Preliminary Results

James Halstead PLC 3 October 2000 JAMES HALSTEAD plc PRELIMINARY ANNOUNCEMENT OF AUDITED RESULTS FOR THE YEAR ENDED 30 JUNE 2000 KEY FIGURES * Pre-tax profit up to £9.95m - 7.5% increase (excluding exceptional items) * Final dividend per ordinary share of 7.7p (7.125p) making a total for the year of 11.75p - 6.8% increase * Headline earnings per ordinary share up to 22.8p (20.4p) - 11.8% increase * Nil net borrowings (Nil) Vincent Clare, Chairman, James Halstead plc said: 'The progress made to date in our European and Australasian branches of the core flooring business and the innovations being introduced at the Manchester factory, together with the sales expansion at Phoenix, all augur well for the coming year.' Enquiries: Mark Halstead, Chief Operating Officer Gordon Oliver, Finance Director Telephone: 020 7796 4133 on Tuesday, 3 October 2000 0161 767 2500 thereafter JAMES HALSTEAD plc PRELIMINARY ANNOUNCEMENT OF AUDITED RESULTS FOR THE YEAR ENDED 30 JUNE 2000 STATEMENT BY THE CHAIRMAN, VINCENT CLARE Results I am very pleased to be able to report that pre-tax profits for the year have, once again, improved. In spite of the continuing strength of sterling, the persistent high cost of raw materials, and the inexorable competition in all our markets, we have achieved an increase of 7.5% over last year (excluding exceptional items) to £9.95 million. The operating profit from continuing operations was £9.83 million - 12.4% ahead of last year. Turnover from continuing operations amounted to £91.9 million, showing an increase of 16.6% over last year. Dividend Your board proposes a final dividend of 7.7p per ordinary share, making a total for the year of 11.75p, an increase of 6.8%. Acknowledgements I record my grateful appreciation of the hard work and dedication of all personnel throughout the Group, without which these results could not have been achieved. More tangible rewards will take the form of a distribution under the Group Profit Sharing Scheme. Outlook The progress made to date in our European and Australasian branches of the core flooring business, and the innovations being introduced at the Manchester factory, together with the sales expansion at Phoenix, all augur well for the coming year. Our worldwide sales penetration and our wealth of experience and innovation in production and competitive purchasing, keep us ahead in our markets. All of these factors, coupled with a strong balance sheet, point, I believe, to continuing progress. Vincent Clare Chairman 3 October 2000 CHIEF EXECUTIVE REVIEW Solid Growth It was a year of solid performance with turnover on our continuing operations increasing by 16.6% to £91.9 million. Operating profit on continuing operations was increased by 12.4% to £9.83 million and headline earnings per share were increased 11.8% to 22.8p. The growth in sales was achieved both overseas and in the home market. In addition, it has been a year of investment in new products with several important launches and the groundwork laid for much more. Our businesses do not stand still, and in marketplaces where competitors are faltering in terms of profitability, there are still good opportunities. During the year we welcomed Mark Halstead onto the Board. Having started in the business 20 years ago Mark has progressed through the flooring organisation. He has been in charge of our European company for some years and set up JHT, both of which have had a great influence on the increase in profits that are reported this year, with JHT sales having increased five-fold over last year. He has now taken up the responsibility of managing and developing the flooring businesses where benefits are already emerging. It has been a year of change for the Group. Early in the year we were successful in disposing of Driza-Bone which had been part of the Group since 1989. Unfortunately the export potential of the product had lessened and the factory was hampered by old equipment and high labour costs. The flooring manufacturing company changed its name to Polyflor Limited (from James Halstead Limited) to reflect the brand which accounts for a high proportion of the Group's flooring sales. The parent company also dropped the word 'Group' and adopted a new identity under the signature of the founder of the company. Flooring Flooring represents the larger proportion of our turnover and in this area sales were increased by nearly 18% in the year, with, encouragingly, much of the growth coming from new products in our portfolio. The overseas companies performed particularly well and have underlined the importance of the Board's strategy of developing overseas markets. In a sector where James Halstead plc derives much of its profitability it remains as important as ever to stay ahead as market share is not a sinecure; it is earned by hard work, determination and skill. Polyflor Limited There was strong sales growth in the year at Polyflor both in the home market and overseas. Sales volumes increased by nearly 8% against strong competition. In the UK, where we are market leaders, there was growth in project business particularly in the healthcare sector through PFI initiatives. Notable successes were the hospitals at Woolwich, Wythenshawe, Hereford and Carlisle. There were also successes in specialised products for the pharmaceutical and electronics sectors. The strength of our product and the backup and service provided by Polyflor are industry renowned and have held us in good stead as customers look to 'whole-life' costs and not just initial purchase price. In overseas markets growth has continued but uncertain market conditions and adverse exchange rates have affected margins. The optimism I expressed in my review last year over sales opportunities has proved well founded particularly in Russia. Other markets such as the USA and South Africa have also shown very marked progress. Based in Whitefield, Manchester the factory continues to be an innovator in flooring. The Polyflor PU coating noted in last years review has been a significant factor in this year's performance and there have been further major advances in the development of our safety flooring, Polysafe. The new Polysafe product is revolutionary in that it offers, for the first time in this market sector, a truly low maintenance product. The design and colourways have been developed in consultation with some of the UK's leading commercial interior design firms. This product innovation has been achieved by the incorporation of Supratec, a system which has been developed in partnership with Dupont using RayTec. The Supratec brand is being developed to help differentiate the new products within our already successful Polysafe family. Recently, the product has been launched within the UK and the initial response has been good. This is the successful culmination of over two years focused effort from the Manchester product development team. During the year we have also enhanced and extended our range of rubber flooring products and we see this type of extension continuing as it takes us into new market areas where we can benefit from our strong Polyflor brand and our knowledge of the commercial flooring market. During the year Polyflor received two important awards. Firstly, Polyflor has been voted commercial flooring manufacturer of the year, following a nationwide poll by the industry trade publication 'Contract Flooring Journal'. Secondly, we have been awarded the environmental management standard EN14001 which I noted we were striving for last year. Investments in computer systems and internet connections have been made which will continue to support the business effectively. Polyflor Australia Pty Ltd (the Australian distributor) Polyflor Australia increased sales by 14% this year achieving a greater penetration of the market and improving market share. In addition, margins improved resulting in higher net profit. The company has strengthened its representation in order that all states are well covered with both sales staff and warehouse facilities. It was particularly encouraging that the major regional market, New South Wales, showed very strong sales growth. During the year, JHT's Expona luxury vinyl tile products were launched and have already begun to contribute to profitability. In the tile market, Polyflor Australia have also sourced a competitive product which complements the Polyflor product range, and are winning significant orders in specialised areas. In order to assist in the continued development of the Australian marketplace, a Marketing Manager from Polyflor Ltd has been seconded to Australia. The management look forward to the new year with confidence. Halstead Flooring Concepts Ltd (the New Zealand distributor) HFC has performed very well with a 12% increase in sales and an excellent uplift in profits. In a relatively small market the company has improved its already significant market position. Several prestigious local contracts were supplied, and the company has developed an excellent local profile. In the latter part of the year the JHT portfolio of luxury vinyl tiles was made available to HFC and sales are, to date, very encouraging. Objectflor Art & Design Belags GmbH (the German distributor) The year was dominated in the early part by the merger of the company with Karndean during which the management very successfully overcame organisational difficulties and several challenging personnel changes. The year was one of progress with turnover increasing by 35%. This was particularly encouraging as the German construction sector was largely stagnant and there has also been some adverse reaction in the public building sector to PVC flooring. Polyflor has countered the latter issue with detailed and objective presentations on the environmental benefits of our flooring products. The financial strength of the company has never been better on the back of a healthy increase in profitability. Objectflor were particularly well placed to benefit from new luxury tile collections from JHT which have been well received in the German marketplace. Three new product launches are planned for the new financial year. Camaro, a new soft contract luxury tile; Expona, a prestigious collection of contract luxury tiles and Performa, the new homogenous flooring range. In a difficult trading climate Objectflor anticipate some further progress in the next financial year. JHT Limited (the flooring tile innovator) I reported, last year, that JHT had been given increased resources to focus on the development of our luxury vinyl tile portfolio. The revised Kudos and new Colonia ranges have been very well received and JHT products now account for 7% of our flooring turnover. The company has, in addition, created a totally new product range with marketing support for entry into the expanding 'soft contract' market. This Camaro range has been prepared for launch early in the new financial year and indications are for further success. The groundwork was also started for the flagship Expona range which will be the most comprehensive contract range of luxury vinyl tile. Having achieved the objective of giving impetus to this product range, the company is now working with all of our flooring companies to capitalise on our well established Polyflor network. To this end the company is being integrated with Polyflor at a managerial and strategic level. This will maintain momentum and unlock synergistic savings. Non-Flooring Businesses The turnover in our non-flooring businesses reduced as a result of the disposal of Driza-Bone. Phoenix Distribution (N.W.) Ltd Phoenix continued to extend its presence in the motorcycle accessories market. Turnover increased by nearly 15%, with another record profit achieved. Helmet sales progressed well and the Arai brand continues to be the most desirable helmet in the market. During the year Motorcycle News awarded the 'Arai Quantum F' product of the year status reflecting the popularity and esteem with which the brand is regarded. The Belstaff range continues to gain market share with a 20% increase in turnover. The Belstaff range has continued to make very good progress in its principal export market, North America. Though profits were ahead of last year, trading has been difficult with intense pressure on margins, most particularly on helmet sales. This will continue in the forthcoming year. I am pleased with the progress in a difficult year. Phoenix moved premises in December 1999 to a new 50,000 sq ft facility in which we invested over £300,000. This offers better working conditions and operational improvements. It is a credit to our staff that the transition went smoothly. A purpose built race support vehicle was acquired to give Phoenix added prominence to our target market at race meetings, achieving exposure through the media, most particularly television. The vehicle has attended all the British Superbike Championship rounds, the Isle of Man TT and several world Superbike events. In the coming year Phoenix will strengthen the management team with a commercial manager dedicated to the Belstaff range and there will be some rationalisation of our portfolio, focusing on the stronger brands. Conway Products Ltd Conway Products had a mixed result for the year but overall provided a satisfactory performance. Sales increased by 7%. Leisure products sales were very slightly increased which reflected a sharp fall in export sales more than offset by increased UK sales. The export sales were reduced due to the competitive advantage gained by European manufacturers. Given that export margins have suffered in recent years the increase in UK sales meant margins overall improved. The Glidalong Trailers Division fared better with a 30% improvement in sales. Sales growth in Glidalong led to pressures on production and temporarily the benefits of improved sales and margins have been negated by the cost of overtime working. The result for the year was marginally better than last year. AUDITED CONSOLIDATED PROFIT AND LOSS ACCOUNT for the year ended 30 June 2000 2000 1999 £'000 £'000 Turnover Continuing operations 91,935 78,878 Discontinued operations 886 5,427 ------------------------------ 92,821 84,305 ------------------------------ Operating profit Continuing operations 9,832 8,744 Discontinued operations (119) 179 ------------------------------ 9,713 8,923 Exceptional item: Goodwill previously written off and provision for loss on disposal of discontinued operation - (3,363) Net interest receivable 233 328 ------------------------------ Profit on ordinary activities before taxation 9,946 5,888 Taxation on ordinary activities (3,033) (3,030) ------------------------------ Profit on ordinary activities after taxation 6,913 2,858 Dividends (3,537) (3,426) ------------------------------ Retained profit/(loss) for the year 3,376 (568) ========= ========= Earnings per ordinary share (as defined in Note 4) - headline 22.8p 20.4p - basic and fully diluted 22.3p 9.2p AUDITED CONSOLIDATED BALANCE SHEET as at 30 June 2000 2000 1999 £'000 £'000 Fixed assets Intangible assets 2,710 2,738 Tangible assets 22,950 22,068 ------------------------------ 25,660 24,806 ------------------------------ Current assets Stocks 20,915 21,669 Debtors 20,055 18,624 Cash at bank and in hand 6,104 7,135 ------------------------------ 47,074 47,428 Creditors - amounts falling due within one year (21,674) (21,272) Net current assets 25,400 26,156 ------------------------------ Total assets less current liabilities 51,060 50,962 Creditors - amounts falling due after more than one year (195) (914) Provision for liabilities and charges - (11) ------------------------------ 50,865 50,037 ========= ========= Capital and reserves Equity share capital 2,987 3,120 Non-equity share capital 200 200 ------------------------------ Called up share capital 3,187 3,320 Share premium account 3,317 2,933 Revaluation reserve 3,670 3,670 Capital reserve 156 - Profit and loss account 40,535 40,114 ------------------------------ 50,865 50,037 ========= ========= AUDITED CONSOLIDATED CASH FLOW STATEMENT for the year ended 30 June 2000 2000 1999 £'000 £'000 Net cash inflow from operating activities 10,910 11,078 Returns on investments and servicing of finance 223 321 Taxation paid (3,566) (3,277) Capital expenditure (4,097) (4,688) Acquisitions and disposals 1,665 (3,112) Equity dividends paid (3,041) (2,546) ------------- ------------- Cash inflow/(outflow) before use of liquid resources and financing 2,094 (2,224) Management of liquid resources (2,535) - Financing: Purchase of own shares (2,536) - Repayment of loans (518) (1,089) ------------- ------------- Decrease in cash (3,495) (3,313) ------------- ------------- Reconciliation of net cash flow to movement in net funds Decrease in cash (3,495) (3,313) Cash flow from decrease in debt 518 1,089 Cash flow from change in liquid resources 2,535 - ------------- ------------- Change in net funds resulting from cash flows (442) (2,224) Effect of exchange differences (54) 48 Borrowings in subsidiaries acquired - (586) ------------- ------------- Movement in net funds for the period (496) (2,762) Net funds as at 30 June 1999 6,600 9,362 ------------- ------------- Net funds as at 30 June 2000 6,104 6,600 ======== ======== STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES for the year ended 30 June 2000 2000 1999 £'000 £'000 Profit for the financial year 6,913 2,858 Currency translation differences on foreign currency net investments (419) 543 Property revaluation - (158) ------------- ------------- Total recognised gains relating to the year 6,494 3,243 ======== ======== RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS for the year ended 30 June 2000 2000 1999 £'000 £'000 Profit for the financial year 6,913 2,858 Dividends (3,537) (3,426) ------------- ------------- 3,376 (568) Other recognised gains and losses relating to the year (419) 385 Goodwill previously written off - 3,063 Purchase of own shares (2,536) - New share capital subscribed 407 652 ------------- ------------- Net increase in shareholders' funds for the year 828 3,532 Opening shareholders' funds 50,037 46,505 -------------- ------------- Closing shareholders' funds 50,865 50,037 ======== ======== Equity shareholders' funds 50,665 49,837 Non-equity shareholders' funds 200 200 -------------- ------------- 50,865 50,037 ======== ======== NOTES 1. The final dividend of 7.7p per share will be paid on 1 December 2000 to shareholders on the register as at 3 November 2000. The full report and accounts will be posted to shareholders on 3 November 2000. 2. The financial information on pages 10 to 13 does not represent the statutory accounts of the group. Statutory accounts for the year ended 30 June 1999 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 2000 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 2000 1999 £'000 £'000 Profit on ordinary activities after taxation 6,913 2,858 Preference dividend (11) (9) -------------------------- Net earnings 6,902 2,849 Exceptional item - 3,363 Goodwill amortisation charge 151 82 -------------------------- Headline earnings 7,053 6,294 -------------------------- Weighted average number of ordinary shares in issue 30,999,695 30,848,428 Headline earnings per ordinary share 22.8p 20.4p Net earnings per ordinary share 22.3p 9.2p There is no dilutive effect on earnings per share resulting from the existence of share options

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