RNS Number : 0377U

James Halstead PLC

31 March 2021

31 March 2021



Key Figures

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

        *    Revenue at GBP130.45 million (2019: GBP130.39 
             million) - level 
        *    Operating profit at GBP26.2 million (2019: GBP25.3 
             million) - up 3.9% 
        *    Pre-tax profit at GBP26.0 million (2019: GBP25.2 
             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 GBP74.4 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".


 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): 
 Dominic Morley                             Telephone: 020 7886 2500 
   WH Ireland (Joint Broker): 
 Ben Thorne / Chris Hardie                  Telephone: 0207 220 1666 


Trading for the six months ended 31 December 2020

Our turnover of GBP130.45 million (2019: GBP130.39 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 Ró ycki 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 GBP26.0 million (2019: GBP25.2 million) is 3.3% ahead of the comparative period and is another record. Our cash inflows from operations in the period are GBP39.8 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 GBP74.4 million compared with GBP64.3 million at 31 December 2019, continues to be a key strength. The cash flow is helped by stock reduction in the period of some GBP6.5 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 GBP2.0 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.


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


31 March 2021

Consolidated Income Statement

for the half-year ended 31 December 2020

                                         Half-year     Half-year         Year 
                                             ended         ended        ended 
                                          31.12.20      31.12.19     30.06.20 
                                           GBP'000       GBP'000      GBP'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   Half-year        Year 
                                                                    ended       ended       ended 
                                                                 31.12.20    31.12.19    30.06.20 
                                                                  GBP'000     GBP'000     GBP'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 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   Half-year              Year 
                                                                   ended       ended             ended 
                                                                31.12.20    31.12.19          30.06.20 
                                                                 GBP'000     GBP'000           GBP'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           7                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   Half-year        Year 
                                                             ended       ended       ended 
                                                          31.12.20    31.12.19    30.06.20 
                                                           GBP'000     GBP'000     GBP'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        Half-year            Year 
                                                                            ended            ended           ended 
                                                                         31.12.20         31.12.19        30.06.20 
                                                                          GBP'000          GBP'000         GBP'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   Half-year        Year 
                                                                             ended       ended       ended 
                                                                          31.12.20    31.12.19    30.06.20 
                                                                           GBP'000     GBP'000     GBP'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. 
   6.     Copies of the interim results 
        Copies of the interim results have been sent to shareholders who requested them. Further copies 
         can be obtained from the Company's registered office, Beechfield, Hollinhurst Road, Radcliffe, 
         Manchester, M26 1JN and on the Company's website at www.jameshalstead.com. 

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(END) Dow Jones Newswires

March 31, 2021 02:00 ET (06:00 GMT)

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