Final Results

James Halstead PLC 04 October 2005 4th October 2005 JAMES HALSTEAD PLC PRELIMINARY ANNOUNCEMENT OF AUDITED RESULTS FOR THE YEAR ENDED 30 JUNE 2005 Key Figures • Turnover increased to £112.4 million (2004: £104.7 million) - up 7.4% • Like for like pre tax profit (before the 2004 exceptional gains) increased to £13.8 million (2004: £12.8 million excluding £0.9 million royalty income relating to 2004 exceptional gain) - up 7.8% • Total dividend per ordinary share for the year at 19.75p (2004: 17.75p) - up 11.3% • Underlying earnings per share (before 2004 exceptional gains and excluding 2004 associated royalty income) 38.5p (2004: 34.9p) - up 10.3% The Chairman, Geoffrey Halstead, said: 'A year of progress, and we are confident that the Group is well placed to continue to profit from commercial flooring opportunities'. 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 show a profit before taxation of £13.8 million, compared with £13.7 million in 2004, (excluding the exceptional gains of £10.4 million) - another record result. I would also point out that the comparative figure for last year included £0.9 million of royalty income which ceased on the disposal of Belstaff International. Therefore, like for like, profit before tax is £13.8 million against £12.8 million for 2004. Sales activities of the Group also achieved record levels at £112.4 million (2004: £104.7 million). Given the climate of substantial increases in raw material prices and energy costs I, and the Board, feel this is a creditable performance. Dividend The Board proposes a final dividend of 12.75p per ordinary share, making the total dividend for the year 19.75p, an increase of 11.3%. In addition, the return of capital announced last year of 60 pence per share was approved at the Extraordinary General Meeting in December 2004 and took place in January 2005. I think it worthy of note that this current year marks the 30th year of improved dividend. Shares sub-division Having regard to the increase in the share price over the last few years and with regard to the marketability of those shares the Board will propose, at the forthcoming Annual General Meeting, a sub-division of our 10p ordinary shares to 5p ordinary shares. This means ordinary shareholders would own two ordinary shares for each one ordinary share currently held. Acknowledgements The whole global workforce has helped achieve this year's result and, on behalf of the Board, I extend our thanks to them. I would also like to extend our gratitude to Michael Vale, our International Director at Polyflor who retired after 36 years with the Group. Outlook We have continued to expand our flooring operations, following the basic principles of sound quality and superior service and support. These, allied with a firm control of costs and working capital, are the bedrock on which we can continue to build. Today we not only have significant presence in the UK, Australia, New Zealand, Germany and Scandinavia but our products are sold in Angola, Brazil, India, Peru and over 100 other countries. All this gives me confidence that we will continue to deliver progress in the current year. Geoffrey Halstead CHIEF EXECUTIVE'S REPORT Turnover increased 7% to £112.4 million (2004: £104.7 million) and profit before tax, was £13.8 million (2004: £13.7 million, excluding exceptional gains). Interest receivable increased to £1.24 million (2004: £0.55 million). Though operating profit shows a decline to £12.6 million (2004: £13.15 million) it must be noted that 2004 included £0.9 million of royalties on the Belstaff operations. Consequently a like-for-like comparison is 2005: £12.6 million (2004: £12.25 million). The flooring companies have progressed 10% in terms of turnover but overall the combined effects of raw material prices and energy costs have held back the full benefit that such growth would normally have on profit. Against the economic climate I feel this must be judged as a good result. Managing the basics was a key challenge and, as a result, stocks are 9% lower than last year and trade debtors just 2% higher on a year of sales growth. Net cash inflow from operations was £19.9 million (2004: £17.4 million) and we closed the year with cash at bank or on short term deposit of £31.7 million. I would like to add my thanks to those of the Chairman for the contributions of Michael Vale, International Director at Polyflor and note that when he commenced work with our Group international sales were negligible but this year we have achieved £61 million. Polyflor (the manufacturing and UK division) Despite the background of the troubled UK carpet manufacturers, Polyflor's sales, both in the UK and export markets, showed healthy growth over last year. Disappointingly, the effect of increased raw material, energy costs and labour costs led to profits being below expectations. As a UK manufacturer we felt that we had no choice but to forego a price increase in our home market. Our UK sales team made progress (turnover was up 13%) and was instrumental in securing extra business and cementing the relationships with the UK distribution trade. Derby Hospital is just one of the significant projects during the year that typifies our business in healthcare. Export sales also showed healthy growth in most markets and, overall, our turnover progressed by 8%. The effects of cost increases meant profits were below last year but sales across all the product ranges, particularly our market leading safety floors, were encouraging. We will continue to invest in key areas to consolidate our presence, especially with our patented anti-soil surface coatings and in extensions to warehouse facilities. The latter is very important to maintain the high level of service to our customer base in a market where lead times are short and stock availability and delivery are paramount. Central Europe (Objectflor Art & Design GmbH / Karndean International GmbH) This large market, dominated by Germany, has continued to have the economic problems widely reported in the press but I am pleased to report that our turnover increased 14% which was, I believe, a creditable achievement. The company increased volume of homogenous vinyl (manufactured by Polyflor in Manchester) and sales were 18% ahead of last year in this sector, which was a welcome result. During the year, significant investment was made in a new Central European warehouse in Cologne, which was completed on time and on budget and this will enable service levels to be maintained as turnover grows. This represents a significant part of the Group capital expenditure in the year which is self financing when compared to the alternative of a medium term lease. Halstead Flooring (Australia) A more modest year of growth in turnover of some 5% (against 12% last year) but this was a record result both in terms of turnover and profit for this subsidiary. In a market that has very active representation from all our global competitors the sales levels, whilst below target, did represent significant progress and we have consolidated our market position. During the year we were successful in our flooring being specified on the New South Wales Government contracts for education and healthcare facilities and we anticipate growth in this key state. Halstead Flooring Concepts (New Zealand) It was a year of consolidation in New Zealand. After a difficult year in 2004 and a complete structural review of costs, profits this year are significantly better, albeit on reduced turnover. The profit improvement was as a result of cost control and focus on more profitable product lines. During the year there was a degree of uncertainty over one of the company's largest suppliers which faced a takeover and this undoubtedly affected sales for a period of some months. This problem is now resolved as the future of this supplier has been clarified. Working capital and overhead control have been a major focus in the year and as we look forward to the next year, sales initiatives are the focus of our budget. Polyflor Nordic The Scandinavian region comprises Polyflor Norway and Falck Design. Our Swedish brands have been merged with the operations of Falck Design, which was acquired in October 2004. The first year of Falck has been very positive and turnover in the region has progressed 21%. Like-for-like growth is more modest, but nevertheless positive. The Megastrong collection has been updated and early comments are positive. In Norway market share was maintained and major projects included the Raaholt Ungdomsskole in Akershus, a major project in the education sector. Polyflor Hong Kong (Asia markets) In 2004 there were a number of large commercial projects and, as anticipated, turnover in this area in 2005 was lower overall, though mainly as a result of reduced sales in Malaysia. Since the projects in 2004 saw us undertake both the Sungei Buloh and Petani hospitals, we did not expect to match this result. Hong Kong, China and South Korea all continued to expand with Japan, Singapore and Taiwan broadly comparable to last year. Phoenix Distribution (motorcycle accessories) Phoenix had a mixed year with good cash generation but significant reduction in both turnover and profit. This was anticipated and budgeted for following the sale of Belstaff at the end of last year. With low cost of entry to the clothing sector of the market and consequent low margins for importer distributors we decided not to continue with clothing. As a result existing clothing ranges were run down. In addition, Phoenix decided to cease distribution of the Shark helmet brand, which was sold in the mid to low end range of the market. Unfortunately this required some redundancies as the company overhead base was realigned to the decreased turnover. We are already seeing the benefits of a closer focus on the more important brands that are based on race/performance, in particular Arai. The cash generated approached £1.9 million and, I believe, the company has consolidated its position and restructured well to the market conditions. We remain cautious in this marketplace but there are promising, early, discussions on augmentation of the Phoenix portfolio of brands in certain areas. Outlook Our operations are in a healthy state and there are several opportunities for augmentation of our product portfolios. Customer service is an area on which we will focus as we are looking to extend our UK warehousing and distribution facilities. All in all, I feel that we are going into the new year very positively and will continue the successful formula which concentrates on sustainable, mainly organic, growth augmented by digestible acquisitions that offer synergy. Mark Halstead Audited Consolidated Profit and Loss Account for the year ended 30 June 2005 2005 2004 £'000 £'000 Turnover 112,353 104,703 Operating profit 12,573 13,150 Exceptional item - 10,396 Net interest receivable 1,241 549 Profit on ordinary activities before taxation 13,814 24,095 Taxation on ordinary activities (4,289) (5,938) Profit on ordinary activities after taxation 9,525 18,157 Dividends (including non-equity) (14,656) (4,487) Retained (loss)/profit for the year (5,131) 13,670 Earnings per ordinary share (as defined in Note 4) -basic (loss)/earnings per ordinary share (0.4)p 72.2p -underlying earnings per ordinary share 38.5p 34.9p -diluted (loss)/earnings per ordinary share (0.4)p 71.7p All the above results derive from continuing operations, apart from the exceptional item in the year to 30 June 2004 Audited Consolidated Balance Sheet as at 30 June 2005 2005 2004 £'000 £'000 Fixed assets Intangible assets 3,460 2,564 Tangible assets 20,741 18,308 24,201 20,872 Current assets Stocks 20,029 21,930 Debtors 18,887 18,533 Cash at bank, in hand and on short-term deposit 31,675 37,045 70,591 77,508 Creditors - amounts falling due within one year (34,367) (33,302) Net current assets 36,224 44,206 Total assets less current liabilities 60,425 65,078 Creditors - amounts falling due after more than one year (2,597) (213) Provisions for liabilities and charges (353) (1,040) 57,475 63,825 Capital and reserves Equity share capital 2,531 2,511 Non-equity share capital 3,697 200 Called up share capital 6,228 2,711 Share premium account 48 5,221 Revaluation reserve 3,544 3,544 Capital reserve 2,942 720 Profit and loss account 44,713 51,629 57,475 63,825 Audited Consolidated Cash Flow Statement for the year ended 30 June 2005 2005 2004 £'000 £'000 Net cash inflow from operating activities 19,866 17,383 Returns on investments and servicing of finance 1,274 616 Return of capital - B share dividend (9,626) - Taxation paid (5,860) (4,262) Capital expenditure (5,827) (1,346) Acquisitions and disposals (1,390) 10,828 Equity dividends paid (4,743) (4,014) Cash (outflow)/inflow before financing (6,306) 19,205 Financing: Redemption of C shares (2,222) - Purchase of own shares - (1,883) Shares issued 406 811 Increase in debt 2,623 - (Decrease)/increase in cash (5,499) 18,133 Reconciliation of net cash flow to movement in net funds (Decrease)/increase in cash (5,499) 18,133 Increase in debt (2,623) - Change in net funds resulting from cash flows (8,122) 18,133 Effect of exchange differences 129 (44) Movement in net funds for the period (7,993) 18,089 Net funds at start of year 37,045 18,956 Net funds at end of year 29,052 37,045 Statement of Total Recognised Gains and Losses for the year ended 30 June 2005 2005 2004 £'000 £'000 Profit for the financial year 9,525 18,157 Currency translation differences on foreign currency net investments 597 (224) Total recognised gains relating to the year 10,122 17,933 Reconciliation of Movements in Shareholders' Funds for the year ended 30 June 2005 2005 2004 £'000 £'000 Profit for the financial year 9,525 18,157 Dividends (14,656) (4,487) (5,131) 13,670 Other recognised gains and losses relating to the year 597 (224) Redemption of C shares (2,222) - Purchase of own shares - (1,883) New share capital subscribed 406 811 Net (decrease)/increase in shareholders' funds for the year (6,350) 12,374 Opening shareholders' funds 63,825 51,451 Closing shareholders' funds 57,475 63,825 Equity shareholders' funds 53,778 63,625 Non-equity shareholders' funds 3,697 200 57,475 63,825 NOTES 1. The final dividend of 12.75p per ordinary share will be paid on 5 December 2005 to shareholders on the register as at 4 November 2005. The full report and accounts will be posted to shareholders on 1st November 2005. 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 2004 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 2005 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 2005 2004 £'000 £'000 Profit on ordinary activities after taxation 9,525 18,157 Preference dividend (11) (11) B share dividend (9,626) - Basic earnings (112) 18,146 Add back B share dividend 9,626 - Goodwill amortisation charge 213 173 Exceptional item (after taxation) - (8,637) Deduct royalty income - (900) Underlying earnings 9,727 8,782 Weighted average number of ordinary shares in issue 25,243,966 25,137,174 Weighted average number of ordinary shares in issue (diluted for the 25,366,107 25,293,497 effect of outstanding share options) Basic (loss)/earnings per ordinary share after B share dividend (0.4)p 72.2p Underlying earnings per ordinary share 38.5p 34.9p Diluted (loss)/earnings per ordinary share after B share dividend (0.4)p 71.7p This information is provided by RNS The company news service from the London Stock Exchange

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