TIDMJHD
RNS Number : 4215L
James Halstead PLC
03 October 2016
3 October 2016
JAMES HALSTEAD PLC
PRELIMINARY ANNOUNCEMENT OF AUDITED RESULTS
FOR THE YEARED 30 JUNE 2016
"Export markets underpin profitability"
Key Figures
Revenue at GBP226.1 million (2015: GBP227.3
-- million) - down 0.5%
Profit before tax GBP45.5 million (2015:
-- GBP44.2 million) - up 3%
Earnings per 5p ordinary share of 17p (2015:
-- 16.4p) - up 3.7%
Final dividend per ordinary share proposed
-- of 8.5p (2015: 7.858p) - up 8.2%
Cash inflow from operating activities GBP40.2
-- million (2015: GBP33.7 million) - up 19.2%
Mr Mark Halstead, Chief Executive, commenting on the results,
said:
"Notwithstanding the average exchange rate for the year
impacting adversely on turnover, we have continued to progress and
as exports represent 67% of our business the decline of sterling
post the referendum offers opportunity for further progress."
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
Under the circumstances it is gratifying to report turnover of
GBP226.1 million (2015: GBP227.3 million) as this was affected by
the adverse sterling exchange rate. In constant currency terms
turnover was higher by around 2%. The profit before tax grew some
3% to GBP45.5 million (2015: GBP44.2 million). Of the millions of
square metres of flooring installed in the year a few to note are
The Royal Mint Visitor Centre in Pontyclun, the Central Bank of
Malta, the Fudan University Ophthalmology Hospital in Shanghai and
for "Baggies" fans the new concourse at the Hawthorns is a fine
example of our flooring in use in a high footfall area.
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 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.
The strategy evolves over time, but our focus on sustainable
growth is undiminished.
Dividend
Profit and earnings per share have increased and our cash
reserves remain, as usual, robust.
Cash flow from operating activities is GBP40.2 million and some
19.2% ahead of last year. Our dividends paid in the last year were
some GBP39.9 million, being 90% above the prior year as a result of
another special dividend (GBP16.3 million).
It is pleasing to report that the Board proposes, once again, an
increased final dividend. The final dividend will be 8.5p (2015:
7.858p) representing an 8.2% increase which combined with the
interim dividend, paid in June 2016, of 3.5p (2015: 3.142p) makes a
total of 12.0p (2015: 11.0p) for the year, an increase of 9.1%.
Once again a record level of dividend in our long history.
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. A particular thanks to the Contract Flooring Association
whose members voted us as the "Manufacturer of the Year" for the
third consecutive year and our safety flooring as "Product of the
Year" for the seventh consecutive year.
Outlook
I have every expectation that we will continue in the vein we
have mined so successfully over the last generation. Whether it is
La Casa Rosada (the executive mansion of the President of
Argentina), the Christiaan Barnard Memorial Hospital in Cape Town
or the Guizhou Anshun Hospital in China, Polyflor continues to
cover the world.
Geoffrey Halstead
Chairman
CHIEF EXECUTIVE'S REVIEW
The one hundred and first year of trading has proved to be a
year of two different halves. The first half continuing the
worldwide growth we saw in the early part of 2015 and the latter
showing a distinct slowing down in UK sales whilst exports
continued to expand.
Overall the picture is one of a good result for 2015/16 and our
position as market leader remains unchanged. The malaise in the UK
in the second half has been tangible and might be allied to the
'Brexit' nervousness leading up to the referendum in June. More
certain is that a little publicised cut to the NHS repairs fund
will have affected demand. The 2016 budget reduced the repair fund
by GBP1.1 billion (some 30%) and some of this would have been
allocated to flooring refurbishment.
Our companies operate in different economic environments but our
continued focus is to ensure our products, manufactured by us or
3(rd) parties, are stocked by distributors and sold on to
contractors for either refurbishment or new build projects. Our
sales forces are multi-focused to not only ensure the sale in
volume to stockists, but also to promote sales directly to
end-users in conjunction with contractors, architects or
specifiers. The diversity of installation from Taiwan public buses,
Dunkin Donuts stores in Warsaw and Santiago Bernabéu (the home of
Real Madrid) continues to impress.
Reviewing the businesses in more detail:
Objectflor / Karndean and James Halstead France, our European
operations
Overall, Objectflor increased sales by some 3.7% in a highly
competitive market which was satisfying. Germany is the largest
market for vinyl flooring in Europe and the relative weakness of
the EU marketplace has made all business hard won. To have like for
like growth is commendable though there has been a degree of margin
erosion due to the weakness of the Euro during the year in question
affecting landed cost of product. Inevitably there was a small
(3.5%) dip in profit.
The company saw good growth in rubber flooring and heterogeneous
sheet (manufactured at Teesside) progressed on the back of new
range launches, notably Expona Flow. "Karndean" branded sales of
luxury vinyl tiles have expanded with the demand from retail shop
fitting being solid. We have adopted a policy of attending more
regional trade fairs to meet contractors face-to face and our
attendance at A&W in Lyon, the EXPO in Holzund and VTDN in
Belgium has been positive in gaining new business.
James Halstead France continues to progress with a 12.5%
increase in turnover in the year.
In France we have expanded our sales network and improved our
customer service, the results of which have given us confidence to
continue this investment. Our market share remains, as yet, small
but despite difficult market conditions continues to grow at the
expense of our competitors.
Some of the projects completed last year include Le Bon Marche
in Paris, one of the leading department stores. Indeed, our team in
France won the project to supply flooring to Orange Telecom in
Madagascar, once again illustrating our global connections.
A restructuring of our sales focus in central Europe has seen us
target new market sectors for our products and in conjunction with
new collections continue to attract market interest. In 2015/16
Objectflor has continued to show its strength within Germany and
now also has a solid presence in the rest of Europe.
Examples of our successes are the new Hyundai headquarters in
Belgium, the refurbished Marriott hotels in Rotterdam and Amsterdam
and the Hotel Arora in Croatia. In Germany itself the
Johannisgarten development of over 100 apartments in Erfurt has
been supplied by us.
It is also pleasing to note that the re-launch of our Artigo
range of rubber flooring has been well received.
As a result of the growth in these markets our warehousing has
reached capacity and plans are afoot to invest in an expansion of
this function which will encompass a new enlarged service centre,
showroom and customer training facilities.
In the Benelux, we have revised our sales network and are now
focused on this region as a stand-alone territory in order to
further increase our market share.
Polyflor Pacific - encompassing Australia, New Zealand and
Asia
Polyflor Australia increased turnover by some 7% in the year in
constant currency terms. The adverse translation effect was around
8%
New management in Australia has overseen a total re-evaluation
of this business and throughout 2015/16 the growth in market share
has been a great success, with our sales teams securing many new
projects such as 135 Woolworths stores and 55 Kmart stores. Against
a flat economic backdrop, with a 5% reduction in construction, our
core sales sectors in healthcare, retail and education are moving
against this trend.
Internally we have made logistics changes over the last 18
months which have resulted in discontinued stock standing at less
than 2% of total inventory, a healthy position. In addition, we
have boosted our representation to architects and improved customer
service focus by extending operating hours to support an expansion
of next day delivery. Further customer service gains should ensue
on the re-location of our Victoria warehouse, for which plans are
at an advanced stage.
But despite this year's good results we believe the main rewards
are yet to come and we remain confident that sales and profit will
continue on an upward trend.
In New Zealand sales were 9.4% ahead in constant currency terms.
It is pleasing to report that New Zealand continued its steady
recovery and grew its sales of Polyflor manufactured products which
now comprise far in excess of 50% of New Zealand turnover.
We continue to win projects and with our pending move to new
warehousing in Auckland we anticipate a further year of growth.
Asia by contrast has proved to be a difficult market throughout
the year with margins under pressure. In response we focused on the
basics and the price structure in this large, but competitive
market. Key to this is a focus on core market sectors such as ship
building, healthcare and educational infrastructure projects.
Whilst we continue to win projects, the day to day distribution
business remains difficult to access despite our complete
understanding of customer service that benefits us in many of our
other markets.
Polyflor & Riverside Flooring, based in UK
There was a 0.7% decline in UK turnover. Profit margins held up
due to raw material prices softening and improved plant
productivity at Riverside.
In Radcliffe the latter part of the year saw adverse volumes
(mainly from the UK) leading to over-capacity against our shift
patterns. To a great extent this was also the result of improved
line speed and conversion improvements meaning that the same volume
could be produced with fewer man hours. This led to a period of
short time working and the redundancy of twenty six shop floor
employees, in effect we reduced a whole shift. The reduced volumes
were mainly of homogenous sheet vinyl. Our luxury vinyl tile and
heterogeneous sheet vinyl production continued to grow.
Notwithstanding the challenges our UK profits increased.
Our market share remains unchanged and impressive and during the
year our Voyager Maritime collection (targeted at marine shipping)
was re-launched; our Simplay loose lay luxury vinyl tile collection
was re-vamped; and Polysafe Wood FX (our heterogeneous sheet) was
re-launched with new colours.
Recofloor, our recycling initiative has, once again, received
recognition winning an award for excellence in recycling and waste
management. We now recover and recycle in excess of 500 tonnes of
waste per annum.
Polyflor Nordic comprising Polyflor Norway based in Oslo and
Falck Design based in Sweden
The Scandinavian markets in 2015/16 saw less sales activity than
in the prior year with a 10% shortfall against last year. However,
sales of Polyflor products remained strong and overall on a par
with the previous year. Sourced product sales did not fare so well
in this market, being very much project orientated in a year where
projects were fewer.
The Norwegian market was sluggish and in Sweden projects were
very competitively fought.
Polyflor Canada, based in Toronto
It is pleasing to report on our continuing success as our
business in Canada goes from strength to strength and has
consequently been further supported through increased sales
representation.
The retail sector continues to present new projects and we have
supplied numerous clients of which a few examples are Shoppers Drug
Mark, Indigo and Good Life Fitness with our flooring solutions.
Healthcare and education are also key markets and recent
successes include the Bergeron Centre in York University,
Toronto.
As a result we now have a programme to invest further in
expanding our sales network and service.
Polyflor India, based in Mumbai
We continue to build our structure in India which is still
largely in the formation stage although we have now appointed
dealers in the key cities of Mumbai, Bangalore, Chennai, Hyderabad,
Cochin, Delhi and Kolkata. Our sales team are focused on gaining
specifications for projects in the healthcare, education and retail
sectors. Current projects include Made Easy Primary School in Delhi
and Howards Storage World in Bangalore.
We firmly believe the small team we started the business with
are now starting to prove both themselves and our faith in the
market and we will continue to cautiously expand our representation
across this large territory.
Although projects are being won and sales continue to grow it
will take time before this market delivers the true results we are
aiming for.
Outlook
We continue to have a large market share in the UK but the
curbing of repair and renewal spending by the NHS was very
noticeable in the first two months' trading of the new financial
year. It would seem that refurbishment in the education sector too
has seen reticence in this period, which is uncharacteristic.
However, the UK represents only about a third of the business and
the doubts over the economy in the weeks after the "Brexit"
referendum seem to be lessening.
Moreover, far more important is the positive effect of a
weakened sterling on both the competitiveness of our offering
around the globe and on margins.
I remain optimistic for the coming year.
Mark Halstead
Chief Executive
Audited Consolidated Income Statement
for the year ended 30 June 2016
Year Year
ended ended
30.06.16 30.06.15
GBP'000 GBP'000
Revenue 226,141 227,261
Cost of sales (130,177) (132,453)
----------------- -----------------
Gross profit 95,964 94,808
Selling and distribution costs (41,105) (40,664)
Administration expenses (8,776) (9,424)
Operating profit 46,083 44,720
Finance income 177 198
Finance cost (761) (734)
Profit before income tax 45,499 44,184
Income tax expense (10,243) (10,250)
Profit for the year attributable to equity shareholders 35,256 33,934
----------------- -----------------
Earnings per ordinary share of 5p:
-basic 17.0p 16.4p
-diluted 17.0p 16.3p
All amounts relate to continuing operations.
Audited Consolidated Balance Sheet
as at 30 June 2016
As at As at
30.06.16 30.06.15
GBP'000 GBP'000
Non-current assets
Property, plant and equipment 34,384 31,172
Intangible assets 3,232 3,232
Deferred tax assets 5,129 4,908
---------- -----------
42,745 39,312
---------- -----------
Current assets
Inventories 62,828 58,707
Trade and other receivables 33,820 31,402
Derivative financial instruments 433 2,242
Cash and cash equivalents 44,096 47,428
---------- -----------
141,177 139,779
---------- -----------
Total assets 183,922 179,091
---------- -----------
Current liabilities
Trade and other payables 53,395 48,022
Derivative financial instruments 2,066 8
Current income tax liabilities 4,300 4,814
59,761 52,844
---------- -----------
Non-current liabilities
Retirement benefit obligations 25,431 18,492
Deferred tax liabilities 603 709
Borrowings 200 200
Other payables 460 386
---------- -----------
26,694 19,787
---------- -----------
Total liabilities 86,455 72,631
---------- -----------
Net assets 97,467 106,460
---------- -----------
Equity
Equity share capital 10,374 10,364
Equity share capital (B shares) 160 160
---------- -----------
10,534 10,524
Share premium account 3,096 2,917
Capital redemption reserve 1,174 1,174
Currency translation reserve 4,026 (782)
Hedging reserve (699) 1,427
Retained earnings 79,336 91,200
Total equity attributable to shareholders of the parent 97,467 106,460
---------- -----------
Audited Consolidated Cash Flow Statement
for the year ended 30 June 2016
Year Year
ended ended
30.06.16 30.06.15
GBP'000 GBP'000
Cash inflow from operations 50,325 42,015
Interest received 177 198
Interest paid (43) (48)
Taxation paid (10,220) (8,416)
Cash inflow from operating activities 40,239 33,749
---------- ----------
Purchase of property, plant and equipment (4,842) (3,855)
Proceeds from disposal of property, plant and equipment 200 187
---------- ----------
Cash outflow from investing activities (4,642) (3,668)
---------- ----------
Equity dividends paid (39,867) (21,020)
Shares issued 189 188
Cash outflow from financing activities (39,678) (20,832)
---------- ----------
Net (decrease)/increase in cash and cash equivalents (4,081) 9,249
Effect of exchange differences 749 (498)
Cash and cash equivalents at start of year 47,428 38,677
Cash and cash equivalents at end of year 44,096 47,428
---------- ----------
Audited Consolidated Statement of Comprehensive Income
for the year ended 30 June 2016
Year Year
ended ended
30.06.16 30.06.15
GBP'000 GBP'000
Profit for the year 35,256 33,934
------------------ -----------
Other comprehensive income net of tax
Items that will not be reclassified subsequently to the income statement :
Actuarial loss on the defined benefit pension scheme
Deferred taxation - change of rate (7,360) (2,720)
106 35
------------------ -----------
(7,254) (2,685)
------------------ -----------
Items that could be reclassified subsequently to the income statement:
Foreign currency translation differences 4,808 (3,868)
Fair value movements on hedging instruments (2,126) 1,323
------------------ -----------
2,682 (2,545)
------------------ -----------
Other comprehensive income for the year (4,572) (5,230)
Total comprehensive income for the year 30,684 28,704
================== ===========
Attributable to equity holders of the
Company 30,684 28,704
================== ===========
Items in the statement above are disclosed net of tax.
NOTES
1. The final dividend of 8.5p per ordinary share will be paid, subject to the approval of the
shareholders, on 2 December 2016 to shareholders on the register as at 4 November 2016. The
annual report and accounts will be posted to shareholders on 21 October 2016.
2. The financial information in this statement does not represent the statutory accounts of the
Group. Statutory accounts for the year ended 30 June 2015 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 2016 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
2016 2015
GBP'000 GBP'000
Profit for the year attributable to equity shareholders 35,256 33,934
-------------- --------------
Weighted average number of shares in issue 207,431,307 207,238,042
-------------- --------------
Dilution effect of outstanding share options 473,629 562,584
Diluted weighted average number of shares 207,904,936 207,800,626
-------------- --------------
Basic earnings per ordinary share 17.0p 16.4p
Diluted earnings per ordinary share 17.0p 16.3p
This information is provided by RNS
The company news service from the London Stock Exchange
END
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