majority
of employees.
MIP Element A
Maximum opportunity 150% of base salary.
2021 award was pro-rated for time in role.
MIP Element B
Maximum opportunity 100%of base salary.
Did not receive a MIP B grant in 2021.
Buy-out awards
29,160 nil-cost options on 20 August 2021 to the value of £223,657.20, based on the share price on 26 July 2021
(his start date) of £7.67.
This bespoke award, made to Justin in lieu of incentives forfeited on cessation of previous employment, is subject
to continued employment. At the time that the award was granted, the Committee felt that it had insufficient
information to calculate the value of awards being forfeited at the previous employment. Therefore, to provide
a suitable estimate of the value, the Committee agreed to provide an award calculated as a pro-rated amount of
the 2021 MIP award opportunity, had he been employed at Marshalls (to the number of days in the calendar year
worked at his previous employer). The amount is no more generous than what he was expected to receive.
Shareholding
requirement
Minimum shareholding requirement of 200% of salary. 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.
Post-cessation holding period of 200% of salary for the first year and 100% of salary for a further year.
Executive Director salary increases for 2021/22
Given the continuing uncertainty caused by the pandemic, the October 2020 Group-wide salary review was delayed until early 2021.
When the CEO’s salary was reviewed in March 2021, the Committee determined that, given the experience, high performance and increased
responsibilities of the CEO, operating in a growing and increasingly complex business, a base salary increase would ensure his remuneration
remains competitive and is commensurate with his role and determined on a basis consistent with the remuneration of the Group’s new
CFO. The Remuneration Committee considered awarding the entire increase in 2021 but felt it appropriate to apply the increase in two
stages, with a 6 per cent increase effective from January 2021, and a further 8 per cent increase effective from January 2022.
The CFO’s salary was set on appointment, and has not increased since. The Committee determined that the CFO’s remuneration remains
competitive and appropriate, and is therefore implementing an increase of 5 per cent, effective from January 2022, in line with the pay
award for the majority of colleagues throughout the Group.
94
Marshalls plc | Governance
Chair and Non-Executive fees
Following the decision to delay the January 2021 pay awards to
later in the year, the Board, on the basis of a recommendation from
the Remuneration Committee, approved a 1.4 per cent increase
in the fees of the Non-Executive Directors, backdated to January
2021. The Committee approved the same increase in the Board
Chair’s fee.
For 2022, the Remuneration Committee has approved an
adjustment to the Board Chair’s annual fee from £177,500 to
£210,000, effective from January 2022. The Chair has historically
been positioned below the lower quartile of the market, which the
Committee does not consider to be appropriate given the growth in
size and increasing complexity of the business and her experience.
During her tenure, the Chair has successfully navigated the Group
through the challenges it has faced, overseen record growth and
led a comprehensive strategic review of the business.
The Committee has provided the Chair with increases aligned to
those of the colleagues across the Group since her appointment,
but feels that, at this time, it is appropriate to align her fee with
the market to ensure that her strong leadership and performance
are reflected in her remuneration. Further, the Committee is
uncomfortable, given the Company’s gender pay policies, that
the Company’s female Chair’s fee is below the market of her
predominantly male peers.
The Board has approved an increase of 5 per cent in the Non‑
Executive Director fees for 2022, which is in line with the increase
applicable to the vast majority of the colleagues across the Group.
Group-wide considerations
Marshalls is committed to creating an inclusive working environment
and to rewarding its employees in a fair way. In making decisions on
Executive pay, the Remuneration Committee considers remuneration
and terms and conditions for colleagues across the Group. This report
includes information on our 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 these matters is key
to the promotion and development of our values and culture.
During the year, the Committee has conducted a review of reward
and talent development across the Group. Progress has been
made in a number of areas, including the introduction, for the
former CPM business (now Marshalls Civils and Drainage), of rates
of guaranteed earnings (away from a productivity-based bonus
with relatively low base pay levels). We have also created parity
in overtime levels. A major focus on benefits has resulted in the
implementation of a new benefits hub (Marshalls NOW) making
our total reward offering much more visible and accessible to all
colleagues. We have also launched three new benefits in year:
Sharesave, Healthcare Cash Plan and Cycle to Work.
In addition, we are pleased to report that the Group gave a £600 thank
you award to employees in December 2021, in recognition of their hard
work and commitment throughout the pandemic.
Shareholders
We are pleased by the continued support shown by our
shareholders through the vote on the Annual Remuneration Report
at the 2021 AGM, and the Remuneration Policy at the 2020 AGM:
93+
97+
Remuneration Policy
For – 93.0%
Against – 7.0%
Withheld – n/a
Votes cast: 154,260,365
Remuneration Report
For – 97.8%
Against – 2.2%
Withheld – n/a
Votes cast: 151,569,081
Shareholder engagement
As part of our annual shareholder engagement programme,
the Chair and I met with key shareholders in November and
December 2021 to understand their current views on how we
apply our Remuneration Policy, as well as remuneration matters
more generally.
Those meetings were constructive and supportive with
shareholders acknowledging the need for flexibility in the
application of our Policy provided it is proportionate, justifiable
and has regard to pay across our Group. Having consulted with
shareholders and undertaken a strategic review in November 2021,
we have modified the non-financial performance conditions in our
incentive schemes. For 2022, we have included a carbon reduction
target, which links to our net zero carbon pathway, in addition to the
existing health and safety measure. This has replaced our historic
customer service measure.
In conclusion
2021 has been a year of record performance for the Group against
the backdrop of a continuing pandemic, supply chain and labour
shortages and costs inflation. We’ve maintained our service to
customers and operational focus to meet demand. We’ve achieved
this whilst prioritising the health, safety and wellbeing of the
employees. Having considered these achievements, the Committee
feels the remuneration outcomes for 2021 are proportionate and
well-deserved and we congratulate the business for this.
I would like to thank our shareholders for their continued support
during the year. I will be available at the Company’s 2022 AGM to
answer any questions in relation to this Remuneration Report.
Angela Bromfield
Chair of the Remuneration Committee
17 March 2022
Our Remuneration Report has been prepared in accordance
with the Companies Act 2006 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 | Annual Report and Accounts 2021
95
Governance7
+
0
+
L
3
+
0
+
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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
Measure
EPS/OCF
EPS/OCF
EPS/OCF
Net debt
OCF
Carbon reduction
Health and safety
Target 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. For 2022, we have substituted the customer service metric for a carbon reduction target which
is aligned with our commitment to achieve net zero by 2030.
Full details of the Company’s strategy are set out in the Strategic Report on pages 30 and 31.
2021 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 2021 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.
250
200
150
100
50
0
2015
2016
2017
2018
2019
2020
2021
— CEO single figure — EPS — OCF (£’m)
2021 single figure
The following charts summarise the single figure of remuneration for 2021 in comparison with 2020 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 2020 and 2021, 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 101).
Jack Clarke
(Former Group FD)
Justin Lockwood
(CFO)
2020
-76
304
60
792
1,080
2021
2020
2021
244
2
405
84 59
16
0
171
8
124
83
386
Martyn Coffey
(CEO)
2020
-115
2021
518
565
85
80
1,207
1,695
399
266
373
2
1,685
0
500
1,000
£’000
1,500
2,000
Salary and other benefits Salary supplement in lieu of employer pension MIP Element A MIP Element B
Long-term incentives (MIP A and MIP B) Proportion due to share price reduction (2019: growth)
Notes:
a)
Base salary, benefits and pension information is taken from the single figure remuneration table in the 2021 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.
96
Marshalls plc | Governance
2021 remuneration outcomes continued
Comparison to peers
The following chart shows the relative position of base salary and total compensation for our Executive Directors compared to our peers.
0
0
0
£
)
’
O
E
C
(
y
e
f
f
o
C
n
y
t
r
a
M
2,500
2,000
1,500
1,000
500
0
Base salary
Total compensation
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 market level, with stretching but achievable variable
incentives appropriately rewarding good performance. The variable element assumes an “on-target” performance under relevant incentive
schemes. Paying at a median level is also consistent with the pay policy for the rest of the organisation.
As the business has grown, the scale, complexity and levels of responsibility of the Executive Directors have increased. This is reflected in
the CFO’s remuneration package on recruitment and the adjustment we have made to the CEO’s remuneration, further details of which are
set out on page 94.
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)
Justin Lockwood
(CFO)
47%
200%
200%
389%
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.
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 Directors’ 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 2021 outcomes. The following charts set out the single figure for 2021 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
405
403
386
386
Jack Clarke
(Former Group FD)
Justin Lockwood
(CFO)
Martyn Coffey
(CEO)
2,350
2,515
364
389
1,685
1,683
4,891
5,234
0
500
1,000
1,500
2,000
0
2,000
4,000
6,000
8,000
Full impact with share price change Assuming no share price change since 31 December 2020
£’000
Marshalls plc | Annual Report and Accounts 2021
97
Governance
Remuneration Committee Report continued
At a glance continued
Implementation of the Policy in 2021 and 2022 for Executive Directors
The table below sets out the following information:
• a summary of the Policy approved at the 13 May 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 2021; and
• how the Company proposes to implement the 2020 Remuneration Policy in 2022.
Element of pay
Summary of Policy
How we implemented the Policy in 2021
How we will implement the Policy in 2022
Executive Director salaries for
2021 were as follows:
Executive Director salaries for
2022 are as follows:
• CEO – £531,586; and
• CFO – £380,000.
• CEO – £574,113 (8%
increase); and
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).
Due to the pandemic, the
October 2020 salary review
was delayed until early 2021.
The above reflect the Executive
Director base salaries effective,
in the case of the CEO, January
2021 and, in the case of the
CFO, on appointment. The
CEO’s salary was increased by
6% in March 2021 (effective
Jan 2021).
• CFO – £399,000 (5% increase).
As referenced in the Chair’s
letter, the Committee conducted
a review of the CEO and CFO’s
packages in October 2021. The
Committee determined that
the CFO’s package remains
competitive and appropriate, and
therefore proposes an increase
in line with the pay award for the
majority of colleagues throughout
the Group.
In line with our Policy
commitment, the CEO’s
employer pension contribution
will be reduced to align with the
contribution for the majority of
colleagues across the Group
(currently 5%) by the end of 2022.
The CFO’s pension contribution
will remain at 5% of salary.
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 15% of salary.
The CFO’s employer pension
contribution was set at 5%
of salary on appointment, in
line with that of the majority
of employees.
Executive Directors are entitled to join the defined
contribution scheme operated by Marshalls.
The Company contributes at an agreed
percentage of basic salary.
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.
98
Marshalls plc | Governance
Implementation of the Policy in 2021 and 2022 for Executive Directors continued
Element of pay
Summary of Policy
How we implemented the Policy in 2021
How we will implement the Policy in 2022
MIP Element A
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 2021 was
as follows:
• CEO – 150% of base
salary; and
• CFO – 150% of base salary,
pro‑rated for time in role.
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:
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, sustainability and our
colleagues will apply as follows:
• annual carbon reduction
targets must be achieved
(target to be net zero by 2030).
The 2022 target is that carbon
consumption be below 48,150
tonnes in the year; and
• customer service (must
• 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.
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 (2018).
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 93 for details of the
targets, their level of satisfaction
and the corresponding
bonus earned.
Marshalls plc | Annual Report and Accounts 2021
99
Governance Remuneration Committee Report continued
At a glance continued
Implementation of the Policy in 2021 and 2022 for Executive Directors continued
Element of pay
Summary of Policy
How we implemented the Policy in 2021
How we will implement the Policy in 2022
MIP Element B
Annual performance conditions and targets are set
by reference to financial, strategic and operational
objectives by the Remuneration Committee.
Awards are granted retrospectively in shares based
on the achievement of performance targets for the
relevant year. Awards vest (subject to continued
employment) three years from grant.
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.
Maximum opportunity of 100%
of salary.
Contribution level for 2021 was
as follows:
Maximum opportunity of 100%
of salary with target set at 50%
of opportunity and threshold at 0%
of opportunity.
The performance measures are
the same as for Element A.
• CEO – 100% of base
salary; and
• CFO – 100% of base salary
pro‑rated for time in role.
The performance measures
were the same as for
Element A.
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.
Group Finance Director leaver arrangements
As described in the Chair’s letter, the Group Finance Director, Jack Clarke, stepped down and retired from the Board and as Group Finance
Director with effect from 1 April 2021. As previously announced, and in accordance with his service agreement, Jack will remain with the
Group until 31 March 2022 to ensure a smooth and orderly handover, and will be classified as a “good leaver”. The table below sets out a
summary of Jack’s leaving remuneration arrangements.
Outstanding in‑flight MIP
Element B share awards
Pro-rated to 31 March 2022, and will only vest to the extent that the applicable performance conditions
are satisfied, subject to the two-year holding requirement.
Malus and clawback provisions will continue to apply.
MIP Element B award for the
financial years ending 2021
and 2022
MIP Element A for the financial
years ending 2021 and 2022
Not entitled to receive MIP Element B grants for these years.
Will receive MIP Element A for the financial year ending 31 December 2021.
Will receive a pro-rated MIP Element A for the year ending 31 December 2022, to the period to
31 March 2022, to the extent that the applicable performance conditions are satisfied.
Malus and clawback provisions will continue to apply.
Save As You Earn Scheme
Treated as a good leaver.
Legal fees
The Company will pay up to £4,500 in legal fees incurred by, and other payments due to, Jack.
Shareholding requirement
Jack is required to maintain a shareholding equivalent to 200% of his leaving salary for the first year
following retirement and 100% of leaving salary for the second year following retirement.
Other than the above, no other remuneration payment, including for “loss of office”, has been or will be paid to Jack Clarke after the termination date.
Implementation of Non-Executive Directors’ fees in 2021 and 2022
Following the decision to delay the January 2021 pay awards to later in the year, the Board, on the basis of a recommendation from
the Remuneration Committee, approved a 1.4 per cent increase in the fees of the Non-Executive Directors, backdated to January 2021.
The Committee approved the same increase in the Chair’s fee.
For 2022, the Remuneration Committee has approved an adjustment to the Board Chair’s annual fee from £177,500 to £210,000, effective
from January 2022. The Chair has historically been positioned below the lower quartile of the market, which the Committee does not
consider to be appropriate given the growth in the size and increasing complexity of the business and her experience. This is also reflective
of the fact that with increased complexity comes an increase in time commitment to fulfil duties to the high level of contribution we see
from the Chair as she executes her duties. During her tenure, the Chair has successfully navigated the Group through the challenges it has
faced, overseen record growth and led a comprehensive strategic review of the business.
The Committee has provided the Chair with increases aligned to those given to the majority of colleagues across the Group since
her appointment, but feels that, at this time, it is appropriate to align her fee with the market to ensure that her strong leadership and
performance are reflected in her remuneration. Further, the Committee is uncomfortable, given the Company’s gender pay policies, that the
Company’s female Chair is below the market of her predominantly male peers.
100
Marshalls plc | Governance
Implementation of Non-Executive Directors’ fees in 2021 and 2022 continued
The Board has approved an increase of 5 per cent in the Non-Executive Director fees for 2022, which is in line with the increase applicable to
the vast majority of colleagues across the Group.
Director
Vanda Murray (Chair, Chair of Nomination Committee)
Graham Prothero (SID, Chair of Audit Committee) – Note a
Angela Bromfield (Chair of Remuneration Committee) – Note b
Tim Pile
Philip Rogerson – Note c
Avis Darzins – Note d
Janet Ashdown – Note e
Notes:
1 January 2022
£’000
1 January 2021
£’000
Percentage
increase
209.5
177.5
64.9
61.0
52.3
—
52.3
—
58.4
49.8
49.8
49.8
49.8
65.7
18%
5%
5%
5%
n/a
5%
n/a
a)
Graham Prothero became the Senior Independent Director from May 2021, and therefore his increase in fees is reflective of the additional fees received
in relation to this role.
b) Angela Bromfield became the Chair of the Remuneration Committee from May 2021, and therefore her increase in fees is reflective of this increase in role.
c)
Philip Rogerson became a Director of the Company effective 1 September 2021 and stepped down as a Director of the Company for health reasons effective
14 December 2021.
d) Avis Darzins became a Director of the Company effective 1 June 2021.
e) Janet Ashdown retired as a Director of the Company on 12 May 2021.
Annual Remuneration Report
This report covers the reporting period from 1 January 2021 to 31 December 2021 and explains how the Remuneration Policy has been
implemented. Comparative figures for the 2020 financial year have also been provided.
Single total figure of remuneration in 2021 – 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
2021
£’000
2020
£’000
2021
£’000
2020
£’000
2021
£’000
2020
£’000
2021
£’000
2020
£’000
2021
£’000
2020
£’000
2021
£’000
2020
£’000
2021
£’000
2020
£’000
2021
£’000
2020
£’000
2021
£’000
2020
£’000
532
485
33
33
80
85
399
—
266
—
375 1,092 1,685 1,695
645
603 1,040 1,092
166
—
83
300
5
1
—
4
8
—
124
16
60
59
Total
781
785
39
37
104
145
582
—
—
—
83
—
349
—
—
—
—
—
386
—
179
—
207
—
246
716
405 1,080
100
364
305
716
621 1,808 2,476 2,775
924
967 1,552 1,808
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)
c)
d)
e)
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.
The annual bonus column shows 50 per cent of the total bonus contribution earned under the MIP Element A in respect of 2021 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 2021 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 2021 Element B shares is subject to underpins and employment-based forfeiture for a three-
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. No MIP awards for 2020.
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 increase in the MIP account balances because of share price increase is £2,000 for Martyn Coffey and £2,000 for Jack Clarke.
Justin Lockwood joined the Board as Chief Financial Officer on 26 July 2021. His single total figure of remuneration elements therefore reflect his time
on the Board since then. Justin Lockwood received 29,160 nil-cost options on 20 August 2021 to the value of £223,657, based on the share price on 26 July
2021 (his start date) of £7.67. This was a bespoke award made to Justin in lieu of incentives forfeited on cessation of employment only, and is subject to
continued employment.
f) Jack Clarke’s 2021 single total figure of remuneration elements are pro-rated based on his time in role, to his date of departure from the Board, 31 March 2021.
Marshalls plc | Annual Report and Accounts 2021
101
Martyn
Coffey
Justin
Lockwood
(Note e)
Jack Clarke
(Note f)
Governance Remuneration Committee Report continued
Annual Remuneration Report continued
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 colleague 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 2021 the Group was re-accredited with the Fair Tax Mark.
Relative importance of spend on pay (percentage change)
Staff pay
(£’m)
+2.1%
Distributions to
shareholders (£’m)
£17.9m
Capital investment
(£’m)
+59.9%
Tax
(£’m)
+39.5%
105.4
106.9
109.1
33.2
22.9
23.5
93.6
96.5
17.9
14.7
69.2
2019
2020
2021
2019
0.0
2020
2021
2019
2020
2021
2019
2020
2021
Outcomes of incentive schemes in 2021 (audited)
See page 93 for details of the satisfaction of the performance conditions under the MIP for 2021.
MIP awards 2021
A new MIP started in 2020. As performance conditions were not met in 2020, the opening balance in 2021 was still zero.
Element A
Plan accounts
Opening balance (number of shares) (Note a)
2021 contribution (% of salary earned)
Value
2021 element released (Note b)
Closing balance (deferred into shares)
Number of shares represented by closing balance (Note c)
Martyn Coffey
Justin Lockwood
Jack Clarke
—
150%
£797,379
£398,689
£398,690
57,188
—
150%
£248,462
£124,231
£124,231
17,819
—
150%
£471,443
£235,721
£235,722
33,812
Element B (2019 award in respect of 2018 performance)
The EPS forfeiture threshold applicable to the 2019 award was 14.32. The actual average EPS performance was 26.29 and therefore the
forfeiture threshold was met and 100% of the award will vest. Note that Justin Lockwood was not granted a 2019 MIP B award.
Number of shares awarded
Value of shares vesting
Value of dividends accrued over vesting period
Value included in single figure table (Note e)
Martyn Coffey
Justin Lockwood
Jack Clarke
97,745
698,838
25,140
374,559
—
—
—
—
64,118
458,418
16,479
245,688
102
Marshalls plc | Governance
MIP awards 2021 continued
Element B (2022 award in respect of 2021 performance)
Plan accounts
Number of shares awarded
Percentage of salary
Value
EPS forfeiture threshold (Note d)
Notes:
Martyn Coffey
Justin Lockwood
Jack Clarke (Note f)
76,251
100%
23,759
100%
£531,586
£165,641
n/a
n/a
n/a
n/a
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 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 2021 and adding the value of dividends of 4.3 pence per share paid during 2021.
b) The earned Element A award for 2021 is added to the individual’s plan account, and 50 per cent of the resulting balance is released to the participant as an
annual bonus; the remaining 50 per cent is 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 2021
(697.15 pence).
d)
e)
f)
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.
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.
In line with his leaver arrangements, Jack Clarke will not be entitled to receive a MIP Element B award for the financial years ending 31 December
2021 and 2022.
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 2021. 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.
Board fee
£’000
Committee fees
£’000
Expenses*
£’000
2021
2020
2021
2020
2021
177
2020
169
—
Vanda Murray
Chair, Chair of Nomination Committee and member
of Remuneration Committee
Graham Prothero
Senior Independent Director (from 13 May 2021), Chair of
Audit Committee and member of Remuneration and
Nomination Committees
Tim Pile
Member of Audit, Remuneration and Nomination
Committees
Angela Bromfield
Chair of Remuneration Committee (from 13 May 2021)
and member of Audit and Nomination Committees
Avis Darzins
Member of Audit, Remuneration and Nomination
Committees (from 1 June 2021)
Philip Rogerson
Member of Audit, Remuneration and Nomination Committees
(from 1 September 2021 to 14 December 2021)
Janet Ashdown
Previously Senior Independent Director, Chair of
Remuneration Committee and member of Audit and
Nomination Committees
Total
Notes:
a) Benefits are travel and accommodation expenses.
50
47
13
50
47
50
47
29
17
—
—
18
49
—
5
—
—
6
—
8
—
—
—
—
17
Total
£’000
2021
179
2020
177
64
55
51
48
56
47
30
18
—
—
24
66
8
—
1
—
—
—
—
2
1
1
1
1
1
—
7
391
359
24
25
9
422
393
Marshalls plc | Annual Report and Accounts 2021
103
Governance Remuneration Committee Report continued
Annual Remuneration Report continued
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 2021.
Shareholding requirement
(Note a)
% of
salary
Number of
shares
required
Beneficially
owned
(Note b)
Shares
that will vest
following
2021 results
(Note c)
Deferred and
contingent
share
interests
(Note e)
Deferred
shares
(Note d)
Total
interests
in shares
(including
contingent
interests)
Number of
shares
Number of
shares
Number of
shares
Number of
shares
Number of
shares
200
200
200
—
—
—
—
—
153,527
306,633
101,350
66,364
123,552
597,899
109,747
5,000
—
—
90,771
132,163
66,480
18,524
46,979
52,336
51,979
269,503
—
—
—
—
—
22,000
40,840
2,417
3,925
3,000
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
22,000
40,840
2,417
3,925
3,000
Director
Executive
Martyn Coffey
Justin Lockwood
Jack Clarke
Non-Executive
Vanda Murray
Tim Pile
Graham Prothero
Avis Darzins
Angela Bromfield
Notes:
a)
The closing price on 31 December 2021 of 699.5 pence per share has been used to measure the number of shares required.
b)
c)
d)
e)
f)
g)
As at the date of this report the number of shares beneficially owned by Martyn Coffey was 306,699, by Justin Lockwood was 5,000 and by Jack Clarke was
132,229. Changes were due to share purchases under the Share Purchase Plan.
This comprises Element B awards granted in March 2019 (based on 2018 performance) that will vest three years from grant (i.e. March 2022) 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 in 2019 and 2020 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 2021.
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. Justin Lockwood’s deferred MIP Element A award amounted to 17,819
shares. In addition, he received 29,160 nil-cost options on 20 August 2021. Further details of this award are set out on page 101.
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 2021 (697.15 pence).
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 Martyn Coffey has met his minimum shareholding requirement. Justin Lockwood currently holds 51,979 Ordinary
Shares representing 47% of his salary. Justin only joined the Group in July 2021.
Statement of implementation of Remuneration Policy in the following financial year (2022)
See pages 98 to 100.
Payments to past Directors/payments for loss of office
As described in the Chair’s letter, the Group Finance Director, Jack Clarke, stepped down and retired from the Board and as Group Finance
Director with effect from 1 April 2021. As previously announced, and in accordance with his service agreement, Jack will remain with the
Group until 31 March 2022 to ensure a smooth and orderly handover, and will be classified as a “good leaver”. A table setting out a summary
of Jack’s full leaver arrangements can be found on page 100.
There were no other payments to Directors or former Directors for loss of office.
104
Marshalls plc | Governance
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 Annual General Meeting
Fairness, diversity and wider workforce considerations
Introduction
This section of the Remuneration Report deals with the following:
Reference
Page 100
Page 96
Page 107
Page 107
Pages 98 to 100
Pages 93 to 95
Page 95
• 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 Chair of the Remuneration Committee and designated Non-Executive Director for employee engagement, Angela Bromfield attends the
Employee Voice Group (“EVG”). The EVG meets six times a year and, amongst other things, provides valuable input into new policy development
around a range of topics including reward and remuneration policy. In 2022 there will be a specific focus on the Group’s gender pay gap reporting
as well as benchmarking and understanding the role of reward in attraction and retention (including Executive Director and senior leader pay). 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 and members of the Marshalls Executive team also attend EVG meetings on a rotational basis.
The attendees of the meeting are now elected by their colleagues to be their representatives. A summary of the EVG’s activities is set out in
the Strategic Report on page 67.
The Committee also receives feedback from regular employee surveys and from 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.
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 annual 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 2021
The annual audit of wider workforce pay and conditions was completed. 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.
Marshalls plc | Annual Report and Accounts 2021
105
Governance Remuneration Committee Report continued
Fairness, diversity and wider workforce considerations continued
Overview of findings
The key findings of the Committee’s review for 2021 were as follows:
• there was support for the £600 thank you award the Group made to employees in recognition of their hard work and commitment
throughout the pandemic. The award, made in December 2021, could be taken in the form of cash, shares or an additional employer
contribution to the Company’s defined contribution pension scheme;
• 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 and, in response to the recognised need for more education, Marshalls NOW has been launched as a
dedicated gateway for benefits information and access. Plans in 2022 include the launch of a dedicated app for pension planning through
our pension provider Aviva. We will continue to drive communication through an “annual calendar” to build greater 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.
There was support for the exercise to standardise terms and conditions of employment thus ensuring consistency and full transparency
across the workforce. This exercise has now largely been completed with the vast majority of consultations complete and new contracts of
employment to be issued in early 2022. This will significantly reduce complexity across the Group and ensures fairness and equality across
the Group with clarity on remuneration packages in each job role.
The Committee provided oversight in connection with the Group’s comprehensive review of HGV driver pay during the year, which resulted
in a significant pay increase for HGV drivers working in the Landscape Products business to ensure our remuneration packages fairly
reward them and reflect current market pay levels effective from 1 January 2022.
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.
The Company expects to continue with the EVG as a mechanism for fully engaging with the workforce on key matters and topics which
relate to their employment and engagement in the business.
• 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 (8)
Senior management (10)
Employees in BSP (74)
Employees in other job related bonus
or commission schemes (336)
Participation
in Element A
of the MIP
(percentage range)
Participation
in Element B
of the MIP
(percentage range)
Participation in
other bonus or
commission plans
Participation in
all‑employee
equity plans
(Sharesave/SPP)
150% of salary
100% of salary
55% to 85% of salary
35% to 80% of salary
45% of salary
45% of salary
No
No
No
15% to 45% of salary
+5% bonus shares
Sales bonuses
Yes
Yes
Yes
Yes
Yes
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.
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 nil-cost options over 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.
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Marshalls plc | Governance
Widening employee share ownership continued
2021 thank you award
As disclosed earlier in this report, in December 2021, the Group awarded a £600 thank you award to employees in recognition of their hard
work and commitment through an incredibly challenging year. The award could be taken in the form of shares (or cash, or an additional
contribution to the Company’s defined contribution pension scheme).
The Group intends to launch another three-year SAYE scheme for employees in 2023.
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 2021.
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
2021
2020
2019
2018
CEO pay ratio
Employee salary
Employee total pay and benefits
25th
percentile
50th
percentile
75th
percentile
55.0:1
42.6:1
35.5:1
70.6:1
46.3:1
38.2:1
77.6:1
58.1:1
60.6:1
51.0:1
44.1:1
37.1:1
CEO
salary
£’000
25th
percentile
£’000
50th
percentile
£’000
75th
percentile
£’000
532
485
460
445
29
23
22
27
40
35
36
35
45
42
40
42
CEO total
pay and
benefits
£’000
1,685
1,695
2,213
1,602
25th
percentile
£’000
50th
percentile
£’000
75th
percentile
£’000
31
24
28
28
40
37
36
36
45
44
43
43
The 25th, 50th and 75th percentiles have been calculated using actual pay for the year ended 31 December 2021, 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.
2014
2015
2016
2017
2018
2019
2020
2021
Ratio of single figure total remuneration to
average employee
25.2x
50.1x
37.5x
48.9x
31.9x
41.2x
35.9x
34.5x
• 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.
Marshalls plc | Annual Report and Accounts 2021
107
Governance Remuneration Committee Report continued
Fairness, diversity and wider workforce considerations continued
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
2021
— 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 (CEO)
Justin Lockwood (CFO)
Jack Clarke (Former Group FD)
Vanda Murray OBE (Chair)
Angela Bromfield (NED)
Tim Pile (NED)
Graham Prothero (NED)
Avis Darzins (NED)
Philip Rogerson (Non-Executive Director)
Janet Ashdown (NED)
Employees
Notes:
Salary/fees
Taxable benefits
Short‑term variable pay*
2021
2020
2019
2021
2020
2019
2021
2020
2019
6.0%
n/a
1.4%
1.4%
1.4%
1.4%
1.4%
1.4%
n/a
1.4%
0.3%
5.4%
n/a
-0.7%
-0.7%
-0.7%
-0.7%
-0.7%
n/a
n/a
-0.7%
5.4%
3.3%
n/a
3.3%
3.3%
n/a
3.3%
3.3%
n/a
n/a
3.3%
3.3%
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
0%
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
3.1%
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
7.3%
-8.8%
23.8%
81.0% -85.1%
22.2%
a)
Martyn Coffey’s salary was increased on 1 January 2021 by 6 per cent in line with the Remuneration Committee review of external benchmarking.
b) The bonus is the non-deferred amount earned for the relevant year taken from the single figure remuneration table on page 101.
c)
A 1.4 per cent increase was awarded to the workforce on 1 January 2021.
d)
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.
Jack Clarke stepped down from the Board and as Group Finance Director with effect from 1 April 2021. Justin Lockwood was appointed to the Board as Chief
Financial Officer on 26 July 2021.
f) Janet Ashdown stepped down from the Board effective 12 May 2021.
g)
Philip Rogerson became a Director of the Company effective 1 September 2021 and stepped down as a Director of the Company effective 14 December 2021.
h)
Avis Darzins became a Director of the Company effective 1 June 2021.
CEO pay in the last ten years
This table shows how pay for the CEO role has changed in the last ten years:
Year
2012 a
£’000
2013 a, b
£’000
2014
£’000
2015
£’000
2016
£’000
2017
£’000
2018
£’000
Single figure remuneration
938
3,143
1,101
2,064
1,913
2,383
1,602
% of maximum annual bonus earned
33.0%
63.6%
99.3% 100.0%
96.9% 100.0%
98.0%
% of maximum LTIP/MIP awards vesting
— 63.0%
— 100.0% 100.0% 100.0%
98.0%
2019
£’000
2,213
99.6%
99.6%
2020
£’000
2021
£’000
1,695
1,685
— 100.0%
— 100.0%
Notes:
a)
The years up to 2013 show the previous CEO’s (Graham Holden’s) remuneration.
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).
108
Marshalls plc | Governance
Total shareholder return
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
Dec
2021
— 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 2021 of £100 invested in Marshalls plc on 1 January 2011 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
At Marshalls, we are wholly committed to promoting equality and preventing discrimination at work. This is especially important when
it comes to pay. It is also our business duty to report on the gender pay gap, which looks at differences between the average hourly pay
of women compared to the average hourly pay of men.
It is important to highlight that 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. It is expressed as a percentage of men’s earnings. It captures any pay differences between men and women
on an organisational level.
• Equal pay is ensuring that men and women are not paid differently for doing the same or like-for-like work.
While 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 2021 the Group’s total UK workforce comprised 2,526 employees with the following gender balance:
Total workforce
Senior managers*
Directors**
Male
2,124
6
4
Female
402
1
3
* Senior managers comprises the Executive Committee and Company Secretary.
** Directors includes the NEDs, CEO and CFO.
Our gender pay gap disclosure is based on amounts paid in the April 2021 payroll for UK employees. The gender bonus gap includes
incentives paid in the year to 31 March 2021.
Our disclosures are made pursuant to UK Government Equalities legislation. The two main employing entities were Marshalls Group Limited
and Marshalls plc.
We believe in transparency. Therefore, we publish pay analysis results for all colleagues employed in the Group. This is particularly relevant
as one employing entity – Marshalls plc – employs less than 250 colleagues, currently the threshold for mandatory reporting.
Marshalls plc | Annual Report and Accounts 2021
109
Governance Remuneration Committee Report continued
Fairness, diversity and wider workforce considerations continued
Gender balance and pay continued
2021 results
Marshalls Group Limited
Marshalls plc
Consolidated (Marshalls plc and Marshalls Group Limited)
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
8.8%
29.3%
-5.8%
15.9%
18.3%
-4.5%
3.2%
14.6%
11.3%
4.3%
15.2%
20.6%
15.7%
12.9%
38.8%
12.2%
22.7%
17.4%
-13.1%
20.1%
18.7%
14.1%
17.0%
21.2%
23.1%
21.8%
60.7%
90.7%
78.9%
65.2%
39.2%
-45.3%
54.0%
63.7%
52.4%
71.4%
85.0%
69.3%
79.1%
40.7%
31.8%
29.8%
25.1%
51.3%
8.2%
21.8%
48.6%
54.8%
67.0%
20.0%
69.7%
73.9%
At a Group level the overall percentage split of male and female employees has stayed broadly the same: 86 per cent male and 14 per cent
female. However, in the fifth year of reporting gender pay figures, Marshalls has achieved its lowest gender pay gap for both mean and
median measures of gender pay. The mean average has reduced to -5.8 per cent and the median average has reduced to 12.2 per cent.
A number of key factors have combined to influence our outcome:
• The progression of women to the higher pay bands: 4 per cent more women are positioned in the upper quartile pay band and 4 per cent
more women now sit in the upper middle quartile when compared to the previous year (see table below).
• Ultimately, gender pay gaps improve when the number of women in higher paid roles increases, a trend seen in 2021. Our data shows
that not only has the number of women in higher paid jobs increased, but the average rate of pay for female workers has progressed
at a faster rate than that of male workers.
Upper quartile
Upper middle quartile
Lower middle quartile
F 75+75+
F 90+90+
F 92+92+
87+87+
F7373+
2424+
4646+
F8888+
6464+
F9090+
6565+
F8383+
Marshalls Group Limited
Marshalls Group Limited
Marshalls Group Limited
Marshalls Group Limited
Female 12.4%
Female 10.5%
Female 24.5%
Female 8.3%
Male 89.5%
Male 75.5%
Male 87.6%
Male 91.7%
Lower quartile
Marshalls plc
Male 65.1%
Female 34.9%
Marshalls plc
Male 64.3%
Female 35.7%
Marshalls plc
Male 46.5%
Female 53.5%
Marshalls plc
Male 23.8%
Female 76.2%
Overall
Overall
Overall
Overall
Male 83.3%
Female 16.7%
Male 89.7%
Female 10.3%
Male 87.8%
Female 12.2%
Male 72.8%
Female 27.2%
110
Marshalls plc | Governance
13
13
+
+
I
I
+
35
35
+
+
F
+
17
17
+
+
F
8
8
+
+
I
I
+
36
36
+
+
F
+
10
10
+
+
F
10
10
+
+
I
I
+
54
54
+
+
F
+
12
12
+
+
F
25
25
+
+
I
I
+
76
76
+
+
F
+
27
27
+
+
F
F
Bonus gender pay gap
Both the mean and median bonus gender pay gaps have widened in 2021, in part due to the COVID-19 pandemic adversely impacting
the 2020 financial year for a large number of UK businesses. Cash bonus payments were significantly reduced (or not paid) in 2021.
This was reflective of the continued impact of COVID-19. Where bonuses were paid these were on individual sales performance and
meeting relevant targets.
The table below shows that overall mean bonus pay gap increased from 54.0 per cent in 2020 to 78.9 per cent in 2021 and the median
bonus pay gap increased from 21.8 per cent to 29.8 per cent.
Percentage receiving bonus
Consolidated
Marshalls Group Limited
Consolidated
Marshalls Group Limited
Male
Female
20.9%
15.3%
26.4%
32.5%
Mean bonus
gender pay gap
Median bonus
gender pay gap
78.9%
65.2%
29.8%
25.1%
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 2021. 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.
Equity 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.
• The appointment of Avis Darzins as a Non-Executive Director further improved gender balance at Board level with Avis also being our first
Board member from an ethnically diverse background.
• The Group’s Diversity and Inclusion Policy is embedded within our recruitment processes supporting our goal of attracting a diverse range
of applicants across all roles in the Group. We have doubled the number of female hires in 2021 (against 2020); we now have 38 per cent
of roles in the senior leadership group (the levels below our Executive Committee) filled by women and our retention rate of females is 5
per cent higher.
• Our Diversity and Equity Taskforce, sponsored by a member of the Executive Committee, is challenged with taking actions to continue
the work of making our workforce more diverse and representative of the communities in which we operate.
• In 2021 we proactively started to collate diversity data so we can set our baseline and then measure progress in subsequent years.
• Our Female Talent and Learning group has grown as women within the business have heard about the positive experience. We have
identified relevant external speakers as well as broader development themes to work on throughout the year. The Group is fully self-
directed but supported by specialists from the Human Resources function.
Marshalls plc | Annual Report and Accounts 2021
111
Governance
Remuneration Committee Report continued
Fairness, diversity and wider workforce considerations continued
Directors’ service contracts
Executive Directors
Non-Executive Directors
Element
Martyn
Coffey
Justin
Lockwood
Jack
Clarke
Vanda
Murray
September
2013
July
2021
October
2014
May 2018
Tim Pile
October
2010
(renewed
in 2013,
2016 and
May 2019)
Graham
Prothero
Angela
Bromfield
Avis
Darzins
May 2017
October
2019
June
2021
12
6
12
12
12
6
6
6
6
6
6
6
6
6
6
6
Date of contract/appointment
Notice period in months
Company
Director
Notes:
a)
Philip Rogerson was appointed as a Non-Executive Director with effect from 1 September 2021. Philip stepped down as a Director of the Company effective
14 December 2021 for health reasons. On compassionate grounds, the Board waived his notice period.
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 twelve
months. Executive Directors are permitted to hold one external plc board appointment and may retain any remuneration received in that
capacity. Executive Director service contracts are not of a fixed duration and therefore have no unexpired terms.
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 2021 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 general advice on remuneration trends, regulations
and best practice. The amount paid to PwC in respect of remuneration advice received during 2021 was £38,000 (2020: £42,500).
Angela Bromfield
Chair of the Remuneration Committee
17 March 2022
112
Marshalls plc | 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 70 and 71.
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 (2020: £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 69. 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 152 to 156.
Greenhouse gas emissions: The Group’s disclosure in respect of the Streamlined Energy and Carbon Reporting requirements can be found
in the Strategic Report on page 61.
Employees: Details of how the Directors have engaged with employees are set out on page 67. 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 64 to 67.
Stakeholders: Details of how the senior management team and the Directors have engaged with shareholders, customers, suppliers
and other stakeholder groups are set out on pages 22 and 27, along with engagement channels used. Details of the Group’s stakeholder
engagement strategy are explained on pages 22 and 27. The statement by the Directors in relation to their statutory duties under S172(1)
Companies Act 2006 is found on pages 20 and 21.
Corporate governance: Details of how the Group complies with and applies the UK Corporate Governance Code are set out on pages 72 to 83.
Post-balance sheet events of importance since 31 December 2021: 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 1 to 69.
Dividends
The Board is recommending a final dividend of 9.6 pence (2020: 4.3 pence) per share, which, together with the interim dividend of 4.7 pence
(2020: £nil) per share, makes a combined dividend of 14.3 pence (2020: 4.3 pence) per share. Payment of the final dividend, if approved
at the Annual General Meeting, will be made on 1 July 2022 to shareholders registered at the close of business on 10 June 2022. The ex-
dividend date will be 9 June 2022.
The dividend paid in the year to 31 December 2021 and disclosed in the Consolidated Income Statement was 9.0 pence (2020: 4.3 pence)
per share, being the previous year’s final dividend of 4.3 pence and the interim dividend of 4.7 pence per share in respect of the year ended
31 December 2021. No dividends were paid in the year ended 31 December 2020. The 2020 final dividend was paid on 1 July 2021.
Share capital and authority to purchase shares
The Company’s share capital at 1 January 2022 was 200,052,157 Ordinary Shares of 25 pence each. No new Ordinary Shares were issued
during the year ended 31 December 2021. Details of the share capital are set out in Note 23 on page 162.
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. Where shares
are acquired by the EBT these are accounted for by the Company as a purchase of own shares. During the year ended 31 December 2021
the EBT acquired 515,102 shares for a total consideration of £3,567,000.
At 31 December 2021 the EBT held 865,154 Ordinary Shares in the Company (2020: 1,289,376 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 160. 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 six 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 2021 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 2021 and 17 March 2022 under this authority, which will expire at the 2022 Annual General Meeting. The
Directors will seek to renew the authority at that meeting.
Marshalls plc | Annual Report and Accounts 2021
113
Governance Directors’ Report – Other Regulatory Information continued
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.
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 are qualifying indemnity provisions under 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 92 to 112.
Listing Rule requirements
The applicable requirements of Listing Rule 9.8.4R in respect of long-term incentive schemes (page 160) and contracts of significance
(page 114) are included in this Annual Report.
Substantial shareholdings
The Company has no controlling shareholder. As at 17 March 2022, 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:
abrdn
BlackRock
Montanaro Investment Managers
Vanguard Group
AXA Framlington Investment Managers
JP Morgan Asset Management
Royal London Asset Management
Lansdowne Partners
Redwheel
Legal and General Investment Management
As at
28 February
2022
%
As at
31 December
2021
%
16.23
16.19
6.15
5.19
4.34
4.29
4.26
4.22
4.00
3.41
3.33
6.15
5.21
4.35
4.24
4.25
4.26
4.01
3.41
3.24
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
17 March 2022
114
Marshalls plc | 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 is 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 113 and 114
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.
Marshalls plc | Annual Report and Accounts 2021
115
Governance Statement of Directors’ Responsibilities continued
in respect of the Annual Report and the Financial Statements
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 twelve months from the date these Financial Statements were approved.
Cautionary statement and Directors’ liability
This Annual Report 2021 has been prepared for, and only for, the members of the Company, as a body, and no other persons. Neither the
Company nor the Directors accept or assume any liability to any person to whom this Annual Report is shown or into whose hands it may
come except to the extent that such liability arises and may not be excluded under English law. Accordingly, any liability to a person who
has demonstrated reliance on any untrue or misleading statement or omission shall be determined in accordance with Section 90A of the
Financial Services and Markets Act 2000.
This Annual Report contains certain forward-looking statements with respect to the Group’s financial condition, results, strategy, plans and
objectives. These statements are not forecasts or guarantees of future performance and involve risk and uncertainty because they relate
to events and depend upon circumstances that will occur in the future.
There are a number of factors that could cause actual results or developments to differ materially from those expressed, implied or forecast
by these forward-looking statements. All forward-looking statements in this Annual Report are based on information known to the Group
as at the date of this Annual Report and the Group has no obligation publicly to update or revise any forward-looking statements, whether
as a result of new information or future events. Nothing in this Annual Report should be construed as a profit forecast.
Annual General Meeting
The Notice convening the Annual General Meeting to be held at the offices of Walker Morris, 33 Wellington Street, Leeds, West Yorkshire
LS1 4DL, together with explanatory notes on the resolutions to be proposed, is contained in a circular to be sent to shareholders with this
Annual Report.
By Order of the Board:
Shiv Sibal
Group Company Secretary
17 March 2022
116
Marshalls plc | 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 2021 and of the Group’s profit for the year then ended;
• the Group Financial Statements have been properly prepared in accordance with United Kingdom adopted International Accounting Standards
and International Financial Reporting Standards (“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, United
Kingdom adopted International Accounting Standards and IFRSs 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 we have not provided any non-audit services prohibited
by the FRC’s Ethical Standard 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:
• Valuation of the inventory provision
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 £3.5 million which was determined on the
basis of 5 per cent of profit before tax.
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 94 per cent of profit before tax generated by profit making entities.
Significant changes
in our approach
We identified a key audit matter in relation to the valuation of inventory provisions. Whilst the absolute risk
associated with this balance has not increased, on consideration of our overall audit strategy, the relative share
of audit effort associated with this balance has increased resulting in its inclusion as a key audit matter within
our report.
We no longer have a key audit matter in relation to the presentation of restructuring costs as exceptional
reflecting that there have been no significant restructuring exercises in the year.
Our approach to determining materiality has changed from using a number of metrics with focus on net assets,
revenue and profit before tax to using 5 per cent of profit before tax. This is as a result of the return to a more
normal trading following the initial impact of COVID-19 during 2020.
There have been no other significant changes to our approach since the prior year.
Marshalls plc | Annual Report and Accounts 2021
117
Governance
Independent Auditor’s Report continued
to the members of Marshalls plc
Report on the audit of the Financial Statements continued
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;
• considering the existence and future periods of availability for borrowings and the extent of headroom available to the Group;
• assessing the assumptions used in the forecasts, including performing sensitivity analysis and considering the ongoing impact
of COVID-19, climate change and any ongoing strategic projects of the Group;
• assessing the historical accuracy of forecasts prepared by management against actuals achieved;
• testing of clerical accuracy of the model used to prepare the forecasts; and
• assessing the disclosures in the Financial Statements for consistency with our knowledge of the business.
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. Valuation of the inventory provision
Key audit matter
description
How the scope of our
audit responded to the
key audit matter
The Group is primarily involved in the manufacture and sale of landscape and natural stone products, selling
to the Public Sector, Commercial and Domestic end users. Inventory is recorded at the lower of cost and
net realisable value and the Group carries a large amount of inventory in order to meet customer needs on
demand. The Group offers a wide range of non-perishable products that are manufactured and subsequently
stored in large quantities at various locations, and therefore carries a high level of inventories at any given point.
A risk exists that the sales price of inventories, particularly those which are aged or in excess of specific
customer requirements, may need to be discounted before they can be sold. The risk of discounting,
combined with potential costs to move the inventory to a location where demand exists, may result in the
inventories being sold at below cost.
The Directors are responsible for making judgements surrounding the future recoverability of inventory values
based on inventory ageing and the quantities of inventory held compared to the future sales potential.
Our audit of valuation of inventory provision, has involved a significant allocation of resources throughout the
audit and has represented one of the key areas of focus in directing the efforts of the engagement team. It
has become a more significant area of audit focus in the current year as it involves manual adjustments to
the stock valuation utilising management judgement. It has therefore been included as a key audit matter.
The carrying value of the Group’s inventory is £107.4m (2020: £89.9m), as disclosed in Note 13 to the Financial
Statements, and this is noted as an area considered by the Audit Committee in its report on page 90.
We have performed the following procedures:
• Obtained an understanding of the relevant controls relating to management’s process to record inventory provisions.
• Tested the relevant general IT controls relating to the stock database.
• Attended inventory counts at key locations and considered any signs of damage or obsolescence which
would indicate a requirement for a provision.
• Used data analytics to compare product lines’ recoverable value to their cost value.
• Assessed the adequacy of provisions recorded, including where relevant the potential impact on inventory
carrying values arising from climate change factors.
Key observations
Based on our procedures the results of our testing were satisfactory. We concur with the basis of valuation
of inventory and are satisfied that the level of inventory provisions is appropriate.
118
Marshalls plc | Governance
Report on the audit of the Financial Statements continued
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:
Group Financial Statements
Parent Company Financial Statements
Materiality
£3.5 million (2020: £2.9 million)
£1.7 million (2020: £1.8 million)
Basis for determining
materiality
Rationale for the
benchmark applied
5 per cent of pre-tax profit. Materiality in the prior year
was determined 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.
This represented approximately 1 per cent of net assets.
In our professional judgement, profit before tax is the
principal benchmark within the financial statements
that is relevant to the users of the financial statements
when assessing performance of the Group.
Parent Company materiality equates to 0.5 per cent
of net assets (2020: 0.5 per cent of net assets).
As a holding company, net assets are considered to
be the primary benchmark.
PBT
£69.3m
Group materiality95++5++II
PBT
Group materiality
£3.5m
Component materiality
£3.3m
Audit Committee reporting threshold
£0.18m
Marshalls plc | Annual Report and Accounts 2021
119
Governance Independent Auditor’s Report continued
to the members of Marshalls plc
Report on the audit of the Financial Statements continued
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.
Performance materiality
Basis and rationale for
determining performance
materiality
Group Financial Statements
Parent Company Financial Statements
70 per cent (2020: 70 per cent) of Group materiality 70 per cent of Parent Company materiality
(2020: 70 per cent of Parent Company 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 continued impact of COVID-19 and climate change 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 £175,000 (2020: £145,000),
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 components accounted for 95 per
cent (2020: 95 per cent) of Group revenue, 100 per cent (2020: 100 per cent) of Group net assets and 94 per cent (2020: 93 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 94+94+
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%
94%
5%
6%
100%
0%
120
Marshalls plc | Governance
5
5
+
+
I
I
6
6
+
+
I
I
+
I
I
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 system within the finance IT environment, Microsoft AX. 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 the following General IT Controls for Microsoft AX and Data Warehouse: 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 of key automated controls (JML, UARs, Change
Management and Batch Job Monitoring); and
• taken reliance on all IT controls associated with these systems.
Controls reliance
During our audit we obtained an understanding and tested the relevant controls within key business cycles. We have taken controls reliance
over the revenue and customer rebates business cycles as these are key accounts that impact the Group’s profit.
7.3. Our consideration of climate-related risks
In planning our audit, we have considered the potential impact of climate change on the Group’s business and its Financial Statements.
The Group has committed to being net zero by 2030 with a developed strategy in how this is to be achieved. Management has considered
transition and physical risks when factoring in climate change as part of their risk assessment process when considering the principal risks
and uncertainties facing the Company. This is set out in the strategic report on pages 50 to 61, the principal risks set out on pages 34 to 43.
Management have concluded that the key risk of climate change for the business is the reduced business from customers choosing lower
carbon products. Furthermore they have acknowledged the increasing risk of climate change and as such have put more focus into climate
risk assessment and developing appropriate strategies to respond to those risks.
We performed our own qualitative risk assessment of the potential impact of climate change on the Group’s account balances and classes
of transaction and did not identify any reasonably possible risks of material misstatement. Our procedures were performed with the
involvement of climate change and sustainability specialists and included reading disclosures included in the Strategic Report to consider
whether they are materially consistent with the Financial Statements and our knowledge obtained in the audit.
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.
Marshalls plc | Annual Report and Accounts 2021
121
Governance Independent Auditor’s Report continued
to the members of Marshalls plc
Report on the audit of the Financial Statements continued
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.
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, IT and climate and
sustainability specialists regarding how and where fraud might occur in the Financial Statements and any potential indicators of fraud.
In common with all audits under ISAs (UK), we are required to perform specific procedures to respond to the risk of management override.
We also obtained an understanding of the legal and regulatory framework 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, tax legislation and health
and safety regulations.
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 did not identify any key audit matters related to the potential risk of fraud or non-compliance with
laws and regulations.
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.
122
Marshalls plc | Governance
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 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.
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 regard to the appropriateness of adopting the going concern basis of accounting and any material
uncertainties identified set out on page 116;
• the Directors’ explanation as to its assessment of the Group’s prospects, the period this assessment covers and why the period is
appropriate set out on page 116;
• the Directors’ statement on fair, balanced and understandable set out on page 91;
• the Board’s confirmation that it has carried out a robust assessment of the emerging and principal risks set out on page 37;
• the section of the Annual Report that describes the review of effectiveness of risk management and internal control systems set out
on page 76; and
• the section describing the work of the Audit Committee set out on page 88 onwards.
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 these matters.
Marshalls plc | Annual Report and Accounts 2021
123
Governance Independent Auditor’s Report continued
to the members of Marshalls plc
Report on other legal and regulatory requirements continued
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 seven years, covering the years ending 31 December 2015 to 31
December 2021.
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.
As required by the Financial Conduct Authority (“FCA”) Disclosure Guidance and Transparency Rule (“DTR”) 4.1.14R, these Financial
Statements form part of the European Single Electronic Format (“ESEF”) prepared Annual Financial Report filed on the National Storage
Mechanism of the UK FCA in accordance with the ESEF Regulatory Technical Standard (“ESEF RTS”). This Auditor’s Report provides no
assurance over whether the Annual Financial Report has been prepared using the single electronic format specified in the ESEF RTS.
David Johnson FCA (Senior Statutory Auditor)
for and on behalf of Deloitte LLP
Statutory Auditor
Leeds, United Kingdom
17 March 2022
124
Marshalls plc | Governance
Consolidated Income Statement
for the year ended 31 December 2021
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.
Profit before adjusting items
Profit before tax (reported)
Adjusting items
Profit before tax (before adjusting items)
Profit for the financial year (reported)
Adjusting items (net of tax)
Profit after tax (before adjusting items)
Earnings per share before adjusting items
Basic
Diluted
Notes
2
3
2
6
6
2
7
8
8
9
9
Notes
4
4
8
8
2021
£’000
589,264
(513,041)
76,223
(6,903)
2
69,322
(14,424)
54,898
2020
£’000
469,454
(460,081)
9,373
(4,730)
10
4,653
(2,095)
2,558
54,806
92
54,898
27.5p
27.4p
14.3p
28,484
2021
£’000
69,322
2,748
72,070
54,898
2,142
57,040
28.6p
28.4p
2,370
188
2,558
1.2p
1.2p
4.3p
8,562
2020
£’000
4,653
17,809
22,462
2,558
14,708
17,266
8.6p
8.5p
Marshalls plc | Annual Report and Accounts 2021
125
Financial Statements Consolidated Statement of Comprehensive Income
for the year ended 31 December 2021
Profit for the financial year before adjusting items
Adjusting items
Profit for the financial year
Other comprehensive income/(expense)
Items that will not be reclassified to the Income Statement:
Remeasurements of the net defined benefit surplus/(loss)
Deferred tax arising
Impact of the change in rate of deferred tax on defined benefit plan actuarial gain/(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 income/(expense) for the year, net of income tax
Total comprehensive income/(expense) for the year
Attributable to:
Equity shareholders of the Parent
Non-controlling interests
Notes
4
20
22
22
24
2021
£’000
57,040
(2,142)
54,898
26,383
(6,600)
17
19,800
1,403
(922)
36
(232)
640
(55)
870
20,670
75,568
75,531
37
75,568
2020
£’000
17,266
(14,708)
2,558
(12,741)
2,421
(314)
(10,634)
(1,526)
1,238
42
922
(1,117)
39
(402)
(11,036)
(8,478)
(8,705)
227
(8,478)
126
Marshalls plc | Financial Statements
Consolidated Balance Sheet
at 31 December 2021
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
Lease liabilities
Interest-bearing loans and borrowings
Non-current liabilities
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
Foreign exchange reserve
Retained earnings
Equity attributable to equity shareholders of the Parent
Non-controlling interests
Total equity
Approved at a Directors’ meeting on 17 March 2022.
On behalf of the Board:
Martyn Coffey
Chief Executive
Justin Lockwood
Chief Financial Officer
The Notes on pages 131 to 165 form part of these Consolidated Financial Statements.
Notes
2021
£’000
2020
£’000
10
11
12
20
22
13
14
15
10
19
16
18
17
18
17
21
22
23
24
173,931
36,445
95,004
25,757
1,605
332,742
107,436
111,909
41,212
1,860
813
263,230
595,972
138,218
2,198
8,545
1,673
150,634
32,776
39,341
839
28,065
101,021
251,655
344,317
50,013
24,482
(646)
75,394
(213,067)
830
47
406,277
343,330
987
344,317
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
(361)
350,930
286,898
950
287,848
Marshalls plc | Annual Report and Accounts 2021
127
Financial Statements
Consolidated Cash Flow Statement
for the year ended 31 December 2021
Cash flows from operating activities
Profit before adjusting items
Adjusting items
Profit for the financial year
Income tax expense on continuing operations
Income tax credit on adjusting items
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 in trade and other receivables
Increase in inventories
Increase in trade and other payables
Adjusting items
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
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 (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Effect of exchange rate fluctuations
Notes
2021
£’000
2020
£’000
7
7
10
10
11
12
6
57,040
(2,142)
54,898
15,030
(606)
69,322
16,423
233
11,315
3,178
(9,194)
2,303
6,901
100,481
(16,696)
(18,108)
19,740
(2,820)
82,597
(3,534)
(13,527)
65,536
14,892
2
(19,037)
(2,885)
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)
(7,028)
(3,297)
(3,567)
(121,286)
32,658
(10,828)
(17,924)
(120,947)
(62,439)
103,707
(56)
(2,705)
(10,009)
67,900
(13,780)
—
41,406
50,481
53,258
(32)
Cash and cash equivalents at the end of the year
41,212
103,707
128
Marshalls plc | Financial Statements
Consolidated Statement of Changes in Equity
for the year ended 31 December 2021
Attributable to equity holders of the Company
Share
capital
£’000
Share
premium
account
£’000
Current year
Capital
Own redemption Consolidation
reserve
£’000
reserve
£’000
shares
£’000
Hedging
reserve
£’000
Foreign
exchange
reserve
£’000
Retained
earnings
£’000
Non-
controlling
interests
£’000
Total
£’000
Total
equity
£’000
At 1 January 2021
50,013 24,482
(806) 75,394
(213,067)
313
(361)
350,930
286,898
950 287,848
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
Impact of the change in
rate of deferred tax on
defined benefit plan
actuarial gain
Total other
comprehensive income/
(expense)
Total comprehensive
income/(expense) for
the year
Share‑based payments
Deferred tax on
share‑based payments
Corporation tax on
share‑based payments
Dividends to equity
shareholders
Purchase of own shares
Disposal of own shares
Total contributions by
and distributions to
owners
Total transactions with
owners of the Company
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
— (3,567)
—
3,727
—
—
160
160
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
54,806
54,806
92 54,898
—
408
—
1,403
—
—
—
—
—
(922)
36
—
—
—
—
—
—
—
—
—
—
—
—
—
408
(55)
353
1,403
—
1,403
(922)
36
—
—
(922)
36
26,383
26,383
— 26,383
(6,600)
(6,600)
— (6,600)
17
17
—
17
—
517
408
19,800
20,725
(55) 20,670
—
—
—
—
—
—
—
—
—
517
408
74,606
75,531
37 75,568
—
—
—
—
—
—
—
—
—
—
—
—
—
2,303
2,303
(256)
(256)
345
345
(17,924)
(17,924)
—
(3,567)
(3,727)
—
—
—
—
2,303
(256)
345
— (17,924)
— (3,567)
—
—
—
(19,259)
(19,099)
— (19,099)
517
408
55,347
56,432
37 56,469
At 31 December 2021
50,013 24,482
(646) 75,394
(213,067)
830
47
406,277
343,330
987 344,317
Marshalls plc | Annual Report and Accounts 2021
129
Financial Statements Consolidated Statement of Changes in Equity continued
for the year ended 31 December 2021
Share
capital
£’000
Share
premium
account
£’000
Capital
Own
shares
£’000
redemption Consolidation
reserve
£’000
reserve
£’000
Hedging
reserve
£’000
Foreign
exchange
reserve
£’000
Retained
earnings
£’000
Non‑
controlling
interests
£’000
Total
£’000
Total
equity
£’000
Prior year
At 1 January 2020
50,013
24,482
(1,391)
75,394
(213,067)
559
(166)
359,219
295,043
723 295,766
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
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
— (2,705)
—
3,290
—
585
—
585
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
2,370
2,370
188
2,558
—
(195)
—
(1,526)
—
—
—
—
—
1,238
42
—
—
—
—
—
—
—
—
—
—
—
—
—
(195)
39
(156)
(1,526)
—
(1,526)
1,238
42
—
—
1,238
42
(12,741)
(12,741)
— (12,741)
2,421
2,421
—
2,421
(314)
(314)
—
(314)
—
(246)
(195)
(10,634)
(11,075)
39 (11,036)
—
—
—
—
—
—
—
(246)
(195)
(8,264)
(8,705)
227
(8,478)
—
—
—
—
—
—
—
—
—
—
—
—
2,998
2,998
—
2,998
(104)
(104)
371
371
—
—
(104)
371
—
(2,705)
— (2,705)
(3,290)
—
—
—
(25)
560
—
560
—
(246)
(195)
(8,289)
(8,145)
227
(7,918)
At 31 December 2020 50,013
24,482
(806)
75,394
(213,067)
313
(361)
350,930
286,898
950 287,848
130
Marshalls plc | 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 2021 comprise
the Company and its subsidiaries (together referred to as the “Group”).
The Consolidated Financial Statements were authorised for issue by the Directors on 17 March 2022.
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 in dealing with items which
are considered material in relation to the Group’s Consolidated Financial Statements.
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 2021
The Group adopted Interest Rate Benchmark Reform – Phase II – Amendments to IFRS 9 “Financial Instruments”, IFRS 16 “Leases” and
other IFRSs with effect from 1 January 2021. The Group has also followed the IFRIC Interpretations Committee’s guidance published in April
2021 on the capitalisation of costs of configuring or customising application software under Software-as-a-Service (“SaaS”) arrangements.
Other than these items, and in relation to additional disclosure in relation to adjusting items, including in respect of the year ended
31 December 2020, “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). Adjusting items have been disclosed separately because of their size, nature
or incidence to enable a full understanding of the Group’s underlying results.
There are no new or amended standards or interpretations adopted during the year that have a significant impact on the Consolidated
Financial Statements.
The following other standards, interpretations and amendments to existing standards have been issued but were not mandatory for
accounting periods beginning 1 January 2021 and are not expected to have a material impact on the Group. These standards have not been
applied in these Financial Statements, and were pending endorsement by the UK Educational Board:
• IFRS 10 (amended) “Consolidated Financial Statements” and IAS 28 (amended) “Investments in Associates and Joint Ventures (2011)”,
effective date deferred indefinitely;
• IFRS 17 “Insurance Contracts”, effective from 1 January 2023;
• IAS 1(amended) – “Classification of Liabilities as Current or Non-current”, effective from 1 January 2023;
• IAS 1(amended) – “Disclosure of Accounting Policies”, effective from 1 January 2023;
• IAS 8 (amended) – “Definition of Accounting Estimates”, effective from 1 January 2023;
• IFRS 16 (amended) – “Property, Plant and Equipment – Proceeds before Intended Use”, effective from 1 January 2022;
• IFRS 37 – “Onerous Contracts – Cost of Fulfilling a Contract”, effective from 1 January 2022;
• IFRS 3 – “Reference to the Conceptual Framework”, effective from 1 January 2022;
• Annual Improvements 2018 – 2020 cycle, effective from 1 January 2022; and
• IAS 12 (amended) – “Income Taxes – Assets and Liabilities arising from a Single Transaction”, effective from 1 January 2023.
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 in conformity with the requirements of the Companies Act 2006 and International Financial Reporting Standards
as issued by the International Accounting Standards Board. The Parent Company has elected to prepare its Financial Statements in
accordance with FRS 101 and these are presented on pages 166 to 173.
(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 69. 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. The additional short-term bank facilities of £90 million established in May
2020 were not utilised and have now reached maturity. In addition, the COVID Corporate Financing Facility (“CCFF”) that was put in place
at the same time was also not required and expired in 2021. Bank facilities have returned to pre-COVID-19 levels and total £165 million, of
which £140 million are committed. On 13 August 2021, the Group entered into a new £20 million revolving credit facility with HSBC and the
Group renewed its on-demand, short-term working capital facilities of £25 million with NatWest.
Amendment agreements were entered into with all partner banks prior to the cessation of LIBOR at the end of 2021. The Group’s
committed bank facilities are all revolving credit facilities with interest now charged at variable rates based on SONIA. The Group’s bank
facilities continue to be aligned with the current strategy to ensure that headroom against available facilities remains at appropriate levels.
The maturity profile of borrowing facilities is structured to provide balanced, committed and phased medium-term debt. The Group has
significant headroom of £114 million at 31 December 2021 against its bank facilities.
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 potential impact of emerging and longer-term risks.
Marshalls plc | Annual Report and Accounts 2021
131
Financial Statements Notes to the Consolidated Financial Statements continued
1 Accounting policies continued
Significant accounting policies continued
(b) Basis of preparation continued
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 the next two years, cumulatively 60 per cent against 2021 revenue. None of the stress
tests applied impact the Directors’ opinion that there are sufficient unutilised facilities held which mature after twelve 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
continuing issues relating to the availability of raw materials and labour and the potential impact of cost inflation that could lead to a
reduction in consumer confidence and a slowdown in the UK economy. The financial impact of climate change risk continues to be
assessed along with market changes driven by advances in technology. Based on current expectations, 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 2021, on a covenant test basis (pre-IFRS 16), the relevant ratios were comfortably achieved and were as follows:
• EBITA: interest charge – 54.4 times (covenant test requirement – to be greater than 2.5 times).
• Net debt: EBITDA – 0 times (covenant test requirement – to be less than 3.0 times).
In performing an assessment of the Group’s going concern, the Directors have considered the Group’s capital allocation policy and priorities
for capital as set out on page 7 and the possible future cash requirements arising from each of these priorities for capital.
After considering these capital allocation priorities and the risks associated with other relevant uncertainties (including the impact
on markets and supply chains of geographical risks such as the current crisis in Ukraine, the risk of further COVID-19 uncertainty and
continuing macro-economic factors and inflation), 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 twelve 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.
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 29 on page 165. 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 29.
(c) Basis of consolidation
(i) Subsidiaries
Subsidiaries (which are set out in detail in Note 33 on pages 170 and 171) 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) 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.
132
Marshalls plc | Financial Statements
1 Accounting policies continued
Significant accounting policies continued
(c) Basis of consolidation continued
(iii) 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 the acquiree’s net assets, are initially
measured at the non-controlling interests’ proportionate share of the fair value 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’ proportionate 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 and are not retranslated.
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. Exchange differences arising, if any, are recognised in other comprehensive income and accumulated in a foreign exchange
translation reserve (attributed to non- controlling interests as appropriate).
(e) Financial instruments
The Group uses derivative financial instruments to hedge its exposure to foreign exchange and fuel pricing 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.
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 three 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”). 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.
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.
The Group has applied the simplified approach to recognise lifetime expected credit losses for its trade receivables, as required or permitted by IFRS 9.
(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.
(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 the Consolidated Statement
of Comprehensive Income. 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.
Marshalls plc | Annual Report and Accounts 2021
133
Financial Statements Notes to the Consolidated Financial Statements continued
1 Accounting policies continued
Significant accounting policies continued
(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 buildings
Fixed plant and equipment
Mobile plant and vehicles
Quarries
–
–
–
–
2.5 per cent to 5 per cent per annum
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.
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. 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.
134
Marshalls plc | Financial Statements
1 Accounting policies continued
Significant accounting policies continued
(h) Intangible assets continued
(i) Goodwill continued
On a transaction‑by‑transaction basis, the Group measures 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 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.
(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) 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) 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.
(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
(vi) Software-as-a-service (“SaaS”)
Software-as-a service (“SaaS”) arrangements are service contracts providing the Company with access to the cloud provider’s application software
over the contract period. Costs incurred to configure or customise, and the ongoing fees to obtain access to the cloud provider’s application
software, are recognised as operating expenses when the services are received. Some of the costs incurred relate to the development of software
code that enhances or modifies existing on-premise systems and meets the definition of, and recognition criteria for, an intangible asset.
The Company has changed its accounting policy related to the capitalisation of certain software assets. This change follows the IFRIC
Interpretations Committee’s guidance published in April 2021 and relates to the capitalisation of costs of configuring or customising
application software under Software-as-a-Service (“SaaS”) arrangements. The impact of this change in policy has not been measured.
The Company’s accounting policy has historically been to capitalise costs related to the configuration of SaaS arrangements as intangible
assets in the balance sheet. Following the adoption of the above IFRIC agenda guidance, current SaaS arrangements were identified and
assessed to determine if the Company has control of the software. For those arrangements where control does not exist, the Company
derecognised the intangible asset previously capitalised.
(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). Subsequent to initial recognition they are accounted for at amortised cost.
(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.
Marshalls plc | Annual Report and Accounts 2021
135
Financial Statements
Notes to the Consolidated Financial Statements continued
1 Accounting policies continued
Significant accounting policies continued
(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).
(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 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. Lease liabilities are discounted at an incremental borrowing rate calculated as the rate of
interest which the Group would have been able to borrow for a similar term with a similar security of funds necessary to obtain a similar
asset in a similar market.
The Group’s leases principally comprise commercial vehicles and trailers, forklift trucks, motor vehicles, certain property assets and fixed plant.
Short-term leases, with a duration of less than twelve 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.
In relation to sale and leaseback transactions, sale proceeds, lease payments and any retained right-of-use asset are measured at fair value
with any gain or loss arising on disposal recognised in the Income Statement. The fair value of rights that have been retained are included in
the carrying amount of any right‑of‑use asset and recognised at the commencement of the lease.
136
Marshalls plc | Financial Statements
1 Accounting policies continued
Significant accounting policies continued
(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. Net interest is calculated by applying a discount rate to the net defined benefit liability or asset.
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.
(s) Own shares held by the Employee Benefit Trust
Transactions of the Group-sponsored Employee Benefit Trust are included in the Group Financial Statements. The Trust’s purchases
of shares in the Company are debited directly to equity and disclosed separately in the balance sheet as “own shares”.
(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 on the same day. 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.
Revenue earned from any contractually distinct installation process is recognised when the Group has fulfilled all its obligations under the
installation contract.
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) 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 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)).
Marshalls plc | Annual Report and Accounts 2021
137
Financial Statements Notes to the Consolidated Financial Statements continued
1 Accounting policies continued
Significant accounting policies continued
(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.
(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 trading performance. As far as Marshalls is concerned, the CODM is regarded as being the Board. 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 profit 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 additional comparative
information.
Adjusting items
Adjusting items are items that are unusual because of their size, nature or incidence and which the Directors consider should be disclosed
separately to enable a full understanding of the Group’s underlying results.
For the year ended 31 December 2021, adjusting items include the disposal of the Group’s site at Ryton, significant asset impairments,
the costs of closing the site at Stoke and exiting the manufacture of cast stone and the special “thank you” bonus paid to employees in
recognition of their contributions during the COVID-19 pandemic. Adjusting items in 2021 also included an accounting charge relating to
additional consideration for the acquisition of CPM and a non-cash finance charge resulting from the receipt of a Counsel legal opinion in
relation to certain historic pension issues. Further details have been disclosed in Note 4.
For the year ended 31 December 2020, adjusting items comprise items previously disclosed separately under the heading of “operational
restructuring costs and asset impairments”. Further details have been included in Note 4.
138
Marshalls plc | Financial Statements
1 Accounting policies continued
Significant accounting policies continued
(z) Alternative performance measures continued
Profit before adjusting items
Profit before tax (reported)
Adjusting items (Note 4)
Profit before tax (before adjusting items)
Profit for the financial year (reported)
Adjusting items (net of tax) (Note 4)
Profit after tax (before adjusting items)
Earnings per share before adjusting items
Basic (pence)
Diluted (pence)
2021
£’000
69,322
2,748
72,070
54,898
2,142
57,040
28.6p
28.4p
2020
£’000
4,653
17,809
22,462
2,558
14,708
17,266
8.6p
8.5p
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. Certain financial information, on both a reported basis and a pre-IFRS 16 basis, is set out below.
Both are disclosed before adjusting items.
EBITDA (£’000)
EPS (pence)
Net (cash)/debt (£’000)
ROCE (%)
Net debt: EBITDA
Gearing (%)
Pre-IFRS 16
December
2021
96,246
29.8
(75)
22.9
—
—
Impact of
IFRS 16
10,828
(1.2)
41,198
(2.3)
0.4
11.9
Post-IFRS 16
December
2021
107,074
28.6
41,123
20.6
0.4
11.9
Pre-IFRS 16
December
2020
43,838
8.5
26,945
8.9
0.6
9.3
Impact of
IFRS 16
13,780
0.1
48,621
(0.7)
0.7
17.0
Post-IFRS 16
December
2020
57,618
8.6
75,566
8.2
1.3
26.3
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 adjusting items.
EBITDA
Depreciation
EBITA
Amortisation of intangible assets
Operating profit
Pre-IFRS 16
2021
£’000
Post-IFRS 16
2021
£’000
Pre-IFRS 16
2020
£’000
Post-IFRS 16
2020
£’000
96,246
(16,423)
79,823
(3,178)
76,645
107,074
(27,738)
79,336
(3,178)
76,158
43,838
(15,657)
28,181
(2,719)
25,462
57,618
(27,717)
29,901
(2,719)
27,182
Marshalls plc | Annual Report and Accounts 2021
139
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 adjusting items.
EBITA
Shareholders’ funds
Net (cash)/debt
Reported ROCE
Pre-IFRS 16
2021
£’000
Post-IFRS 16
2021
£’000
79,823
79,336
348,788
(75)
344,317
41,123
348,713
385,440
22.9%
20.6%
Pre-IFRS 16
2020
£’000
28,181
289,816
26,945
316,761
8.9%
Post-IFRS 16
2020
£’000
29,901
287,848
75,566
363,414
8.2%
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 25.
The ratio of adjusted 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
Adjusting items paid
Net financial expenses paid
Taxation paid
Adjusted operating cash flow
EBITDA
Ratio of adjusted operating cash flow to EBITDA
2 Segmental analysis
Segment revenues and results
Total revenue
Inter‑segment revenue
Landscape
Products
£’000
499,561
(226)
2021
Other
£’000
94,092
(4,163)
Total
£’000
593,653
(4,389)
External revenue
499,335
89,929
589,264
Segment operating profit
76,221
4,618
80,839
Landscape
Products
£’000
381,304
(314)
380,990
32,413
Adjusting items (Note 4)
Unallocated administration costs
Operating profit
Finance charges (net) (Note 6)
Profit before tax
Taxation (Note 7)
Profit after tax
65
(4,681)
76,223
(6,901)
69,322
(14,424)
54,898
2021
£’000
65,536
2,820
3,534
13,527
85,417
107,074
79.8%
2020
Other
£’000
90,903
(2,439)
88,464
1,517
2020
£’000
12,372
6,946
4,475
4,631
28,424
57,618
49.3%
Total
£’000
472,207
(2,753)
469,454
33,930
(17,809)
(6,748)
9,373
(4,720)
4,653
(2,095)
2,558
The Group has two 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.
140
Marshalls plc | Financial Statements
2 Segmental analysis continued
Segment revenues and results continued
Included in “Other” are the Group’s Landscape Protection, Mineral Products, Mortars and Screeds 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, assets held for sale and inventory:
Landscape Products
Other
Total segment property, plant and equipment, right‑of‑use assets and inventory
Unallocated assets
Consolidated total assets
2021
£’000
2020
£’000
260,198
57,614
317,812
278,160
595,972
248,245
65,928
314,173
300,256
614,429
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
Geographical destination of revenue
United Kingdom
Rest of the world
Depreciation
and amortisation
Property, plant and equipment,
right‑of‑use asset and intangible asset
additions
2021
£’000
24,588
6,328
30,916
2020
£’000
23,707
6,729
30,436
2021
£’000
22,423
5,246
27,669
2021
£’000
556,110
33,154
589,264
2020
£’000
24,723
6,528
31,251
2020
£’000
438,173
31,281
469,454
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 | Annual Report and Accounts 2021
141
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 5)
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 costs
Operating costs
Other operating income
Net gain on asset and property disposals
Net operating costs before adjusting items
Adjusting items (Note 4)
Total 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
4 Adjusting items
Additional special COVID-19 bonus paid to all colleagues (Note 5)
Redundancy and other closure costs
Write‑off of property, plant and equipment
Additional consideration to the CPM vendors (Note 14)
Net gain on sale of significant surplus site
Total adjusting items within operating costs (Note 3)
Adjusting interest expense on defined benefit pension scheme (Note 6)
Total adjusting items before taxation
Current tax on adjusting items (Note 7)
Deferred tax on adjusting items (Note 7)
Total adjusting items after taxation
142
Marshalls plc | Financial Statements
2021
£’000
246,478
(15,762)
130,903
16,423
11,315
3,178
(2,758)
124,665
398
2020
£’000
182,605
378
122,260
15,657
12,060
2,719
(2,991)
112,603
356
514,840
445,647
(1,687)
(47)
513,106
(65)
513,041
(2,272)
(1,103)
442,272
17,809
460,081
2021
£’000
340
5,671
3,098
2021
£’000
50
265
25
340
2021
£’000
2,216
1,175
1,666
3,750
(8,872)
(65)
2,813
2,748
97
(703)
2,142
2020
£’000
286
4,551
3,109
2020
£’000
45
211
30
286
2020
£’000
—
12,320
5,489
—
—
17,809
—
17,809
(2,341)
(760)
14,708
4 Adjusting items continued
Notes:
(i)
The additional special bonus payable to employees as a thank you for their support during the pandemic.
(ii) Redundancy and other closure costs relate to the Edenhall Stoke site following a network review. The site was used to manufacture cast
stone and the Group has decided to exit this market.
(iii) Write-off of property, plant and equipment relates to assets at our St Ives site that are being dismantled to allow construction of the dual
block plant (Note 10).
(iv) The additional consideration to the CPM vendors represents an accounting charge relating to the acquisition of CPM following the
agreement reached with the vendors to release of funds initially set aside in escrow, following the identification of an under-funded
pension scheme of a related company. This risk is now considered to be remote and £3,750,000 million will be released from escrow
and paid to the vendors as additional consideration. This results in a charge to the Income Statement because it falls outside the
hindsight period of twelve months as set out under IAS.
(v) The net gain on a significant surplus site relates to the sale of Ryton near Coventry (Note 10).
(vi) The interest expense on defined benefit pension scheme relates to a technical non-cash finance charge resulting from the receipt of
Counsel’s opinion on certain historic benefit issues (Note 6).
5 Personnel costs
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 in net operating costs (Note 3)
Personnel costs relating to the special COVID-19 bonus awarded to all colleagues (Note 4)
Personnel costs relating to redundancy and other costs (Note 3)
Personnel costs relating to adjusting items (Note 4)*
2021
£’000
2020
£’000
105,692
12,309
2,303
10,599
130,903
2,216
398
159
99,082
10,650
2,630
9,898
122,260
—
52
7,818
Total personnel costs
133,676
130,130
* Personnel costs relating to adjusting items of £159,000 (2020: £7,818,000) includes £nil (2020: £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
2021
£’000
781
39
582
349
621
104
422
2,898
2020
£’000
785
37
—
—
1,808
145
393
3,168
The aggregate of emoluments and amounts receivable under the MIP of the highest paid Director was £1,685,000 (2020: £1,695,000),
including a salary supplement in lieu of pension of £80,000 (2020: £85,000).
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 101, 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 92 to 112.
The average monthly number of persons employed by the Group during the year was:
Continuing operations
2021
Number
2,643
2020
Number
2,579
Marshalls plc | Annual Report and Accounts 2021
143
Financial Statements Notes to the Consolidated Financial Statements continued
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) Adjusting items
Adjusting interest expense on defined benefit pension scheme (Note 4)
(c) Financial income
Interest receivable and similar income
Net interest expense on the defined benefit pension scheme is disclosed net of Company recharges (Note 20).
2021
£’000
439
1,762
1,889
4,090
2,813
6,903
2020
£’000
154
2,972
1,604
4,730
—
4,730
2
10
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
Total tax expense
Current tax on adjusting items (Note 4)
Deferred tax on adjusting items (Note 4)
Total tax expenses before adjusting items
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
144
Marshalls plc | Financial Statements
2021
£’000
11,360
(2,147)
9,213
6,519
(1,308)
14,424
(97)
703
15,030
2021
£’000
2020
%
2020
£’000
2,731
(1,768)
963
158
974
2,095
2,341
760
5,196
2020
£’000
69,322
13,171
(2,260)
(74)
(2,147)
523
9,213
1,610
(22)
659
(633)
(1,308)
4,905
14,424
100.0
4,653
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
884
173
645
(1,768)
1,029
963
(1,585)
52
(124)
18
974
1,797
2,095
2021
%
100.0
19.0
(3.3)
(0.1)
(3.1)
0.8
13.3
2.3
—
0.9
(0.9)
(1.9)
7.1
20.8
7 Income tax expense continued
The net amount of deferred taxation debited to the Consolidated Statement of Comprehensive Income in the year was £6,547,000
(2020: credited £2,149,000).
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 2021. The 2021 Budget announced that the UK corporation tax rate would increase to 25 per cent from 2023. This change
was substantively enacted on 10 June 2021 and consequently, the deferred taxation liability at 31 December 2021 has been calculated at
25 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 £4.9 million which in turn has given rise to an 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 2021 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.
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 tax provisions made in prior years which are no longer required,
including provisions made on acquisition of subsidiaries.
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 approximately 5 per cent of the Group’s turnover in the year ended 31 December 2021. In total,
the trading profits were not material and a minimal amount of tax is due to be paid overseas.
8 Earnings per share
Basic earnings per share from total operations of 27.5 pence (2020: 1.2 pence) per share is calculated by dividing the profit attributable to
Ordinary Shareholders for the financial year, after adjusting for non-controlling interests, of £54,806,000 (2020: £2,370,000) by the weighted
average number of shares in issue during the period of 199,094,964 (2020: 198,642,224).
Basic earnings per share before adjusting items of 28.6 pence (2020: 8.6 pence) per share is calculated by dividing the profit attributable to
Ordinary Shareholders for the financial year, after adjusting for non-controlling interests, of £56,948,000 (2020: £17,078,000) by the weighted
average number of shares in issue during the period of 199,094,964 (2020: 198,642,224).
Profit attributable to Ordinary Shareholders
Profit before adjusting items
Adjusting items
Profit for the financial year
Profit attributable to non‑controlling interests
Profit attributable to Ordinary Shareholders
2021
£’000
57,040
(2,142)
54,898
(92)
54,806
2020
£’000
17,266
(14,708)
2,558
(188)
2,370
Marshalls plc | Annual Report and Accounts 2021
145
Financial Statements Notes to the Consolidated Financial Statements continued
8 Earnings per share continued
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
2021
Number
2020
Number
200,052,157
200,052,157
(957,193)
(1,409,933)
199,094,964
198,642,224
Diluted earnings per share from total operations of 27.4 pence (2020: 1.2 pence) per share is calculated by dividing the profit for the
financial year, after adjusting for non-controlling interests, of £54,806,000 (2020: £2,370,000) by the weighted average number of shares
in issue during the period of 199,094,964 (2020: 198,642,224) plus potentially dilutive shares of 1,222,847 (2020: 1,614,132), which totals
200,317,811 (2020: 200,256,356).
Diluted earnings per share before adjusting items of 28.4 pence (2020: 8.5 pence) per share is calculated by dividing the profit for the
financial year, after adjusting for non-controlling interests, of £56,948,000 (2020: £17,078,000) by the weighted average number of shares
in issue during the period of 199,094,964 (2020: 198,642,224) plus potentially dilutive shares of 1,222,847 (2020: 1,614,132), which totals
200,317,811 (2020: 200,256,356).
Weighted average number of Ordinary Shares (diluted)
Weighted average number of Ordinary Shares
Potentially dilutive shares
Weighted average number of Ordinary Shares (diluted)
2021
Number
2020
Number
199,094,964
198,642,224
1,222,847
1,614,132
200,317,811
200,256,356
9 Dividends
After the balance sheet date, a final dividend of 9.6 pence was proposed by the Directors. This dividend has not been provided for and there
are no income tax consequences.
2021 final
2021 interim
2020 final
2020 interim
Pence per
qualifying share
9.6
4.7
14.3
4.3
—
4.3
The following dividends were approved by the shareholders and recognised in the Financial Statements:
2021 interim
2020 final
Pence per
qualifying share
4.7
4.3
9.0
2021
£’000
19,122
9,362
28,484
2021
£’000
9,362
8,562
17,924
2020
£’000
8,562
—
8,562
2020
£’000
—
—
—
The Board recommends a 2021 final dividend of 9.6 pence per qualifying Ordinary Share (amounting to £19,122,000, to be paid on
1 July 2022 to shareholders registered at the close of business on 10 June 2022. The Board did not propose an interim dividend
during 2020.
146
Marshalls plc | Financial Statements
10 Property, plant and equipment
Cost
At 1 January 2020
Exchange differences
Additions
Reclassified as held for sale
Reclassifications
Disposals
At 31 December 2020
At 1 January 2021
Exchange differences
Additions
Reclassified as held for sale
Reclassified to intangibles
Reclassifications
Disposals
At 31 December 2021
Depreciation and impairment losses
At 1 January 2020
Depreciation charge for the year
Exchange differences
Impairments
Reclassified as held for sale
Reclassifications
Disposals
At 31 December 2020
At 1 January 2021
Depreciation charge for the year
Exchange differences
Impairments
Reclassified as held for sale
Reclassified to intangibles
Reclassifications
Disposals
At 31 December 2021
Net book value
At 1 January 2020
At 31 December 2020
At 31 December 2021
Land and
buildings
£’000
Quarries
£’000
Plant, machinery
and vehicles
£’000
105,425
28,677
Total
£’000
516,333
765
13,158
(1,114)
—
382,231
351
12,424
—
—
—
327
—
523
(53)
(6,327)
(14,497)
29,474
29,474
388,679
514,645
388,679
514,645
—
—
—
—
(2,305)
(73)
(420)
19,231
(1,566)
(837)
—
(432)
20,558
(3,102)
(837)
—
(17,567)
(24,815)
27,096
387,520
506,017
8,983
350
—
—
—
5
(53)
9,285
9,285
368
—
—
—
—
(28)
(23)
269,478
13,485
296
4,892
—
(824)
(5,869)
320,779
15,657
313
5,489
(664)
—
(6,330)
281,458
335,244
281,458
13,395
(368)
45
(829)
(219)
—
335,244
16,423
(370)
233
(1,242)
(219)
—
(14,922)
(17,983)
9,602
278,560
332,086
19,694
20,189
112,753
107,221
195,554
179,401
17,494
108,960
173,931
414
407
(1,114)
(523)
(8,117)
96,492
96,492
(12)
1,327
(1,536)
—
2,305
(7,175)
91,401
42,318
1,822
17
597
(664)
819
(408)
44,501
44,501
2,660
(2)
188
(413)
—
28
(3,038)
43,924
63,107
51,991
47,477
Mineral reserves and associated land have been separately disclosed under the heading of “Quarries”.
Disposals include fixed assets written off at the St Ives wet cast plant with a net book value of £1,294,000; these assets are included
in the £1,666,000 write-off shown in Note 4.
The disposals figures include a net book value of £3,058,000 which relates to the sale of the Ryton site (Note 4).
The impairment represents the assets being written down to fair value less cost to sell.
During the year ended 31 December 2021, land and buildings with a book value of £1,860,000 (2020: £450,000) have been reclassified
as held for sale in accordance with IFRS 5 “Non-current Assets Held for Sale and Discontinued Operations”.
Group cost of land and buildings and plant and machinery includes £318,000 (2020: £73,000) and £8,534,000 (2020: £4,495,000)
respectively for assets in the course of construction.
Marshalls plc | Annual Report and Accounts 2021
147
Financial Statements Notes to the Consolidated Financial Statements continued
10 Property, plant and equipment continued
Capital commitments
Capital expenditure that has been contracted for but for which no provision has been made in the
Consolidated Financial Statements
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
At 1 January 2020
Additions
Disposals
Modifications
At 31 December 2020
At 1 January 2021
Additions
Disposals
Modifications
At 31 December 2021
Depreciation and impairment losses
At 1 January 2020
Depreciation change for the year
Disposals
At 31 December 2020
At 1 January 2021
Depreciation change for the year
Disposals
At 31 December 2021
Net book value
At 1 January 2020
At 31 December 2020
At 31 December 2021
2021
£’000
2020
£’000
14,480
3,496
2021
£’000
2020
£’000
16,423
15,657
Land and
buildings
£’000
20,984
4,135
(188)
—
24,931
24,931
625
(2,679)
(1,338)
21,539
2,057
2,176
(188)
4,045
4,045
2,212
(2,679)
3,578
18,927
20,886
17,961
Plant and
equipment
£’000
31,898
12,359
(3,428)
542
41,371
41,371
3,601
(4,198)
(118)
40,656
10,811
9,884
(3,428)
17,267
17,267
9,103
(4,198)
22,172
21,087
24,104
18,484
Total
£’000
52,882
16,494
(3,616)
542
66,302
66,302
4,226
(6,877)
(1,456)
62,195
12,868
12,060
(3,616)
21,312
21,312
11,315
(6,877)
25,750
40,014
44,990
36,445
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
148
Marshalls plc | Financial Statements
2021
£’000
2020
£’000
11,315
12,060
2021
£’000
1,513
2020
£’000
2,963
12 Intangible assets
Cost
At 1 January 2020
Additions
Goodwill
£’000
Customer
relationships
£’000
Supplier
relationships
£’000
and Development
costs
£’000
know-how
£’000
Software
£’000
Total
£’000
Patents,
trademarks
87,426
12,811
1,629
1,760
—
—
—
—
At 31 December 2020
87,426
12,811
1,629
1,760
At 1 January 2021
Additions
Reclassified from property, plant and equipment
87,426
12,811
1,629
1,760
—
—
—
—
—
—
—
—
At 31 December 2021
87,426
12,811
1,629
1,760
Amortisation and impairment losses
At 1 January 2020
Amortisation for the year
At 31 December 2020
At 1 January 2021
Amortisation for the year
Reclassified from property, plant and equipment
8,912
—
8,912
8,912
—
—
4,061
1,060
5,121
5,121
1,060
—
1,063
103
1,516
42
1,166
1,558
1,166
1,558
103
—
42
—
159
—
159
159
139
342
640
125
8
133
133
88
144
18,775
122,560
1,599
1,599
20,374
124,159
20,374
124,159
2,746
495
2,885
837
23,615
127,881
11,084
1,506
26,761
2,719
12,590
29,480
12,590
29,480
1,885
75
3,178
219
At 31 December 2021
Carrying amounts
At 1 January 2020
At 31 December 2020
At 31 December 2021
8,912
6,181
1,269
1,600
365
14,550
32,877
78,514
8,750
78,514
7,690
78,514
6,630
566
463
360
244
202
160
34
26
7,691
95,799
7,784
94,679
275
9,065
95,004
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 2021 and 31 December 2020 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 2.4 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
14.0 per cent (2020: 10.5 per cent). The Directors have reviewed the recoverable amounts of the CGUs, and considered possible impacts
that might arise from a range of uncertainties, including the availability of raw materials and labour and the potential impact of cost inflation,
that could lead to a reduction in consumer confidence and a slowdown in the UK economy. The financial impact of climate change risk,
including the cost of the Group’s operational mitigation initiatives, continues to be assessed, 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 £1,610,000 (2020: £1,414,000) 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)
2021
£’000
3,178
2020
£’000
2,719
Marshalls plc | Annual Report and Accounts 2021
149
Financial Statements Notes to the Consolidated Financial Statements continued
13 Inventories
Raw materials and consumables
Finished goods and goods for resale
2021
£’000
22,805
84,631
107,436
2020
£’000
21,335
68,447
89,782
Inventories stated at a net realisable value less than cost at 31 December 2021 amounted to £4,656,000 (2020: £4,506,000). The write down
of inventories made during the year amounted to £1,534,000 (2020: £1,150,000). There were £520,000 of reversals of inventory write downs
made in previous years in 2021 (2020: £201,000).
14 Trade and other receivables
Trade receivables
Other receivables
Prepayments and accrued income
2021
£’000
84,313
15,989
11,607
111,909
2020
£’000
73,290
13,408
9,044
95,742
A reimbursement asset of £4,149,000 (2020: £4,149,000) is included in other receivables. This relates to monies held in escrow in relation
to the acquisition of CPM in 2017 as a consequence of an under-funded pension scheme of a related company. The risk of a liability arising
from this matter is now considered to be remote and in December 2021 agreement was reached to release £3,750,000 from escrow in
order to be paid to the vendors as additional consideration for the purchase of CPM. An amount has been recorded in other payables for
the charge of £3,750,000 which has been booked in the Income Statement for the year ended 31 December 2021 to reflect this additional
consideration now payable to the CPM vendors (Note 4).
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
2021
£’000
46,142
32,927
2,700
2,544
84,313
2020
£’000
37,604
29,295
2,634
3,757
73,290
There were no receivables due after more than one year (2020: £nil). All amounts disclosed above are considered recoverable and are
disclosed net of a provision for expected credit losses of £732,000 (2020: £899,000). 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 six months or less.
150
Marshalls plc | Financial statements
2021
£’000
2020
£’000
41,207
103,690
5
17
41,212
103,707
2021
£’000
67,261
13,718
31,278
25,961
2020
£’000
59,282
10,998
20,786
28,750
138,218
119,816
16 Trade and other payables continued
Included in other payables are deferred amounts payable to former shareholders and employees, in relation to the acquisition of Edenhall
Holdings Limited in previous accounting periods. These were dependent on the achievement of performance targets in the three-year post-
acquisition period to 31 December. The performance targets were achieved and were settled in cash or shares after the balance sheet date.
17 Loans
Analysed as:
Current liabilities
Non‑current liabilities
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
9,828
7,316
13,149
21,915
52,208
2021
Interest
£’000
1,283
1,110
2,434
6,060
10,887
Principal
£’000
8,545
6,206
10,715
15,855
41,321
Minimum
lease
payments
£’000
11,579
8,605
12,350
28,598
61,132
2021
£’000
1,673
39,341
41,014
2021
£’000
8,545
32,776
41,321
2020
Interest
£’000
1,514
1,287
2,036
7,304
12,141
2020
£’000
20,000
110,282
130,282
2020
£’000
10,065
38,926
48,991
Principal
£’000
10,065
7,318
10,314
21,294
48,991
As at 31 December 2021, the total minimum lease payments (above) comprised property of £33,272,000 (2020: £32,122,000) and plant,
machinery and vehicles of £18,936,000 (2020: £29,010,000).
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
ten-year term, with an option to extend after five 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 £285,254 (2020: £239,003) are expected to be received
during the following financial year. An amount of £295,548 (2020: £225,786) 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 2021, the interest
expense on lease liabilities amounted to £1,889,000 (2020: £1,604,000). 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 2021, the average effective borrowing rate was 3.4 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.
For the year ended 31 December 2021, the total cash outflow in relation to leases amounts to £12,717,000 (2020: £13,780,000). The total
cash outflow in relation to short-term and low value leases was £5,671,000 (2020: £4,551,000).
Marshalls plc | Annual Report and Accounts 2021
151
Financial Statements Notes to the Consolidated Financial Statements continued
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 page 155.
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 2020.
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
2021 and 31 December 2020.
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 69. 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 page 155.
(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 2020.
Increase of 100 basis points
Decrease of 100 basis points
2021
£’000
(372)
372
2020
£’000
(652)
652
(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 150.
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.
152
Marshalls plc | Financial statements
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 one 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 a £159,000 asset (2020: £28,000 asset) and is adjusted against the hedging reserve on an ongoing basis. During the year
£131,000 (2020: £71,000) has been recognised in other comprehensive income for the year with £nil (2020: £nil) being reclassified
from equity to the Income Statement. At 31 December 2021 all outstanding forward exchange contracts had a maturity date within
twelve months.
The foreign currency profile of monetary items was:
Sterling
£’000
Cash and cash equivalents
38,534
2021
US Dollar
£’000
AED
£’000
Total
£’000
1,834
36
41,212
Euro
£’000
808
Trade receivables
82,712
1,529
192
(120) 84,313
Sterling
£’000
101,177
71,501
Secured bank loans
(34,500)
(6,514)
(35,598)
(5,723)
—
—
— (41,014)
(122,400)
— (41,321)
(42,742)
Lease liabilities
Trade payables
Derivative financial
instruments
(61,634)
(5,114)
(513)
— (67,261)
(50,294)
(8,509)
(477)
654
158
1
—
813
304
18
10
2020
Euro
£’000
US Dollar
£’000
AED
£’000
Total
£’000
1,185
1,549
(7,882)
(6,249)
1,316
360
—
—
29
103,707
(120)
73,290
— (130,282)
—
(2)
—
(48,991)
(59,282)
332
Balance sheet exposure
(9,832) (14,856)
1,514
(84) (23,258)
(42,454)
(19,888)
1,209
(93)
(61,226)
A 10 per cent strengthening and weakening of the following currencies against the Pound Sterling at 31 December 2021 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 2020:
10% strengthening of £ against €
10% weakening of £ against €
10% strengthening of £ against $
10% weakening of £ against $
10% strengthening of £ against AED
10% weakening of £ against AED
2021
£’000
1,321
(1,080)
(135)
110
7
(6)
2020
£’000
1,768
(1,446)
(107)
88
8
(7)
(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 28 February 2023. 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 £654,000 asset (2020: £304,000 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 £1,272,000 (2020: £1,455,000) has been recognised in other comprehensive income, with
£922,000 (2020: £1,238,000) 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 £1,403,000 credit (2020: £1,526,000 debit) recognised in other
comprehensive income for the year with £922,000 debit (2020: £1,238,000 credit) being reclassified from equity to the Income Statement.
Marshalls plc | Annual Report and Accounts 2021
153
Financial Statements Notes to the Consolidated Financial Statements continued
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 49.
Effective interest rates and maturity of liabilities
At 31 December 2021 there were £41,321,000 (2020: £48,991,000) 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 25).
Fixed or
variable
rate
Effective
interest rate
%
Total
£’000
6 months
or less
£’000
31 December 2021
Cash and cash equivalents (Note 15)
Bank loans (Note 17)
Lease liabilities (Note 18)
Variable
Variable
Fixed
1.80
1.80
3.41
(41,212)
(41,212)
41,014
41,321
—
5,396
6 – 12
months
£’000
—
1,673
3,149
1 – 2
years
£’000
2 – 5
years
£’000
More than
5 years
£’000
—
39,341
—
—
—
—
6,206
10,715
15,855
31 December 2020
Cash and cash equivalents (Note 15)
Bank loans (Note 17)
Lease liabilities (Note 18)
41,123
(35,816)
4,822
45,547
10,715
15,855
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)
(103,707)
—
—
130,282
48,991
—
20,000
10,591
5,422
4,643
7,318
—
99,691
10,314
—
—
21,294
75,566
(98,285)
24,643
17,909
110,005
21,294
At 31 December the undiscounted outstanding contractual payments (including interest) of financial liabilities were as follows:
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
31 December 2021
Bank loans
Variable
41,014
41,700
237
1,907
39,556
Trade and other payables
Variable
118,888
118,888
118,888
Lease liabilities
Derivative financial assets
Fixed
Fixed
41,321
52,208
(813)
(813)
6,175
(547)
—
3,653
(266)
—
—
—
—
—
7,316
13,149
21,915
—
—
—
200,410
211,983
124,753
5,294
46,872
13,149
21,915
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
31 December 2020
Bank loans
Variable
130,282
134,044
710
20,637
11,809
100,888
Trade and other payables
Variable
110,039
110,039
110,039
Lease liabilities
Derivative financial assets
Fixed
Fixed
48,991
61,132
(332)
(332)
6,169
(166)
—
5,410
(166)
—
—
8,605
12,350
28,598
—
—
—
—
—
288,980
304,883
116,752
25,881
20,414
113,238
28,598
154
Marshalls plc | Financial statements
19 Financial instruments continued
Borrowing facilities
The total bank borrowing facilities at 31 December 2021 amounted to £155.0 million (2020: £255.0 million), of which £114.0 million (2020:
£124.7 million) remained unutilised. The undrawn facilities available at 31 December 2021, 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
2021
£’000
—
80,659
18,327
2020
£’000
—
9,718
90,000
15,000
25,000
113,986
124,718
The additional short-term bank facilities of £90 million established in May 2020 were not utilised and have now reached maturity. In
addition, the COVID Corporate Financing Facility (“CCFF”) that was put in place at the same time was also not required. Bank facilities have
returned to pre-COVID-19 levels and total £165 million, of which £140 million are committed.
On 13 August 2021, the Group entered into a new £20 million revolving credit facility with HSBC and the Group has also renewed its short-
term working capital facilities of £25 million with NatWest.
Amendment agreements have also been entered into with all our partner banks following the announcement that LIBOR will cease at the
end of 2021. The Group’s committed bank facilities are all revolving credit facilities with interest now charged at variable rates based on
SONIA. The Group’s bank facilities continue to be aligned with the current strategy to ensure that headroom against available facilities
remains at appropriate levels. The maturity profile of borrowing facilities is structured to provide balanced, committed and phased
medium‑term debt.
The current facilities are set out as follows:
Committed facilities
Q3: 2025
Q3: 2024
Q1: 2024
Q3: 2023
Q2: 2023
Q4: 2022
On-demand facilities
Available all year
Seasonal (February to August inclusive)
Facility
£’000
20,000
35,000
25,000
20,000
20,000
20,000
15,000
10,000
Cumulative
facility
£’000
20,000
55,000
80,000
100,000
120,000
140,000
155,000
165,000
Marshalls is party to a reverse factoring finance arrangement between a third party UK bank and one of the Group’s key customers. The
principal relationship is between the customer and its partner bank. The agreement enables Marshalls to benefit from additional credit
against approved invoices and, in practice, this provides facilities of between £5 million and £15 million which the Group utilises periodically
in order to help manage its short-term, mid-month funding requirements. The credit risk is retained by the customer and Marshalls pays a
finance charge upon utilisation.
Marshalls plc | Annual Report and Accounts 2021
155
Financial Statements Notes to the Consolidated Financial Statements continued
19 Financial instruments continued
Borrowing facilities continued
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 2021 is
shown below:
Trade and other receivables
Cash and cash equivalents
Bank loans
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
2021
2020
Book amount
£’000
95,032
41,212
(41,014)
(118,888)
813
(1,563)
(24,408)
368,725
344,317
Fair value
£’000
95,032
41,212
(40,023)
(118,888)
813
(1,563)
Book amount
£’000
86,699
103,707
(130,282)
(110,039)
332
(1,800)
(51,383)
339,231
287,848
Fair value
£’000
86,699
103,707
(126,010)
(110,039)
332
(1,800)
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) Trade and other receivables/payables
For receivables/payables with a remaining life of less than one year, the notional amount is deemed to reflect the fair value. All other
receivables/payables are discounted to determine the fair value.
(d) Contingent consideration
The basis of calculating contingent consideration is set out in Note 16 on page 151.
(e) 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 2021
Derivative financial assets/(liabilities)
31 December 2020
Derivative financial assets/(liabilities)
Level 1
£’000
—
—
Level 2
£’000
813
332
Level 3
£’000
Total
£’000
(1,563)
(750)
(1,800)
(1,468)
156
Marshalls plc | Financial statements
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 three years. The
next actuarial valuation is being 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 2021 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
2021
£’000
(366,359)
392,116
2020
£’000
(399,938)
402,664
2019
£’000
(353,136)
368,857
Net amount recognised at the year end (before any adjustments for deferred tax)
25,757
2,726
15,721
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.
Net interest expense before adjusting items
Adjusting interest expense (Note 4)
Net interest expense recognised in the Consolidated Income Statement
Remeasurements of the net liability:
Return on Scheme assets (excluding amount included in interest expense)
(Gain)/loss arising from changes in financial assumptions
(Gain)/loss arising from changes in demographic assumptions
Experience gain
(Credit)/debit recorded in other comprehensive income
Total defined benefit (credit)/debit
2021
£’000
539
2,813
3,352
3,786
(20,383)
(6,317)
(3,469)
(26,383)
(23,031)
2020
£’000
254
—
254
(40,151)
52,491
1,209
(808)
12,741
12,995
Marshalls plc | Annual Report and Accounts 2021
157
Financial Statements Notes to the Consolidated Financial Statements continued
20 Employee benefits continued
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
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
158
Marshalls plc | Financial statements
2021
£’000
1.90%
3.30%
2.70%
n/a
2.70%
2.70%
3.35%
2.35%
0%
80%
2020
£’000
1.40%
2.85%
2.20%
n/a
2.20%
2.20%
3.25%
1.95%
0%
80%
Same as post-
retirement
Same as post‑
retirement
S2PXA tables
S2PXA tables
110%
110%
Year of birth
CMI_2020
Year of birth
CMI_2019
1.0%
1.0%
S2PXA tables
S2PXA tables
110%
110%
Year of birth
CMI_2020
Year of birth
CMI_2019
1.0%
1.0%
85.4
87.5
86.3
88.7
2021
£’000
402,664
5,551
(3,786)
(11,740)
(573)
85.7
87.7
86.7
88.9
2020
£’000
368,857
7,600
40,151
(13,366)
(578)
392,116
402,664
1,765
47,751
20 Employee benefits continued
Changes in the present value of liabilities over the year
Liabilities at the start of the year
Past service cost
Interest cost
Remeasurement (gains)/losses:
Actuarial (gains)/losses arising from changes in financial assumptions
Actuarial (gains)/losses arising from changes in demographic assumptions
Experience (gain)
Benefits paid
Liabilities at the end of the year
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
2021
£’000
2020
£’000
399,938
353,136
2,813
5,517
(20,383)
(6,317)
(3,469)
(11,740)
—
7,276
52,491
1,209
(808)
(13,366)
366,359
399,938
2021
£’000
204,739
161,620
366,359
18
2021
£’000
1,864
41,492
34,119
77,475
591
6,117
36,941
270,992
314,641
392,116
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
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 2022.
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 £31.9
million (increase by £31.9 million) if all the other assumptions remained unchanged.
If the inflation assumption were 0.5 per cent higher/(lower), the Scheme liabilities would increase by £14.3 million (decrease by £12.9 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 one year, the Scheme liabilities would increase by £18.0 million (decrease by £18.0
million) if all the other assumptions remained unchanged.
Marshalls plc | Annual Report and Accounts 2021
159
Financial Statements Notes to the Consolidated Financial Statements continued
20 Employee benefits continued
Sensitivity of the liability value to changes in the principal assumptions continued
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 92 to 112.
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
Number of
instruments
161,863
151,321
92,335
94,144
—
—
208,829
289,427
997,919
£’000
723
676
758
773
—
—
1,458
2,018
6,406
Plan year
Vesting date
2018
2018
2019
2019
2020
2020
2021
2021
March 2022
March 2022
March 2023
March 2023
March 2024
March 2024
March 2025
March 2025
2021
2020
Shares
463,027
534,892
997,919
£’000
3,378
3,883
7,261
2021
2020
Number of
options
1,228,437
498,256
—
(43,204)
(685,570)
Value
£’000
9,361
—
(361)
(249)
(1,490)
£’000
2,939
3,467
6,406
Value
£’000
7,261
3,474
—
(252)
(4,077)
Shares
579,320
649,117
1,228,437
Number of
options
1,767,118
—
—
(39,469)
(499,212)
Outstanding at 31 December
6,406
997,919
7,261
1,228,437
The total expenses recognised for the period arising from share-based payments were as follows:
Awards granted and total expense recognised as employee costs
2021
£’000
2,545
2020
£’000
3,679
Further details in relation to the Directors are set out in the Remuneration Committee Report on pages 92 to 112. Included in the total
expense of £2,545,000 (2020: £3,679,000) is an amount of £1,490,000 (2020: £1,980,000) settled as interim cash payments under the terms
of the Scheme and which has been included within wages and salaries in Note 5.
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 three-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
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 three-year period. Other awards granted in the year included 29,160 nil-cost options to Justin Lockwood on
his appointment as Chief Financial Officer on 26 July 2021. This was a bespoke award made in lieu of incentives forfeited on cessation of
his previous employment. Further details of this award are set out on page 101. The total awards outstanding at 31 December 2021 were
over 358,217 shares (31 December 2020: 420,633). The total expenses recognised for the year arising from share-based payments were
£1,117,000 (2020: £931,000).
Employee profit sharing scheme
At 31 December 2021 the scheme held 42,287 (2020: 42,287) Ordinary Shares in the Company.
160
Marshalls plc | Financial statements
21 Provisions
At 1 January 2020
Additional provisions made in the period
At 31 December 2020
At 1 January 2021
Unused amounts reversed during the period
At 31 December 2021
Legal and
regulatory
provisions
£’000
2,649
500
3,149
3,149
(2,310)
839
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
2021
£’000
—
—
—
—
1,249
356
—
1,605
2020
£’000
—
—
—
—
2,241
379
—
2,620
2021
£’000
(17,089)
(1,547)
(477)
(6,439)
—
—
2020
£’000
(12,506)
(1,594)
(499)
(519)
—
—
(2,513)
(1,948)
(28,065)
(17,066)
The deferred taxation liability at 31 December 2021 has been calculated at 25 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 £6,439,000 (2020: £519,000) in relation to employee benefits is in respect of the net surplus for the defined
benefit obligations of £25,757,000 (2020: £2,726,000) (Note 20) calculated at 25 per cent (2020: 19 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 2021 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.
Movement in temporary differences
Year ended 31 December 2021
Property, plant and equipment
Intangible assets
Inventories
Employee benefits
Equity settled share‑based payments
IFRS 16 transition adjustment
Other items
1 January
2021
£’000
(12,506)
(1,594)
(499)
(519)
2,241
379
(1,948)
Recognised
in income
£’000
(4,583)
47
22
663
(736)
(23)
(601)
Recognised
in other
comprehensive
income
£’000
Recognised
in statement
of changes
in equity
£’000
—
—
—
(6,583)
—
—
36
—
—
—
—
(256)
—
—
31 December
2021
£’000
(17,089)
(1,547)
(477)
(6,439)
1,249
356
(2,513)
(14,446)
(5,211)
(6,547)
(256)
(26,460)
Marshalls plc | Annual Report and Accounts 2021
161
Financial Statements Notes to the Consolidated Financial Statements continued
22 Deferred taxation continued
Movement in temporary differences continued
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
1 January
2020
£’000
(11,321)
(1,909)
(337)
(2,674)
2,550
397
(2,066)
Recognised
in income
£’000
(1,185)
315
(162)
48
(205)
(18)
76
Recognised
in other
comprehensive
income
£’000
Recognised
in statement
of changes
in equity
£’000
—
—
—
2,107
—
—
42
—
—
—
—
(104)
—
—
31 December
2020
£’000
(12,506)
(1,594)
(499)
(519)
2,241
379
(1,948)
(15,360)
(1,131)
2,149
(104)
(14,446)
The deferred tax balances on short-term timing differences are expected to reverse within one to three 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 24 May 2021 the 2021 Finance Bill changed the main rate of corporation tax to 25 per cent for financial year 2023. This change creates a
deferred tax charge in the year of £4,900,000.
23 Capital and reserves
Called-up share capital
As at 31 December 2021, the authorised, issued and fully paid up Ordinary Share Capital was as follows:
Ordinary Shares
Authorised
2021 and 2020
Issued and paid up
2021 and 2020
Number
Value
£’000
Number
Value
£’000
At 1 January and 31 December
300,000,000
75,000
200,052,157
50,013
Share premium account
The share premium account represents all proceeds received above the share capital cost.
Own shares reserve
Transactions of the Group-sponsored Employee Benefit Trust are included in the Group Financial Statements. The Trust’s purchases
of shares in the Company are debited directly to equity and disclosed separately in the balance sheet as “own shares”. Further details
are included on page 113.
Capital redemption reserve
The capital redemption reserve records the nominal value of shares repurchased by the Company.
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.
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.
9.6 pence final dividend (2020: 4.3 pence) per Ordinary Share
2021
£’000
19,122
2020
£’000
8,562
162
Marshalls plc | Financial statements
24 Non-controlling interests
At 1 January
Share of profit for the year
Foreign currency transaction differences
At 31 December
25 Analysis of net debt
Cash at bank and in hand
Debt due within 1 year
Debt due after 1 year
Lease liabilities
1 January
2021
£’000
103,707
(20,000)
(110,282)
(48,991)
(75,566)
Cash flow
£’000
(62,439)
20,000
68,628
10,828
37,017
New leases
£’000
—
—
—
(3,158)
(3,158)
* Other changes include foreign currency movements on cash and loan balances.
Reconciliation of net cash flow to movement in net debt
Net (decrease)/increase in cash equivalents
Cash outflow/(inflow) from decrease/(increase) 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
2021
£’000
950
92
(55)
987
Other
changes *
£’000
(56)
(1,673)
2,313
—
584
2021
£’000
(62,439)
88,628
10,828
(3,158)
584
34,443
(75,566)
2020
£’000
723
188
39
950
31 December
2021
£’000
41,212
(1,673)
(39,341)
(41,321)
(41,123)
2020
£’000
50,481
(57,891)
13,780
(20,811)
(1,149)
(15,590)
(59,976)
(41,123)
(75,566)
Marshalls plc | Annual Report and Accounts 2021
163
Financial Statements Notes to the Consolidated Financial Statements continued
26 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 loans (Note 17)
Lease liabilities (Note 18)
1 January
2021
£’000
(130,282)
(48,991)
(179,273)
1 January
2020
£’000
(71,274)
(41,960)
Financing
cash flows *
£’000
Other non‑cash
changes **
£’000
31 December
2021
£’000
88,628
10,828
99,456
Financing
cash flows *
£’000
(57,891)
13,780
1,640
(3,158)
(1,518)
(40,014)
(41,321)
(81,335)
Other non‑cash
changes **
£’000
31 December
2020
£’000
(1,117)
(20,811)
(130,282)
(48,991)
Total liabilities from financing activities
(113,234)
(44,111)
(21,928)
(179,273)
*
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.
27 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
£430,000
£500,000
£575,000
£100,000
£180,000
Period
Purpose
23 Dec 2011 to 30 Oct 2022
Employer’s liability
8 Dec 2020 to 30 Oct 2022
Employer’s liability
8 Dec 2020 to 30 Oct 2022
Vehicle insurance
19 Mar 2014 to 29 Oct 2022
Vehicle insurance
30 Oct 2016 to 30 Oct 2022
Vehicle insurance
28 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.
The Directors of the Company and their immediate relatives control 0.3072 per cent (2020: 0.2915 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 92 to 112.
164
Marshalls plc | Financial statements
29 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 131 to 140.
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 159.
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:
• Adjusting items have been disclosed separately as alternative performance measures due to their size, nature and incidence to provide
a better understanding of the Group’s results. The determination of whether items merit treatment as an adjusting item is a matter of
judgement. Note 4 contains details of adjusting items.
Marshalls plc | Annual Report and Accounts 2021
165
Financial Statements Company Statement of Changes in Equity
for the year ended 31 December 2021
Current year
At 1 January 2021
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
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
(806)
75,394
13,010
195,034
357,127
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(3,567)
3,727
160
160
—
—
—
—
—
—
—
—
—
—
—
(6,362)
(6,362)
(6,362)
(6,362)
1,622
(72)
681
—
2,303
(72)
—
—
—
(17,924)
(17,924)
—
(3,567)
(3,727)
—
1,550
(20,970)
(19,260)
1,550
(27,332)
(25,622)
At 31 December 2021
50,013
24,482
(646)
75,394
14,560
167,702
331,505
There were no items of other comprehensive income/(expense) in the year other than the loss for the financial year recorded above.
Prior 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
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)
2,230
(2,491)
2,998
31
(2,705)
—
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 loss for the financial year recorded above.
166
Marshalls plc | Financial statements
Company Balance Sheet
at 31 December 2021
Fixed assets
Investments
Deferred taxation assets
Current assets
Debtors
Net current assets
Total assets
Current liabilities
Creditors
Net current liabilities
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
2021
£’000
2020
£’000
33
34
35
352,974
673
353,647
964
964
351,352
1,058
352,410
4,717
4,717
354,611
357,127
(23,106)
36
(23,106)
—
—
331,505
357,127
37
50,013
24,482
(646)
75,394
14,560
167,702
331,505
50,013
24,482
(806)
75,394
13,010
195,034
357,127
The Company reported a loss for the financial year ended 31 December 2021 of £6,362,000 (2020: loss of £4,760,000).
Approved at a Directors’ meeting on 17 March 2022.
On behalf of the Board:
Martyn Coffey
Chief Executive
Justin Lockwood
Chief Financial Officer
The Notes on pages 168 to 173 form part of these Company Financial Statements.
Marshalls plc | Annual Report and Accounts 2021
167
Financial Statements
Notes to the Company Financial Statements
30 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 2021 were authorised for issue by the Board
of Directors on 17 March 2022. 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 2021.
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 two 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 157 to 159.
(ii) Defined contribution scheme
Obligations for contributions to defined contribution schemes are recognised as an expense as incurred.
168
Marshalls plc | Financial statements
30 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 and disclosed separately in the balance sheet as “own shares”.
(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.
31 Operating costs
The audit fee for the Company was £50,000 (2020: £45,000). 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 101
to 105 of the Remuneration Committee Report.
The average monthly number of employees of Marshalls plc (including Executive Directors) in the year ended 31 December 2021 was 183
(2020: 175). 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 £4,524,000 (2020: £4,261,000) in relation to 21 employees (2020: 16), including the Directors.
32 Ordinary dividends: equity shares
2021 interim: paid 1 December 2021
2020 final: paid 1 July 2021
2021
2020
Pence per share
£’000
Pence per share
£’000
4.7
4.3
9.0
9,362
8,562
17,924
—
—
—
—
—
—
Due to the impact of COVID-19, 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.
2021 final: 9.6 pence (2020: 4.3 pence) per Ordinary Share
2021
£’000
19,122
2020
£’000
8,562
Marshalls plc | Annual Report and Accounts 2021
169
Financial Statements Notes to the Company Financial Statements continued
33 Investments
At 1 January 2021
Additions
At 31 December 2021
£’000
351,352
1,622
352,974
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 £1,622,000 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 2021 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
Edenhall Technologies Limited
Locharbriggs Sandstone Limited
Lloyds Quarries Limited
Marshalls Building Materials 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
Non‑trading
Non‑trading
Non‑trading
Non‑trading
Marshalls Building Products Limited
Property management
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*
Non‑trading
Non‑trading
Non‑trading
Non‑trading
Non‑trading
Non‑trading
Intermediate holding company
Marshalls Landscape Products Limited
Non‑trading
Marshalls Landscape Products (North America) Inc.
Landscape Products supplier
Marshalls Mono Limited
Landscape Products manufacturer and supplier and
quarry owner supplying a wide variety of paving, street
furniture and natural stone products
Marshalls Natural Stone Limited
Non‑trading
Marshalls NV
Landscape Products manufacturer and supplier
Marshalls Profit Sharing Scheme Limited
Non‑trading
Marshalls Properties Limited
Marshalls Register Limited
Marshalls Stone Products Limited
Marshalls Street Furniture Limited
Ollerton Limited
Property management
Non‑trading
Non‑trading
Non‑trading
Non‑trading
170
Marshalls plc | Financial statements
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
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
100
66.7
100
100
100
100
100
100
33 Investments continued
Subsidiaries
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
Principal activities
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
Xiamen Marshalls Import Export Company Limited
Sourcing and distribution of natural stone products
* Held by Marshalls plc. All others held by subsidiary undertakings.
Class of share
% ownership
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
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
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
Marshalls NV
Nieuwstraat 4, 2840 Rumst, Belgium
Xiamen Marshalls Import Export Company Limited
12 A4, Xiangyu Building, No. 22, 4th Xiangxing Road,
Xiangyu Free Trade Zone, Xiamen, China
Marshalls plc | Annual Report and Accounts 2021
171
Financial Statements Notes to the Company Financial Statements continued
34 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
35 Debtors
Corporation tax
Amounts owed from subsidiary undertakings
No debtors were due after more than one year.
36 Creditors
Amounts owed to subsidiary undertakings
No creditors were due after more than one year.
Assets
Liabilities
2021
£’000
673
2020
£’000
1,058
2021
£’000
—
2020
£’000
–
1 January
2021
£’000
1,058
1 January
2020
£’000
1,464
Recognised
in income
£’000
Recognised
in other
comprehensive
income
£’000
31 December
2021
£’000
(313)
(72)
673
Recognised
in income
£’000
Recognised
in other
comprehensive
income
£’000
31 December
2020
£’000
(375)
(31)
1,058
2021
£’000
964
—
964
2021
£’000
23,106
2020
£’000
890
3,827
4,717
2020
£’000
—
37 Capital and reserves
Called-up share capital
As at 31 December 2021, the authorised, issued and fully paid up Ordinary Share capital was as follows:
Ordinary Shares
Authorised
2021 and 2020
Issued and paid up
2021 and 2020
Number
Value
£’000
Number
Value
£’000
At 1 January and 31 December
300,000,000
75,000
200,052,157
50,013
Share premium account
The share premium account represents all proceeds received above the share capital cost.
Own shares reserve
Transactions of the Group-sponsored Employee Benefit Trust are included in the Group Financial Statements. The Trust’s purchases
of shares in the Company are debited directly to equity and disclosed separately in the balance sheet as “own shares”. Further details
are included on page 113.
172
Marshalls plc | Financial statements
37 Capital and reserves continued
Capital redemption reserve
The capital redemption reserve records the nominal value of shares repurchased by the Company.
Distributable reserves
The Company’s distributable reserves amount to £168 million (2020: £195 million) at the end of the period.
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 2021 or 31 December 2020.
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
M S Amlin Limited
HDI Global SE — UK
AIOI Nissay Dowa Insurance UK Limited
Aviva Insurance Limited
M S Amlin Limited
Amount
£430,000
£500,000
£575,000
£100,000
£180,000
Period
Purpose
23 Dec 2011 to 30 Oct 2022
Employer’s liability
8 Dec 2020 to 30 Oct 2022
Employer’s liability
8 Dec 2020 to 30 Oct 2022
Vehicle insurance
19 Mar 2014 to 29 Oct 2022
Vehicle insurance
30 Oct 2016 to 30 Oct 2022
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 2021 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 | Annual Report and Accounts 2021
173
Financial Statements Financial History – Consolidated Group
Year ended
31 December 2017
£’000
Year ended
31 December 2018
£’000
Year ended **
Year ended **
31 December 2019
£’000
31 December 2020
£’000
Year ended
31 December 2021
£’000
Consolidated Income Statement
Revenue
Net operating costs (before adjusting items)
Operating profit (before adjusting items)
Adjusting items
Operating profit
Financial income and expenses (net)
Profit before tax (before adjusting items)
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 adjusting items)
EBITDA****
EBITDA (before adjusting items)
Basic earnings per share (pence)
Basic earnings per share (before adjusting items)
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
53,439
—
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
21.5
21.5
12.2
10.2
4.0
454.9
19.1
2017*
£’000
430,194
(376,755)
490,988
(426,154)
541,832
(468,151)
64,834
—
64,834
(1,899)
62,935
62,935
(11,307)
73,681
—
73,681
(3,828)
69,853
69,853
(11,942)
51,628
57,911
51,958
(330)
51,628
66,593
66,593
80,792
80,792
26.3
26.3
14.8
12.0
4.0
464.8
18.0
2018 *
£’000
58,240
(329)
57,911
76,104
76,104
103,875
103,875
29.4
29.4
16.7
4.7
—
860.0
17.1
2019*
£’000
350,035
212,534
562,569
(162,349)
(104,454)
248,055
166,372
414,427
(109,507)
(67,293)
302,785
210,776
513,561
(141,190)
(105,656)
469,454
(442,272)
27,182
(17,809)
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
1.2
8.6
—
4.3
—
748.5
45.0
2020 *
£’000
589,264
(513,106)
76,158
65
76,223
(6,901)
72,070
69,322
(14,424)
54,898
54,806
92
54,898
79,401
79,336
107,139
107,074
27.5
28.6
9.0
14.3
—
699.5
20.8
2021
£’000
324,416
290,013
614,429
(157,158)
(169,423)
332,742
263,230
595,972
(150,634)
(101,021)
237,627
266,715
295,766
287,848
344,317
(24,297)
(37,433)
(59,976)
(75,566)
(41,121)
10.2%
14.0%
20.3%
26.3%
11.9%
* 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 adjusting items.
**** 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.
174
Marshalls plc | Financial statements
Glossary
ABI
Barbour ABI ‑ a provider of construction intelligence data
eNPS
Employee Net Promoter Score - how likely employees are to
recommend an organisation as a good place to work
Alliance 8.7
Organisation supporting eradication of forced labour, modern
slavery, human trafficking and child labour globally
EPDs
Environmental Product Declarations
BEIS
Business, Energy & Industry Strategy
ERP system
Enterprise Resource Planning software system
BES 6001
BRE environmental and sustainability standard
ESOS
Energy Saving Opportunity Scheme
BRE
Independent organisation offering expertise in the built
environment sector
CO2e
Carbon dioxide equivalent - metric tonnes of CO2 emissions with
the same global warming potential as on metric tonne of another
greenhouse gas
CCO
Corporate Criminal Offence - legislation which can hold companies
accountable for tax fraud
CDP
Carbon Disclosure Project
Circular economy
Production model recycling and reusing as much as possible
COP26
UN Climate Change Conference
CO2, CO2e and greenhouse gas emissions
Carbon dioxide emissions. Carbon dioxide (CO2) is the primary
greenhouse gas emitted through human activities.
While CO2 emissions come from a variety of natural sources, human
related emissions are responsible for the increase that has occurred
in the atmosphere since the Industrial Revolution.
“Carbon dioxide equivalent” or “CO2e” is a term for describing
different greenhouse gases in a common unit. For any quantity and
type of greenhouse gas, CO2e signifies the amount of CO2 which
would have the equivalent global warming impact.
Carbon neutral
Carbon neutral is a term used to describe the state of an entity
(such as a company, service, product or event), where the carbon
emissions caused by them have been balanced out by funding an
equivalent amount of carbon savings elsewhere in the world.
Carbon sequestration
Carbon sequestration is the long‑term removal, capture or
sequestration of CO2 from the atmosphere to slow or reverse
atmospheric CO2 pollution and to mitigate or reverse climate change.
Carbon dioxide is captured from the atmosphere through biological,
chemical and physical processes. Concrete building products naturally
absorb CO2. Calculations show that concrete absorbs roughly 30 per
cent of the amount of CO2 that cement production emits over its life.
CPA
Construction Products Association
D365
Microsoft cloud ERP software system
ETI
Ethical Trading Initiative
EVG
Employee Voice Group
FSC certified
Forest Stewardship Council certified from responsibly
managed forests
FTSE4Good
An index of companies scoring highly in corporate social
responsibility measures
GDPR
General Data Protection Regulation
GfK
Company providing data and analytics on consumer goods
GHG
Greenhouse gases
Global warming projections
At 1.5°C warming, about 14 per cent of the Earth’s population will
be exposed to severe heatwaves at least once every five years, while
at 2°C warming that number jumps to 37 per cent.
Extreme heatwaves will become widespread at 1.5°C warming.
ILO
International Labour Organisation
ISO
International Organisation for Standardisation
LDI asset portfolio
Liability Driven Investment asset portfolio ‑ investment needed to
fund future liabilities
Marshalls NOW
An internal news, employee benefits and wellbeing platform
MHFAs
Mental Health First Aiders
MIP
Management Incentive Plan
Mitigation vs adaptation
The difference between climate change mitigation strategies and
climate change adaptation is that mitigation is aimed at tackling the
causes and minimising the possible impacts of climate change.
Adaptation looks at how to reduce the negative effects it has and
how to take advantage of any opportunities that arise.
Marshalls plc | Annual Report and Accounts 2021
175
Financial Statements Glossary continued
Net zero
A net zero company will set and pursue a 1.5°C aligned science-
based target for its full value chain emissions. Any remaining
hard‑to‑decarbonise emissions must be compensated using
certified greenhouse gas removal.
NGO
Non‑Governmental Organisation
NHBC
National House Building Council
PAS 2050
PAS 2050 is the first consensus-based and internationally applicable
standard on product carbon footprinting that has been used as the basis
for the development of other standards internationally. From creation to
disposal; throughout the life cycle. The term is used in a number of
business contexts, but most typically in company’s responsibility for
dealing with hazardous waste and product performance.
PAS 2060
PAS 2060 is the internationally recognised specification for carbon
neutrality and builds on the existing PAS 2050 environmental
standard. It sets out requirements for quantification, reduction and
offsetting of greenhouse gas (“GHG”) emissions for organisations,
products and events.
Product carbon footprints
A lifecycle product carbon footprint measures the total greenhouse
gas emissions generated by a product, from extraction of raw
materials, to end of life. It is measured in carbon dioxide equivalent
(CO2e). Product carbon footprints should be associated with a
scope or boundary, the most common being:
climate science. The SBTi is a partnership between CDP, the United
Nations Global Compact, the World Resources Institute (“WRI”) and
the World Wide Fund for Nature (“WWF”). The SBTi is considered the
gold standard in carbon reduction commitment setting.
Scope 1, 2 and 3 emissions
Scope 1 – all direct emissions
Emissions derived from the activities of an organisation or under
their control. This includes fuel combustion on site, from owned
vehicles and fugitive emissions. Examples include fleet vehicles, gas
emissions from boilers and air-conditioning refrigerant leaks.
Scope 2 – indirect emissions
Emissions derived from electricity purchased and used by the
organisation. Emissions will be created during the production of the
energy and eventually used by the organisation. This includes electricity
from energy suppliers to power computers, heating and cooling.
Scope 3 – all other indirect emissions
Emissions derived from activities of the organisation, but occur
from sources that they do not own or control. This is usually the
largest share of the carbon footprint, especially for office-based
companies, covering emissions associated with business travel,
procurement, waste and water. Examples include plane travel,
shipping of goods and waste disposal.
SDG
Sustainable Development Goal
SECR
Streamlined Energy and Carbon Reporting
SIP
Share Investment Plan
Cradle to gate: This measures the total greenhouse gas emissions
from the extraction of raw materials through to product
manufacture up to the factory gate.
SLAM
Stop, Look, Assess, Manage
Cradle to grave: This measures the total greenhouse gas emissions
from the extraction of raw materials through to the product’s
manufacture, distribution, use and eventual disposal.
Statista
A company providing market and consumer data
QR technologies
Quick Response technology, a type of barcode
RIDDOR
Reporting of Injuries, Diseases and Dangerous Occurrences Regulations
Risk Register
A document used to table risks and responses to those risks
RM&I
Repair, Maintenance & Improvement
SASB
Sustainability Accounting Standards Board
Science-based targets
Science‑based targets are a set of goals developed by a business to
provide it with a clear route to reduce greenhouse gas emissions. An
emissions reduction target is defined as “science based” if it is
developed in line with the scale of reductions that are required to
keep global warming below 1.5°C from pre-industrial levels.
Science Based Targets initiative (“SBTi”)
The Science Based Targets initiative (“SBTi”) defines and promotes
best practice in emissions reductions and net zero targets in line with
climate science. It provides technical assistance and expert resources
to companies which set science-based targets in line with the latest
176
Marshalls plc | Financial statements
SuDS
Sustainable Drainage Systems
TAH
Traffik Analysis Hub
TCFD
Task force on Climate related Financial Disclosures
The Group
All of Marshalls UK and overseas operations
ULEZ
Ultra Low Emission Zone
UNGC
United Nations Global Compact
Verisk Maplecroft
A company providing risk analytics
WDI
Workforce Disclosure Initiative
WEPs
Women’s Empowerment Principles
Shareholder Information
Shareholder analysis at 31 December 2021
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
1,866
476
537
333
228
151
131
62
30
93
%
47.76
12.18
13.74
8.52
5.84
3.86
3.35
1.59
0.77
2.39
Number of
Ordinary Shares
269,118
359,446
910,220
1,184,600
1,613,582
2,414,740
6,841,065
10,551,383
10,971,054
164,936,949
3,907
100.00
200,052,157
%
0.13
0.18
0.45
0.59
0.81
1.21
3.42
5.27
5.48
82.46
100.00
Financial calendar
Preliminary announcement of results for the year ended 31 December 2021
Final dividend for the year ended 31 December 2021
Half-yearly results for the year ending 31 December 2022
Announced
17 March 2022
Payable
1 July 2022
Announcement
18 August 2022
Half-yearly dividend for the year ending 31 December 2022
Payable
1 December 2022
Results for the year ending 31 December 2022
Announcement
Early March 2023
Advisers
Stockbrokers
Numis Securities Limited
Peel Hunt
Auditor
Deloitte LLP
Legal advisers
Slaughter and May
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
CBP011646
The Group’s commitment to environmental issues is reflected in this Annual
Report, which has been printed on Galerie Satin, an FSC® certified material.
This document was printed by Park Communications using its environmental
print technology, which minimises the impact of printing on the environment,
with 99% of dry waste diverted from landfill. Both the printer and the paper mill
are registered to ISO 14001.
Marshalls plc | Annual Report and Accounts 2021
177
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
Marshalls plc, Landscape House,
Premier Way, Lowfields Business Park,
Elland HX5 9HT