Preliminary Results

James Halstead PLC 22 September 2006 22 September 2006 JAMES HALSTEAD PLC PRELIMINARY ANNOUNCEMENT OF AUDITED RESULTS FOR THE YEAR ENDED 30 JUNE 2006 Key Figures • Turnover increased to £126 million (2005: £112.4 million) - up 12% • Pre tax profit increased to £17.48 million (2005: £13.76 million) - up 27% • Total dividend per ordinary share for the year at 12.25p (2005: 9.875p) - up 24% • Final dividend per ordinary share proposed of 8p ( 2005 : 6.375p) - up 25% • Underlying earnings per 5p ordinary share 23.8p (2005: 19.2p) - up 24% • Net cash inflow from operating activities £25.13 million (2005 : £19.87 million) - up 26% The Chairman, Geoffrey Halstead, said: 'This is an excellent performance particularly against a climate of adverse raw material prices, and energy costs. In recent weeks, we have committed funds for further expansion of both distribution facilities and manufacturing capacity and I look forward to the next year with optimism'. Enquiries: Mark Halstead, Chief Executive Gordon Oliver, Finance Director Telephone: 0161 767 2500 Nick Lyon - Hudson Sandler Telephone: 020 7796 4133 CHAIRMAN'S STATEMENT I am very pleased to report, once again, a record set of results. Our profit before taxation is £17.5 million which is some 27% ahead of the £13.8 million of last year. The driving factor behind this result is increased turnover and the Group reports sales of £126 million (2005 : £112.4 million) which is an increase of 12%. The year has seen the company face significant raw material and energy cost increases. However, this excellent set of results, I feel, vindicates the confidence I expressed last year. Dividend The Board proposes to increase the final dividend to 8p (2005 : 6.375p), an increase of 25.5%. The total dividend for the year will therefore be 12.25p (2005 : 9.875p) an increase of 24%. Acknowledgements Once again our team succeeded in facing the challenge of tough markets to expand our operations and on behalf of the Board I extend our thanks for their efforts. In April 2006 the Group gained recognition by receiving the Queen's Award for Enterprise in the category of International Trade. Any successful exporter relies on a sound base in their home market and this award is the result of solid focus by our sales teams in both the UK and overseas. Outlook In recent weeks we have committed funds for further expansion of both our distribution facilities and our manufacturing capacity and given a continuation of current demand, notwithstanding continued upward pressure on raw material costs, I look forward to the next year with continued confidence for another year of progress. Geoffrey Halstead, Chairman CHIEF EXECUTIVE'S REPORT The year was not easy. There was a very challenging environment with adverse raw material prices and energy costs. However, a very strong sales performance and increased productivity mitigated these cost increases. With turnover increased to £126 million (an uplift of 12%) the additional volume offset significant increases in electricity costs and in polymer prices. Gross margins slightly improved. Profit before tax of £17.5 million (2005 : £13.8 million) was 27% ahead of last year. Once again our subsidiaries effectively managed working capital, particularly stock. Consequently, net cash inflow from operations was 26% ahead of last year and the year-end net funds are £25.6 million (2005 : £25.5 million). Given the special dividend of £12.7 million paid in the year this was a satisfying achievement. During the year the Group was presented with the Queen's Award for Enterprise. This was welcome recognition of our efforts in overseas markets and it is pleasing to report further growth in this area. Our international turnover has reached £69.7 million, some 14% ahead of the corresponding £61.2 million for 2005. The projects undertaken are numerous but include Cross River State Hospital in Calabar, Nigeria; Costa Coffee shops in India; the Siemens Arena in Vilnius, Lithuania and Bagram Airbase Hospital in Afghanistan. Our product is actively and regularly sold in over 60 countries. Even though the sales activity has been very good in the year, export markets have further potential and we continue to invest in our distribution chain overseas. The UK market has also been strong. Total UK sales growth of 10% (2006 : £56.3 million; 2005 : £51.1 million) does not fully reflect our growth in flooring as turnover at Phoenix (which has now fully exited motorcycle clothing and the low end of the crash helmet market) fell. Focusing solely on flooring, the UK improvement is 16%. Given the inability to increase prices in this market, due to competitive conditions, this is a laudable achievement. The sales growth in volume terms was not linked to any one product range: across our main product ranges, marbleised, non-directional, safety and luxury vinyl tile we achieved an average 15% growth in volume. Our flooring product has been installed in Arsenal's new Emirates Stadium, in the redeveloped Ascot racecourse and in the new Derby Hospital. Looking at our subsidiaries : Polyflor, (our UK manufacturing base and a major exporter), had a good year of growth despite the previously mentioned cost increases. Turnover was 16% ahead of last year with strong sales both in the UK and overseas and the company was focused on maximising previous capital investments thus creating improvements in output and productivity. The UK market has undoubtedly grown but indications suggest Polyflor also increased its market share in resilient floor coverings. Objectflor, (based in Cologne, Germany). This company acts not just as our stocking point but as our European face. The company markets its flooring ranges (supplied in part by Polyflor) and offers technical back-up, local marketing and sales support through its sales force and its sub-distributors across Western Europe. Turnover increased 20% and projects completed in the year included Ikea's head office in Wallau, Germany and all the restaurants on the Velaro high speed trains in Spain. Karndean International GmbH, (based in Germany). The company specialises in luxury vinyl tiles and traded very well with turnover 27% ahead of last year. Polyflor Australia. With warehousing facilities across the country this company is a significant player in the Australian commercial flooring market. The company supports day to day flooring sales from its premises in each state and a dedicated contract sales force is aimed at winning contracts in projects nationwide. During the year our central warehouse, based in Melbourne, was relocated to much larger premises. Turnover increased by 12%. During the year the company supplied flooring to the Melbourne Cricket Ground, one of the most prestigious contracts available this year. Halstead Flooring Concepts, (based in New Zealand), operates from three locations. This long established distributor continues to be a solid part of the international team. The company, like others, faced competition in its carpet ranges and was not alone in facing difficult trading in that sector. Contract vinyl collections performed more robustly. Polyflor Nordic. Incorporating Polyflor Norway and Falck Design (Sweden), this division continues to perform well. Turnover growth in this division has been 19% in the year. The luxury vinyl tile range, Megastrong, has been fully re-vamped and whilst this happened towards the end of the year, sales indications are good. Phoenix Distribution, (based in Stoke-on-Trent), is a distributor of motorcycle related accessories. The company is much reduced in size following prior year decisions to focus on the premium brand Arai. Last year, our motorcycle clothing sales (Belstaff) ceased and this year saw the final exit from the secondary brand of 'low end' crash helmets. Reduced turnover was inevitable and planned as the brand portfolio shrank, but gross margin and underlying profit (before exceptionals) were improved. Core Arai sales were improved by 4%. The market place remains fragile but Phoenix is firmly focused on one of the few true performance brands and we look forward to building on this base. Outlook This year was the most successful in our history and our subsidiaries and trading partners are well placed to continue this success. There are areas where improved performance can be expected and whilst next year will see investment in new production facilities, the benefits accruing will be late in the year and more likely in 2007/08. Overall the new financial year should see a continuation of growth in turnover and profitability and I expect continued progress. Mark Halstead, Chief Executive Accounting Standards and Prior Year Adjustments There are new Financial Reporting Standards which have an effect on these accounts. • FRS 17 - Retirement Benefits requires the inclusion of a value for the defined benefit scheme deficit in the Balance Sheet as a liability. • FRS 21 - Events after the Balance Sheet Date which means that there is no longer an accrual for dividends proposed after the year end date nor are dividends paid required to be shown on the face of the Profit & Loss Account. • FRS25 - Financial Instruments which requires reclassification of preference shares and C preference shares as debt rather than non-equity share capital. There is a consequent reclassification of preference dividend to the interest line. In summary the 2005 Accounts are restated as follows : • Profit after taxation has been reduced by £41,000 being FRS 17 adjustments of £30,000 ( the net of tax effect of current service cost and other finance income and contributions) and preference dividend of £11,000. • The Balance Sheet has been altered from £57,475,000 to £47,375,000 by the reclassification of £3,537,000 of preference shares to debt; by the add back of £3,227,000 of dividend proposed and by the inclusion of the FRS 17 deficit of £9,790,000. A final adjustment to the comparatives was made in respect of the share sub-division, on 27 February 2006. The company's 10p ordinary shares were sub-divided into two new ordinary shares of 5p each. Audited Consolidated Profit and Loss Account for the year ended 30 June 2006 2006 2005 As restated £'000 £'000 Turnover 126,024 112,353 Operating profit 16,567 12,733 _____________ _____________ Interest and other finance costs 914 1,027 _____________ _____________ Profit on ordinary activities before taxation 17,481 13,760 Taxation on ordinary activities (5,647) (4,276) _____________ _____________ Profit on ordinary activities after taxation 11,834 9,484 _____________ _____________ Earnings per ordinary share (as defined in Note 4) -basic earnings / (loss) per ordinary share 23.3p (0.3)p -underlying earnings per ordinary share 23.8p 19.2p -diluted earnings / (loss) per ordinary share 23.2p (0.3)p All the above results derive from continuing operations. Audited Consolidated Balance Sheet as at 30 June 2006 2006 2005 As restated £'000 £'000 Fixed assets Intangible assets 3,232 3,460 Tangible assets 18,687 20,741 _____________ _____________ 21,919 24,201 _____________ _____________ Current assets Stocks 19,770 20,029 Debtors 21,093 18,887 Cash at bank, in hand and on short-term deposit 30,050 31,675 _____________ _____________ 70,913 70,591 _____________ _____________ Creditors - amounts falling due within one year (37,685) (31,140) _____________ _____________ Net current assets 33,228 39,451 _____________ _____________ Total assets less current liabilities 55,147 63,652 _____________ _____________ Creditors - amounts falling due after more than one year (4,441) (6,134) Provisions for liabilities and charges - (353) _____________ _____________ Net assets excluding pension scheme deficit 50,706 57,165 Pension scheme deficit (8,681) (9,790) _____________ _____________ 42,025 47,375 _____________ _____________ Capital and reserves Equity share capital 2,543 2,531 Equity share capital (B shares) 160 160 _____________ _____________ Called up share capital 2,703 2,691 Share premium account 321 48 Revaluation reserve 3,544 3,544 Capital redemption reserve 3,449 2,942 Profit and loss account 32,008 38,150 _____________ _____________ 42,025 47,375 _____________ _____________ Audited Consolidated Cash Flow Statement for the year ended 30 June 2006 2006 2005 As restated £'000 £'000 Net cash inflow from operating activities 25,130 19,866 Returns on investments and servicing of finance 856 1,274 Return of capital - B share dividend - (9,626) Taxation paid (6,866) (5,860) Capital expenditure (1,035) (5,827) Acquisitions and disposals - (1,390) Equity dividends paid (18,113) (4,743) _____________ _____________ Cash outflow before financing (28) (6,306) Financing: Shares issued 285 406 (Decrease) / increase in debt (1,794) 401 _____________ _____________ Decrease in cash (1,537) (5,499) _____________ _____________ Reconciliation of net cash flow to movement in net funds Decrease in cash (1,537) (5,499) Movement in debt 1,794 (401) _____________ _____________ Change in net funds resulting from cash flows 257 (5,900) Effect of exchange differences (151) 129 Creation of C Shares - (5,559) _____________ _____________ Movement in net funds for the period 106 (11,330) Net funds at start of year 25,515 36,845 _____________ _____________ Net funds at end of year 25,621 25,515 _____________ _____________ Statement of Total Recognised Gains and Losses for the year ended 30 June 2006 2006 2005 As restated £'000 £'000 Profit for the financial year 11,834 9,484 Currency translation differences on foreign currency net investments (438) 597 Actuarial gain / (loss) on the pension scheme 1,546 (1,748) Movement on deferred tax asset relating to the pension scheme (464) 524 _____________ _____________ Total recognised gains relating to the year 12,478 8,857 _____________ Prior year adjustment (implementation of FRS 17) (9,790) _____________ Total recognised gains since the last report 2,688 _____________ Reconciliation of Movements in Shareholders' Funds for the year ended 30 June 2006 2006 2005 As restated £'000 £'000 Profit for the financial year 11,834 9,484 Equity dividends paid (18,113) (14,369) _____________ _____________ (6,279) (4,885) Other recognised gains and losses relating to the year 644 (627) Creation of C shares - (5,559) New share capital subscribed 285 406 _____________ _____________ Net decrease in shareholders' funds for the year (5,350) (10,665) Opening equity shareholders' funds 47,375 58,040 (originally £57,475,000 before prior year adjustments of £10,100,000) _____________ _____________ Closing equity shareholders' funds 42,025 47,375 _____________ _____________ NOTES 1. The final dividend of 8p per ordinary share will be paid on 1 December 2006 to shareholders on the register as at 3 November 2006. The full report and accounts will be posted to shareholders on 20 October 2006. 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 2005 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 2006 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 The company's 10p ordinary shares were sub-divided into two new ordinary shares of 5p each on 27 February 2006. 2006 2005 As restated £'000 £'000 Profit on ordinary activities after taxation 11,834 9,484 B share dividend - (9,626) _____________ _____________ Basic earnings 11,834 (142) Add back B share dividend - 9,626 Goodwill amortisation charge 228 213 _____________ _____________ Underlying earnings 12,062 9,697 _____________ _____________ Weighted average number of ordinary shares in issue 50,764,031 50,487,932 Weighted average number of ordinary shares in issue 51,008,831 50,732,214 (diluted for the effect of outstanding share options) Basic earnings / (loss) per ordinary share 23.3p (0.3)p Underlying earnings per ordinary share 23.8p 19.2p Diluted earnings / (loss) per ordinary share 23.2p (0.3)p This information is provided by RNS The company news service from the London Stock Exchange ZM

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