TIDMJHD

RNS Number : 8392U

James Halstead PLC

31 March 2023

31 March 2023

JAMES HALSTEAD PLC

INTERIM RESULTS FOR THE HALF-YEARED 31 DECEMBER 2022

Record turnover; confident in long-term progress

James Halstead plc, the AIM listed manufacturer and international distributor of commercial floor coverings, announces its results for the six months ended 31 December 2022:

Financial highlights

 
 
        *    Revenue at GBP149.6 million (2021: GBP136.7 million) 
 
       *    Operating profit at GBP23.1 million (2021: GBP25.5 
            million) 
 
       *    Pre-tax profit at GBP23.2 million (2021: GBP25.4 
            million) 
 *    Basic earnings per ordinary share 4.3p (2021: 4.7p) 
 
 *    Interim dividend declared of 2.25p (2021: 2.25p) 
 
 *    Cash of GBP44.3 million (2021: GBP69.4 million) 
 
 

The Chief Executive, Mr. Mark Halstead, commented:

"These last three years have seen our businesses challenged by numerous unexpected factors that have added to costs significantly and to the complexity of the simple business of designing, manufacturing and selling commercial flooring. The bottom line results show a small dip in profits at the half year but this, in the view of the board, is a creditable performance."

Enquiries:

 
 James Halstead: 
 Mark Halstead, Chief Executive             Telephone: 0161 767 2500 
 Gordon Oliver, Finance Director 
 
   Hudson Sandler: 
 Nick Lyon                                  Telephone: 020 7796 4133 
 Nick Moore 
 
   Panmure Gordon (NOMAD & Joint Broker): 
 Dominic Morley                             Telephone: 020 7886 2500 
 
   WH Ireland (Joint Broker): 
 Ben Thorne                                 Telephone: 0207 220 1666 
 

CHAIRMAN'S STATEMENT

Trading for the six months ended 31 December 2022

Sales revenue of GBP149.6 million (2021: GBP136.7 million) is a record level of turnover which, considering the economic backdrop in the many markets, is a satisfactory achievement. However, the effects of transportation costs, energy price increases and raw materials costs have meant that profit is lower than last year. The profit before tax is GBP23.2 million (2021: GBP25.4 million), a drop of 8.6%.

Turnover for the first half is 9.5% ahead of the comparative with UK sales 10% ahead of 2021, Europe 4% up, Australasia 16% ahead and the rest of the world up by 26%. The rest of the world turnover was driven mainly by further increases in sales across the Middle East and North America. Certain markets, most notably South America, were affected by delayed shipments due to reduced shipping route availability and consequent significant delays. There is a plethora of projects that illustrate the breadth and depth of our flooring sales: Churchill Downs Racecourse in Kentucky, the Toulouse Rugby Stadium in France, the FIFA Museum in Qatar and the Palace Hotel in Konary (Poland). Most of our export markets experienced shipping delays as global shipping routes continued to be in turmoil following the significant changes to demand patterns resulting from events of the last two years.

Distribution costs, in terms of export shipping, remained at very high levels throughout the period. Given our shipments of flooring were as diverse as the St Helene hospital in Mauritius, the student accommodation at Iceland University, the WKI Lab in East Java, the Biscotti Headquarters in Lviv or the Penfolds Wine Exhibition at Raffles City in Singapore we thank our logistics teams.

Within the Australasian markets both Australia and New Zealand reported double digit sales increases. Our business in Malaysia is growing steadily with increases in sales volumes over each quarter since its inception in 2020. As we add more sales staff to the surrounding South Asia countries, we expect further growth. However, Asia sales as a whole have been impacted by the Chinese market where the continued Covid restrictions throughout the period has seen demand and projects at very low levels.

Margins have remained under pressure throughout the period, even though in many markets we have undertaken price increases, with energy costs increasing steadily in our manufacturing sites in the UK. To an extent the growth in stock earlier in the year had a degree of hedge against energy price increases - but not significantly so. As I noted in the final results for the year ended 30 June 2022 we have, in our manufacturing businesses, adopted a lag between absorbing costs and increases in sales prices. The lag is partly the holding of prices quoted on projects in advance, partly to allow stockists to look at their price lists and in part our reticence to risk the unknown consequences of price increases on future demand. Given that many industries have passed on costs with little or no notice to the customer we have, to a degree, taken a more protective stance towards long term relationships.

Our German and Central European businesses have seen flat growth and margin erosion and have been the least effective of our businesses in achieving price increases. Overall, the adverse effects noted had an average 3% impact on margins in the period, and a price increase in most regions and all our major markets was implemented from the start of January 2023.

Overhead costs in the six months to 31 December 2022 were 4.9% higher than the prior year with the most significant increase being export shipping costs.

We noted in our full year results for the year to 30 June 2022 that at the year end our stock holding had significantly increased, partly through higher costs, but in general as a result of a key decision to hold higher volumes to defend against the uncertainties in the market (notably the risk of restrictions in energy and raw material availability). In the main, this was achieved, and as some of those uncertainties and pressures have eased, we have looked to reduce our stock levels. At the end of December, although GBP10 million higher than at the same time last year, stock levels had fallen just over 16% since June 2022 and have continued to fall after the half year end. It was obviously helpful to raw material supplies that the European winter was relatively mild.

Though profit for the first half of our year is lower we, as a board, are satisfied overall with the outcome relative to the challenges. Most of our businesses are progressing, though in Germany where we are more exposed to the retail and domestic markets we saw both lower volumes and lower margins. Cost control continues to be the focus of our attention.

The UK group has a final salary pension scheme (also known as a defined benefit scheme) and though this scheme was closed to new entrants in 2002 it has now been closed to future accrual. Since the number of employees in the scheme was less than 70 it was inevitable that this would happen at some point.

Earnings per Share and Dividend

Our cash, which stands at GBP44.3 million as of 31 December 2022 compared with GBP69.4 million at 31 December 2021, continues to be a key strength. Since 31 December 2021 we have distributed GBP32.3 million in dividends and increased our stock levels in the six months to 30 June 2022 as a defensive precaution against energy and raw material shortages.

With regard to our cash and profitability, we have decided to declare an unchanged interim dividend of 2.25p per share, payable on 9 June 2023 to those shareholders on the register at 12 May 2023.

Environmental, sustainability, social responsibility and governance

The detailed Sustainability Report that we issue annually is now in its 18(th) edition and continues to underline the Group's commitment to ESG and sustainability. Our commitment as a business to these matters is not new. In addition, we have identified the members of our committee in respect of addressing the TCFD (Taskforce on Climate-related Financial Disclosures) and whilst these disclosures seem in some ways to be a degree pretensive, we will continue our many sustainability and environmental initiatives undertaken not only at the company level but also at our industry level alongside our competitors. In addition, we are participants within European and international organisations regarding recycling, environmental, sustainability and product standards. Examples include EPDs (environmental product declarations which document environmental impact from life cycle analysis) and ESOS (the energy savings opportunity scheme) which differentiate UK and European manufacturers from suppliers importing products from often less environmentally-conscious regions.

As a manufacturer we see this as a key way of communicating our place in, and contribution to, society, and the many and varied actions that are ongoing inside the business and relevant to our place in the global community. It is of advantage that we are manufacturers that can and do actively recycle waste material, and our UK produced goods have up to 40% recyclate and up to 85% natural material content by physical weight.

Achieving our environmental and sustainable business targets continues to be a key focus.

Outlook

The past three years have seen numerous extraordinary factors impact on the business (Covid-19, raw material shortages and price increases, freight price increases and availability, the energy crisis) and to come through all of these, in the view of the board, is a creditable performance. However, the profits of the business reported in the first six months of the trading year are lower. Nevertheless, the demand for flooring for refurbishment projects across healthcare, social housing and education is significant with projects such as Terminal 1 at the Paris Charles de Gaulle airport, the Sema Park urban regeneration project in Romania and the K inga Ora state housing projects in New Zealand.

As we move into the second half of the year, energy costs appear to be holding stable, with the mild winter in Europe helping the wholesale gas prices fall from their peak in August 2022. Whilst energy costs are still in excess of prior comparatives there are positives. Availability and cost of shipping to our global markets is vastly improved. Raw material availability and the costs of those materials are more favourable. Production from our UK factories is higher, and with that we should see improved productivity. Most importantly, sales in recent weeks in the UK and many export markets have been very encouraging with our core commercial vinyl ranges experiencing especially robust demand.

I, and the board, are confident of our progress.

Anthony Wild

Chairman

31 March 2023

Consolidated Income Statement

for the half-year ended 31 December 2022

 
 
                                         Half-year     Half-year         Year 
                                             ended         ended        ended 
                                          31.12.22      31.12.21     30.06.22 
                                           GBP'000       GBP'000      GBP'000 
 
 Revenue                                   149,638       136,654      291,860 
                                      ============  ============  =========== 
 
 Operating profit                           23,085        25,507       52,258 
 Finance income                                230            18           42 
 Finance cost                                 (95)         (120)        (237) 
 
 Profit before income tax                   23,220        25,405       52,063 
 
 Income tax expense                        (5,176)       (5,692)     (11,735) 
 
 Profit for the period                      18,044        19,713       40,328 
                                      ============  ============  =========== 
 
 
 Earnings per ordinary share of 5p: 
 -basic                                       4.3p          4.7p         9.7p 
 -diluted                                     4.3p          4.7p         9.7p 
 
 

All amounts relate to continuing operations.

Details of dividends paid and declared/proposed are given in note 4.

Consolidated Statement of Comprehensive Income

for the half-year ended 31 December 2022

 
 
 
                                                         Half-year   Half-year        Year 
                                                             ended       ended       ended 
                                                          31.12.22    31.12.21    30.06.22 
                                                           GBP'000     GBP'000     GBP'000 
 Profit for the period                                      18,044      19,713      40,328 
                                                        ----------  ----------  ---------- 
 
   Other comprehensive income net of tax: 
 
 Remeasurement of the net defined benefit liability        (4,948)       1,963       7,090 
 Foreign currency translation differences                       63       (310)         926 
 Fair value movements on hedging instruments               (1,297)       (218)       (111) 
 
 
 Other comprehensive income for the period net of tax      (6,182)       1,435       7,905 
 
 Total comprehensive income for the period                  11,862      21,148      48,233 
                                                        ==========  ==========  ========== 
 
 
 
 Attributable to equity holders of the parent    11,862   21,148   48,233 
                                                -------  -------  ------- 
 

Consolidated Balance Sheet

as at 31 December 2022

 
                                                            Half-year   Half-year        Year 
                                                                ended       ended       ended 
                                                             31.12.22    31.12.21    30.06.22 
                                                              GBP'000     GBP'000     GBP'000 
 Non-current assets 
 Property, plant and equipment                                 36,265      36,599      36,671 
 Right of use assets                                            8,914       5,565       5,634 
 Intangible assets                                              3,232       3,232       3,232 
 Retirement benefit obligations                                   499           -       6,144 
 Deferred tax assets                                              236         356         234 
                                                           ----------  ----------  ---------- 
                                                               49,146      45,752      51,915 
                                                           ----------  ----------  ---------- 
 Current assets 
 Inventories                                                   93,863      83,191     112,279 
 Trade and other receivables                                   39,053      37,539      51,171 
 Derivative financial instruments                                 286       1,700       2,166 
 Cash and cash equivalents                                     44,325      69,381      52,144 
                                                           ----------  ----------  ---------- 
                                                              177,527     191,811     217,760 
                                                           ----------  ----------  ---------- 
 
 Total assets                                                 226,673     237,563     269,675 
 
 Current liabilities 
 Trade and other payables                                      49,788      72,705      84,507 
 Derivative financial instruments                               1,406          71         517 
 Current income tax liabilities                                 2,198         865       2,097 
 Lease liabilities                                              2,906       2,846       2,166 
                                                           ----------  ----------  ---------- 
                                                               56,298      76,487      89,287 
                                                           ----------  ----------  ---------- 
 
 Non-current liabilities 
 Retirement benefit obligations                                     -       1,390           - 
 Other payables                                                   432         448         453 
 Deferred tax liabilities                                       1,425         648       2,929 
 Lease liabilities                                              6,093       2,843       3,548 
 Preference shares                                                200         200         200 
                                                           ----------  ----------  ---------- 
                                                                8,150       5,529       7,130 
                                                           ----------  ----------  ---------- 
 
 Total liabilities                                             64,448      82,016      96,417 
                                                           ----------  ----------  ---------- 
 
 Net assets                                                   162,225     155,547     173,258 
                                                           ==========  ==========  ========== 
 
 Equity 
 Equity share capital                                          20,838      10,419      20,837 
 Equity share capital (B shares)                                  160         160         160 
                                                           ----------  ----------  ---------- 
                                                               20,998      10,579      20,997 
 Share premium account                                             13       4,934           - 
 Capital redemption reserve                                         -       1,174           - 
 Currency translation reserve                                   5,975       4,676       5,912 
 Hedging reserve                                                (356)         834         941 
 Retained earnings                                            135,595     133,350     145,408 
 Total equity attributable to shareholders of the parent      162,225     155,547     173,258 
                                                           ==========  ==========  ========== 
 
 

Consolidated Cash Flow Statement

for the half-year ended 31 December 2022

 
                                                               Half-year   Half-year         Year 
                                                                   ended       ended        ended 
                                                                31.12.22    31.12.21     30.06.22 
                                                                 GBP'000     GBP'000      GBP'000 
 
 Profit for the period                                            18,044      19,713       40,328 
 Income tax expense                                                5,176       5,692       11,735 
                                                              ----------  ----------  ----------- 
 Profit before income tax                                         23,220      25,405       52,063 
 Finance cost                                                         95         120          237 
 Finance income                                                    (230)        (18)         (42) 
 Operating profit                                                 23,085      25,507       52,258 
 Depreciation of property, plant & equipment                       1,712       1,879        3,794 
 Depreciation of right of use assets                               1,578       1,590        3,139 
 Profit on sale of property, plant and equipment                    (26)        (73)        (198) 
 Defined benefit pension scheme service cost                         154         253          500 
 
 Defined benefit pension scheme employer contributions paid        (975)       (991)      (1,970) 
 Change in fair value of financial instruments                     (564)        (14)          703 
 Share based payments                                                 12           3            6 
 Decrease/(increase) in inventories                               19,008    (23,198)     (50,272) 
 
 Decrease/(increase) in trade and other receivables               11,975       5,165      (7,451) 
 (Decrease)/increase in trade and other payables                (33,225)       6,986       15,905 
 Cash inflow from operations                                      22,734      17,107       16,414 
 Taxation paid                                                   (4,957)     (5,730)      (9,879) 
 Cash inflow from operating activities                            17,777      11,377        6,535 
                                                              ----------  ----------  ----------- 
 
 
 Purchase of property, plant and equipment                       (1,143)     (1,466)      (3,248) 
 Proceeds from disposal of property, plant and equipment              47         129          280 
                                                              ----------  ----------  ----------- 
 Cash outflow from investing activities                          (1,096)     (1,337)      (2,968) 
                                                              ----------  ----------  ----------- 
 
 
 
 Interest received                                                    99          18           42 
 Interest paid                                                       (7)         (7)         (20) 
 Lease interest paid                                                (88)        (73)        (143) 
 Lease capital paid                                              (1,573)     (1,634)      (3,233) 
 Equity dividends paid                                          (22,921)    (22,921)     (32,298) 
 Shares issued                                                        14         823          823 
                                                              ----------  ----------  ----------- 
 Cash outflow from financing activities                         (24,476)    (23,794)     (34,829) 
                                                              ----------  ----------  ----------- 
 
 
 Net decrease in cash and cash equivalents                       (7,795)    (13,754)     (31,262) 
                                                              ----------  ----------  ----------- 
 
 Effect of exchange differences                                     (24)       (126)          145 
 Cash and cash equivalents at start of period                     52,144      83,261       83,261 
 
 Cash and cash equivalents at end of period                       44,325      69,381       52,144 
                                                              ==========  ==========  =========== 
 

Notes to the Interim Results

for the half-year ended 31 December 2022

 
 1.    Basis of preparation 
       The interim financial statements are unaudited and do not constitute statutory accounts as 
        defined within the Companies Act 2006. 
 
        The principal accounting policies applied in the preparation of the consolidated interim statements 
        are those set out in the annual report and accounts for the year ended 30 June 2022. 
 
        The figures for the year ended 30 June 2022 are an abridged statement of the group audited 
        accounts for that year. The financial statements for the year ended 30 June 2022 were audited 
        and have been delivered to the Registrar of Companies. 
 
        As is permitted by the AIM rules, the directors have not adopted the requirements of IAS 34 
        'Interim Financial Reporting' in preparing the interim financial statements. Accordingly the 
        interim financial statements are not in full compliance with IFRS. 
 
 2.    Taxation 
       Income tax has been provided at the rate of 22.3% (2021: 22.4%). 
 3.    Earnings per share 
 
                                                                        Half-year        Half-year            Year 
                                                                            ended            ended           ended 
                                                                         31.12.22         31.12.21        30.06.22 
                                                                          GBP'000          GBP'000         GBP'000 
 
  Profit for the period                                                    18,044           19,713          40,328 
                                                                  ---------------  ---------------  -------------- 
 
  Weighted average number of shares in issue                          416,751,498      416,431,865     416,586,675 
  Dilution effect of outstanding share options                             23,830          276,142         201,425 
  Diluted weighted average number shares                              416,775,328      416,708,007     416,788,100 
 
  Basic earnings per 5p ordinary share                                       4.3p             4.7p            9.7p 
  Diluted earnings per 5p ordinary share                                     4.3p             4.7p            9.7p 
 
 
 4.    Dividends 
                                                                         Half-year   Half-year        Year 
                                                                             ended       ended       ended 
                                                                          31.12.22    31.12.21    30.06.22 
                                                                           GBP'000     GBP'000     GBP'000 
       Equity dividends paid: 
 
  Final dividend for the year ended 30 June 2021                                 -      22,921      22,921 
  Interim dividend for the year ended 30 June 2022                               -           -       9,377 
       Final dividend for the year ended 30 June 2022                       22,921           -           - 
 
                                                                            22,921      22,921      32,298 
                                                                        ----------  ----------  ---------- 
 
       Equity dividends declared/proposed after the end of the period 
  Interim dividend                                                           9,377       9,377           - 
  Final dividend                                                                 -           -      22,921 
 

Equity dividends per share, paid and declared/proposed are as follows:

 
 
          11.00p final dividend for the year ended 30 June 2021, paid on 17 December 2021 
          2.25p interim dividend for the year ended 30 June 2022, paid on 10 June 2022 
          5.50p final dividend for the year ended 30 June 2022, paid on 16 December 2022 
 
          2.25p interim dividend for the year ended 30 June 2023, payable on 9 June 2023, to those shareholders 
          on the register at the close of business at 12 May 2023. 
 
   6.     Copies of the interim results 
        Copies of the interim results have been sent to shareholders who requested them. Further copies 
         can be obtained from the Company's registered office, Beechfield, Hollinhurst Road, Radcliffe, 
         Manchester, M26 1JN and on the Company's website at www.jameshalstead.com. 
 

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END

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March 31, 2023 02:00 ET (06:00 GMT)

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