Chairman's statement
Unaudited results for the six months trading to 30 September 2017
Revenue for the six months ended 30 September 2017 was £107.3m, up 7% on £100.3m for the same period last year. We have seen volumes continue to grow especially through our own warehouses where they are up nearly 8%. The cost price of our products overall continues to increase in comparison to the comparative six months. This is in part down to the weakening of sterling following the European Union Referendum, but also in this six months we have seen manufacturers increasing prices, and we have not been able to pass all these increases onto our customers.
Gross margin for the six month period ended 30 September 2017 was 17.3% compared with 18.7% in the comparative six months. This gross margin is similar to the 17.6% achieved in the second half of 2016/7, and we believe margins are starting to stabilise. We were also affected in this half year by some disruption to supplies from some of our key suppliers' manufacturing facilities, which are now getting back to normal.
Selling and distribution costs were 6.4% higher than last year. Distribution costs rise in line with volumes, and we monitor costs per tonne which are up by less than 2%. We have also invested in new specialist sales staff to develop the markets where we see potential for good future growth.
In July we successfully completed the move of our Yate depot to a new modern facility. I am very grateful to all of the staff involved in the move, who were very effective at minimising the disruption to the business and I am pleased to report the new facility is already performing ahead of our expectations. In this half year we incurred approximately £100,000 of one off costs relating to the move.
Profit before tax was £6.7m, down 12.2% on the comparative period's profit of £7.7m. Earnings per ordinary share were 27.8p (2016: 31.2p) a decrease of 10.9%.
As at 30 September 2017 net assets have increased to £83.8m (30.9.16: £64.5m). Fixed assets have increased by £5.6m from 31 March 2017, the majority of this being the remaining cost of the new warehouse at Yate and the start of the investment in the new warehouse at Leicester. Stock levels have remained stable throughout the period. Trade Receivables have continued to show good debtors day figures with there being another low bad debt charge of under 0.15% of turnover in the first six months. Cash and cash equivalents of £12.6m (30.9.16: £16.1m), remain strong with strong cash flows from operating activities.
The calculation of the pension deficit remains very sensitive to changes in assumptions, and the pension deficit under IAS19 is now calculated as decreasing from £16.6m at 31 March 2017 to £8.5m. This is largely due to updated membership data and an increase in the discount rate. Positive asset performance and changes to the mortality base tables also reduced the net liability. The triennial actuarial valuation as at 31 March 2017 is currently being calculated.
Interim dividend
The Board has declared an interim dividend of 4.5p per Ordinary Share (2016: 4.5p), which is covered 6.2 times (2016: 6.9 times). The dividend is payable on 26 January 2018 to ordinary shareholders on the Company's Register at close of business on 5 January 2018. The ex-dividend date will be 4 January 2018.
Current and future trading
The second half of 2017/18 has started well with growing revenues at slightly higher margins. Trading conditions continue to be mixed, but despite the uncertainties in the economy, we and our customers remain busy. We are confident in the long term prospects of our key product drivers, and this underpins our plan to continue to invest in our business to further improve the offering to our customers. Following the successful relocation of our Yate depot, we are looking forward to a relocation of our Wigston depot to a site closer to the motorway network in Leicester ahead of schedule in January 2018.
Nick Latham
Chairman
30 November 2017