TIDMJHD
RNS Number : 6478G
James Halstead PLC
31 March 2022
31 March 2022
JAMES HALSTEAD PLC
INTERIM RESULTS FOR THE HALF-YEARED 31 DECEMBER 2021
Key Figures
James Halstead plc, the AIM listed manufacturer and
international distributor of commercial floor coverings,
reports:
* Revenue at GBP136.7 million (2020: GBP130.45 million)
* Operating profit at GBP25.5 million (2020: GBP26.2
million)
* Pre-tax profit at GBP25.4 million (2020: GBP26.0
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 GBP69.4 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 GBP136.7 million (2020: GBP130.45 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 GBP25.4 million is a slight decrease on the
prior year (2020: GBP26.0 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 GBP83.2 million
(2020: GBP61.9 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 GBP69.4 million compared with GBP74.4
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 GBP1.4 million against the
comparative at 31 December 2020 of GBP13.4 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
GBP'000 GBP'000 GBP'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
GBP'000 GBP'000 GBP'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
GBP'000 GBP'000 GBP'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
GBP'000 GBP'000 GBP'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 1,435 5,687 13,182
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
GBP'000 GBP'000 GBP'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
GBP'000 GBP'000 GBP'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.
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END
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