Coronavirus Update

James Halstead PLC Interim Results 2020

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Key Figures

 

James Halstead plc, the AIM listed manufacturer and international distributor of commercial floor coverings, reports:

 

 

· Revenue at £130.45 million (2019: £130.39 million) - level

 

· Operating profit at £26.2 million (2019: £25.3 million) - up 3.9%

 

· Pre-tax profit at £26.0 million (2019: £25.2 million) - up 3.3%

 

· Basic earnings per ordinary share 9.8p (2019: 9.5p) - up 3.2%

 

· Interim dividend declared of 4.25p

 

· Cash at 31 December 2020 of £74.4 million

 

     

 

The Chief Executive, Mr. Mark Halstead, commented:

 

"I am very pleased to report these improved figures and all credit to our workforce for their efforts in the face of great uncertainty and major challenge. Trading continues to be solid".

 

CHAIRMAN'S STATEMENT

Trading for the six months ended 31 December 2020

 

Our turnover of £130.45 million (2019: £130.39 million) shows a slight increase on the comparative six months. This is a record level for sales and, against a difficult global trading environment, a significant achievement. The variety of projects completed was, as ever, diverse from the Enigma Museum in Poznan, which has been built to commemorate the great success of three brilliant mathematicians - Marian Rejewski, Jerzy Róycki and Henryk Zygalski, to the Umm Al-Qura University in Mecca and the well known Canadian coffee retailer   Second Cup in its Hemisphere Cannabis outlets.

 

Profit before tax of £26.0 million (2019: £25.2 million) is 3.3% ahead of the comparative period and is another record. Our cash inflows from operations in the period are £39.8 million. The business has performed well given the breadth of interruptions to many of our markets over the course of the six months.

 

In the UK our sales are 2.2% ahead of the prior comparative six months and are testament to the efforts of our sales and distribution teams in servicing the market. Sales across Europe were down 1% compared to the comparative period, Australasia showed positive growth of 2% and the rest of the world decreased 8%, the latter being principally adversely impacted by North America and the Middle East. Though commendable overall, it is evident that in many markets normal business has been significantly interrupted by the ongoing pandemic. 

 

Gross margins were resilient but were reduced and the factories were all affected by the operational difficulties of operating large-scale capital equipment with significant numbers of employees self-isolating and the associated employee safeguarding.

 

Overheads continue to be managed tightly and during the period there was little activity on new product launches due to the ongoing situation with Covid-19 and, in particular, the constraints on site visits and meeting customers. Historically there are major exhibitions to attend in the early part of the calendar year which have been cancelled with resulting cost savings relating to the usual expenditure on these events.

 

It is very encouraging that overall demand has been consistent through our first half year and in many markets was significantly higher than anticipated. Clearly normal business has been affected in areas such as retail and hospitality but others such as healthcare continue to be robust.  We have continued our long history of supplying flooring to healthcare projects globally from the Mahala Hospital in Gharbia Egypt, the   Kopanong Regional Hospital in South Africa, St. Michael's Hospital in Toronto and the Haugesund hospital in Rogaland Norway.

 

 

Earnings per Share and Dividend

 

Our basic earnings per share at 9.8p is above the comparative period of 9.5p by 3.2%.

 

Our cash, which stands at £74.4 million compared with £64.3 million at 31 December 2019, continues to be a key strength.  The cash flow is helped by stock reduction in the period of some £6.5 million and whilst buoyant sales are to be welcomed, the reduction in stock levels has been due to the difficulty of operating our usual shift patterns as employees self-isolated. Ideally we would have looked to have about 7-8% higher stock at the end of the calendar year.

 

With regard to our cash and profitability we have decided to declare an interim dividend of 4.25p per share payable on 4 June 2021 to those shareholders on the register at the close of business on 7 May 2021. Last year as the first lockdown commenced we declared a first interim dividend of 2.125p paid on 5 June 2020 followed by a second interim, also of 2.125p, paid on 10 September 2020.

 

Having regard to our defined benefit pension scheme which is undergoing its triennial valuation the Company paid additional contributions of £2.0 million in August 2020. The reduction in retirement benefit obligations partly reflects these increased company contributions but also improved return on scheme assets and changes in demographic assumptions (including the effects of covid-19).

 

 

Environmental, sustainability, social responsibility and governance

 

Every two years we publish a full report on these topics to document and underline the Group's commitment to ESSG. 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. The latest report is published on our website and will be updated later this calendar year.

 

Environmental and sustainable business targets continue to be a key focus and in January 2021 our flooring ranges were re-certified to BES6001 (responsible sourcing) once again achieving the highest rating of "excellent". Just one example of our innovation: Even though our PVC flooring is incredibly durable and recyclable we have commenced the use of fossil free PVC polymers that are sourced from renewable biomass. This bio-vinyl does not take materials from the food chain and its manufacture has a 90% reduction in greenhouse gases when compared to traditional fossil fuel derived feedstock.

 

In terms of governance we, as a board, continue to believe in a straight forward 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 adjusting profit for the trials and tribulations of that year has not seemed appropriate to this board and for a capital intensive business adding back costs such as depreciation (by use of, for example,  EBITDA as a performance measure) is, we believe, to ignore an important charge on profit. Our key performance measures are turnover, profit before tax and cash generation.

 

 

Outlook

 

Post-Brexit trading began in January and though our exports are duty free into Europe there was considerable early disruption. There was confusion among freight forwarders, border control and customers alike and there were inescapable delays. Customers, in particular, were unprepared and confused by VAT procedures in their jurisdictions. The situation has improved considerably but there remain some issues such as EU sourced goods that are re-exported and attract import duty. The tumult in international sea freight noted in our Trading Update on 1 February 2021 has reduced but remains challenging.

 

We have recently supplied flooring to the Serum Institute of India in Pune for expansion of production of the Astra Zeneca AZD1222 vaccine and the ongoing roll out of the UK vaccination program offers the prospect of a high degree of normality returning to our home market and our production process. However, we operate in a global economy and the challenges of disruption continue in many regions. The situation in our biggest export market, Europe, remains under review as the Covid-19 virus continues to affect many countries with restrictions on movement of various degrees and duration. It remains the case that business is very far from normal. Another example is the "lightning" lockdown in Victoria, Australia during the Melbourne Open tournament which closed our facility in that state.

 

In recent months there have been shortages of basic raw materials that, in conjunction with employee absenteeism, have disrupted our production. There have been increases in the cost of materials which in themselves present challenges but availability is more problematical. These shortages, bordering on supplier rationing, continue but it is encouraging that production has been and continues to be able to fulfill all confirmed orders.

 

Having noted these adversities, demand remains consistently solid. Projects such as the new Macau Wholesale Market and the Van der Valk hotels in the Netherlands are just two examples of recent projects. We have continued confidence in the performance of our businesses in the second half of our financial year.

 

 

Anthony Wild

Chairman

31 March 2021

 

Consolidated Income Statement

for the half-year ended 31 December 2020

 

 

 

Half-year 

ended 

31.12.20 

£'000 

 

Half-year 

ended 

31.12.19 

£'000 

 

Year 

ended 

30.06.20 

£'000 

 

 

 

 

Revenue

130,447 

130,391 

238,630 

 

 

 

 

Operating profit

26,232 

25,258 

44,135 

Finance income

33 

243 

382 

Finance cost

(277)

(351)

(660)

 

 

 

 

Profit before income tax

25,988 

25,150 

43,857 

 

 

 

 

Income tax expense

(5,639)

(5,389)

(9,502)

 

 

 

 

Profit for the period

20,349 

19,761 

34,355 

 

 

 

 

 

 

 

 

Earnings per ordinary share of 5p:

 

 

 

-basic

9.8p

9.5p

16.5p

-diluted

9.8p

9.5p

16.5p

 

 

 

 

 

 

 

All amounts relate to continuing operations.

 

Details of dividends paid and declared/proposed are given in note 4.

 

 

 

Consolidated Balance Sheet

as at 31 December 2020

 

 

Half-year 

ended 

31.12.20 

£'000 

Half-year 

ended 

31.12.19 

£'000 

Year 

ended 

30.06.20 

£'000 

Non-current assets

 

 

 

Property, plant and equipment

38,302 

37,759 

38,520 

Right of use assets

7,799 

7,103 

5,872 

Intangible assets

3,232 

3,232 

3,232 

Deferred tax assets

2,568 

3,179 

4,334 

 

51,901 

51,273 

51,958 

Current assets

 

 

 

Inventories

61,861 

67,180 

68,542 

Trade and other receivables

28,257 

25,962 

28,361 

Derivative financial instruments

1,097 

1,218 

73 

Cash and cash equivalents

74,445 

64,332 

67,445 

 

165,660 

158,692 

164,421 

 

 

 

 

Total assets

217,561 

209,965 

216,379 

 

 

 

 

Current liabilities

 

 

 

Trade and other payables

54,006 

50,643 

47,444 

Derivative financial instruments

1,791 

290 

883 

Current income tax liabilities

1,461 

740 

773 

Lease liabilities

3,496 

2,774 

2,568 

 

60,754 

54,447 

51,668 

 

 

 

 

Non-current liabilities

 

 

 

Retirement benefit obligations

13,446 

19,354 

23,216 

Other payables

  455

400 

449 

Lease liabilities

4,428 

4,480 

3,371 

Preference shares

200 

200 

200 

 

18,529 

24,434 

27,236 

 

 

 

 

Total liabilities

79,283 

78,881 

78,904 

 

 

 

 

Net assets

138,278 

131,084 

137,475 

 

 

 

 

Equity

 

 

 

Equity share capital

10,407 

10,407 

10,407 

Equity share capital (B shares)

160 

160 

160 

 

10,567 

10,567 

10,567 

Share premium account

4,072 

4,044 

4,072 

Capital redemption reserve

1,174 

1,174 

1,174 

Currency translation reserve

5,688 

4,338 

5,601 

Hedging reserve

(200)

225 

(37)

Retained earnings

116,977 

110,736 

116,098 

Total equity attributable to shareholders of the parent

138,278 

131,084 

137,475 

 

 

 

 

 

 

 

 

Consolidated Cash Flow Statement

for the half-year ended 31 December 2020

 

 

Half-year 

ended 

31.12.20 

£'000 

Half-year 

ended 

31.12.19 

£'000 

Year 

ended 

30.06.20 

£'000 

 

 

 

 

Profit for the period

20,349 

19,761 

34,355 

Income tax expense

5,639 

5,389 

9,502 

Profit before income tax

25,988 

25,150 

43,857 

Finance cost

277 

351 

660 

Finance income

(33)

(243)

(382)

Operating profit

26,232 

25,258 

44,135 

Depreciation of property, plant & equipment

1,738 

1,650 

3,185 

Depreciation of right of use assets

1,485 

1,487 

2,937 

Profit on sale of plant and equipment

(34)

(6)

(43)

Defined benefit pension scheme service cost

245 

318 

611 

Defined benefit pension scheme employer contributions paid

 

(3,080)

 

(1,074)

 

(4,138)

Change in fair value of financial instruments

(654)

(344)

14 

Share based payments

4 

13 

Decrease in inventories

6,488 

1,044 

1,717 

(Increase)/decrease in trade and other receivables

(865)

5,685 

  4,388

Increase/(decrease) in trade and other payables

8,286 

(5,657)

(10,450)

Cash inflow from operations

39,845 

28,368 

42,369 

Taxation paid

(4,520)

(7,973)

(11,566)

Cash inflow from operating activities

35,325 

20,395 

30,803 

 

 

 

 

 

 

 

 

Purchase of property, plant and equipment

(1,649)

(2,479)

(4,215)

Proceeds from disposal of property, plant and equipment

52 

32 

110 

Cash outflow from investing activities

(1,597)

(2,447)

(4,105)

 

 

 

 

 

 

 

 

 

 

 

 

Interest received

33 

243 

382 

Interest paid

(15)

(11)

(30)

Lease interest paid

(82)

(110)

(202)

Lease capital paid

(1,424)

(1,335)

(2,873)

Equity dividends paid

(25,237)

(20,813)

(25,236)

Shares issued

28 

Cash outflow from financing activities

(26,725)

(22,026)

(27,931)

 

 

 

 

 

 

 

 

Net increase/(decrease) in cash and cash equivalents

7,003 

(4,078) 

(1,233)

 

 

 

 

Effect of exchange differences

(3)

(254)

14 

Cash and cash equivalents at start of period

67,445 

68,664 

68,664 

 

 

 

 

Cash and cash equivalents at end of period

74,445 

64,332 

67,445 

 

 

 

 

Consolidated Statement of Comprehensive Income

for the half-year ended 31 December 2020

 

 

 

 

 

 

 

 

 

 

Half-year 

ended 

31.12.20 

£'000 

 

Half-year 

ended 

31.12.19 

£'000 

 

Year 

ended 

30.06.20 

£'000 

 

Profit for the period

20,349 

19,761 

34,355 

 

Other comprehensive income net of tax:

 

 

 

Remeasurement of the net defined benefit liability

5,763 

(247)

 

(5,062)

Foreign currency translation differences

87 

(927)

336 

Fair value movements on hedging instruments

(163)

246 

(16)

 

 

 

 

Other comprehensive income for the period net of tax

 

5,687 

 

(928)

(4,742)

 

 

 

 

Total comprehensive income for the period

26,036 

18,833 

29,613 

 

 

 

 

 

Attributable to equity holders of the parent

26,036 

18,833 

29,613 

 

 

 

 

 

Notes to the Interim Results

for the half-year ended 31 December 2020

 

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 2020.

 

The figures for the year ended 30 June 2020 are an abridged statement of the group audited accounts for that year. The financial statements for the year ended 30 June 2020 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 21.7% (2019: 21.4%).

 

 

3.

Earnings per share

 

 

 

 

 

 

 

Half-year

ended

31.12.20

£'000

 

Half-year

ended

31.12.19

£'000

 

Year

ended

30.06.20

£'000

 

 

 

 

 

 

 

 

Profit for the period

20,349

19,761

34,355

 

 

 

 

 

 

 

 

Weighted average number of shares in issue

208,141,108

208,131,108

208,135,698

 

 

Dilution effect of outstanding share options

125,225

152,678

148,358

 

 

Diluted weighted average number shares

208,266,333

208,283,786

208,284,056

 

 

 

 

 

 

 

 

Basic earnings per 5p ordinary share

9.8p

9.5p

16.5p

 

 

Diluted earnings per 5p ordinary share

9.8p

9.5p

16.5p

 

 

 

 

4.

Dividends

 

 

 

 

 

Half-year

ended

31.12.20

£'000

Half-year

ended

31.12.19

£'000

Year

ended

30.06.20

£'000

 

Equity dividends paid:

 

 

 

 

 

Final dividend for the year ended 30 June 2019

-

20,813

20,813

 

Interim dividend for the year ended 30 June 2020

4,423

-

4,423

 

Final dividend for the year ended 30 June 2020

20,814

-

-

 

 

 

 

 

 

 

25,237

20,813

25,236

 

 

 

 

 

 

Equity dividends declared/proposed after the end of the period

 

 

 

 

Interim dividend

8,846

4,423

4,423

 

Final dividend

-

-

20,814

 

 

  Equity dividends per share, paid and declared/proposed are as follows:

 

 

10.00p final dividend for the year ended 30 June 2019, paid on 6 December 2019

2.125p first interim dividend for the year ended 30 June 2020, paid on 5 June 2020

2.125p second interim dividend for the year ended 30 June 2020, paid 10 September 2020

10.00p final dividend for the year ended 30 June 2020, paid on 11 December 2020

 

4.25p interim dividend for the year ended 30 June 2021, payable on 4 June 2021, to those shareholders on the register at the close of business on 7 May 2021.