Final Results

James Halstead PLC 30 September 2003 30th September 2003 JAMES HALSTEAD PLC PRELIMINARY ANNOUNCEMENT OF AUDITED RESULTS FOR THE YEAR ENDED 30 JUNE 2003 Key Figures Turnover increased to £99.77 million (2002 : £93.03 million) - up 7.2%. Pre-tax profit increased to £12.21 million (2002 : £11.28 million) - up 8.3%. Headline earnings per share increased to 33.6p (2002 : 28.8p) up 16.7%. Final dividend proposed at 10.0p (2002 : 9.0p) up 11.1%. Total dividend for the year at 15.10p (2002 : 13.75p) up 9.8%. Commenting, Geoffrey Halstead said: 'The management teams of this Group have been fully focused on delivering shareholder value. In a year of record results shareholders will receive a record dividend'. Enquiries: Mark Halstead, Chief Executive Gordon Oliver, Finance Director Telephone : 0161 767 2500 Nick Lyon - Hudson Sandler PR Telephone : 020 7796 4133 CHAIRMAN'S STATEMENT (Geoffrey Halstead) In these results, the Group reports a laudable set of figures with sales at £99.8 million, a 7.2% increase over the previous year. Pre-tax profit at £12.2 million is 8.3% ahead, and post tax profit at £8.6 million - 9.7% ahead. The improvement in sales has been reflected in most, but not all, our markets. The areas of decline were largely anticipated and cost control measures put in place. Our flooring businesses combine to form the backbone of the Group and whilst conditions in the motorcycle accessories market have precluded significant bottom line improvement, Phoenix contributed a more than acceptable result. Dividend The Board are proposing a final dividend of 10.0p per Ordinary Share, being 11.1% ahead of last year. This compares with a post tax profit increase of 9.7% and earnings per share improvement of 16.7%. Despite a climate of falling interest rates and negative stock market sentiment, it is our belief that these results should be reflected in a record dividend. Acknowledgements Over many years I have taken this opportunity to thank the directors, management and employees of this Group for their efforts, and again our teams warrant such a mention. Outlook Once again I am cautiously optimistic about the prospects for the year ahead and given the solid base of our balance sheet, the platform of our organisation around the world and the commitment of the team, I retain this stance. The challenge placed upon us in providing employee pensions might be viewed as a concern, but against the positives of longer lives and low inflation, meaning that pensions are not being eroded by the cost of living, we will be encouraging our staff to consider a longer working life and a greater personal saving toward retirement. CHIEF EXECUTIVE'S REPORT (Mark Halstead) The overall result measured by sales, pre-tax profit, post-tax profit and earnings must be viewed as good, given that all these are at record levels. The business has moved forward measurably, if modestly. However, many markets remain fragile and a cause for concern; the European flooring market and the motorcycle accessories market in the UK being typical examples. A 7.2% increase in sales was the main reason for our achieving a record profit of £12.2 million (2002 - £11.3 million), however the absorption of increased costs resulted in the sales growth not translating more fully to the bottom line. Once again, our flooring interests showed measured improvements in sales and profit across the world, and within our niche markets we held, or progressed our share in all key territories. To single out positives I would note that luxury tile launches in the UK have gone well and our 'cleanability' enhanced products in Polysafe continue to set the standard for the industry. Manufactured products have held their own in a competitive environment, but the year has been an extremely challenging one for our UK factory. Although our investment in equipment earns satisfactory returns, over-capacity in this industry compounds the problems caused by the European economic climate. The results reflect our success in the year of facing this challenge, but inflationary pressures on our UK manufacturing continue. However our dependence on this part of the business has, again, reduced. Polyflor - the UK Business The Polyflor brand is probably the most recognised in the whole of the contract flooring market, and we have increased marketing, sales support and sales representation during the year. This year we launched Voyager, a collection directed at the transport sector. This collection is fully focussed on product specifiers and end-users in the train, bus and shipping markets. The results have been most encouraging. Our ties with the distribution business in the UK have continued and significant growth has been experienced. Whilst never at the lowest price points, we continue to offer value for money and have increased our focus on bringing business to our distribution partners. Once again, our next generation of safety floors has proved successful and an increasing focus on end-user requirements continues. Energy usage, sustainability and environmental impact are important issues, and the company has emphasised its commitment in this respect by greater impetus to marketing our environmental policies. Halstead Flooring Concepts - New Zealand The company had a good year with a 16% improvement in sales, partially as a result of being selected as the supplier of flooring to the largest hospital to be built in New Zealand. The spin-off benefits of this have included other projects in Auckland and several other refurbishment programmes in New Zealand. During the year our own brand range of cushion vinyl was successfully launched and already has established a significant market share. The challenge for this long established distributor is to expand its range of end-users with its portfolio of products. Objectflor - The Central European Market The economic conditions in Germany and its neighbouring countries have been consistently gloomy over the past year. Our competitors report sales decline, with many reducing their workforce. Objectflor is well organised and has followed a business concept of ignoring competitor activity. Our sales team increased during the year, and there has been a sales growth of almost 14%. Whilst the addition of complementary flooring products was significant, it was by no means the only reason for growth, and in the most difficult sector, homogeneous sheet, market share improved. Karndean also contributed to growth with its budget range of products. Cost increases, associated with freight and distribution activities, blunted some of the bottom line improvement and increased demands for product samples also prevented the full effect of sales improvement from reflecting totally into profit. Nevertheless, in a depressed market, the company's progress was good. Given the economic backdrop, debtor control was a key management objective and both debtors and stock levels improved during the year. Halstead Flooring - Australia In terms of sales growth, Australia has performed well with a year on year growth of 15%. This was, however, below target and the planned investment in point-of-sale material and additional sales staff resulted in a shortfall in budgeted profit. The relocation of the head office to Melbourne was completed within agreed timescales, but problems associated with this move proved to be another contributory factor to the profit shortfall. The Group Board have augmented the management and the combination of further sales growth and a more settled team has been reflected in improved results towards the year-end. Despite the changes and sales growth, debtor levels are below last year and stockholding broadly on a par. Polyflor Hong Kong Polyflor Hong Kong was established in 1992 and directs the flooring distributors in the Asian markets, primarily China, Singapore, Malaysia and Japan. As a result of the local team's efforts, Polyflor is consistently short listed for major projects throughout the Far East/Pacific Rim. The company has enjoyed a successful year, improving our presence in one of the most competitive areas for project business in the world. From prestigious Japanese transport projects and the SARS clinics of Singapore to the large hospitals of China, the progress has been steady and Polyflor's hallmarks of solid technical input to specification and customer service have consolidated our achievements over the years with a 14% improvement in sales. Polyflor Nordic This year saw the Scandinavian business grow with our established Norwegian base continuing to advance the Polyflor product range by continued progress in Sweden. Sales have increased by 12% and the business is moving into larger warehousing premises in Oslo early in the new financial year. The core Polyflor range is to be augmented with the distribution of wood laminates, new luxury tile offerings and the Saarfloor range of rubber flooring which has already proved itself in the central European market. Towards the end of the year a branch was opened in Sweden and a direct sales force established. Phoenix Distribution - Motorcycle Accessories Given adverse market conditions, the Board are satisfied with the significant contribution made by Phoenix to Group profitability. Whilst UK operations generally suffered, the Belstaff brand continues to perform well. Phoenix Distribution sells predominantly to the motorcycle retail trade and the market leader in this sector ceased to trade during the year after months of speculation and uncertainty. Despite this, cash generation and profit were creditable, a result of working capital control being a key management objective, avoiding the temptation of speculative stock purchases which could have required considerable discounting at point of sale. Within the brand portfolio, the results were mixed. Arai performed well against the UK market trend. The Shark product, however, was hampered by production delays, which are unacceptable to customers in an extremely competitive sector. The Belstaff performance, which also suffered from UK problems, was more than compensated for by the European brand performance. Sales of products under the Belstaff brand have continued to be a significant factor over the last 12 months. Prospects The Group's companies are well placed to continue to deliver a satisfactory return on our investments. Given our share in certain markets, we are inevitably exposed to general economic conditions but, this said, some new products will be added to complement the 'Halstead' portfolio. We have limited ability to add to our manufacturing base and there appears to be a sentiment against manufacturing by government, both at a national level and, much more surprisingly, at local government level. Whilst this is regrettable, it seems likely that the proportion of total sales made by the Manchester factory will continue to decline. Despite this, it is reasonable to look forward, albeit prudently, to continued success. Audited Consolidated Profit and Loss Account for the year ended 30 June 2003 2003 2002 £'000 £'000 Turnover 99,775 93,033 Operating profit 11,792 10,838 Net interest receivable 419 437 Profit on ordinary activities before taxation 12,211 11,275 Taxation on ordinary activities (3,646) (3,465) Profit on ordinary activities after taxation 8,565 7,810 Dividends (3,797) (3,674) Retained profit for the year 4,768 4,136 Earnings per ordinary share (as defined in Note 4) - headline 33.6p 28.8p - basic 33.0p 28.3p - diluted 32.8p 28.2p All the above results derive from continuing operations Audited Consolidated Balance Sheet as at 30 June 2003 2003 2002 £'000 £'000 Fixed assets Intangible assets 2,737 2,909 Tangible assets 20,331 21,756 23,068 24,665 Current assets Stocks 21,436 20,521 Debtors 17,639 17,727 Cash at bank in hand and on short-term deposit 18,956 13,755 58,031 52,003 Creditors - amounts falling due within one year (27,484) (24,905) Net current assets 30,547 27,098 Total assets less current liabilities 53,615 51,763 Creditors - amounts falling due after more than one year (204) (188) Provisions for liabilities and charges (1,960) (1,976) 51,451 49,599 Capital and reserves Equity share capital 2,543 2,673 Non-equity share capital 200 200 Called up share capital 2,743 2,873 Share premium account 4,442 4,369 Revaluation reserve 3,544 3,544 Capital reserve 656 523 Profit and loss account 40,066 38,290 51,451 49,599 Audited Consolidated Cash Flow Statement for the year ended 30 June 2003 2003 2002 £'000 £'000 Net cash inflow from operating activities 17,261 15,233 Returns on investments and servicing of finance 397 395 Taxation paid (3,838) (2,111) Capital expenditure (1,626) (1,582) Acquisitions and disposals - (251) Equity dividends paid (3,645) (3,173) Cash inflow before use of liquid resources and financing 8,549 8,511 Management of liquid resources - 4,616 Financing: Purchase of own shares (3,505) (5,096) Shares issued 76 192 Increase in cash 5,120 8,223 Reconciliation of net cash flow to movement in net funds Increase in cash 5,120 8,223 Cash flow from change in liquid resources - (4,616) Change in net funds resulting from cash flows 5,120 3,607 Effect of exchange differences 81 79 Movement in net funds for the period 5,201 3,686 Net funds as at 30 June 2002 13,755 10,069 Net funds as at 30 June 2003 18,956 13,755 Statement of Total Recognised Gains and Losses for the year ended 30 June 2003 2003 2002 £'000 £'000 Profit for the financial year 8,565 7,810 Currency translation differences on foreign currency net investments 513 237 Total recognised gains relating to the year 9,078 8,047 Prior year adjustment - (2,265) Total recognised gains since the last annual report 9,078 5,782 Reconciliation of Movements in Shareholders' Funds for the year ended 30 June 2003 2003 2002 £'000 £'000 Profit for the financial year 8,565 7,810 Dividends (3,797) (3,674) 4,768 4,136 Other recognised gains and losses relating to the year 513 237 Purchase of own shares (3,505) (4,614) New share capital subscribed 76 630 Net increase in shareholders' funds for the year 1,852 389 Opening shareholders' funds (2001 : originally £ 51.475m before prior 49,599 49,210 year adjustment of £ 2.265m) Closing shareholders' funds 51,451 49,599 Equity shareholders' funds 51,251 49,399 Non-equity shareholders' funds 200 200 51,451 49,599 NOTES 1. The final dividend of 10.0p per share will be paid on 5 December 2003 to shareholders on the register as at 31 October 2003. The full report and accounts will be posted to shareholders on 3 November 2003. 2. The financial information on pages 7 to 11 does not represent the statutory accounts of the Group. Statutory accounts for the year ended 30 June 2002 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 2003 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 2003 2002 £'000 £'000 Profit on ordinary activities after taxation 8,565 7,810 Preference dividend ( 11) ( 11) Net earnings 8,554 7,799 Goodwill amortisation charge 172 153 Headline earnings 8,726 7,952 Weighted average number of ordinary shares in issue 25,960,207 27,578,577 Weighted average number of ordinary shares in issue 26,083,850 27,640 686 (diluted for the effect of outstanding share options) Headline earnings per ordinary share 33.6p 28.8p Basic earnings per ordinary share 33.0p 28.3p Diluted earnings per ordinary share 32.8p 28.2p This information is provided by RNS The company news service from the London Stock Exchange

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