James Halstead plc (LON: JHD) published its Annual Report and Accounts for the year ended 30 June 2024 on Friday 18 October, and provided notice of its 2024 Annual General Meeting. The Company’s AGM will be held in the Platinum Suite, Toughsheet Community Stadium, Burnden Way, Bolton BL6 6JW on 6 December 2024 at 12.00pm.
Chairman’s Statement
Results
Revenue for the year at £274.9m (2023: £303.6m) was 9.4% behind the comparative year largely driven by headwinds in the UK and Europe. The year was largely positive and the challenges that the Group faced in its major markets were not unexpected and appropriate mitigating actions were already in place. There was further disruption to world trade routes as a result of the ongoing situation in the Red Sea. This has extended delivery times to many export markets, in some cases impacting sales and increasing freight transportation costs.
The geographic spread and diverse sectors to which we supply flooring can be illustrated this year by installations such as the Venetis Chain Stores (Bakeries) in Greece, founded in 1948,Vox Cinemas in Kuwait and the incredible Star of the Seas, which is the second ship from the Icon class mega cruisers, that will be built in Finland.
The reported profit before tax for the year of £56.2m (2023: £52.1m) was 7.9% ahead of the prior year comparative, a good result against a challenging array of market conditions.
Gross margins improved in most of our major markets. Overall, the margins moved from 38% to 44%. Principally this increase was driven by our manufacturing plants which ran longer hours thus improving plant utilisation, and output volumes.
Selling and distribution costs at £53.0m (2023: £53.3m) were slightly below last year and reflect the lower volume of sales (particularly in UK and Europe). Expenses were also mitigated by reduced freight costs and restricted marketing and sampling costs.
Administration overheads at £14.3m (2023: £10.5m) are some 35.7% higher than last year. However, the comparative included a receipt of £1.6m regarding an insurance claim receipt (a one off relating to a major breakdown at the Radcliffe site dating back to 2020) together with an increase in IT expenditure (Australia and New Zealand with new IT systems and major upgrades to our systems security in the UK) representing about 5% of the increase in overheads.
The standard rate of tax in the UK for the year increased to 25% (2023: 20.5%) which in effect added £2.6m to tax charges. As a consequence, profit after tax was £41.5m (2023: £42.4m), a decrease of 2.1%. Consequent to the rise in the effective rate of tax, earnings per share are at 10.0p (2023: 10.2p) which is a decrease of 2%.
Re-investment
Over many years our strategy has also included a policy of continual investment in both process improvement and in product development to improve output efficiency and our product offering. To maintain our competitiveness as manufacturers supplying global markets, we continue to commit to capital investment in the upgrading of plant for efficiency, flexibility, durability and to reduce energy usage.
During the Covid pandemic, and for a period afterward, we had to severely curtail some investment and production improvements. In part this was because of the unavailability of labour due to the covid self-certification of workers and to far greater degree the severe shortage of spares and parts due to the disruption of global supply chains. Consequently, this year has been significant for investment in our various production lines which will continue to underpin growth.
At Riverside two major capital items were approved and work initiated which represented a £350,000 investment. Firstly, a new drive system for the press and registration control systems has been updated and improved. The new equipment will also use less energy.
In addition, preparations were made for replacing the Teesside plant’s fume abatement systems. This will increase line efficiency, increase the level of fume extraction and removal thereby improving air quality, line performance and using less energy. This is a £1.6 million investment.
Royton (our UK main warehouse) is undertaking a full upgrade to modern LED lighting at the cost of £200,000 and our Radcliffe plant is undertaking preparatory work for a £400,000 investment in solar panels where 100% of the energy will be used on site. The breadth of change has been significant and has already led to improved productivity and margin improvement.
Sustainability, social responsibility and the environment
We have recently published our 19th sustainability report that details our actions and ambitions in the areas of the environment, sustainability and social responsibility (available for download from our website).
Climate change has led to a greater focus on carbon dioxide levels but dealing with climate change is not, in our view, just a matter of trying to highlight any one single measure such as carbon emissions or setting net zero targets. As a manufacturer in the UK there are basic levels of environmental legislation that far exceed the standards of many countries and as users of energy we rely on government policies to achieve the greater use of greener energy. In addition, we look to go far beyond that in our ethical sourcing and we strive to have our claims independently audited to credible standards – none of which is required of ‘importers’. Further information on some of the actions that we have taken are referred to in the Chief Executive’s Review.
Dividend
Cash balances increased to £74.3 million (2023: £63.2 million) helped by a further reduction in our stockholdings. The inventory at the year-end is £82.3 million (2023: £87.4 million) which is about 6% lower than the prior year comparative.
During the year taxation paid was £15.5 million (2023: £11.9 million), fixed asset additions of £3.3 million (2023: £2.9 million) and equity dividends paid of £34.4 million (2023: £32.3 million).
The interim dividend of 2.5p (2023: 2.25p) was paid in June 2024. The board, having regard to the cash balances and profitability, is proposing a final dividend of 6.0p (2023: 5.75p) which will mean a total dividend for the year of 8.5p (2023: 8.0p) an increase of 6.25%. This is a record level of dividend and marks our 49th year of increased dividend. This final dividend will be paid on 13 December 2024.
Acknowledgements
Once again, I would like to thank all our colleagues across the globe for their continued efforts in achieving this year’s result.
In memoriam
Special acknowledgement must be made to the Life President, Geoffrey Halstead, who died on 22 August at the age of 94. Geoffrey was a director of the company for 60 years and guided the first steps that were taken to manufacture resilient sheet vinyl flooring and to moving the business from textiles to the focus on Polyflor. He will be sadly missed by staff, past and present and customers, suppliers and the many friends who knew him. Our condolences to the family are heart felt.
Outlook
The results, cash generation and proposed dividend stand testament to the resilience of the products, the business and the management of the Company. After 23 years as a non-executive director with currency crises, the great financial recession, Brexit and more recently the Covid recession and the Ukraine/energy inflation recession one thing has been constant – the Company’s ability to progress even in the face of adversity.
As announced separately, I am stepping down as Chairman at the forthcoming AGM. I have been proud to serve as Chairman since 2017 after many years as a non-executive director.The Company has a strong team both on the board and in the subsidiary companies with solid foundations for continued growth.
Since I joined the board in 2001, turnover is near 300% higher and profit 525% higher. Quoting the late Sir John Harvey-Jones, back in 1993, ‘James Halstead has a consistency of aim and performance, with the results obtained highlighting sound management principles and spectacular growth’.
As I step down, the Company’s prospects continue to look positive into the new financial year and beyond. Projects such as the International Airport JSM in San Jose, capital of Costa Rica underline the reach and deep history of our global sales.
The malaise of the UK and European markets will end, the deferral of spending due to high inflation and the energy crisis will ease and our global markets offer continued opportunity.
James Halstead has operated for more than 100 years, withstanding and resilient to the numerous market challenges that it has faced. The Company is pleased to report a year of profitable growth in FY24 and looks ahead with confidence in the long term growth strategy.
Anthony Wild
Chairman
30 September 2024
James Halstead plc manufactures and supplies flooring products for commercial and domestic uses in the United Kingdom, rest of Europe, Scandinavia, Australasia, Asia, and internationally manufactures and supplies flooring products for commercial and domestic uses in the United Kingdom, rest of Europe, Scandinavia, Australasia, Asia, and internationally.
