Final Results
James Halstead PLC
01 October 2007
1 October 2007
JAMES HALSTEAD PLC
PRELIMINARY ANNOUNCEMENT OF AUDITED RESULTS
FOR THE YEAR ENDED 30 JUNE 2007
Key Figures
• Turnover increased to £142.9 million (2006: £126 million) - up 13%
• Pre tax profit increased to £23.3 million (2006: £17.48 million) - up 33%
• Final dividend per ordinary share proposed of 11.25p ( 2006 : 8p) - up 41%
• Underlying earnings per 5p ordinary share 31.2p (2006: 23.8p) - up 31%
The Chief Executive, Mark Halstead, said:
'This year was the most successful in the Group's history. Overall, having
regard to the operations we have around the globe, I am confident that our
progress can be consolidated in the current year and beyond.'
Enquiries:
Mark Halstead, Chief Executive
Gordon Oliver, Finance Director Telephone: 0161 767 2500
Nick Lyon - Hudson Sandler Telephone: 020 7796 4133
CHAIRMAN'S STATEMENT
The results for the year to 30 June 2007 show the highest sales and profit ever
reported by the Group, with sales levels achieved being £142.9 million (2006 :
£126.0 million), an increase of 13.4%. Profit before taxation is £23.3 million
(2006 : £17.5 million) which is 33% above last year. I believe that these
results are commendable and reflect our simple approach of sourcing and
producing the right products, effectively servicing our customers' needs,
defending our market position and maintaining our reputation and credibility for
the future. Our technical knowledge and worldwide industry recognised expertise
continue to keep our products on the short list of choice for commercial
flooring installations in a vast array of projects around the world.
As usual our year featured many interesting flooring projects that are keenly
contested and attract attention. This year we have supplied product to the
Grand Egyptian Museum in Giza, dubbed the 'fourth pyramid'.
Our Chinese sales office also secured the largest single hospital building
project of 2007, the Chongqing South West Hospital.
In addition, closer to home our computerised design service, using water jet
cutting, is producing flooring inserts to highlight Manchester Hope Hospital's
initiative to combat MRSA in an innovative use of our in-house facilities.
Dividend
The Board proposes to increase the final dividend to 11.25p (2006 : 8p) an
increase of 40.6%.
Acknowledgements
All of our companies succeeded in meeting the challenges of very diverse market
conditions across the globe to make progress and on behalf of the Board I
commend their achievements and extend our thanks to all involved.
In April 2007 the Group gained recognition by receiving the Queen's Award for
Enterprise in the category of innovation and continuous development. This was
in respect of our market leading Polysafe range of slip resistant flooring and
followed the Queen's Award in 2006 for international trade. I believe these
awards recognise years of effort and hard work by our workforce.
I would like, specifically, to acknowledge the significant contribution to the
business of Mr John Kay who has retired as the Technical Director of Polyflor
Ltd after over thirty five years' service with the company. His expertise will
not be lost as he will continue to act as a consultant on special projects.
Outlook
The drive onward has not become easier, but in taking stock of the Group at the
present point in time we are in good standing. Compared to our competitors our
turnover is relatively modest, and on the global scale of flooring there is
market share to be gained.
There are initiatives in place to move us forward and whilst there are, as ever,
challenges in the marketplace and strong competition, we look forward, with
every confidence, to building upon this year's growth.
Geoffrey Halstead, Chairman
CHIEF EXECUTIVE'S REPORT
In the past year sales growth of 13.4% resulted in record turnover of £142.9
million (2006 : £126.0 million). This growth in turnover was the key driver in
increasing profit before tax to £23.3 million (2006 : £17.48 million), up by
over 33% on the previous year.
Turnover was ahead in all geographic areas. UK turnover increased by 10.5%,
European turnover by 13.8%, Australasian turnover by 17.3% and the other
overseas markets (including North America) progressed by 27%. Our international
sales overall achieved £80.8 million (2006 : £69.7 million), an increase of just
under 16%.
Whilst there were some markets reporting less than double digit growth, it is
encouraging that our product offering and our strategy were effective from
Norway to Australia and from Canada to China.
The increasing levels of product sourced from third party/joint venture
operations have, this year, as in recent years, offset some of the increased
cost of UK manufacturing. They form a significant proportion of sales in many of
our principal markets. It is important to note that, in the main, these are not
proprietary factored products, but are designed, tested and trialled by James
Halstead. Our technical and support expertise was historically dedicated to our
Manchester manufacturing operation, but has been and will be additionally
focused on James Halstead branded, out-sourced products, since we demand that
these must meet the high standards established over many years in the UK.
Patenting, branding and ownership of intellectual rights plus fifty years of
expertise underpin the confidence of our customers in 'James Halstead' flooring
products, which, like our company logo, bear our founder's signature.
There were significant currency movements during the year and whilst diligent
hedging of transactions was, as usual, in place, market movements inevitably
affected results. The weak US dollar affected sales margins, not only in the
USA, but in many of the Far Eastern markets whose currencies tend to mirror its
movements. Benefits gained from purchases made in US dollars and favourable
movements on exports in other currencies to a large degree mitigated these
effects.
Polyflor, the UK based operation
Our active sales representatives support local distributors throughout the UK
and globally, working on specifications and projects from inception to
installation in a very wide range of applications. The variety of installations
was perhaps best illustrated when recently our Voyager Marine product was used
on the '50 Let Pobedy', a 25,000 tonne nuclear powered Russian ice breaker able
to break ice up to 2.8 metres thick.
Turnover in the year increased in the UK, to overseas subsidiaries and most
particularly in third party export markets. Almost all direct export markets
showed good growth, and all significant markets were well ahead of last year.
North America has historically presented a challenge for Polyflor, but the
current year has shown very good results. In the USA sales are 60% ahead of last
year with Polyflor homogeneous flooring supplied to a number of important
hospitals. In addition, Polyflor supplied luxury vinyl tiles for installation in
some of North America's largest retail chain stores including 'Rite-Aid' and '
Bed, Bath and Beyond'.
Sales to the Mediterranean region are also worthy of mention with the countries
surrounding the Mediterranean having become some of our largest third party
export markets. Particularly pleasing were the results of a change in
distribution in Turkey, where our new representative has really shown what can
be achieved in this market within a very short time frame.
Sales growth in the UK has been solid, and some 10% ahead of last year. The mix
of product was favourable, with good growth in the higher added value products
such as luxury vinyl tile, heterogeneous product and safety flooring. Polyflor
are now the only UK manufacturer of homogenous vinyl flooring and though this
gives the logistical advantage of being local it does mean that the factory must
continue to improve productivity as competitors move to lower labour cost
countries. It is true to say that a significant part of the growth in sales
emanating from Polyflor has come from Halstead branded products and this is a
trend that seems set to continue.
Manchester manufactured volumes increased by over 6%, which is encouraging, and
this increase in output helped to offset margin erosion resulting from our
inability to raise selling prices whilst facing increased costs. During the year
there was no respite from high raw material prices and little relief from
increased energy costs, but increased sales volumes, the benefit of product mix
and the increased level of James Halstead branded products avoided margin
erosion. The increased sales volume has meant that the logistics and
distribution functions of the company have also been developed to handle the
greater volumes. We continue to work with our local authority on site
developments for the future.
During the last twelve months there have been several product launches, for
example Bevel Line Wood, a luxury vinyl tile, Gallery FX Acoustic and Forest FX
Acoustic flooring, which are particularly suitable for affordable and social
housing, 'Sport 67' and 'Sport 80' flooring, aimed at the UK secondary school
rebuild programme, together with Polysafe Strata and new colours for Polyflor
2000 PUR. Each of these is targeted at our core markets in the UK where our
market share continues to be supported with strong initiatives and a portfolio
of products focused on end user requirements.
The strong focus in the UK on initiatives to combat the recent rise in
infections such as MRSA and E-Coli emphasises the extremely powerful case for
the use of homogenous sheet vinyl, providing no sanctuary for dirt and bacteria,
in healthcare establishments. For example Polyflor's Mystique PUR is installed
in the wards and corridors of Reading's Royal Berkshire hospital and our
products are in use throughout Alder Hey Hospital in Liverpool. For many years
the ease of maintenance and cleanability of our ranges have made them the best
flooring solution for almost every conceivable area within a hospital. Our
research and development ensures that our products continue to maintain their
superiority over the alternatives.
The Polyflor campaign, '4 steps to safety', is the largest communication
campaign we have ever undertaken with UK architects. It seeks to be balanced and
educational about slip management and, we feel, underlines our position as the
clear market leading brand, emphasising and reinforcing the Polysafe reputation
for credibility and trust. A new initiative to raise the profile of slip
resistant flooring in Germany has commenced with the German trade press visiting
the UK to learn more about the UK market, which leads the world in sustainable
slip resistant flooring.
It has been especially pleasing that the upgrades to the Polysafe line,
installed to deliver greater capacity and, potentially, new products, was
commissioned without any disruption to our day to day safety flooring business.
In April 2007 the Polysafe range was awarded the Queen's Award for innovation
and continuous product development.
Our training facility in Manchester, noted last year, has been opened and will
not only showcase our work but be a working facility to train new floor layers
hopefully combating skills shortages in our industry. I see this as an
important initiative for our industry and have confidence that its cost will be
justified.
New product development is a key priority to enable us to maintain growth, enter
new market sectors and maximise plant utilisation in all areas of our
manufacturing units. Furthermore, we will need to continue to ensure that our
service levels match the requirements of a growing business, and our customers,
who have delivered this growth, continue to be provided with an excellent
product backed up with outstanding service levels.
Objectflor Art & Design, and Karndean International GmbH, our German based
operations
The year to June 2007 was Objectflor's most successful to date. Turnover
increased by nearly 16%. As the year progressed, it was clear that a more
confident economic environment increased business despite intense competitive
pressure which was a feature of the whole year. The German business is solid in
terms of turnover and profitability and is a significant player in the world's
foremost vinyl flooring market.
The initiative noted earlier to raise the profile of safety flooring is being
well reported and received in Germany and Central Europe. It is clear that
lobbying and presenting to decision makers professionally and in detail is
enhancing trading opportunities in the long term.
Two new updated collections were also launched during this business year.
Performa, our homogeneous range, was received throughout the market with great
interest, and the new collection, launched in January of this year, has raised
the profile of our homogeneous business. In addition, the Expona Domestic
Collection was revitalised and consolidated this brand's status as one of the
most successful luxury vinyl tile range in the German market. We believe that
both businesses increased their market share in Germany and in the neighbouring
countries.
In addition to servicing day to day demand this level of growth was achieved by
the sales force securing important projects against our competition - such as
Mechelen Hospital and IKEA, Dusseldorf.
Some of the reasons for the successful result of our German based operations in
the past financial year are: improved stock levels in the market place, a
stable, experienced and motivated staff combined with outstanding training
schools for customers, providing not only installation training but in addition,
training in sales techniques. Underlying these factors we have very clear sales
concepts and consistent implementation in each of the Central European markets
that the companies service.
It is clear that the strong sales growth in Germany and the surrounding markets
will require additional warehousing and plans for further expansion are at an
advanced stage.
The German market is one of the most developed markets for vinyl flooring in the
world and our success in this market continues with attention to product range
and design that will be crucial to further expansion. Both businesses are well
placed and well structured for continued progress.
Polyflor Nordic, comprising Polyflor Norway, based in Oslo and Falck Design
based in Gothenburg
2006/07 has been a year of significant growth for the Scandinavian region.
Falck Design, our business in Sweden, acquired three years ago, has grown
strongly with turnover very significantly ahead of the previous year. The newly
designed Megastrong range of luxury vinyl tiles was re-launched during the year
and the product offering has been augmented by adding the Polyflor range into
markets where our products were previously under-represented. During the year
Falck confirmed distributor arrangements with local parties to ensure that
products were more readily available ex-stock. This process is on-going and the
prospect for increasing market share in Sweden is particularly good.
In the Norwegian market, where we have been longer established, this was another
year of growth which saw our strong position in this market place maintained and
expanded. Overall our ranges saw significant growth and the company made gains
in market share with sales of rubber floor coverings being particularly
encouraging.
Polyflor Pacific, encompassing our businesses in Australia and New Zealand
The year saw the reorganisation of the Pacific Region bringing Australia, New
Zealand and peripheral markets under a single management structure. This
provides synergy between the Australian and New Zealand businesses, with the
benefits having an encouraging impact over the course of the year.
The Australian business reported a 16% increase in turnover over the previous
year with growth in all States and as a consequence profit moved strongly ahead.
During the year there was significant focus on logistics and on delivering added
value following recent investment in operating systems. An Operations business
team was established with resultant improvements in stock holding and stock turn
which improved cash flow and customer service.
The sales growth not only came from recent product launches, most significantly
luxury vinyl tile, but also the sales in Polyflor sheet vinyl which showed
double digit volume growth on the previous year.
As well as ensuring product availability and maintaining customer service the
company continued with successful marketing initiatives such as the prestigious
Polyflor Highflyers awards.
The Melbourne Cup is a high profile sporting event in Australia and our company
has supplied flooring to the 'Bird Cage Restaurant' overlooking the famous
Flemington Racecourse at this legendary venue. Whilst our day to day business
is more mundane these prestigious installations enhance the profile of the
product offering.
The year also saw the introduction by the Australian business of the Kiesel
range of cementitious screeds and adhesives which have been sold in Europe for
many years but were sourced for the first time by the Australian business, and
have taken significant market share in their first year in the market. This not
only increases sales but, just as importantly, means that the company can offer
a total flooring package to its customers.
The New Zealand business recovered after a slow start to record improved
turnover, up 4% on the previous year. The centralisation of some administration
functions and an improved sales mix contributed to a healthier net profit than
the prior year. Major changes were also made to improve focus on customer
service. Whilst maintaining a full sales presence in the area, our Wellington
warehouse was closed and we plan to expand the Christchurch and Auckland
warehouse operations. At the same time there was a radical consolidation of the
carpet portfolio to a smaller, more focused range of products. This enables the
business to present a more balanced branded flooring products range and to give
focus to the core ranges of James Halstead and, most particularly, Forbo branded
products.
From the 1 August 2007 the New Zealand company changed its name to James
Halstead Flooring New Zealand to emphasise its affiliation to the parent and its
multi-brand credentials, as a major distributor of flooring products.
The Sky Tower in Auckland looms over the city and again is fitted with products
supplied by ourselves.
Polyflor Hong Kong, sales office for Asian and Far East Markets
We have a significant presence in Asia and during the year there was modest
sales growth in the region reflecting the effect of a very weak US Dollar, this
being the currency of trade in most Asian markets. Polyflor continued to be
short listed and to be specified in diverse government and private building
projects across China, in the face of very strong competition. The diversity is
illustrated by the examples of the Beijing Rolex Customer Service Centre, which
will repair, locally, luxury watches, and the Chinese People's Liberation Army
Shenyang Military Area Command Headquarters.
During the year we have built up local stock holding on mainland China to
service and support a wider distribution base which has increased local
day-to-day business. In addition, one of the major European manufacturers has
opened a manufacturing facility in China but we continue to be competitive with
our UK manufacturing capabilities in which we have invested heavily in over the
years.
With lower price point products it seems clear that basic homogenous vinyl is
becoming a commodity product but increasingly we look to specify and supply
higher value products, such as the Polysafe range, which offers added benefits
and more unique selling features to a marketplace that is ever more
sophisticated.
Phoenix Distribution, based in Stoke-on-Trent, distributor of motorcycle
accessories
The strategy of focusing on the core Arai business, commenced eighteen months
ago, has been successful. New motorcycle sales, as evidenced by registration
statistics, have been static and despite the sluggishness in the accessories
market Phoenix has performed exceptionally well. Arai motorcycle helmet sales
have increased by 14% year on year, Abus motorcycle locks, introduced in 2006,
showed continued growth and other brands (Yoshimura, Kappa, Fog City, Pinlock
and Shift It) have all performed steadily in a depressed market.
Phoenix was appointed the UK Arai car helmet distributor in January 2007. This
specialised market, although smaller than the motorcycle market, opens up many
new exciting sales opportunities and ties in nicely with their public relations
and promotional activities with high profile racing drivers such as Lewis
Hamilton, Fernando Alonso, Jensen Button and David Coulthard, all using the Arai
product.
Sales activities are focused through the Arai 'Five Star' retailer concept which
has proved its value, and a strong network of premier dealers add strength and
depth to the brand; each of these dealers has staff fully trained by Phoenix and
have detailed technical knowledge to underline the difference between cheaper
brands that use marketing to create an image of race performance and Arai which
is a race led brand.
Given the market conditions and the very wet summer, tight control of working
capital has been a key task but there has also been a very significant
improvement in bottom line performance. In 2008 we look forward to additional
helmet standards coming into force which will affect the UK helmet market and,
hopefully, make it clearer to the customer how important it is to invest in a
high quality product, such as Arai, that far exceeds the basic European Standard
for motorcycle helmets. The input of ideas and cross fertilisation of concepts
with our much larger flooring operations are, over time, beneficial.
Environment
In the UK, as a manufacturer and supplier, we continue to issue a regular
environmental report. We continue to see this as one of the criteria a
responsible manufacturer should meet. We continue to support our EN 14001
accreditation and some of the key achievements are: ongoing reduction in energy
usage (down 20% over the last five years), reduction in wet and dry waste (down
over 23% in the last year) and ongoing initiatives to increase the use of
post-consumer waste and recycled content.
Looking Forward
This year was the most successful in our Group's history. New production
equipment was installed to upgrade our facilities in Manchester, and new
distribution facilities were added in key areas. The volume of product
manufactured in Manchester has risen but price pressure is constant. There is no
doubt that out-sourcing additional James Halstead branded product is a major
part of our activities and will continue.
In recent years sales price increases have been, in many markets, precluded by
volume-driven competitors offering ever more price incentives. The year ahead
shows signs of inflationary pressures and in certain areas selling prices will
need to reflect these pressures.
Some initiatives envisaged may detract from short term profit opportunities but
as the Group approaches its centenary we must look to the future.
Overall, having regard to the operations we have around the globe I am confident
that this excellent year can be consolidated in the next year and look forward
to further progress. I and the Board have a proud regard for our long history
of dividend growth and see this as the bulwark of a strategy of delivering
shareholder value.
Mark Halstead, Chief Executive
FINANCIAL DIRECTORS REPORT
I preface my report by noting that these accounts have been prepared in
accordance with generally accepted accounting principles, using accounting
policies which the directors consider are appropriate to give a true and fair
view. The directors do not take their responsibility in presenting the accounts
lightly and the fundamental principles of going concern, matching of costs and
revenues, consistency and prudence, are the basis for their policies.
Profit before tax at £23.3 million (2006: £17.5 million) shows an increase of
33% despite high raw material and energy costs. Some of the key statistics are:
• Group turnover at £142.9 million (2006: £126 million) up 13%
• Underlying earnings per share at 31.2p (2006: 23.8p) up 31%
• Dividends at 16.50p (2006: 12.25p) up 34.7%, being interim paid May 2007
and final proposed December 2007
• Trade debtors at £18.8 million (2006: £18.4 million) up 2%
• Net cash at £22.8 million (2006: £30 million), despite spending £15.3
million on the special dividend
During the year we returned cash of £15.3 million to shareholders by way of a
special dividend of 30p per ordinary share. The final proposed dividend
represents the 31st year of dividend increases.
Defined Benefit Pension Scheme
In recent years the final salary scheme has become an area of increasing work,
partly the result of the growing cost of the provision of this type of pension
and partly the increasing legislative environment.
The final salary scheme was closed to new members some years ago and a new
defined contribution scheme introduced. This has not meant that the issues
associated with the original scheme have lessened, merely that they are not
compounded.
I noted last year that several changes were made to the final salary scheme,
effectively reducing future benefit accrual for individual members (with reduced
contributions from the employee but not the employer). To date these changes
have mitigated the increased cost of the scheme to the group. Individual
employees can choose to augment their future benefits by way of personal
contributions to the group's defined contribution scheme.
The full accounts will detail the FRS 17 analysis of the scheme and whilst this
seems to be the main focus of attention for analysts and shareholders, it gives
only a snapshot of the scheme and the creditor in the balance sheet is very
fluid. It is sensitive to gilt yields and other assumptions and is at best a
rough guide to the ongoing liability. Certainly it falls well short of a '
buy-out' figure.
It is important to appreciate that whilst the scheme is closed to new members
and future accrual rates for benefits have been reduced, the liabilities of the
scheme are not capped but will continue to be determined not just by investment
returns but also by longevity of pensioners. It is worth noting the decline in
the FRS 17 deficit despite all this, but as many of the factors that dictate
this figure are outside the group's control the issue remains under close
scrutiny.
The group will adopt International Financial Reporting Standards ('IFRS') for
the first time in its annual report for the year ending 30 June 2008.
Consequently the group's interim results for the six months to 31 December 2007
will be presented under IFRS.
All UK employees are offered, by way of gift, share participation. This
reflects the longer-term objective of rewarding employees for the success of the
Group. Rewarding employees by way of shares has extended the shareholder base
and a significant number of employees retain shares. Allocation is on various
criteria but heavily biased to length of service
Cash inflow from operating activities remained strong at £26.3 million (2006:
£25.1 million).The overall decrease in cash of £7.3 million is after net capital
expenditure of £3.3 million, payment of taxation and dividends (including the
special dividend) less interest of £29.3 million and the repayment of borrowings
of £1.5 million. £0.5 million was received from share issues. The net funds
(cash net of loans and preference shares classed as borrowings under FRS 25) at
£19.9 million (2006: £25.6 million) show a healthy ungeared position.
The overall decrease in net assets is £1.4 million with the increase from
profits after tax and ordinary dividends of £8.9 million and exchange movements,
actuarial gains (net of deferred tax) and share issues of £5.0 million being
offset by the effects of the special dividend of £15.3 million. Net assets per
ordinary share decreased to 79.5p (2006: 82.6p). However to give a fair
comparison, the 2006 figure should be adjusted to 52.6p to reflect the 30p per
share special dividend.
Treasury
The group's UK cash and bank balances are managed centrally at the group's head
office. As a norm, the group makes use of foreign currency bank balances and
fixed forward exchange contracts rather than more exotic financial derivatives
in managing its currency exposures. Foreign currency bank accounts are operated
in all major currencies in which the group's UK subsidiaries have transactional
exposures. Balances on these accounts are monitored daily.
Where appropriate, overseas subsidiaries have borrowing facilities with their
local banks. At 30 June 2007 all overseas subsidiaries had positive bank
balances.
The group has significant transactional exposures relating to both sales and
purchases denominated in foreign currencies. In particular it is the group's
stated policy to undertake much of its export trade in local currency. This
works to our advantage by ensuring the sales volume does not fluctuate as a
result of exchange rate movements and removes risks from our trading partners.
The level of forward cover in place is reported to the group board on a regular
basis.
Overall, our approach to treasury management is to identify appropriate
instruments to facilitate the group's trading activities, and to be risk averse.
There is no intention to trade in financial instruments or for the group
treasury department to act as a profit centre in its own right and,
consequently, 'speculative' instruments and practices are avoided.
Key Performance Indicators
The group's subsidiaries are measured against detailed budgets and prior year
comparatives. Monthly reports to the group executive directors and senior
management are required from their function directors.
In terms of key performance indicators for the group as a whole the board
considers growth in profit before tax and growth in dividend levels to be of
most importance. Since increase in the former is heavily linked to growth in
turnover, close attention at main board level is given to sales strategies,
product mix and gross margin.
Dividend payments require sales to be translated into cash, and control of
working capital is closely monitored. Levels of stock, debtors and creditors are
collated and reported to the board on a monthly basis. Our focus is on stock
availability, stock turn and appropriate credit being given to and received from
our customers and suppliers respectively, rather than performance indicators
associated with cash flow directly.
No individual key performance indicator is regarded so highly that it can
replace the informed background knowledge, at board level, of our individual
businesses, which underpins the way our group is managed.
The board seeks to give an informative business review, but remains conscious
that the group's competitors do not offer significant disclosure of their
individual key performance indicators. The board remains reluctant to publish
key statistics which may lead to loss of competitive advantage.
The nature of key performance indicators is information and given the complexity
of large scale manufacture many indicators are non-ratio or statistically based
and are assessed on absolute monetary cost to the group. Cost of 'sick pay' in
manufacturing can and does attract more attention than product margin in many
cases, as indeed can corporate entertaining, customer complaints, employee
liability claims and consultancy fees.
Principal Business Risks and Uncertainties
The ongoing nature of a business such as ours dictates that the board both
understands the nature of the business and its direction. I would like to
underline the importance of detailed strategic board meetings held regularly at
Group and subsidiary level. The board constantly assesses risks. To the extent
risk is insurable the board is risk averse and is widely insured.
The board is of the belief that internal control, risk management and
stewardship are linked and inseparable. Whilst principally risk and control are
measured and assessed from a financial prospective, this is not to the exclusion
of non-financial risks and uncertainties.
A comprehensive insurance appraisal takes place annually to mitigate risk
exposures to business interruption, fire, etc. but obviously key risks such as
escalating raw material prices and energy costs fall outside any insurable
event. There are key customers and key suppliers which create dependencies.
Sales and purchasing policies are under regular review to assess these
dependencies.
It is clear that scenarios can be envisaged where the group's activities may be
disrupted and little could be done to mitigate the negative effects.
In Conclusion
The nature of our annual report is to give information and demonstrate
accountability to our owners. The board's role is also to fulfil the
obligations of stewardship and to maintain and defend shareholder value. There
is a vast increase in prescribed disclosure and a lengthening of the annual
report which has the potential to detract from the core objectives, profit,
dividend and growth. The Board welcomes shareholder views on this matter
Gordon Oliver, Finance Director
Accounting Standards and Prior Year Adjustments
There is one new Financial Reporting Standard which has an effect on these
accounts. FRS 20 - Share Based Payment, requires the inclusion of a charge to
the profit and loss account in respect of share options granted to employees.
This charge, spread over the vesting period, is based on the fair value of the
option at the date of grant.
There is no adjustment to the results of prior years in respect of the adoption
of this accounting standard since the effects are immaterial.
Audited Consolidated Profit and Loss Account
for the year ended 30 June 2007
2007 2006
£'000 £'000
Turnover 142,948 126,024
Operating profit 22,452 16,567
Interest and other finance costs 856 914
Profit on ordinary activities before taxation 23,308 17,481
Taxation on ordinary activities (7,657) (5,647)
Profit on ordinary activities after taxation 15,651 11,834
Earnings per ordinary share (as defined in Note 4)
-basic earnings per ordinary share 30.7p 23.3p
-diluted earnings per ordinary share 30.5p 23.2p
All the above results derive from continuing operations.
Audited Consolidated Balance Sheet
as at 30 June 2007
2007 2006
£'000 £'000
Fixed assets
Intangible assets 3,004 3,232
Tangible assets 18,334 18,687
21,338 21,919
Current assets
Stocks 23,899 19,770
Debtors 22,511 21,093
Cash at bank, in hand and on short-term deposit 22,756 30,050
69,166 70,913
Creditors - amounts falling due within one year (44,880) (37,685)
Net current assets 24,286 33,228
Total assets less current liabilities 45,624 55,147
Creditors - amounts falling due after more than one year (506) (4,441)
Net assets excluding pension scheme deficit 45,118 50,706
Pension scheme deficit (4,502) (8,681)
40,616 42,025
Capital and reserves
Equity share capital 2,555 2,543
Equity share capital (B shares) 160 160
Called up share capital 2,715 2,703
Share premium account 803 321
Revaluation reserve 3,544 3,544
Capital redemption reserve 3,626 3,449
Profit and loss account 29,928 32,008
40,616 42,025
Audited Consolidated Cash Flow Statement
for the year ended 30 June 2007
2007 2006
£'000 £'000
Net cash inflow from operating activities 26,309 25,130
Returns on investments and servicing of finance 945 856
Taxation paid (8,182) (6,866)
Capital expenditure (3,289) (1,035)
Equity dividends paid (22,013) (18,113)
Cash outflow before financing (6,230) (28)
Financing:
Shares issued 494 285
Decrease in debt (1,539) (1,794)
Decrease in cash (7,275) (1,537)
Reconciliation of net cash flow to movement in net funds
Decrease in cash (7,275) (1,537)
Movement in debt 1,539 1,794
Change in net funds resulting from cash flows (5,736) 257
Effect of exchange differences 18 (151)
Movement in net funds for the period (5,718) 106
Net funds at start of year 25,621 25,515
Net funds at end of year 19,903 25,621
Statement of Total Recognised Gains and Losses
for the year ended 30 June 2007
2007 2006
£'000 £'000
Profit for the financial year 15,651 11,834
Currency translation differences on foreign currency net investments 284 (438)
Actuarial gain on the pension scheme 5,943 1,546
Movement on deferred tax asset relating to the pension scheme (1,783) (464)
Total recognised gains relating to the year 20,095 12,478
Prior year adjustment (implementation of FRS 17) - (9,790)
Total recognised gains since the last report 20,095 2,688
Reconciliation of Movements in Shareholders' Funds
for the year ended 30 June 2007
2007 2006
£'000 £'000
Profit for the financial year 15,651 11,834
Equity dividends paid (22,013) (18,113)
(6,362) (6,279)
Other recognised gains and losses relating to the financial year 4,444 644
FRS 20 share option charge 15 -
New share capital subscribed 494 285
Net decrease in shareholders' funds for the year (1,409) (5,350)
Opening equity shareholders' funds 42,025 47,375
(at 1 July 2005 originally £57,475,000 before prior year adjustments of
£10,100,000)
Closing equity shareholders' funds 40,616 42,025
NOTES
1. The final dividend of 11.25p per ordinary share will be paid
on 7 December 2007 to shareholders on the register as at 9 November 2007. The
full report and accounts will be posted to shareholders on 29 October 2007.
2. The financial information on pages 15 to 20 does not
represent the statutory accounts of the Group. Statutory accounts for the year
ended 30 June 2006 have been delivered to the Registrar of Companies, carrying
an unqualified audit report and no statement under section 237 (2) or (3) of the
Companies Act 1985.
3. Statutory accounts for the year ended 30 June 2007 have not
yet been delivered to the Registrar of Companies. They will carry an
unqualified audit report and no statement under section 237 (2) or (3) of the
Companies Act 1985.
4. Calculation of earnings per ordinary share
2007 2006
£'000 £'000
Basic earnings 15,651 11,834
Goodwill amortisation charge 228 228
Underlying earnings 15,879 12,062
Weighted average number of ordinary shares in issue 50,897,640 50,764,031
Weighted average number of ordinary shares in issue 51,273,344 51,008,831
(diluted for the effect of outstanding share options)
Basic earnings per ordinary share 30.7p 23.3p
Underlying earnings per ordinary share 31.2p 23.8p
Diluted earnings per ordinary share 30.5p 23.2p
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