CHAIRMAN'S STATEMENT

Trading

In my first announcement as Chairman, I am greatly pleased to be able to continue the long tradition of reporting not only a record level of sales at the interim but more gratifyingly increased profit and an increased interim dividend.

Group turnover at £126.0 million (2016: £119.6million) was some 5.4% ahead. The mix and range of customers continues to be as diverse as it is global, whether it is the Kitéa Furniture stores across Morocco, the Tullibardine Whisky Distillery located in Perth & Kinross or the The University of Corsica founded by Pasquale Paoli in 1765. Our sales encompass new buildings, extensions and refurbishment. The UK turnover is one third of total sales and was some 2.6% ahead of the comparative period. Given the tumult in the facilities management sector, not least the demise of Carillion, this is to my mind, commendable. Objectflor, reported just over 2% growth in sales in local currency which is creditable against the strong competition. In sterling terms Europe overall fared well with 4.4% sales growth in Germany and just over 14% in France.

Our pre-tax profit at £ 23.7 million (2016: £23.2 million) is some 2% ahead of the prior year comparative and is creditable against the raw material cost increases in this six months' trading, some 13.9% ahead of the comparable period. We noted in our preliminary results (issued 2 October 2017) that we had commenced utilising bulk storage for raw materials in Teesside to more easily source raw materials from Asia. This has not only mitigated European shortages but has also led to lower raw material prices than those available from local sources. Up to 50% of our polymer requirements are sourced this way and are a hedge against pricing / exchange rate issues with European supply. In addition, we can offset customs import duty as around 25% of our exports are outside the EU customs area.

One of the many positives in this trading period is that our sales in Australia have grown 7%. Having moved our Queensland warehouse to larger premises, opened our first warehouse in South Australia and augmented our sales force with representatives in Far North Queensland and Tasmania, the business continues to drive bottom line growth.

I am pleased to report that continued investment in sales representation at Polyflor Canada Inc. is bearing fruit with over a 25% increase in turnover in the period. Falck Design, based in Sweden, posted 9% growth. Polyflor India, having made a good start last year, has slipped backward with a decline in sales that resulted from the introduction of general sales tax (GST) in July 2017 which disrupted construction activity and purchasing particularly in our core healthcare sector. Current trading is now back up at prior year levels and growing. Our sales in the Middle East have also more than doubled with numerous healthcare and education sector projects completing together with projects in Qatar such as the Al Bayt and Khalifa Stadiums.

The Company will soon reach another milestone in its history- seventy years as a publicly quoted company. James Halstead floated on the LSE on 4^th May 1948. At float there were 700,000 shares of 10 shillings in issue and anyone who followed the buy advice of W I Carr (stockbrokers) in November 1948 would have seen an approximate 300,000% return on their investment (not including dividends). One month after our flotation, one of our major customers of today also came into being- the National Health Service. These days our healthcare sales extend far and wide from Mediclinic Dubai, to Guizhou Provincial Cancer Hospital in China.

In addition to healthcare, our presence in retail continues to expand with global partners such as Montblanc stores (globally), Marc Dorcel stores across France, Thalia book stores across Germany and Freshii restaurants in Canada. Further examples of the breadth of applications of our flooring are the Indian Space Research Organisation (ISRO) semi-conductor laboratories, in Dehli, the Universal Church of San Paolo in Brazil and Central Bark dog hotel in Auckland.

We continue to focus on customer service to maintain market penetration and to be industry leaders, for example in responsible sourcing. BES6001 certification is the “gold” standard for the responsible sourcing of construction products and in recent months Polyflor was awarded an “excellent” rating by the independent certifying body. We continue to trail blaze in our approach to PVC waste collection and recycling and Polyflor are proud to announce the 8^th annual Recofloor Awards event, which will soon take place at Anfield Football Stadium, hosted by footballing legend Kevin Keegan.

Earnings per Share

Our basic earnings per share at 8.8p are above the comparative period of 8.5p by 3.5%.

Having regard to cash, which stands at £47.5 million, I am pleased to say that an interim dividend of 3.85p has been declared (2017: 3.75p), representing a 2.7% increase and this reflects both the strength of earnings and the cash reserves of the Company. This will be payable on 6 June 2018 to those shareholders on the register at the close of business on 4 May 2018.

Outlook

The three months leading up to the half-year end saw us preparing for range updates and new product launches at the major European exhibitions held in January and February and I am pleased to report an encouragingly strong reception for these which should underpin the second half of the year.

We noted in our pre-close trading update (29 January 2018) that a German competitor had entered administration and would be closing its resilient vinyl manufacturing facility and this has now happened.  In consequence we have received multiple enquires from customers of that business. To date, we have converted many of these enquiries into sales across the European market and more will follow.

Looking at the period since the half-year it is pleasing to note that January trading was a particularly strong sales month and February and March also compared well to last year such that, to date, sales are ahead of the comparative by some 10%.

Against this background I have confidence in continued progress.

Anthony Wild

Chairman

27 March 2018