Samuel Heath Regulatory News (HSM)

SAMUEL HEATH & SONS plc

("the Company")

UNAUDITED INTERIM REPORT

Half year ended 30 September 2022

CHAIR'S STATEMENT

As predicted in the year end statement, our trading performance for the six months to 30 September 2022 reflected continuing resilience in the sales line but a tightening of margins compared to the outperformance of last year.

Sales increased 9.5% to £7.56m (2021: £6.9m) but this was largely due to currency movements rather than volume growth. The strength of the dollar compared to sterling has had a materially beneficial effect as a significant proportion of our foreign sales is denominated in dollars.

Profit before tax was £521k compared to £776k in the six months to 30 September 2021. As expected, costs have increased disproportionately since last year for a number of reasons. A proactive decision was taken to restore selling and marketing costs to pre-pandemic levels, particularly by resuming attendance at international trade fairs (which were mostly cancelled during lockdowns), but also in augmenting our sales teams at home and abroad. Another area where costs were increased is product development where more frequent new product launches are targeted.

As might be expected, we have been adversely affected by the general rise in energy and other costs, with our combined electricity and gas cost more than doubling. Avoiding supply chain disruption has also been a key concern and we have had to increase order lead times and build stock levels, so as to minimise delays in production. In addition, the recruitment market is very tight particularly for the skills required on the factory floor; this is a key concern in light of inevitable retirements in our loyal but aging workforce. Credit is therefore due to our operations team for the fact that, despite these problems, customer order lead times have held up well, with, we believe, a number of our competitors suffering much worse on this key measure.

First half performance was commendable in the current economic environment and the executive team are to be congratulated for managing the challenges so well. The order book has held up well to date, but talk of a worldwide recession is likely to affect customer sentiment. Strains on the supply chain and labour market are of increasing concern and energy costs will increase further. We are therefore hesitant to predict a result for the second half of the year.

Our balance sheet remains robust with net assets increasing to £11.1m (2021: £6.1m) and cash and cash equivalents of £3.5m (2021: £4.9m which included the £950k cash received from the Business Interruption Loan (since repaid) referenced in note 6). The significant increase in net assets was due to the reduction of the pension liability from £6.2m to zero, calculated under IAS 19 rules, resulting from higher interest rates and gilt yields (see note 7). Shareholders should note however that the next formal actuarial valuation is not due until 31 March 2025.

Anthony Buttanshaw

Chair

17 November 2022

Dividend

The directors recommend the maintenance of the interim dividend at 5.5p per share (2021: 5.5p). The interim dividend will be paid on 24 March 2023 to shareholders on the register at the close of business on 24 February 2023. The ex-dividend date for this payment is 23 February 2023.

For further information, please contact:

Samuel Heath & Sons Plc

Simon Latham, Company Secretary 0121 766 4200

Cairn Financial Advisers LLP

James Caithie / Jo Turner 020 7213 0880

This announcement contains inside information for the purposes of the UK Market Abuse Regulation and the Directors of the Company are responsible for the release of this announcement.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Attributable to owners of the Parent Company

CONSOLIDATED CASH FLOW STATEMENT

NOTES TO THE INTERIM FINANCIAL REPORT

1. BASIS OF PREPARATION OF INTERIM REPORT

As permitted, IAS34 'Interim Financial Reporting' has not been applied in this interim report. The information for the period ended 30 September 2022 is not audited and does not constitute statutory accounts as defined in section 434 of the Companies Act 2006. The statutory accounts for the year ended 31 March 2022 were given an unqualified audit report and did not contain statements under section 498(2) or 498(3) of the Companies Act 2006. A copy of the statutory accounts for that year has been delivered to the Registrar of Companies. The interim accounts for the half year ended 30 September 2021 were also unaudited.

2. ACCOUNTING POLICIES

Basis of accounting

The report has been prepared on a going concern basis in accordance UK-adopted International Accounting Standards.

The group has not availed itself of early adoption options in standards and interpretations.

The principal accounting policies adopted are as set out in the Annual Report for the year ended 31 March 2022. The valuation of inventories is considered to be the main area in terms of significant accounting estimates and judgements.

The retirement benefit scheme liability recognised in these interim accounts reflects the estimated change in the deficit at 30 September 2022 from the movements in discount rates and inflation during the six months.

3. DIVIDENDS

A final dividend for the financial year 2022 of 7.5625p per share (2021: 6.875p) was paid during the period.

An Interim dividend for the financial year 2023 of 5.5p per share is proposed (2022: 5.5p), payable on 25 March 2023.

4. EARNINGS/(LOSS) PER SHARE

The basic and diluted earnings per share are calculated by dividing the relevant profit after taxation of £488,000 (2021: profit £651,000) by the average number of ordinary shares in issue during the period being 2,534,322 (2021: 2,534,322). The number of shares used in the calculation is the same for both basic and diluted earnings.

5. OTHER OPERATING INCOME - GRANT FUNDING

Income has been received from government grants providing support during the Coronavirus pandemic:

Income has been accounted for under the accruals method.

NOTES TO THE INTERIM FINANCIAL REPORT

6. BORROWINGS

At the end of April 2021, the Company drew down a loan under the Coronavirus Business Interruption Loan Scheme (CBILS), for the value of £950,000, which under the standard terms is interest free for 12 months, with no penalty for early repayment.

This loan was repaid in full in March 2022.

7. RETIREMENT BENEFIT SCHEME

The retirement benefit scheme is valued in part using yield rates, as indicated by government bonds. Towards the end of September 2022, the rate of these bonds increased significantly, causing the valuation of the scheme to move from a liability to become an asset.

However, based on a review of the scheme deeds it is not clear whether the Company has an unconditional right to a refund and therefore for the purposes of the interim financial statements the surplus has not been recognised as an asset in accordance with the requirements of IAS 19 and IFRIC 14. In addition, the Directors believe that the gilt yields at 30 September 2022 are not likely to persist and indeed they have subsequently reduced. A future movement (reduction) in bond yields may return the scheme to a deficit position.

At 30 September 2022 the scheme had no exposure to Liability Driven Investments.

Note: 

Certain statements made in this announcement are forward-looking statements. These forward-looking statements are not historical facts but rather are based on the Company's current expectations, estimates, and projections about its industry; its beliefs; and assumptions. Words such as 'anticipates,' 'expects,' 'intends,' 'plans,' 'believes,' 'seeks,' 'estimates,' and similar expressions are intended to identify forward-looking statements. These statements are not a guarantee of future performance and are subject to known and unknown risks, uncertainties, and other factors, some of which are beyond the Company's control, are difficult to predict, and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements. The Company cautions security holders and prospective security holders not to place undue reliance on these forward-looking statements, which reflect the view of the Company only as of the date of this announcement. The forward-looking statements made in this announcement relate only to events as of the date on which the statements are made. The Company will not undertake any obligation to release publicly any revisions or updates to these forward-looking statements to reflect events, circumstances, or unanticipated events occurring after the date of this announcement except as required by law or by any appropriate regulatory authority.