Interim Results

James Halstead PLC 28 March 2007 28 March 2007 JAMES HALSTEAD PLC INTERIM RESULTS FOR THE HALF-YEAR ENDED 31 DECEMBER 2006 Key Figures James Halstead plc, manufacturer and international distributor of commercial floor coverings reports: • Turnover increased to a record £71 million - an increase of 12.9% • Pre-tax profit increased to a record £11.05 million - an increase of 30.1% • Basic earnings per ordinary 5p share increased to a record 14.7p - an increase of 27%. • Proposed interim dividend increased to a record 5.25p - an increase of 23.5% Chairman, Mr Geoffrey Halstead, commenting said: 'These interim figures, once again, show a record performance and are testimony to the combined efforts of our sales teams, our workforce and our management. I and the Board remain confident of continued success.' 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 first six months of the year showed a healthy increase in turnover to £71 million (2005: £62.89 million) an increase of 12.9%. Turnover related to flooring was almost 14% ahead of the comparative half year and around 15% ahead based on like for like exchange rates. Our overseas sales progressed well with Central Europe increasing 17%, the Pacific region (Australia/New Zealand) ahead 11% and our home market 12.8%. Sales of the Polysafe range of products continue to show good growth. Polysafe products are used widely in public areas to reduce the risk of slipping and, over time, there is no degradation in the slip resistance as the result of wear. Over a number of years, we have successfully introduced a series of new and improved products meeting the conflicting demands of whole-life slip-resistance, cleanability and strong design. Phoenix, our motorcycle accessories business, also showed growth in 'like for like' sales and the Arai motorcycle helmet brand increased sales by 20% in a difficult market, undoubtedly through increasing market share. In the last six months we have re-organised sales activities in Australia and New Zealand under the banner of the 'Pacific Region' and synergy of management is already bringing added benefits. Profit before tax of £11.05 million (2005: £8.49 million) represents a 30% increase, reflecting the benefit of increased turnover. I believe this to be a very creditable performance. These results are very encouraging considering intensive sales activity by our competitors, the challenging continuation of high raw material prices and high energy costs. Our balance sheet remains robust. Cash has, again, increased but the balance at 31 December 2006, at £33.2 million, is before the 30p per share special dividend paid in February (some £15.3 million). The stock of £21.6 million (2005 : £18.3 million) reflects stock build in advance of a production line overhaul. This level of stock is mathematically 18% ahead of last year. Our basic earnings per share for the six months to 31 December 2006 of 14.7p (2005 : 11.6p) have increased 26.7% and we propose to pay an interim dividend in May 2007 of 5.25p (2005: 4.25p) an increase of 23.5% reflecting the improved results. Our production facility in Radcliffe is achieving record levels of output and building work for the expansion of production is nearing completion, with equipment installation at an advanced stage. In anticipation of the production shutdown required to install the new machinery, stocks have been increased which will minimise and hopefully prevent stock shortages over the next few weeks. In addition, we have secured 80,000 sq ft of warehousing near to the Radcliffe facility which will reduce the pressure on logistics that has resulted from the increased level of sales over the last few years. This offers a medium term solution in dealing with our current warehousing requirements. Gross margins in our flooring business improved. With selling prices largely unchanged, due to competitor activity, this was achieved by increased production on largely fixed overheads and the benefits of product mix. At Polyflor the focus on environmentally sustainable development continues and the company, our core manufacturing unit, has achieved savings in excess of 5% in energy usage as measured by kilowatt-hours per square metre of product produced. These savings are independently assessed by The Carbon Trust. Gross margins in our motorcycle accessories business also improved. At our Polyflor site, in Radcliffe, work has been taking place in allocating part of our site to a dedicated training facility for 'grass-roots' floor layers. Our products are sold into the distribution trade and then fitted by specialist flooring contractors. Both the UK and Central Europe face skills shortages in this area and in the last 12 months we have offered a 3 day training course for over 500 floor layers in Germany. Polyflor (the UK manufacturing company) has for some time operated a floor-layer training scheme but will introduce a much broader based scheme similar to the scheme presented in Central Europe for a nominal charge giving intensive training in products and techniques. We have allocated staff and resources to training which will increase key skills for our long term benefit (and no doubt that of our competitors). At a time when many flooring manufacturers are scaling back training facilities we plan significant expansion (http://www.polyflor.com/jh/ PolyflorHomePage.nsf/TRHP). Recognition from customers is always welcome and I would like to note that the Independent Flooring Distributors Association have voted Polyflor overall Supplier of the Year. Outlook It has been a good six month's trading and we are focused on building on this result. Our products continue to be sold throughout the world from the Olympic Stadium complex in Qazakh in Azerbaijan and the Sindh Institute (Pakistan's largest public health organisation) through to the use of Polyflor in wards and corridors at Reading's Royal Berkshire NHS Foundation Trust - rated in 2005 by the Healthcare Commission as joint first cleanest NHS acute hospital in the UK. Detailed plans are in place to ensure that plant upgrades are trouble free but in the next few weeks there will be a period when one of our three major production lines is closed, hence the cautious building of stock as previously noted. Other infrastructure projects are in hand to improve productivity. Taking all things into consideration, I remain solidly confident of another year of progress in the year to June 2007. Geoffrey Halstead Chairman 28 March 2007 Interim Report for the half-year ended 31 December 2006 Half-year Half-year Year ended ended ended 31.12.06 31.12.05 30.6.06 £'000 £'000 £'000 Turnover 70,999 62,890 126,024 Operating profit 10,440 7,845 16,567 Interest and other finance costs 608 646 914 Group profit on ordinary activities (before taxation) 11,048 8,491 17,481 Taxation (3,549) (2,630) (5,647) Group profit on ordinary activities (after taxation) 7,499 5,861 11,834 Earnings per ordinary share of 5p: - basic 14.7p 11.6p 23.3p - diluted 14.6p 11.5p 23.2p Details of dividends paid and proposed are given in note 3 Consolidated Balance Sheet as at 31 December 2006 Half-year Half-year Year ended ended ended 31.12.06 31.12.05 30.6.06 £'000 £'000 £'000 Fixed assets Intangible assets 3,118 3,346 3,232 Tangible assets 18,341 19,985 18,687 21,459 23,331 21,919 Current assets Stocks 21,592 18,284 19,770 Debtors 21,771 18,750 21,093 Cash at bank, in hand and on short-term deposits 33,202 40,236 30,050 76,565 77,270 70,913 Creditors - amounts falling due within one year (40,724) (34,245) (37,685) Net current assets 35,841 43,025 33,228 Total assets less current liabilities 57,300 66,356 55,147 Creditors - amounts falling due after more than one year (3,316) (6,062) (4,441) Provisions for liabilities and charges - (205) - Net assets excluding pension scheme deficit 53,984 60,089 50,706 Pension scheme deficit (8,530) (10,480) (8,681) 45,454 49,609 42,025 Capital and reserves Equity share capital 2,545 2,538 2,543 Equity share capital (B shares) 160 160 160 Called up share capital 2,705 2,698 2,703 Share premium account 364 223 321 Revaluation reserve 3,544 3,544 3,544 Capital reserve 3,449 2,942 3,449 Profit and loss account 35,392 40,202 32,008 45,454 49,609 42,025 Consolidated Cash Flow Statement for the half-year ended 31 December 2006 Half-year Half-year Year ended ended ended 31.12.06 31.12.05 30.6.06 £'000 £'000 £'000 Net cash inflow from operating activities 12,915 14,876 25,130 Returns on investments and servicing of finance 634 474 856 Taxation paid (3,844) (3,008) (6,866) Capital expenditure (1,081) (641) (1,035) Equity dividends paid (4,072) (3,236) (18,113) Cash inflow/(outflow) before financing 4,552 8,465 (28) Financing: Shares issued 45 182 285 Decrease in debt (1,363) (119) (1,794) Increase/(decrease) in cash 3,234 8,528 (1,537) Reconciliation of net cash flow to movement in net funds Increase/(decrease) in cash 3,234 8,528 (1,537) Movement in debt 1,363 119 1,794 Change in net funds resulting from cash flows 4,597 8,647 257 Effect of exchange differences (46) (13) (151) Movement in net funds for the period 4,551 8,634 106 Net funds at start of period 25,621 25,515 25,515 Net funds at end of period 30,172 34,149 25,621 Statement of Total Recognised Gains and Losses for the half-year ended 31 December 2006 Half-year Half-year Year ended ended ended 31.12.06 31.12.05 30.6.06 £'000 £'000 £'000 Profit for the financial period 7,499 5,861 11,834 Currency translation differences on foreign currency net investments (24) 133 (438) Actuarial (loss)/gain on the pension scheme (38) (1,008) 1,546 Movement on deferred tax asset relating to the pension scheme 11 302 (464) Share based payments 8 - - Total recognised gains relating to the financial period 7,456 5,288 12,478 Reconciliation of Movements in Shareholders' Funds for the half-year ended 31 December 2006 Half-year Half-year Year ended ended ended 31.12.06 31.12.05 30.6.06 £'000 £'000 £'000 Profit for the financial period 7,499 5,861 11,834 Dividends (4,072) (3,236) (18,113) 3,427 2,625 (6,279) Other recognised gains and losses relating to the financial period (43) (573) 644 New share capital subscribed 45 182 285 Net increase/(decrease) in shareholders' funds for the financial period 3,429 2,234 (5,350) Opening shareholders' funds 42,025 47,375 47,375 Closing equity shareholders' funds 45,454 49,609 42,025 Notes to the Accounts 1. Basis of preparation The interim financial statements, which are unaudited, consolidate the accounts of the holding company and its subsidiaries made up to 31 December 2006 and have been prepared in accordance with applicable Accounting Standards and, save for the adoption of FRS 20 - Share Based Payments, on the basis of accounting policies as set out in the annual report and accounts for the year ended 30 June 2006. The comparative figures for the six months ended 31 December 2005 and year ended 30 June 2006, have not been restated from those previously published since the impact of the adoption of FRS 20 on the results for those periods is not material. 2. Taxation Taxation has been provided at the rate of 32.1% (2005: 31%). 3. Dividends Half-year Half-year Year ended ended ended 31.12.06 31.12.05 30.6.06 £'000 £'000 £'000 Equity dividends paid: Final dividend for the year ended 30 June 2005 - 3,236 3,236 Special dividend of 25p - - 12,715 Interim dividend for the year ended 30 June 2006 - - 2,162 Final dividend for the year ended 30 June 2006 4,072 - - 4,072 3,236 18,113 Equity dividends proposed at the end of the period Special dividend 15,269 12,715 - Interim dividend 2,672 2,158 - Final dividend - - 4,072 Equity dividends per share, paid and proposed, are as follows: • 6.375p final dividend for the year ended 30 June 2005, paid on 5 December 2005. • 25p special dividend for the year ended 30 June 2006, paid on 17 February 2006. • 4.25p interim dividend for the year ended 30 June 2006, paid on 26 May 2006. • 8p final dividend for the year ended 30 June 2006, paid on 1 December 2006. • 30p special dividend for the year ended 30 June 2007, paid on 2 February 2007. • 5.25p interim dividend for the year ended 30 June 2007, payable on 23 May 2007 to those shareholders on the register at the close of business on 27 April 2007 4. Calculation of earnings per ordinary share Half-year Half-year Year ended ended ended 31.12.06 31.12.05 30.6.06 £'000 £'000 £'000 Basic earnings 7,499 5,861 11,834 Goodwill amortisation charge 114 114 228 Underlying earnings 7,613 5,975 12,062 Weighted average number of 5p ordinary shares in issue 50,875,694 50,672,074 50,764,031 Weighted average number of 5p ordinary shares in issue (diluted for the effect of outstanding share options) 51,284,522 50,957,920 51,008,831 Underlying earnings per 5p ordinary share 15.0p 11.8p 23.8p Basic earnings per 5p ordinary share 14.7p 11.6p 23.3p Diluted earnings per 5p ordinary share 14.6p 11.5p 23.2p 5. Statutory accounts The figures for the year ended 30 June 2006 are an abridged statement of the group audited accounts for that year. The audited accounts, containing an unqualified audit report, have been delivered to the Registrar of Companies. 6. Copies of the interim results Copies of the interim results have been sent to shareholders. Further copies can be obtained from the company's registered office, Beechfield, Hollinhurst Road, Radcliffe, Manchester M26 1JN. Directors and Advisors Directors Registrars G Halstead Capita Registrars M Halstead Northern House G R Oliver ACA MCT Woodsome Park J A Wild FCA Fenay Bridge Huddersfield HD8 0LA Secretary W J Whittaker FCMA Registered Office Auditors Beechfield PKF (UK) LLP Hollinhurst Road Sovereign House Radcliffe Queen Street Manchester M26 1JN Manchester M2 5HR Tel. 0161 767 2500 Fax. 0161 766 7499 Company Registration No. 140269 Website :www.jameshalstead.com This information is provided by RNS The company news service from the London Stock Exchange

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