James Halstead has now released their interim results for the year ending 2015.
When compared to the first half of last year, revenues increased by £6.3M, equivalent to 5.7% although on a constant currency basis, like for like turnover is some 10.3% ahead of last year which meant that after a smaller increase in cost of sales, operating profit was some £1M higher at £21.6M before an improved finance costs was more than offset by a small increase in tax to give a profit for the year of £16.2M, a £1M increase when compared to the first six months of 2014.
When compared to the end point of last year, total assets increased by £5M driven by an £8M growth in cash levels and a £2.1M increase in the value of derivative financial assets, partially offset by a £7.2M fall in receivables. Liabilities also increased during the period due to a £4.6M growth in pension obligations, a £1.6M increase in current tax liabilities and a £901k growth in payables to give a £2M decline in net tangible assets, although the balance sheet remains strong with £93.3M worth of tangible equity.
Operational cash flows improved considerably during the first six months of the year, helped by the previously seen reduction in receivables to give a figure some £8.1M higher than last time at £28.3M. We then see a fall in tax being offset by an increase in capital expenditure before a reduction in the proceeds from the sale of fixed assets and an increase in dividends meant that the cash flow for the year was £8.2M, a £4.4M improvement on last time to give a cash pile of £46.7M at the end of the half. This company continues to be very cash generative and there seems to be scope for a further increase in dividends going forward if this continues.
UK trading performed solidly despite competitor activity and reported figures were 9% ahead of the first half of last year and the group continues as market leader in this country, and indeed increased market share. The European business grew by some 6.7% at a constant currency basis and the Oceania business grew by 11% at the same measures. One project that was completed during the year was at the Sjoskrenten student hostel on the Svalbard archipelago, probably the most northerly contract yet. Gross margin improved slightly on last time helped by downward pressure on raw materials. The refurbishment business completed contracts at the Cardiff International Swimming Pool, the Calgary Stampede showground and the extensive Daenisches Bettenlager retail outlets in Germany.
Overheads grew above inflation with the largest being infrastructure expenses associated with sales into global markets but the costs are in line with plans as the group expands into new territories such as the Middle East, India and Canada. Also during the year Simplay, a loose lay tile was awarded best flooring innovation by the Euro Décor magazine and Expona Flow, the design sheet, was launched at the BAU exhibition in Munich in January. The award winning recycling scheme collected record amounts of waste destined for landfill and returned it to the manufacturing loop.
As well as quoting famous poets and statesmen, the board have confidence with regards the full year result but the continued strength of Sterling presents some headwinds in the coming months. After the announcement of a 4.7% increase in the interim dividend, the shares now trade on a yield of 3.1% rising to 3.3% for the full year forecast.
This was a good update, profits increased, as did operational cash flow, although this was mainly due to a large reduction in receivables but the group remains very cash generative. Net assets did fall slightly due to an increase in pension liabilities but the balance sheet remains very strong. There is some good news in that raw material costs are falling with lower energy prices but overheads in general increased as the group pushed into new markets. The strong sterling is likely to cause some problems for James Halstead, however, as they export a lot of their products overseas. As an aside, it is interesting to see the report being littered with quotes from famous people and it can’t be coincidence that the interim dividend is 3.142p, or the first four digits of pi! I think the directors are having a bit of fun here which suggests some confidence in the group’s performance (hopefully not overconfidence). The yield is getting to a decent level again now and I see these shares as a very strong hold having topped up earlier in the year.
On the 29th July the group released a trading update for the full year. Trading has been solid and profit before tax will be ahead of last year and in line with market expectations. There is confidence that the full year dividend will be increased once again. Not really much here that we didn’t already know but a decent update nonetheless.