REG - James Halstead PLC - Preliminary Results
03/10/2022 07:00
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20221003:nRSC4464Ba&default-theme=true
RNS Number : 4464B James Halstead PLC 03 October 2022
3 October 2022
JAMES HALSTEAD PLC
PRELIMINARY ANNOUNCEMENT OF AUDITED RESULTS
FOR THE YEAR ENDED 30 JUNE 2022
Key Figures
· Revenue at £291.9 million (2021: £266.4 million) - up 9.6%
· Underlying profit before tax £51.1 million (2021: £51.3 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 £52.1 million (2021: £83.3 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 £291.9m (2021: £266.4m) is 9.6% ahead of the
comparative year.
Underlying operating profit is £51.1 million (2021: £51.3m) - 0.4 % below
last year. The reported profit for the year of £52.2m 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 £52.1 million (2021: £83.3 million) with the
major reason for the reduction being, obviously, increased stock. The
inventory at the year end is £112.3 million (2021: £60.7 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 £9.9
million (2021: £9.9 million) - unchanged and equity dividends paid of £32.3
million (2021: £34.1 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
£'000 £'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
£'000 £'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)
(111) 1,089
Fair value movements on hedging instruments
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
£'000 £'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
£'000 £'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
£'000 £'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.
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 FR ZZGFLMGKGZZZRecent 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