Trading levels showing recovery at floorings group
Bury-based flooring group James Halstead said trading conditions have improved over the past month after its operations were badly hit by the pandemic lockdown.
In a trading update ahead of its final results for the year ended June 30, it said following the outbreak and the impact on businesses, an initial concern was cash inflow, but it found that customers did not, in general, hold up payments.
It was also able to utilise various initiatives by governments in the countries it trades in, and, as at June 30, 2020, cash balances are slightly ahead of the levels at December 31, 2019.
The statement said: “The countries in which our businesses were completely closed were few, with New Zealand being the most significant.
“There were several UK and international government cash flow initiatives in which we participated – the most significant being the VAT deferral in the UK (March-June) and in Germany (April-June).”
The UK, which represents around 30-35% of turnover, faced significant disruption, it said.
Almost all its customers are distributors and through April and into May many were closed.
Turnover, in the UK, in those months dropped by up to 65%, versus the comparable period last year, but the group continued production to focus on the type of product that was anticipated to remain in demand. In June the UK turnover had recovered to approximately 80% of the prior year.
Direct exports, ie to non-group companies, continued with only a 5-10% reduction versus last year in the April-May period.
In terms of the overseas-based businesses most continued to trade, albeit it with reduced manning levels.
In the core lock-down period – April-May – sales were broadly 20% below the prior year comparative with the full lock-down of New Zealand having an effect. In June overseas businesses recovered to 90% of the prior year.
The preparations made by many governments for the onset of the pandemic did lead to an uplift in the sales of products to the health and medical research sectors.
Normally this sector would represent around 30% of the group’s sheet vinyl sales, but from April to June it was much more significant.
As well as the supply of sheet vinyl to the NHS across the UK and significant supplies to Ireland, Halstead supplied new hospital facilities across the globe including Brazil, Argentina, Chile, Mexico, Italy, South Africa, Qatar and the UAE.
However, this was not sufficient to offset the shortfall in business of other sectors which were closed.
In terms of overall turnover during the period April to June, the group averaged just over 70% of the prior year. In terms of the bottom line in this period, profit before tax was just under 50% of the prior year comparative. Cash levels have been preserved.
It said July has seen the position in terms of trading continue to improve as the distribution base in the UK started to fully re-open and in recent weeks the group seen UK sales average over 90% of the comparative.
Looking at the main businesses overseas – Germany, Australia and New Zealand – the level is near parity with the comparatives.
The statement said: “It is still too early to be confident that the worst is over, but it is clear that, to date, this situation is far better than we envisaged four months ago.
“This has been one of the most testing periods in our long history and many of our staff have put in the most commendable of efforts mobilising direct shipments not just across the UK but to far parts of the world.”
It also confirmed it will pay an additional interim dividend to shareholders of 2.125p, after it announced it would pay 2.125p, which was half the normal first dividend it would otherwise have declared.
“These dividends reflected a first half year of record sales and profit. Given the improvement in trading conditions and the cash levels we, as a board, are sufficiently confident now to declare a second interim dividend.”