Final Results
James Halstead PLC
28 September 2004
28th September 2004
JAMES HALSTEAD PLC
PRELIMINARY ANNOUNCEMENT OF AUDITED RESULTS
FOR THE YEAR ENDED 30 JUNE 2004
Key Figures
• Turnover increased to £104.7 million (2003 : £99.8 million) - up 4.9%.
• Pre-tax profit increased to £24.1 million (2003 : £12.2 million) - up 97%
including an exceptional gain of £10.4 million.
• Pre-tax profit before exceptional gain increased to £13.7 million (2003 :
£12.2 million) - up 12.2%.
• Basic earnings per share increased to 72.2p (2003 : 33.0p) - up 119%.
• Headline earnings per share increased to 38.5p (2003 : 33.6p) - up 14.6%.
• Final dividend per ordinary share proposed at 11.75p (2003 : 10.0p) - up
17.5%.
• Total dividend per ordinary share for the year at 17.75p (2003 : 15.1p) -
up 17.5%.
The Chairman, Geoffrey Halstead, said:
'Once again record sales, record profits and a record dividend. In addition, the
Board will be sending details to shareholders of a proposal to return capital to
the level of £15 million (equivalent to 60p per ordinary share).'
Enquiries:
Mark Halstead, Chief Executive
Gordon Oliver, Finance Director Telephone : 0161 767 2500
Nick Lyon - gcg hudson sandler Telephone : 020 7796 4133
CHAIRMAN'S STATEMENT
(Geoffrey Halstead)
In presenting these record results it is clear that the platform of our
organisation around the world is focused on continuing progress. Sales of
£104.7 million are 4.9% ahead of last year and the profit before tax at £24.1
million is well ahead of last year's £12.2 million. Obviously this includes an
exceptional gain, the profit on the sale of Belstaff International Ltd and
several associated brand names and trademarks. Nevertheless, our underlying
profit after interest but before exceptionals and tax is £13.7 million, a 12.2%
increase over last year.
The achievement of exceeding £100 million turnover for the first time represents
another landmark for the Group. It is worthy of note that whilst education and
healthcare are the primary markets for our flooring products the portfolio has a
much broader appeal. Installations this year range from the Currimundi Hospital
in Queensland, the Victoria Aged Care Village in Ontario and the Gloucester
Hospital in the UK to the likes of the Manilov Restaurant in St Petersburg, the
Tse Sui Luen jewellery chain in China, the Irina Eris beauty salon in Bogata and
the Harley Davidson store in Hong Kong.
Dividend
The Board are proposing a final dividend of 11.75p per ordinary share being an
increase of 17.5% over last year.
Return of capital
Given our healthy position and significant reserves, I am pleased to report that
the Board are also planning to undertake a return of capital of £15 million,
equivalent to 60p per ordinary share. This will require shareholder approval and
we will give full details in a circular that will be sent to shareholders with
the published accounts.
Acknowledgements
The efforts of our global team have played a significant part in our success and
on behalf of the Board I offer my thanks and encouragement for their continued
efforts.
Outlook
James Halstead plc is a significant manufacturer on the world stage for
commercial floorings and, within its sector, is recognised as offering sound
products, effective service levels and good after sales support. This gives me
every confidence that progress will continue into the year ahead.
CHIEF EXECUTIVE'S REPORT
(Mark Halstead)
The results for the year are very good with turnover up 4.9% to £104.7 million
and profits before tax and exceptionals up 12.2% to £13.7 million.The sale of
Belstaff International Ltd and the sale of a number of textile brand names and
trademarks, represents a significant break from part of the Group's history. In
their time Belstaff, and previously Driza Bone and Conway trailers, were good
contributors to Group profit. However, in the last decade, our core focus has
been increasingly on flooring.
The safety flooring ranges under the Polysafe brand name are performing very
well. Our transport sector collection, Voyager, is increasing our customer base
and the volume growth is very encouraging. For example, several thousand buses
in China are fitted with Polysafe flooring and the Forest FX commercial flooring
collection is being very well received. This said, Polyflor XL, XL2000 and the
core collections are still very successful performers in the portfolio.
Competitor activity is, as ever, fierce and prices are routinely under pressure.
In my report last year, I noted pressure on UK manufacturing and our Company
has coped well with this in the financial year. An additional challenge in the
coming year is one of managing increasing raw material costs.
In this Olympic year, our products were installed in over a dozen of the Athens
games venues and facilities, including the Athens Galatsi Stadium of Gymnastics
(Electra), the Piraeus Weightlifting Stadium (Electra), the main Stadium (XL),
the Olympic Stadium of Hellinico (SD) and the Olympic Doping Control Centre
(XL).
Further away, Polyflor Mystique is being laid in a large hospital contract in
Inner Mongolia, whilst nearer to home, one of the newer ranges, Saarfloor
Rubber, was chosen for installation in the Music Centre, Gateshead, which was
designed by acclaimed architects Foster and Partners.
The motorcycle accessory market has had a difficult year, with probably the
worst market conditions since the return of the 'born-again biker' phenomenon a
dozen years ago. Nevertheless, Phoenix made a good contribution to the overall
Group result.
Polyflor (the UK flooring business)
The core flooring business had another solid year of progress. Turnover in all
areas increased: the UK, sales to other Group companies and export markets all
moved forward with a total increase in turnover of 9.2%. Market conditions and
the global low inflation environment precluded price increases even though there
have been cost increases. Notwithstanding this, margins improved as a result of
plant volume efficiencies, product mix and more beneficial exchange rates.
Increasingly the product offering is not just our own manufactured product but
product manufactured to our specification, sourced from overseas. This allows a
broader portfolio to be offered to our customer base. Significant capital
investment in the year on a new extrusion line has resulted in improved
productivity on flooring accessories. We firmly believe that Polyflor maintains
its competitive edge because of its modern plant in the production of sheet
vinyl products. Increased energy costs have been somewhat mitigated late in the
year by the use of gas as an energy source instead of oil which has been our
main source in recent years.
Increasing raw material prices have been a recent feature but we believe
increases in selling prices are not yet appropriate given the market conditions
and to date this has not had a detrimental effect on business. This situation
will be monitored and controlled by the Board as the year progresses.
Objectflor (the central European market)
Central Europe, and Germany in particular, faced a very challenging year.
Overall, the market in Germany was sluggish, but, against this, Objectflor's
performance shows significant improvement. With German turnover showing an
increase of 8% and other Central European markets increasing by a corresponding
amount, it was a satisfactory result all round. Volume growth was apparent in
all major product lines and margin improvement further contributed to the bottom
line. Objectflor's subsidiary company, Karndean, faired particularly well in
sales of luxury vinyl tiles, where this value-for-money range is well received
in many markets.
During the year, plans were drawn up for the construction of a new central
distribution warehouse in Cologne, which should further streamline our
operations in Europe. Building work has recently commenced and the facility
should be opened early in the New Year.
Halstead Flooring (Australia)
Australia improved on last year's growth with a further 12% increase in
turnover. Without the disruption of business relocation, which affected last
year's result, and with the benefit of established point-of-sale material and
better sales co-ordination, the bottom line result was very good.
The management changes noted in last year's report have worked well and the
company is trading satisfactorily.
Halstead Flooring Concepts (New Zealand)
New Zealand faced a difficult year. Turnover increased by 2.2%, but the company
experienced significant problems around the middle of the year. Whilst domestic
flooring sales (particularly carpet and underlay) increased significantly these
ranges were generally at a lower margin than the commercial products. The
market conditions for commercial flooring were, for several months, adverse.
These factors, combined with large increases in internal distribution costs,
meant the company experienced margin erosion.
The Board felt decisive action was needed to correct this situation and
instigated a complete structural review. This led to several redundancies,
including at the highest levels of management. This had the effect of both
reducing costs and focusing the company on the core commercial business. Whilst
profits slipped back significantly, the actions taken have had the effect of
putting profitability back on track by the year end.
Polyflor Hong Kong
Hong Kong leads our sales in many Asian markets and with an 8.7% increase in
turnover the situation is more than satisfactory. Hong Kong, China, Japan,
Malaysia and Singapore all showed good sales growth. It is clear that there were
a large number of commercial projects in the region and we are confident that we
won our fair share of the market.
As a result of the good year for sales, profits have risen. Our team continue to
win significant specification work for our products across the region, though it
would be prudent to recognise that the coming year may see fewer projects
available.
Polyflor Nordic
Norway and Sweden are both operated and managed from Oslo. The Swedish branch
is a new venture this year and results are, to date, below budget and
expectations albeit in the first year of operation. The progress in Norway,
however, continues to be very good with a 25% increase in turnover. The
results, after a move to our new warehouse which is based in a more central
location, have exceeded the planned growth and provided increased profit. The
market continues to offer opportunities for expansion and Polyflor Nordic is
expanding its operations into other Scandinavian countries.
Phoenix Distribution (motorcycle accessories)
In a very difficult year the UK sales were 96% of last year, which is a
creditable performance in view of the market conditions. Profitability has
decreased by 10% but still made a significant contribution to the Group's
result. Tight overhead control was put in place during the financial year, and
a cautious stance taken. Stock levels have risen and will take some months to
come into line with current sales levels, but, in a Group context, the
additional working capital is modest. Structurally, the business remains a
simple distribution organisation and the core brands are very well recognised in
the trade.
The disposal of the Belstaff brands means that the management of Phoenix will no
longer be responsible for design, sourcing and marketing of this range. This
will bring savings to the overhead base of this company.
Whilst any backward movement in business is a cause of some concern, Phoenix
remains financially sound and will be structured commensurate with market
conditions.
Outlook
The sale of Belstaff removes a profit stream of royalties (some £900,000 in the
year) but at the same time frees Board time for the consideration of new
opportunities. Given the strength of our balance sheet, the network of sales
operations and the plans for further investment, including acquisition, I am
confident of continued success.
Audited Consolidated Profit and Loss Account
for the year ended 30 June 2004
2004 2003
£'000 £'000
Turnover 104,703 99,775
Operating profit 13,150 11,792
Exceptional item 10,396 -
Net interest receivable 549 419
Profit on ordinary activities before taxation 24,095 12,211
Taxation on ordinary activities (5,938) (3,646)
Profit on ordinary activities after taxation 18,157 8,565
Dividends (4,487) (3,797)
Retained profit for the year 13,670 4,768
Earnings per ordinary share (as defined in Note 4)
- basic 72.2p 33.0p
- headline 38.5p 33.6p
- diluted 71.7p 32.8p
All the above results derive from continuing operations
Audited Consolidated Balance Sheet
as at 30 June 2004
2004 2003
£'000 £'000
Fixed assets
Intangible assets 2,564 2,737
Tangible assets 18,308 20,331
20,872 23,068
Current assets
Stocks 21,930 21,436
Debtors 18,533 17,639
Cash at bank, in hand and on short-term deposit 37,045 18,956
77,508 58,031
Creditors - amounts falling due within one year (33,302) (27,484)
Net current assets 44,206 30,547
Total assets less current liabilities 65,078 53,615
Creditors - amounts falling due after
more than one year (213) (204)
Provisions for liabilities and charges (1,040) (1,960)
63,825 51,451
Capital and reserves
Equity share capital 2,511 2,543
Non-equity share capital 200 200
Called up share capital 2,711 2,743
Share premium account 5,221 4,442
Revaluation reserve 3,544 3,544
Capital reserve 720 656
Profit and loss account 51,629 40,066
63,825 51,451
Audited Consolidated Cash Flow Statement
for the year ended 30 June 2004
2004 2003
£'000 £'000
Net cash inflow from operating activities 17,383 17,261
Returns on investments and servicing of finance 616 397
Taxation paid (4,262) (3,838)
Capital expenditure (1,346) (1,626)
Acquisitions and disposals 10,828 -
Equity dividends paid (4,014) (3,645)
Cash inflow and financing 19,205 8,549
Financing:
Purchase of own shares (1,883) (3,505)
Shares issued 811 76
Increase in cash 18,133 5,120
Reconciliation of net cash flow to movement
in net funds
Increase in cash 18,133 5,120
Change in net funds resulting from cash flows 18,133 5,120
Effect of exchange differences (44) 81
Movement in net funds for the period 18,089 5,201
Net funds as at 30 June 2003 18,956 13,755
Net funds as at 30 June 2004 37,045 18,956
Statement of Total Recognised Gains and Losses
for the year ended 30 June 2004
2004 2003
£'000 £'000
Profit for the financial year 18,157 8,565
Currency translation differences on
foreign currency net investments (224) 513
Total recognised gains relating to the year 17,933 9,078
Reconciliation of Movements in Shareholders' Funds
for the year ended 30 June 2004
2004 2003
£'000 £'000
Profit for the financial year 18,157 8,565
Dividends (4,487) (3,797)
13,670 4,768
Other recognised gains and losses
relating to the year (224) 513
Purchase of own shares (1,883) (3,505)
New share capital subscribed 811 76
Net increase in shareholders' funds
for the year 12,374 1,852
Opening shareholders' funds 51,451 49,599
Closing shareholders' funds 63,825 51,451
Equity shareholders' funds 63,625 51,251
Non-equity shareholders' funds 200 200
63,825 51,451
NOTES
1. The final dividend of 11.75p per ordinary share will be paid
on 6 December 2004 to shareholders on the register as at 5 November 2004. The
full report and accounts will be posted to shareholders on 1 November 2004.
2. The financial information on pages 9 to 13 does not
represent the statutory accounts of the Group. Statutory accounts for the year
ended 30 June 2003 have been delivered to the Registrar of Companies, carrying
an unqualified audit report and no statement under S.237 (2) or (3) Companies
Act 1985.
3. Statutory accounts for the year ended 30 June 2004 have not
yet been delivered to the Registrar of Companies. They will carry an
unqualified audit report and no statement under S.237 (2) or (3) Companies Act
1985.
4. Calculation of earnings per ordinary share
2004 2003
£'000 £'000
Profit on ordinary activities after
taxation 18,157 8,565
Preference dividend (11) (11)
Net earnings 18,146 8,554
Goodwill amortisation charge 173 172
Exceptional item (after taxation) (8,637) -
Headline earnings 9,682 8,726
Weighted average number of ordinary
shares in issue 25,137,174 25,960,207
Weighted average number of ordinary
shares in issue (diluted for the 25,293,497 26,083,850
effect of outstanding share options)
Basic earnings per ordinary share 72.2p 33.0p
Headline earnings per ordinary share 38.5p 33.6p
Diluted earnings per ordinary share 71.7p 32.8p
This information is provided by RNS
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