James Halstead Regulatory News (JHD)

 1 October 2013

JAMES HALSTEAD PLC

PRELIMINARY ANNOUNCEMENT OF AUDITED RESULTS

FOR THE YEAR ENDED 30 JUNE 2013

"Record dividends"

Key Figures

Mr Mark Halstead, Chief Executive, commenting on the results, said:

 "We have grown significantly in the last few years and though in this year like for like turnover is 1.1% behind last year this should not detract from the upward trend we have seen and are determined to exploit. We remain highly profitable and cash generative which underpins our ability and intention to continue our record of dividends."

Arden Partners (Brokers):

Chris Hardie Telephone: 020 7614 5900

CHAIRMAN'S STATEMENT

Against challenging market conditions I can report a solid set of results.

Our revenue for the year is £ 217.1 million (2012: £ 226.3 million), a reduction of some 4.1% on last year.

Looking at the revenue more closely the turnover in the UK is 3.5% ahead of last year and encouraging indeed. Turnover though down overall, includes the effects of foreign currency translation and the cessation of the motorcycle accessories business (Phoenix) last year; excluding these the decline in turnover is 1.1%.

We continue to win significant new build projects around the world such as the Specsavers chain of stores in Sweden and the Wulanchabu Hospital in Inner Mongolia.

Dividend

Despite the modest decline in profit our earnings per share are slightly increased and our cash reserves remain robust and it is pleasing to report that the Board proposes, once again, an increased final dividend. The final dividend will be 6.0p (2012: 5.5p) representing a 9.1% increase which combined with the interim dividend, paid in June 2013, of 2.75p (2012: 2.5p) makes a total of 8.75p (2012: 8.0p) for the year, an increase of 9.4%.

Acknowledgements

Given the solid achievements in difficult market conditions it is my pleasure to extend our gratitude to our staff and customers for their continued support. Our companies received various accolades in the year voted for by end users including Best Vinyl Product (UK - Contract Flooring Association), Supplier of the Year (New Zealand - Flooring Xtra), and Sales Partner Awards (Germany - Architects AIT). Our special thanks for the recognition of our teams that these accolades represent.

Outlook

Whilst the seeds of recovery are apparent these continue to be difficult times. Government spending is restricted in many markets and "tough" is the best description of the current trading conditions. Our visibility of day to day progress in the refurbishment market is not extensive and major projects are keenly contested by all manufacturers. We have grown significantly in the last few years and though in this year like for like turnover is 1.1% behind last year this should not detract from the upward trend we have seen and are determined to exploit.

Geoffrey Halstead

Chairman

CHIEF EXECUTIVE'S REVIEW

In these challenging times, with recessionary pressures on many businesses, I am disappointed not to be able to report continued record revenue and profit. However, the last decade has seen turnover more than double and profit before tax treble. Our flooring business continues to be highly successful.

The James Halstead Group of companies is focused completely on flooring these days and the value of our flooring turnover in the core UK market has grown 3.5% year on year. Excluding the effects of currency translation and the cessation of the Phoenix motorcycle accessory business there is an underlying drop of 1.1% in our flooring sales.

Raw material prices were broadly in line with the prior year which was itself comparable with 2010-11: a year of record highs. That said, raw material prices are high for our competitors and the more pressing challenge is of industry wide excess capacity and the consequent battle to gain volume.

Overhead control continues to be important and we continue to focus on our costs.

Overall the fall in profit before tax was 3.5%, which, whilst disappointing, is the first fall for over a decade. The profit after tax is slightly ahead of last year at £ 30.6 million (2012: £ 30.5 million) and reflects the lower tax rates on profit in the UK relative to Germany and Australia.

Our gross margins increased as a percentage by ½%, caused mainly by the effects of volume growth in sheet vinyl flooring. The combined effects of various exchange rates largely offset each other and though there were monthly fluctuations in raw material prices these were generally flat over the year as a whole. There were fixed overhead increases in selling and distribution costs as a result of increased warehousing space, though these were mitigated by tight control of other costs. Administration costs were also reduced.

Cash stands at £34.9 million (2012: £38.7 million) even after the payment of £31.5 million in dividends, £11.4 million in tax and £3.7 million of capital expenditure. The cash inflow from operations remains strong at £42.1 million (2012: £37.3 million).

Polyflor Nordic comprising Polyflor Norway based in Oslo and Falck Design based in Sweden

Our Scandinavian businesses made good progress with Norway advancing sales 5.4% in local currency and our Swedish business by some 23%. These are positive moves indeed.

In Norway we have noted in recent months that there is an increase in the rate of new build and refurbishment particularly in the areas of healthcare and education and this should underpin continued progress. Polyflor Nordic recently supplied the new headquarters of the Miljøvern Departementat (the Department for the Environment) against keen competition. Falck have supplied the NKS Hospital and the Tele2 Arena, both in Stockholm.

The growth in our sheet vinyl sales is encouraging.

Objectflor and Karndean, our European based organisations located in Cologne

In local currency terms our central European based business achieved the same level of turnover as last year. This was an achievement in a very competitive market especially as the business grew 14.1% to a record level last year (again excluding exchange rate effects). Germany is a very large marketplace for vinyl flooring, most notably sheet vinyl, and as other parts of Europe suffer from the effects of governmental "belt-tightening" all manufacturers are looking to increase volumes in this area. Inevitably there was a degree of margin erosion and this combined with the launch of new designs and full year effect of the new 18,000 m² warehouse facility had an effect on the bottom line profitability of the business.

Notwithstanding the foregoing the growth in sales of sheet vinyl is encouraging as our competitors focus on the mature luxury vinyl tile (LVT) market. In the area of LVT our re-vamped Expona Commercial range was launched at the BAU exhibition in Munich and though facing some price pressure is trading well.

The company supplied flooring to the Jena (Germany) social housing renovation project which was one of the largest residential renovation projects in Europe last year and has been the major flooring partner in the Weissenhäuser Strand development, a major holiday park on the Baltic Sea at Kiel.

Polyflor Pacific - encompassing Australia, New Zealand and Asia

In Hong Kong and Oriental Asia sales were some 8% ahead of last year with a degree of margin improvement. China in particular continues to trade well. This is encouraging because this emerging market is still, for us, an area of new build project rather than refurbishment and every manufacturer wants these volumes. To the extent that we face European competitors the relative weakness of Sterling gives some competitive advantage, though our successes over the last 25 years present a very good CV for specifiers. What is also encouraging is that we remain competitive against our European and American competitors that have built factories in China - not only on price but on quality. This was evident in the sales we made relating to the 12th National Games of the People's Republic (recently held in Liaoning Province) where a good proportion of the facilities used Polyflor flooring.

Australia reported lower sales by some 11% which was largely as expected, as certain key large projects ended. Nevertheless, the company has seen good take up of its design flooring in the retail sector with chain stores such as "Wok-in-a-Box", "Foodtopia" and "SpendlessShoes" adopting our product for store refurbishment. Polyflor is also the standard for all trains and trams in Southern Australia and the core business is robust.

New Zealand, after many years in recession is showing signs of recovery and our turnover has increased, albeit by a modest 2%. Polyflor has secured the tender for all social housing through "Housing New Zealand", as well as supplying flooring to the last 7 hospital refurbishments and supplying safety flooring to the number 1 bus manufacturer, Designline. I am hopeful of continued growth, especially as the rebuilding work in Christchurch begins to ramp up.

Polyflor & Riverside Flooring, based in UK

A solid year for our UK operations in Teesside and Greater Manchester, with UK turnover increasing by 3.7%.

Profitability increased and these manufacturing facilities are the backbone of our sales activities around the globe. In the early part of the year we launched Polyflor Modena to the UK trade to set the standard for design effect in safety flooring and the sales have been encouraging. During the year we augmented this with the first "luxury vinyl sheet" aimed at adding to the success of luxury vinyl tile by offering a loose lay design sheet of contract quality to the social housing sector. This added the option of 3m and 4m wide product in addition to the standard 2m and though only launched in May 2013 is, to date, proving to be a success.

In terms of major investment plans for our plant there is little to report. We have upgraded line speed and line capability and will continue to implement engineering solutions to improve conversion, reduce energy waste and improve output but the "big ticket" items are fully paid for and the focus is on extracting the returns for these investments. The slowdown in overseas market leads us to manufacture within our capacity and is, to a degree, hampering productivity but this is, hopefully, a short term problem that will reverse.

Our business manufactures and sources vinyl floor covering and though the majority of sales are manufactured in house there is an important fraction from elsewhere, most notably China.

Whilst we do not own a factory in China, the Company takes a hands-on approach when sourcing product to ensure high manufacturing standards and product quality. We believe that for many companies that source in China, the key motivation is to minimise costs. Often this comes at the cost of responsible environmental manufacturing and product quality.

Many of our end customers are connected to government-sponsored contracts. The reputation that we build in the market is vitally important to us and will underpin our success in the future.

In 2005, we worked with our manufacturing partner in China to ensure they were accredited to ISO 14001 in respect of environmental standards. We continue to drive for "best in class" accreditation across the board and have recently achieved the BES 6001 standard, which is an independent verification of responsible outsourcing. Our manufacturing partner is the only vinyl flooring factory in China to achieve this accreditation. This demonstrates clearly the serious approach we take to corporate social responsibility in this geography.

Outlook

There are signs of recovery, but these are patchy. Our markets remain solid but missing that key confidence that growth has returned. I am confident that our portfolio and our commercial reputation will hold us in good stead but cannot predict that there will be significant growth in the short term.

Innovation continues to be a feature of our business having developed and patented two new safety floors - acoustic safety floor and LVT safety floor. These have already been sampled and tested in situ and are in the process of full launch to our customers. These, and range updates will help us to maintain margins against the competitors.

In short, it is a time keep heads down and plough on, defending the position we have achieved, and I am confident of another set of solid results to come.

Mark Halstead

Chief Executive

Audited Consolidated Income Statement

for the year ended 30 June 2013

Audited Consolidated Balance Sheet

as at 30 June 2013

Audited Consolidated Cash Flow Statement

for the year ended 30 June 2013

Audited Consolidated Statement of Comprehensive Income

for the year ended 30 June 2013

NOTES