James Latham Share Blog – Interim Results Year Ending 2020

James Latham has now released their interim results for the year ending 2020.

Revenues increased by £7.4M when compared to the first half of last year and with cost of sales only up £5.8M, the gross profit was £1.7M higher.  Selling and distribution costs increased by £1M but admin costs were broadly flat to give an operating profit £743K higher.  There was no profit on the disposal of a property, however, which was £1.1M last time so after finance costs grew by £57K and tax expenses were up £212K the profit for the period was £6.7M, a decline of £564K year on year.

When compared to the end point of last year total assets increased by £9.9M, driven by a £4.3M recognition of right of use assets, a £3.1M increase in receivables, a £997K growth in cash and a £983K increase in deferred tax assets.  Total liabilities also increased as a £1.1M decline in tax payable was more than offset by a £4.4M recognition of lease liabilities, a £5.9M increase in pension obligations and a £1.2M growth in payables.  The end result was a net tangible asset level of £95.2M, a decline of £294K over the past six months.

Before movements in working capital, cash profits increased by £1.6M to £9.5M.  There was a cash outflow from working capital but this was less than last tie and after tax payments increased by £1.3M the net cash from operations was £4.9M, a growth of £4.2M year on year.  The group spent a net £1.4M on property, plant and equipment to give a free cash flow of £3.6M. The group paid out £2.5M in dividends to give a cash flow of £997K and a cash level of £16.5M at the period-end.

During the period the revenue increase was due to a strategic change in product mix as overall volumes have been flat.  The panel product business has seen an increase in delivered volumes through their warehouses, but a reduction in their direct volumes. Their timber business has also seen an increase in delivered volumes, especially on added value products.  Prices have decreased on most of their commodity panel products but timber prices have remained stable.

Warehouse costs were higher due to the increased volumes through warehouses and as part of the strategy to increase the working hours to better meet customer needs.  Three of their depots are now working 24 hours a day five days a week.  The increased delivered volumes have also resulted in an increase in distribution costs but admin costs are down with a reduction in the bad debt charge.

The second half of the year has started well with margins slightly ahead.  They are seeing increased sales at Abbey Woods, the Irish business purchased in February 2019, and an improvement in their panel product volumes. Purchase prices of their commodity panel products remain weak.  The investment in the Gateshead facility to improve site efficiency is going well and should be completed in June.  The racking investment in Purfleet will be completed by the end of December 2019.  The majority of customers are busy and the board remain confident that they can continue to grow their business.

At the current share price the shares are trading on a PE ratio of 16.5 and are yielding 1.9%.  There are no current forecasts available.

On the 25th November the group announced that it had acquired Dresser Mouldings, a processor of timber and cladding products, for £1M.  Last year the business had an EBITDA of £276K.  They specialise in the processing and vacuum coating of bespoke timber products, the production of timber mouldings and other specialist timber machining for use in a variety of market segments.  They operate from one site in Rochdale and an online store.

Overall then this has been a decent period for the group.  Profits fell but this was because there was no land sale this year and underlying profit saw an increase.  Net assets declined due to the pension obligations increasing but the operating cash flow improved with a decent amount of free cash being generated.  Volumes seem to be static but the group are selling more value added product which is fuelling the good performance.  Trading seems to be pretty steady but the shares are not exactly cheap with a PE of 16.5 and yield of 1.9%.

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