Final Results

James Halstead PLC 30 September 2002 30th September 2002 JAMES HALSTEAD plc PRELIMINARY ANNOUNCEMENT OF AUDITED RESULTS FOR THE YEAR ENDED 30 JUNE 2002 KEY FIGURES • Pre-tax profit up to £11.28m - 5.5% increase • Headline earnings per ordinary share up to 28.8p (2001 : 24.7p restated) - 16.6% increase • Final dividend per ordinary share of 9.0p (2001 : 8.35p) making a total for the year of 13.75p - 7.8% increase Geoffrey Halstead, Chairman, James Halstead plc said: 'Not a bad year'. Enquiries: Mark Halstead, Chief Executive Gordon Oliver, Finance Director Telephone: 0161 767 2500 CHAIRMAN'S STATEMENT (GEOFFREY HALSTEAD) It gives me pleasure, once again to report an increase in pre-tax profit to £11.28 million, (2001 : £10.69 million) an increase of 5.5 %. The year has been one of steady progress, with continued emphasis on customer service, market reputation and tight financial control, the cornerstones of our business. Dividend Your Board proposes an increase in dividend, with a final dividend of 9.0p per ordinary share, taking the total for the year to 13.75p (2001 : 12.75p) - an increase of 7.8%. The Move to AIM During the year, and after considered review and debate, the Board decided to move the Group to the Alternative Investment Market of the London Stock Exchange, from the Official List. It was our opinion that this market would offer a more interested shareholder base and greater liquidity. To date, we feel the heightened interest in our shares supports this view. Institutions and private shareholders have widely supported the change, which the Board considers to be a positive move forward. Acknowledgements I owe sincere thanks to all our employees for their contribution to the continued development of the Group. As a tangible reward, a percentage of Group net profit will again be distributed under the Employee Profit Sharing Scheme. Chief Executive I welcome Mr Mark Halstead to the role of Chief Executive, a title that reflects his role more correctly than that of Chief Operating Officer. Having myself held this post for over 20 years, I must thank colleagues and our business partners for their support and efforts and I trust Mark will continue the Group tradition of consistent positive performance. Outlook Despite the uncertainty of world markets, the Board are confident that our robust balance sheet and core management strengths will enable the Group's future progress to be maintained. Some influences give rise to a cautionary note, particularly large increases in insurance premiums and continued pressure on pension arrangements. Notwithstanding this, our efforts will be 100% focused on achieving our targets. CHIEF EXECUTIVE'S REVIEW (MARK HALSTEAD) Profit Growth Turnover was slightly below that of the previous year reflecting the disposal of Conway Products Limited in the previous financial year. However, pre-tax profit increased to a record £11.3 million (2001 : £10.7 million). Market conditions have been extremely testing during the current year, particularly in the German flooring market and the motorcycle accessories market in the UK. However, our process and supply chain focus delivered margin improvements, which, combined with a solid sales achievement, contributed to bottom line success. Profit after taxation is £7.81 million (2001 : £7.15 million) representing an increase of 9.2%. Acquisition During the year our German Company, Objectflor, acquired the assets and business of Saarfloor GmbH. This acquisition is significant as it broadens our product offering to the German market by the addition of rubber sheet, tile and accessories under our own branding. Since the acquisition in April 2002 , Saarfloor has already contributed to Group profitability. Product Development Over the last decade our capital investment programme has been significant, with investment of approximately £34 million in fixed assets. During this financial year the expenditure in this respect, at £2.15 million, is below the average but by no means an austerity measure; rather a focused plan to capitalise on prior investments. Our technical engineering development and manufacturing resources have been charged with obtaining maximum benefits from new product development. Already, the bulk of our product range benefits from factory-finished coating offering improved maintenance over the life of the product. As I write our customers, both at home and abroad, are placing stock orders for the XL PU coated product, a polyurethene reinforced factory finish on the core flooring product. Increasingly we are focused on products developed and manufactured for us overseas, particularly in China, Italy and Japan. In recent years, within flooring, we have augmented our traditional sheet range by sourced products. This close co-operation with other manufacturers has enabled us to add complimentary products to our portfolio for sale through our tried and tested market channels. Ongoing product development of domestic luxury vinyl has seen the launch of a major range in Germany and central Europe and plans to launch this range in the UK are at an advanced stage. This growth has been possible by utilising technical, manufacturing and marketing resources originally devoted to purely manufactured products. Changing Environment From being a Manchester based manufacturer, James Halstead plc has extended its business to being a significant supplier of a comprehensive variety of flooring products in addition to the original Polyflor range. Overcapacity in flooring manufacture and the increased costs of European manufacture dictate that we continue to form alliances with other manufacturers. This significantly reduces the risks associated with a purely UK manufacturing base. Involvement of our own personnel in these ventures is crucial. With increasing emphasis on recycling, our strengths again come to the fore as Polyflor has been actively recycling for 40 years, with over 97% of production waste being recovered into the manufacturing process. In addition, a significant amount of post-consumer waste is recycled with over 7,000 tonnes of predominantly packaging waste from the food industry being used as an alternative to 'virgin' PVC. Polyflor Limited (The UK flooring business) Overall this was a satisfactory year, the net result of which was an increase in profitability. Like for like turnover reduced marginally as a result of less business emanating from the electronics sector where in previous years Polyflor Antistatic Flooring has been a greater contributor to total turnover. In addition, our USA distributor significantly under performed against the previous year; a new distributor was appointed in July 2002. Polyflor is benefiting more and more from products sourced overseas, and our business, whilst still significantly focused on manufacture, is increasingly using its resources in joint venture arrangements. Despite inflationary pressures on manufacturing costs, most particularly employment costs, the company has more than offset these cost increases by improved margins resulting from product mix. These new initiatives have shown that there are potentially large savings in unit labour costs accruing from diverting the manufacture of our traditional products to overseas manufacturers. However, the Board believes that following twenty years of capital investment in the best equipment of its kind in the industry we, at present, maintain a significant competitive edge. The challenges for the Company come from the increasing cost of operating a manufacturing process within the UK economy. The increased cost of insurance premiums has been significant and well documented by the financial press. In addition to generally large increases in property and business interruption insurances, the pressure on employers' liability insurance is acute, with a widespread claims exacerbated by so called 'trippers and slippers'. Objectflor Art & Design (Germany and Central Europe) Turnover reduced slightly over the previous year which we believe was largely due to the state of the German economy. However, a favourable product mix and the acquisition of Saarfloor enabled the overall margin to be maintained at last year's level. There was a reduction in overhead expenditure, but increased expenditure on sales activities to ensure our market share was maintained. Profitability fell below the level of last year but Objectflor's performance was commendable, being achieved against the worst market conditions seen in Germany for many years. Halstead Flooring Concepts (New Zealand and Australia) Our Australian business (Polyflor Australia) and New Zealand business (Halstead Flooring Concepts) were placed under a new management structure early in the year. Halstead Flooring Concepts Pty Limited, (Australasia), now directs operations locally and sales have increased significantly (by 39% in Australia and by 7% in New Zealand). The restructuring of these businesses has involved major changes in the management structure and sales and administration support of both companies and it has also involved the relocation of our Australian Head Office from Brisbane to Melbourne. Phoenix Distribution (NW) Ltd (Motorcycle accessories) The motorcycle accessories market has experienced a difficult year in which turnover declined by 7%. Despite this, Phoenix's net margin increased in absolute terms and overheads remain under tight control. The market place in the first half of the year proved particularly difficult with administrative receivers being appointed to two of the industry's significant retailers M & P Accessories and Bikes UK. Retail sales have since remained fragile. Despite this, the Belstaff motorcycle-clothing brand enjoyed a very good year and remains the premier brand in motorcycle clothing, as does the Arai helmet, another of Phoenix's major product lines. In a difficult year Phoenix brought in a satisfactory result. Audited Consolidated Profit and Loss Account for the year ended 30 June 2002 2002 2001 as restated £'000 £'000 Turnover 93,033 93,541 ____________ ___________ Operating profit 10,838 10,467 Net interest receivable 437 222 ____________ ___________ Profit on ordinary activities before taxation 11,275 10,689 Taxation on ordinary activities (3,465) (3,538) ____________ ___________ Profit on ordinary activities after taxation 7,810 7,151 Dividends (3,674) (3,697) ____________ ___________ Retained profit for the year 4,136 3,454 ____________ ___________ Earnings per ordinary share (as defined in Note 4) - headline 28.8p 24.7p - basic 28.3p 24.2p - fully diluted 28.2p 24.2p All the above results derive from continuing operations Audited Consolidated Balance Sheet as at 30 June 2002 2002 2001 as restated £'000 £'000 Fixed assets Intangible assets 2,909 2,563 Tangible assets 21,756 22,774 ____________ ___________ 24,665 25,337 ____________ ___________ Current assets Stocks 20,521 18,806 Debtors 17,727 19,771 Cash at bank in hand and on short-term deposit 13,755 10,069 ____________ ___________ 52,003 48,646 Creditors - amounts falling due within one year (24,905) (22,453) Net current assets 27,098 26,193 ___________ ___________ Total assets less current liabilities 51,763 51,530 ____________ ___________ Creditors - amounts falling due after more than one year (188) (201) Provisions for liabilities and charges (1,976) (2,119) ____________ ____________ 49,599 49,210 ____________ ____________ Capital and reserves Equity share capital 2,673 2,841 Non-equity share capital 200 200 ____________ ____________ Called up share capital 2,873 3,041 Share premium account 4,369 3,766 Revaluation reserve 3,544 3,544 Capital reserve 523 328 Profit and loss account 38,290 38,531 ____________ ____________ 49,599 49,210 ____________ ____________ Audited Consolidated Cash Flow Statement for the year ended 30 June 2002 2002 2001 £'000 £'000 Net cash inflow from operating activities 15,233 15,851 Returns on investments and servicing of finance 395 214 Taxation paid (2,111) (3,259) Capital expenditure (1,582) (3,290) Acquisitions and disposals (251) 582 Equity dividends paid (3,173) (3,140) ____________ ___________ Cash inflow before use of liquid resources and financing 8,511 6,958 Management of liquid resources 4,616 (2,277) Financing: Purchase of own shares (5,096) (2,684) Shares issued 192 - ____________ ___________ Increase in cash 8,223 1,997 ____________ ___________ Reconciliation of net cash flow to movement in net funds Increase in cash 8,223 1,997 Cash flow from change in liquid resources (4,616) 2,277 ____________ ___________ Change in net funds resulting from cash flows 3,607 4,274 Effect of exchange differences 79 (309) ____________ ___________ Movement in net funds for the period 3,686 3,965 Net funds as at 30 June 2001 10,069 6,104 ____________ ___________ Net funds as at 30 June 2002 13,755 10,069 ____________ ___________ Statement of Total Recognised Gains and Losses for the year ended 30 June 2002 2002 2001 as restated £'000 £'000 Profit for the financial year 7,810 7,151 Currency translation differences on foreign currency net 237 (600) investments __________ ___________ Total recognised gains relating to the year 8,047 6,551 ___________ Prior year adjustment (2,265) Total recognised gains since the last report 5,782 ___________ Reconciliation of Movements in Shareholders' Funds for the year ended 30 June 2002 2002 2001 as restated £'000 £'000 Profit for the financial year 7,810 7,151 Dividends (3,674) (3,697) __________ ___________ 4,136 3,454 Other recognised gains and losses relating to the year 237 (600) Purchase of own shares (4,614) (3,166) New share capital subscribed 630 475 __________ ___________ Net increase in shareholders' funds for the year 389 163 Opening shareholders' funds (originally £51,475,000 before prior 49,210 49,047 year adjustment of £2,265,000) __________ ___________ Closing shareholders' funds 49,599 49,210 __________ ___________ Equity shareholders' funds 49,399 49,010 Non-equity shareholders' funds 200 200 __________ ___________ 49,599 49,210 __________ ___________ NOTES 1. The final dividend of 9.0p per share will be paid on 6 December 2002 to shareholders on the register as at 1 November 2002. The full report and accounts will be posted to shareholders on 4 November 2002. 2. The financial information on pages 6 to 11 does not represent the statutory accounts of the Group. Statutory accounts for the year ended 30 June 2001 have been delivered to the Registrar of Companies, carrying an unqualified audit report and no statement under S.237 (2) or (3) Companies Act 1985. 3. Statutory accounts for the year ended 30 June 2002 have not yet been delivered to the Registrar of Companies. They will carry an unqualified audit report and no statement under S.237 (2) or (3) Companies Act 1985. 4. Calculation of earnings per ordinary share 2002 2001 as restated £'000 £'000 Profit on ordinary activities after taxation 7,810 7,151 Preference dividend (11) (11) ------- ------- Net earnings 7,799 7,140 Goodwill amortisation charge 153 147 ------- ------- Headline earnings 7,952 7,287 ------- ------- Weighted average number of ordinary shares in issue 27,578,577 29,553,763 Headline earnings per ordinary share 28.8p 24.7p Basic earnings per ordinary share 28.3p 24.2p Fully diluted earnings per ordinary share 28.2p 24.2p 5. Prior year adjustment The prior year adjustment relates to the adoption of FRS 19 - Deferred Tax and has led to a restatement of 2001 figures as previously reported. Year end 30 June 2001 As reported As restated £'000 £'000 Profit and loss account Taxation 3,091 3,538 Profit after tax 7,598 7,151 This information is provided by RNS The company news service from the London Stock Exchange

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