TIDMJHD
RNS Number : 2415O
James Halstead PLC
01 October 2019
1 October 2019
JAMES HALSTEAD PLC
PRELIMINARY ANNOUNCEMENT OF AUDITED RESULTS
FOR THE YEARED 30 JUNE 2019
"Record turnover and profits with, once again, record
dividend."
Key Figures
-- Revenue at GBP253.0 million (2018: GBP249.5 million)
- up 1.4%
-- Profit before tax GBP48.3 million (2018: GBP46.7 million)
- up 3.4%
-- Earnings per 5p ordinary share of 18.2p (2018: 17.7p)
- up 2.8%
-- Final dividend per ordinary share proposed of 10.0p (2018:
9.65p) - up 3.6%
-- Cash GBP68.7 million (2018: GBP50.7 million) - nil gearing
Mr Mark Halstead, Chief Executive, commenting on the results,
said:
"Welcome news with record turnover, record profit and once again
a record dividend"
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
Arden Partners (Joint Broker):
Tom Price Telephone: 020 7614 5900
Matthew Groves
CHAIRMAN'S STATEMENT
Results
I am pleased to report that we have, again, achieved record
turnover with sales of GBP253.0 million (2018: GBP249.5 million).
In addition, we have also achieved a record profit before tax of
GBP48.3 million (2018: GBP47.1 million). The growth in these
numbers may be modest but they build upon years of increasing and
continued progress and in a particularly difficult climate where so
many seem to have deferred spending plans.
The UK turnover (which represents 35% of the total) grew by a
very respectable 7.1% and this is the result of targeted sales
focus in a difficult market. The constant focus on Brexit has led
to deferred spending in several sectors and certain retail chains
are curtailing their normal refurbishment cycles.
The company and our strategy
James Halstead plc 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 Exchanges for more than 70 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 enhance the brand identity thereby
generating and enhancing goodwill and customer satisfaction with
the aim of continued repeat business. This approach is designed to
increase revenue and consequently profitability and cash flow to
enable the continuation of dividends thereby creating shareholder
wealth. As a manufacturer our supply is in bulk to distributors
responsible for regional and local delivery. Key to the company
ethos is having dedicated sales personnel to present our product to
end users and specifiers rather than to delegate the representation
of products to stockists. Our businesses are totally flooring
focused and predominantly commercial flooring.
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.
Sustainability is a key area of focus and, from our award
winning recycling initiatives through to our environmental
policies, we are recognised as leaders within our industry. We
publish an annual "Sustainability Report" and our latest
achievements include an 84% usage of renewable energy in our
production processes, a 16% decrease in energy usage and 570 tonnes
of post-consumer PVC waste collected for re-use in production.
Corporate governance and corporate social responsibility
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.
We continue to focus on the life cycle analysis to identify and
reduce the environmental impacts throughout our product life cycle
and just one example of this is that we are now achieving 96% usage
of recycled water within our production processes. For some years
air quality has been in the press and it is a factor in the
flooring selection decision. There should be no negative impact on
air quality and we commit to being at the forefront of our market.
The "Indoor Air Comfort Gold" certification extends across the vast
majority of our flooring portfolio, exceeds the standards of other
"ecolabels" and various EU specifications and are rated "best in
class". As ever, we believe independent verification and
certification demonstrates our credentials as a global player.
Dividend
Profits and earnings per share have increased and we continue
un-geared. Our cash balances stand at GBP68.7 million, even after
dividends paid in the last year that amounted to GBP28.4 million
and taxation of GBP10.5 million. Our cash reserves continue as the
foundation of our strong balance sheet.
It is pleasing to report that the board proposes, yet again, an
increased final dividend. The final dividend will be 10.0p (2018:
9.65p) representing a 3.6% increase which, combined with the
interim dividend paid in June 2019 of 4.0p (2018: 3.85p), makes a
total of 14.0p (2018: 13.5p) for the year, an increase of 3.7%.
This is a record dividend.
Acknowledgements
My thanks go to our staff in the UK and around the world whose
hard work continues to differentiate us from our competitors.
Outlook
Trading since our year-end continues to be solid, particularly
in the UK. As a Board we continue to consider the Brexit situation
which seems never ending.
I can report that, in September 2019, Polyflor was selected as a
key supplier for the National Health Service under an initiative
known as Procure 22. James Halstead plc listed on the London Stock
Exchange 8 weeks before the foundation of the NHS and has been
proud to supply flooring to the organisation for over 70 years.
I can only be confident of continued progress in the coming
year.
Anthony Wild
Chairman
CHIEF EXECUTIVE'S REVIEW
This has been a challenging year with European markets slothful
and a never ending saga over Brexit. As a net exporter we had the
advantage of a weak sterling, but with many economies sluggish and
projects crawling to fruition it was a year of difficult
trading.
Despite this UK turnover grew an impressive 7.1% and represents
35% of total revenue. Beneath this headline number there have been
areas where the market is clearly suffering a lack of confidence.
Looking at the global markets, Europe (excluding the UK) was on a
par with last year (this represents 43% of total turnover). Our
revenue within France, Holland and Spain demonstrated the best
growth within Europe while Turkey and Italy were the worst
performing. The rest of the world is broadly positive with growth
in South America, North America, Africa and Scandinavia while
mainland China has slowed.
In terms of raw materials it was a year of relative stability,
though there were fluctuations shortly before and after the aborted
Brexit day at the end of March. Overall, the average cost of raw
materials year on year increased 0.52%. Energy costs continue to
rise with electricity some 12% more expensive than the previous
year and it is worth noting that 60% of our electricity bills are
"non-commodity" costs added to the energy cost to fund various
schemes. Four years ago these add-ons were only 40%. This is a
hidden cost that overseas competitors do not face. Our focus on
energy efficiency does help to offset this, but it is getting
harder. The schemes involved are by way of example the cost of
providing electricity to the north of Scotland, feed in tariffs and
contracts for difference subsidies.
Our cash generation has continued and plans for expansion remain
in the pipeline with both plant and infrastructure expansion on the
agenda.
We continue to support the grass roots of our industry through
our training school in Radcliffe which was established 15 years ago
as it became clear that there was a growing skills gap in the UK.
Last year we had 198 delegates receiving certificates. We offer
similar training in Europe and in Australia. I would note that no
government funding is available to us for these activities.
Reviewing the businesses in more detail:
Objectflor / Karndean and James Halstead France, our European
operations
Turnover in the Central European market was solid but 1.2% below
that achieved last year which reflected the downturn in the German
market where all business is hard fought against strong competition
and a sluggish economic climate. It is pleasing to note that
branded sales have increased with declines more centred on own
label collections. We tasked our business here with a focus on
sheet vinyl sales of both our homogenous ranges (including the new
Palettone range) and our heterogeneous ranges. It is pleasing to
note that homogenous ranges showed 33% year on year growth.
The main product launches in the year were the revamped Expona
Design, which has been received well, and Expona Clic our new rigid
product has also sold well.
Our businesses in Europe pride themselves on being market
leaders in terms of both design and product offering. We have been
named winner in the BTM Heimtex wholesaler survey for best quality
suppliers for the third time, as giving best customer service by
Eurodecor and Fußbodentechnik named Expona Domestic their product
of the year.
As part of our activities to maintain our leading position the
"Objectflor Campus" was completed in the year and opened in
December. This is a large showroom and training facility built at
our offices in Cologne. We have invited many customers and
architects to attend with a programme of events and courses
throughout the year. The facilities have also been used by
suppliers of complementary products for their own activities which
allows new opportunities to present our portfolio of products to an
ever wider audience.
In the year James Halstead France made progress in all key
regions which is encouraging following our investment in sales
representation. Our distribution network has broadened and whilst
our market share is modest in comparison to our French competitors,
we are encouraged by our continued growth. Whilst the economy is
not showing good growth, we do see the potential for increased
market share and continue to invest. Our successes include the Tony
Parker Sports Academy in Lyon, Amazon France HQ in Clichy and the
prestigious La Pitié-Salpêtrière Hospital in Paris.
Following on from the success we have had in other countries we
have established an office showroom in the Netherlands. Objectflor
Benelux has fitted out a showroom in the former Van Nelle factory,
a design led building that is a UNESCO world heritage site. This
presents to architects and specifiers the design possibilities of
our flooring.
Polyflor Pacific - encompassing Australia, New Zealand and
Asia
Despite a soft economy, attributed to factors such as a Royal
Commission into lending practices, our Australian business remained
solid. Volumes in most segments remained strong and stock
management saw reduced working capital and strong dividend cash
flow.
Turnover was just below the levels of last year while the
effects of exchange rates and increased investment in warehousing
saw the bottom line profit decline. Palettone took market share and
with an update of our loose-lay flooring we lifted the profile of
our offering to the market. The AFL Max facility in Adelaide is a
brand new facility that has installed Palettone. In addition our
flooring has been used in the new concept Vape Square Lounge - a
dedicated vape venue. Our strength in this market continues with
installations such as the Salvation Army, Red Shield Hotel in
Darwin and the Zuccoli Primary School in the Northern
Territories.
Polyflor New Zealand showed good growth compared to the prior
year with sales increasing by 4% against the prior year. The
increased revenue led to increased profitability, although the
sales mix resulted in slightly lower margins. The growth continued
in the North Island, being the main economic driver while business
in the South was generally tougher and additional investment has
been made in the sales team to achieve more there. The business
continues to have a very high market share in key product
areas.
In the latter part of the year there has been focus on
broadening the customer chains we are operating with and new
arrangements have been concluded that will increase the visibility
of our products in the market which, combined with the activities
of our own sales force, gives confidence to continuing this trend
in the market.
The changes in the management structure of Polyflor Asia, by
bringing it under the watch of our more mature Australian business,
have been bedding down. Investments have been made in the marketing
(directly and through social media) taking greater control of this
from our customers. Our business is growing in Hong Kong but in
mainland China there has been a distinct slow down and it is clear
that the structural changes we have commenced there need to
continue. Plans to have a stock presence on the mainland to access
the smaller projects and refurbishment markets are at an advanced
stage. The focus we have successfully had for many years to
concentrate efforts on new builds continues to be important. Asia
is a large geographic area and is to be split and given more "on
the ground" attention to ensure that our activities are
increasingly local in nature and focussed on the markets, with the
intention to be more pro-active in the markets. This means more
sales representation within each region augmenting the existing
third party distributors and contractors.
Markets across Asia have always been very competitive on a price
basis and, whilst offering very competitive prices is naturally one
tool in our arsenal, we are building a model to better service our
customers by adding other factors into the buying decisions.
Through availability of stock locally, technical back-up and market
support we have learned that business growth is more assured. This
programme continues.
Polyflor & Riverside Flooring, based in UK
There were several new ranges launched in the year with Polysafe
Quick Lay and Polyflor Stone FX sheet vinyl core to the offering.
Installations across healthcare and education continue as a bedrock
to the company but more widely examples such as the Port of Spain
International School (Trinidad and Tobago), the Sheffield Olympic
Legacy Park and the Moët & Chandon VIP areas of Royal Ascot
continue to show how widely our flooring solutions are
installed.
An important part of customer service is ensuring complaints are
fully investigated and lessons are learned for the future.
Historically, the most common complaints were for wrong product
delivery and investments in bar coding and more automated picking
have reduced these to record lows. In addition, significant focus
goes into product complaints (which as a percentage are very low).
The reputation we have earned in this area is not taken for granted
and our founder's refrain - "quality is when the customer comes
back, not the product" - continues to hold as true today as it did
100 years ago. Consequently complaints are fully analysed and
reported back not only to the relevant departments but to the
Board.
The year was challenging for production and towards the year end
part of the plant was closed due to equipment failure. This had
adverse effects on overhead recovery and consequently profitability
- but these challenges are behind us.
Polyflor Nordic comprising Polyflor Norway based in Oslo and
Falck Design based in Sweden
Under new management during the year Norway has focused on
presenting Polyflor and, in particular, Palettone and Wovon to
specifiers, architects and interior designers. Turnover grew some
3.8%. Amongst the projects supplied were the Norwegian University
of Science and Technology in Trondheim, Thon Hotels and Samfjord
Kuartalet government offices.
Our offices in Oslo have been refurbished with Polyflor flooring
so that the space now serves as a showroom with different flooring
solutions in each room and all 50 shades of Palettone in the
hallway.
In Sweden the economic conditions have been difficult. Turnover
fell short of last year's record turnover but the core sales of UK
Polyflor sourced products increased with the decline being in
factored products (at lower margins). For many years Sweden has had
a strong focus on environmental concerns in the flooring sector and
it is pleasing to note that we have been accredited as an
authorised supplier, with the "Auktoriserad Golvleverantör 2.0"
accreditation within GBR (the Golvbranchens Riksorganisation).
Polyflor Canada, based in Toronto
Sales grew an impressive 24% in the year and brand awareness
across the country continues to grow with increased specifications
following. The portable building sector, which services the mining
and other industries, continues to perform relatively poorly but
successes in the commercial sector have more than compensated.
Our business in the region of Ontario has continued to grow and
our new team in British Columbia have had good results. We have
continued to expand our presence in Vancouver giving us nationwide
penetration.
Installations are diverse and the Canadian Royal Mint, the Tip
Top Tailors retail chain and Collingwood Affordable Housing stand
as testimony to the results.
Polyflor India, based in Mumbai
Turnover has increased and profitability more so. It was a
record year for sales volumes. Our flooring continues to be laid in
the healthcare and education sectors but we have also had success
in the retail sector and in the Defence sector. There is
encouraging interest from aligned markets such as Bangladesh, Sri
Lanka and Nepal and volumes to these territories are increasing.
Key projects include the NTPC Hospital in Sundergarh and the
Presidency School in Bangalore.
Rest of the World
The Polyflor export and marketing offices, based in Royton,
continue to support our international businesses and to direct sell
via a global network of representatives, agents and distributors.
Projects such as the Amazon Head office in South Africa, Parmano Oy
across Finland and the Al Thumama Stadium in Qatar are only a few
of many examples.
Last year I noted that we had opened Polyflor FZE in the Dubai
free trade zone and this year we have continued to underpin our
global sales with more representation in the local markets. We have
sold and seen continued growth for 25 years in Poland and this year
we augmented the team with a national sales manager to assist our
third party distribution and to make direct business to business
approaches.
In June 2019, we opened a sales office in Bogota, Colombia to
support sales not only in that country but also Argentina, Chile,
Brazil and Mexico. In Chile we have supplied the Quillota Petorca
Hospital in the Valparaiso region and in Peru the continued
expansion of the Videna National sport village.
Other local representatives working locally but reporting to
Polyflor have been recruited and are based in Romania, Indonesia,
Czech Republic and Hungary.
Outlook
Having noted above the, albeit modest, year on year raw material
increases, I can advise that for the first two months of the new
financial year we have seen around a 4% reduction in raw material
prices and, whilst this is pleasing, predicting second quarter
onwards is difficult until the manufacturers report back after
their traditional August shutdown and refurbishment cycle together
with the ongoing political epic regarding our relationship with the
rest of Europe.
The coming year will see a new phase of investment. In part this
will be expansion of warehouse and distribution and this is one
decision that does require us to have some clarity on the outcome
of the UK's relationship with EU. Currently, with the simplified
administrative access to Europe, we would increase warehousing
close to the point of manufacture in the UK but it is easy to
conceive of that expansion being on mainland Europe if the
administrative hurdles slow movements.
As we continue to implement our plan to have employees in
markets where we have a long history of sales I can only be
confident of continued success. We have, over the years, supplied
over 160 countries across the world with our flooring and look
forward to continuing this in greater volumes.
Mark Halstead
Chief Executive
Audited Consolidated Income Statement
for the year ended 30 June 2019
Year Year
ended ended
30.06.19 30.06.18
GBP'000 GBP'000
Revenue 253,038 249,510
Cost of sales (144,236) (144,993)
----------------- -----------------
Gross profit 108,802 104,517
Selling and distribution costs (49,149) (48,087)
Administration expenses (11,279) (9,282)
Operating profit 48,374 47,148
Finance income 357 150
Finance cost (455) (596)
Profit before income tax 48,276 46,702
Income tax expense (10,484) (9,994)
Profit for the year attributable to equity shareholders 37,792 36,708
----------------- -----------------
Earnings per ordinary share of 5p:
-basic 18.2p 17.7p
-diluted 18.2p 17.6p
All amounts relate to continuing operations.
Audited Consolidated Balance Sheet
as at 30 June 2019
As at As at
30.06.19 30.06.18
GBP'000 GBP'000
Non-current assets
Property, plant and equipment 37,449 36,324
Intangible assets 3,232 3,232
Deferred tax assets 3,261 2,674
---------- ----------
43,942 42,230
---------- ----------
Current assets
Inventories 69,921 71,096
Trade and other receivables 32,816 32,040
Derivative financial instruments 372 971
Cash and cash equivalents 68,664 50,679
---------- ----------
171,773 154,786
---------- ----------
Total assets 215,715 197,016
---------- ----------
Current liabilities
Trade and other payables 58,354 48,721
Derivative financial instruments 684 119
Current income tax liabilities 3,419 3,769
62,457 52,609
---------- ----------
Non-current liabilities
Retirement benefit obligations 19,582 14,899
Borrowings 200 200
Other payables 419 491
---------- ----------
20,201 15,590
---------- ----------
Total liabilities 82,658 68,199
---------- ----------
Net assets 133,057 128,817
---------- ----------
Equity
Equity share capital 10,407 10,399
Equity share capital (B shares) 160 160
---------- ----------
10,567 10,559
Share premium account 4,044 3,805
Capital redemption reserve 1,174 1,174
Currency translation reserve 5,265 5,435
Hedging reserve (21) 668
Retained earnings 112,028 107,176
Total equity attributable to shareholders of the parent 133,057 128,817
---------- ----------
Audited Consolidated Cash Flow Statement
for the year ended 30 June 2019
Year Year
ended ended
30.06.19 30.06.18
GBP'000 GBP'000
Profit for the period 37,792 36,708
Income tax expense 10,484 9,994
---------- ----------
Profit before income tax 48,276 46,702
Finance cost 455 596
Finance income (357) (50)
---------- ----------
Operating profit 48,374 47,148
Depreciation 3,105 3,055
Loss/(profit) on sale of plant and equipment 16 31
Decrease in inventories 1,449 1,247
(Increase) in trade and other receivables (621) (1,093)
Increase / (decrease) in trade and other payables 9,033 (11,448)
Defined benefit pension scheme service cost 564 497
Defined benefit pension scheme employer contributions paid (1,780) (1,517)
Change in fair value of financial instruments 281 250
Share based payments 11 5
Cash inflow from operations 60,432 38,175
Interest received 357 150
Interest paid (33) (36)
Taxation paid (10,487) (9,642)
Cash inflow from operating activities 50,269 28,647
---------- ----------
Purchase of property, plant and equipment (4,263) (3,567)
Proceeds from disposal of property, plant and equipment 107 232
---------- ----------
Cash outflow from investing activities (4,156) (3,335)
---------- ----------
Equity dividends paid (28,405) (27,245)
Shares issued 247 196
---------- ----------
Cash outflow from financing activities (28,158) (27,049)
---------- ----------
Net increase/(decrease) in cash and cash equivalents 17,955 (1,737)
---------- ----------
Effect of exchange differences 30 (116)
Cash and cash equivalents at start of period 50,679 52,532
Cash and cash equivalents at end of period 68,664 50,679
========== ==========
Audited Consolidated Statement of Comprehensive Income
for the year ended 30 June 2019
Year Year
ended ended
30.06.19 30.06.18
GBP'000 GBP'000
Profit for the year 37,792 36,708
----------- -----------
Other comprehensive income net of tax:
Items that will not be reclassified subsequently to the income statement:
Remeasurement of the net defined benefit liability (4,546) 4,895
----------- -----------
(4,546) 4,895
----------- -----------
Items that could be reclassified subsequently to the income statement:
Foreign currency translation differences (170) (759)
Fair value movements on hedging instruments (689) 957
----------- -----------
(859) 198
----------- -----------
Other comprehensive income for the year (5,405) 5,093
Total comprehensive income for the year 32,387 41,801
=========== ===========
Attributable to equity holders of the
Company 32,387 41,801
=========== ===========
Items in the statement above are disclosed net of tax.
NOTES
1. The final dividend of 10.0p per ordinary share will be paid, subject to the approval of the
shareholders, on 6 December 2019 to shareholders on the register as at 8 November 2019. The
annual report and accounts will be posted to shareholders on 18 October 2019.
2. The financial information in this statement does not represent the statutory accounts of the
Group. Statutory accounts for the year ended 30 June 2018 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 2019 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
2019 2018
GBP'000 GBP'000
Profit for the year attributable to equity shareholders 37,792 36,708
-------------- --------------
Weighted average number of shares in issue 208,071,633 207,965,693
-------------- --------------
Dilution effect of outstanding share options 70,667 121,068
Diluted weighted average number of shares 208,142,300 208,086,761
-------------- --------------
Basic earnings per ordinary share 18.2p 17.7p
Diluted earnings per ordinary share 18.2p 17.6p
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 or visit www.rns.com.
END
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