REG - James Halstead PLC - Interim Results
31/03/2022 07:01
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20220331:nRSe6478Ga&default-theme=true
RNS Number : 6478G James Halstead PLC 31 March 2022
31 March 2022
JAMES HALSTEAD PLC
INTERIM RESULTS FOR THE HALF-YEAR ENDED 31 DECEMBER 2021
Key Figures
James Halstead plc, the AIM listed manufacturer and international distributor
of commercial floor coverings, reports:
· Revenue at £136.7 million (2020: £130.45 million)
· Operating profit at £25.5 million (2020: £26.2 million)
· Pre-tax profit at £25.4 million (2020: £26.0 million)
· Basic earnings per ordinary share 4.73p (2020: 4.89p)
· Interim dividend declared of 2.25p (2020: 2.125p)
· Cash at 31 December 2021 of £69.4 million
The Chief Executive, Mr. Mark Halstead, commented:
"I, and the Board, believe we have delivered a solid performance given the
continued tumult that has challenged our businesses, compounded by
inflationary pressures not seen in a generation. These challenges continue and
we are fully focused on the balance of the financial year armed with our
collective experience and committed workforces as major assets."
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 2021
Sales revenue of £136.7 million (2020: £130.45 million) is another record,
which considering the turmoil in the market many companies have faced, is a
satisfactory achievement. There has been a small drop in profits for the
period, and while disappointing, given the increased costs in both raw
materials and energy, I can only describe this as a commendable result.
The year on year comparison of turnover for the period shows an overall 5%
increase in sales. In looking at the geographic distribution of the markets
we have seen 9% growth in the UK, 2% in Europe, a 2% decline in Australasia
and 13% growth in other markets. The decline in Australasia is largely as a
result of New Zealand which has, of all our markets, been most affected by
Covid lockdowns. The growth in other markets has been driven mostly by South
America, the Middle East, and North America. The currency translation effect
on turnover, as result of exchange rates, has been adverse when compared to
the comparative to the extent of around 3%.
There are positives to be seen in the trading of the last few months as many
markets and sectors recovered, and indeed show a degree of buoyancy as the
long period of Covid-19 disruption moved into a period of "vaccinated
confidence". We have seen a degree of change in the types of flooring being
bought in significant sectors (such as healthcare and education) with a focus
more on sheet vinyl (which is our area of supply) for expansion and more
significantly refurbishment, to the detriment of commercial carpet and carpet
tile (which we do not manufacture). On a more cautious note there is a
tardiness of Government-funded projects in many markets which may be funding
related but all have been lower priority as, understandably, efforts on
Covid-19 containment and vaccine delivery have absorbed resources and
attention.
Margin has been affected by raw material and energy cost increases but has
been offset by the mix of sales and decisions about which products to
manufacture. It must be noted that not only were raw material costs much
higher but in short supply. Additionally, labour was restricted and production
capacity for periods was capped. As a consequence, high volume sales that
are normally fundamental to large scale manufacturing were not sought and in
cases declined because these sales are usually at a lower margin. Whilst a
focus on higher margin products has been a necessity, it is not a strategy
that helps medium to long term success. Rather than detail the decisions
made, I think it suffices to note that gross margins in the period were 40.2%
(2020: 42.1%). Profit before tax of £25.4 million is a slight decrease on the
prior year (2020: £26.0 million), largely due to higher material costs.
Margins have been under pressure and although we have undertaken price
increases (with further increases due in 2022) these increases lag the costs
with a consequent impact on profit. The lag is partly because of prices quoted
on projects in advance, in part to allow stockists to look at their price
lists and in part our reticence in facing unknown consequence of price
increases on future demand. In many cases our stockists apply price increases
at the same time as ourselves which increases the price of their stock
holdings. This practice does allow us to see the effects of the price
increases on the demand from end customers earlier than would otherwise be the
case. As the first six months of our trading year progressed we have seen
increases in demand in several key markets. The reasons for this are varied
and no doubt include the availability for immediate delivery, brand confidence
and appreciation of our measured and cautionary approach in passing on
costs.
Overheads in the six months to 31 December 2021 were 21.6% relative to
turnover (2020: 21.9%). However, to note the overhead in the period against
its comparative is not to compare like with like. There has been a return to
more normal levels of expenditure in areas such as marketing spend on sales
support, travel costs etc but with a decline in the cost of PPE, Covid-19
testing and remote working costs. In addition, we have started to catch up on
plant maintenance that could not be undertaken due to labour shortages and
Covid-19 concerns.
We have been associated with many projects around the world and I would
normally note a few of these. The projects are global and we trade with almost
every country. I would like to note just a few that we have been proud to be
associated with: the shipyards in Odesa, the Solonko Sovyak Dentistry Center
in Lviv and the International Airport of Boryspil located in the oblast of
Kyiv.
Russia is a market that we no longer trade with.
The level of stock has risen over the period to £83.2 million (2020: £61.9
million) and the increase reflects three factors:
Firstly, the build-up of stock as our production lines have been able to
run more normally following long periods of workforce disruption (owing to
Covid-19) and raw material shortages. Secondly, the increased cost of stock as
a result of the increased costs of materials, shipping and packaging. Thirdly,
our stock as at 31 December 2021 includes launch stocks for new ranges to be
launched early in the new calendar year. This growth in stock has reduced the
cash balances held but offers our business a far greater return than any
interest receipts that will be foregone.
For over 18 months we have been unable to build stock and we perceive it an
advantage that we have now done so. Although, arguably, at 31 December 2021,
the Group was over stocked we do not consider this to be problematical in the
prevailing market conditions.
Earnings per Share and Dividend
Our cash, which stands at £69.4 million compared with £74.4 million at 31
December 2020, continues to be a key strength. The cash has reduced in the
period as a result of the increase in stock.
With regard to our cash and profitability, we have decided to declare an
increased interim dividend of 2.25p per share payable on 10 June 2022 to those
shareholders on the register on 6 May 2022. This represents a 5.9% increase on
the interim dividend paid last year (2.125p).
Having agreed a deficit reduction plan following the triennial scheme
valuation on the defined benefit pension scheme, there has been a large
reduction in the deficit. Based on the valuation methods under IAS 19, the
deficit is now £1.4 million against the comparative at 31 December 2020 of
£13.4 million. The reduction is in part from contributions, in part
investment performance and in part changes in interest rates.
Our basic earnings per share at 4.73p are lower than the comparative period of
4.89p by 3.3%.
Environmental, sustainability, social responsibility and governance
We recently published our 2021 Sustainability Report underlining the Group's
commitment to ESG. Sustainability is a key metric in this report that
encompasses environmental considerations as well as our corporate social
responsibility and indeed governance. In addition, our sustainability
underpins energy usage, water usage and our footprint on the planet. I would
note that our report is audited with each claim documented and independently
verified. This verification is to the very high standard of BES6001 and we
achieved the high rating of "excellent". The full report is available on the
Company website.
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. Whether it is the independent review of our supply chain
or the verification of our products to the standards of indoor air quality or
energy consumption, we look always for credible, independent verification
rather than "green marketing" labels.
Achieving our environmental and sustainable business targets continue to be a
key focus.
In terms of governance we, as a board, continue to believe in a
straightforward approach to accounting and that a prudent and conservative
attitude serves the Company and shareholders alike. Each year has its
challenges and its successes and in the simplest of terms we endeavour in our
business to do no harm.
Acknowledgements
It must be recognised that our workforce have faced difficult times over the
last two years. Some were working from home, many did not have that option
and many have had a "hybrid" existence.
It is clear that teams and departments work best together and not on
conference calls and on behalf of our Board I offer our thanks for their
efforts and forbearance for those many months where they have continued to
work despite the challenges imposed upon us all.
Outlook
Since the half year end we have made several key product launches that have
been well received by the market. As was noted in the review above,
increased prices in the period do not seem to have moderated demand and I can
report that in key markets, and most empathically in February and March, sales
have increased. Given that December itself was at a record level, we can be
reasonably confident that stock bought by distributors in advance of an
increase in prices in January 2022 has been sold onwards.
We have continued to maintain production at normal levels (though there were
higher levels of Covid-19 for several weeks) and hence a degree of improved
productivity from running longer hours in our production facilities. Again, as
noted in the comments under the paragraphs on trading, availability of stock
for customers is crucial.
It is not yet the case that our markets have returned to normality, with
Covid-19 still disrupting several parts of the world. In addition, there are
ongoing inflationary pressures and the uncertainty following the invasion of
Ukraine has clearly added to those stresses immediately affecting the cost of
freight and energy prices. It is, as yet, unclear how the many
interdependencies of Russian sanctions and Ukrainian disruption with the
global market will affect our business. It is to be anticipated that both
inflation and interest rates will face upward momentum.
As a manufacturer we are experiencing levels of inflation not seen in a
generation. The passing on of costs is a necessary consequence and whilst we
do not know yet we are mindful that demand may be affected. The probable
increases in interest rates through the coming months may exacerbate the
issue. To date they have not.
With the caveat of the unknown effects of recent events on input availability
and costs to our businesses, I am confident of progress in our business going
forward, with sales performance continuing to be positive and many markets
returning to a more normal footing.
Anthony Wild
Chairman
31 March 2022
Consolidated Income Statement
for the half-year ended 31 December 2021
Half-year Half-year Year
ended ended ended
31.12.21 31.12.20 30.06.21
£'000 £'000 £'000
Revenue 136,654 130,447 266,362
Operating profit 25,507 26,232 51,773
Finance income 18 33 48
Finance cost (120) (277) (553)
Profit before income tax 25,405 25,988 51,268
Income tax expense (5,692) (5,639) (11,407)
Profit for the period 19,713 20,349 39,861
Earnings per ordinary share of 5p:
-basic 4.73p 4.89p 9.58p
-diluted 4.73p 4.89p 9.57p
All amounts relate to continuing operations.
Details of dividends paid and declared/proposed are given in note 4.
The earnings per share have been adjusted to reflect the effect of the
one-for-one bonus issue on 14 January 2022.
Consolidated Balance Sheet
as at 31 December 2021
Half-year Half-year Year
ended ended ended
31.12.21 31.12.20 30.06.21
£'000 £'000 £'000
Non-current assets
Property, plant and equipment 36,599 38,302 37,242
Right of use assets 5,565 7,799 6,015
Intangible assets 3,232 3,232 3,232
Deferred tax assets 356 2,568 254
45,752 51,901 46,743
Current assets
Inventories 83,191 61,861 60,684
Trade and other receivables 37,539 28,257 42,949
Derivative financial instruments 1,700 1,097 848
Cash and cash equivalents 69,381 74,445 83,261
191,811 165,660 187,742
Total assets 237,563 217,561 234,485
Current liabilities
Trade and other payables 72,705 54,006 65,551
Derivative financial instruments 71 1,791 92
Current income tax liabilities 865 1,461 1,160
Lease liabilities 2,846 3,496 2,948
76,487 60,754 69,751
Non-current liabilities
Retirement benefit obligations 1,390 13,446 4,357
Other payables 448 455 447
Deferred tax liabilities 648 - -
Lease liabilities 2,843 4,428 3,236
Preference shares 200 200 200
5,529 18,529 8,240
Total liabilities 82,016 79,283 77,991
Net assets 155,547 138,278 156,494
Equity
Equity share capital 10,419 10,407 10,408
Equity share capital (B shares) 160 160 160
10,579 10,567 10,568
Share premium account 4,934 4,072 4,122
Capital redemption reserve 1,174 1,174 1,174
Currency translation reserve 4,676 5,688 4,986
Hedging reserve 834 (200) 1,052
Retained earnings 133,350 116,977 134,592
Total equity attributable to shareholders of the parent 155,547 138,278 156,494
Consolidated Cash Flow Statement
for the half-year ended 31 December 2021
Half-year Half-year Year
ended ended ended
31.12.21 31.12.20 30.06.21
£'000 £'000 £'000
Profit for the period 19,713 20,349 39,861
Income tax expense 5,692 5,639 11,407
Profit before income tax 25,405 25,988 51,268
Finance cost 120 277 553
Finance income (18) (33) (48)
Operating profit 25,507 26,232 51,773
Depreciation of property, plant & equipment 1,879 1,738 3,541
Depreciation of right of use assets 1,590 1,485 3,115
Profit on sale of property, plant and equipment (73) (34) (64)
Defined benefit pension scheme service cost 253 245 620
Defined benefit pension scheme employer contributions paid
(991) (3,080) (4,144)
Change in fair value of financial instruments (14) (654) (90)
Share based payments 3 4 8
(Increase)/decrease in inventories (23,198) 6,488 6,346
Decrease/(increase) in trade and other receivables
5,165 (865) (15,573)
Increase in trade and other payables 6,986 8,286 20,248
Cash inflow from operations 17,107 39,845 65,780
Taxation paid (5,730) (4,520) (9,895)
Cash inflow from operating activities 11,377 35,325 55,885
Purchase of property, plant and equipment (1,466) (1,649) (2,811)
Proceeds from disposal of property, plant and equipment 129 52 131
Cash outflow from investing activities (1,337) (1,597) (2,680)
Interest received 18 33 48
Interest paid (7) (15) (26)
Lease interest paid (73) (82) (173)
Lease capital paid (1,634) (1,424) (3,010)
Equity dividends paid (22,921) (25,237) (34,083)
Shares issued 823 - 51
Cash outflow from financing activities (23,794) (26,725) (37,193)
Net (decrease)/ increase in cash and cash equivalents (13,754) 7,003 16,012
Effect of exchange differences (126) (3) (196)
Cash and cash equivalents at start of period 83,261 67,445 67,445
Cash and cash equivalents at end of period 69,381 74,445 83,261
Consolidated Statement of Comprehensive Income
for the half-year ended 31 December 2021
Half-year Half-year Year
ended ended ended
31.12.21 31.12.20 30.06.21
£'000 £'000 £'000
Profit for the period 19,713 20,349 39,861
Other comprehensive income net of tax:
Remeasurement of the net defined benefit liability 1,963 5,763
12,708
Foreign currency translation differences (310) 87 (615)
Fair value movements on hedging instruments (218) (163) 1,089
Other comprehensive income for the period net of tax 13,182
1,435 5,687
Total comprehensive income for the period 21,148 26,036 53,043
Attributable to equity holders of the parent 21,148 26,036 53,043
Notes to the Interim Results
for the half-year ended 31 December 2021
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 2021.
The figures for the year ended 30 June 2021 are an abridged statement of the
group audited accounts for that year. The financial statements for the year
ended 30 June 2021 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 22.4% (2020: 21.7%).
3. Earnings per share
Half-year Half-year Year
ended ended ended
31.12.21 31.12.20 30.06.21
£'000 £'000 £'000
Profit for the period 19,713 20,349 39,861
Weighted average number of shares in issue 416,431,865 416,282,216 416,283,040
Dilution effect of outstanding share options 276,142 250,450 246,330
Diluted weighted average number shares 416,708,007 416,532,666 416,529,370
Basic earnings per 5p ordinary share 4.73p 4.89p 9.58p
Diluted earnings per 5p ordinary share 4.73p 4.89p 9.57p
The earnings per share and the weighted average number of ordinary shares have
been adjusted to reflect the effect of the one-for-one bonus issue
on 14 January 2022.
4. Dividends
Half-year Half-year Year
ended ended ended
31.12.21 31.12.20 30.06.21
£'000 £'000 £'000
Equity dividends paid:
Interim dividend for the year ended 30 June 2020 - 4,423 4,423
Final dividend for the year ended 30 June 2020 - 20,814 20,814
Interim dividend for the year ended 30 June 2021 - - 8,846
Final dividend for the year ended 30 June 2021 22,924 - -
22,924 25,237 34,083
Equity dividends declared/proposed after the end of the period
Interim dividend 9,377 8,846 -
Final dividend - - 22,924
Equity dividends per share, paid and declared/proposed are
as follows:
1.0625p interim dividend for the year ended 30 June 2020 paid 10 September
2020
5.00p final dividend for the year ended 30 June 2020, paid on 11 December 2020
2.125p interim dividend for the year ended 30 June 2021, paid on 4 June 2021
5.50p 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, payable on 10 June
2022, to those shareholders on the register at the close of business on 6 May
2022.
The equity dividends per share have been adjusted to reflect the effect of the
one-for-one bonus issue on 14 January 2022.
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.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END IR SDMFLSEESELDRecent news on James Halstead
See all newsREG - James Halstead PLC - PDMR Exercise of Share Options
AnnouncementREG - James Halstead PLC - PDMR Acquisition of Shares
AnnouncementREG - James Halstead PLC - PDMR Grant of Share Options
AnnouncementREG - James Halstead PLC - Interim Results
AnnouncementREG - James Halstead PLC - Appointment of Senior Independent Director
Announcement