HEATH (SAMUEL) & SONS PLC

Earnings Release • Aug 7, 2024

National Storage Mechanism | Additional information

RNS Number : 4487Z

Heath(Samuel) & Sons PLC

07 August 2024

HEATH (SAMUEL) & SONS PLC

7 August 2024

PRELIMINARY RESULTS FOR THE YEAR ENDED 31 MARCH 2024 AND NOTICE OF AGM

CHAIR'S STATEMENT

I am pleased to report that the year has turned out considerably better than the Board had feared at the half year. The weaker order book mentioned at the half year continued below par until December 2023, when we experienced a marked upturn that continued broadly until the end of the financial year, albeit remaining below budget. The production team did a good job of converting the orders to sales, so that sales for the year ended at £15.24m compared to £14.72m in 2023, a 3.5% increase.

Also as mentioned at the half year, management took actions to trim costs and improve efficiency, and this resulted in an improvement in gross profit margin from 44.8% in the first half to 48.5% in the second half (46.6% for the full year compared to 46.0% prior year). An easing of the very high utility costs also contributed to better second half performance, although the year overall still saw a significant utility cost increase of £203k (24%).

Selling and distribution costs increased in the second half as a result of the resumption of trade shows and expansion of the sales team, with an overall year on year increase of 12%. Administrative overheads increased by 10% compared to prior year, mainly due to general cost inflation.

The resulting operating profit was £832k (2023: £1,167k) and profit after tax was £768k (2023: £931k).

Net assets increased to £12.18m (2023: £11.19m), but this increase included the recognition of a £766k surplus in the pension fund (net of deferred tax), which the Directors do not consider to be appropriate to distribute, but which accounting guidelines require to be included as an asset. Cash and cash equivalents decreased to £1.68m (2023: £2.72m) after spending £0.85m on fixed and intangible assets (mainly production machinery), £0.91m on contributions to the pension fund and £0.31m on dividend distributions. Also, investment in trading stocks increased by £0.45m.

The pension scheme deficit recorded as of 31 March 2023 was £537k on a going concern basis. Under the same IAS Rules, a £1.02m surplus was calculated as of 31 March 2024. The Directors again decided to ask the trustees to request an Annual Funding Update from the Scheme actuary: using the same underlying basis as the last triennial valuation in 2022, a surplus of £1.37m was calculated. The Directors have also asked the trustees to accelerate by one year the triennial valuation due on 31 March 2025. This will then become the basis for agreeing future contributions with the trustees and the pensions regulator. At this time, the Board has agreed a reduced company contribution in 2025 of £300k.

Independently, the Board and pension trustees consider that it is time to investigate the option to buy out the fund, while in the meantime adopting a more cautious investment strategy to match more closely the scheme assets and liabilities, such that if interest rates and discount rates fall, the investment assets will move in alignment, and vice versa. The trustees are in the process of appointing a fiduciary manager to achieve this and prepare the fund for buy out. It must be understood that the fund would still have a shortfall calculated on a 'wind-up' basis, but detailed work is needed to ascertain exactly the size of the shortfall.

Outlook

The order book has held up reasonably well during the first few months of the new financial year. We have seen a number of projects that were on hold come to fruition amidst a more positive environment, although our UK customers are expressing concern about the impact of political change on their client base, particularly for international clients with multiple homes, who are in some cases waiting to see where best to invest in their property.

Although we have seen a good start to the new financial year, we are mindful of our customers' concerns and are budgeting cautiously, while allowing sufficient flexibility should trade remain consistently positive.

Recruitment has been less difficult than in 2023 and we are pleased to welcome a number of highly skilled new colleagues to the company.

We are also taking delivery of a further high specification CNC lathe in July which will help drive efficiency in our machine shop and new product development. The problems experienced last year with machine breakdowns and inefficiency are now much less frequent.

With the introduction of new spout patterns, we have widened the One Hundred Collection into Modern and Luxe ranges, which should reach a broader client base. Approvals in the USA for our Forme collection finally came over the line in late spring 2024 so we should see continued growth of this popular new collection in our biggest export market. We have exciting new finishes and marketing events lined up in our key markets which will help bring us even closer to our customer base.

Having cut the interim dividend in the light of trading concerns at the time, the directors now recommend increasing the final dividend to 8.5625p, which will be paid on 20 September 2024 to shareholders registered as at 16 August 2024, the ex-dividend date for the payment is 15 August 2024. This will bring the total for the year (Interim and Final) to £331k (2023: £331k), the same total dividend as last year.

Anthony Buttanshaw

Non-Executive Chair

7 August 2024

DIVIDEND

The directors recommend a final dividend of 8.5625 pence per share (2023: 7.5625 pence). The final dividend will be paid on 20 September 2024 to shareholders on the register at the close of business on 16 August 2024. The ex-dividend date for this payment is 15 August 2024.

This announcement contains inside information for the purposes of the UK Market Abuse Regulation and the Directors of the Company are responsible for the release of this announcement.

For further information:

Samuel Heath & Sons Plc
Simon Latham - Company Secretary	+44 (0)121 766 4200
Cairn Financial Advisers LLP	+44 (0)20 7213 0880
James Caithie/Jo Turner

________________________ CONSOLIDATED INCOME STATEMENT_________________________

for the year ended 31 March 2024

			2024			2023
	Note
			£000			£000
Revenue	3		15,237			14,717
Cost of sales			(8,137)			(7,950)
Gross profit			7,100			6,767
Selling and distribution costs			(3,973)			(3,556)
Administrative expenses			(2,313)			(2,097)
Other operating income			18			53
Operating profit			832			1,167
Finance income			64			34
Finance cost			(12)			(133)
Profit before taxation			884			1,068
Taxation	4		(116)			(137)
Profit for the year attributable to owners of the Parent Company			768			931
Basic and diluted earnings per ordinary share	6		30.3p			36.7p
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 31 March 2024
			£000			£000
Profit for the year			768			931
Items that will not be reclassified to profit or loss:
Actuarial gain on defined benefit pension scheme			693			3,588
Deferred taxation on actuarial gain			(174)			(891)
Revaluation of property, plant and equipment			-			293
Deferred tax on revaluation			-			(73)
			519			2,917
Total comprehensive income for the year			1,287			3,848

__________________ STATEMENT OF FINANCIAL POSITION _____________________

31 March 2024

		Group
		2024		2023
		£000		£000
Non-current assets
Intangible assets		911		691
Property, plant and equipment		4,733		4,754
Investments		-		-
Retirement benefit scheme		767		-
		6,411		5,445
Current assets
Inventories		4,842		4,387
Trade and other receivables		2,071		1,629
Current tax receivable		-		37
Cash and cash equivalents		1,684		2,717
		8,597		8,770
Total assets		15,008		14,215
Current liabilities
Trade and other payables		(1,989)		(1,644)
Lease liabilities		(60)		(62)
		(2,049)		(1,706)
Non-current liabilities
Lease liabilities		(25)		(56)
Retirement benefit scheme		-		(537)
Deferred tax liability		(759)		(723)
		(784)		(1,316)
Total liabilities		(2,833)		(3,022)
Net assets		12,175		11,193
Equity
Called up share capital		254		254
Capital redemption reserve		109		109
Revaluation reserve		1,146		1,220
Retained earnings		10,666		9,610
Total equity attributable to owners of the Parent Company		12,175		11,193

The prior year deferred tax liability has been reclassified to non-current in line with IAS 1 guidance.

_____________ CONSOLIDATED STATEMENT OF CHANGES IN EQUITY __________________

for the year ended 31 March 2024

	Attributable to owners of the Parent Company
	Share capital	Capital redemption reserve	Revaluation reserve	Retained Earnings	Total Equity
	£000	£000	£000	£000	£000
Balance at 31 March 2022	254	109	1,186	6,127	7,676
Equity dividends paid				(331)	(331)
Profit for the year	-	-	-	931	931
Reclassification of depreciation on revaluation	-	-	(81)	81	-
Other comprehensive income for the year	-	-	115	2,802	2,917
Total comprehensive income for the year	-	-	34	3,814	3,848
Balance at 31 March 2023	254	109	1,220	9,610	11,193
Total transactions with owners
Equity dividends paid	-	-	-	(305)	(305)
Profit for the year	-	-	-	768	768
Reclassification of depreciation on revaluation	-	-	(74)	74	-
Other comprehensive income for the year	-	-	-	519	519
Total comprehensive income for the year	-	-	(74)	1,361	1,287
Balance at 31 March 2024	254	109	1,146	10,666	12,175

__________________________STATEMENTS OF CASHFLOWS _____________________________

for the year ended 31 March 2024

			Group
			2024		2023
			£000		£000
Cash flow from operating activities
Profit for the year before taxation			884		1,068
Adjustments for:
Depreciation			535		401
Amortisation			154		107
Loss on disposal of property, plant and equipment			1		41
Net finance costs			(52)		99
Defined benefit pension scheme expenses			38		41
Contributions to defined benefit pension scheme			(909)		(877)
Operating cash flows before movements in working capital			651		880
Changes in working capital:
(Increase) in inventories			(455)		(471)
(Increase)/decrease in trade and other receivables			(442)		170
Increase/(decrease) in trade and other payables			345		(213)
Cash generated from operations			99		366
Taxation paid			38		-
Net cash generated from operating activities			137		366
Cash flows used in investing activities
Payments to acquire property, plant and equipment			(476)		(1,167)
Proceeds from the sale of property, plant and equipment			1		41
Payments to acquire intangible assets			(374)		(357)
Net finance income/(cost)			62		(99)
			(787)		(1,582)
Cash flows from financing activities
Lease payments			(71)		(58)
Dividends paid			(305)		(331)
			(376)		(389)
Net (decrease)/increase in cash and cash equivalents			(1,026)		(1,605)
Cash and cash equivalents at beginning of year			2,717		4,410
Effect of exchange rate differences on cash and cash equivalents			(7)		(88)
Cash and cash equivalents at end of year			1,684		2,717

NOTES TO THE PRELIMINARY ANNOUNCEMENT

1.     Basis of preparation

The Group has prepared its consolidated financial statements for the year ended 31 March 2024 in accordance with UK-adopted International Accounting Standards. The accounting policies applied are consistent with those included in the financial statements of the Group for the year ended 31 March 2023.

The financial information contained in this preliminary announcement does not constitute the Group's statutory accounts within the meaning of Section 434 of the Companies Act 2006.

The annual report and financial statements for the year ended 31 March 2024 were approved by the Board of Directors on 7 August 2024 along with this preliminary announcement.   The annual report and financial statements will be delivered to the Registrar of Companies after the Annual General Meeting.

The statutory accounts of Samuel Heath & Sons PLC for the year ended 31 March 2023 have been delivered to the Registrar of Companies. The auditor's reports on the statutory accounts for the years ended 31 March 2024 and 31 March 2023 were unqualified and did not contain a statement under section 498 of the Companies Act 2006.

2.     Key areas of judgment and sources of estimation uncertainty

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

The Group makes estimates and assumptions concerning the future.  The resulting accounting estimates and assumptions will, by definition, seldom equal the related actual results. The Group has evaluated the estimates and assumptions that have been made in relation to the carrying amounts of assets and liabilities in these financial statements.

The key accounting judgements and sources of estimation uncertainty with a significant risk of causing a material adjustment to assets and liabilities in the next 12 months include the following:

Pensions - movements in equity markets, interest rates and life expectancy could materially affect the level of surpluses and deficits in the defined benefit pension scheme. The key assumptions used to value pension assets and liabilities are set out in note 23 "Retirement benefit scheme". Where a surplus on a defined benefit scheme arises, the rights of the Trustees to prevent the Group obtaining a refund of that surplus in the future are considered in determining whether it is necessary to restrict the amount of the surplus that is recognised. The Retirement benefit scheme is in surplus at 31 March 2024. The directors have made the judgement that these amounts meet the requirements of recoverability and a surplus of £1.02m has been recognised.

Valuation of property, plant and equipment - the Group reviews the value, useful economic lives and residual values attributed to assets on an on-going basis to ensure they are appropriate. Changes in market value, economic lives or residual values could impact the carrying value and charges to the income statement in future periods.

Provisions - using information available at the balance sheet date, the Directors make judgements based on experience on the level of provision required against assets, including inventory where the provision is reviewed against expected future stock usage, the stock provision at year end was £3.287m (2023: £2.688m).

Research and development - the Group reviews the projects worked on during the year and capitalises the costs of those projects deemed to generate profits in future years, £355,000 was capitalised in the year (2023: £311,000). The Company takes full advantage of available taxation support.

3.     Revenue by geographic market
			2024 £000		2023 £000
Overseas			7,316		7,276
UK			7,921		7,441
			15,237		14,717

4.     Income taxes

	2024 £000		2023 £000
Current taxes:
Current year	-		-
Adjustments in respect of prior periods	-		(41)
	-		(41)
Deferred taxes:
Origination and reversal of temporary differences	203		211
Adjustments in respect of prior periods	(87)		(33)
	116		178
Total income taxes	116		137

Corporation tax is calculated at 25% (2023: 19%) of the estimated assessable profit for the year.

Tax reconciliation

		2024 £000		2023 £000
	Profit for the year	884		1,068
	Corporation tax charge thereon at 25% (2023: 19%)	221		203
	Adjusted for the effects of:
	Prior year adjustments	(87)		(73)
	Research and development claim	(71)		-
	Changes in tax rates	-		68
	Fixed asset differences	42		-
	Revaluation	-		(73)
	Other adjustments	11		12
	Total income taxes	116		137

5.     Dividends

	2024		2023
	£000		£000
Final dividend for the year ended 31 March 2023 of 7.5625 pence per share (2022: 7.5625 pence per share)	192		192
Interim dividend for the year ended 31st March 2024 of 4.50 pence per share (2023: 5.50 pence per share)	113		139
	305		331

The directors are recommending a final dividend for 2024 of 8.5625 pence per share amounting to £217,000. The proposed final dividend is subject to approval at the Annual General Meeting and hence has not been included as a liability in these accounts.

6.     Earnings per share

The basic and diluted earnings per share are calculated by dividing the relevant profit after taxation of £768,000 (2023: £931,000) by the average number of ordinary shares in issue during the year being 2,534,322 (2023: 2,534,322). The number of shares used in the calculation is the same for both basic and diluted earnings.

7.     Exceptional items

There were no exceptional costs for 2023.

8.     Notice of annual general meeting

Notice is hereby given that the 2024 Annual General Meeting of the Company will be held at the registered office of the Company, Leopold Street, Birmingham, on 5 September 2024 at 12.00 noon.

9.     Posting of accounts

The report and accounts are being posted to shareholders today where requested, and are available on the Company's website, at www.samuel-heath.com/investor-relations . 

Note : 

Certain statements made in this announcement are forward-looking statements. These forward-looking statements are not historical facts but rather are based on the Company's current expectations, estimates, and projections about its industry; its beliefs; and assumptions. Words such as 'anticipates,' 'expects,' 'intends,' 'plans,' 'believes,' 'seeks,' 'estimates,' and similar expressions are intended to identify forward-looking statements. These statements are not a guarantee of future performance and are subject to known and unknown risks, uncertainties, and other factors, some of which are beyond the Company's control, are difficult to predict, and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements. The Company cautions security holders and prospective security holders not to place undue reliance on these forward-looking statements, which reflect the view of the Company only as of the date of this announcement. The forward-looking statements made in this announcement relate only to events as of the date on which the statements are made. The Company will not undertake any obligation to release publicly any revisions or updates to these forward-looking statements to reflect events, circumstances, or unanticipated events occurring after the date of this announcement except as required by law or by any appropriate regulatory authority. 

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