James Latham plc
(“James Latham” or the “Company”)
HALF YEARLY RESULTS FOR THE PERIOD ENDED 30 SEPTEMBER 2023
Chairman’s statement
Unaudited results for the six months trading to 30 September 2023
Revenue for the six months ended 30 September 2023 was £190.9m, down 10.3% on £212.8m for the same period last year. Cost prices on both timber and panels have slowly fallen throughout the first half of the year but they are now relatively stable and there are currently few signs of price weakness. Sales volumes have also remained at similar levels to the same period last year. We have seen a change in the product mix of our sales, with some of our customers moving to cheaper alternative products to counter the effect of high inflation, which is the main reason for the reduction in revenues.
Gross profit percentage, which includes warehouse costs, for the six month period ended 30 September 2023 was 16.8% compared with 19.4% in the comparative six months. Increased competition in weaker market conditions has led to the gross profit percentage dipping slightly below the long term average of 17.5%.
Overheads have been well controlled during the six months, and despite the stubbornly high inflation rates, the overheads are slightly lower than the same period last year.
Operating profit was £14.5m, down £9m compared with £23.5m profit for the same period last year. This reduction was anticipated as we return to normal trading conditions after the exceptional results of the last two years. Profit before tax was £16.4m compared with £23.7m for the same period last year. The tax charge of £4.0m represents an effective rate of 24.6%, and reflects the increase in the UK basic rate of corporation tax. Earnings per ordinary share were 61.5p compared with 95.6 p for the same period last year.
As at 30 September 2023 net assets are £203.8m (2022: £180.5m). Inventory levels of £66.1m have reduced from £74.6m at the same period last year as supply chains have stabilised. Trade and other receivables are also slightly down with bad debts remaining at a low figure. Cash and cash equivalents have increased to £66.0m (2022: £36.9m) and we continue to take advantage of additional early settlement discount opportunities with our suppliers as well as generating improved interest receipts.
There is a surplus in the IAS19 valuation of the pension scheme at 30 September 2023 of £11.2m compared with £7.2m in the same period last year. The triennial valuation at 31 March 2023 has been completed, and is showing a surplus of £10.0m and a funding level of 118%. This strong position has enabled the trustees to derisk their investments to reduce the volatility of the IAS19 valuation. In addition the deficit recovery funding payment of £3m a year will cease from 1 December 2023.
Interim dividend
The Board has declared an increased interim dividend of 7.75p per Ordinary Share (2022: 7.25p). The dividend is payable on 26 January 2024 to ordinary shareholders on the Company’s Register at close of business on 5 January 2024. The ex-dividend date will be 4 January 2024.
Current and future trading
The second half of 2023/24 has started with similar volumes to the previous six month period to 30 September 2023, with similar margins. Cost prices of the majority of our products are stable at the moment, but we are mindful that the market in continental Europe is quiet at the moment, with European Panel manufacturers exporting more product to the UK, where the market is currently more robust. There remain significant cost pressures on all our manufacturers, so we expect any further price weakness to be limited.
Our customers still have reasonable order books, but there are still indications that some contracts are being postponed rather than cancelled. We are seeing a continued shift in our market sectors to more lower value products, where we have gained market share, and we expect this trend to continue as customers look for more cost effective solutions.
The strength of our customer base and the diverse markets in which we operate will help us during the more challenging macroeconomic climate that we are all facing.
The board anticipates that the results for the year ended 31 March 2024 will be in line with market expectations.
Nick Latham
Chairman
30 November 2023