TIDMJHD
RNS Number : 3275S
James Halstead PLC
02 October 2017
2 October 2017
JAMES HALSTEAD PLC
PRELIMINARY ANNOUNCEMENT OF AUDITED RESULTS
FOR THE YEARED 30 JUNE 2017
"Record turnover and profits with, once again, record
dividend"
Key Figures
-- Revenue at GBP240.8 million (2016: GBP226.1
million) - up 6.5%
-- Profit before tax GBP46.6 million (2016:
GBP45.5 million) - up 2.5%
-- Earnings per 5p ordinary share of 17.6p
(2016: 17.0p) - up 3.5%
-- Final dividend per ordinary share proposed
of 9.25p (2016: 8.5p) - up 8.8%
-- Cash GBP52.5 million (2016: GBP44.1 million)
- up 19.1%
Mr Mark Halstead, Chief Executive, commenting on the results,
said:
"Despite the shadow of uncertainty that "Brexit "has cast and in
a year of clearly tougher than normal trading conditions it's
satisfying to report another year of record profits."
Enquiries:
James Halstead:
Mark Halstead, Chief Executive
Gordon Oliver, Finance Director Telephone: 0161 767 2500
Hudson Sandler:
Nick Lyon Telephone: 020 7796 4133
Panmure Gordon (NOMAD & Joint Broker):
Ben Thorne
Andrew Potts Telephone: 020 7886 2500
Arden Partners (Joint Broker):
Chris Hardie Telephone: 020 7614 5900
CHAIRMAN'S STATEMENT
Results
It is gratifying to report turnover of GBP240.8 million (2016:
GBP226.1 million) - a record. Just as satisfying to report as the
sales is the record profit before tax at GBP46.6 million (2016:
GBP45.5 million). There was clearly a boost to our export
activities given the general weakness of Sterling aiding
competitiveness and margins. This was tempered by a 5.2% fall in UK
sales and turmoil in the supply chain of raw materials. The drop in
UK sales is entirely accounted for by de-stocking at two of the
larger distributor chains. We are satisfied that the actual
purchases of Polyflor ranges by end users increased and we are
encouraged that other independent distributors increased sales.
Strategy
Our businesses are totally flooring focused and our strategy is
designed to enhance our brand identity thereby generating goodwill
and customer satisfaction with the aim of continued repeat
business. This approach is designed to increase revenue, and
consequently profitability, which then creates wealth for our
shareholders in the form of dividend as reward for their investment
in our company. It also underpins job security for our employees
and benefits all stakeholders in the business.
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.
The strategy evolves over time, but our focus on sustainable
growth is undiminished. Indeed sustainability in general is a key
strategy and, from our award winning recycling initiatives through
to our environmental policies, we are recognised as leaders in this
area.
Dividend
Profit and earnings per share have increased and our cash
reserves continue to be healthy. Cash flows from operating
activities were GBP47.5 million and our cash balances stand 19.1%
ahead of last year, even after our dividends paid in the last year
which amounted to GBP25.4 million.
It is pleasing to report that the Board proposes, once again, an
increased final dividend. The final dividend will be 9.25p (2016:
8.5p) representing an 8.8% increase which combined with the interim
dividend, paid in June 2017, of 3.75p (2016: 3.5p) makes a total of
13.0p (2016: 12.0p) for the year, an increase of 8.3%. It is
pleasing to have reported a record dividend as I have done now each
year for over 40 years.
Acknowledgements
As we close this year I would like to express the gratitude of
the Board to our customers and employees for their part in our
success. I would especially like to extend our gratitude to Mr
Eberhard Lotz who has notified his intention to retire at the
upcoming AGM after nine years on the Group Board having been one of
the founders of Objectflor Art & Design Belags GmbH which was
acquired in 1996 and which has been such an important part of our
flooring operations for many years.
It is with sadness that I report the passing of our former
director Mr Arthur Halstead in July of this year who was employed
by the Group for 50 years, 36 of these as director of James
Halstead plc. Always a trusted and loyal colleague, friend and
family member - he will be greatly missed.
Outlook
I have been Chairman for 17 years and a director of James
Halstead plc for 55 years and it is time for me to step down from
the Board at the AGM. In doing so I leave a strong team and a
business solidly built and not only capable of continued growth,
but achieving this growth. I refer you to the announcement on
proposed Board changes, released today and to be effected at the
AGM, which includes details of our proposed new Chairman and
proposed new appointments to the Board.
Trading since our year-end has been strong, particularly in the
UK. In addition, both our antipodean and French colleagues reported
record sales in the first two months. Taking current trading into
account I can only be confident of progress in the coming year.
Geoffrey Halstead
Chairman
CHIEF EXECUTIVE'S REVIEW
The major benefit to the year was the positive effects of
exchange rates on our export margins and our competitiveness.
Turnover at GBP240.8 million (2016: GBP226.1 million) was ahead by
some 6.5% but the exchange rate benefits were offset to a large
degree by raw material costs increasing.
Raw material price increases noted in the first half year
continued into the second half as a result of an explosion at the
BASF site in Germany followed by a fire at a Shell refinery in the
Netherlands which interrupted supply of PVC from Shin-Etsu's Dutch
PVC plant and then a fire at Vinnolit's plant in Germany. These
events resulted in greater demand for raw materials from other
manufacturers who struggled to fulfil the demand. In addition we
saw the withdrawal of one US supplier from the European markets and
the currency cost increases, as Sterling fell in value after the
Brexit vote. In mitigation we visited Asia and established extended
relationships with three Asian suppliers. Moreover, by utilising
bulk storage tanks located at Seal Sands in Teesside we reduced
some of the cost effects and most of the shortages associated with
the turmoil.
We make significant purchases of finished goods denominated in
US dollars and the strength of that currency has been far from
helpful. In mitigation product sourced from Korea has increased
(free of import tariffs) and we are investigating opportunities for
supply from Europe. More significant are plans for our own UK
manufacture of these sourced items at Teesside which, initial
costings suggest, could offer cost advantage as well as the
logistical benefit of being nearer our European markets.
Our gross margin improved in all markets, a major achievement
given the challenges facing the group during the year and obviously
greatly helped by the weakness of Sterling.
International trade is about more than just shipping product.
Our customers, often governments and multi-nationals, expect
sustainability standards and environmental credentials. To us this
means action and involvement, not just the glossy PR so often seen.
For example, we are one of the first to achieve SA 8000
certification (for global working practices), BES 6001
certification (for ethical sourcing) and BRE Global A+ rating (for
sustainable manufacture).
Achieving these certifications gives us added credibility in the
market. Our recycling initiatives and co-operations demonstrate
both innovation and solid action, whether it is the UK with the
Chartered Institute of Waste Management (CIWM) (who awarded us for
environmental excellence) or the Green Councils of Australia/New
Zealand (awarded Green Tag certificate). Polyflor is leading the
industry.
Reviewing the businesses in more detail:
Objectflor / Karndean and James Halstead France, our European
operations
Turnover was on a par with last year although within this it was
encouraging that there was growth in our Expona brand, by some
3.3%, offset by a reduction in the Karndean ranges of 6.4%.
As anticipated, given our market share and the intense pressure
from competitors within the German market a decline in turnover
within Germany was noted but this was compensated for by
performance in surrounding territories, most markedly Belgium,
Austria, Eastern Europe and Switzerland.
During the year augmenting the Benelux and Eastern bloc sales
force has been a strategy to increase our penetration of
surrounding territories whilst defending our leading position in
Germany. Germany sales represent 68% of total sales serviced from
Cologne (2016: 71%).
For several years we have supplied flooring to the expanding
fitness chains Fit One and McFit but this year we have secured many
other national chains of which Fitness First, Linzenich Fitness and
Pfitzenmeier Group are but examples. Retail chains are important
clients and Objectflor have secured many customers including
Euronics stores across the region as well as Unitymedia stores and
the retail outlets of Bijou Brigitte. Hotel chains such as Sol Umag
in Croatia and Aquis Grana are referenced as good installations but
our flooring was also supplied and fitted to the central police
station in Frankfurt and in the Kika Leiner furniture stores across
Germany.
In France, turnover was on a par with the record of the previous
year with increased profit as a result of product sales migrating
to higher margin lines. Turnover across France was strong. In the
Paris region we have supplied 'Passy Plaza', the prestigious
shopping centre in the 16(th) arrondissement and other
installations as diverse at the 'Thalassa', France's flagship
oceanographic vessel and the Puy du Fou theme park.
Polyflor Pacific - encompassing Australia, New Zealand and
Asia
Turnover was 6.8% above last year, with profit greatly
increased. Margins improved by over 5% reflecting both favourable
product mix and the cessation of sales of dis-continued stock which
was a feature of the prior year. This top line benefit was further
improved by reduced freight costs (equivalent to 1.3% of sales) by
the realignment of stock holdings across the continent.
Our team in NSW have relocated our Victoria offices, augmented
the Queensland staff with representation in Far North Queensland
and recruited a state manager for Western Australia. The breadth of
installations was impressive, whether it be the rollout of Polyflor
across Woolworths stores nationally, the Narrogin Hospital in WA or
the Western Sydney University as well as countless refurbishments
across the country.
Our Hong Kong office continues to supply impressive projects
across China such as Qinhuangdou Welfare Hospital and the award
winning Fudan University Hospital of Shanghai. As important as
healthcare continues to be, our Chinese presence is much more
broadly based with the recent Toys R Us franchises and Louis
Vuitton shops in Hong Kong illustrating the breadth of customers as
does the MGM Casino in Macau.
New Zealand showed modest 1% growth and improved margins. This
achievement illustrates the underlying strength of the day to day
business where for some key product ranges we continue to have
significant market share, particularly for UK manufactured
products. This share is over 30% of the market which is commendable
for such a distant location. The headline 1% hides good growth in
the North Island contrasting with the South Island, where activity
generally for our customers has been poor, still affected by
continued uncertainty following the Christchurch earthquake some
years ago.
We retained the main New Zealand social housing contract which
came up for renewal in the period. Success in this is testament to
the high level of service and quality provided, a key factor in
decision making. Polyflor in New Zealand was voted Vinyl Flooring
Supplier of the year by the Flooring Xtra group and continues to
offer retail stores, such as the Spark Stores chain and Motorcycle
Mecca in Invercargill, design led flooring. Healthcare will always
be a key market segment but beyond this use of our products in the
year extended from buses and BP garages to the Rorotonga sports
stadium in the Cook Islands.
A key development in the year was the move to the new warehouse
in Auckland, which is better suited to our current and likely
business needs. This has assisted with the profitability of the
business.
Polyflor & Riverside Flooring, based in UK
Overall turnover reduced by 2.5% and profit was consequently
affected but Riverside continued to grow with 3% increase in
turnover.
The last 12 months in the UK have been difficult. One of the
major distributors was prepared for sale by its PLC parent which
involved de-stocking, a lack of investment and ultimately disposal.
Another of the major distributors looked to rationalise stock and
focused on margin improvement. Whilst this de-stocking did affect
our sales, ultimately it is temporary. The similarities to the
actions of the large UK retailers such as Tesco, Sainsbury, etc., a
few years ago seem appropriate to mention because, whilst the major
chains focused on margin and own label products, the large
independent distributors have focused on branded products, such as
ours, at keen price points and showed good growth and increased
market share. Sales in the market place of Polyflor product were
higher than the previous year despite the de-stocking which is
encouraging.
Productivity improvements in line speed and capacity at
Radcliffe combined with the, at best, flat UK demand that was a
consequence of the aforementioned de-stocking inevitably led us to
drop shifts from each of our Radcliffe production lines.
Regrettably there were redundancies (just under 30). This obviously
had a financial cost (which hit the bottom line in the early part
of the year) and a human cost. Thankfully all the redundancies were
voluntary, but the consequence was 570 man years of experience left
the business.
Product development was at the forefront and a lot of time, and
cost, has gone into new product lines for the future. Over
GBP900,000 has been invested into the Riverside plant in Teesside
and the company can now offer in line registered embossing on its
award winning heterogeneous sheet. In addition, we have secured
planning permission to extend the plant.
Polyflor has for the fourth consecutive year won the Contract
Flooring Association's Manufacturer of the Year Award as Best Vinyl
Award (for the 8(th) year in a row) which helped us to secure the
order for the new Dumfries Royal Infirmary which faced competition
from one of our continental competitors. Range launches and
re-vamps were several and included our new 'Silentflor' commercial
flooring with unique sound-deadening properties and vivid colour
ranges. 'Bloc', our vivid single colour homogenous range, has
received very good responses from architects and specifiers.
Polyflor Nordic comprising Polyflor Norway based in Oslo and
Falck Design based in Sweden
Norway posted a small increase in turnover in the year of just
under 2% increase over the prior year. As a largely primary
economy, the low oil prices of the recent past had an impact on
this market. Nevertheless, turnover comprised a greater proportion
of UK manufactured product (around 39% of the total) which was
gratifying. Projects included the new Svalbard Satellite Station
(SvalSat 2) which is located at 78deg north of the equator and
probably our most Northern installation together with the new
Trondheim Spektrum arena. Profit in Norway was comfortably ahead of
the prior year.
In Sweden, turnover declined 8.3%. Profit, though reduced, held
up surprisingly well as a result of a swing to our higher end
products leading to improved margins. The Swedish business
experienced a change in management following the retirement of the
previous Managing Director. This, along with some staff disruption,
resulted in a poor second half of the year, however as new sales
and marketing strategies have been implemented sales are improving.
Higher margins and tight overhead control meant that the shortfall
in sales was not reflected to as great an extent in terms of
profitability.
Close control of overheads where possible means that
profitability across the Scandinavian business has increased vis a
vis the prior year.
Polyflor Canada, based in Toronto
Turnover continued to grow with an 8% growth in distributor
sales. However, this was offset by a decline in direct sales into
the mining sector due to lower activity in this sector.
National retailers such as Boston Pizza and Booster Juice are
valued clients as well as Landmark Cinemas and Chevron Gas
stations. In addition, prestigious new buildings continue to choose
Polyflor such as the Royal Victoria Hospital, the National Hockey
League Association NHLA head offices and Omers Towers in
Toronto.
Polyflor India, based in Mumbai
We had a good year as this relative new business reported a
small profit. With five regional sales managers and a dealer
network approaching two dozen we have exited the start-up phase of
our move into this market and several healthcare projects have
contributed to this record year such as the Humancare Trust
Hospital in Dwarka, the Royalcare Super Speciality Hospital,
Coimbatore and the ESIC Medical College in Mandi.
Rest of the World
Outside our headline markets we continue to cover the world and
a few a locations worthy of mention are Banco De la Natu in Mexico
City, Salalah airport in Oman, the new Schengen terminal at Athens
airport and Tamana University in Trinidad. Our distribution network
has performed well with several countries at record levels of
turnover (Ghana, Lithuania, Italy, Portugal, Puerto Rica and the
USA being examples).
Outlook
There are positive signs in the UK that after the turbulence of
the last year resulting from changes at two of the larger
distributors conditions are now normalising. In addition, our
supply chain issues have largely been resolved. The early months of
the new financial year have provided encouraging signs of growth
with turnover increasing. I am optimistic for the coming year.
Mark Halstead
Chief Executive
Audited Consolidated Income Statement
for the year ended 30 June 2017
Year Year
ended ended
30.06.17 30.06.16
GBP'000 GBP'000
Revenue 240,784 226,141
Cost of sales (135,974) (130,177)
----------------- -----------------
Gross profit 104,810 95,964
Selling and distribution costs (47,659) (41,105)
Administration expenses (9,867) (8,776)
Operating profit 47,284 46,083
Finance income 134 177
Finance cost (802) (761)
Profit before income tax 46,616 45,499
Income tax expense (10,106) (10,243)
Profit for the year attributable to equity shareholders 36,510 35,256
----------------- -----------------
Earnings per ordinary share of 5p:
-basic 17.6p 17.0p
-diluted 17.6p 17.0p
All amounts relate to continuing operations.
Audited Consolidated Balance Sheet
as at 30 June 2017
As at As at
30.06.17 30.06.16
GBP'000 GBP'000
Non-current assets
Property, plant and equipment 36,103 34,384
Intangible assets 3,232 3,232
Deferred tax assets 4,151 5,129
---------- ----------
43,486 42,745
---------- ----------
Current assets
Inventories 72,936 62,828
Trade and other receivables 31,176 33,820
Derivative financial instruments 416 433
Cash and cash equivalents 52,532 44,096
---------- ----------
157,060 141,177
---------- ----------
Total assets 200,546 183,922
---------- ----------
Current liabilities
Trade and other payables 59,321 53,395
Derivative financial instruments 1,362 2,066
Current income tax liabilities 3,860 4,300
64,543 59,761
---------- ----------
Non-current liabilities
Retirement benefit obligations 21,257 25,431
Deferred tax liabilities - 603
Borrowings 200 200
Other payables 486 460
---------- ----------
21,943 26,694
---------- ----------
Total liabilities 86,486 86,455
---------- ----------
Net assets 114,060 97,467
---------- ----------
Equity
Equity share capital 10,393 10,374
Equity share capital (B shares) 160 160
---------- ----------
10,553 10,534
Share premium account 3,615 3,096
Capital redemption reserve 1,174 1,174
Currency translation reserve 6,194 4,026
Hedging reserve (289) (699)
Retained earnings 92,813 79,336
Total equity attributable to shareholders of the parent 114,060 97,467
---------- ----------
Audited Consolidated Cash Flow Statement
for the year ended 30 June 2017
Year Year
ended ended
30.06.17 30.06.16
GBP'000 GBP'000
Cash inflow from operations 47,478 50,325
Interest received 134 177
Interest paid (33) (43)
Taxation paid (10,682) (10,220)
Cash inflow from operating activities 36,897 40,239
---------- ----------
Purchase of property, plant and equipment (4,234) (4,842)
Proceeds from disposal of property, plant and equipment 234 200
---------- ----------
Cash outflow from investing activities (4,000) (4,642)
---------- ----------
Equity dividends paid (25,438) (39,867)
Shares issued 538 189
Cash outflow from financing activities (24,900) (39,678)
---------- ----------
Net increase/(decrease) in cash and cash equivalents 7,997 (4,081)
Effect of exchange differences 439 749
Cash and cash equivalents at start of year 44,096 47,428
Cash and cash equivalents at end of year 52,532 44,096
---------- ----------
Audited Consolidated Statement of Comprehensive Income
for the year ended 30 June 2017
Year Year
ended ended
30.06.17 30.06.16
GBP'000 GBP'000
Profit for the year 36,510 35,256
----------- -----------
Other comprehensive income net of tax
Items that will not be reclassified subsequently to the income statement:
Re-measurement of the net defined benefit liability
Deferred taxation - change of rate 2,404 (7,360)
- 106
----------- -----------
2,404 (7,254)
----------- -----------
Items that could be reclassified subsequently to the income statement:
Foreign currency translation differences 2,168 4,808
Fair value movements on hedging instruments 410 (2,126)
----------- -----------
2,578 2,682
----------- -----------
Other comprehensive income for the year 4,982 (4,572)
Total comprehensive income for the year 41,492 30,684
=========== ===========
Attributable to equity holders of the
Company 41,492 30,684
=========== ===========
Items in the statement above are disclosed net of tax.
NOTES
1. The final dividend of 9.25p per ordinary share will be paid, subject to the approval of the
shareholders, on 1 December 2017 to shareholders on the register as at 3 November 2017. The
annual report and accounts will be posted to shareholders on 20 October 2017.
2. The financial information in this statement does not represent the statutory accounts of the
Group. Statutory accounts for the year ended 30 June 2016 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 2017 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
2017 2016
GBP'000 GBP'000
Profit for the year attributable to equity shareholders 36,510 35,256
-------------- --------------
Weighted average number of shares in issue 207,620,432 207,431,307
-------------- --------------
Dilution effect of outstanding share options 216,506 473,629
Diluted weighted average number of shares 207,836,938 207,904,936
-------------- --------------
Basic earnings per ordinary share 17.6p 17.0p
Diluted earnings per ordinary share 17.6p 17.0p
This information is provided by RNS
The company news service from the London Stock Exchange
END
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