TIDMJHD
RNS Number : 9051B
James Halstead PLC
26 September 2018
26 September 2018
JAMES HALSTEAD PLC
PRELIMINARY ANNOUNCEMENT OF AUDITED RESULTS
FOR THE YEARED 30 JUNE 2018
"Record turnover and profits with, once again, record
dividend"
Key Figures
-- Revenue at GBP249.5 million (2017: GBP240.8 million)
- up 3.6%
-- Profit before tax GBP46.7 million (2017: GBP46.6 million)
- up 0.2%
-- Earnings per 5p ordinary share of 17.7p (2017: 17.6p)
- up 0.6%
-- Final dividend per ordinary share proposed of 9.65p (2017:
9.25p) - up 4.3%
-- Cash GBP50.7 million (2017: GBP52.5 million) - nil gearing
Mr Mark Halstead, Chief Executive, commenting on the results,
said:
"From the Forensic Laboratory of The Metropolitan Police in
Buenos Aires to the new Schengen area of Athens Airport we continue
to cover the world and again report record turnover, profit and
dividend. With the investment in product, processes and structures,
I believe we have undertaken significant groundwork in the year to
put us in good stead for continued progress."
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):
Ben Thorne
Dominic Morley Telephone: 020 7886 2500
Arden Partners (Joint Broker):
Chris Hardie Telephone: 020 7614 5900
CHAIRMAN'S STATEMENT
Results
I am pleased to report in my first year as Chairman that we
have, again, achieved record turnover with sales of GBP249.5
million (2017: GBP240.8 million). In addition, we have also
achieved a record profit before tax of GBP46.7 million (2017:
GBP46.6 million).
The growth in profit is modest but we have made some significant
investment in new product during the year and this is reflected in
the profit before tax figure. The breadth of projects that we have
been associated with is impressive and includes the Aston Martin
DBX factory in Llandough, Amazon's sales office in Cape Town and
the Guizhou Provincial Cancer Hospital in China.
As the "Brexit" deadline grows ever nearer I, and the Board,
remain vigilant for issues that may arise though obviously the
detail remains somewhat hazy. Notwithstanding this lack of clarity,
I believe we are well placed in that we export to far more
countries outside the EU than are members of the EU. In addition,
we have attained full Authorised Economic Operator (AEO) status
with HMRC. AEO status is an internationally recognised quality mark
indicating that our role in the international supply chain is
secure, and that our customs controls and procedures are efficient
and compliant. It is considered, depending on the exact details of
Brexit, that this will minimise the risk of any post Brexit border
delays.
With projects as diverse as The Irish Whiskey Museum on Grafton
Street in Dublin and the Universal Church, Sao Paolo our portfolio
continues to reach far across the globe.
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 is listed on the AIM
market of the London Stock Exchange and celebrates 70 years as a
listed company this year.
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.
It also sources other flooring products, in particular luxury
vinyl tiles and rubber flooring from key partners manufacturing on
the group's behalf, predominantly under Halstead brand names.
The key brands the group operates under are Polyflor, Objectflor
and Expona. There are other brands that the group operates under
that are more regionally based or territory specific.
James Halstead utilises a global distribution chain for export.
Parts of this network are controlled by the group, in particular,
Western Europe, Australia, New Zealand, Canada and India. The group
employs around 830 people worldwide, the majority of whom are in
the UK.
The company's strategy is designed 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 / local delivery. Key to the
company ethos is to have dedicated sales personnel to present our
product to end users and specifiers rather than to delegate the
representation of product 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.
I think it is worthy to note that our credentials for
responsible sourcing have been recognised with our UK businesses
awarded an "excellent "rating under the BES6001 certification
process. We were awarded 51 points out of a maximum 52 which I
believe is the highest rating given by the British Research
Establishment (the BRE). In addition, we have published our latest
"Sustainability Report" which communicates our performance to all
stakeholders
Corporate governance
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. During this calendar year the Financial
Reporting Council and the Quoted Company Alliance have both issued
guidance on governance and, having assessed these codes, we have
aligned our approach to the latter. In many ways this is a
continuing process but in the annual accounts we outline how we put
into effect this code and I trust our shareholders will take the
time to review our comments.
Dividend
Profits and earnings per share have increased and we continue
un-geared. With our cash balances standing at GBP50.7 million, even
after dividends paid in the last year that amounted to GBP27.2
million. Our cash reserves continue as the bedrock of a strong
balance sheet.
It is pleasing to report that the board proposes, yet again, an
increased final dividend. The final dividend will be 9.65p (2017:
9.25p) representing a 4.3% increase which combined with the interim
dividend paid in June 2018 of 3.85p (2017: 3.75p), makes a total of
13.5p (2017: 13.0p) for the year, an increase of 3.85%. Once again
a record dividend.
Acknowledgements
During the financial year the general manager of our Norwegian
business sadly died after battling cancer for many months. Jan-Eric
Jorgensen had been with us since 2001 and led his team to create a
strong business and is a sad loss to us all. I would also note the
retirement from the board of Mr Geoffrey Halstead after 55 years
and thank him for his continued support. In addition, my thanks go
also to our staff in the UK and around the world whose hard work
continues to push us forward.
Outlook
Trading since our year-end continues to be solid, particularly
in the UK. Given the adverse raw material cost increases over the
last twelve months or so we have increased our prices which our
trade partners have accepted.
In addition, we have updated our product portfolio - not least
in the homogenous sheet vinyl with Palettone - and to date the new
products have received a very good reaction from customers. Shortly
this will be augmented by Polysafe Verona, offering enhanced slip
resistance and with decoration optimised for dementia friendly
environments. As is our way, we have sought third-party
certification for this innovative product and the range has been
described as "excellent" by the Dementia Services Development
Centre (DSDC) at The University of Stirling.
I can only be confident of continued progress in the coming
year.
Anthony Wild
Chairman
CHIEF EXECUTIVE'S REVIEW
A year of record turnover and one of record profit but the year
was challenging. As an exporter we had the advantage of a weaker
sterling, but against this raw material prices continued to
rise.
The year on year adverse effect of raw material price increases
was 9.5% which equates to about GBP1.8 million. To an extent this
was the result of a weak sterling and was offset by sales outside
the UK at better exchange rates. Nevertheless, it did affect
profitability on sales in the UK but we took an active decision to
hold back on price increases to maximise sales volumes. Favourable
mix of sales largely offset the bottom line effect of these raw
material costs.
The launch, in May 2018, of Palettone was costly but very
worthwhile in the longer term. The costs of development trials,
sampling, marketing material and related expenditure were around
GBP2 million and the product has just been launched into the global
market place. More than half of these costs were above the gross
margin line. We believe that the timing of this was important
following the closure of one of our competitor's factories.
The Palettone range is a premium homogenous sheet vinyl
collection. It is the largest new range by any manufacturer in this
core product area for many years and offers a collection of 50
colours optimised for our global market. In recent years a lot of
competitor focus has been in the area of luxury vinyl tile but
vinyl sheet continues to be a large sector of the market.
Palettone is presented in a unique, innovative sample package
with full customer support from specification to installation. The
feedback we have received on the collection since its launch has
been exceptional.
In addition to the existing businesses we have, during the year,
taken considerable time to assess various acquisition
opportunities. The most visible of these, which resulted in several
announcements, was our approach to Airea plc to look to adding
their carpet tile ranges to our portfolio. Having looked in some
detail we decided not to progress our ambitions in this area with
that company.
Reviewing the businesses in more detail:
Objectflor / Karndean and James Halstead France, our European
operations
This year has been one of significant product re-launches for
this business.
Firstly, the Karndean ranges which are aimed at the wholesale
market were launched at the beginning of the year. Secondly, the
flagship Expona Domestic range was launched at the Domotex show in
January 2018 and thirdly Polyflor's new Palettone range was
launched late in the financial year. The gestation period for a new
launch is typically a number of months so the positive impact
arising from such major product changes has only been partially
seen in the current financial year.
Sales increased by 2% across the business however profitability
was negatively impacted by a number of factors, principally, the
adverse effect of exchange rates and price increases from
suppliers.
All the key markets the business operates in grew, with the
exception of Benelux. France in particular has grown again and is
very much accepted as a "local" within that market.
Polyflor Pacific - encompassing Australia, New Zealand and
Asia
Our Australian business had a record year both in terms of
turnover and profit.
The ongoing projects that the business continues to win and
supply include the Howard Solomon Aged Care Facility in Ferndale,
Western Australia and The Australian Embassy in Port Moresby.
Another impressive flooring installation is the Pier 33 Yacht Club
in Mooloolaba, Queensland. Given that we are the only manufacturer
/ distributor with warehousing in every state and with the sales
representation local to each major city, the business is soundly
based for continued growth.
The business uses product launches not just to present the new
product but to also renew contact with specifiers and users of our
products.
During the year we added warehousing in South Australia and this
has enhanced our service offering to customers with the Angaston,
Strathalbyn, Goolwa and Barossa Hospitals all examples of our
penetration in this region.
New Zealand had another year of modest 1% growth, which
similarly to last year showed good growth on the North Island
offset by contraction on the South Island which continues to be
slow. Product mix has had some negative impact on margin locally
for bought in products as one key supplier had some supply
interruptions and the shortfalls in this product were made up with
greater sales of lower margin products.
Our UK manufactured products continue to have a dominating
market share and the New Zealand social housing contract referred
to last year continues to be an important component of this. Our
service led approach remains important to that business and
continues to be a key distinguishing feature over our
competitors.
We have changed the management structure of the Asia business
during the course of the year to align it with our larger
Australian business. This will ensure that we have a clearer
decision making process and aligns more effectively with regional
time zones. A key theme for the group in recent years is taking
greater control of our markets, and plans are in place to extend
and make more effective the footprint of our Hong Kong operation
both in China and other key markets around Asia. The presence of
Chinese manufactured products makes many of these markets very
price sensitive and allows for competitors to claim better
servicing at least. The restructuring of this part of the business
continues to ensure our response to these market pressures is
robust. Projects such as the HPA Electronics Factory in Malaysia,
Hamazushi Chain Stores across Japan, The Water Market in Macau and
Chengdu Woman and Children's Hospital in China illustrate just a
few of the many new installations we are proud to have been
involved with.
Polyflor & Riverside Flooring, based in UK
There was a dearth of large government funded projects in the UK
throughout the year as spending cuts continued to be applied across
the board. Nevertheless sales into the refurbishment sector
remained strong and, with a 24 hour delivery service across the UK,
Polyflor was able to make the most out of a weak market. Our UK
sales were 3% ahead of the prior year. Polyflor overall reported
4.9% growth in turnover and Riverside some 7%.
New products such as the "next generation" barefoot safety
flooring, Polysafe Quattro, which offers sustainable wet slip
resistance and the extensive new Palettone collection further
helped confidence and sales.
A restructuring of the Polyflor board was carried out during the
year which included succession planning and also greater focus on
sales into markets where we have identified strong opportunities,
such as Eastern Europe and the South Americas. This has not
involved adding to the headcount in the UK but will result in the
employment of further staff in the local market places.
Also during the year extensive research was undertaken into the
development of a totally new format of manufacturing flooring, the
results of which are now under board consideration. We plan to
acquire a new production plant and our technical teams are working
with suppliers on a final specification. To pave the way for this
we have spent many months removing old and surplus equipment to
create space for this facility on the Radcliffe site.
Investment in our continued success endures. Notwithstanding the
development of new ranges, our long term performance depends on
continuous improvement of our productivity and plant performance.
In the early part of the year we upgraded the chilling units at the
Radcliffe site with more effective equipment which reduced energy
consumption and with the prolonged heat of this summer this paid
for itself, with production at full line speed throughout. Our
non-directional sheet vinyl plant was modified with increased
automation allowing us to achieve 96% utilisation. Over the coming
year this should ensure 25% higher output for the same man-hours.
Our high voltage and low voltage equipment was completely revamped
which will again reduce down-time and improve quality control. At
the same time we have installed new LED lighting across the site
which not only improves visibility but does so at a reduced energy
level. Given that the per/unit cost of electricity is 2% higher
year on year and gas some 9%, these changes have negated cost
increases.
Investment at Teesside also continued. We have completed the
upgrade to allow in-line register emboss on our heterogeneous sheet
as well as upgrading our inspection to an in-line facility. The
former offers pay-back with improved designs and the latter with
reduced manpower. In addition, we have increased the number of
racks in the warehouse at Teesside to give us greater capacity and
flexibility in our distribution and have also replaced our chilled
water system for cooling rolls on the finishing line.
These enhancements to processes are as important as product
development because as manufacturers we need to stay at the
forefront of competitiveness.
Notable projects in the year included the new Kellogg HQ in
Manchester, the S4C HQ (BBC Welsh Language Channel) - Carmarthen,
Wales (which used our new Palettone), Adidas UK Head Office in
Stockport and Alexander McQueen Head Office in London.
Polyflor Nordic comprising Polyflor Norway based in Oslo and
Falck Design based in Sweden
The Scandinavian business has posted a 6% increase in turnover
over the prior year.
Sweden has had a record year for sales and profitability, along
with growth in sales of UK manufactured products which showed an
increase in sales by some 51%.
The Norwegian business had a change in management late in the
year following the sad death of the Managing Director following a
short illness. During the year the business was re-focused on the
core portfolio of Polyflor vinyl sheet. One highlight was one of
the first Palettone specifications for Helly Hansen (the sailing
and outdoor clothing retailer) in central Oslo. Sales in this
business fell back slightly on the prior year as major projects
were keenly contested by our competitors. Nevertheless, projects
such as the FlipZone Trampolinepark in Bergen and supplying the
Swedish government-controlled pharmacy Apoteket (which has 400
stores across Sweden) were examples of our solid presence.
Polyflor Canada, based in Toronto
Turnover in this business continued to grow with 15% growth in
sales overall. The mining sector, previously the major part of our
business in Canada, continues to be in the doldrums and the growth
comes from the sales force obtaining specifications from end
users.
During the year we relocated to larger premises and we have now
put in place a training facility which is a common feature of our
businesses around the world. Though initially this facility is only
based in the Toronto area it is already raising the profile of our
business and adds to our reputation of being a manufacturer that
does far more than just sell flooring. Furthermore we have added
more sales representation with a team now based in British
Colombia.
In the current year we have had products installed in as diverse
places as the Canadian Hockey Hall of Fame and in CBC's radio
studios.
Polyflor India, based in Mumbai
As reported at the half year the introduction of general sales
tax (GST) in July 2017 severely disrupted the performance of this
fledgling business for much of the year. As the year progressed the
business community overcame the initial shock and more
significantly, following a reduction in the GST rates applicable to
our product, business activity increased considerably in the latter
months of the year allowing the business to break even for the year
as a whole.
This level of activity has continued in the first months of the
new year. The portfolio of projects continues to increase monthly
as the sales extended Polyflor's footprint across the country.
Healthcare remains at the core of opportunities but the year has
seen sales to the Indian Space Research Organisation, Goldman
Sachs' offices in Bangalore and the Chaitanya Bharati Institute of
Technology. Although competition from both global and local players
is tough throughout the market we are seeing increasing levels of
specifications of our products which bodes well for the future of
this business.
Rest of the World
Our global reach continues with our flooring being supplied to
Parmaco Pre-Fabricated buildings in Finland, the Malvern College in
Cairo and Aksaray Public Hospital in Central Anatolia, Turkey.
In order to further support our activities we opened Polyflor
PZE (within the Dubai free trade zone) in February 2018, as a
representative office to support our trade in the region and enable
us to employ local sales staff. We were pleased to win the contract
to supply Al Hokair Play Centres across Saudi Arabia and the UAE
and we have every expectation of increased penetration of these
markets.
Outlook
In addition to the Verona range noted in the Chairman's outlook
we are at an advanced stage of another new range - Polyflor Wovon.
A first of its kind for our company, Polyflor Wovon is an exciting
collection of interwoven vinyl tiles, a low maintenance alternative
to traditional textile materials and has a stylish, tactile design
as well as a heavy commercial vinyl construction, perfect for
specification within busy interior environments. It should broaden
the possibilities for vinyl installations.
With the investments in product, processes and structures I
believe we have undertaken significant groundwork in the year to
put us in good stead for continued progress in 2019.
Mark Halstead
Chief Executive
Audited Consolidated Income Statement
for the year ended 30 June 2018
Year Year
ended ended
30.06.18 30.06.17
GBP'000 GBP'000
Revenue 249,510 240,784
Cost of sales (144,993) (135,974)
----------------- -----------------
Gross profit 104,517 104,810
Selling and distribution costs (48,087) (47,659)
Administration expenses (9,282) (9,867)
Operating profit 47,148 47,284
Finance income 150 134
Finance cost (596) (802)
Profit before income tax 46,702 46,616
Income tax expense (9,994) (10,106)
Profit for the year attributable to equity shareholders 36,708 36,510
----------------- -----------------
Earnings per ordinary share of 5p:
-basic 17.7p 17.6p
-diluted 17.6p 17.6p
All amounts relate to continuing operations.
Audited Consolidated Balance Sheet
as at 30 June 2018
As at As at
30.06.18 30.06.17
GBP'000 GBP'000
Non-current assets
Property, plant and equipment 36,324 36,103
Intangible assets 3,232 3,232
Deferred tax assets 2,674 4,151
---------- ----------
42,230 43,486
---------- ----------
Current assets
Inventories 71,096 72,936
Trade and other receivables 32,040 31,176
Derivative financial instruments 971 416
Cash and cash equivalents 50,679 52,532
---------- ----------
154,786 157,060
---------- ----------
Total assets 197,016 200,546
---------- ----------
Current liabilities
Trade and other payables 48,721 59,321
Derivative financial instruments 119 1,362
Current income tax liabilities 3,769 3,860
52,609 64,543
---------- ----------
Non-current liabilities
Retirement benefit obligations 14,899 21,257
Borrowings 200 200
Other payables 491 486
---------- ----------
15,590 21,943
---------- ----------
Total liabilities 68,199 86,486
---------- ----------
Net assets 128,817 114,060
---------- ----------
Equity
Equity share capital 10,399 10,393
Equity share capital (B shares) 160 160
---------- ----------
10,559 10,553
Share premium account 3,805 3,615
Capital redemption reserve 1,174 1,174
Currency translation reserve 5,435 6,194
Hedging reserve 668 (289)
Retained earnings 107,176 92,813
Total equity attributable to shareholders of the parent 128,817 114,060
---------- ----------
Audited Consolidated Cash Flow Statement
for the year ended 30 June 2018
Year Year
ended ended
30.06.18 30.06.17
GBP'000 GBP'000
Cash inflow from operations 38,175 47,478
Interest received 150 134
Interest paid (36) (33)
Taxation paid (9,642) (10,682)
Cash inflow from operating activities 28,647 36,897
---------- ----------
Purchase of property, plant and equipment (3,567) (4,234)
Proceeds from disposal of property, plant and equipment 232 234
---------- ----------
Cash outflow from investing activities (3,335) (4,000)
---------- ----------
Equity dividends paid (27,245) (25,438)
Shares issued 196 538
Cash outflow from financing activities (27,049) (24,900)
---------- ----------
Net (decrease)/increase in cash and cash equivalents (1,737) 7,997
Effect of exchange differences (116) 439
Cash and cash equivalents at start of year 52,532 44,096
Cash and cash equivalents at end of year 50,679 52,532
---------- ----------
Audited Consolidated Statement of Comprehensive Income
for the year ended 30 June 2018
Year Year
ended ended
30.06.18 30.06.17
GBP'000 GBP'000
Profit for the year 36,708 36,510
----------- -----------
Other comprehensive income net of tax:
Items that will not be reclassified subsequently to the income statement:
Remeasurement of the net defined benefit liability 4,895 2,404
----------- -----------
4,895 2,404
----------- -----------
Items that could be reclassified subsequently to the income statement:
Foreign currency translation differences (759) 2,168
Fair value movements on hedging instruments 957 410
----------- -----------
198 2,578
----------- -----------
Other comprehensive income for the year 5,093 4,982
Total comprehensive income for the year 41,801 41,492
=========== ===========
Attributable to equity holders of the
Company 41,801 41,492
=========== ===========
Items in the statement above are disclosed net of tax.
NOTES
1. The final dividend of 9.65p per ordinary share will be paid, subject to the approval of the
shareholders, on 7 December 2018 to shareholders on the register as at 9 November 2018. The
annual report and accounts will be posted to shareholders on 19 October 2018.
2. The financial information in this statement does not represent the statutory accounts of the
Group. Statutory accounts for the year ended 30 June 2017 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 2018 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
2018 2017
GBP'000 GBP'000
Profit for the year attributable to equity shareholders 36,708 36,510
-------------- --------------
Weighted average number of shares in issue 207,965,693 207,620,432
-------------- --------------
Dilution effect of outstanding share options 121,068 216,506
Diluted weighted average number of shares 208,086,761 207,836,938
-------------- --------------
Basic earnings per ordinary share 17.7p 17.6p
Diluted earnings per ordinary share 17.6p 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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