LATHAM (JAMES) PLC

Interim / Quarterly Report • Nov 28, 2019

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RNS Number : 9021U

Latham(James) PLC

28 November 2019

James Latham plc

("James Latham" or the "Company")

HALF YEARLY RESULTS FOR THE PERIOD ENDED 30 SEPTEMBER 2019

Chairman's statement

Unaudited results for the six months trading to 30 September 2019

Revenue for the six months ended 30 September 2019 was £125.6m, up 6.3% on £118.2m for the same period last year. This turnover increase is down to our long term strategic changes in product mix, as overall volumes have been static.  The panel product business has seen an increase in delivered volumes through our warehouses, but a reduction in our direct volumes. Our timber business has also seen an increase in delivered volumes especially on added value products. Prices have decreased on most of our commodity panel products throughout this six month period although timber prices have remained stable.

Gross margin for the six month period ended 30 September 2019 was 17.4% compared with 17.1% in the comparative six months. This figure includes warehouse costs which are higher due to the increased volumes through our warehouses, and also part of our strategy to increase the working hours in order to better meet our customer needs. Three of our depots are now working 24 hours/5 days a week. The increased delivered volumes have also resulted in an increase in distribution costs. Administrative expenses though are lower than last year, with a reduction in the bad debt charge.

Operating profit was £8.5m, up 9.6% on last year's profit of £7.7m. Profit before tax was £8.3m compared with £8.7m in the comparative six months which included a profit of £1.1m on the sale of our old Yate site. Earnings per ordinary share, excluding the profit on the sale of Yate were 33.8p (2018: 31.5p) an increase of 7.3%.

As at 30 September 2019 net assets are £97.6m (2018: £98.6m). We have adopted IFRS 16 on leasing in these results, which has had an insignificant effect on profit before tax and these changes are explained in note 6 to this statement. Stock volume levels have remained stable throughout the six months. Trade Receivables have continued to show good debtor days figures. Cash and cash equivalents of £16.5m (2018: £12.9m) 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 calculated as increasing from £8.7m at 31 March 2019 to £14.6m at 30 September 2019.  This is largely due to a reduction in the discount rate.

Interim dividend

The Board has declared an increased interim dividend of 5.5p per Ordinary Share (2018: 5.0p), which is covered 6.1 times (2018: 7.4 times).  The dividend is payable on 24 January 2020 to ordinary shareholders on the Company's Register at close of business on 3 January 2020.  The ex-dividend date will be 2 January 2020.

Current and future trading

The second half of 2019/20 has started well with margins slightly ahead of the previous period. We are seeing increased sales at Abbey Woods, the Irish timber distributor purchased in February 2019, and also an improvement in our panel product volumes. Purchase prices of our commodity panel products remain weak. The investment in our Gateshead facility, to improve the site efficiency, is going well, and should be completed in June 2020. The racking investment at Purfleet will be completed by the end of December 2019. The majority of our customers are busy, and we remain confident that we can continue to grow our business, but remain mindful of the uncertainties caused by the forthcoming General Election and a weakening global economy.

I am also very pleased to have reported this week the strategic purchase of Dresser Mouldings for £1 million, which will allow us to continue to grow our sales of added value timber.

Nick Latham

Chairman

28 November 2019

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

For further information please visit www.lathams.co.uk or contact:

James Latham plc	Tel: 01442 849 100
Nick Latham, Chairman
David Dunmow, Finance Director
SP Angel Corporate Finance LLP
Matthew Johnson / Charlie Bouverat (Corporate Finance)	Tel: 0203 470 0470
Abigail Wayne (Corporate Broking)

JAMES LATHAM PLC
CONSOLIDATED INCOME STATEMENT
For the six months to 30 September 2019
	Six months to 30 Sept. 2019 unaudited	Six months to 30 Sept. 2018 unaudited	Year to 31 March 2019 audited
	£000	£000	£000
Revenue	125,609	118,160	235,132
Cost of sales (including warehouse costs)	(103,726)	(97,974)	(194,686)
Gross profit	21,883	20,186	40,446
Selling and distribution costs	(9,703)	(8,679)	(18,082)
Administrative expenses	(3,712)	(3,782)	(7,896)
Operating profit	8,468	7,725	14,468
Profit on disposal of property	-	1,052	1,052
Finance income	46	32	71
Finance costs	(198)	(141)	(256)
Profit before tax	8,316	8,668	15,335
Tax expense	(1,630)	(1,418)	(2,913)
Profit after tax attributable to owners of the parent company	6,686	7,250	12,422
Earnings per ordinary share (basic)	33.8p	36.9p	63.1p
Earnings per ordinary share (diluted)	33.8p	36.8p	63.0p
Earnings per ordinary share (basic, excluding profit on disposal of property)	33.8p	31.5p	61.6p
Earnings per ordinary share (diluted, excluding profit on disposal of property)	33.8p	31.5p	61.5p
All results relate to continuing operations.

JAMES LATHAM PLC
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the six months to 30 September 2019
	Six months to 30 Sept. 2019 unaudited	Six months to 30 Sept. 2018 unaudited	Year to 31 March 2019 audited
	£000	£000	£000
Profit after tax	6,686	7,250	12,422
Other Comprehensive income
Actuarial (loss)/gains on defined benefit pension scheme	(6,767)	4,444	(1,360)
Deferred tax relating to components of other comprehensive income	1,150	(673)	314
Foreign translation credit/(charge)	12	-	(31)
Other comprehensive income for the period, net of tax	(5,605)	3,771	(1,077)
Total comprehensive income, attributable to owners of the parent company	1,081	11,021	11,345

JAMES LATHAM PLC
CONSOLIDATED BALANCE SHEET
At 30 September 2019
	As at 30 Sept. 2019 unaudited	As at 30 Sept. 2018 unaudited	As at 31 March 2019 audited
	£000	£000	£000
ASSETS
Non-current assets
Goodwill	523	237	523
Intangible assets	1,905	1	1,989
Property, plant and equipment	34,581	33,979	34,159
Right-of-use-asset	4,344	-	-
Deferred tax asset	2,560	582	1,577
Total non-current assets	43,913	34,799	38,248
Current assets
Inventories	42,501	41,462	42,350
Trade and other receivables	45,697	43,082	42,613
Cash and cash equivalents	16,538	12,864	15,541
Total current assets	104,736	97,408	100,504
Total assets	148,649	132,207	138,752
Current liabilities
Lease liabilities	1,143	-	-
Trade and other payables	28,321	25,743	27,113
Current tax payable	86	1,272	1,193
Total current liabilities	29,550	27,015	28,306
Non-current liabilities
Interest bearing loans and borrowings	592	987	597
Lease liabilities	3,252	-	-
Retirement and other benefit obligation	14,637	3,072	8,714
Other payables	180	262	413
Deferred tax liabilities	2,856	2,283	2,762
Total non-current liabilities	21,517	6,604	12,486
Total liabilities	51,067	33,619	40,792
Net assets	97,582	98,588	97,960
Capital and reserves
Issued capital	5,040	5,040	5,430
Share-based payment reserve	89	235	259
Own shares	(891)	(423)	(923)
Capital reserve	398	3	3
Retained earnings	92,946	93,733	93,191
Total equity attributable to shareholders of the parent company	97,582	98,588	97,960

JAMES LATHAM PLC
CONSOLIDATED CASH FLOW STATEMENT
For the six months to 30 September 2019
	Six months to 30 Sept 2019 unaudited	Six months to 30 Sept 2018 unaudited	Year to 31 March 2019 audited
	£000	£000	£000
Net cash flow from operating activities
Cash generated from operations	7,468	1,972	10,267
Interest paid	(3)	(1)	(8)
Income tax paid	(2,552)	(1,292)	(2,651)
Net cash inflow from operating activities	4,913	679	7,608
Cash flows from investing activities
Interest received and similar income	46	32	71
Acquisition of businesses net of cash acquired	-	-	(1,604)
Purchase of property, plant and equipment	(1,512)	(1,136)	(2,362)
Proceeds from sale of property, plant and equipment	119	1,718	1,743
Net cash (outflow)/inflow from investing activities	(1,347)	614	(2,152)
Cash flows before financing activities
Purchase of treasury shares	(5)	-	(478)
Equity dividends paid	(2,540)	(2,379)	(3,363)
Preference dividend paid	(24)	(39)	(63)
Cash outflow from financing activities	(2,569)	(2,418)	(3,904)
Increase/(decrease) in cash and cash equivalents for the period	997	(1,125)	1,552
Cash and cash equivalents at beginning of the period	15,541	13,989	13,989
Cash and cash equivalents at end of the period	16,538	12,864	15,541

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 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
Transaction with owners:
Dividends	-	-	-	-	(2,379)	(2,379)
Exercise of options	-	-	-	-	-	-
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
Profit for the period	-	-	-	-	5,172	5,172
Other comprehensive income:
Actuarial loss on defined benefit pension scheme	-	-	-	-	(5,804)	(5,804)
Deferred tax relating to components of other comprehensive income	-	-	-	-	987	987
Foreign translation charge	-	-	-	-	(31)	(31)
Total comprehensive income for the period	-	-	-	-	324	324
Transactions with owners:
Dividends	-	-	-	-	(984)	(984)
Transfer of treasury shares	-	-	(82)	-	82	-
Exercise of options	-	(19)	54	-	19	54
Deferred tax on share options	-	-	-	-	31	31
Write down on conversions of ESOP shares	-	-	14	-	(14)	-
Purchase of preference shares	390	-	(478)	-	-	(88)
Change in investment in ESOP shares	-	-	(8)	-	-	(8)
Share-based payment expense	-	43	-	-	-	43
Total transactions with owners	-	24	(500)	-	(866)	(952)
Balance at 31 March 2019 (audited)	5,430	259	(923)	3	93,191	97,960
Change in accounting policy (IFRS16)	-	-	-	-	262	262
Deferred tax on IFRS 16	-	-	-	-	(45)	(45)
As at 1 April 2019 (as restated)	5,430	259	(923)	3	93,408	98,177
Profit for the period	-	-	-	-	6,686	6,686
Other comprehensive income:
Actuarial gain on defined benefit pension scheme	-	-	-	-	(6,767)	(6,767)
Deferred tax relating to components of other comprehensive income	-	-	-	-	1,150	1,150
Foreign translation charge	-	-	-	-	12	12
Total comprehensive income for the period	-	-	-	-	1,081	1,081
Transactions with owners:
Dividends	-	-	-	-	(2,540)	(2,540)
Transfer of treasury shares	-	-	(1,668)	-	1,668	-
Exercise of options	-	(213)	779	-	213	779
Deferred tax on share options	-	-	-	-	(32)	(32)
Write down on conversions of ESOP shares	-	-	369	-	(369)	-
Purchase of preference shares	5	-	-	-	(5)	-
Cancellation of preference shares	(395)	-	478	395	(478)	-
Change in investment in ESOP shares	-	-	74	-	-	74
Share-based payment expense	-	43	-	-	-	43
Total transactions with owners	(390)	(170)	32	395	(1,543)	(1,676)
Balance at 30 September 2019 (unaudited)	5,040	89	(891)	398	92,946	97,582

JAMES LATHAM PLC
NOTES TO THE HALF YEARLY REPORT
1. The results presented in this report are unaudited and they have been prepared in accordance with the recognition and measurement principles of International Financial Reporting Standards ('IFRS') as adopted by the EU and on the basis of the accounting policies expected to be used in the financial statements for the year ending 31 March 2020. The figures for the year ended 31 March 2019 are extracted from the statutory accounts of the group for that period.
2.  The directors propose an interim dividend of 5.5p per ordinary share which will absorb £1,085,000 (2018: 5.0p absorbing £980,000), payable on 24 January 2020 to shareholders on the Company's Register at the close of business on 3 January 2020. The ex-dividend date is 2 January 2020.
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 2019 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 2019 unaudited	Six months to 30 Sept 2018 unaudited	Year to 31 March 2019 audited
	£000	£000	£000
Net profit attributable to ordinary shareholders	6,686	7,250	12,422
	Number '000	Number '000	Number '000
Weighted average share capital	19,759	19,661	19,674
Add: diluted effect of share capital options issued	33	41	28
Weighted average share capital for diluted earnings per ordinary share calculation	19,792	19,702	19,702
5.  Net cash flow from operating activities
	Six months to 30 Sept 2019 unaudited	Six months to 30 Sept 2018 unaudited	Year to 31 March 2019 audited
	£000	£000	£000
Profit before tax	8,316	8,668	15,335
Adjustment for finance income and expenditure	152	109	185
Depreciation and amortisation	1,174	970	2,036
Profit on disposal of property, plant and equipment	(119)	(1,062)	(1,079)
Increase in inventories	(151)	(1,394)	(2,282)
Increase in receivables	(3,084)	(1,574)	(1,105)
Increase/(decrease) in payables	1,236	(2,935)	(1,825)
Own shares non cash amounts	853	106	152
Retirement benefits non cash amounts	(941)	(967)	(1,213)
Translation non cash amounts	12	-	(31)
Share-based payments non cash amounts	43	51	94
IFRS16 Lease non cash items	(23)	-	-
Cash generated from operations	7,468	1,972	10,267
6.   The Group has adopted IFRS 16 "leases" which is effective for annual periods beginning on or after 1 January 2019. The Company has chosen to apply the modified retrospective transition method and so the prior year figures have not been adjusted. The Company has elected to apply the practical expedient for short-term leases to leases for which the lease term ends within 12 months of the date of initial application, and the practical expedient for low value leases.
The adoption of the standard has resulted in the Group bringing many of its leases onto the balance sheet reflecting 'right-of-use' assets which, are depreciated, and corresponding liabilities on which interest accrues. The impact of the standard in the period to 30 September 2019, compared to the results if the standard had not been recognised, is that operating profit has increased by £23,000 due to the elimination of rent costs and recognition of depreciation. However, profit before and after tax has reduced by £51,000 due to interest charges.
At 30 September 2019 non-current assets have increased by £4,344,000 as a result of the additional right-of-use assets. Total liabilities have increased by £4,395,000 due to the addition of finance lease liabilities. Total net asset effect is a decrease of £51,000.
The rent-free period accruals previously recognised under liabilities to the value of £262,000 have been transferred to retained earnings. A deferred tax provision of £45,000 has been recognised on the impact of IFRS 16.
7.  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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