LATHAM (JAMES) PLC

Earnings Release • Nov 29, 2018

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RNS Number : 8304I

Latham(James) PLC

29 November 2018

James Latham plc

("James Latham" or the "Company")

HALF YEARLY RESULTS FOR THE PERIOD ENDED 30 SEPTEMBER 2018

Chairman's statement

Unaudited results for the six months trading to 30 September 2018

Revenue for the six months ended 30 September 2018 was £118.2m, up 10.2% on £107.3m for the same period last year. Volumes increased by 1.5%, mainly through an increase in direct business, and product prices increased by 7.8%, against the comparative six months. The remaining increase in revenue arose due to changing product mix, with increased sales of lower volume, higher priced products.

Gross margin for the six month period ended 30 September 2018 was 17.1% compared with 17.3% in the comparative six months, which is partly explained by the increase in direct business which is at a lower margin. This figure includes warehouse costs, which have increased by 4.9% due to the increased cost of operating from the two new depots at Yate and Leicester. Both relocated sites are performing well.

Selling and distribution costs were 3.4% higher than the comparative period last year. Transport costs per tonne have increased by 3.0%, where increased fuel costs have been partially offset by reduced external haulier costs.

Administrative expenses are higher than last year, mainly due to an increase in bad debts compared with a low charge in the comparative six months. Despite this increase in bad debts, total bad debts are still on budget.

Operating profit was £7.7m, up 10.0% on the comparative period's operating profit of £7.0m. Profit before tax of £8.7m (2017: £6.7m) includes a profit of £1.1m on the sale of our old Yate site. Earnings per ordinary share were 36.9p (2017: 27.8p) an increase of 32.7%.

As at 30 September 2018 net assets have increased to £98.6m (2017: £83.8m). Stock volume levels have remained stable throughout the six months. Trade Receivables have continued to show good debtors day figures. Cash and cash equivalents of £12.9m (2017: £12.6m), remain strong and we continue to take advantage of additional early settlement discount opportunities with our suppliers.

The calculation of the pension deficit remains very sensitive to changes in assumptions, and the pension deficit under IAS19 is now calculated as decreasing from £8.4m at 31 March 2018 to £3.1m at 30 September 2018.  This is largely due to positive asset performance and an increase in the discount rate. Following the finalisation of the triennial actuarial valuation as at 31 March 2017, the Company has agreed a recovery plan with the trustees of £2.0m per annum until 31 March 2024. Since the end of the half year, the High Court made a judgement confirming that pension schemes are required to equalise male and female Guaranteed Minimum Pensions. The effect of this decision is still being assessed by the Trustees, but is likely to increase the pension scheme liabilities by approximately £1m.

Interim dividend

The Board has declared an increased interim dividend of 5.0p per Ordinary Share (2017: 4.5p), which is covered 7.4 times (2017: 6.2 times).  The dividend is payable on 25 January 2019 to ordinary shareholders on the Company's Register at close of business on 4 January 2019.  The ex-dividend date will be 3 January 2019.

Current and future trading

The second half of 2018/19 has started well with revenues continuing to grow. Margins however are slightly down, with price rises being more difficult to absorb by the market. Our customers remain busy and are reporting good order books. The economic outlook though is affected by the uncertainty caused by the Brexit negotiations and we will not be immune to any slowdown in the UK economy. We have reviewed our key European suppliers and have put plans in place to hold more stocks for a period of time in the first half of 2019 in order to mitigate any supply issues over that period. We are continuing to invest in the business, with extensive racking projects started at our Purfleet and Thurrock depots, and the planned redevelopment of our Gateshead site in order to make the most efficient use of the space.

Nick Latham

Chairman

29 November 2018

This announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) No 596/2014.

Enquiries

James Latham plc	Tel: 01442 849 100
Nick Latham, Chairman
David Dunmow, Finance Director
Northland Capital Partners Limited  Nominated Adviser and Broker	Tel: 020 3861 6625
Matthew Johnson / Edward Hutton (Corporate Finance) Abigail Wayne / Rob Rees (Corporate Broking)

JAMES LATHAM PLC
CONSOLIDATED INCOME STATEMENT
For the six months to 30 September 2018
	Six months to 30 Sept. 2018 unaudited	Six months to 30 Sept. 2017 unaudited	Year to                31 March 2018 audited
	£000	£000	£000
Revenue	118,160	107,335	214,919
Cost of sales (including warehouse costs)	(97,974)	(88,810)	(177,145)
Gross profit	20,186	18,525	37,774
Selling and distribution costs	(8,679)	(8,391)	(16,277)
Administrative expenses	(3,782)	(3,178)	(7,106)
Operating profit	7,725	6,956	14,391
Profit on disposal of property	1,052	-	1,276
Finance income	32	15	37
Finance costs	(141)	(248)	(488)
Profit before tax	8,668	6,723	15,216
Tax expense	(1,418)	(1,262)	(2,570)
Profit after tax attributable to owners of the parent company	7,250	5,461	12,646
Earnings  per ordinary share (basic)	36.9p	27.8p	64.4p
Earnings  per ordinary share (diluted)	36.8p	27.7p	64.1p
All results relate to continuing operations.

JAMES LATHAM PLC
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the six months to 30 September 2018
	Six months to 30 Sept. 2018 unaudited	Six months to 30 Sept. 2017 unaudited	Year to                31 March 2018 audited
	£000	£000	£000
Profit after tax	7,250	5,461	12,646
Other Comprehensive income
Actuarial gains on defined benefit pension scheme	4,444	8,515	7,948
Deferred tax relating to components of other comprehensive income	(673)	(1,430)	(1,262)
Other comprehensive income for the period, net of tax	3,771	7,085	6,686
Total comprehensive income, attributable to owners of the parent company	11,021	12,546	19,332

JAMES LATHAM PLC
CONSOLIDATED BALANCE SHEET
At 30 September 2018
	As at 30 Sept. 2018 unaudited	As at 30 Sept. 2017 unaudited	As at 31 March 2018 audited
	£000	£000	£000
ASSETS
Non-current assets
Goodwill	237	237	237
Intangible assets	1	1	1
Property, plant and equipment	33,979	31,939	33,831
Deferred tax asset	582	1,546	1,491
Total non-current assets	34,799	33,723	35,560
Current assets
Inventories	41,462	35,915	40,068
Trade and other receivables	43,082	43,523	41,508
Cash and cash equivalents	12,864	12,585	13,989
Non-current assets held for sale	-	641	638
Total current assets	97,408	92,664	96,203
Total assets	132,207	126,387	131,763
Current liabilities
Trade and other payables	25,743	28,961	28,648
Current tax payable	1,272	1,332	1,292
Total current liabilities	27,015	30,293	29,940
Non-current liabilities
Interest bearing loans and borrowings	987	987	987
Retirement and other benefit obligation	3,072	8,470	8,382
Other payables	262	320	291
Deferred tax liabilities	2,283	2,485	2,374
Total non-current liabilities	6,604	12,262	12,034
Total liabilities	33,619	42,555	41,974
Net assets	98,588	83,832	89,789
Capital and reserves
Issued capital	5,040	5,040	5,040
Share-based payment reserve	235	153	184
Own shares	(423)	(180)	(529)
Capital reserve	3	3	3
Retained earnings	93,733	78,816	85,091
Total equity attributable to shareholders of the parent company	98,588	83,832	89,789

JAMES LATHAM PLC
CONSOLIDATED CASH FLOW STATEMENT
For the six months to 30 September 2018
	Six months to 30 Sept 2018 unaudited	Six months to 30 Sept 2017 unaudited	Year to                31 March 2018 audited
	£000	£000	£000
Net cash flow from operating activities
Cash generated from operations	1,972	6,155	11,251
Interest paid	(1)	(2)	(1)
Income tax paid	(1,292)	(1,517)	(2,797)
Net cash inflow from operating activities	679	4,636	8,453
Cash flows from investing activities
Interest received and similar income	32	15	37
Purchase of property, plant and equipment	(1,136)	(7,163)	(10,840)
Proceeds from sale of property, plant and equipment	1,718	19	2,186
Net cash inflow/(outflow) from investing activities	614	(7,129)	(8,617)
Cash flows before financing activities
Equity dividends paid	(2,379)	(2,129)	(3,014)
Preference dividend paid	(39)	(39)	(79)
Net cash outflow from financing activities	(2,418)	(2,168)	(3,093)
Decrease in cash and cash equivalents for the period	(1,125)	(4,661)	(3,257)
Cash and cash equivalents at beginning of the period	13,989	17,246	17,246
Cash and cash equivalents at end of the period	12,864	12,585	13,989

JAMES LATHAM PLC
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Attributable to owners of the parent company
	Issued capital £000	Share-based payment reserve £000	Own shares £000	Capital reserve £000	Retained earnings £000	Total equity £000
As at 1 April 2017 (audited)	5,040	108	(291)	3	68,398	73,258
Profit for the period	-	-	-	-	5,461	5,461
Other comprehensive income:
Actuarial gain on defined benefit pension scheme	-	-	-	-	8,515	8,515
Deferred tax relating to components of other comprehensive income	-	-	-	-	(1,430)	(1,430)
Total comprehensive income for the period	-	-	-	-	12,546	12,546
Transaction with owners:
Dividends	-	-	-	-	(2,129)	(2,129)
Write down on conversion of ESOP shares	-	-	2	-	(2)	-
Exercise of options	-	(3)	-	-	3	-
Change in investment in ESOP shares	-	-	109	-	-	109
Share-based payment expense	-	48	-	-	-	48
Total transactions with owners	-	45	111	-	(2,128)	(1,972)
Balance at 30 September 2017 (unaudited)	5,040	153	(180)	3	78,816	83,832
Profit for the period	-	-	-	-	7,185	7,185
Other comprehensive income:
Actuarial loss on defined benefit pension scheme	-	-	-	-	(567)	(567)
Deferred tax relating to components of other comprehensive income	-	-	-	-	168	168
Total comprehensive income for the period	-	-	-	-	6,786	6,786
Transactions with owners:
Dividends	-	-	-	-	(885)	(885)
Transfer of treasury shares	-	-	(414)	-	414	-
Exercise of options	-	(16)	-	-	16	-
Deferred tax on share options	-	-	-	-	(43)	(43)
Write down on conversions of ESOP shares	-	-	13	-	(13)	-
Change in investment in ESOP shares	-	-	52	-	-	52
Share-based payment expense	-	47	-	-	-	47
Total transactions with owners	-	31	(349)	-	(511)	(829)
Balance at 31 March 2018 (audited)	5,040	184	(529)	3	85,091	89,789
Profit for the period	-	-	-	-	7,250	7,250
Other comprehensive income:
Actuarial gain on defined benefit pension scheme	-	-	-	-	4,444	4,444
Deferred tax relating to components of other comprehensive income	-	-	-	-	(673)	(673)
Total comprehensive income for the period	-	-	-	-	11,021	11,021
Transactions with owners:
Dividends	-	-	-	-	(2,379)	(2,379)
Change in investment in ESOP shares	-	-	106	-	-	106
Share-based payment expense	-	51	-	-	-	51
Total transactions with owners	-	51	106	-	(2,379)	(2,222)
Balance at 30 September 2018 (unaudited)	5,040	235	(423)	3	93,733	98,588

JAMES LATHAM PLC
NOTES TO THE HALF YEARLY REPORT
1. The results presented in this report are unaudited and have been prepared in accordance with the recognition and measurement requirements of International Financial Reporting Standards ('IFRS') as adopted by the EU that are expected to be applicable to the financial statements for the year ending 31 March 2019 and on the basis of the accounting policies to be used in those financial statements.  The half yearly report does not include all the information and disclosures required in financial statements prepared in accordance with IFRS and should be read in conjunction with the accounts for the year ended 31 March 2018. The figures for the year ended 31 March 2018 are extracted from the statutory accounts of the group for that period. The Group has adopted IFRS 15 - Revenue from Contracts with Customers and IFRS 9 - Financial Instruments in the half yearly report, the impact of which is set out below: (i) IFRS 15 'Revenue from Contracts with Customers' IFRS 15 - Revenue from Contracts with Customers establishes a comprehensive framework for determining whether, how much and when revenue is recognised. It has replaced existing revenue recognition guidance, including IAS 18 Revenue. IFRS 15 sets out the requirements for recognising revenue from contracts with customers. The standard requires entities to apportion revenue earned from contracts to individual promises, or performance obligations, on a stand-alone selling price basis, based on a five-step model (identification of contracts; performance obligations; transaction prices; allocation of price to performance obligations; and recognition of revenue). Revenue is recognised at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer. It has replaced existing revenue recognition guidance, including IAS 18 Revenue.  IFRS 15 is effective for annual periods beginning on or after 1 January 2018.  (ii) IFRS 9 'Financial Instruments' IFRS 9 'Financial Instruments' determines the basis of the financial instrument and how a financial asset should be classified and measured. It also provides a forward-looking expected losses impairment model for financial assets, including trading receivables, and includes amendments to classification and measurement of financial instruments.  It has replaced existing standard IAS 39 'Financial Instruments: Recognition and Measurement'. IFRS 9 is effective for annual periods beginning on or after 1 January 2018. The directors have assessed the impact of the adoption IFRS 15 and IFRS 9 and there has been no material impact on the financial statements of the Group as a result of these standards coming into effect.
2.  The directors propose an interim dividend of 5.0p per ordinary share which will absorb £980,000 (2017: 4.5p absorbing £880,000), payable on 25 January 2019 to shareholders on the Company's Register at the close of business on 4 January 2019. The ex-dividend date is 3 January 2019.
3. This half yearly report does not constitute statutory financial accounts within the meaning of section 434 of the Companies Act 2006. The statutory accounts for the year ended 31 March 2018 were filed with the Registrar of Companies.  The audit report on those financial statements was not qualified and did not contain a reference to any matters to which the auditor drew attention by way of emphasis without qualifying the report and did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.  The half yearly report has not been audited by the Company's auditor.

4.  Earnings per ordinary share is calculated by dividing the net profit for the period attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the period.
	Six months to 30 Sept 2018 unaudited	Six months to 30 Sept 2017 unaudited	Year to 31 March 2018 audited
	£000	£000	£000
Net profit attributable to ordinary shareholders	7,250	5,461	12,646
	Number '000	Number '000	Number '000
Weighted average share capital	19,661	19,629	19,640
Add: diluted effect of share capital options issued	41	108	85
Weighted average share capital for diluted earnings per ordinary share calculation	19,702	19,737	19,725
5.  Net cash flow from operating activities
	Six months to 30 Sept 2018 unaudited	Six months to 30 Sept 2017 unaudited	Year to 31 March 2018 audited
	£000	£000	£000
Profit before tax	8,668	6,723	15,216
Adjustment for finance income and expenditure	109	233	451
Depreciation and amortisation	970	885	1,941
Profit on disposal of property, plant and equipment	(1,062)	(9)	(1,444)
Increase in inventories	(1,394)	(407)	(4,560)
Increase in receivables	(1,574)	(3,447)	(1,432)
(Decrease)/increase in payables	(2,935)	1,867	1,526
Own shares non cash amounts	106	109	161
Retirement benefits non cash amounts	(967)	153	(703)
Share-based payments non cash amounts	51	48	95
Cash generated from operations	1,972	6,155	11,251
6.  Copies of this statement will be posted on our website, www.lathams.co.uk.  A copy can be emailed or posted upon application to the Company Secretary, James Latham plc, Unit 3 Swallow Park, Finway Road Hemel Hempstead, Herts, HP2 7QU, or by email to plc@lathams.co.uk

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