TIDMJHD
RNS Number : 4464B
James Halstead PLC
03 October 2022
3 October 2022
JAMES HALSTEAD PLC
PRELIMINARY ANNOUNCEMENT OF AUDITED RESULTS
FOR THE YEARED 30 JUNE 2022
Key Figures
-- Revenue at GBP291.9 million (2021: GBP266.4 million)
- up 9.6%
-- Underlying profit before tax GBP51.1 million (2021: GBP51.3
million) - down 0.4 %
-- Earnings per 5p ordinary share of 9.7p (2021: 9.6p) -
up 1%
-- Final dividend per ordinary share proposed of 5.5p -
unchanged
-- One-for-one bonus issue on 14 January 2022
-- Cash GBP52.1 million (2021: GBP83.3 million)
Mr Mark Halstead, Chief Executive, commenting on the results,
said :
"A solid performance for a year that started in a positive way,
as the large challenges of the last two years looked set to
dissipate, only to be faced by a set of new obstacles with both
energy and materials costs escalating".
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: 020 7220 1666
CHAIRMAN'S STATEMENT
Results
Revenue for the year at GBP291.9m (2021: GBP266.4m) is 9.6%
ahead of the comparative year.
Underlying operating profit is GBP51.1 million (2021: GBP51.3m)
- 0.4 % below last year. The reported profit for the year of
GBP52.2m differed from this due to the one-off effect of insurance
pay-outs in respect of the breakdown of one of the major production
lines at our Radcliffe manufacturing plant in September 2019.
As I wrote in our trading update on 1 August 2022, the second
half of the year has been, on the one hand, a period of full
production for our factories in the UK but also with its
challenges. The optimism at the start of the year on the decline of
Covid-19, related supply problems and greater availability of
labour was offset by a myriad of shortages/cost increases following
the invasion of the Ukraine. Transport, fuel and energy increases
were immediately obvious and whilst a significant issue during the
spring/summer period, we have been mindful that the autumn/winter
period may bring deeper problems. The most obvious effect on our
business has been our decision to increase stockholdings as we
sought to mitigate the risks associated with the potential
inability to manufacture. This, in our view, seemed judicious and
hopefully is over-cautious. In the event that the crisis does not
escalate, then it is likely we will temporarily suspend some
production for a period to bring stock levels back to normal.
Trading margins during the year decreased but are acceptable
given the flood of cost increases that we have in part passed on.
As I noted in the last two years' trading updates, this period was
again not normal. For example, in some flooring projects that have
been severely delayed, we have honoured the prices originally
quoted to preserve the volume needed to feed our production lines.
In other instances, we have re-priced to find volume still goes
elsewhere and in many cases we have re-priced again and retained
the business. This is the nature of our industry with over-capacity
of supply and at least one global competitor has fallen into
receivership on the back of facing similar issues. Whilst some
other industries have priced daily on the back of this difficult
situation, we have walked a more cautious path and I commend our
teams that collectively have been successful in managing the
challenges we face.
There have been some positives in the midst of a generally
difficult trading environment. The general boycott in Russian trade
has eased the widespread shortage of shipping containers that has
prevailed since Covid-19 disrupted normal shipping routes.
Similarly, with Russian bound supplies of certain raw materials
facing export restrictions there was, at times, more availability
to our factories as these were diverted back into the European
market. Overall it was a difficult period for manufacturing.
The company and our strategy
James Halstead is a group of companies involved in the
manufacture and supply of flooring for commercial and domestic
purposes, based in Bury UK. James Halstead plc has been listed on
the London Stock Exchange for nearly 75 years.
The group was established in 1914 and continues to operate out
of the original premises in Bury. In its factories in Bury and
Teesside it manufactures resilient flooring for distribution in the
UK and worldwide.
The company's strategy is to constantly develop its brand
identity and its reputation for quality, product innovation,
durability and availability, thereby enhancing and maintaining
goodwill with the aim of achieving repeat business. Our focus is to
work with stockists who in turn distribute those bulk deliveries
whilst promoting and representing the products to the end users and
specifiers who will purchase the stock from those stockists.
This approach is designed to increase and secure revenue streams
and drive profitability and cash flow which enables the
continuation of dividends thereby creating shareholder wealth. In
the normal course of business one key element of the company ethos
is having dedicated sales personnel to present our product to our
customers' clientele.
Over many years our strategy has also included a policy of
continual investment in both process improvement and in product
development to improve output efficiency and product offering.
Corporate governance and corporate social responsibility and the
environment
The board has over many years recognised its responsibility
towards good corporate governance. It is part of our character and,
I believe, contributes to our ability to deliver long-term
shareholder value. Increasingly companies are, quite rightly,
tasked with demonstrating that their environmental credentials and
supply chain management are supported by social and sustainability
dimensions with appropriate stewardship.
We can say, with some pride, that almost 100% of our electric
usage is now derived from renewables. Our bi-annual Sustainability
Report was published in 2021 and we have this report independently
audited to further under-line our credentials. (Available to
download on our website).
PVC polymer is one of our main raw materials and we began
recycling waste into our processes in the 1950s and have continued
to use waste PVC as part of the process of manufacturing in ever
increasing volumes. For many years we have funded waste collection
with Recofloor - our UK joint venture that collects post
installation waste PVC within our industry. We are also founder
members of the European PVC recycling venture, the AgPr, which
funds the recycling of post-consumer PVC waste and diverts waste
from landfill back into the manufacturing process.
An important point to note about PVC is that it has evolved and
it is no longer just derived from petrochemicals. It is
increasingly produced from biomass. Indeed, many of the by-products
of PVC manufacturing are indispensable to the medical and food
industries. PVC manufacture has the lowest consumption of primary
energy of any of the major commodity plastics and our PVC flooring
is made with over 80% renewable materials. Our recycling
initiatives further reduce our footprint on the environment.
As part of our focus on the future and the footprint of our
industry we are major partners in industry wide bodies. We are, for
example, active members of the ERFMI (the European Resilient
Flooring Manufacturing Institute). ERFMI activities range from
involvement in the EU carbon neutral strategy through to funding
new recycling initiatives to extend the ability of PVC to be
recovered and recycled.
The UK may have left the European Union but our work on
standards, the circular economy, sustainability and meaningful
recycling is both Europe wide and globally focused and is
progressing at pace. In no way has "Brexit" lessened our
involvement as Europeans in the flooring industry.
Dividend
Our cash balances stand at GBP52.1 million (2021: GBP83.3
million) with the major reason for the reduction being, obviously,
increased stock. The inventory at the year end is GBP112.3 million
(2021: GBP60.7 million) which is about 85% higher than the prior
year comparative.
Also of note regarding the cash flow for the year is taxation
paid of GBP9.9 million (2021: GBP9.9 million) - unchanged and
equity dividends paid of GBP32.3 million (2021: GBP34.1 million) -
down 5.3%.
Having this large investment in our stockholdings and with the
challenges facing our companies in terms of cash flow, the Board do
not propose to increase the final dividend which will remain at the
level of last year and will be paid in December 2022.
The interim dividend of 2.25p (2021: 4.25p) was paid in June
2022.
Acknowledgements
As is customary, I would like to thank our staff for their
continued efforts in achieving this year's result.
In addition, I feel I must note the death of HM Queen Elizabeth
II. The brand 'Polyflor' was created in 1950, just prior to start
of her reign. Her Majesty's service over the years since has no
doubt been the rock on which the reputation of the United Kingdom
has been built and helped in the growth of our exports over the
last 70 years.
Our thanks also to the UK Contract Flooring Association for
their members' accolades with Polyflor being awarded the 2022
Manufacturer of the Year, as well as the Healthcare Installation of
the Year (Kitwood House Care Home in Cheshire) and International
Installation of the Year (Live Sport Offices, Prague).
Outlook
Trading from the year-end to date has been positive. Post year
end, prices have been increased and demand has remained strong.
Sales volume is higher and we have continued to pass on cost
increases. Costs, most particularly energy, have continued to rise.
The fall in the value of sterling, most markedly against the US
dollar, in recent days will no doubt have implications to certain
input costs but equally, given our level of exports, will have some
positives.
We cannot forecast the effects of energy costs on the myriad of
materials and goods that are needed to undertake mass volume
manufacture but with the vast array of skills, knowledge and
entrepreneurs within our collective, each challenge should be
overcome.
In the light of current demand, with the accumulated industry
experience at our disposal, I, and the Board, remain confident of
progress over the medium term, notwithstanding the short term
challenges I have highlighted in my statement.
Anthony Wild
Chairman
CHIEF EXECUTIVE'S REVIEW
As noted by the Chairman, it has been a mixed year. For the
largest input costs to our manufacturing we have had to accept
price increases. Be it energy or raw materials it has been a
constant adverse situation. The simple idea that these costs are
passed on is complicated.
(a) Complicated by the project related nature of quotations and
the time from quotation to supply of the stock, reality of losing
business at high prices or maintaining it at a loss.
(b) Complicated by the fact that at least two generations that
have never seen inflation of this scale and who are partly in
denial as to its reality, duration and implications.
(c) Complicated by the possibility that this may yet affect the
continuous production we have enjoyed over many, many years.
These challenges are faced by many of our European competitors
and inevitably there is a degree of margin erosion which
manufacturers from all types of industry face.
Reviewing the businesses in more detail:
Objectflor / Karndean and James Halstead France, our European
operations
In Germany sales growth of near 12% came largely from cost
surcharges and price increases as costs increased during the year.
In one of the most competitive markets for flooring, volumes were
maintained. The year was one of two halves with the earlier part
facing stock shortages due to adverse shipping conditions. There
were key product launches that were delayed by both the
availability of complete stock ranges and difficulties in supply of
marketing materials to support launches. The stock situation
improved as the year progressed.
In France sales were increased by 18%, volumes also increased
though by a lesser percentage. Investments in regional sales teams
were key to the sales growth. Stock levels have grown, once again
largely planned in the expectation of supply problems.
Polyflor Pacific - encompassing Australia, New Zealand and
Asia
In Australia, sales were some 6% ahead of the prior year with
increases in profitability that resulted from increased margin due
to favourable product mix and staff costs savings compared to the
prior year. The staff savings were the result of difficulties in
recruitment leaving vacancies for periods of time. The favourable
product mix was due to higher margin domestic flooring sales having
taken a larger proportion of sales than commercial flooring. This
was, no doubt, in part because Covid-19 restrictions were in place
for a long part of the first half financial year. Freight costs, as
with all markets, were greater. Stock levels increased.
In New Zealand sales were lower than the comparative year. This
market had the longest Covid restrictions of our major markets.
Operational restrictions impacted the economy and the building
sector in particular. Supplying New Zealand was challenging with
shipments of flooring from the UK taking up to 8 months from order
due to sea freight complexities such as shortages of shipping
containers in Europe and severe congestion in ports such as
Singapore. The supply of flooring into nationwide social housing
contracts continues to be an important source of revenue and will
continue as backlogs in the roll-out programme alleviate. One
negative was the supply of cushion vinyl from European
manufacturers which was severely disrupted. Nevertheless, it is
pleasing to report increased market share and customer satisfaction
- largely due to our company having stock
and offering service levels far better than competitors. Stock levels have been increased.
This was the first full year of our Malaysian business (which
also covers the South Eastern markets of Indonesia, Singapore,
Thailand, Vietnam and the Philippines) and we can be satisfied with
the progress made to date. The start of the year was again hampered
by various lockdowns and travel movements across the territories,
but as the year progressed, we saw the order book and sales grow,
with sales across the region 153% ahead of last year.
The order book remains healthy, and we have every expectation
that sales will continue to grow. At the end of the financial year,
we strengthened the sales team further by employing salespeople
directly in Vietnam and Thailand to support the distributors, and
similar plans are in place for the Philippines before the end of
2022.
Polyflor and Riverside Flooring, based in UK
We continue to see growth in the heterogeneous ranges
manufactured at Teesside, and a falloff in certain of the 'older'
ranges manufactured in Radcliffe. Overall volumes were maintained.
Output was increased as we returned to a situation of being able to
run all production lines, albeit with continued absenteeism levels
that are above the "normal" levels that existed prior to the
Covid-19 pandemic.
The increase in energy and raw material costs have put pressure
on our margins and whilst we have a proportion of our energy
consumption on forward contracts, costs continue to rise to
unprecedented levels. The recent announcement by the government,
whilst welcome, will only limit the increase, not reduce it.
Availability of raw materials has improved, but costs remain high.
The impact of rising energy costs on the production costs has been
a significant issue.
We have made several price increases during the year across our
ranges and across all markets to pass on these increases. This
continues to be the case after the year end.
Stocks in the UK also increased, both in manufactured and
merchanted goods. Delays in product launches earlier in the year
compounded the issue as we waited for marketing material, such as
shade cards and display boards. This was another fallout of the
Ukraine war due to the lack of wood pulp and related materials.
Polyflor Nordic comprising Polyflor Norway based in Oslo and
Falck Design based in Sweden
The markets have been re-organised to bring both Norway and
Sweden under one reporting structure. In Norway sales are 17% ahead
of the prior year largely supported by price increases. Net profit
rose by just under 6%. Heterogeneous flooring (supplied by
Riverside) grew and there has been investment in additional staff
in internal sales and regional sales areas. In Sweden, sales
increased 37% and the volume of product supplied from our UK
factories increased by near 50%. It must be noted that the prior
year comparatives were subdued by Covid-19 but nevertheless this is
a good result for both countries.
Polyflor Canada, based in Toronto
A record year for sales and a significant increase in net profit
against a generally sluggish economy. Our market share is still
embryonic in this market but with the shadow of Covid-19 having
crippled travel for much of the financial year this was a
creditable performance. Our Canadian business is very largely
project based and these have faced delays in funding and progress
but the business is well placed for further growth.
Rest of the World
Our products are sold in many markets across the globe and the
preceding sections cover some of the key markets where we have a
local presence and warehousing. These markets have been long
established for the sales of our flooring and there has also been
significant growth in several other markets when compared to last
year. Spain was up 30%, South America up 48% and the Middle East up
59%. In some instances the comparative for 2021 was affected by the
impact of the Covid-19 virus (most notably in Spain). It is
pleasing to see these markets have recovered, this has been hard to
achieve with the cost of international freight and equally as
problematical have been delays and difficulties in available
shipping. The markets that did not grow in the year were Africa and
North Asia.
The North Asia markets have experienced a challenging year due
to the increase in Covid-19 cases and the "zero-Covid" policy
adopted across China. This meant our local warehouse in China,
which became operational last year supplying smaller and local
orders, as well as being able to support other Asian markets, could
not despatch products. Several larger Asian projects, which are
shipped direct, have been delayed. Latterly we have started to see
some improvement but sales for 2022 fell by 28% against the
previous year.
In conclusion
Given the circumstances we can only be pleased with the results
for the year. The hard work, dedication and experience of our
subsidiary directors and management has been a key factor in this
achievement.
However, the challenges have not lessened.
Mark Halstead
Chief Executive
Audited Consolidated Income Statement
for the year ended 30 June 2022
Year Year
ended ended
30.06.22 30.06.21
GBP'000 GBP'000
Revenue 291,860 266,362
Cost of sales (178,355) (154,722)
----------- -----------
Gross profit 113,505 111,640
Selling and distribution costs (50,316) (46,335)
Administration expenses (10,931) (13,532)
Operating profit 52,258 51,773
Finance income 42 48
Finance cost (237) (553)
Profit before income tax 52,063 51,268
Income tax expense (11,735) (11,407)
Profit for the year attributable to equity shareholders 40,328 39,861
----------- -----------
Earnings per ordinary share of 5p:
-basic 9.7p 9.6p
-diluted 9.7p 9.6p
All amounts relate to continuing operations.
The earnings per ordinary share of 5p for the year ended 30 June
2021 have been restated for the effect of the one-for-one bonus
issue on 14 January 2022.
Audited Consolidated Statement of Comprehensive Income
for the year ended 30 June 2022
Year Year
ended ended
30.06.22 30.06.21
GBP'000 GBP'000
Profit for the year 40,328 39,861
----------- -----------
Other comprehensive income net of tax:
Items that will not be reclassified subsequently to the income statement:
Remeasurement of the net defined benefit liability 7,090 12,708
----------- -----------
7,090 12,708
----------- -----------
Items that could be reclassified subsequently to the income statement if specific
conditions
are met
Foreign currency translation differences 926 (615)
Fair value movements on hedging instruments (111) 1,089
815 474
----------- -----------
Other comprehensive income for the year 7,905 13,182
----------- -----------
Total comprehensive income for the year 48,233 53,043
=========== ===========
Attributable to equity holders of the
company 48,233 53,043
=========== ===========
Items in the statement above are disclosed net of tax.
Audited Consolidated Balance Sheet
as at 30 June 2022
As at As at
30.06.22 30.06.21
GBP'000 GBP'000
Non-current assets
Property, plant and equipment 36,671 37,242
Right of use assets 5,634 6,015
Intangible assets 3,232 3,232
Retirement benefit obligations 6,144 -
Deferred tax assets 234 254
---------- ------------------
51,915 46,743
---------- ------------------
Current assets
Inventories 112,279 60,684
Trade and other receivables 51,171 42,949
Derivative financial instruments 2,166 848
Cash and cash equivalents 52,144 83,261
---------- ------------------
217,760 187,742
---------- ------------------
Total assets 269,675 234,485
---------- ------------------
Current liabilities
Trade and other payables 84,507 65,551
Derivative financial instruments 517 92
Current income tax liabilities 2,097 1,160
Lease liabilities 2,166 2,948
89,287 69,751
---------- ------------------
Non-current liabilities
Retirement benefit obligations - 4,357
Other payables 453 447
Deferred tax liabilities 2,929 -
Lease liabilities 3,548 3,236
Preference shares 200 200
---------- ------------------
7,130 8,240
---------- ------------------
Total liabilities 96,417 77,991
---------- ------------------
Net assets 173,258 156,494
---------- ------------------
Equity
Equity share capital 20,837 10,408
Equity share capital (B shares) 160 160
---------- ------------------
20,997 10,568
Share premium account - 4,122
Capital redemption reserve - 1,174
Currency translation reserve 5,912 4,986
Hedging reserve 941 1,052
Retained earnings 145,408 134,592
Total equity attributable to shareholders of the parent 173,258 156,494
---------- ------------------
Audited Consolidated Cash Flow Statement
for the year ended 30 June 2022
Year Year
ended ended
30.06.22 30.06.21
GBP'000 GBP'000
Profit for the year attributable to equity shareholders 40,328 39,861
Income tax expense 11,735 11,407
---------- ----------
Profit before income tax 52,063 51,268
Finance cost 237 553
Finance income (42) (48)
---------- ----------
Operating profit 52,258 51,773
Depreciation of property, plant and equipment 3,794 3,541
Depreciation of right of use assets 3,139 3,115
Profit on sale of plant and equipment (198) (64)
Defined benefit pension scheme service cost 500 620
Defined benefit pension scheme employer contributions paid (1,970) (4,144)
Change in fair value of financial instruments 703 (90)
Share based payments 6 8
(Increase)/decrease in inventories (50,272) 6,346
(Increase) in trade and other receivables (7,451) (15,573)
Increase in trade and other payables 15,905 20,248
---------- ----------
Cash inflow from operations 16,414 65,780
Taxation paid (9,879) (9,895)
---------- ----------
Cash inflow from operating activities 6,535 55,885
---------- ----------
Purchase of property, plant and equipment (3,248) (2,811)
Proceeds from disposal of property, plant and equipment 280 131
---------- ----------
Cash outflow from investing activities (2,968) (2,680)
---------- ----------
Interest received 42 48
Interest paid (20) (26)
Lease interest paid (143) (173)
Lease capital paid (3,233) (3,010)
Equity dividends paid (32,298) (34,083)
Shares issued 823 51
---------- ----------
Cash outflow from financing activities (34,829) (37,193)
---------- ----------
Net (decrease)/increase in cash and cash equivalents (31,262) 16,012
---------- ----------
Effect of exchange differences 145 (196)
Cash and cash equivalents at start of year 83,261 67,445
Cash and cash equivalents at end of year 52,144 83,261
========== ==========
NOTES
1. The final dividend of 5.5p per ordinary share will be paid, subject to the approval of the
shareholders, on 16 December 2022 to shareholders on the register as at 18 November 2022.
The annual report and accounts will be posted to shareholders on 14 October 2022.
2. The financial information in this statement does not represent the statutory accounts of the
Group. Statutory accounts for the year ended 30 June 2021 have been delivered to the Registrar
of Companies, carrying an unqualified audit report and no statement under section 498 (2)
or (3) of the Companies Act 2006.
3. Statutory accounts for the year ended 30 June 2022 have not yet been delivered to the Registrar
of Companies. They will carry an unqualified audit report and no statement under section 498
(2) or (3) of the Companies Act 2006.
4. Earnings per ordinary share
2022 2021
GBP'000 GBP'000
Profit for the year attributable to equity shareholders 40,328 39,861
-------------- --------------
Weighted average number of shares in issue 416,586,675 416,283,040
-------------- --------------
Dilution effect of outstanding share options 201,425 246,330
Diluted weighted average number of shares 416,788,100 416,529,370
-------------- --------------
Basic earnings per ordinary share 9.7p 9.6p
Diluted earnings per ordinary share 9.7p 9.6p
The figures for the year ended 30 June 2021 have been restated
for the effect of the one-for-one bonus issue on 14 January
2022.
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October 03, 2022 02:00 ET (06:00 GMT)
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