James Halstead : JH plc Report & Accounts 2023

Report & Accounts 2023

Expona Commercial PUR

House of Books & Friends, Manchester, UK

Directors and Advisers

Directors	Nominated adviser and stockbrokers
J A Wild FCA	Panmure Gordon & Co
M Halstead	40 Gracechurch Street
G R Oliver FCA MCT	London
S D Hall	EC3V 0BT
M J Halstead	Stockbrokers
R P Whiting
WH Ireland
Secretary	24 Martin Lane
D N Fletcher ACMA ACG	London
Registered office	EC4R 0DR
Beechfield	Independent auditor
Hollinhurst Road	BDO LLP
Radcliffe	3 Hardman Street
Manchester	Spinningfields
M26 1JN	Manchester
Company registration No.	M3 3AT
140269
Website
www.jameshalstead.com
Bankers
National Westminster Bank plc
1 Hardman Boulevard
Manchester
M3 3AQ
Registrars
Link Group
Central Square
29 Wellington Street
Leeds
LS1 4DL

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Contents

Strategic Report
Chairman's Statement	2
Chief Executive's Review	4
Financial Director's Review	9
Section 172 Statement	10
Climate-related Financial Disclosures	14
Sustainability and the environment	19
Governance
Report of the Directors	20
Board Report on Remuneration	24
Corporate Governance	25
Financial Statements
Independent Auditor's Report to the Members
of James Halstead plc	31
Consolidated Income Statement	37
Consolidated Statement of Comprehensive Income	38
Consolidated Balance Sheet	39
Consolidated Statement of Changes in Equity	40
Consolidated Cash Flow Statement	41
Notes to the Consolidated Financial Statements	42
Company Balance Sheet	67
Company Statement of Changes in Equity	68
Notes to the Company Financial Statements	69
Supplementary Information
Ten Year Summary	76
Shareholder Information	77
Notice of Annual General Meeting	78

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Chairman's Statement

Results

Revenue for the year at £303.6m (2022: £291.9m) is 4% ahead of the comparative year largely driven by increased demand across a number of our key markets. This is a record level of sales.

The reported profit before tax for the year of £52.1m (2022: £52.1m) is a fraction over the comparative. Nevertheless, profit after tax is £42.4m (2022: £40.3m) - an increase of 5.1%. A record level of profit. Furthermore, earnings per share are at 10.2p (2022: 9.7p) which is an increase of 5.2% and a record level of EPS.

The financial year was one of contrast, with the earlier months having encountered escalating energy costs, severe difficulties as a result of the lack of timely availability of international shipping and increased transportation costs. However, the latter months of the year were much more positive with the easing of energy costs and a great improvement in shipping and transportation costs. In addition, our export sales in many markets developed as demand increased. The breadth of projects stretches from The Media Centre for the Paris 2024 Olympics, Castlerock Farm in British Columbia to The Centre for Autism Research (CFAR) at the King Faisal Specialist Hospital & Research Centre in Riyadh.

Sales growth has, on the whole, proved positive with the UK, the Americas, Australia, New Zealand and Malaysia all reporting increased demand, although Central Europe sales were lower than last year. As the year progressed, gross margins improved for the reasons already noted helped by the price increases and also by a swing in the mix of sales to pure commercial ranges as opposed to light commercial/heavy domestic. The core focus of our flooring ranges in healthcare, education and retail infrastructure, rather than private residential, remains a key benefit to our business model. Nevertheless, in Germany we have seen recent successes in new residential apartment buildings such as Quartier Möllner Straße in Rostock (Mecklenburg-Vorpommern) and York- Quartier in Münster (North Rhine-Westphalia).

The Company and our strategy

has been listed on the London Stock Exchange for 75 years. The Group was established in 1914 and continues to operate out of the original premises in Bury. In its factories in Bury and Teesside it manufactures resilient flooring for distribution in the UK and worldwide.

The Company's strategy is to constantly develop its brand identity and its reputation for quality, product innovation, durability and availability, thereby enhancing and maintaining goodwill with the aim of achieving repeat business. Our focus is to work with stockists who in turn distribute those bulk deliveries whilst promoting and representing the products to the end users and specifiers who will purchase the stock from those stockists.

This approach is designed to increase and secure revenue streams and drive profitability and cash flow which enables the continuation of dividends, in turn creating shareholder value. In the normal course of business one key element of the Company ethos is having dedicated sales personnel to present our product to our customers' clientele.

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.

Sustainability, social responsibility and the environment

We have in recent weeks published our 18th sustainability report that details our actions and ambitions in the areas of the environment, sustainability and social responsibility. Climate change has led to a greater focus on carbon dioxide levels but climate change it is not, in our view, a matter of trying to highlight any one single measure such as carbon emissions or net zero targets. As a manufacturer in the UK there are basic levels of environmental legislation that far exceed the standards of many countries. However we look to go far beyond that. Further information on the actions that we have taken are included further down in this report.

Dividend

James Halstead is a group of companies involved in the manufacture and supply of flooring for commercial and domestic purposes, based in Bury, UK. James Halstead plc

Our cash balances stand at £63.2 million (2022: £52.1 million) with one of the major reasons for the increase being decreased stock. The finished goods inventory at the

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year-end is £77.1 million (2022: £101.9 million) which is about 24.3% lower than the prior year comparative.

Also of note regarding the cash flow for the year is taxation paid of £11.9 million (2022: £9.9 million), fixed asset additions of £2.9 million (2022: £3.2 million) and equity dividends paid of £32.3 million (2022: £32.3 million).

The interim dividend of 2.25p (2022: 2.25p) was paid in June 2023. The Board, having regard to the cash balances and profitability, is proposing a final dividend of 5.75p (2022: 5.50p) which will mean a total dividend for the year of 8.0p (2022: 7.75p) an increase of 3.23%. This is a record level of dividend.

Acknowledgements

Once again, I would like to thank our colleagues for their continued efforts in achieving this year's result.

Our thanks also to the UK Contract Flooring Association for their members' accolades with Polyflor being awarded the 2023 Manufacturer of the Year, as well as the best use of flooring in a charitable initiative with the community interest company House of Books and Friends, Manchester.

Outlook

Trading from the year end to date, overall, has been positive. Flooring has been supplied to diverse end customers from Medica Sur, which is recognised as the best hospital in Mexico, the Giant Flagship Store, Düsseldorf (one of the world's largest manufacturers of high-end bicycles) and the new headquarters of Deloitte in Milan (a NZEB - "Nearly Zero Energy Building"), helped by our flooring rated with both LEED "Platinum" status and WELL "Gold" certified. While both four-letter acronyms have similar requirements and standards, the two certifications are very different. WELL Certification focuses on people's health and wellness, while LEED is a certification that focuses on environmental impact and sustainability.

In the UK demand has been slightly less buoyant. Our UK business is far more focused on commercial flooring and repair, renewal and refurbishment and consequently less exposed to consumer spending. Nevertheless, there are budgetary constraints on renewal spending. Indeed, the Chairman's report of September 2016 noted UK

government spending restrictions on refurbishment in the education sector and this continues to be case.

We welcome the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and note that we already trade with 10 of the 11 countries that now have a free trade agreement with the UK.

Overall overseas turnover is 60-65% of total turnover and growing. With greater availability of global shipping, a strong balance sheet and a proven business model, we are confident in the prospects of the year ahead and progress across the Group.

Anthony Wild

Chairman

29 September 2023