James Latham plc
(“James Latham” or the “Company”)
HALF YEARLY RESULTS FOR THE PERIOD ENDED 30 SEPTEMBER 2021
Chairman's statement
Unaudited results for the six months trading to 30 September 2021
Revenue for the six months ended 30 September 2021 was £193.9m, up 81.2% on £107.0m for the same period last year. Revenue in the six months to 30 September 2020 was significantly impacted by the first lockdown. Cost prices on both timber and panels have risen significantly since the start of the financial year, with average cost prices up over 25%. We have had strong volume growth in the first quarter of the financial year, although these volumes returned to normal levels in the second quarter, and overall volumes are 4.9% higher than in the six months to 31 March 2021. All sites are still operating with some COVID restrictions and I am very pleased with the way that we have grown revenues and maintained a safe environment for our staff to work in.
Gross profit percentage, which includes warehouse costs, for the six month period ended 30 September 2021 was 26.4% compared with 16.9% in the comparative six months. This six month period has been very turbulent with significant increases in the market prices for our products and well documented problems in the global supply chain leading to difficulties in obtaining regular supplies of inventory. We anticipated this issue and made sure that sufficient contracts were placed to ensure that our customers were not left short of stock. These significant increases in market prices did lead to a short-term improvement in margins as we worked through inventory purchased at competitive prices.
Overheads have been well controlled during the six months, although they are starting to increase with pressure on transport costs in particular.
Operating profit was £34.1m, up £27.6m on the £6.5m profit for the same period last year. Profit before tax was £34.0m compared with £6.3m for the same period last year. The tax charge of £7.5m represents an effective rate of 21.9%, which includes an increased charge for deferred taxation following the announcement of a future increase in corporation tax to 25%. Earnings per ordinary share were 133.5p compared with 25.6 p for the same period last year.
As at 30 September 2021 net assets are £146.4m (2020: £109.1m). Inventory has increased significantly, up to £69.1m from £41.3m. Apart from the increases due to the higher cost of our products, the supply chain has become extended leading to increased stocks on water from £7m to nearly £20m, as vessels are delayed both at the port of origin and the destination port. Trade and other receivables have increased by £23.65m to £68.4m due directly to the increases in revenues, but continue to show good debtor day figures, with bad debts remaining at a low figure. Cash and cash equivalents of £24.5m (2020: £26.1m) have been important to allow us to increase our investment in working capital especially the inventory levels. We continue to take advantage of additional early settlement discount opportunities with our suppliers.
This six months has tested the strength of our business model and our impressive results reflect the hard work of all parts of the Company, but also are a reflection of the unprecedented market conditions of the first six months which are unlikely to be repeated.
The calculation of the pension deficit remains very sensitive to changes in assumptions, and the pension deficit under IAS19 is calculated as decreasing from £2.5m at 31 March 2021 to just £12,000 at 30 September 2021. This is largely due to a recovery in the plan asset valuations although the discount rate has slightly reduced.
Interim dividend
The Board has declared an increased interim dividend of 6.5p per Ordinary Share (2020: 5.7p). The dividend is payable on 21 January 2022 to ordinary shareholders on the Company's Register at close of business on 17 December 2021. The ex-dividend date will be 16 December 2021.
Current and future trading
The second half of 2021/22 has started with slightly weaker volumes compared with the exceptional six months to 30 September 2021, and margins are returning to more normal levels. We have seen a reduction in prices of some commodity products but most products are seeing prices remaining firm. The challenges persist in our supply chain, with shipment delays, congestion at the ports and container prices at all time high levels. Inventory levels have remained high to ensure we can meet our customers' expectations. The issues with the supply chain could persist throughout 2022. It is difficult to predict when this may return to normal but when it does, this will significantly reduce the cost price of imported commodity products. There will be continued inflationary pressure on our overheads for the foreseeable future.
Some of our customers are a bit quieter, which is in part due to projects being delayed due to supply issues with non-timber products but overall we remain confident that we will have a good end to our financial year despite the challenges ahead of us.
We are pleased that our acquisition of IJK Timber Group in Northern Ireland has completed successfully post period end and the integration into the Latham Group is proceeding according to plan. The investment in the large racking project at our Thurrock facility is now complete, and we have invested in state of the art machinery at Dresser Mouldings to improve the efficiency of the production process.
Nick Latham
Chairman
24 November 2021