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Chairman’s Statement 3
Operating Reviews
Marshall Aerospace 5
Marshall Motor Holdings:
Marshall Motor Group 9
Marshall Leasing 11
Marshall Thermo King 13
Marshall Specialist Vehicles 15
Property Review 16
Corporate Responsibility 17
Financial Review 18
Corporate Governance 20
The Board 23
Directors’ Report 24
Statement of Directors’ Responsibilities 27
Group Profit and Loss Account 28
Group Statement of Total Recognised Gains and Losses 28
Group Statement of Cash Flows 29
Group Balance Sheet 30
Company Balance Sheet 31
Notes to the Financial Statements 32
Report of the Auditors 50
Recent Financial History 51
Notice of AGM 52
AGM Agenda 53
Sir Arthur Marshall OBE DL 54
Key Group Personnel 56
C o n t e n t s
3
I cannot begin my Statement this year
without a reference to the death of our
Honorary Life President, my father Sir
Arthur Marshall, who after an
incredible 103 year innings finally
folded his wings and died peacefully at home early in
the morning of March 16th. The tributes to him have
been pouring in from all over the world and from
some 500 kind colleagues, friends and acquaintances,
to whom we in the Company are all most grateful.
There have also been amazing obituaries in the
national press. Although my father had ‘retired’ in
1989, it was good that we were able to persuade him
to write the history of the wonderful story of the life
of his family and the development of Marshall of
Cambridge in his much sought-after book ‘The
Marshall Story’. We must all be grateful to him for
what he has bequeathed to us in this Company, some
highlights of which are recorded on pages 54-55 of
this report, and it is in our hands to continue to build
further on his legacy.
2006 has been an excellent year for the Group, thanks to the hard work
of our dedicated management and staff.
Our Aerospace activities have continued to grow on the back of the
important HIOS contract which gives such critical support to the Royal
Air Force on its C-130 fleet. Our work in Canada has already resulted in
a sharp reduction in turnaround time for the RCAF C-130 fleet. We are
delighted that our Dutch company has been established to carry out
engineering work in support of our C-130 digitisation and modernisation
programme for the C-130s of the Royal Netherlands Air Force. Our
manufacturing of Airbus wing stringers for the A320 and A330
programmes is exceeding expectations, as is our work for Boeing on
long range integral fuel tanks.
As I write this, we anticipate soon taking delivery of an A400M engine
from Airbus for us to mount and test-fly on a C-130 Hercules which has
been substantially modified for this important task. I was also delighted
that in July we were able to celebrate with Lockheed Martin and
the Royal Air Force the fortieth anniversary of our support for the
C-130, which has been such a success story for all of us and the nation.
At Cambridge Airport we have seen a major increase in the number of
executive jets and are ourselves participating in the rapid growth of this
sector with our work for NetJets on Citations.
Michael Marshall
Chairman and Chief Executive
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C h a i r m a n ’ s S t a t e m e n t
Our Motor Group has had a further tough year but has maintained its
sales penetration levels. The prime focus has been on continuing to
provide our customers with a service second to none. We are pleased to
have reached agreement with the HM Revenue and Customs on the
repayment to us of VAT on demonstrator vehicles.
Specialist Vehicles is now building up its production of the bodies for the
MoD Support Vehicle contract with MAN at our new facility at
Mildenhall, close to the RAF Station which is used by the USAF. We are
involved in a number of important MoD manufacturing and logistics
support programmes.
Marshall Thermo King and VTR, now under the Chairmanship of my son
Robert and led by Nigel Faben, have consolidated their headquarters in
the Quorum building next to Cambridge Airport, from which, with their
twelve depots and one hundred mobile workshops, we are positioning to
provide a first rate service to our customers.
As a result of the increase in profits and reserves, the Board recommends
that the final dividend should be increased to 14p, thereby making a
total payment for the year of 19p.
We have built further on our strong links with the community and have
continued to support many local activities and schools. We have also
maintained our participation in national organisations and charities in the
industries of which we are a part.
Our staff continue to work enthusiastically and I am grateful for all their
support. I was very pleased that John Lander was awarded the MBE in
the New Year’s Honours List for his splendid work in training and leading
apprentices working on our aircraft modernisation programmes.
I am sad, that after almost 52 years work with the Company and 42 years
on the Board of our Group, Peter Hedderwick has finally decided to
retire from the Board at the AGM, at the end of his current term. Peter
has enjoyed the trust of all of us, including my father, and provided a
vital link during the years of transition to me and the next generation of
management. His wise contributions to the development of the business,
and particularly the Aerospace business in which he spent the major part
of his career, will be greatly missed. We are enormously grateful to him
for all that he has done for our Group.
I would again like to thank our shareholders for their encouragement,
our non-executive directors for their support and guidance, and above all
our executive directors, management and staff who continue to ensure
that, whenever possible, we exceed our customers’ expectations. As
always, delighted customers underpin all our endeavours.
5
M a r s h a l l A e r o s p a c e
Turnover was up by 61% on 2005 and the company returned to profit,
recording by far its best result for several years. The most important
element underpinning this growth and improvement was the securing
of a contract with the UK MoD, at the end of May 2006, to provide
enhanced levels of service in support of the Royal Air Force fleet of
C-130 Hercules aircraft.
This programme known as Hercules Integrated Operational Support
(HIOS) tasks Marshall Aerospace to provide support through to the
planned retirement date for the C-130J aircraft (currently 2030) and
requires the company to deliver maintenance, logistic and technical
services sufficient to ensure a set level of daily availability. In
delivering these services the company is partnered with Lockheed
Martin, Rolls-Royce and the MoD Hercules Integrated Project Team,
with Marshall Aerospace taking the lead management role.
Personnel from all the organisations are centred at Cambridge and
new office facilities have been built to cater for the joint working
teams. The contract has a headline value for Marshall Aerospace of
£1.4bn and will save MoD some £171m, over the life of the contract,
as compared with the pre-existing arrangements. HIOS represents a
ground breaking way of working between Industry and Government
and the reputation of Marshall Aerospace has been greatly enhanced
through this innovative approach to partnership.
The company believes that there will be extensive opportunities to
extend the concept of integrated operational support to new and
existing customers and this forms one of the three legs to our
strategy going forward.
The second leg is based on the provision of technology services.
During the course of the last year we have made considerable
progress, in particular in developing our business of providing
specialist fuel tanks. We are now the selected supplier to Boeing on
the 777-200 LR Civil airliner and on the US Navy P8A Multi-
Mission military aircraft. In addition we are undertaking
preliminary design work on tanks for the next generation 737-900
and Boeing Business Jet aircraft. Further opportunities exist to
become a supplier on the US Air Force KC767 military tanker
aircraft. Whilst all these programmes are in the preliminary phases
MARSHALL AVIATION SERVICES
CAMBRIDGE
AERO CLUB
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2006 was a year of significant growth and improvement for Marshall Aerospace.
M a r s h a l l A e r o s p a c e
the potential for high volumes of production orders is good. We are
considering developing a US presence to facilitate the ongoing
delivery of these and similar programmes. Equally encouraging is the
development of our Test Business where enquiries and orders are
growing on a monthly basis.
The third leg of our strategy is based on People Services and I am
pleased to report that Aeropeople has made further strides during the
course of the last year. Of particular significance was the completion
of the acquisition of the Acetech business from Babcock plc.
This acquisition has given a boost to our customer base and the
integrated company now has an average of 400 engineers on contract
at any one time. We will look to supplement this business through
further acquisitions this year. We have also started up an Airfield
Services arm providing air traffic control, fire and airfield
management personnel.
The thrust of Marshall Aerospace strategy is to move the company over
time away from its traditional reliance on runway related volume
towards a broader range of services many of which may not be
delivered from Cambridge. In this respect, we were pleased to open
our Netherlands Design Office, based in Leiden. It is planned that
Marshall Aerospace Netherlands B.V. will be staffed by the end of 2007
with some twenty engineers. They will be carrying out tasks in support
of the Royal Netherlands Air Force and other customers in the region.
In the short to medium term, however, it is essential that Marshall
Aerospace maintains its core strength and the expansion of military
work for a wide range of customers over the past year has been helpful
in this respect. We have progressively effected an exit
from large civil aircraft maintenance where low
margins and lack of consistency of work had led
to this stream of activity
becoming unviable. We do,
however, see real prospects for expanding our Business Jet service and
maintenance business both at Cambridge and at other locations. We
are building a relationship with NetJets the world’s largest operator and
we expect to see our work on Citation aircraft more than double over
the course of the next year.
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M a r s h a l l A e r o s p a c e
In order to focus the organisation better on delivery, the company
has undertaken a major re-organisation. We have broken down our
traditional functional organisation and created a series of business
streams focused on specific markets, each with a designated Head of
Business Unit specifically tasked with developing and growing their
area. These key positions have been staffed through a combination
of internal promotion and external recruitment. As a service
business, it is essential that we put our customers at the heart of our
approach and we continue to count customer service satisfaction as
the single most important non-financial key performance indicator
that we measure. Our customer satisfaction index score continued
to show improvement during 2006.
The expansion of business over the past year, taken together with the
efforts to develop and implement the diversification strategy, has placed
intense pressure on resource but the company has managed to cope
remarkably well despite running
below target personnel numbers
throughout the period. We have
strengthened our Human
Resources team both to help manage
the pressures and to bring all our HR processes into
line with best practice. The emphasis that the company has placed on
training over the past years is certainly standing us in good stead and,
whilst we have made a number of outside appointments during the
year, we have also been in a good position to promote internally.
In summary, Marshall Aerospace has had an extremely busy and
exciting year during which we established a more predictable
throughput of work and created a platform from which we can start to
reshape the business for the medium to long term. This will involve
significant challenges particularly in terms of resource but we are
seeing progress in a number of key areas which is encouraging.
As ever, it will be the company’s service ethic and open approach to
partnership working which will underpin these developments.
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Martin Broadhurst
Chief Executive
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Following a year of relocations and refurbishments, we focused during 2006 on the capabilities of our people, with a
particular emphasis on the operation and the structure of our management team in the Motor Group.
M a r s h a l l M o t o r H o l d i n g s
Our aim is to ensure that our staff have the necessary skills to move the
business forward in a demanding environment over the next decade. In
Marshall Leasing, we completed an acquisition to strengthen this
successful business.
MARSHALL MOTOR GROUP
The Motor Group is positioned as a
regional force in the retail car market. We
also successfully operate in the truck and
commercial vehicle market, but we are
particularly influenced by the
performance of the new car market.
The decline in the new car market
seen in 2005 continued into
2006, yet despite this we
achieved a number of
significant highlights during
the year, spearheaded by
the performance of our
Land Rover dealerships. The
introduction of Discovery 3 and
Range Rover Sport helped our Land Rover
branches perform above expectations. We were particularly pleased to
be rated as the number one Land Rover Dealer Group on performance
during the year in the UK.
Our Vauxhall franchises in the Group also performed well during the
year, especially the Leicester Vauxhall dealership which was the
Group’s top performing branch in 2006. The Vauxhall franchise, which
in recent years has been refocused on retail sales, has performed well
within the Group. Strong performances were also seen from our
Honda, Toyota and Nissan car operations, three brands with which we
are keen to grow our representation.
Our used car performance during the year did not quite reach the level
we had planned, with a sales shortfall in the nearly new market caused,
in our view, by extremely competitive new car pricing.
The new year has started well for our new and used car businesses
throughout the Group despite signs of upward pressure on interest
rates in early 2007. However, we are
susceptible to pressures
both on consumer
spending power and
also long term
environmental issues.
Clearly those
manufacturers involved
in producing large
prestige vehicles are continuing to work very
hard to ensure that their products lose their perception of causing
environmental damage. We have already seen a number of new
products coming through specifically designed to avoid the increasing
costs of high emissions and congestion charges.
One priority during 2006 was reinforcing the capabilities of our
management team. The management structure within head office and
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M a r s h a l l M o t o r H o l d i n g s
the regions was reorganised during the summer, focusing on
streamlining the communication between the Motor Holdings Board
and the branch network. The subsequent performance of the Motor
Group has confirmed that these actions were timely and appropriate.
All of the senior management of the Group have embarked on a
Leadership Development programme specifically designed to help those
managers develop and bring out the best in their dealership teams. In
addition to this training, a robust system of performance reviews has
been introduced throughout the Group. We are intending to develop
further our work with Loughborough University Automotive Academy,
expanding the intake of young people to the Group, who are supported
by Marshall through their BSc degree course in Automotive Retailing.
We are continuing to measure performance of the key elements of our
business to ensure that our performance is in line with our
expectations. We have focused in particular on our market share of the
new vehicle franchises, together with measurement of our stock turns
on used vehicles based on the available display spaces, and
improvements in stock management and sales performance within our
parts business. Our two large parts wholesale operations are now
managed jointly within the Group. Our service departments are
measured on capacity utilisation and growth in labour sales and
associated products, and we appointed a Group Service Development
Manager during the year to ensure that this vital area of our business
continues to prosper. We have seen some tremendous success in the
sale of service plans, add-on products and, in particular, the
development of tyre sales across the Group.
All these key performance indicators are relevant to the business but
without customer feedback they only tell part of the story. During the
last 12 months we have sought and received feedback from 16,000
customers, a number well in excess of anything achieved by the
manufacturers. Encouragingly, when asked the key question of
whether they would recommend us to family and friends, 95% of our
customers said "yes". Whilst pleased with this result, we are not
complacent, and have worked hard to understand the reasoning
behind those who said "no".
The scale of our activity on CSI or customer research resulted in our
winning an Automotive Management award for Excellence in Customer
Service during 2006. We are currently reviewing the whole area of
communication with our customers to ensure that our contact with
them is timely and appropriate. This includes the use of email, SMS text
and the internet. We firmly believe that retention of customers and the
provision to them of a more competitive range of products and services
is the key to the future of this business.
Into 2007, we are continuing to focus sharply on the growth of our
used car business and our after sales operations. We are particularly
working on the development of "all makes servicing" plans to ensure
that capacity in our workshops is fully utilised. The issue of available
land and property to develop further businesses continues to be a
challenge. We are fortunate to have property in key locations in
many of the towns in which we operate, but further
growth and development is
certainly affected by
alternative use values
of suitable sites.
The importance of
good relationships with
our stakeholders in the
business, particularly our
customers, our suppliers and our staff, will
continue to be high on the agenda over the next few
years. We will continue to work hard to attract and retain customers,
and to ensure regular communication with them. Good relationships
with our manufacturing suppliers, together with suppliers of finance, oil,
fuel, etc, will continue to be key to the success of our business. RE
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M a r s h a l l M o t o r H o l d i n g s
The relationships with our staff are crucial to our success and as the
competitive business environment puts increasing demands on them,
we endeavour to ensure that they feel valued and recognised in their
jobs. Staff retention and long service is valued in the business, and we
will continue to recognise long service and exceptional job performance
across the Group.
Marshall Leasing had another excellent year in 2006, delivering a
profit of £1.1m. This represents a 15% increase over 2005, and
shows the continued strength of the business.
During the course of the year, we acquired the vehicle assets and
staff of Gates Contract Hire. This business, a long established and
respected company, shares our focus on customer satisfaction and
retention through high service levels. Indeed, the philosophies of
both companies are remarkably similar. As a result, we are confident
that the combined business will flourish, with the Gates brand being
retained with its own market positioning. The acquisition has added
20% to our funded fleet size, and has been profitable from day one.
This growth has been particularly welcome, as the competitive
environment has remained extremely tough, with the result that
our like-for-like fleet size would otherwise have
diminished slightly.
We have seen some success in new
account opening, and are confident that
we can build on this with further new
clients throughout 2007. Meanwhile, our
focus has been placed strongly on existing
client retention. To this end, we have
developed and launched a number of new products within the year,
thereby enabling us to offer a compelling proposition to both existing
and new clients.
Amongst these, a dramatically improved short term vehicle rental service
has been introduced, and has already been widely welcomed amongst
our client base. Further developments are planned, reflecting our
determination to remain at the leading edge of our industry.
In 2007, the sales environment remains competitive. We will meet the
challenge with confidence, however, knowing that we offer a unique
combination of small company service and large corporation stability.
MARSHALL MOTOR HOLDINGS SUMMARY
Following a testing year in 2006, we have approached 2007 with a
leaner, more focused business. We will continue to look to grow our new
vehicle activities, both within the Motor Group and the Leasing business.
The success of our business however, will increasingly be underpinned
by the continued growth of our aftersales, used car, leasing and
contract hire operations and particularly by the ability of our staff to
offer exceptional customer service in every one of our locations.
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Chief Executive
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M a r s h a l l T h e r m o K i n g
Marshall Thermo King is working hard with Thermo King to re-establish the pre-eminence of their product in the UK.
2006 saw the first significant increase in sales of Thermo King
refrigeration products in the UK for several years, following an
extended period of falling market share. This has come about as a result
of renewed support of the dealer network and improved
competitiveness of the product line. However, this increase in new unit
sales takes time to filter through to aftersales support where Marshall
Thermo King achieves most of its sales and gross margin. The result for
the year was, therefore, disappointing.
The main emphases of the year have been to: strengthen the management
team; complete the process of centralisation of business processes and
the national call centre to the new Cambridge headquarters office; and to
build the relationship with Thermo King so that we can both capitalise on
the increasing unit sales and improving market share. The ultimate aim
of this effort is, of course, to provide the customer with best in class sales
and aftersales support of the best refrigeration products in the market.
TEAM WORK
I was delighted that Nigel Faben transferred
from the Motor Group to become
Managing Director. His
experience as Financial
Director and Aftersales
Director of the Motor
Group has been ideal for
ensuring a disciplined
and spirited approach
to establishing the
Cambridge headquarters.
This included integrating all
back office systems and sales
and aftersales work scheduling
systems with the engineer field communication equipment. One of his
initial tasks was to complete and consolidate the centralisation of our Call
Centre and back office systems.
The result of this integration is a cost effective one-stop-shop service for
our refrigeration customers, for whom speed of repair and minimum
downtime of their refrigerated fleet are of paramount importance.
Over the course of the year, we have seen continuous improvement in
sales, service performance and back office efficiencies. Great credit
must go to all the team for making these difficult changes and
maintaining their focus on the customer throughout.
VTR
VTR has franchise agencies with many tail lift manufacturers, and there
are good opportunities for future expansion. In 2006 VTR improved
sales and gross profit but overall profits were depressed due to the
move at the start of the year to a new headquarters at Aldridge. We
have capacity for higher volumes of work and our efforts are being
concentrated on winning that business in 2007 and improving our
outlook as a result.
CUSTOMER SERVICE
At MTK and VTR we acknowledge that the success of our business is
directly related to the quality of service which we give to our
customers. Every effort is being made to ensure that interaction with our
customers is prompt, courteous and efficient. We can now measure
our response times, monitor periods of down time and record our "first
time fix rates" as well as providing our customers with this information
in a prompt and professional manner.
OUTLOOK
In 2007 we have the opportunity to increase sales through a
resurgence in the competitiveness of the
Thermo King product, better partnership
with Thermo King, greater emphasis on
aftersales, and through a relentless focus
on satisfying our customers’ needs.
As sales develop, we aim to increase the
numbers of tail lifts and refrigeration units
being looked after by our aftersales departments. Our ability to
provide first class support to our customers through our reinvigorated
central support and local teams will strongly affect our performance in
2007. We are determined to improve our relationships with our
customers and Thermo King which should, in turn, translate into an
improved financial performance.
Robert MarshallChairman R
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M a r s h a l l S p e c i a l i s t V e h i c l e s
MSV is currently enjoying a strong order book of long term
design and production contracts for the British Army’s Support
Vehicles and the Watchkeeper aerial surveillance programme.
On the back of a stable order bank, MSV has focused on its military
customers, concentrating on the delivery and support of mission
critical systems. The company has undergone a major management
overhaul to enable employees at all levels to improve project
management controls and business systems. We have also made the
decision to locate the production of the Support Vehicles at a new
facility in Mildenhall equipped with automated welding equipment
and a state-of-the-art metal surface treatment plant. This is the most
significant investment in the company for many years and we look
forward to reaping the rewards over the 10 year life of the contract.
INVESTING IN PEOPLE
Following a comprehensive business review in early 2006, the company
has decided to concentrate on a limited number of core military and
government markets. To facilitate this, the business has been restructured
into a number of streams. Since the start of 2007, the Support Vehicle at
Mildenhall and our unmanned aerial vehicle activities at Cambridge have
been managed as separate subsidiary companies, Marshall Vehicle
Engineering Ltd and Marshall UAV Ltd respectively.
The success of these entities is dependent on the good governance of
the company as a whole and, more importantly, the people that run
them. People are at the heart of MSV’s capability. During the year
considerable progress was made in encouraging project teams to take
full responsibility for project delivery. Training has focused on
increasing cross department co-operation and project management.
A philosophy of continuous improvement is now an accepted part of
the MSV culture, and through this approach significant improvements
have been realised in the company’s bid process, procurement and
IT systems.
VEHICLE ENGINEERING
The ability to manage complex projects, delivering on time and to cost
is key to our future success. Over the past year increased emphasis has
been placed on developing our teams by way of establishing dedicated
project rooms and processes. An example of progress has been on the
design, testing and manufacture of the load beds for the Army’s Support
Vehicle Programme. This has been managed in conjunction with the
establishment of the new 120,000 square feet factory at Mildenhall,
housing one of the largest electro-phosphating plants within the UK
and state-of-the-art robotic welding equipment. This new facility has
been brought in on time and to budget.
MILITARY ENGINEERING
In our traditional markets of providing military customers with shelter
based systems and vehicle engineering, it has been a busy time with a
broad workload. We progressed well into the design and prototype phase
of the ground systems for the Watchkeeper aerial surveillance programme.
The company completed the design and manufacture of the prototype
stretcher handling system for the Boxer armoured vehicle being procured
for the Dutch Army. Other specialist shelter systems were designed and
manufactured for Sweden, reviving a long-standing relationship.
In addition to MSV’s traditionally recognised capabilities in the design
and manufacture of shelters and specialist vehicles, the company has also
demonstrated the ability to provide valuable assistance to prime
contractors in the field of human factors and safety engineering. This has
enabled MSV to engage with customers on a broad front from an early
stage in major programmes. In this respect, our specialist engineering
department at Petersfield has had a good year and has fulfilled customer
expectations and its prime role within MSV with enthusiasm and aplomb.
SUMMARY
In 2006, we used the stable order bank to restructure and rationalise the
company. We invested in our people and built up our capability to
manage large complex projects within budget and to the satisfaction of
our customers. We invested heavily in our new factory at Mildenhall
which will be unique in scale and capability in the UK. The company
has developed well in the year and is starting to meet expectations.
For 2007 the priorities will be to ensure that the investment in the Support
Vehicle at Mildenhall starts making the expected return, the continuation
of the development of our people together with the enhancement of our
project management capabilities, and the building of the long term order
bank in our key military markets.
Robert MarshallChairman
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P r o p e r t y R e v i e w
The Carter Group has built a number of major buildings for the Group andthe most recent result of this successful relationship is Phase II of the AircraftSupport Centre which has been completed on time and within budget. TheCarter Group is another very large East Anglian family-owned business whichalso believes in the benefits of developing long term relationships.
In the summer of 2006 the multi-million pound programme to replace theAirport Works oil fired heating system with a much more efficient localisedgas fired heating plant was completed. The improvement to the local airquality around Cambridge Airport has been welcomed by the local councils.
In the summer of 2006 the Cambridge City Local Plan was adopted and thishas confirmed that the 115 hectares of Cambridge Airport that lie within theCity boundaries should be removed from the Green Belt and allocated forhousing if the flying activities of Marshall Aerospace can be relocated.
The remainder of Cambridge Airport falls within the South CambridgeshireDistrict Council area and a Public Inquiry is due to take place in the summerof 2007 to consider the removal of the remainder of the Airport from theGreen Belt and its allocation for housing. The Council’s draft Cambridge EastArea Action Plan, which will be considered at this Public Inquiry, proposesthe building of about 10,000 houses on Marshall-owned land.
Marshall has confirmed that if the Cambridge East Area Action Plan isapproved then it will be willing to release its land for housing, providing thatsuitable alternative sites can be found for the Marshall businesses which
would need to be relocated, and that the development is of a high qualitythat enhances the City.
In 2006, Marshall Specialist Vehicles won a major contract with partners toprovide support vehicles to the British Army. To provide state-of-the-artfacilities for this important contract, MSV has established a newmanufacturing facility in Mildenhall.
This development has been enthusiastically supported by Forest HeathDistrict Council, which is also encouraging Marshall Aerospace to relocatesome of its aviation activities to land adjacent to RAF Mildenhall rather thanan alternative possible relocation site in Wyton.
We have been working in partnership with a local housing developer toredevelop a two acre site in Cambridge. In December 2006, Marshall andthe developer received planning permission for the construction of 113apartments on this site. Work is underway to refurbish and extend existingpremises on Marshall-owned land north of Newmarket Road in Cambridge toprovide space for the relocation of the businesses which are currentlyoperating from this site.
During the year the Motor Group sold surplus premises in Spalding andPeterborough which generated an exceptional profit of £153,000. Itcontinues to invest in refurbishing its premises and there was a majorrefurbishment of its Vauxhall franchise in Peterborough, which wascompleted in early 2007.
The Cambridge office and housing markets have continued to improve and asa result the directors have incorporated a revaluation increase of our propertyassets of £1.35m into the financial statements.
Jonathan Barker
Company Secretary
2006 was a year during which the property interest of the Marshall Group continued to benefit from a number
of important long term relationships.
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C o r p o r a t e R e s p o n s i b i l i t y
The Marshall Group of Companies values its important relationships with its staff,
customers, suppliers and the local communities in which it operates.
SKILLS DEVELOPMENT
The Company’s commitment to the ongoing development of employee skills continues, recognising that
continued investment in this important area strengthens individuals and the Group’s future.
The range of skills development programmes running throughout the Company continues to extend from full
apprenticeships and induction for new starters to the honing of advanced leadership skills for senior managers
and includes the ongoing development of product, technical and management skills in all areas of the
businesses, including the BSc Degree in Automotive Retailing which the Motor Group is supporting at
Loughborough University.
Recognition on a local, national, or even international level encourages individuals and businesses to strive
for ever greater challenges and we continue to be delighted by the number of awards that recognise
individual or business success.
Our active Human Resources teams work alongside our operational management teams to help ensure
that we continue to attract, recruit and retain the very best people in the business. We seek to employ
people who reflect the diverse nature of society and we value our people and their contribution,
irrespective of their age, gender, disability, sexual orientation, race, colour, religion or ethnic origin.
COMMUNITY
Most of the Company’s employees are drawn from the local communities within which our businesses are
based. For the Motor Group, these communities are also our customers. The Group, therefore, remains
committed to the development and maintenance of close relationships with the local community at all
levels from local charitable projects to district or regional initiatives.
Marshall employees from across the Group continue to be actively involved in many aspects of local
community life in a variety of largely voluntary roles, including as school governors, magistrates, youth
organisation leader and as charity volunteers. The Group also continues to encourage employees to
support a number of national charities and events such as: the Macmillan Cancer Relief Biggest Coffee
Morning; the Red Nose Day in aid of Comic Relief; and the BBC’s Children in Need.
HEALTH, SAFETY & ENVIRONMENT
Maintaining high standards in the area of Health & Safety and the Environment remains a high priority.
We continue to invest significantly in new and revised systems and processes to ensure that we
consistently meet our obligations in each of these areas.
Globally, concern for the environment is gaining momentum; in particular regarding the impact that
mankind is having on climate change. As part of good business practice and our commitment to understand
better our role in managing our own impact on the environment, the Marshall Group continues to invest in
new initiatives to reduce the emissions generated by the Company in the course of our business. This has
included the complete upgrade of our heating systems at the Cambridge Airport site to modern, highly
efficient gas-fired boiler systems with state-of-the-art computerised thermostatic control systems.
We are very proud that Marshall Aerospace has been awarded, for the second consecutive year, a Gold
Medal by RoSPA, recognising five years of continuous improvement.
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18
F i n a n c i a l R e v i e w
The profit before tax for the Group for 2006 was a record £18.5m.
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RESULTSGroup sales increased over 10% to £633m following the award of theHIOS contract to Marshall Aerospace and a general increase in activitylevels for the engineering companies, although the climate for motorretail sales remained challenging.
Gross profits increased by nearly 19% to £142m representing a returnof 22.4% on sales, well up on the 20.8% achieved in 2005. MarshallAerospace was the catalyst for this improvement, although MarshallSpecialist Vehicles saw an increase here too.
Exceptional property profits, principally on the sale of the formerVolvo premises in Peterborough and Spalding, were only £153,000but the main exceptional item, included in cost of sales, was the VATrecovery of £1.8m in respect of two claims against HMRC togetherwith interest of £2m.
The pre tax profit of £18.5m is the highest profit the Group has everreported and has been achieved with trading conditions still difficult forsome subsidiaries.
DIVIDENDSPreference dividends amounting to £744,000 were paid to preferenceshareholders during the year. The directors increased the interimdividend to ordinary shareholders in respect of 2006’s results to 5pper share and this was paid out in January, 2007. In view of the results,the Board is recommending a final dividend of 14p. This wouldrepresent a total dividend on ordinary shares of 19p in respect of 2006.If the final dividend is approved by shareholders at the AGM, it wouldbe the intention to pay this on 29th June 2007.
It is important to reiterate that, as a private company, we have limitedaccess to external funds, other than by way of borrowing or loans,generally from the banks. Accordingly, the Group has to generate andretain sufficient post-tax profits to fund future investments, as well asgrowth in the business. It is, therefore, the Group’s policy to try toensure that dividends are well covered by post tax earnings.
GROUP ACCOUNTING POLICIESThere have been no new Financial Reporting Standards to adopt in2006 so the Group’s financial statements have been drawn up on abasis consistent with previous years and in accordance with the latestrequirements applicable to us.
Shareholders will be aware from last year’s report that for the UK, and,for that matter, the rest of the EC, International Accounting Standards
(IAS) and International Financial Reporting Standards (IFRS) becamemandatory for all listed or quoted companies from 2005. Although theGroup is not required to comply, we have evaluated the implications forthe Group of adopting these Standards. No decision has, as yet, beenmade to change but the Board continues to keep this issue under review.
TAXATIONThe Group tax charge at 34.9% is above the statutory rate of 30%,principally because of certain expenses not allowed for tax and also theeffect of there being restricted allowances on the purchase of land andbuildings. The Group has been able to utilise in 2006 certain taxationlosses brought forward from 2005. A full analysis and reconciliation ofthe tax charges is given in Note 8 on page 36.
In accordance with FRS 19, the deferred tax accounting standard, wecontinue to recognise deferred tax in the financial statements. This can besimply explained as taxation charges, reliefs or benefits which will beincluded in future years’ financial statements. Where recovery is notassured, such as Industrial Building Allowances which the Government hasrecently indicated will now be phased out by 2011, an asset is not booked.
GOODWILLIntangible assets acquired in the year amounted to £0.4m as a result ofthe purchase of Acetech by Aeropeople. The policy for goodwill is tocapitalise and then write-down the assets over the years in which it isexpected results will benefit.
NET ASSETSThe Group net assets were increased to nearly £138m at the end of2006. The carrying value of the Group’s principal investmentproperty, the Quorum, rose from £9.0m to £9.5m following animprovement in the Cambridge commercial property market and therevaluation surplus of £1.3m on this, and the other investmentproperties, was credited to the revaluation reserve thereby increasingnet assets.
Group total reserves are now over £122m of which only £5.3mrepresents revaluation surpluses or capital profits.
Net current assets, namely our net working capital and cash balances,increased during the year, as the increase in profitability outstrippedcash being invested in fixed assets, which, nevertheless, increased to£113.5m (2005 - £105.5m) reflecting the continued commitment toinvest for the future.
PENSIONSThe Group’s defined benefit scheme, the “Plan” had shown a funding
4002002
£490m
£536m
£605m
£574m
£633m
2003 2004 2005 2006
450
500
550
600
650
Turnover (£m)
110
115
120
125
130
135
140
2002 2003 2004 2005 2006
Net assets (£m)
19
F i n a n c i a l R e v i e w
deficit of £2.4m in April 2005. Since then, the Group has invested afurther £0.75m and there has been an improvement in the marketssuch that at 5th April, 2006 there was a surplus of £0.8m.
For accounting purposes, however, the above valuation which informsthe Company and the Trustees of the recommended funding position,is no longer the relevant valuation methodology. FRS 17, which wasadopted fully for the first time in 2005, mandates that all liabilitiesshould be valued by reference to the yield attainable on AA ratedCorporate Bonds. This valuation takes no account of where the assetsof the pension fund are actually invested, or of the yields currently andprospectively to be earned on those assets. On this basis, the deficit at31st December 2006 (not April 2006) was estimated at £1.96m beforetax (and £1.4m after tax relief). The improvement from the £4m deficitin 2005, arose from the additional contributions and the improvementin the markets although the increase in yield on corporate bonds from4.74% in 2005, to 5.16% had a smaller impact than would beexpected. The Board and the Pension Fund Trustees are very closelyaligned in addressing and continuing to monitor and manage thefunding challenges as well as taking account of the best interests of the employees.
CASH FLOWThe Group ended 2006 with cash balances of just over £23m, anincrease of £8.5m over 2005 and a sound position. This cashimprovement was achieved without restricting any essential investmentfor the future. Rigorous reviews, however, of the return or pay back arecarried out for all capital projects, other than those deemed essential inorder to comply with operating regulations or legislative requirements.
The investment in fixed assets amounted to £29.9m compared with£31.7m in 2005. Only £1.8m of this was on property developmentswith a further £8.2m on equipment and technological improvementsand a continuing spend of £18.4m gross (£13.6m net) on the Leasingfleet including the acquisition of the Gates fleet which increased thefleet size to 3,598.
TREASURY MANAGEMENTThe Group Finance function continues to manage, centrally, our mainGroup banking relationships. It is also responsible for monitoring,controlling and reviewing the management of the Group’s loans, cash,currency and interest risk for the benefit of the Group and subsidiarycompanies. The function is not set up as a profit centre but one whichis meant to mitigate cost and risk for the benefit of the tradingsubsidiaries in the Group.
The Group, once again, became a net receiver of interest reflecting thehigher level of cash balances throughout the year, as well as interestrelating to the tax rebate.
Group borrowings were largely stable in the year, reducing slightlyfrom £25.6m to £24.8m. The main movements were in Leasing loans,whilst a further £1m was repaid on the loan taken out in 2003 to helpfund the purchase of the TMS assets. Notes 19 and 28 give furtheranalysis of loans and cash flow.
The Group trades not only in Sterling but in a number of othercurrencies, principally US Dollars and the Euro. Managementendeavours to identify, monitor, measure and control likely currencyexposures within the Group’s trading operations. Where it is possibleto protect trading margins against the adverse impact of currencymovements, forward exchange cover is considered.
KEY PERFORMANCE INDICATORSThere are a number of Key Performance Indicators ("KPIs") bothfinancial and non-financial used by the individual companies to gaugeperformance. The diversity of the nature of the Group’s businessesmeans that few are applicable for every company. Accordingly, as aGroup, we set a number of specific KPIs against which we canmonitor individual or Group performance in the monthly managementaccounts. These are measured and reported on monthly to the Board.
The principal measures used to monitor the Group’s results areachieving a minimum return on capital employed of 12.5% and areturn on sales of at least 2% which were both accomplished in 2006.At company level, the former remains a target but the latter is too higha threshold for the motor retail businesses and too low a target for theengineering companies and therefore only works as an amalgam forthe Group.
There are also two primary cash measures. The first is for the Group tobe cash generative in any three year period after allowing for normalcapital expenditure but excluding acquisitions or major developments.The second target is to ensure that available cash and borrowingfacilities are at least 5% of turnover. Again, in 2006 both of thesewere achieved. All subsidiary companies are monitored on their cashgenerative performance and use of Group facilities.
Non-financial KPIs, particularly customer satisfaction measures, arereferred to in the various subsidiary operating reviews.
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Bill Dastur
Group Financial Director
28%3%(4%)
(45%)
(27%)
(24%)
62%
Land & buildings
Plant & machinery
Motor vehicles
Hire & Leasing fleet
7%
2006 (2005) Capital expenditure analysis
15
20
25
30
35
2002 2003 2004 2005 2006
Gross capital expenditure (£m)
CORPORATE GOVERNANCE
The Combined Code on Corporate Governance applies only to those
companies listed on the London Stock Exchange which are obliged to
implement the various guidelines. However, the Group continues to
endeavour to apply the highest standards of corporate governance and
has implemented the recommendations, where it is considered both
practical and appropriate for a private company.
Set out below are the arrangements which have applied during 2006.
THE WORKINGS OF THE BOARD
Eleven directors served during the year, ten at the year end, including
five experienced non-executive directors. The Board has overall
responsibility for the Group; it is responsible for setting the Group’s
strategic aims, ensuring that sufficient resources are available for the
Group to meet its objectives as well as monitoring executive
management. The Board is accountable to the shareholders for the
performance and activities of the Group.
The Board has a formal schedule of matters required to be brought to
it for its decision. Such matters include: monitoring the Group’s
businesses and their performance; developing strategy; approval of
major investments, acquisitions and disposals; approval of major
contracts, board and senior management appointments; corporate
governance; dividend policy; and the endorsement of Group policy in
important areas.
The Board delegates executive responsibility to management for the
Group’s performance in order to ensure that the business is managed
in a fit and proper manner in keeping with its values and business
principles. The Board has put in place an organisational structure with
formally defined lines of responsibility and there are clear limits on the
authority, which the Group’s businesses and individuals have, to make
financial commitments. Directors receive detailed briefing papers,
including monthly management accounts prior to each meeting to
enable them to perform their role effectively.
The Board and its principal committees met regularly during the year.
The timetable is set at the beginning of the year so as to ensure that
sufficient regular meetings are scheduled and other meetings held, as
required, in order for the Board and the committees to discharge their
respective duties sufficiently. In 2006, in addition to the AGM, the
Board held ten regular meetings.
The Board has established procedures to allow individual directors to
seek independent professional advice at the Company’s expense for
the furtherance of their duties. All directors have access to the services
of the Company Secretary who is responsible for ensuring compliance
with relevant procedures, rules and regulations. There are also
procedures in place for the induction and training of new directors.
BOARD INDEPENDENCE
The non-executives bring a wide range of experience to the Board and
participate fully in key decisions facing the Group. They are all
considered by the Board to be independent of management and free
from any business, or other relationship, which could materially
interfere with the exercise of independent judgement.
PDN Hedderwick and JCG Stancliffe were appointed to the Board in
1965 and 1992 respectively. Their length of service exceeds the nine
years referred to in the Combined Code. The Board considers,
however, that the experience and long association of both the
directors with the Group provide a valuable contribution to the
Board, given the long term nature of the business. In particular, they
have both continued to demonstrate a strong independence of
management in the manner in which they discharge their
responsibilities as directors. Accordingly, the Board has decided that,
in the absence of any other relevant factors, both should be
considered independent non-executive directors.
In the few instances where a director has not been able to attend a
Board or committee meeting, this has been due to a prior commitment
or for reason of illness. In such circumstances, it has been the normal
practice for his/her comments on the papers to be relayed to the
chairman in advance. The number of meetings of the Board and the
Audit Committee, held during the year, and directors’ attendance
thereat, is given below:
DIRECTORS’ ATTENDANCE AT MEETINGS OF THE BOARD AND
AUDIT COMMITTEE DURING 2006
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C o r p o r a t e G o v e r n a n c e
Meetings Holdings Board Audit Committee Attended Held* Attended Held*
MJ Marshall 10 10NV Barber 9 10MT Broadhurst 10 10WCM Dastur 10 10PDN Hedderwick 10 10RM Knight 10 10RD Marshall 8 10Sir Ralph Robins 8 10 4 4FAL Robinson 4 5 2 2SJ Sillars 10 10JCG Stancliffe 10 10 4 4
*During the period a director was in office or a member of the audit committee
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C o r p o r a t e G o v e r n a n c e
DIRECTORS’ AND OFFICERS’ LIABILITY INSURANCE
The company purchased and maintained a directors’ and officers’
liability insurance policy throughout 2006. Although a director’s
defence costs may be met, neither the company’s indemnity nor
insurance provides cover in the event that he or she is proved to have
acted fraudulently or dishonestly.
BOARD COMMITTEES
In accordance with the principles of good corporate governance, the
following committees, all of which have written terms of reference,
have been established by the Board.
AUDIT COMMITTEE
The Audit Committee met four times during 2006. Its members are
independent, non-executive directors under the chairmanship of JCG
Stancliffe. While the audit committee members are not considered to
have "recent" financial experience, as recommended by the Combined
Code, in common with all the non-executive directors, the members
of the Audit Committee are experienced individuals, and the Board
considers that they have the requisite skills and attributes to enable the
Audit Committee to properly discharge its responsibilities.
A key function of the Audit Committee is to monitor the control
environment through reports to it from the Group Finance function
and the internal and external auditors. Its responsibilities include
advising and reporting to the Board after each meeting on its review of
the internal and external audit processes, presentation of the financial
results, the review of the success of any major capital acquisition or
capital expenditure, the review of progress on major contracts and
reviewing the performance, independence and objectivity of the
external auditors.
The Group Financial Director, the external audit partner and the
internal auditor attend each meeting at the request of the committee
chairman. The committee also met with the external auditor, without
the executive management being present.
The committee received reports from the Group Financial Director
concerning the Group’s accounting treatment of various issues
including provisions, pensions and the revaluation of fixed assets. The
committee were satisfied that such liabilities and contingencies were
appropriately reflected in the financial results.
The committee evaluated the performance of the external auditors and
enquired into their independence and objectivity. The external auditors
are engaged to express an opinion on the financial statements. They
review and test the systems of internal financial control and the data
contained in the financial statements to the extent necessary to express
their audit opinion. They discuss with management the reporting of
operational results and the financial position of the Group and present
their findings to the Audit Committee. The auditors regularly rotate the
partners assigned to the audit. In 2007, the Group has been advised
that the current engagement partner who has completed six years on
the audit will be replaced. After review, the Audit Committee has
recommended to the Board that the re-appointment of the auditors be
proposed to shareholders at the Annual General Meeting to be held in
2007. Internal audit’s work is focused on areas of priority as identified
by the risk profiles. During the year, internal audit has, in conjunction
with the management teams of each of the subsidiaries, continued to
develop the risk profiles for those operating subsidiaries, together with
a group level risk assessment. These assessments have enabled the
Audit Committee to review the effectiveness of the system of internal
control in operation for managing significant risks throughout the year.
The reports describe the significant risks identified together with an
assessment of the effectiveness of management’s controls. The
continuing development of the systems and processes to identify,
manage and address these risks is also covered.
The committee approved the annual internal audit plan to be
undertaken during the year. Regular reports of audit findings and
management responses were reviewed in detail. Discussions of these
reports contributed to the committee’s view of the effectiveness of
company’s internal control framework.
NOMINATIONS COMMITTEE
The Nominations Committee which met twice during the year has
responsibility for overseeing that appropriate procedures are in place
for the nomination, selection and training of directors as well as
ensuring the right balance between executive and non-executive
directors with an appropriate blend of skills and training. All new
appointments to the board are based on the recommendation of the
Chairman and Nominations Committee and approved by the entire
board. There are also procedures in place for the proper induction and
training of new directors.
EXECUTIVE REMUNERATION
The Chairman has a Remuneration Committee to advise him in the
process of setting and reviewing executive remuneration. This met on
two occasions during 2006. Operating subsidiary Chief Executives and
the Group Financial Director have service contracts, which are
terminable by no longer than twelve months’ notice given by either
party thereto.
22
C o r p o r a t e G o v e r n a n c e
AGM
The Chairman, the executive directors and board committee chairmen
were present at the 2006 AGM and available to answer shareholders’
questions or to hear their views.
INTERNAL CONTROL
The Board has established what it believes is an appropriate control
environment through the definition of the organisational structure and
authority levels.
The key features of the Group’s internal control system are: an
organisational structure at head office and at subsidiary level which
clearly defines responsibilities; an annual budgeting process,
supported by regular forecasts; monthly detailed management
accounts with a report to the Board; an internal audit function; control
of capital expenditure through budgets and authorisation levels;
defined procedures for investment and treasury management; detailed
matrix levels of authority; Board approval of significant investments,
acquisitions and disposals; and policies for health, safety and
environment which are applicable to the whole Group.
During the year, the Audit Committee received and reviewed reports
from both the internal and external auditors. In the Board’s view, the
information the Board received was sufficient to enable it to review the
effectiveness of the systems of internal control.
GOING CONCERN
In accordance with the Combined Code, the directors, having made
appropriate enquiries, consider that adequate resources exist for the
Group to continue in operational existence for the foreseeable future
and that, therefore, it is appropriate to adopt the going concern basis
in preparing the financial statements.
ETHICS POLICY
In 2006, the Board approved and issued a Code of Business Ethics to
all employees of the Group. This document sought to encapsulate and
combine in one document the various Group policies and guidelines
in place. It seeks to ensure the Group’s commitment to the highest
ethical standards in all its dealings and provides a framework and
decision tree to guide members of staff. There is also a confidential
disclosure mechanism for reporting serious breaches of this code.
HEALTH & SAFETY POLICY
The Group is committed to safeguarding the health and safety of its
employees, customers, contractors and visitors to the Group’s premises,
and the community. Subsidiaries employ health and safety advisers for
the implementation of the Group’s health and safety policies. The
Group’s policies are kept under review and include procedures that:
• Ensure that all sites meet all legal and company health and
safety requirement;
• Strive to eliminate unsafe practices at all locations;
• Promote high standards of safety awareness through
employee involvement and management commitment at
each location;
• Minimise danger to local communities; and
• Provide an immediate and effective response in the event of
accidents and emergencies.
THE ENVIRONMENT
All Marshall operating companies are required to conform to the
relevant legislation and codes of practice. In addition, companies
adopt integrated environmental management systems which
specifically focus on minimising pollution by:
• Controlling emissions to air, land and water;
• Reducing the consumption of energy;
• Managing waste to maximise re-cycling;
• Improving the awareness of, and training to, employees in
environmental best practice.
ADVISERS
AUDITORS Ernst & Young LLP SOLICITORS Greenwoods / Rustons & Lloyd / Eversheds / Bird & Bird BANKERS Barclays Bank PLC
PROPERTY ADVISERS Bidwells PENSION AND ACTUARIAL ADVISERS Buck Consultants INSURANCE BROKERS Willis
REGISTERED OFFICE Airport House Newmarket Road Cambridge CB5 8RY REGISTERED NUMBER 2051460
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EXECUTIVE DIRECTORS NON-EXECUTIVE DIRECTORS
M.J. MARSHALL CBE DL * o
Appointed to main Board in 1960
Having joined the Group in 1955, he was appointed aDirector in 1957. In 1963 he was appointed ManagingDirector of the Motor Group. In 1990, he became Chairmanand Chief Executive of the whole Group. He is a DeputyLieutenant of Cambridgeshire, Honorary Air Commodore ofNo 2623 (East Anglian) Squadron RAuxAF, President of TheAir League, a Fellow of the Royal Aeronautical Society, aCompanion of the Institute of Management and a VicePresident of the Institute of the Motor Industry and of theEngineering Employers’ Federation, and President of theFund for Addenbrooke’s. Aged 75.
M.T. BROADHURST OBE FRAeS C.Dir Appointed 1996
Having joined the Group in 1975, he was appointedManaging Director of Marshall Aerospace in 1996 and ChiefExecutive in 1999. He is also Chairman of Connexions forCambridgeshire and Peterborough. Aged 53.
W.C.M. DASTUR FCA Appointed 1996
Formerly a partner with Ernst & Young, he joined theGroup and the Board in 1996 as Group FinancialDirector. He acts as Chairman of the Trustees for theGroup’s various pension funds. He is also Chairman ofEly Cathedral Finance Investment Advisory Committeeand a Fellow of the Royal Society for the Encouragementof Arts, Manufactures and Commerce. Aged 54.
R.M. KNIGHT Appointed 1996
He has over 30 years of motor industry experience,working for both manufacturers and retailers, includingVolvo Concessionaires, Rover Group and Henlys. Hejoined the Group in 1989 as Regional Director, waspromoted to Managing Director of Marshall MotorHoldings in 1995 and is now Chief Executive. He sits onthe National Franchised Dealer Association StrategyCommittee and the DTI-sponsored Retail Motor StrategyGroup. Aged 58.
R.D. MARSHALL Appointed 2000
He joined Marshall Aerospace in 1995 and wasappointed a Director in 1999 before moving to MarshallSpecialist Vehicles as Chief Executive in 2000. He wasappointed Chairman of Marshall Specialist Vehicles fromJanuary 2006 and Chairman of Marshall Thermo Kingfrom January 2007. Aged 44.
COMPANY SECRETARYJ.D. BARKER AIB ACIS
Formerly with Lloyds Bank plc before joining the MarshallGroup in 1976. He is a member of the Institute of Bankersand the Institute of Chartered Secretaries andAdministrators and was appointed Company Secretary ofthe Group in 1993. He is Company Secretary of allprincipal Group companies and the Audit Committee.Aged 56.
P.D.N. HEDDERWICK CBE FRAeS Appointed 1965
Formerly Managing Director of Marshall Aerospace. Hewas appointed CBE in 1989 and elected a Fellow of theRoyal Aeronautical Society in 1995. Aged 74.
J.C.G. STANCLIFFE * ✝ Appointed 1992
Deputy Chairman of Marshall of Cambridge (Holdings)Limited and Chairman of the Audit Committee. Formerly aDirector of S. G. Warburg Group and Mercury AssetManagement Group. Aged 75.
N.V. BARBER * Appointed 2000
Formerly an Executive Director of Smiths Industries,responsible for their aerospace activities and prior to thatsuccessively Managing Director of the Weapons Systemsand Military Aircraft divisions of British Aerospace. PastPresident of the SBAC. Aged 67.
S.J. SILLARS Appointed 2004
Sarah has been the Chief Executive of The Institute ofMotor Industry since 2002. Prior to this appointment shewas the Operations Director of Anne Gray Associates aleading Management Consultancy to the Motor Industry.She is a member of the DTI's Retail Motor Strategy Group,Fellow of the IMI and a Freeman of the City of London. Aged 48.
23
T h e B o a r d
✝ Member of the Audit Committee
* Nomination Committee
oRemuneration Advisory Committee
SIR RALPH ROBINS DL FREng FRAeS ✝ oAppointed 2004
He retired as Chairman of Rolls-Royce plc in January2003, and is a former Chairman of Cable & Wireless plcand the Defence Industries Council. He is also a formerPresident of the Society of British Aerospace Companiesand Director of several international companies. He is aDeputy Lieutenant of Derbyshire and a Freeman of theCity of London. Aged 74.
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24
DIRECTORS’ REPORT
The directors present their report and financial statements for the year ended 31st December, 2006.
RESULTS AND DIVIDENDSThe Group recorded a profit after tax and minority interests for the year of £12,060,000 (2005 - £1,816,000). An interim dividend of 5.0p was paid on 15th January, 2007and the directors recommend a final ordinary dividend in respect of the year of 14p per share, which, in accordance with FRS 21, is not shown as a liability in the financialstatements as it has been proposed after the balance sheet date and will be included in the financial statements for 2007. Preference dividends on the ‘A’ and ‘B’ preferenceshares amounting to £744,000 were accrued and paid during the year.
PRINCIPAL ACTIVITIESThe activities of the Group consist principally of the business of car and commercial vehicle sales, distribution, service, hire and associated activities, together with generalengineering connected with aircraft and military systems.
REVIEW OF THE BUSINESS AND FUTURE DEVELOPMENTSIn contrast with 2005, 2006 was a record year for the Group. The Group produced the highest pre-tax profit in its 98 year history on the back of a strong set of results fromMarshall Aerospace. Improvement in the order take position for the engineering companies in 2006 contributed to higher levels of activity and, coupled with the benefit ofcontracts won towards the end of 2005, contributed to a much improved performance. The motor retail market, nationally, fell again which was reflected in low operatingprofitability in the Motor Group, although the Leasing operations held up well and produced another good set of results. Marshall Thermo King had a difficult year withsignificant restructuring at senior management level, operations and in the administrative areas. These changes should provide a platform for a better performance in 2007.VTR fell back slightly in 2006 as it moved its headquarters into new premises and upgraded its computer support systems. Exceptional property profits were low although theresults for the Motor Group were boosted by a settlement with HMRC on a long running VAT claim in respect of demonstrator bonuses.
The Group entered 2007 with an improved long term order book for its engineering businesses, although the prospects for the motor retail market continue to remain mixedwhilst vehicle and refrigeration support activities also face a challenging and competitive environment. The Group remains focused on structuring its cost base to match currentactivity levels as well as ensuring the appropriate amounts of investment are made in its businesses, facilities and people to provide a solid base for future success. This isreinforced by the commitment to balance short term performance with long term sustainability through capital expenditure on property and infrastructure improvements aswell as a profit improvement and enhancement initiatives.
The Group uses a series of Key Performance Indicators to measure performance both at a Group and company level. These include returns on sales, return on capital employed,interest cover and cash generation measures as well as order intake, unit sales, service absorption and utilisation measures. These are explained further in the individualoperating and financial reviews earlier in this report. However, a principal measure of improving customer service and satisfaction remains paramount to all our business andunderpins the ongoing business ethos of the Group.
The Group undertakes an annual assessment of the risks and uncertainties facing the Group as a whole and each of its principal trading subsidiaries. This is carried out byoperational management and a summary of the main risks is set out below.
Further details on the Group’s principal businesses and their prospects for the future can be found in the operational reviews of the subsidiaries included earlier in this report.
RISK ASSESSMENTThe risk management process is designed to identify, manage and mitigate business risk. Regular reporting of these risks and the monitoring of actions and controls is conductedby the Audit Committee, which reports its findings to the Board. This process is described in the Corporate Governance section on pages 20 to 22.
The factors described below highlight risks and uncertainties which affect the Group but are not intended to be an exhaustive analysis of all the potential risks which may arisein the ordinary course of business or otherwise. Some risks may be unknown to the Group and other risks, currently regarded as immaterial, could turn out to be material.
Business conditions, general economy and Government policyThe profitability of the Group’s businesses could be adversely affected by a worsening of general economic conditions in the UK. Factors such as unemployment, the level ofvolatility of equity markets, interest rates, exchange rates, and inflation could all impact the markets in which we operate and reduce demand whilst action taken by the UKgovernment relating to the taxation of private cars and the availability and cost of credit could significantly affect the market for the sale of new and used motor cars. In thecase of new car sales during a period of economic downturn, there is likely to be an oversupply of vehicles leading to reduced margins. Whilst a short term worsening ineconomic conditions in the UK should not significantly adversely impact in our various aftersales business, a sustained downturn over a number of years would be likely tolead to reduced profits in these businesses. Equally, a reduction in defence spending by the Government or a change in procurement policy would have a marked impact onthe engineering businesses which could lead to reduced orders, activities and, thus, our ability to absorb fully current levels of overheads. Over a prolonged period this wouldhave a detrimental effect on performance, profitability and, possibly, employment levels.
Complexity of major projectsMarshall Aerospace and Marshall Specialist Vehicles undertake highly complex projects involving design, development and integration of major aircraft systems and military systemsrespectively. Underestimation of the technical content and requirements could lead to cost and schedule overruns impacting both financial performance and customer confidence.
Labour marketThe UK aerospace skills base is under pressure with falling numbers available in the engineering resource pool. Aerospace is a highly labour intensive industry and Marshallcontinues to invest strongly in training to protect itself from this threat to its business.
Franchises and agreementsWe operate motor car franchises as well as refrigeration and tail lift franchises and aircraft servicing agreements. Franchises are awarded to us and the failure to continue to
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DIRECTORS’ REPORT
hold franchises could result in a significant reduction in the profits of the Group due to our inability then to source new car stock to sell, perform warranty repairs or carry outmaintenance activity.
Vehicle manufacturer dependenciesWe depend on the vehicle manufacturers’ financial condition, marketing, vehicle design, production capabilities, reputation, management and industrial relations. Althoughwe do not depend on any single vehicle manufacturer, a failure by a manufacturer, as with MG Rover a few years ago, could lead to significant losses. Vehicle manufacturersprovide sales incentive, warranty and other programmes that are intended to promote new vehicle sales. A withdrawal or reduction in these programmes would have anadverse impact on our business.
Regulatory compliance riskThe Group is subject to a regulatory compliance risk which can arise from a failure to comply fully with the laws, regulations or codes applicable, for example, those set outby the Civil Aviation Authority, the Ministry of Defence, the Health and Safety Executive and Financial Services Authority as well as local authorities. Non-compliance canlead to fines, enforced suspension from sales of general insurance products or public reprimand or, in the extreme, closure of parts of our business.
CompetitionThe global markets in which the Group operates are highly competitive. Innovative competition for corporate and retail clients and customers comes both from incumbentplayers and a steady stream of new market entrants, particularly in the aerospace and vehicle engineering businesses. The landscape is expected to remain highly competitivein all areas, which could adversely affect the Group’s profitability if the Group fails to continue to retain and attract clients and customers.
Certain Group companies compete with other franchised operations, private buyers and sellers, internet based dealers, independent service and repair shops and manufacturerswho have entered the retail market. Motor Group competes for the sale of new and used vehicles, the performance of warranty repairs, non warranty repairs, routine maintenancebusiness and for the provision of spare parts. The principal competitive factors in service and parts sales are price, customer database, familiarity with a manufacturer’s brandsand models and the quality of customer service. We also compete with a range of financial institutions in arranging finance for vehicle purchases. Some of our competitors mayhave greater resources and lower overhead and sales costs. This could lead to our failure to be able to compete and result in a reduction in our profitability.
Reliance on certain members of management and staffThe Group is dependent on members of its senior management team and skilled personnel and the future financial well-being of the Group could depend in part on our abilityto attract and retain highly skilled management and personnel. The loss of the service of a number of such individuals could have a material adverse effect on the business.Additionally, if we fail to recruit and retain skilled staff it may not be possible to continue to grow the business.
Failure of information systemsOur businesses are dependent on the efficient and uninterrupted operation of our information technology and computer systems, which are vulnerable to damage or interruptionfrom power loss, telecommunications failures, sabotage, vandalism or similar misconduct. Whilst the Group has put in place insurance cover and also contingency and disasterrecovery plans in order to mitigate the impact of such failures it can never be certain that these plans could cover every eventuality or situation or fully recompense every loss.
Reliance on the use of significant estimatesMarshall Leasing enters into leasing arrangements whereby it agrees to repurchase vehicles from their lessees or providers of lease finance at the end of the lease agreement whichare typically two to four years in the future. The repurchase price is determined at the time the agreement is entered into based on the then estimate of a vehicle’s future residualvalue. The actual value of the vehicles at the end of the lease contract and therefore the profits that the company can realise from their eventual sales could vary materially fromthese estimates due to changes in either the popularity or the reliability of the brand. Marshall Thermo King enters into long term contracts with some of its customers wherebyit undertakes to provide maintenance and repair services on refrigeration equipment for fixed monthly fees. The income and costs arise or are incurred in different periods andthe resulting profit or loss can vary depending upon the reliability and usage of the equipment, risks which are outside the direct control of Marshall Thermo King.
FINANCIAL RISKSLiquidity and financing Liquidity and financing risks relate to the ability to pay for goods and services required by the Group to trade on a day-to-day basis. The main sources of financing facilitiesare from banks by way of borrowing facilities and from suppliers by way of trade credit. A withdrawal of financing facilities or a failure to renew them as they expire couldlead to a significant reduction in the trading ability of the Group.
Cash forecasts identifying the liquidity requirements for the Group are produced regularly and are reviewed regularly by the Group Finance function and the Board to ensurethat the Group has sufficient cash resources or facilities for at least a 12 month period. The Group’s policy is to maintain a minimum level of facilities and ensure the fundingof the Leasing fleet is achieved partly by debt matched in its maturity to the life of the vehicles leased out. As at 31 December, 2006, the Group had cash balances of over£23m and available facilities of £15m.
Exchange rate riskThe Group’s approach to exchange rate risk is explained further in the Financial Review.
Interest rateThe Group’s policy is to maximise interest recoverable whilst managing and monitoring the potential interest rate on borrowings. The use of derivative financial instruments,such as interest rate swaps, are considered but rarely used and the principal mechanism has been to borrow on both a fixed and floating rate basis.
CounterpartyThe Board’s policy is to limit exposures by setting credit limits for each counterparty. Surplus cash is invested in short term financial instruments and only deposited withcounterparties with minimum credit rating of AA.
26
DIRECTORS’ REPORT
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The interests of the directors of Marshall of Cambridge (Holdings) Limited and their families in the shares of the Company at 1st January 2006 were:
Ordinary shares of £1 each
8% ‘A’ cumulative preference shares of £1 each
10% ‘B’ cumulative preference shares of £1 each
As trustee
3,521,750
2,452,333
1,812,500
M.J. Marshall*
Beneficially
522,000
348,000
201,000
As trustee
-
-
60,000
J.C.G. Stancliffe
Beneficially
647,500
240,000
180,000
As trustee
29,500
50,333
11,500
W.C.M. Dastur
The interests of the directors of Marshall of Cambridge (Holdings) Limited and their families in the shares of the Company at 31st December, 2006 were:
Ordinary shares of £1 each
8% ‘A’ cumulative preference shares of £1 each
10% ‘B’ cumulative preference shares of £1 each
M.J. Marshall* J.C.G. StancliffeR.D. Marshall** W.C.M. Dastur
*M. J. Marshall has a life interest in one half of the income from 2,446,098 ordinary shares, 1,630,732 8% ‘A’ cumulative preference shares and 1,223,049 10%‘B’ cumulative preference shares out of the totals referred to above in the trustee column.
**R.D. Marshall has a life interest in one eleventh of the income from 1,015,092 ordinary shares, 677,268 8% ‘A’ cumulative preference shares and 507,951 10%‘B’ cumulative preference shares out of the totals referred to above in the trustee column.
As trustee
3,521,500
2,462,666
1,829,333
Beneficially
522,000
348,000
201,000
As trustee
-
-
60,000
Beneficially
10,380
-
-
As trustee
1,045,402
737,934
536,284
R.D. Marshall**
Beneficially
1,000
-
-
As trustee
1,045,402
727,601
519,451
Beneficially
652,520
240,000
180,000
As trustee
29,500
60,666
28,333
DIRECTORSThe directors who served during the year were:-
At the forthcoming Annual General Meeting, N.V Barber, Sir Ralph Robins and P.D.N Hedderwick retire by rotation. N.V Barber and Sir Ralph Robins, being eligible, offer
themselves for re-election; P.D.N Hedderwick is not seeking re-election. F.A.L Robinson retired at the Annual General Meeting on 7th June 2006.
M.J. Marshall CBE DL (Chairman)
J.C.G. Stancliffe (Deputy Chairman)
N.V. Barber
M.T. Broadhurst OBE
W.C.M. Dastur
P.D.N. Hedderwick CBE
R.M. Knight
R.D. Marshall
Sir Ralph Robins DL
F.A.L. Robinson
S.J. Sillars
Pensions The Group maintains a variety of pension schemes including a defined benefit scheme, the Plan. The pension fund liabilities of the Plan are balanced by a portfolioof assets, which leaves potential risk around the mortality rate, wage inflation and return on assets. In addition, actions by the Pensions Regulators or the Trusteesand/or any material revisions to the existing pension legislation could require increased contributions by the Group to the Plan.
TaxThe Group is subject to the tax laws in all countries in which is operates. Tax risk is the risk associated with changes in tax law or in the interpretation of tax law.It also includes the risk of changes in tax rates and the risk of failure to comply with procedures required by tax authorities. Failure to manage tax risks could leadto an additional tax charge. It could also lead to a financial penalty for failure to comply with required tax procedures or other aspects of tax law.
Health, safety and the environmentThe Group faces health and safety risks due to the scale of its operations. It is committed to maintaining high standards of health and safety, and its processes reflectthis risk. Further information on the approach to health and safety is available in the Corporate Responsibility section on page 17.
The Group’s activities have an impact on the environment. The need for action to tackle climate change was further emphasised in the Stern Review published in2006 and the Group is studying the implications of this.
FIXED ASSETSThe Group invested £29.9m in new assets and businesses during 2006 (2005 - £32.0m). The Group’s freehold investment properties were informally revalued onan open market basis by the directors, as at 31st December, 2006 at £11,575,000. A revaluation surplus of £1,315,000 has been taken to the revaluation reserve.Other tangible fixed assets’ details and movements can be found in note 13 to the financial statements.
DIRECTORS’ AND OFFICERS’ LIABILITY INSURANCEThe Company has continued to effect directors’ and officers’ insurance in respect of all the directors of the Company and its subsidiary undertakings.
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DIRECTORS’ REPORT
EMPLOYMENT POLICIESThe Group is committed to its Equal Opportunities programme covering recruitment and selection, training and development, appraisal and promotion. The Grouprecognises the diversity of its employees, its customers and the community at large and seeks to use employees’ talents and abilities to the full. This approachextends to the fair treatment of employees with disabilities in relation to their recruitment, training and development. Full consideration is given to the retention ofstaff who become disabled during employment.
The Group recognises the importance of good communications and relations with its employees and the requirements of the Information and Consultation ofEmployees Regulations 2004. It is Group policy to keep employees as fully informed as possible on matters which affect them through communication procedures,which include regular briefings, consultative committees and through its regular Group newsletter, Teamwork. These arrangements are continually being reviewedand updated to ensure the Group meets the latest standards.
During the year, a series of meetings was held between management and employee representatives to discuss performance and to enhance information flow.
SOCIAL POLICYThe Group takes its responsibilities to its employees, customers and shareholders seriously, as well as its wider social responsibilities. The Group has a policy of notmaking donations to political groups, parties or individuals, but has a positive policy of supporting, selectively, charities and organisations which benefit either thecommunities in which the Group operates or the industries in which the Group works.
POLITICAL AND CHARITABLE CONTRIBUTIONSThe Group made various charitable contributions during the year totalling £195,000 (2005 - £29,000). There were no political donations.
DISCLOSURE OF INFORMATION TO THE AUDITORSSo far as each person who was a director at the date of approving this report is aware, there is no relevant audit information, being information needed by theauditor in connection with preparing its report, of which the auditor is unaware. Having made enquiries of fellow directors and the Group’s auditor, each directorhas taken all the steps that he/she is obliged to take as a director in order to made himself/herself aware of any relevant audit information and to establish that theauditor is aware of that information.
AUDITORSA resolution to re-appoint Ernst & Young LLP as auditors will be put to the members at the Annual General Meeting.
BY ORDER OF THE BOARD
J. D. BarkerSecretary23rd April, 2007
The directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations. Company lawrequires the directors to prepare financial statements for each financial year. Under that law, the directors have elected to prepare the financial statements inaccordance with UK Generally Accepted Accounting Practice (UK Accounting Standards and applicable law). The financial statements are required by law to give atrue and fair view of the state of affairs of the Group and of the Company and of the profit or loss of the Group for that period. In preparing those financialstatements, the directors are required to:
• select suitable accounting policies and then apply them consistently;• make judgements and estimates that are reasonable and prudent;• state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; and• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group will continue in business.
The directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at any time the financial position of the Group and theCompany and to enable them to ensure that the financial statements comply with the Companies Act 1985. They are also responsible for safeguarding the assets ofthe Group and the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The directors are responsiblefor the maintenance and integrity of the corporate and financial information included on the Group’s websites. Legislation in the UK governing the preparation anddissemination of financial statements may differ from legislation in other jurisdictions.
STATEMENT OF DIRECTORS’ RESPONSIBILITIES IN RESPECT OF THE FINANCIAL STATEMENTS
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GROUP PROFIT AND LOSS ACCOUNTfor the year ended 31st December, 2006
TURNOVER: continuing operations
Cost of sales
GROSS PROFIT
Distribution and selling costs
Administrative expenses
Other operating income
GROUP OPERATING PROFIT / (LOSS): continuing operations
Share of operating loss in joint venture
TOTAL OPERATING PROFIT / (LOSS): GROUP AND SHARE OF JOINT VENTURES
EXCEPTIONAL ITEMS:
Profit on disposal of fixed assets
PROFIT ON ORDINARY ACTIVITIES BEFORE INVESTMENT INCOME, INTEREST AND TAXATION
Income from investments
Interest receivable
Interest payable and similar charges
Other finance income
PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION
Tax on profit on ordinary activities
PROFIT ON ORDINARY ACTIVITIES AFTER TAXATION
Minority interests
PROFIT FOR THE FINANCIAL YEAR ATTRIBUTABLE TO THE MEMBERS OF THE PARENT COMPANY
BASIC AND DILUTED EARNINGS PER ORDINARY SHARE
2005
£000
574,042
(454,401)
119,641
(5,826)
(115,343)
86
(1,442)
(2)
(1,444)
4,180
2,736
6
402
(2,088)
166
1,222
598
1,820
(4)
1,816
14.6p
2006
£000
633,207
(491,131)
142,076
(5,717)
(119,212)
92
17,239
-
17,239
153
17,392
2
2,980
(2,110)
258
18,522
(6,462)
12,060
-
12,060
154.3p
Notes
2
2/3
4
5
6
29
8
9
PROFIT ON ORDINARY ACTIVITIES AFTER TAXATION excluding share of profits of joint venture
Share of joint venture’s profit on ordinary activities after taxation
Profit on ordinary activities after taxation attributable to shareholders
Unrealised surplus on revaluation of investment properties
Actuarial profit / (loss) net of tax
TOTAL RECOGNISED GAINS AND LOSSES FOR THE YEAR
Prior year adjustments
TOTAL RECOGNISED GAINS AND LOSSES SINCE LAST ANNUAL REPORT
2005
£000
1,813
7
1,820
1,142
(1,151)
1,811
(2,693)
(882)
2006
£000
12,060
-
12,060
1,315
977
14,352
-
14,352
GROUP STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES for the year ended 31st December, 2006
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GROUP STATEMENT OF CASH FLOWSfor the year ended 31st December, 2006
Cash inflow from operating activities before contribution to the pension fund
Contribution to the pension fund
NET CASH INFLOW FROM OPERATING ACTIVITIES
RETURNS ON INVESTMENTS AND SERVICING OF FINANCE
Interest received
Interest paid
Interest element of finance lease rental payments and stock finance
Preference dividends paid
CORPORATION TAX PAID
CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT
Payments to acquire tangible fixed assets
Payments to acquire intangible fixed assets
Payments to acquire investments
Receipts from sales of tangible fixed assets
Receipts from sales of fixed asset investments
ACQUISITIONS AND DISPOSALS
Purchase of subsidiary undertaking
Net cash acquired with subsidiary undertaking
EQUITY DIVIDENDS PAID
NET CASH INFLOW / (OUTFLOW) BEFORE FINANCING
FINANCING
New loans
Repayment of loans
Capital element of finance lease rental payments
INCREASE / (DECREASE) IN CASH AT BANK AND IN HAND
2005
£000
18,603
(1,325)
17,278
415
(1,280)
(798)
(744)
(2,407)
(1,701)
(31,508)
(208)
(7)
9,089
106
(22,528)
(312)
65
(247)
(1,027)
(10,632)
13,838
(13,687)
(37)
114
(10,518)
Notes
28
10
28
28
28
28
28
29
2006
£000
39,076
(750)
38,326
750
(1,399)
(711)
(744)
(2,104)
(2,176)
(29,480)
(416)
(2)
6,136
-
(23,762)
-
-
-
(1,027)
9,257
13,776
(14,564)
46
(742)
8,515
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FIXED ASSETS
Intangible assets
Tangible assets
Investments:
Investment in joint venture:
Share of gross assets
Share of gross liabilities
Other investments
Total investments
Other investments
TOTAL FIXED ASSETS
CURRENT ASSETS
Stocks
Debtors
Cash at bank and in hand
CREDITORS: amounts falling due within one year
NET CURRENT ASSETS
TOTAL ASSETS LESS CURRENT LIABILITIES
CREDITORS: amounts falling due after more than one year
PROVISIONS FOR LIABILITIES
PENSION LIABILITY
MINORITY INTERESTS
CAPITAL AND RESERVES
Called up share capital
Revaluation reserve
Capital redemption reserve
Profit and loss account
On behalf of the Board:
M. J. Marshall )
)
)Directors
W. C. M. Dastur )
23rd April, 2007
2005
£000
2,018
103,498
29
(18)
11
331
342
105,858
69,398
61,353
14,784
145,535
(105,652)
39,883
145,741
(17,523)
(15)
(2,807)
(32)
125,364
15,733
3,834
130
105,667
125,364
2006
£000
1,967
111,510
29
(18)
11
324
335
113,812
65,906
80,598
23,299
169,803
(125,917)
43,886
157,698
(17,191)
(1,231)
(1,372)
(32)
137,872
15,733
5,149
130
116,860
137,872
Notes
12
13
14
15
16
28
17
18
21
29
22
23
23
23
GROUP BALANCE SHEETat 31st December, 2006
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FIXED ASSETS
Tangible assets
Investments
TOTAL FIXED ASSETS
CURRENT ASSETS
Debtors
Cash at bank and in hand
CREDITORS: amounts falling due within one year
NET CURRENT ASSETS
TOTAL ASSETS LESS CURRENT LIABILITIES
CREDITORS: amounts falling due after more than one year
PENSION LIABILITY
CAPITAL AND RESERVES
Called up share capital
Capital redemption reserve
Profit and loss account
On behalf of the Board:
M. J. Marshall )
)
)Directors
W. C. M. Dastur )
23rd April, 2007
2005
£000
177
16,379
16,556
13,574
11,324
24,898
(10,644)
14,254
30,810
(2,000)
(2,807)
26,003
15,733
130
10,140
26,003
2006
£000
210
16,372
16,582
18,638
20,216
38,854
(27,936)
10,918
27,500
(1,000)
(1,372)
25,128
15,733
130
9,265
25,128
Notes
13
14
16
17
18
22
23
23
COMPANY BALANCE SHEETat 31st December, 2006
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Accounting convention and basis of preparationThe Group financial statements have been prepared under the historical cost convention, as modified by the revaluation of investment properties, and
comply with all applicable accounting standards.
Basis of consolidationThe Group financial statements consolidate the financial statements of the Company and its subsidiary undertakings, all of which are made up to 31st
December, each year, together with the Group’s share of results of joint ventures. Other investments are held in the balance sheet at cost. No profit and
loss account is presented for the parent company as provided by Section 230 of the Companies Act 1985.
TurnoverTurnover comprises group sales and charges for services rendered during the year, excluding value added tax, trade discounts and inter-company sales,
except in the case of long term work in progress, where turnover represents the value of work done during the year.
GoodwillPurchased goodwill arising on the acquisition of businesses or subsidiary undertakings, is capitalised as an intangible asset and amortised on a straight
line basis over an appropriate period representing its useful economic life but not exceeding 20 years. Where a business is sold, or where goodwill has
been impaired, the net book value of goodwill or the amount of impaired goodwill, as applicable, is charged through the profit and loss account in the
year of disposal or impairment.
DepreciationDepreciation is provided on fixed assets, other than freehold land and investment properties, at rates calculated to write off the cost or valuation, less
estimated residual value, based on prices prevailing at the date of acquisition or revaluation, of each asset evenly over its expected useful life, as follows:
Freehold buildings:
Residential properties 50 years
Garage properties 25 years
Hangars 20 years
Runway 20 years
Offices 15 - 40 years
Temporary shelters 5 years
Leasehold land over lease term
Leasehold improvements over lease term
Plant and equipment 3 - 8 years
Motor vehicles (except short term hire vehicles and leased vehicles) 3 - 4 years
Vehicles on lease to customer over lease term
Aircraft 10 - 20 years
Vehicles acquired, whether by purchase or finance lease, for the purpose of letting under lease contracts, are depreciated evenly over the period of the
lease contract to reduce the original cost to the estimated residual value at the end of the lease.
The carrying values of tangible fixed assets are reviewed for impairment periodically if events or changes in circumstances indicate the carrying value
may not be recoverable.
Investment propertiesCertain of the Group’s properties are held for long term investment. In accordance with SSAP 19, such investment properties are included in the balance
sheet at valuation and the aggregate surplus or deficit is transferred to a revaluation reserve. No depreciation is provided in respect of
investment properties.
Although the Companies Act would normally require the systematic annual depreciation of fixed assets, the directors believe that this policy of not
providing depreciation or amortisation is necessary in order for the financial statements to give a true and fair view since the current value of investment
properties, and changes in that current value, are of greater importance rather than a calculation of systematic annual depreciation.
1. ACCOUNTING POLICIES
NOTES TO THE FINANCIAL STATEMENTSat 31st December, 2006
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1. ACCOUNTING POLICIES (continued)
LeasesAssets obtained under finance leases and hire purchase contracts are capitalised in the balance sheet and depreciated as set out above.
The interest element of the rental obligations is charged to the profit and loss account over the period of the lease and apportioned under a
declining balance method.
Rentals paid under operating leases are charged to income on a straight line basis.
Where assets are leased out under finance leases, the amount due from the lease customer is recorded in the balance sheet at the amount of the net
investment in the lease. The total interest under finance leases is allocated to accounting periods under a declining balance method.
Rental income from operating leases is recognised on a straight line basis over the period of the lease.
Foreign currenciesMonetary assets and liabilities denominated in foreign currencies are translated at the rate of exchange ruling at the balance sheet date or the forward
contract rate, if appropriate. Transactions in foreign currencies are recorded at the rate ruling at the date of the transaction. All differences are taken to
the profit and loss account.
StocksStocks and work in progress are valued at the lower of cost and net realisable value. In the case of work in progress, cost includes, where appropriate,
labour and attributable production overheads. Long-term contract work in progress is stated at cost, as defined above, less amounts transferred to the
profit and loss account, provision for any known or anticipated losses and payments on account received and receivable.
Profit on long term contracts is taken, as the work is carried out, if the final outcome can be assessed with reasonable certainty. The profit included is
calculated on a prudent basis and the resulting turnover together with related costs are recorded as the contract progresses.
Stocks held on consignment are accounted for in the balance sheet when the terms of a consignment agreement and commercial practice indicate that
the principal benefit of owning the stock (the ability to sell it) and principal risks of ownership (stockholding cost, responsibility for safe-keeping and
some risk of obsolescence) rest with the Group.
Research and developmentResearch and development expenditure is written off as incurred, except that development expenditure incurred on an individual project is carried
forward when its future recoverability can reasonably be regarded as assured. Any expenditure carried forward is amortised in line with the expected
future sales from the related project.
TaxationThe charge for taxation is based on the profit for the year and takes into account taxation deferred because of timing differences between the treatment
of certain items for taxation and accounting purposes.
Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date where transactions or events
that result in an obligation to pay more, or a right to pay less, tax in the future have occurred at the balance sheet date, with the following exceptions:
• provision is made for gains on disposal of fixed assets which have been rolled over into replacement assets only where, at the balance sheet date,
there is a commitment to dispose of the replacement assets.
• provision is made for the tax which would arise on remittance of the retained earnings of overseas subsidiaries only to the extent that, at the balance
sheet date, dividends have been accrued as receivable.
• deferred tax assets are recognised only to the extent that the directors consider that it is more likely than not that there will be suitable taxable profits
from which the future reversal of the underlying timing differences can be deducted.
Deferred tax is measured on a non-discounted basis at the tax rates which are expected to apply in the periods in which timing differences reverse, based
on tax rates and laws enacted, or substantively enacted, at the balance sheet date.
NOTES TO THE FINANCIAL STATEMENTSat 31st December, 2006
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PensionsThe Group operates a number of different pension funds, including both defined contribution and defined benefit schemes, for employees of the Group.The assets of all the schemes are held in separately administered trust funds. For the defined contribution schemes, contributions are charged to theprofit and loss account as they become payable in accordance with the rules of the schemes.
For the defined benefit scheme regular valuations are prepared by an independent professionally qualified actuary. These determine the level ofcontributions required to fund the benefits set out in the rules of the plan and allow for the periodic increase of pensions in payment. The regular servicecost of providing retirement benefits to employees during the year, together with the cost of any benefits relating to past service, is charged to operatingprofit in the year.
A credit representing the expected return on the assets of the retirement benefit schemes during the year is included within other finance income. Thisis based on the market value of the assets of the schemes at the start of the financial year. A charge representing the expected increase in the liabilitiesof the retirement benefit schemes during the year is also included within other finance income. This arises from the liabilities of the schemes being oneyear closer to payment.
The difference between the market value of assets and the present value of accrued pension liabilities is shown as an asset or liability in the balancesheet net of deferred tax. Differences between actual and expected returns on assets during the year are recognised in the statement of total recognisedgains and losses in the year, together with differences arising from changes in assumptions and are disclosed as actuarial gains or losses net of tax.
Post balance sheet eventsThe financial statements take into consideration events occurring between the year end date and the date of their approval by the Board of Directors,as indicated on the balance sheet. In accordance with FRS 21 equity dividends on ordinary share capital are recognised as a liability in the period inwhich they are declared.
The Group operates in the principal markets of the sale, distribution, hire and associated activities in relation to cars and commercial vehicles; aerospace,
military and civilian systems engineering and property rental. An analysis of turnover, operating profit and net assets is given below.
Analysis by business:
Cars and commercial vehicles
Aerospace, military and civilian systems engineering
Property and investment
Unallocated net liabilities
Segmental net assets comprise the non-interest bearing operating assets less the non-interest bearing operating liabilities. They, therefore, exclude assets
in respect of cash, fixed asset investments and current asset investments as well as liabilities in respect of dividends, corporation tax, overdrafts and loans,
which together are disclosed as unallocated net liabilities.
Unallocated net liabilities comprise:
Fixed asset investments
Corporation tax
Deferred tax
Interest
Dividends
Cash
Loans and financing
A geographical analysis has not been given since, in the opinion of the directors, this would be seriously prejudicial to the Group’s activities.
2005
£000
81,847
37,823
14,832
134,502
(9,138)
125,364
2005
£000
342
1,675
240
-
(448)
14,784
(25,731)
(9,138)
2006
£000
81,421
50,689
7,601
139,711
(1,839)
137,872
2006
£000
335
(1,116)
(1,059)
2,212
(521)
23,299
(24,989)
(1,839)
2005
£000
3,823
(5,511)
246
(1,442)
-
(1,442)
2006
£000
3,179
14,158
(98)
17,239
-
17,239
2005
£000
437,203
135,690
1,149
574,042
-
574,042
2006
£000
430,501
201,565
1,141
633,207
-
633,207
Turnover Operating profit / (loss) Net assets
2. SEGMENTAL ANALYSIS
NOTES TO THE FINANCIAL STATEMENTSat 31st December, 2006
1. ACCOUNTING POLICIES (continued)
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NOTES TO THE FINANCIAL STATEMENTSat 31st December, 2006
Operating profit / (loss) is after charging / (crediting):
Auditors’ remuneration - audit fees
- taxation fees
- other fees
Depreciation - owned assets
- leased assets
Amortisation - goodwill
Operating lease rentals - plant and machinery
- land and buildings
Finance lease rental income - motor vehicles
Profit on disposal of tangible fixed assets
Profit on disposal of fixed asset investments
Total credited to profit on ordinary activities before tax
Tax credit on exceptional profit
Bank interest receivable
Interest receivable on tax repayments and other rebates
Share of joint venture’s interest
Interest receivable
Bank loans and overdrafts
Finance lease charges
Stock finance charges
Interest payable and similar charges
2005
£000
286
164
23
15,570
61
330
128
1,558
(352)
2005
£000
4,104
76
4,180
(249)
2005
£000
393
6
3
402
2005
£000
1,290
8
790
2,088
4. EXCEPTIONAL ITEMS
5. INTEREST RECEIVABLE
6. INTEREST PAYABLE AND SIMILAR CHARGES
3. OPERATING PROFIT / (LOSS)2006
£000
343
188
44
16,732
68
467
103
1,736
(453)
2006
£000
153
-
153
-
2006
£000
938
2,042
-
2,980
2006
£000
1,399
10
701
2,110
The loss dealt with in the financial statements of the parent company was £8,000 (2005 - profit of £2,051,000).
7. PROFIT ATTRIBUTABLE TO MEMBERS OF THE PARENT COMPANY
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(a) Analysis of tax charge / (credit) for the year
UK corporation tax charge / (credit) on the profit / (loss) for the year
UK corporation tax adjustment in respect of prior years
Share of joint venture’s tax
Overseas tax
Current tax charge / (credit)
Deferred tax charge
Total tax charge / (credit)
2005
£000
(981)
(642)
(6)
88
(1,541)
943
(598)
1,222
367
641
(156)
(335)
(1,234)
7
-
(609)
(270)
48
(1,541)
2006
£000
4,853
(39)
-
153
4,967
1,495
6,462
18,522
5,557
874
(716)
82
-
-
(791)
(39)
-
-
4,967
8. TAX ON PROFIT ON ORDINARY ACTIVITIES
NOTES TO THE FINANCIAL STATEMENTSat 31st December, 2006
2005
£000
(155)
372
372
155
744
734
293
1,771
2006
£000
(155)
372
372
155
744
734
366
1,844
9. EARNINGS PER ORDINARY SHARE
10. DIVIDENDS
Dividends on preference shares:
Accrual for dividend due in period 16th October to 31st December, 2005
Paid 15th April, 2006
Paid 15th October, 2006
Accrual for dividend due in period 16th October to 31st December, 2006
Dividends on ordinary shares:
10.0p per share paid on 30th June 2006 (1st July 2005 - 10.0p)
5.0p per share paid on 15th January 2007 (13th January 2006 - 4.0p)
Aggregate dividends declared during the year
(b) Factors affecting current tax charge for the year
Profit on ordinary activities before tax
Profit on ordinary activities before tax at 30%
Effects of:
Expenses not deductible for tax purposes
Capital allowances in excess of depreciation
Short term timing differences
Chargeable gains not recognised
Losses carried forward
Utilisation of losses brought forward
Adjustments in respect of prior years
Indexation allowance
Overseas tax
Current tax charge / (credit)
(c) Factors that may affect future tax charges
No provision has been made for deferred tax on gains recognised on revaluing property to its market value, or on the sale of properties where taxable gains have been
rolled over into replacement assets. Such tax would become payable only if the properties concerned were sold without it being possible to claim rollover relief. The total
amount unprovided in respect of these two elements is £5,727,000 (2005 - £5,392,000). At present, it is not envisaged that any tax will become payable in the foreseeable
future. In addition, the group has not recognised a potential deferred tax asset of £483,000 (2005 - £454,000), being the element of the full potential deferred tax asset that
relates to capital allowances on buildings. The asset will be recoverable only if, in the year or years in which it is realised, the Group has sufficient taxable profits and the
Government has recently signalled its intention to phase out this allowance by 2011.
The Company is a close company within the provisions of the Income and Corporation Taxes Act, 1988.
Basic earnings per ordinary share are calculated by dividing the profit after tax and minority interests, after deducting preference dividends, of £11,316,000(2005 - £1,072,000) by 7,332,500 (2005 - 7,332,500) ordinary shares, being the average number of ordinary shares in issue during the year. Dilutedearnings per share are calculated in the same way as currently there is no commitment to issue shares in the future.
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(a) Group staff costs
Wages and salaries
Social security costs
Other pension costs
The average monthly number of employees of the Group during the year was made up as follows:
Cars and commercial vehicles
Aerospace, military and civilian systems engineering
(b) Directors’ emoluments
Emoluments
Long term incentive payments
Company contributions paid to defined benefit pension schemes
Contributing members of defined benefit pension schemes
The amounts, including profit related payments, in respect of the highest paid director, for whom there were no
company pension contributions in either year, were as follows:
Emoluments
2005
£000
89,836
9,015
3,110
101,961
No.
1,906
1,663
3,569
£000
1,711
9
120
1,840
No.
4
£000
472
2006
£000
97,342
10,112
3,268
110,722
No.
1,808
1,776
3,584
£000
2,204
9
125
2,338
No.
4
£000
646
11. STAFF COSTS AND DIRECTORS’ EMOLUMENTS
NOTES TO THE FINANCIAL STATEMENTSat 31st December, 2006
Cost:
At 1st January, 2006
Arising on acquisitions
At 31st December, 2006
Amortisation:
At 1st January, 2006
Provided during the year
At 31st December, 2006
Net book value:
At 31st December, 2006
Net book value:
At 1st January, 2006
Goodwill
£000
2,955
416
3,371
937
467
1,404
1,967
2,018
12. INTANGIBLE FIXED ASSETS
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NOTES TO THE FINANCIAL STATEMENTSat 31st December, 2006
Group
Cost or valuation:
At 1st January, 2006
Additions
Disposals
Revaluation
At 31st December, 2006
Depreciation:
At 1st January, 2006
Provided during the year
Eliminated on disposals
At 31st December, 2006
Net book value:
At 31st December, 2006
Net book value:
At 1st January, 2006
Assets held
for contract
rental
£000
44,141
18,372
(13,017)
-
49,496
15,391
9,295
(8,267)
16,419
33,077
28,750
Total
£000
198,461
29,480
(15,196)
1,315
214,060
94,963
16,800
(9,213)
102,550
111,510
103,498
Plant and
machinery
£000
71,645
8,256
(158)
-
79,743
55,836
4,802
(129)
60,509
19,234
15,809
Motor
vehicles
£000
5,541
962
(939)
-
5,564
4,116
780
(744)
4,152
1,412
1,425
Land and buildings
Long
leasehold
£000
2,232
207
-
-
2,439
378
138
-
516
1,923
1,854
Freehold
£000
74,902
1,683
(1,082)
1,315
76,818
19,242
1,785
(73)
20,954
55,864
55,660
13. TANGIBLE FIXED ASSETS
Company
Cost:
At 1st January, 2006
Additions
Disposals
At 31st December, 2006
Depreciation:
At 1st January, 2006
Provided during the year
Eliminated on disposals
At 31st December, 2006
Net book value:
At 31st December, 2006
Net book value:
At 1st January, 2006
Total
£000
547
123
(47)
623
370
90
(47)
413
210
177
Motor
vehicles
£000
285
55
(47)
293
182
67
(47)
202
91
103
Plant and
machinery
£000
262
68
-
330
188
23
-
211
119
74
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Assets acquired under finance leases
Included in plant and machinery are the following amounts relating to assets acquired by the Group under finance leases:
Group
Cost:
At 1st January, 2006
Additions
Disposals
At 31st December, 2006
Depreciation:
At 1st January, 2006
Provided during the year
Eliminated on disposal
31st December, 2006
Net book value:
At 31st December, 2006
Net book value:
At 1st January, 2006
Assets acquired to let under finance leases
The Group has purchased motor vehicles with an original cost of £930,000 (2005 - £882,000) for the purposes of letting under finance leases
which are not shown as fixed assets. The related depreciation charge for the year was £209,000 (2005 - £175,000).
Plant and
machinery
£000
237
124
(54)
307
196
68
(54)
210
97
41
13. TANGIBLE FIXED ASSETS (continued)
NOTES TO THE FINANCIAL STATEMENTSat 31st December, 2006
Investment properties
Investment properties included in freehold land and buildings are stated at market value. No depreciation is provided in respect of such properties in
accordance with current accounting practice. All other properties are included at original cost.
The Group’s freehold investment properties were informally valued on an open market basis by the directors as at 31st December, 2006 at £11,575,000.
A revaluation surplus of £1,315,000 has been taken to the revaluation reserve.
The historical cost of the investment properties included at valuation in freehold land and buildings is £6,426,000 (2005 - £6,425,000).
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Other
investments
£000
110
2
-
112
31
81
79
Joint
ventures
£000
11
-
-
11
-
11
11
Total
£000
373
2
(9)
366
31
335
342
Group
Cost:
At 1st January, 2006
Additions
Mark to market
At 31st December, 2006
Provision:
At 1st January, 2006 and
At 31st December, 2006
Net book value:
At 31st December, 2006
Net book value:
At 1st January, 2006
14. INVESTMENTS
NOTES TO THE FINANCIAL STATEMENTSat 31st December, 2006
Company
Cost:
At 1st January, 2006
Additions
Mark to market
31st December, 2006
Provision:
At 1st January, 2006 and
At 31st December, 2006
Net book value:
At 31st December, 2006
Net book value:
At 1st January, 2006
Total
£000
26,379
2
(9)
26,372
10,000
16,372
16,379
Subsidiary
undertakings
£000
26,050
-
-
26,050
10,000
16,050
16,050
Listed on
London Stock
Exchange
£000
252
-
(9)
243
-
243
252
Listed on
London Stock
Exchange
£000
252
-
(9)
243
-
243
252
Other
investments
£000
77
2
-
79
-
79
77
Marshall of Cambridge Aerospace Limited holds 50% of the issued ordinary share capital of BRAMA Brown & Root and Marshall Aerospace Limited
(BRAMA). This company is disclosed as a joint venture in the Group financial statements and, as such, has been accounted for in accordance with the
Group’s accounting policy. The company is registered in England and Wales and did not trade during the year.
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14. INVESTMENTS (continued)
NOTES TO THE FINANCIAL STATEMENTSat 31st December, 2006
Cost
£000
12,000
12,000
1,734
269
20
17
10
-
26,050
The Company’s direct investments in subsidiary undertakings at 31st December, 2006 were as follows:
Proportion Ordinary Shares
Subsidiary undertaking held of £1 each Principal activity
Marshall of Cambridge Aerospace Limited 100% 12,000,000 Aerospace engineering
Marshall Specialist Vehicles Limited 100% 12,000,000 Military and civilian systems engineering
MGPH Limited 100% 500,000 Property holding
Marshall of Cambridge (Motor Holdings) Limited 100% 2,250,000 (See below)
MC (Outstations) Limited 100% 12,000 Non-trading
The Cambridge Aero Club Limited 100% 5,000 Flying instruction & aircraft charter
Marshall of Cambridge (Airport Properties) Limited 100% 10,000 Farming and property holding
Marshall of Cambridge (Engineering) Limited 100% 100 Dormant
The following companies are subsidiary undertakings of Marshall of Cambridge (Motor Holdings) Limited:
+ Dormant
* Wholly owned by Marshall of Cambridge (Motor Holdings) Limited
** 99% owned by Marshall of Cambridge (Motor Holdings) Limited
*** Wholly owned by Fellhouse Limited
**** Wholly owned by Marshall Leasing Limited
All the above subsidiary undertakings of Marshall of Cambridge (Motor Holdings) Limited carry on the business of car and commercial vehicle and
equipment sales, distribution, service, leasing, hire and associated activities except Marshall of Cambridge (Garage Properties) Limited (property holding)
and those companies marked as dormant above. On 1st August 2006, Marshall Leasing acquired the trade and assets of a contract hire company from Gates
Contract Hire Limited. It later also acquired the name.
Aeropeople Limited and Marshall Aerospace International Services Limited are wholly owned subsidiaries of Marshall of Cambridge Aerospace Limited.
Aeropeople Limited supplies labour to aerospace and associated industries and Marshall Aerospace International Services Limited is dormant.
Marshall Vehicle Engineering Limited incorporated on 2nd October 2006 and Marshall UAV Limited incorporated on 24th October 2006 are wholly
owned subsidiaries of Marshall Specialist Vehicles Limited. Marshall Vehicle Engineering Limited manufactures, assembles and integrates load beds onto
vehicle chassis and Marshall UAV Limited provides the design, development and manufacture of unmanned aerial vehicles.
All of the subsidiary undertakings referred to above are registered in England and Wales.
Marshall Aerospace Canada Inc is registered in Canada and provides design and engineering support and labour supplies to the aerospace industry.
Marshall Aerospace Netherlands B.V. was registered in the Netherlands on 26th July 2006 and provides design and engineering support to the aerospace
industry. Both Marshall Aerospace Canada Inc and Marshall Aerospace Netherlands B.V. are wholly owned subsidiaries of Marshall of Cambridge
Aerospace Limited.
* Marshall Motor Group Limited
* Marshall of Cambridge (Garage Properties) Limited
* Marshall Leasing Limited
* Marshall Thermo King Limited
* Fellhouse Limited
* Tim Brinton Cars Limited
* + Marshall Commercial Vehicles Limited
* + Brunswick Croydon Limited
** Marshall of Ipswich Limited
** Marshall of Peterborough Limited
*** Jack Roberts (Tail Lifts) Limited
**** Gates Contract Hire Limited
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NOTES TO THE FINANCIAL STATEMENTSat 31st December, 2006
Loans (see note 19)
Loan notes (see note 19)
Payments received on account
Trade creditors
Amounts owed to subsidiary undertakings
Corporation tax
Other taxes and social security costs
Other creditors
Accruals and deferred income
Ordinary dividends
Accrued preference dividends
Obligations under finance leases (see note 20)
2005
£000
1,000
-
-
71
6,720
631
185
-
1,589
293
155
-
10,644
2006
£000
1,000
-
-
109
24,021
-
151
-
2,134
366
155
-
27,936
2005
£000
12,406
346
6,524
61,836
-
-
4,419
3,517
16,115
293
155
41
105,652
2006
£000
13,682
-
20,204
50,146
-
1,116
4,060
2,315
33,810
366
155
63
125,917
17. CREDITORS: Amounts falling due within one year
Group Company
Trade debtors
Amounts recoverable on long term contracts
Amounts owed by subsidiary undertakings
Other debtors
Prepayments and accrued income
Other taxes recoverable
Corporation tax
Deferred tax
Finance lease debtors
During the year, the Group received gross rentals of £453,000 (2005 - £352,000) in respect of finance leases.
16. DEBTORS
Group Company
2005
£000
39,610
5,362
-
11,415
2,420
40
1,675
240
591
61,353
2006
£000
46,398
10,721
-
19,950
2,879
63
-
-
587
80,598
2005
£000
2
-
13,059
39
34
-
-
440
-
13,574
2006
£000
123
-
16,617
32
44
-
1,373
449
-
18,638
Long term contract balances:
Costs to date less provision for losses
Applicable payments on account
Work in progress
Raw materials, components and consumables
Finished goods and goods for resale
Progress payments receivable in excess of the value of work done on individual contracts less provisions for losses are shown separately under creditors:
amounts falling due within one year in the balance sheet. At 31st December, 2006, the Group held vehicles on consignment from manufacturers with a
wholesale value of £9,437,000 (2005 - £11,326,000) which are included within finished goods and goods for resale. The difference between purchase price
and production cost of stocks and their replacement cost is not material.
15. STOCKS
Group
2005
£000
10,750
(9,711)
1,039
6,635
5,283
56,441
69,398
2006
£000
-
-
-
7,426
6,415
52,065
65,906
43
NOTES TO THE FINANCIAL STATEMENTSat 31st December, 2006
Amounts falling due:
Within one year
Between one and two years
Between two and five years
Less: included in creditors: amounts falling
due within one year
Amounts falling due after more than one year
Analysis of changes in loan financing during the year:
At 1st January
New loans
Loans repaid
At 31st December
All loans are repayable within 5 years with a variable interest rate and, with the exception of one loan for £2,000,000 held by the Company which is unsecured,
are secured on vehicles leased to third parties. Loan notes are unsecured with an interest rate 0.95% below base rate and were repaid on 3rd January, 2006.
19. LOANS2005
£000
12,752
9,341
3,538
25,631
(12,752)
12,879
25,480
13,838
(13,687)
25,631
2006
£000
13,682
9,529
1,632
24,843
(13,682)
11,161
25,631
13,776
(14,564)
24,843
Loan
notes
£000
-
-
-
-
-
-
346
-
(346)
-
Loans
£000
13,682
9,529
1,632
24,843
(13,682)
11,161
25,285
13,776
(14,218)
24,843
Group
2005
£000
1,000
1,000
1,000
3,000
(1,000)
2,000
4,000
-
(1,000)
3,000
2006
Loans
£000
1,000
1,000
-
2,000
(1,000)
1,000
3,000
-
(1,000)
2,000
Company
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Amounts falling due:
Within one year
Between two and five years
Less: finance charges allocated to future periods
Included in creditors:
Amounts falling due within one year
Amounts falling due after more than one year
20. OBLIGATIONS UNDER FINANCE LEASES 2005
£000
46
62
108
(8)
100
41
59
100
2006
£000
70
90
160
(14)
146
63
83
146
Group
Loans (see note 19)
Accruals and deferred income
Obligations under finance leases (see note 20)
2005
£000
12,879
4,585
59
17,523
2006
£000
11,161
5,947
83
17,191
18. CREDITORS: Amounts falling due after more than one year Group
2005
£000
2,000
-
-
2,000
2006
£000
1,000
-
-
1,000
Company
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NOTES TO THE FINANCIAL STATEMENTSat 31st December, 2006
At 1st January, 2006
Arising during the year
Amounts utilised
Amounts reversed
At 31st December, 2006
A provision is recognised for expected warranty claims on products sold. It is expected that the majority of the warranty costs will be incurred in thenext financial year.
£000
15
264
(32)
(75)
172
21. PROVISIONS FOR LIABILITIES
(a) Warranty provision
(b) Deferred tax
Group
The deferred tax (liability) / asset provided in the financial statement is made up as follows:
Accelerated capital allowances
Other short term timing differences
Overseas tax
The deferred tax liability not provided is made up as follows:
Accelerated capital allowances
Capital gains rolled over
Revaluation reserve
Group
2005
£000
(454)
4,242
1,150
4,938
2006
£000
(483)
4,182
1,544
5,243
£000
440
(187)
(418)
614
449
£000
240
(1,495)
(418)
614
(1,059)
2006
£000
(1,894)
835
-
(1,059)
2005
£000
18
422
-
440
2005
£000
(559)
751
48
240
2006
£000
27
422
-
449
Group Company
The movement in the deferred tax (liability) / asset during the year is as follows:
At 1st January, 2006
Charge for the year
Charge on actuarial gain
Credit on reduction in pension deficit
At 31st December, 2006
CompanyGroup
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NOTES TO THE FINANCIAL STATEMENTSat 31st December, 2006
23. SHAREHOLDERS’ FUNDS Profit and
loss
account
£000
105,667
12,060
(1,844)
-
977
116,860
Profit and
loss
account
£000
10,140
(8)
(1,844)
977
9,265
Total
shareholders’
funds
£000
125,364
12,060
(1,844)
1,315
977
137,872
Total
shareholders’
funds
£000
26,003
(8)
(1,844)
977
25,128
Revaluation
reserve*
£000
3,834
-
-
1,315
-
5,149
Share
capital
£000
15,733
-
-
-
15,733
Capital
redemption
reserve
£000
130
-
-
-
-
130
Capital
redemption
reserve
£000
130
-
-
-
130
Share
capital
£000
15,733
-
-
-
-
15,733
*The revaluation reserve relates to investment properties only.
Group
At 1st January, 2006
Profit for the year after minority interests
Dividends payable
Surplus on revaluation of investment properties
Actuarial profit net of tax on pension liability
At 31st December, 2006
Company
At 1st January, 2006
Loss for the year
Dividends payable
Actuarial profit net of tax on pension liability
At 31st December, 2006
Ordinary shares of £1 each
8% ‘A’ cumulative preference shares of £1 each
10% ‘B’ cumulative preference shares of £1 each
Rights of preference shares
(i) holders of preference shares are entitled, in priority to holders of ordinary shares, to fixed cumulative preference dividends annually as follows:
- in respect of the ‘A’ preference shares 8p per share
- in respect of the ‘B’ preference shares 10p per share
(ii) on a return of capital on a winding up or redemption, the preference shares carry the right to repayment of capital at par; this right is in priority
to the rights of ordinary shareholders;
(iii) they carry the right to attend and vote at a general meeting of the Company only if a resolution is to be considered at the meeting for winding up
the Company or for reducing the capital of the Company, in which cases the holders are only entitled to vote on these specific resolutions, or if
the preference dividends are more than 36 months in arrears.
2005
£000
7,333
4,800
3,600
15,733
2005
No.
7,332,500
4,800,000
3,600,000
15,732,500
2006
No.
7,332,500
4,800,000
3,600,000
15,732,500
2006
£000
7,333
4,800
3,600
15,733
2006
£000
7,800
4,800
3,600
16,200
2005
£000
7,800
4,800
3,600
16,200
22. SHARE CAPITALAuthorised Allotted, called up and fully paid
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NOTES TO THE FINANCIAL STATEMENTSat 31st December, 2006
25. CONTINGENT LIABILITIES
26. CAPITAL COMMITMENTS
27. OTHER FINANCIAL COMMITMENTS
Group
Authorised by the Board and contracted but not provided for
These commitments to invest in fixed assets have been made by subsidiary undertakings.
The Group leases a number of properties, equipment and vehicles under operating leases.
The minimum annual rentals under these leases are as follows:
Operating leases which expire:
- within 1 year
- in 2 to 5 years
- over 5 years
2006
£000
384
2,080
2,049
4,513
2005
£000
25
443
882
1,350
Other
2006
£000
7,434
2006
£000
50
39
-
89
2005
£000
1,142
Group
2005
£000
56
47
-
103
Land and Buildings
Guarantees to third parties, granted by subsidiary undertakings, amounted to £2,396,000 (2005 - £1,766,000). At the year end there was no liability in respect of performance guarantees granted by the Company on behalf of subsidiary undertakings.
Group
2005
£000
1,820
(4)
(1,771)
45
1,142
(1,151)
36
125,328
125,364
2006
£000
12,060
-
(1,844)
10,216
1,315
977
12,508
125,364
137,872
Company
2005
£000
2,051
-
(1,771)
280
-
(1,151)
(871)
26,874
26,003
2006
£000
(8)
-
(1,844)
(1,852)
-
977
(875)
26,003
25,128
24. RECONCILIATION OF SHAREHOLDERS’ FUNDS
Profit attributable to shareholders
Minority interests
Dividends
Other recognised gains relating to the year
Actuarial profit / (loss) net of tax
Net increase / (decrease) in shareholders’ funds
Shareholders’ funds at 1st January
Shareholders’ funds at 31st December
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28. NOTES TO THE STATEMENT OF CASH FLOWS
(a) Reconciliation of operating profit / (loss) to net cash inflow from operating activities
Operating profit / (loss)
Share of results of joint venture
Depreciation of tangible fixed assets
Amortisation of intangible fixed assets
Provision against fixed asset investments
Mark to market of fixed asset investments
Decrease in stocks
Increase in debtors
(Decrease) / increase in provisions
Increase in creditors
Cash inflow from operating activities before contribution to the pension fund
Contribution to the pension fund
Net cash inflow from operating activities
(b) Analysis of net debt
Cash at bank and in hand
Short term loans
Long term loans
Loan notes
Finance lease obligations
Net debt
(c) Reconciliation of net cash flow to movement in net debt
Increase / (decrease) in cash
Cash inflow from new loans
Repayment of loans
New capital element of finance leases
Decrease / (increase) in net debt
Net debt at 1st January
Net debt at 31st December
Non - cash
movement
£000
-
(7,529)
7,529
-
-
-
At
31st December
2006
£000
23,299
(13,682)
(11,161)
-
(146)
(1,690)
At
1st January
2006
£000
14,784
(12,406)
(12,879)
(346)
(100)
(10,947)
Cash
movement
£000
8,515
6,253
(5,811)
346
(46)
9,257
NOTES TO THE FINANCIAL STATEMENTSat 31st December, 2006
2006
£000
17,239
-
16,800
467
-
9
3,492
(17,920)
(1,278)
20,267
39,076
(750)
38,326
2005
£000
(1,444)
2
15,630
330
31
(98)
3,670
(4,716)
136
5,062
18,603
(1,325)
17,278
2005
£000
(10,518)
(13,838)
13,687
37
(10,632)
(315)
(10,947)
2006
£000
8,515
(13,776)
14,564
(46)
9,257
(10,947)
(1,690)
i) The major financial assumptions used by the actuary as at 31st December, 2006 were:
Discount rate
Rate of increase in salaries
Rate of increase in pensions in payment
Inflation assumption
2005
4.74%
4.39%
2.89%
2.89%
2004
5.23%
4.36%
2.86%
2.86%
2006
5.16%
4.51%
3.01%
3.01%
2005
£000
1,265
(1,099)
166
(867)
(701)
2005
£000
2,021
(1,935)
(1,731)
(1,645)
494
(1,151)
2006
£000
763
(638)
1,271
1,396
(419)
977
2006
£000
1,483
(1,225)
258
(1,071)
(813)
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(a) The Group operates, for the benefit of its employees, three schemes, one of which has elements of both defined benefit and defined contribution, while the othertwo are entirely defined contribution. All the schemes are funded by the payment of contributions to trustee administered funds which are kept entirely separatefrom the assets of the Group. The level of pension contribution is determined with the advice of independent qualified actuaries.
(b) The scheme which has elements of both defined benefit and defined contribution, is known as the Marshall Group Executive Pension Plan (the “Plan”). The defined contribution type schemes, which cover approximately 95% of scheme members, were established in 1982 and 1988. The total pension cost forthe Group for the year in respect of all defined contribution schemes was £2,197,000 (2005 - £2,243,000). The total defined benefit cost for the Group in respectof the Plan was £813,000 (2005 - £701,000) under FRS 17 of which £1,071,000 (2005 - £867,000) has been charged against operating profit and £258,000(2005 - £166,000) has been credited to other finance income.
(c) The Plan was assessed by a qualified independent actuary from Buck Consultants, as at 6th April, 2006 using the projected unit method and indicated a fundingsurplus of £805,000. The valuation of the defined benefit section of the Plan under FRS 17 has been based on this actuarial valuation, updated by the actuaryfrom Buck Consultants in order to assess the assets and the liabilities of the scheme as at 31st December, 2006. The assets and liabilities shown exclude thoserelating to defined contribution pensions.
NOTES TO THE FINANCIAL STATEMENTSat 31st December, 2006
29. PENSIONS AND OTHER RETIREMENT BENEFIT COSTS
ii) Analysis of the amount charged against profits:
Finance income
Expected return on pension scheme assets
Interest on pension scheme liabilities
Net credit to finance income
Operating profit
Current service costs
Total charge
iii) Analysis of the amount recognised in the statement of recognised gains and losses
Actual return less expected return on pension scheme assets
Experience gains and losses arising on the scheme liabilities
Changes in assumptions underlying the present value of the scheme liabilities
Actuarial gain / (loss)
Deferred tax thereon
Actuarial profit / (loss) net of tax recognised in the statement of recognised gains and losses
vi) The five year history of experience gains and losses is as follows:
Actual return less expected return on scheme assets:
Amount
% of scheme assets at year end
Experience gains and losses arising on scheme liabilities:
Amount
% of scheme liabilities at year end
Total amount recognised in the statement of total recognised gains and losses:
Amount
% of scheme liabilities at year end
2004
%
0.4
(0.9)
(2.4)
£000
75
(189)
(488)
2003
%
6.4
1.3
1.6
£000
960
245
301
2002
%
(27.0)
0.3
(25.7)
£000
(3,406)
54
(4,433)
2005
%
9.4
(7.6)
(6.5)
£000
2,021
(1,935)
(1,645)
2006
%
3.2
(2.5)
5.4
£000
763
(638)
1,396
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NOTES TO THE FINANCIAL STATEMENTSat 31st December, 2006
29. PENSIONS AND OTHER RETIREMENT BENEFIT COSTS (continued)
2006
£000
2005
£000
(3,749)
(867)
2,086
166
(1,645)
(4,009)
(4,009)
(1,071)
1,466
258
1,396
(1,960)
v) The movement in the deficit over the year is as follows:
Deficit in the scheme at the beginning of the year
Current service cost
Employers’ contributions
Finance costs
Actuarial gain / (loss)
Deficit in the scheme as at 31 December
Equities
Property
Government stock
Corporate bonds
Cash
Total market value of assets
Present value of insured annuity policies
Present value of scheme liabilities
Deficit in the scheme as at 31 December
Related deferred tax asset
Net pension liability
iv) The value of the assets in the scheme and the expected long-term rate of return as at 31st December, 2006 were:
Rate of return
%
8.04
8.04
4.12
4.74
4.50
Rate of return
%
7.85
7.00
4.60
5.10
5.25
Note: The difference between assets and liabilities is extremely volatile; it can alter significantly depending on the date at which the measurements are carried out.
2006
£000
13,558
3,359
2,332
2,257
(35)
21,471
2,416
23,887
(25,847)
(1,960)
588
(1,372)
2005
£000
11,751
2,476
1,932
1,882
849
18,890
2,518
21,408
(25,417)
(4,009)
1,202
(2,807)
Rate of return
%
8.17
8.17
4.57
5.23
4.75
2004
£000
9,390
2,092
741
2,171
175
14,569
2,287
16,856
(20,605)
(3,749)
1,125
(2,624)
Due to an administrative error, in December 2006 one of the directors, RD Marshall, received an interest free loan of £6,840 from Marshall SpecialistVehicles Limited, a subsidiary company of which he is also a director. This was repaid in full on 22nd February 2007.
The parent company has claimed the exemptions under FRS 8 and has not disclosed transactions with subsidiary undertakings.
30. RELATED PARTIES
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REPORT OF THE AUDITORS
INDEPENDENT AUDITORS’ REPORT to the members of Marshall of Cambridge (Holdings) LimitedWe have audited the Group and parent Company financial statements (the ‘financial statements’) of Marshall of Cambridge (Holdings) Limited for the year ended 31st
December, 2006 which comprise the Group Profit and Loss Account, Group Statement of Total Recognised Gains and Losses, Group Statement of Cash Flows, Group
Balance Sheet, Company Balance Sheet and the related notes 1 to 30. These financial statements have been prepared under the accounting policies set out therein.
This report is made solely to the Company’s members, as a body, in accordance with Section 235 of the Companies Act 1985. 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 auditors’ 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.
Respective responsibilities of directors and auditorsThe directors’ responsibilities for preparing the Annual Report and the financial statements in accordance with applicable United Kingdom law and Accounting
Standards (UK Generally Accepted Accounting Practice) are set out in the Statement of Directors’ Responsibilities.
Our responsibility is to audit the financial statements in accordance with relevant legal and regulatory requirements and International Standards on Auditing (UK and Ireland).
We report to you our opinion as to whether the financial statements, give a true and fair view and are properly prepared in accordance with the Companies Act
1985. We also report to you whether, in our opinion, the information given in the directors’ Report is consistent with the financial statements. The information given
in the Directors’ Report includes that specific information presented in the Operating and Financial Review that is cross referred from the Business Review section
of the Directors’ Report. In addition we report to you if, in our opinion, the Company has not kept proper accounting records, if we have not received all the infor-
mation and explanations we require for our audit, or if information specified by law regarding directors’ remuneration and other transactions is not disclosed.
We read other information contained in the Annual Report and consider whether it is consistent with the audited financial statements. This other information
comprises only the Directors’ Report, the Chairman’s Statement, the Operating and Financial Reviews and the Corporate Governance Statement. We consider the
implications for our report if we become aware of any apparent misstatements or material inconsistencies with the financial statements. Our responsibilities do not
extend to any other information.
Basis of audit opinionWe conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued by the Auditing Practices Board. An audit includes examination,
on a test basis, of evidence relevant to the amounts and disclosures in the financial statements. It also includes an assessment of the significant estimates and judgements
made by the directors in the preparation of the financial statements, and of whether the accounting policies are appropriate to the Group’s and Company’s circumstances,
consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient
evidence to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or other irregularity or error. In
forming our opinion we also evaluated the overall adequacy of the presentation of information in the financial statements.
OpinionIn our opinion:
• the financial statements give a true and fair view, in accordance with UK Generally Accepted Accounting Practice, of the state of the Group’s and parent
Company’s affairs as at 31st December, 2006 and of the Group’s profit for the year then ended;
• the financial statements have been properly prepared in accordance with the Companies Act 1985; and
• the information given in the Directors’ Report is consistent with the financial statements.
Ernst & Young LLP
Registered Auditor
Cambridge
23rd April, 2007
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RECENT FINANCIAL HISTORY
Turnover
Operating profit / (loss) before operating and non-operating exceptional items
Exceptional items
Net interest / investment income
Profit before tax
Taxation
Minority interests
Dividends
Retained profit
Total dividend cover
Earnings per share
Return on average shareholders’ funds
Average no. of staff
Cash generated/(utilised)
Capital expenditure and investment (net)
Fixed assets
Net current assets
Creditors over one year, provisions, pension liability and minority interests
Shareholders’ funds
2002
£000
490,363
162
2,181
2,343
(1,220)
1,123
434
(1)
(1,551)
5
1.0
11p
1.0%
3,352
(6,913)
13,703
88,628
38,472
(13,450)
113,650
2003
£000
Restated
535,900
14,230
1,572
15,802
(778)
15,024
(4,347)
(1)
(1,551)
9,125
6.9
135p
12.8%
3,527
8,607
15,785
89,407
47,980
(19,672)
117,715
2004
£000
Restated
605,015
10,573
2,752
13,325
(1,024)
12,301
(3,398)
(1)
(1,697)
7,205
5.2
111p
10.1%
3,628
4,245
16,860
93,682
52,457
(20,811)
125,328
2005
£000
574,042
(1,444)
4,180
2,736
(1,514)
1,222
598
(4)
(1,771)
45
1.0
15p
1.0%
3,569
(10,518)
22,528
105,858
39,883
(20,377)
125,364
2006
£000
633,207
17,239
153
17,392
1,130
18,522
(6,462)
-
(1,844)
10,216
6.5
154p
14.1%
3,584
8,515
23,762
113,812
43,886
(19,826)
137,872
Following the adoption of FRS 17 and FRS 21, in 2005, values were restated for 2003 and 2004 but not for 2002
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MARSHALL OF CAMBRIDGE (HOLDINGS) LIMITEDTWENTY FIRST ANNUAL GENERAL MEETING
NOTICE OF MEETING
Notice is hereby given that the Twenty First Annual General Meeting of the Shareholders of Marshall ofCambridge (Holdings) Limited will be held at 11.30 am on Wednesday 6th June, 2007 at The Airport,Cambridge, in accordance with the attached Agenda.
J D BarkerSecretary
Dated this 23rd April, 2007by Order of the Board
A Member entitled to attend and vote at the Meeting may appoint a Proxy to attend to vote instead of him / her, and such Proxy need not also be a Member.
Registration Number 2051460 Registered Office: Airport House, Newmarket Road, Cambridge, CB5 8RY, England
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MARSHALL OF CAMBRIDGE (HOLDINGS) LIMITEDTWENTY FIRST ANNUAL GENERAL MEETING
Wednesday 6th June, 2007 at 11.30 am
AGENDA
1. The Notice convening the Meeting to be taken as read.
2. Proxies.
3. Minutes of the Annual General Meeting held on 7th June, 2006.
4. Statement by the Chairman of Marshall of Cambridge (Holdings) Limited.
5. To receive the Directors’ Report and Accounts for the year ended 31st December, 2006 together with the Auditors’ Report thereon and a Resolution to be proposed, seconded and put to the vote THAT they be and are hereby approved and adopted.
6. A Resolution to be proposed, seconded and put to the vote THAT a final ordinary dividend of 14p per share amounting to £1,026,550 be paid on 29th June, 2007.Together with the interim dividend of 5p per share amounting to £366,625 paid on 15th January,2007, the total ordinary dividend would be 19p per share amounting to £1,393,175.
7. Resolutions to be proposed, seconded and put to the vote THAT :
i. NV Barber, who retires by rotation, be re-appointed as a Directorii. Sir Ralph Robins, who retires by rotation, be re-appointed as a Director
8. A Resolution to be proposed, seconded and put to the vote THAT Ernst & Young LLP be re-appointed as Auditors until the completion of the next Annual General Meeting and that their remuneration be fixed by the Directors.
9. To propose the date of the next Annual General Meeting - Wednesday 4th June, 2008.
10. Any other business.
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SIR ARTHUR MARSHALL OBE DL 4th DECEMBER 1903 to 16th MARCH 2007
Sir Arthur Marshall OBE DL who was one of Britain’s aviation pioneers, diedat the age of 103 at his Cambridgeshire home, Horseheath Lodge, on Friday16th March 2007. He was born on 4th December 1903, two weeks beforethe first manned flight by the Wright Brothers.
Following his education at Jesus College, Cambridge where he obtained afirst class degree in Engineering, Arthur Marshall joined his father in thefamily motor business and after learning to fly in 1928, he combined hiswork in the garage with giving flying instruction in his spare time. Theexpansion of the aviation business in the mid 1930s led to the purchase ofland in 1935 on which the present Cambridge Airport was developed.
Pre-war, Arthur Marshall played an important part in the development of flyingtraining, particularly for the Royal Air Force. From his own experience, Arthurwas convinced that selected pupils, fresh from learning to fly, would makebetter Flying Instructors than the then accepted RAF practice of using only themore experienced pilots. He recruited suitable pupils for training whichproved to be an enormous success as the young enthusiastic instructorsestablished day and night elementary and advanced flying instruction of over1,000 hours per year as compared with the normal 250; this provided afourfold increase in the output of trained pilots and instructors. The AirMinistry was reluctant to adopt the scheme universally across the RAF butafter much persistence by Arthur Marshall, they did so in 1941, and from thatdate there was no further shortage of either pilots or instructors for the RAF forthe remainder of the Second World War. In 2001, Air Chief Marshal Sir JohnDay, Commander in Chief of Royal Air Force Personnel & Training Commandcommented that if the Marshall Flying Instructor Scheme, which continues inuse for the RAF to this day, had been adopted earlier in the War, there wouldhave been no shortage of pilots for the Battle of Britain. Sir Arthur Marshallconsidered his Flying Instructor Scheme to be one of his two most significantachievements in supporting the RAF.
The second, of which he was also most proud, was in 1982 when MarshallAerospace was instructed to provide the Hercules with an air-to-air refuellingcapability to enable it to reach the Falkland Islands. Arthur Marshall directedthe Aircraft Design Office to get work under way at once, working on a 24 hourday basis, seven days per week. The first aircraft XV200, having completed dayand night flight refuelling trials was delivered to the RAF for operational use on5th May just 19 days after the initial request had been made. Some years afterthe Falklands Conflict, Prime Minister Margaret Thatcher visited Marshall ofCambridge and commented "your work for the Falklands campaign will neverbe forgotten". It was a testament to the engineering quality of this modificationwhich was personally directed by Arthur Marshall, that the C-130 Hercules air-to-air refuelling probe has continued in RAF service to this day.
During the Second World War Marshall Aerospace repaired over 5,000aircraft which included Whitley, Oxford, Albemarle, Mosquito, Typhoons andDakotas. Completed aircraft were test flown by the company’s full time testpilot but Arthur Marshall undertook some of this flight testing himself. At theend of the war, Arthur Marshall was invited by the Air Ministry to chair theAircraft Repairers Dinner held at the Dorchester Hotel on the 8th November1945 to celebrate the company’s considerable successes in supporting theRAF during the war years.
Arthur Marshall who took over control in 1942 on his father’s death remainedas Chairman of the company for 47 years until his retirement in 1989. In 1942the Group’s turnover was just £1m but by 1989 this had grown to £244m. Hisunique management style as well as his single minded attention to detail andstrong leadership enabled him to achieve success by example which fosteredunrivalled team spirit and enduring loyalty from his workforce. This rareinspiration became a Marshall hallmark which exists to this day and was atelling testimony of his leadership. In his introduction to the company’s LongService Awards on 9th December 1983, Sir Arthur Marshall said "Thecompany endeavours to establish a Marshall attitude and outlook to life andwork – nobody owes us a living and we have to work hard and long tomaintain our position. Any success we have achieved together has resultedfrom long and loyal teamwork ....our roots have become well and trulyestablished based on an overwhelming anxiety to satisfy the customer,whether it be a garage customer or an engineering company customer ....inall respects including, of course, price, delivery and quality”.
Marshall Motor Bodies which later became Marshall Specialist Vehicles wasestablished in 1946 by Arthur Marshall as the vehicle body building division.This business went on to manufacture over 80,000 soft skinned vehicles basedon Bedford Trucks as well as manufacturing buses and a wide range ofspecialist vehicles including, ambulances for the Armed Forces, Royal Mailvehicles and even dustcarts.
Arthur Marshall always remained interested in the progress of the Group’smotor business which, because of manufacturer requirements, remained formany years exclusively based on Austin. His son Michael joined the Companyin 1955 and progressively took over the running of the motor business whichcontinued to expand through the creation of the British Motor Corporation,Leyland Cars and then into its current multi-franchise group.
Following the depression with cancellations and redundancies across theaerospace industry at the end of the Second World War, Marshall ofCambridge undertook contracts on Mosquito aircraft and, later on, Vampireand Venom aircraft. As the aircraft industry got into its post-war strideMarshall, through the reputation which it had established and the wide
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network of friends and contacts which Arthur Marshall had created, was ableto gain contracts from throughout the UK aircraft industry including EnglishElectric, Vickers and Bristol; all of which were willing to be relieved ofmodification work, so that they could concentrate on new aircraft. Contractsgained included development work on the very successful Canberra bomber,as well as design and other work on the Lightning supersonic fighter. Thecompany also converted 73 Canberra aircraft to carry the firstAmerican/British atomic weapons after extensive trials.
Marshall rapidly gained a reputation for making a success of everything thatwas made available to it, and that resulted in Arthur Marshall being askedwhether Marshall could undertake the design and manufacture of theConcorde Droop Nose and the retracting visor. The answer was an instant"yes" and this resulted in Marshall Aerospace manufacturing all of Concorde’sdistinctive Droop Noses.
In 1960, Arthur Marshall began a strong North Atlantic relationship when thecompany was appointed by Gulfstream as their European Service Centrewhich included the completion and furnishing of a number of aircraft prior todelivery. This was followed by a similar appointment for the Cessna Citationexecutive jet in 1974. Arthur Marshall remained a pilot into his 80s andconverted to fly the Citation jet – his first experience of flying jet aircraft – atthe age of 71.
In the mid 1960s, the Ministry of Defence was considering the purchase ofthe versatile Lockheed C-130 Hercules cargo aircraft to replace its aging fleetof Britannia, Beverley and Hastings transport aircraft. The Ministry ofDefence insisted on the establishment of a UK designated company for theseaircraft and Marshall was appointed to this role, subsequently becoming aSister Design Authority for Lockheed Martin in 1988. Arthur Marshallworked tirelessly to gain this Hercules contract and all 66 of the Herculesfleet were delivered via Cambridge for completion work and painting. Thecompany has completed maintenance, modification and repair work on theHercules aircraft on an unbroken basis which continues to this day. Someof the other major modifications for which Arthur Marshall had closeinvolvement included: in 1974, the conversion of a Hercules into ‘Snoopy’,the meteorological research aircraft, (the same aircraft is now to be used forthe A400-M flying TestBed contract); and in 1980, the lengthening of thefuselage by 15ft, the rebuilding of wings, and, the development of a WingTest Rig to identify the progressive life of the rebuilt wings.
Following the Falklands War, Arthur Marshall gained the largest ever contractawarded to the company at that time to convert their fleet of L-1011 TriStaraircraft into Strategic Tanker Freighter aircraft for the RAF. This necessitatedthe building of No 17 Hangar, in which the Thanksgiving Service to Sir Arthur
Marshall will be held on 19th May 2007. Sir Arthur Marshall, who wasknighted in 1974, personally supervised the construction of the hangarwhich commenced in February 1983 and was completed in just six months.On its completion, Sir Arthur Marshall said "it is a hangar we can be proudof – one of the biggest, if not the biggest, of its kind outside of America. Wehave with our aircraft work obviously given a good account of ourselves overthe years – we have succeeded in establishing in all divisions – vehicles andaircraft – the reputation that you can rely on in Marshall – they will not letyou down. Let’s hope that this may prove to be the same with the TriStarproject". Sir Arthur Marshall witnessed the clear success of the TriStar projectprior to his retirement from the company in 1989 at the age of 86 when hewas still working his legendary 7 day 65 hour week.
In his retirement, he took offices at Greenhouse Farm, opposite the airport,where, although long retired from playing a part in the management of theexpanding family business, he nonetheless kept in touch and maintained avery sharp sense of humour. In a speech for his 100th birthday he reflectedthat "as you get older you find there are three phases of life: you are born,you are middle aged and …….you’re looking very well!"
Sir Arthur Marshall was a cautious businessman imbued with relentlessenergy and a legendary attention to detail. It was typical of him that whenhe was appointed High Sheriff in 1969, he adopted for his Arms, the mottoFelix qui Laborat which he always translated as "Happy is he who works".He was passionately attached to Cambridge and was particularly proud ofcreating a highly respected business which provided substantial localemployment and skills in the days when Cambridge was over dependent onthe University for its prosperity. He was also immensely proud that theaerodrome owned by the company provided the region with a fully licensedcustoms airport at no cost to local or central government.
As a local Cambridge man, he maintained a close relationship with JesusCollege which elected him as an Honorary Fellow in 1990 and he was alsoparticularly proud that, in 2001, the Sir Arthur Marshall Institute ofAeronautics was formed as part of the Cambridge University EngineeringDepartment. At the end of a 90th birthday lunch for Sir Arthur in 1993, oneof his closest friends, Sir Peter Masefield, who also enjoyed a distinguishedcareer in aviation, reflected on the 58 years they had known each other bysaying "of all the great figures in the aeronautical scene in all that time, nonehas done more for the country nor earned genuine regard and friendship insuch a dedicated and determined but modest way – even if that personalmodesty has been laced on occasion with a wholly justified and professionalautocratic approach. I think that the mixture has been just right".
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KEY GROUP PERSONNEL
MARSHALL GROUP OF COMPANIESM J Marshall Chairman & Chief Executive
R D Marshall Group Development Director
W C M Dastur Group Financial Director
J D Barker Company Secretary
S J Moynihan Group Financial Controller & Head of Group Insurance
T M Holloway Group Support Executive
MARSHALL MOTOR HOLDINGSR M Knight Chief Executive
F Laud Financial Director
I J Mitchell Senior Divisional Director
C M H Walkinshaw Business Development Director
R J Ward Divisional Director
C A Minter General Manager, Human Resources
MARSHALL LEASINGP G Cakebread Managing Director
C Lavender Operations Director
J A Ross Sales & Marketing Director
MARSHALL THERMO KINGN B J Faben Managing Director
E Gedney Financial Director
VTR GROUPM Smith General Manager
MARSHALL AEROSPACEM T Broadhurst Chief Executive
G R Nix Chief Operating Officer
C J Bunney Commercial Director
G J Clark Financial Director
N M Jennion Production Director
M E Milne Marketing & Business Development Director
R E Ward Engineering Director
R D Buckley Airport Director
I Young Chief Test Pilot
K Hussey Head of Human Resources
AEROPEOPLEK J Bishop Director
MARSHALL SPECIALIST VEHICLESP W Callaghan Chief Executive
R D Cutting Engineering Director
S P Northam Business Development Director
A Pettitt Financial Controller
D P Thompson Head of Human Resources
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