REG - James Halstead PLC - Interim Results
27/03/2024 07:00
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RNS Number : 4013I James Halstead PLC 27 March 2024
27 March 2024
JAMES HALSTEAD PLC
INTERIM RESULTS FOR THE HALF-YEAR ENDED 31 DECEMBER 2023
Strong H1 profitability and record interim dividend; solid margins and profit
performance continue into H2
Key Figures
James Halstead plc, the AIM listed manufacturer and international distributor
of floor coverings, announces its results for the six months ended 31 December
2023:
Financial highlights
· Revenue at £136.5 million (2022: £149.6 million)
· Operating profit at £26.2 million (2022: £23.1 million)
· Pre-tax profit at £27.4 million (2022: £23.2 million)
· Basic earnings per ordinary share 4.8p (2022: 4.3p)
· Interim dividend declared of 2.50p (2022: 2.25p)
· Cash of £62.4 million (2022: £44.3 million)
The Chief Executive, Mr. Mark Halstead, commented:
"Against difficult markets we have raised profits and are confidently growing
our export of UK manufactured goods across the globe. Once again, we have
declared a record interim dividend to shareholders to reward their continued
investment".
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 2023
Sales revenue of £136.5 million (2022: £149.6 million) was 8.8% lower than
the prior year, primarily due to recessionary pressures in several major
markets and delays in the rebuilding of our UK manufactured flooring export
markets.
Profit before tax of £27.4 million (2022: £23.2 million) is 18% ahead of the
comparative period, driven partly by higher rates of interest received on
cash deposits and more importantly by increased operating profit which was
13.6% ahead of the prior year.
The turnover shortfalls relative to the comparative period were: Europe -15%,
Australasia -13% and the UK -5%. The rest of the world showed 4% growth. The
key growth areas were South America (+36%), the Middle East (+26%) and the
Mediterranean (+22%).
Lack of availability of raw materials, lack of timely shipping and labour
restrictions hampered export of manufactured goods significantly in calendar
year 2021 and 2022. However, it is pleasing to see that the various
bottlenecks that affected our exports in prior years are now largely cleared
and we have been focused on restoring the project pipeline in order to
facilitate sales growth in certain markets.
Margins have improved as manufacturing output increased significantly compared
to the comparative period, up 62%. Gross margins in all major markets improved
as productivity improvements in manufacturing output were realised and with a
product shift to higher added value ranges. Exceptions to this general
improvement were New Zealand, Malaysia and India where we were not able to
fully recoup the added cost of transport of goods to these markets in late
2022 and early 2023 through price increases. However, the transportation cost
fell steadily from March 2023 onwards to near normal levels by December 2023.
Our UK businesses (Polyflor and Riverside) fared well with manufacturing
efficiencies through increased output more than offsetting the slightly lower
sales in the UK. Exports from the UK to our own subsidiaries were much higher
than the comparatives (principally Australia, New Zealand and Canada) and will
translate into external sales as the stock arrives locally.
The principal area of sales shortfall against the prior year was in the
product group of luxury vinyl tiles which was unsurprising given these ranges
cross into the domestic consumer market. In the UK our sales model is to
supply product in breadth and depth via the distribution trade whilst
maintaining sales communication with the end customer and the flooring
contractors. Our distribution customers often also supply domestic flooring of
which the largest component is historically carpet, where consumer confidence
and spending has suffered in recent years. Notwithstanding these difficulties,
there is growth in the distribution trade and we continue to focus on this
route to our end customers. The polyvinyl solution for flooring continues to
increase its share of the market. The durability, cleanability and
recyclability of vinyl combined with the cost, design choice and availability
are key to the success of our flooring ranges.
Our German and Central European businesses are operating in an economic
climate characterised by great uncertainty. Despite the difficulty in
achieving sales, the underlying profit mix is favourable and profit has held
up very well. The retail-shop refurbishment market, which has been a core
strength, has suffered as many retail chains are facing challenging consumer
demand and consequently renovation and new store opening plans are in many
cases on hold. Notwithstanding this, we have delivered several key projects
such as the "New Yorker", "Tom Tailor" and "Smyths Toy" store chains across
the DACH region alongside projects such as the Papenburg Meyer shipyard,
Marseille Airport duty free area and the new Lidl HQ in France. Despite
softening demand in the European market, price increases were implemented in
early 2023 and the product mix generally improved with higher value commercial
ranges generally selling better than the "semi-commercial" / heavy domestic
products. Objectflor were the recipients of the German flooring contractors
association' (Netzwerk Boden) flooring project of the year for POHA House in
Aachen, a listed building converted to living / work accommodation.
Canada faced a difficult trading climate with delayed construction projects
and constrained budgets due to inflationary pressures. Nevertheless,
like-for-like sales, in local currency, increased by 9%. Key projects such as
the renovation of Rexell Pharmacy's stores and the Terra Hill Medical Centre
are just two examples of installations in this market. As with other regions,
margins improved and the net profit in Canada was over 50% higher (a record
level).
Sales in the APAC region were mixed with New Zealand showing a modest growth
(4%) in same currency, Malaysia was on a par with the comparative, Australia
saw a 9% reduction and China down around 10%. Market conditions in New Zealand
were difficult with the housing market facing an almost 40% decline in new
builds. Despite this, our business was successful in driving sales into social
housing initiatives. Range consolidation to ensure greater stocks in narrower
colour/design options is helping to focus the commercial sales team on
projects. Australia also faced challenges, most notably in the effects of
interest rate rises on consumer confidence and a much decreased level of
retail footfall, the latter having an effect on the rate of retail store
refurbishment and expansion. In addition, there were delays / deferment of
government social housing initiatives. Stock shortages in the early part of
the period were also an issue due to the shipping delays of the prior year.
Nevertheless Australia and New Zealand continued to supply projects such as
the Footscray Hospital in Victoria and the Takanaki Base Hospital in New
Plymouth.
We continue to make progress in Malaysia and South Asia. Fresh stock from
Polyflor in the UK is starting to bolster margins and orders have been secured
from projects not only in Malaysia but also Singapore, Indonesia and Vietnam.
North Asia, notably China, Hong Kong and South Korea continue to fall short of
pre pandemic levels of sales as these markets suffered the worst of the supply
chain issues from UK manufacturing sites throughout 2021-2022. Our North Asian
team are rebuilding customer confidence with several key projects targeted.
Projects such as Nhan Le Kindergarten Hospital and the National Childrens
Hospital (both in Vietnam), Sunway Hospital in Selangor, Malaysia and Skol4kds
Childcare Centres in Singapore all continue our long association with the
region. This can only deepen as The Comprehensive and Progressive Agreement
for Trans-Pacific Partnership (CPTPP) free trade agreement progresses to full
ratification during 2024. UK manufactured products have always been welcomed
in these markets and any trade agreement can only accentuate ongoing trade.
In the rest of the world, we delivered a myriad of projects from the Vox
Cinemas in Kuwait to Coomeva Medicina Prepagada in Colombia.
Earnings per share and dividend
Since the start of the financial year we have distributed £24.0 million in
dividends and paid corporation taxes of £8.2 million. In addition, capital
expenditure over the same period was £2.1 million. The cash inflow from
operations at £33.6 million significantly exceeds last year (2022: £22.7
million). Our cash, which stands at £62.4 million as of 31 December 2023
compared with £44.3 million at 31 December 2022, continues to be a key
strength.
Having regard to our cash and profitability, we have decided to declare an
interim dividend of 2.50p per share (2022: 2.25p), an increase of 11.1%. This
dividend will be payable on 14 June 2024 to those shareholders on the register
as at 17 May 2024.
Current trading and outlook
The breadth and depth of our projects across the globe continue to drive a
diverse sales mix, from the renovation of the Novopecherska Primary school, in
Kyiv, Hospital El Salvador, the major hospital in Chile, the UN Offices in
Nairobi, Kenya to the Unimed Hospitals in Brazil. The recent disruption to
shipping in the Red Sea has, to a degree, lengthened delivery times and
increased costs which is complicating exports to our APAC markets and
frustrating (to a small degree) the return to pre-pandemic norms for freight
in respect of availability and cost.
The shortfall in sales against the comparative in the first six months to 31
December 2023 was largely attributed to lower consumer confidence in major
markets and delays in rebuilding supply to export markets. In January and
February, sales of manufactured goods are in line with last year's record
comparatives and overall, UK activity is showing improved confidence against
the last six months. In Europe there is a similar zeitgeist of positive
sentiment. Similarly, export markets continue to show positive prospects for
growth as our sales teams continue quoting on projects, with our highly
regarded ranges of flooring, for timely delivery, around the world.
Margins remain solid and overheads are contained within inflationary
parameters. Consequently, the improved first half profitability continues into
the early months of the second half of the year. I, and the board, remain
confident of making further progress.
Anthony Wild
Chairman
27 March 2024
Consolidated Income Statement
for the half-year ended 31 December 2023
Half-year Half-year Year
ended ended ended
31.12.23 31.12.22 30.06.23
£'000 £'000 £'000
Revenue 136,451 149,638 303,562
Operating profit 26,213 23,085 51,611
Finance income 1,339 230 748
Finance cost (156) (95) (260)
Profit before income tax 27,396 23,220 52,099
Income tax expense (7,317) (5,176) (9,695)
Profit for the period 20,079 18,044 42,404
Earnings per ordinary share of 5p:
- basic 4.8p 4.3p 10.2p
- diluted 4.8p 4.3p 10.2p
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 2023
Half-year Half-year Year
ended ended ended
31.12.23 31.12.22 30.06.23
£'000 £'000 £'000
Profit for the period 20,079 18,044 42,404
Other comprehensive income net of tax:
Remeasurement of the net defined benefit liability (959) (4,948) (7,237)
Foreign currency translation differences 439 63 (1,818)
Fair value movements on hedging instruments (1,086) (1,297) (135)
Other comprehensive income for the period net of tax (9,190)
(1,606) (6,182)
Total comprehensive income for the period 18,473 11,862 33,214
Attributable to equity holders of the parent 18,473 11,862 33,214
Consolidated Balance Sheet
as at 31 December 2023
Half-year Half-year Year
ended ended ended
31.12.23 31.12.22 30.06.23
£'000 £'000 £'000
Non-current assets
Intangible assets 3,232 3,232 3,232
Property, plant and equipment 36,116 36,265 35,887
Right of use assets 6,804 8,914 7,164
Retirement benefit obligations - 499 -
Deferred tax 118 236 114
46,270 49,146 46,397
Current assets
Inventories 83,118 93,863 87,440
Trade and other receivables 35,623 39,053 46,979
Derivative financial instruments 60 286 773
Current tax 1,012 - 699
Cash and cash equivalents 62,420 44,325 63,222
182,233 177,527 199,113
Total assets 228,503 226,673 245,510
Current liabilities
Trade and other payables 49,173 49,788 60,738
Derivative financial instruments 735 1,406 213
Current tax - 2,198 422
Lease liabilities 2,586 2,906 2,696
52,494 56,298 64,069
Non-current liabilities
Retirement benefit obligations 2,240 - 1,460
Other payables 408 432 400
Lease liabilities 4,359 6,093 4,582
Preference shares 200 200 200
Deferred tax 62 1,425 585
7,269 8,150 7,227
Total liabilities 59,763 64,448 71,296
Net assets 168,740 162,225 174,214
Equity
Equity share capital 20,838 20,838 20,838
Equity share capital (B shares) 160 160 160
20,998 20,998 20,998
Share premium account 13 13 13
Currency translation reserve 4,533 5,975 4,094
Hedging reserve (280) (356) 806
Retained earnings 143,476 135,595 148,303
Total equity attributable to shareholders of the parent 168,740 162,225 174,214
Consolidated Cash Flow Statement
for the half-year ended 31 December 2023
Half-year Half-year Year
ended ended ended
31.12.23 31.12.22 30.06.23
£'000 £'000 £'000
Profit for the period 20,079 18,044 42,404
Income tax expense 7,317 5,176 9,695
Profit before income tax 27,396 23,220 52,099
Finance cost 156 95 260
Finance income (1,339) (230) (748)
Operating profit 26,213 23,085 51,611
Depreciation of property, plant & equipment 1,859 1,712 3,461
Depreciation of right of use assets 1,496 1,578 3,060
Profit on sale of property, plant and equipment (20) (26) (84)
Defined benefit pension scheme service cost - 154 178
Defined benefit pension scheme employer contributions paid
(531) (975) (1,942)
Change in fair value of financial instruments - (564) (776)
Share based payments 16 12 26
Decrease in inventories 4,832 19,008 22,966
Decrease in trade and other receivables 11,669 11,975 3,031
(Decrease) in trade and other payables (11,961) (33,225) (20,365)
Cash inflow from operations 33,573 22,734 61,166
Taxation paid (8,234) (4,957) (11,900)
Cash inflow from operating activities 25,339 17,777 49,266
Interest received 1,339 99 467
Purchase of property, plant and equipment (2,058) (1,143) (2,854)
Proceeds from disposal of property, plant and equipment 38 47 134
Cash outflow from investing activities (681) (997) (2,253)
Interest paid (10) (7) (36)
Lease interest paid (114) (88) (224)
Lease capital paid (1,474) (1,573) (3,015)
Equity dividends paid (23,963) (22,921) (32,298)
Shares issued - 14 14
Cash outflow from financing activities (25,561) (24,575) (35,559)
Net (decrease) / increase in cash and cash equivalents (903) (7,795) 11,454
Effect of exchange differences on cash and cash equivalents
101 (24) (376)
Cash and cash equivalents at start of period 63,222 52,144 52,144
Cash and cash equivalents at end of period 62,420 44,325 63,222
Notes to the Interim Results
for the half-year ended 31 December 2023
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 2023.
The figures for the year ended 30 June 2023 are an abridged statement of the
group audited accounts for that year. The financial statements for the year
ended 30 June 2023 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 26.7% (2022: 22.3%).
3. Earnings per share
Half-year Half-year Year
ended ended ended
31.12.23 31.12.22 30.06.23
£'000 £'000 £'000
Profit for the period 20,079 18,044 42,404
Weighted average number of shares in issue 416,754,052 416,751,498 416,752,764
Dilution effect of outstanding share options 33,687 23,830 21,390
Diluted weighted average number shares 416,787,739 416,775,328 416,774,154
Basic earnings per 5p ordinary share 4.8p 4.3p 10.2p
Diluted earnings per 5p ordinary share 4.8p 4.3p 10.2p
4. Dividends
Half-year Half-year Year
ended ended ended
31.12.23 31.12.22 30.06.23
£'000 £'000 £'000
Equity dividends paid:
Final dividend for the year ended 30 June 2022 - 22,921 22,921
Interim dividend for the year ended 30 June 2023 - - 9,377
Final dividend for the year ended 30 June 2023 23,963 - -
23,963 22,921 32,298
Equity dividends declared/proposed after the end of the period
Interim dividend 10,419 9,377 -
Final dividend - - 23,963
Equity dividends per share, paid and declared/proposed are
as follows:
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, paid on 9 June 2023
5.75p final dividend for the year ended 30 June 2023, paid on 15 December 2023
2.50p interim dividend for the year ended 30 June 2024, payable on 14 June
2024, to those shareholders on the register at 17 May 2024
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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