James Halstead Regulatory News (JHD)

4 Oct 2005 07:00

James Halstead PLC04 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 tocontinue 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 £10.4million) - another record result. I would also point out that the comparativefigure for last year included £0.9 million of royalty income which ceased on thedisposal of Belstaff International. Therefore, like for like, profit before taxis £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 energycosts I, and the Board, feel this is a creditable performance. Dividend The Board proposes a final dividend of 12.75p per ordinary share, making thetotal dividend for the year 19.75p, an increase of 11.3%. In addition, thereturn of capital announced last year of 60 pence per share was approved at theExtraordinary 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 improveddividend. Shares sub-division Having regard to the increase in the share price over the last few years andwith regard to the marketability of those shares the Board will propose, at theforthcoming Annual General Meeting, a sub-division of our 10p ordinary shares to5p ordinary shares. This means ordinary shareholders would own two ordinaryshares for each one ordinary share currently held. Acknowledgements The whole global workforce has helped achieve this year's result and, on behalfof the Board, I extend our thanks to them. I would also like to extend ourgratitude to Michael Vale, our International Director at Polyflor who retiredafter 36 years with the Group. Outlook We have continued to expand our flooring operations, following the basicprinciples of sound quality and superior service and support. These, alliedwith a firm control of costs and working capital, are the bedrock on which wecan continue to build. Today we not only have significant presence in the UK,Australia, New Zealand, Germany and Scandinavia but our products are sold inAngola, Brazil, India, Peru and over 100 other countries. All this gives me confidence that we will continue to deliver progress in thecurrent year. Geoffrey Halstead CHIEF EXECUTIVE'S REPORT Turnover increased 7% to £112.4 million (2004: £104.7 million) and profit beforetax, was £13.8 million (2004: £13.7 million, excluding exceptional gains). Interest receivable increased to £1.24 million (2004: £0.55 million). Thoughoperating profit shows a decline to £12.6 million (2004: £13.15 million) it mustbe noted that 2004 included £0.9 million of royalties on the Belstaffoperations. 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 thecombined effects of raw material prices and energy costs have held back the fullbenefit 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% lowerthan last year and trade debtors just 2% higher on a year of sales growth. Netcash inflow from operations was £19.9 million (2004: £17.4 million) and weclosed the year with cash at bank or on short term deposit of £31.7 million. Iwould like to add my thanks to those of the Chairman for the contributions ofMichael Vale, International Director at Polyflor and note that when he commencedwork with our Group international sales were negligible but this year we haveachieved £61 million. Polyflor (the manufacturing and UK division) Despite the background of the troubled UK carpet manufacturers, Polyflor'ssales, both in the UK and export markets, showed healthy growth over last year. Disappointingly, the effect of increased raw material, energy costs and labourcosts led to profits being below expectations. As a UK manufacturer we feltthat we had no choice but to forego a price increase in our home market. Our UKsales team made progress (turnover was up 13%) and was instrumental in securingextra business and cementing the relationships with the UK distribution trade.Derby Hospital is just one of the significant projects during the year thattypifies our business in healthcare. Export sales also showed healthy growth in most markets and, overall, ourturnover progressed by 8%. The effects of cost increases meant profits were below last year but salesacross all the product ranges, particularly our market leading safety floors,were encouraging. We will continue to invest in key areas to consolidate ourpresence, especially with our patented anti-soil surface coatings and inextensions to warehouse facilities. The latter is very important to maintainthe high level of service to our customer base in a market where lead times areshort 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 economicproblems widely reported in the press but I am pleased to report that ourturnover increased 14% which was, I believe, a creditable achievement. The company increased volume of homogenous vinyl (manufactured by Polyflor inManchester) and sales were 18% ahead of last year in this sector, which was awelcome result. During the year, significant investment was made in a new Central Europeanwarehouse in Cologne, which was completed on time and on budget and this willenable service levels to be maintained as turnover grows. This represents asignificant part of the Group capital expenditure in the year which is selffinancing 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) butthis was a record result both in terms of turnover and profit for thissubsidiary. In a market that has very active representation from all our global competitorsthe sales levels, whilst below target, did represent significant progress and wehave consolidated our market position. During the year we were successful in our flooring being specified on the NewSouth Wales Government contracts for education and healthcare facilities and weanticipate growth in this key state. Halstead Flooring Concepts (New Zealand) It was a year of consolidation in New Zealand. After a difficult year in 2004and a complete structural review of costs, profits this year are significantlybetter, albeit on reduced turnover. The profit improvement was as a result ofcost control and focus on more profitable product lines. During the year there was a degree of uncertainty over one of the company'slargest suppliers which faced a takeover and this undoubtedly affected sales fora period of some months. This problem is now resolved as the future of thissupplier has been clarified. Working capital and overhead control have been a major focus in the year and aswe 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 Swedishbrands have been merged with the operations of Falck Design, which was acquiredin October 2004. The first year of Falck has been very positive and turnover inthe region has progressed 21%. Like-for-like growth is more modest, butnevertheless positive. The Megastrong collection has been updated and early comments are positive. InNorway market share was maintained and major projects included the RaaholtUngdomsskole 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 ofreduced sales in Malaysia. Since the projects in 2004 saw us undertake both theSungei Buloh and Petani hospitals, we did not expect to match this result. HongKong, China and South Korea all continued to expand with Japan, Singapore andTaiwan broadly comparable to last year. Phoenix Distribution (motorcycle accessories) Phoenix had a mixed year with good cash generation but significant reduction inboth turnover and profit. This was anticipated and budgeted for following thesale of Belstaff at the end of last year. With low cost of entry to theclothing sector of the market and consequent low margins for importerdistributors we decided not to continue with clothing. As a result existingclothing ranges were run down. In addition, Phoenix decided to ceasedistribution of the Shark helmet brand, which was sold in the mid to low endrange of the market. Unfortunately this required some redundancies as the company overhead base wasrealigned to the decreased turnover. We are already seeing the benefits of a closer focus on the more importantbrands that are based on race/performance, in particular Arai. The cashgenerated approached £1.9 million and, I believe, the company has consolidatedits 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 foraugmentation of our product portfolios. Customer service is an area on which wewill focus as we are looking to extend our UK warehousing and distributionfacilities. All in all, I feel that we are going into the new year verypositively and will continue the successful formula which concentrates onsustainable, mainly organic, growth augmented by digestible acquisitions thatoffer 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 theexceptional item in the year to 30 June 2004 Audited Consolidated Balance Sheet as at 30 June 2005 2005 2004 £'000 £'000 Fixed assetsIntangible assets 3,460 2,564Tangible assets 20,741 18,308 24,201 20,872 Current assetsStocks 20,029 21,930Debtors 18,887 18,533Cash 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 63,825Capital and reservesEquity share capital 2,531 2,511Non-equity share capital 3,697 200 Called up share capital 6,228 2,711 Share premium account 48 5,221Revaluation reserve 3,544 3,544Capital reserve 2,942 720Profit 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 811Increase 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) 18,133Increase in debt (2,623) - Change in net funds resulting from cash flows (8,122) 18,133Effect 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 Lossesfor the year ended 30 June 2005 2005 2004 £'000 £'000 Profit for the financial year 9,525 18,157Currency 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' Fundsfor the year ended 30 June 2005 2005 2004 £'000 £'000 Profit for the financial year 9,525 18,157Dividends (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 63,625Non-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 18,157Preference dividend (11) (11)B share dividend (9,626) -Basic earnings (112) 18,146Add back B share dividend 9,626 - Goodwill amortisation charge 213 173Exceptional 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 25,293,497effect of outstanding share options) Basic (loss)/earnings per ordinary share after B share dividend (0.4)p 72.2pUnderlying earnings per ordinary share 38.5p 34.9pDiluted (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