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Share Name Share Symbol Market Type Share ISIN Share Description
James Halstead Plc LSE:JHD London Ordinary Share GB00B0LS8535 ORD 5P
  Price Change % Change Share Price Bid Price Offer Price High Price Low Price Open Price Shares Traded Last Trade
  -4.00 -0.8% 496.00 497.00 502.00 504.00 496.00 496.00 3,596 16:35:12
Industry Sector Turnover (m) Profit (m) EPS - Basic PE Ratio Market Cap (m)
Construction & Materials 253.0 48.3 18.2 27.3 1,032

James Halstead PLC Interim Results

31/03/2020 7:00am

UK Regulatory (RNS & others)


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RNS Number : 1112I

James Halstead PLC

31 March 2020

31 March 2020

JAMES HALSTEAD PLC

INTERIM RESULTS FOR THE HALF-YEARED 31 DECEMBER 2019

Key Figures

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

 
 
 
       *    Revenue at GBP130.4 million (2018: GBP125.8 million) 
            - up 3.7% 
 
       *    Operating profit at GBP25.3 million (2018: GBP24.5 
            million) - up 3.0% 
 
       *    Pre-tax profit at GBP25.2 million (2018: GBP24.5 
            million) - up 2.8% 
 
       *    Basic earnings per ordinary share 9.5p (2018: 9.1p) - 
            up 4.4% 
 *    1(st) Interim dividend proposed of 2.125p 
 
 
              *    Cash at GBP64.3 million 
 

The Chief Executive, Mr. Mark Halstead, commented:

"In the first half, we have supplied flooring to installations as diverse as the Folies Bergère in Paris and to the Pooch Perfect TV set for Network Seven in Australia and, with profits growth and robust cash balances, it was a satisfying performance.

However, the world has changed since the turn of the year and we are focused on the security of our businesses and the immediate challenges of the Coronavirus (COVID- 19). The focus of our business has moved to our expertise in healthcare as the immediate need in many of our markets for flooring is in this sector."

Enquiries:

 
 James Halstead                     0161 767 2500 
 Mark Halstead, Chief Executive 
 Gordon Oliver, Finance Director 
 
 Hudson Sandler                     020 7796 4133 
 Nick Lyon 
 Nick Moore 
 
 Panmure Gordon (Nomad and Joint 
  Broker)                           020 7886 2500 
 Dominic Morley 
 Arden Partners (Joint Broker) 
  Richard Johnson                   020 7614 5900 
 

CHAIRMAN'S STATEMENT

Trading for the six months ended 31 December 2019

Our turnover of GBP130.4 million (2018: GBP125.8 million) shows growth of 3.7% and is a record level for the first half. Profit before tax of GBP25.2 million (2018: GBP24.5 million) is 2.8% ahead of the comparative period and is another record. Our cash inflows from operations in the period are GBP28.4 million. The business has performed well given the fragile state of many markets.

In the UK our sales are 7% ahead of the prior year comparative and are testament to the efforts of our sales and distribution teams in servicing the market.

James Halstead France continues to grow, by some 6% in the first six months. The greater Paris region was affected by strikes but our investment in additional sales staff across the country is showing success. One project of note was the new intensive care facility at the Centre Hospitalier Intercommunal de Poissy.

Objectflor, based in Germany and serving Central Europe, reported sales growth of some 2.3% though encountered margin erosion as a result of exchange rates. The Netherlands has had a difficult few months with the restrictions on construction as a result of their government's actions to tackle nitrogen emissions. In October, Objectflor launched "Expona Simplay" carpet tiles which complement our ranges of loose lay vinyl and are selling very well. Our new in-house showroom / exhibition centre - "Campus" had 2,500 visitors up until the end of December. The Campus is also a training facility and in December we introduced a new event, a trade fair, named "Weilhnacht Campus" where around twenty flooring related companies shared the costs and presented our flooring comprehensively with industry leading accessories, adhesives and design ideas. Projects supplied by Objectflor in the period include three hospitals - Klinikum Darmstadt, Kilnikum Eisenberg and Charité Berlin.

In looking at the regions of Polyflor Pacific, sales are generally positive though mainland China was down by around 8% which we ascribe to project delays. New Zealand has seen sales growth of 12% and Australia, mainly affected by the various widely reported climate issues, reported a 6% decline.

North America has been very positive with over 22% growth in the six months in comparison to the prior year. Within this, Canada continues to grow and our team there have supported US growth with attendance at major exhibitions.

As mentioned at the time of our preliminary results last October, throughout July and August one of our three main production lines in Whitefield was idle following the failure of part of the plant and the consequent damage to the line. Inevitably this led to unrecovered overhead costs as we were unable to produce for ten weeks as well as the increased cost of working once the plant re-started in September and a required running of additional hours in overtime to rebuild stock levels. This had a knock-on effect on our ability to fulfil orders particularly in export markets and, indeed, part of the decline in our Australian sales is attributable to this break-down. These problems are now behind us and it is testimony to our robustness that record turnover and record profits have still been attained.

Earnings per Share and Dividend

Our basic earnings per share at 9.5p are above the comparative period of 9.1p by 4.4%.

Our cash, which stands at GBP64.3 million, is a key strength and in these difficult times with the world focused on the global situation and COVID-19 we are conscious of this asset and the importance of retaining it. As a Board, we are prudent and cautious and have looked at our forecasts and discussed at length various ongoing scenarios regarding the dividend.

We undoubtedly have the cash resource to declare an increased interim dividend, and based on the position three weeks ago, with a record first half and a robust balance sheet, with nil net gearing, this would have been our position. As a Board we are proud of our long history of increases in dividend. However, as a Board, we feel given the level of uncertainty in the short-term this would signal that we are not focused on the current and ongoing situation. Equally, to forgo a dividend, given the interim payment would have cost around 14% of the cash resources herein reported, might be regarded as an overreaction. Our shareholder base includes several income funds and many private individuals looking for both security and the income. Approximately half our UK workforce and around 60% of our former employees (who are now pensioners) are shareholders.

Accordingly, and in consultation with advisors, we have decided to declare a first interim dividend of 2.125p per share representing half of the interim dividend we would otherwise have declared and to review a payment of a second interim dividend in August when visibility of the global economy may be clearer. As we stand, the intention is that this first interim dividend will be payable on 5 June 2020 to those shareholders on the register at the close of business on 11 May 2020.

The Board in arriving at this decision has also, recently, paid an amount broadly equivalent to 50% of this interim dividend into the Group's defined benefit pension scheme and has contacted the trustees to confirm that at this time the scheme should not be liquidating scheme assets to fund benefits and that for the period to 30 June 2020 the company will underpin any shortfall with additional funds. In terms of cash this is unlikely to exceed the level of 25% of this interim dividend and the underpin is capped at that level.

As a Board we believe this is a measured response and would note that the first two months trading of the second half have continued positively in terms of cash flow.

COVID-19 and our current status

The Group as a whole is closely monitoring developments in respect to the ongoing COVID-19 pandemic. Up until the 20(th) March we had not experienced any meaningful disruption to our operations although regionally there were restrictions on travel.

Since that time the UK, and other countries have instigated various restrictions on travel and the closure of many businesses. Inevitably office refurbishment, retailer business and leisure will slow drastically in the coming weeks. None of our markets are unaffected in terms of the general economic environment. However, a major part of our business is in healthcare and over 70% of our turnover is exported and we are receiving a large number of enquiries from many of our markets.

Our Group has plans in place to mitigate adverse challenges we face, and resources have been put in place to allow for remote working for many office-based personnel. More importantly we have rigorous procedures in our factories to protect our colleagues including social distancing measures and use of sanitizers. In addition we stopped all external visitors to site and segregated delivery drivers from warehouse operatives. We have also insisted on any employee with symptoms remaining at home, sent home any worker with underlying conditions, closed vending machines, conducted all meetings by conference call and limited staff to no more than two people in any room at the same time.

Government measures to slow the growth of the virus disrupts a significant part of our business, most noticeably in the UK but, as noted earlier, around 70% of our sales are exported and other markets are also affected. It is highly likely that our sales of luxury vinyl tiles ("LVT") will slow rapidly to the extent that LVT is installed in the retail and hospitality sectors. Refurbishment is less affected, and it is clear than contractors are active in this early phase but are winding-down. Equally, for a period of time the sheet vinyl part of the business will grow given the immediate need for expansion of temporary hospitals, assessment centres, sterile changing areas and isolation wards. Our UK production lines can fulfil some of this need and are producing this flooring.

In several markets we have "key supplier" status and are a preferred supplier to the UK's National Health Service, whilst there are two other preferred suppliers who are based in France where all manufacturing is currently closed. Despite being competitors, we work closely with these two companies on trade bodies and international standards and have sent our wishes for a safe outcome. Given the "stay at home" message our employees and their families have understandable concerns, and the stress and worry associated with the current situation is an issue for everyone. Having regard to this, and given the nearness of our normal Easter shutdown, we will close the Radcliffe factory one week earlier and extend the break to three weeks.

Our suppliers are in contact and raw material supplies continue, with 60% of raw materials sourced in Europe and, to date, supply and delivery are largely unaffected. The 3 week break will give us more clarity on supply chains as government policy evolves.

I would like to thank those senior members of the various heath bodies that have written to us with thanks for our ability to supply rapidly for needed facilities, our local Members of Parliament for taking time to understand our concerns about the lack of clarity of going to work, to our workforce whose efforts are appreciated and to our senior management team who are having to react to unprecedented events.

Our cash resources are robust and stock levels remain solid which should help to underpin the coming months and immediate demand.

Outlook

The second half of the financial year started well with full production in the UK, with sales and profit in the first three months of the second half in line with expectations.

Looking at the coming months, it can be envisaged that sales to retailer refurbishment will slow down, but our core business in healthcare and institutional refurbishment is more robust. Indeed, as I have noted, in the preceding section, there are increased enquiries for flooring for medical facilities in several parts of the globe and our stocks of sheet resilient flooring allow us to respond quickly.

The balance of our business will likely continue to shift to healthcare and given the fast pace of events we cannot be sure how the market will react to the next few months. In the immediate two-six weeks the focus in many markets will be on healthcare and, with the extended Easter factory closure, we will focus on distribution. Transportation of goods remains relatively normal. In the UK even large distributors that have closed depots are making arrangements to continue the supply of commercial flooring to contractors, but there are localised issues of vehicles being stopped as part of government monitoring of essential travel. Overseas international freight rates are rising and the drastic changes to lock-down in the world means there may be challenges in delivery.

The immediate few weeks would seem to be busy in terms of demand but daily changes must be faced. Looking further ahead, our balance sheet strength, our depth of experience and focus on detail encourage me to have confidence that we are well placed to withstand prevailing pressures.

Anthony Wild

Chairman

31 March 2020

Consolidated Income Statement

for the half-year ended 31 December 2019

 
 
                                         Half-year     Half-year         Year 
                                             ended         ended        ended 
                                          31.12.19      31.12.18     30.06.19 
                                           GBP'000       GBP'000      GBP'000 
 
 Revenue                                   130,391       125,786      253,038 
                                      ============  ============  =========== 
 
 Operating profit                           25,258        24,528       48,374 
 Finance income                                243           171          357 
 Finance cost                                (351)         (223)        (455) 
 
 Profit before income tax                   25,150        24,476       48,276 
 
 Income tax expense                        (5,389)       (5,474)     (10,484) 
 
 Profit for the period                      19,761        19,002       37,792 
                                      ============  ============  =========== 
 
 
 Earnings per ordinary share of 5p: 
 -basic                                       9.5p          9.1p        18.2p 
 -diluted                                     9.5p          9.1p        18.2p 
 
 

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 2019

 
                                                            Half-year   Half-year        Year 
                                                                ended       ended       ended 
                                                             31.12.19    31.12.18    30.06.19 
                                                              GBP'000     GBP'000     GBP'000 
 Non-current assets 
 Property, plant and equipment                                 37,759      36,870      37,449 
 Right of use assets                                            7,103           -           - 
 Intangible assets                                              3,232       3,232       3,232 
 Deferred tax assets                                            3,179       3,267       3,261 
                                                           ----------  ----------  ---------- 
                                                               51,273      43,369      43,942 
                                                           ----------  ----------  ---------- 
 Current assets 
 Inventories                                                   67,180      63,664      69,921 
 Trade and other receivables                                   25,962      26,911      32,816 
 Derivative financial instruments                               1,218         620         372 
 Cash and cash equivalents                                     64,332      62,795      68,664 
                                                           ----------  ----------  ---------- 
                                                              158,692     153,990     171,773 
                                                           ----------  ----------  ---------- 
 
 Total assets                                                 209,965     197,359     215,715 
 
 Current liabilities 
 Trade and other payables                                      50,643      48,930      58,354 
 Derivative financial instruments                                 290         428         684 
 Current income tax liabilities                                   740       4,624       3,419 
 Lease liabilities                                              2,774           -           - 
                                                           ----------  ----------  ---------- 
                                                               54,447      53,982      62,457 
                                                           ----------  ----------  ---------- 
 
 Non-current liabilities 
 Retirement benefit obligations                                19,354      18,491      19,582 
 Other payables                                                   400         475         419 
 Lease liabilities                                              4,480           -           - 
 Preference shares                                                200         200         200 
                                                           ----------  ----------  ---------- 
                                                               24,434      19,166      20,201 
                                                           ----------  ----------  ---------- 
 
 Total liabilities                                             78,881      73,148      82,658 
                                                           ----------  ----------  ---------- 
 
 Net assets                                                   131,084     124,211     133,057 
                                                           ==========  ==========  ========== 
 
 Equity 
 Equity share capital                                          10,407      10,404      10,407 
 Equity share capital (B shares)                                  160         160         160 
                                                           ----------  ----------  ---------- 
                                                               10,567      10,564      10,567 
 Share premium account                                          4,044       3,922       4,044 
 Capital redemption reserve                                     1,174       1,174       1,174 
 Currency translation reserve                                   4,338       5,680       5,265 
 Hedging reserve                                                  225       (130)        (21) 
 Retained earnings                                            110,736     103,001     112,028 
 Total equity attributable to shareholders of the parent      131,084     124,211     133,057 
                                                           ==========  ==========  ========== 
 
 

Consolidated Cash Flow Statement

for the half-year ended 31 December 2019

 
                                                               Half-year           Half-year        Year 
                                                                   ended               ended       ended 
                                                                31.12.19            31.12.18    30.06.19 
                                                                 GBP'000             GBP'000     GBP'000 
 
 Profit for the period                                            19,761              19,002      37,792 
 Income tax expense                                                5,389               5,474      10,484 
                                                              ----------  ------------------  ---------- 
 Profit before income tax                                         25,150              24,476      48,276 
 Finance cost                                                        351                 223         455 
 Finance income                                                    (243)               (171)       (357) 
 Operating profit                                                 25,258              24,528      48,374 
 Depreciation of property, plant & equipment                       1,650               1,558       3,105 
 Depreciation of right of use assets                               1,487                   -           - 
 (Profit)/loss on sale of plant and equipment                        (6)                  24          16 
 Decrease in inventories                                           1,044               7,713       1,449 
 
 Decrease/(increase)in trade and other receivables                 5,685               5,469       (621) 
 (Decrease)/increase in trade and other payables                 (5,657)               (598)       9,033 
 Defined benefit pension scheme service cost                         318                 287         564 
 
 Defined benefit pension scheme employer contributions paid      (1,074)               (643)     (1,780) 
 Change in fair value of financial instruments                     (344)                  89         281 
 Share based payments                                                  7                   5          11 
 Cash inflow from operations                                      28,368              38,432      60,432 
 Interest received                                                   243                 171         357 
 Interest paid                                                     (121)                (13)        (33) 
 Taxation paid                                                   (7,973)             (4,581)    (10,487) 
 Cash inflow from operating activities                            20,517              34,009      50,269 
                                                              ----------  ------------------  ---------- 
 
 
 Purchase of property, plant and equipment                       (2,479)             (2,038)     (4,263) 
 Proceeds from disposal of property, plant and equipment              32                  34         107 
                                                              ----------  ------------------  ---------- 
 Cash outflow from investing activities                          (2,447)             (2,004)     (4,156) 
                                                              ----------  ------------------  ---------- 
 
 
 Lease payments                                                  (1,335)                   -           - 
 Equity dividends paid                                          (20,813)            (20,080)    (28,405) 
 Shares issued                                                         -                 122         247 
                                                              ----------  ------------------  ---------- 
 Cash outflow from financing activities                         (22,148)            (19,958)    (28,158) 
                                                              ----------  ------------------  ---------- 
 
 
 Net (decrease)/increase in cash and cash equivalents            (4,078)              12,047      17,955 
                                                              ----------  ------------------  ---------- 
 
 Effect of exchange differences                                    (254)                  69          30 
 Cash and cash equivalents at start of period                     68,664              50,679      50,679 
 
 Cash and cash equivalents at end of period                       64,332              62,795      68,664 
                                                              ==========  ==================  ========== 
 

Consolidated Statement of Comprehensive Income

for the half-year ended 31 December 2019

 
 
 
                                                         Half-year   Half-year        Year 
                                                             ended       ended       ended 
                                                          31.12.19    31.12.18    30.06.19 
                                                           GBP'000     GBP'000     GBP'000 
 Profit for the period                                      19,761      19,002      37,792 
                                                        ----------  ----------  ---------- 
 
   Other comprehensive income net of tax: 
 
 Remeasurement of the net defined benefit liability          (247)     (3,102)     (4,546) 
 Foreign currency translation differences                    (927)         245       (170) 
 Fair value movements on hedging instruments                   246       (798)       (689) 
 
 
 Other comprehensive income for the period net of tax        (928)     (3,655)     (5,405) 
 
 Total comprehensive income for the period                  18,833      15,347      32,387 
                                                        ==========  ==========  ========== 
 
 Attributable to equity holders of the parent 
                                                            18,833      15,347      32,387 
                                                        ==========  ==========  ========== 
 

Notes to the Interim Results

for the half-year ended 31 December 2019

 
 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 2019, except 
        for the adoption of IFRS16 Leases as explained in note 5. 
 
        The figures for the year ended 30 June 2019 are an abridged statement of the group audited 
        accounts for that year. The financial statements for the year ended 30 June 2019 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 IAS34 
        '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 21.4% (2018: 22.4%). 
 3.    Earnings per share 
 
                                                                        Half-year        Half-year            Year 
                                                                            ended            ended           ended 
                                                                         31.12.19         31.12.18        30.06.19 
                                                                          GBP'000          GBP'000         GBP'000 
 
  Profit for the period                                                    19,761           19,002          37,792 
                                                                  ---------------  ---------------  -------------- 
 
  Weighted average number of shares in issue                          208,131,108      208,031,705     208,071,633 
  Dilution effect of outstanding share options                            152,678           45,378          70,667 
  Diluted weighted average number shares                              208,283,786      208,077,083     208,142,300 
 
  Basic earnings per 5p ordinary share                                       9.5p             9.1p           18.2p 
  Diluted earnings per 5p ordinary share                                     9.5p             9.1p           18.2p 
 
 
 4.    Dividends 
                                                                      Half-year   Half-year        Year 
                                                                          ended       ended       ended 
                                                                       31.12.19    31.12.18    30.06.19 
                                                                        GBP'000     GBP'000     GBP'000 
       Equity dividends paid: 
  Final dividend for the year ended 30 June 2018                              -      20,080      20,080 
  Interim dividend for the year ended 30 June 2019                            -           -       8,325 
       Final dividend for the year ended 30 June 2019                    20,813           -           - 
 
                                                                         20,813      20,080      28,405 
                                                                     ----------  ----------  ---------- 
 
       Equity dividends declared/proposed at the end of the period 
  Interim dividend                                                        4,423       8,325           - 
  Final dividend                                                              -           -      20,813 
 

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

 
       9.65p final dividend for the year ended 30 June 2018, paid on 7 December 2018 
        4.00p interim dividend for the year ended 30 June 2019, paid on 6 June 2019 
        10.00p final dividend for the year ended 30 June 2019, paid on 6 December 2019 
        2.125p 1st interim dividend for the year ended 30 June 2020, payable on 5 June 2020, to those 
        shareholders on the register at the close of business on 11 May 2020 
 5.    New accounting standard IFRS16 Leases 
 
        IFRS16 Leases has replaced IAS17 Leases. The new standard eliminates the distinction between 
        operating and finance leases. All leases are now accounted for on the balance sheet, except 
        for low value leases and short term leases of one year or less. The leases are accounted for 
        by recognising a right of use asset and a lease liability. 
 
        On recognition, the right of use asset and lease liability are measured at the present value 
        of the lease payments discounted over the lease term. The discount rate used is the rate inherent 
        in the lease if this can be determined, or the incremental borrowing rate. 
 
        Subsequent to initial recognition, the right of use assets are depreciated on a straight line 
        basis over the lease term. The lease liabilities are increased by the interest cost and reduced 
        by the lease payments made. A depreciation charge and an interest cost are recognised in the 
        income statement. 
 
        IFRS16 has been adopted with effect from 1 July 2019. On adoption the modified retrospective 
        approach has been applied, such that the right of use assets and lease liabilities are equal 
        to each other, with no adjustment to opening reserves. There is no restatement of the comparative 
        periods. The right of use assets and lease liabilities recognised on adoption at 1 July 2019 
        were GBP8,869,000. 
 
        For the half year ended 31 December 2019 the right of use assets depreciation charge was GBP1,487,000 
        and the lease interest cost was GBP110,000. The adoption of IFRS16 had no significant effect 
        on the profit before income tax for the half year ended 31 December 2019. 
 
 
  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. 
 

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

END

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