JAME S HA LSTEA D PLC
Covering the World
Report and Accounts 2017
J
a
m
e
s
H
a
l
s
t
e
a
d
p
l
c
•
A
n
n
u
a
l
R
e
p
o
r
t
&
A
c
c
o
u
n
t
s
2
0
1
7
Beechfield
Hollinhurst Road
Radcliffe
Manchester
M26 1JN
J A M E S H A L S T E A D p l c
Tel +44 (0)161 767 2500
Fax +44 (0)161 766 7499
www.jameshalstead.com
James Halstead Cover 2017 A4 5.3mm spine.indd 1
04/10/2017 15:34
Nominated adviser
Panmure Gordon & Co
One New Change
London
EC4M 9AF
Stockbrokers
Arden Partners
125 Broad Street
London
EC2N 1AR
Auditor
BDO LLP
3 Hardman Street
Spinningfields
Manchester
M3 3AT
Directors and Advisers
Directors
G Halstead
M Halstead
G R Oliver FCA MCT
J A Wild FCA
E K Lotz
S D Hall
Secretary
D W Drillingcourt ACA
Registered office
Beechfield
Hollinhurst Road
Radcliffe
Manchester
M26 1JN
Company registration No.
140269
Website
www.jameshalstead.com
Bankers
The Royal Bank of Scotland plc
6th Floor
1 Spinningfields Square
Manchester
M3 3AP
Registrars
Capita Registrars
The Registry
34 Beckenham Road
Beckenham
Kent
BR3 4TU
Raststätte Würzburg Germany,
Expona Art and Design
1
Contents
Strategic Report
Chairman’s Statement 2
Chief Executive’s Review 3
Financial Director’s Review 6
Governance
Report of the Directors 9
Board Report on Remuneration 12
Corporate Governance 13
Financial Statements
Independent Auditor’s Report to the Members
of James Halstead plc 15
Consolidated Income Statement 19
Consolidated Statement of Comprehensive Income 20
Consolidated Balance Sheet 21
Consolidated Statement of Changes in Equity 22
Consolidated Cash Flow Statement 23
Notes to the Consolidated Financial Statements 24
Company Balance Sheet 50
Company Statement of Changes in Equity 51
Notes to the Company Financial Statements 52
Supplementary Information
Ten Year Summary 59
Shareholder Information 60
Notice of Annual General Meeting 61
2
Chairman’s Statement
Results
Acknowledgements
As we close this year I would like to express the gratitude of
the Board to our customers and employees for their part in
our success. I would especially like to extend our gratitude
to Mr Eberhard Lotz who at the upcoming AGM will step
down as a director of the Group after nine years on the
Group Board having been one of the founders of Objectflor
Art & Design Belags GmbH which was acquired in 1996 and
which has been such an important part of our flooring
operations for many years.
It is with sadness that I report the passing of our former
director Mr Arthur Halstead in July of this year who was
employed by the Group for 50 years, 36 of these as director
of James Halstead plc. Always a trusted and loyal colleague,
friend and family member – he will be greatly missed.
Outlook
I have been Chairman for 17 years and a director of James
Halstead plc for 55 years and it is time for me to step down
from the Board at the AGM. In doing so I leave a strong
team and a business solidly built and not only capable of
continued growth, but achieving this growth.
Trading since our year-end has been strong, particularly in
the UK. In addition, both our antipodean and French
colleagues reported record sales in the first two months.
Taking current trading into account I can only be confident
of progress in the coming year.
On behalf of the board
Geoffrey Halstead
Chairman
29 September 2017
It is gratifying to report turnover of £240.8 million (2016:
£226.1 million) - a record. Just as satisfying to report as the
sales is the record profit before tax at £46.6 million (2016:
£45.5 million). There was clearly a boost to our export
activities given the general weakness of Sterling aiding
competitiveness and margins. This was tempered by a 5.2%
fall in UK sales and turmoil in the supply chain of raw
materials. The drop in UK sales is entirely accounted for by
de-stocking at two of the larger distributor chains. We are
satisfied that the actual purchases of Polyflor ranges by end
users increased and we are encouraged that other
independent distributors increased sales.
Strategy
Our businesses are totally flooring focused and our strategy
is designed to enhance our brand identity thereby
generating goodwill and customer satisfaction with the aim
of continued repeat business. This approach is designed to
increase revenue, and consequently profitability, which then
creates wealth for our shareholders in the form of dividend
as reward for their investment in our company. It also
underpins job security for our employees and benefits all
stakeholders in the business.
Over many years our strategy has also included a policy of
continual investment in both process improvement and in
product development to improve output efficiency and
product offering.
The strategy evolves over time, but our focus on sustainable
growth is undiminished. Indeed sustainability in general is a
key strategy and, from our award winning recycling
initiatives through to our environmental policies, we are
recognised as leaders in this area.
Dividend
Profit and earnings per share have increased and our cash
reserves continue to be healthy. Cash flows from operating
activities are £47.5 million and our cash balances stand
19.1% ahead of last year, even after dividends paid in the
last year, which amounted to £25.4 million.
It is pleasing to report that the Board proposes, once again,
an increased final dividend. The final dividend will be 9.25p
(2016: 8.5p) representing an 8.8% increase which combined
with the interim dividend, paid in June 2017, of 3.75p (2016:
3.5p) makes a total of 13.0p (2016: 12.0p) for the year, an
increase of 8.3%. It is pleasing to have reported a record
dividend as I have done now each year for over 40 years.
Chief Executive’s Review
The major benefit to the year was the positive effects of
exchange
rates on our export margins and our
competitiveness. Turnover at £240.8 million (2016: £226.1
million) was ahead by some 6.5% but the exchange rate
benefits were offset to a large degree by raw material costs
increasing.
Raw material price increases noted in the first half year
continued into the second half as a result of an explosion at
the BASF site in Germany followed by a fire at a Shell
refinery in the Netherlands which interrupted supply of PVC
from Shin-Etsu’s Dutch PVC plant and then a fire at
Vinnolit’s plant in Germany. These events resulted in greater
demand for raw materials from other manufacturers who
struggled to fulfil the demand. In addition we saw the
withdrawal of one US supplier from the European markets
and the currency cost increases, as Sterling fell in value after
the Brexit vote. In mitigation we visited Asia and established
extended relationships with three Asian suppliers. Moreover,
by utilising bulk storage tanks located at Seal Sands in
Teesside we reduced some of the cost effects and most of
the shortages associated with the turmoil.
We make significant purchases of
finished goods
denominated in US dollars and the strength of that currency
has been far from helpful. In mitigation product sourced
from Korea has increased (free of import tariffs) and we are
investigating opportunities for supply from Europe. More
significant are plans for our own UK manufacture of these
sourced items at Teesside which, initial costings suggest,
could offer cost advantage as well as the logistical benefit of
being nearer our European markets.
Our gross margin improved in all markets, a major
achievement given the challenges facing the group during
the year and obviously greatly helped by the weakness of
Sterling.
expect
sustainability
International trade is about more than just shipping
product. Our customers, often governments and multi-
nationals,
and
environmental credentials. To us this means action and
involvement, not just the glossy PR so often seen. For
example, we are one of the first to achieve SA 8000
certification (for global working practices), BES 6001
certification (for ethical sourcing) and BRE Global A+ rating
(for sustainable manufacture).
standards
Achieving these certifications gives us added credibility in
the market. Our recycling initiatives and co-operations
demonstrate both innovation and solid action whether it is
3
the UK with the Chartered Institute of Waste Management
(CIWM) (who awarded us for environmental excellence) or
the Green Councils of Australia/New Zealand (awarded
Green Tag certificate). Polyflor is leading the industry.
Reviewing the businesses in more detail:
Objectflor/Karndean and James
Halstead France, our European
operations
Turnover was on a par with last year although within this it
was encouraging that there was growth in our Expona
brand, by some 3.3%, offset by a reduction in the Karndean
ranges of 6.4%.
As anticipated given our market share and the intense
pressure from competitors within the German market a
decline in turnover within Germany was noted but this was
compensated for by performance in surrounding territories
most markedly Belgium, Austria, Eastern Europe and
Switzerland.
During the year augmenting the Benelux and Eastern bloc
sales force has been a strategy to increase our penetration
of surrounding territories whilst defending our leading
position in Germany. Germany sales represent 68% of total
sales serviced from Cologne (2016: 71%).
For several years we have supplied flooring to the expanding
fitness chains Fit One and McFit but this year we have
secured many other national chains of which Fitness First,
Linzenich Fitness and Pfitzenmeier Group are but examples.
Retail chains are important clients and Objectflor have
secured many customers including Euronics stores across
the region as well as Unitymedia stores and the retail
outlets of Bijou Brigitte. Hotel chains such as Sol Umag in
Croatia and Aquis Grana are referenced as good installations
but our flooring was also supplied and fitted to the central
police station in Frankfurt and in the Kika Leiner furniture
stores across Germany.
In France, turnover was on a par with the record of the
previous year with increased profit as a result of product
sales migrating to higher margin lines. Turnover across
France was strong. In the Paris region we have supplied
‘Passy Plaza’, the prestigious shopping centre, in the 16th
arrondissement and other installations as diverse at the
‘Thalassa’, Frances flagship oceanographic vessel and the
Puy du Fou theme park.
4
Chief Executive’s Review
continued
Polyflor Pacific – encompassing
Australia, New Zealand and Asia
Turnover was 6.8% above last year, with profit greatly
increased. Margins improved by over 5% reflecting both
favourable product mix and the cessation of sales of dis-
continued stock which was a feature of the prior year. This
top line benefit was further improved by reduced freight
costs (equivalent to 1.3% of sales) by the realignment of
stock holdings across the continent.
Our team in NSW have relocated our Victoria offices,
augmented the Queensland staff with representation in Far
North Queensland and recruited a state manager for
Western Australia. The breadth of installations was
impressive whether it be the rollout of Polyflor across
Woolworths stores nationally, the Narrogin Hospital in WA
or the Western Sydney University as well as countless
refurbishments across the country.
Our Hong Kong office continues to supply impressive
projects across China such as Qinhuangdou Welfare
Hospital and the award winning Fudan University Hospital
of Shanghai. As important as healthcare continues to be, our
Chinese presence is much more broadly based with the
recent Toys R Us franchises and Louis Vuitton shops in Hong
Kong illustrating the breadth of customers as does the MGM
Casino in Macau.
New Zealand showed modest 1% growth and improved
margins. This achievement illustrates the underlying
strength of the day to day business where for some key
product ranges we continue to have significant market
share, particularly for UK manufactured products. This share
is over 30% of the market which is commendable for such
a distant location. The headline 1% hides good growth in
the North Island contrasting with the South Island, where
activity generally for our customers has been poor, still
affected by continued uncertainty
the
Christchurch earthquake some years ago.
following
We retained the main New Zealand social housing contract
which came up for renewal in the period. Success in this is
testament to the high level of service and quality provided,
a key factor in decision making. Polyflor in New Zealand was
voted Vinyl Flooring Supplier of the year by the Flooring
Xtra group and continues to offer retail stores such as the
Spark Stores chain and Motorcycle Mecca in Invercargill
design led flooring. Healthcare will always be a key market
segment but beyond this use of our products in the year
extended from buses, and BP garages to the Rorotonga
sports stadium in the Cook Islands.
A key development in the year was the move to the new
warehouse in Auckland, which is better suited to our current
and likely business needs. This has assisted with the
profitability of the business.
Polyflor & Riverside Flooring, based in
UK
Overall turnover reduced by 2.5% and profit was
consequently affected but Riverside continued to grow with
3% increase in turnover.
The last 12 months in the UK have been difficult. One of the
major distributors was prepared for sale by its PLC parent
which involved de-stocking, a lack of investment and
ultimately disposal. Another of the major distributors looked
to rationalise stock and focused on margin improvement.
Whilst this de-stocking did affect our sales, ultimately it is
temporary. The similarities to the actions of the large UK
retailers such as Tesco, Sainsbury, etc., a few years ago seem
appropriate to mention because, whilst the major chains
focused on margin and own label products, the large
independent distributors have focused on branded products,
such as ours, at keen price points and showed good growth
and increased market share. Sales in the market place of
Polyflor product were higher than the previous year despite
the de-stocking which is encouraging.
Productivity improvements in line speed and capacity at
Radcliffe combined with the, at best, flat UK demand that was
a consequence of the aforementioned de-stocking inevitably
led us to drop shifts from each of our Radcliffe production
lines. Regrettably there were redundancies (just under 30).
This obviously had a financial cost (which hit the bottom line
in the early part of the year) and a human cost, but thankfully
all the redundancies were voluntary, but the consequence was
570 man years of experience left the business.
Product development was at the forefront and a lot of time,
and cost, has gone into new product lines for the future.
Over £900,000 has been invested into the Riverside plant in
Teesside and the company can now offer in line registered
embossing on its award winning heterogeneous sheet. In
addition we have secured planning permission to extend the
plant.
Polyflor has for the fourth consecutive year won the
Contract Flooring Association’s Manufacturer of the Year
5
Award as Best Vinyl Award (for the 8th year in a row) which
helped us to secure the order for the new Dumfries Royal
Infirmary which faced competition from one of our
continental competitors. Range launches and re-vamps
were several and included our new ‘Silentflor’ commercial
flooring with unique sound-deadening properties and vivid
colour ranges. ‘Bloc’, our vivid single colour homogenous
range, has received very good responses from architects and
specifiers.
Polyflor Nordic comprising Polyflor
Norway based in Oslo and Falck
Design based in Sweden
Norway posted a small increase in turnover in the year of
just under 2% increase over the prior year. As a largely
primary economy, the low oil prices of the recent past had
an impact on this market. Nevertheless, turnover comprised
a greater proportion of UK manufactured product (around
39% of the total) which was gratifying. Projects included
the new Svalbard Satellite Station (SvalSat 2) which is
located at 78° north of the equator and probably our most
Northern installation together with the new Trondheim
Spektrum arena. Profit in Norway was comfortably ahead of
the prior year.
In Sweden, turnover declined 8.3%. Profit, though reduced,
held up surprisingly well as a result of a swing to our higher
end products leading to improved margins. The Swedish
business experienced a change in management following
the retirement of the previous Managing Director. This along
with some staff disruption resulted in a poor second half of
the year, however as new sales and marketing strategies
have been implemented sales are improving. Higher margins
and tight overhead control meant that the shortfall in sales
was not reflected to as great an extent in terms of
profitability.
Close control of overheads where possible means that
profitability across the Scandinavian business has increased
vis a vis the prior year.
Polyflor Canada, based in Toronto
Turnover continued to grow with an 8% growth in
distributor sales. However this was offset by a decline in
direct sales into the mining sector due to lower activity in
this sector.
National retailers such as Boston Pizza and Booster Juice are
valued clients as well as Landmark Cinemas and Chevron
Gas stations. In addition prestigious new buildings continue
to choose Polyflor such as the Royal Victoria Hospital, the
National Hockey League Association NHLA head offices and
Omers Towers in Toronto.
Polyflor India, based in Mumbai
We had a good year as this relative new business reported a
small profit. With five regional sales managers and a dealer
network approaching two dozen we have exited the start-up
phase of our move into this market and several healthcare
projects have contributed to this record year such as the
Humancare Trust Hospital in Dwarka, the Royalcare Super
Speciality Hospital, Coimbatore and the ESIC Medical
College in Mandi.
Rest of the World
Outside our headline markets we continue to cover the
world and a few locations worthy of mention are Banco De
la Natu in Mexico City, Salalah airport in Oman, the new
Schengen terminal at Athens airport and Tamana University
in Trinidad. Our distribution network has performed well
with several countries at record levels of turnover (Ghana,
Lithuania, Italy, Portugal, Puerto Rica and the USA being
examples).
Outlook
There are positive signs in the UK that after the turbulence
of the last year resulting from changes at two of the larger
distributors conditions are now normalising. In addition, our
supply chain issues have largely been resolved. The early
months of the new financial year have provided encouraging
signs of growth with turnover increasing. I am optimistic for
the coming year.
On behalf of the board
Mark Halstead
Chief Executive
29 September 2017
6
Financial Director’s Review
As is usual, we have prepared these accounts by the
consistent application of accounting standards, the
matching of costs and revenues with due appraisal and
accrual for subjective (but probable) liabilities at the year-
end. Prudence is less regarded in the preparation of
published accounts than it was even a decade ago but
caution remains important. The group operates through
separate legal entities in certain areas of the world and
though these are discussed in the Chief Executive’s Review
we, as a Board, have concluded that these operations are
one segment for the purposes of IFRS 8.
This year’s profit before tax is a record being 2.5% ahead of
the profit for the year to 30 June 2016.
Profit after tax is also at a record level being 3.6% ahead of
the prior year to 30 June 2016. Our gross margins increased
as a percentage and in absolute terms. The main reason was,
broadly, the beneficial effects of exchange rates on export
activities offset by increased raw material and purchase
costs. There were monthly fluctuations in raw material
prices initially exacerbated by shortages in certain areas but
overall by the weakness of Sterling.
Some key statistics:
Group turnover at £240.8 million (2016: £226.1
million) was 6.5% higher than last year and was
significantly affected by the exchange rates.
Net finance income (excluding the effects of IAS19
accounting for pensions) was £0.1 million (2016: £0.2
million) reflecting rates that remain very low.
Selling and distribution costs were 15.9% ahead of
last year reflecting foreign exchange translation
effects
Trade debtors decreased to £28.5 million (2016:
£30.7million). Trade creditors were higher at £41.3
million (2016: £32.8 million).
Stock levels have risen and stand at £72.9 million
(2016: £62.8 million) and this 16% increase is partly
related to year end translation where the exchange
rate has moved 6 % against last year and the
remaining growth from product launch stock prior to
July despatch and wider product ranges.
Cash stands at £52.5 million (2016: £44.1 million)
even after the payment of £25.4 million in dividends,
£10.7 million in tax and £4.2 million of capital
expenditure.
Key Performance Indicators
The board considers growth in profit before tax and growth
in dividend key targets in line with the task of delivering
shareholder value. Control of working capital continues to
be important and the level of cash is monitored.
Rather than focus on individual working capital targets or
ratios, the Board are informed of all significant issues
directly by subsidiary management by means of monthly
reports on the key decisions and influences on working
capital. Our focus at subsidiary level is on stock availability
and appropriate credit given to and received from
customers and suppliers respectively. Obviously sales,
margin and profitability are monitored as well as cash,
which is the final result of our economic activities.
Appropriate summaries of these statistics are collated into
monthly Group reports.
No individual key performance indicator, or group thereof, is
regarded as more important than informed in-depth
knowledge of the underlying businesses. Subsidiaries
present key performance indicators on debtor days, stock
turn and creditor days but the consolidation of these for the
whole Group offers no extra benefit as the component of
mix can mask underlying effects.
In terms of non-financial KPIs brand awareness, reputation,
customer satisfaction and market share are all important
but difficult to assess. We do not believe that surveys and
market share data, to the extent that is collated by various
trade bodies, is complete and wholly accurate. Consequently
little reliance is placed upon this data. Customer satisfaction
awards are always welcome.
Principal Business Risks and
Uncertainties
The ongoing discussions regarding the UK leaving the EU
(“Brexit”) is an ongoing uncertainty. It has affected
exchange rates and interest rates, at least in the short term,
but it is as yet unclear what will unfold and we continue to
await the evolution of the repercussions.
The Board constantly assesses risks and discusses business
issues regularly. To the extent risk is insurable the Board is
risk averse and the Group
insured. A
comprehensive insurance appraisal takes place annually to
mitigate exposure to risks, such as business interruption and
fire but obviously key risks such as escalating raw material
prices and energy costs fall outside any insurable event.
is widely
7
Inevitably the unexpected cannot be anticipated but given
the depth of understanding of our principal business by the
senior management, and the Board, risk is ameliorated but
not eliminated.
Our goals are simple and we avoid over-stretching our
capabilities. Our plans are not limited to a twelve month set
of figures, though budgets are prepared and monitored, and
we look to benefit from decisions over a longer time frame.
A major mitigation of risk is a close understanding of our
people, their motivations, experience and limitations. In
general it is in the nature of the Board to talk about and
focus on the problems of our business. This is the major way
in which risk is not merely identified but mitigated. Excess
capacity exists in our businesses and across Europe, but
turnover and profit have advanced.
The risks identified beyond insured events include foreign
exchange risk, credit risk, liquidity risk and key management.
There are, additionally, key customers and key suppliers
which create dependencies. Sales and purchasing policies
are under regular review to assess these dependencies. In
the main, risk and control are measured and assessed from
a financial perspective, but this is not to the exclusion of
non-financial risks and uncertainties. It is clear that
scenarios can be envisaged where the Group’s activities may
be disrupted and little could be done to mitigate the
negative effects.
In terms of credit risk certain companies have insurance in
place and where there is no insurance we often require
letters of credit or bills of exchange but fundamentally
credit control and market awareness are important. Our
cash balances, and bank facilities combined with a robust
balance sheet are buffers against liquidity risk.
In respect of exchange risk, the Group operates
internationally and is exposed to foreign exchange risk on
both sales and purchases that are dominated in currencies
other than Sterling. Those giving rise to the most significant
risk are US Dollar, Euro and Australian Dollar. To mitigate risk
associated with exchange rate fluctuations the Group’s
policy is to hedge known and forecast transactions. This
hedging is at least 25% and on occasion, albeit rarely, more
than 100% of the next year’s anticipated exposure. IFRS7
dictates several disclosures on risk and we have undertaken
a market risk sensitivity analysis on fluctuations in our
major currency exposure and the effects on the financial
assets and liabilities in the balance sheet (which is included
in the notes to the accounts).
Several external factors can be envisaged that would affect
operating activities. These include technical failures, labour
disputes outside our businesses, availability of raw
materials, and import or customs delays. Given the spread
of our operating activities there is a reduced risk of any
single event being catastrophic, but external factors are an
area of risk that continues to be monitored. Certain
suppliers would be difficult to replace or their products to
substitute and delays could be of several weeks duration,
which would be not be covered by our current levels of
stock holding. Given the length of service of many senior
managers succession planning becomes a risk and/or an
uncertainty but again the open style of decision making and
collaboration mitigate the risk.
The activity and progress of our competitors is a significant
risk. Whether there is a new innovation or a gain in
competitive advantage by a new process, or the loss of
market share by any means, any effect on our volume
throughput will have an effect on profitability. The Board
looks for market intelligence, and devotes significant time to
understanding the strategy of our competitors. It is clear
that the success this business has achieved over the last 20
years leads our competitors to scour all information we
publish for data on our activities.
I would note that we have overseas subsidiaries with
significant profit and assets which are translated at average
exchange rates (in the case of profit and loss items) and at
year end rates (in the case of balance sheet items). The
effect of this is shown annually in the Consolidated
Statement of Comprehensive Income. Inevitably there is a
translational exposure on these items and since they are not
necessarily cash flows (excepting dividend payments) the
consolidated net worth of the Group varies over time. We do
not hedge this translational exposure though we have in the
past hedged overseas assets with matching debt. At present
the cost and complexity in terms of arranging facilities and
complying with local taxation rules would seem to
outweigh the benefits.
The last five years of these exposures in terms of
increase/(decrease) in the value of our overseas assets are as
follows:
2017
2016
2015
2014
2013
£’000
2,168
4,808
(3,868)
(2,260)
93
Aside from the strategic, operational and financial risks
described there are also compliance risks relating to the
legal and regulatory requirements of the various markets in
which we operate. Directors and senior management are
involved in health and safety, duty and customs clearance,
waste management and other such issues.
8
Financial Director’s Review
continued
Defined Benefit Pension Scheme
These ratios for this Group based on a share price of £4.68
(2016: £4.09) are:
The net deficit to market capitalisation is 2.2% (2016:
2.5%);
The total liabilities to market capitalisation is 8.5%
(2016: 9.6%); and,
The deficit to operating profit is 45.0% (2016:
55.2%).
I pass no comment on the merits of these ratios but note
that with the assumptions changing annually (despite the
long term nature of the liability) there does not seem to be
a consistent long term measure of the deficit. The above
merely give some idea of the “affordability” of the deficit to
the group. The dominant assumption that drives up the
deficit is that the current very low gilt yields are used to
determine liabilities. There is an irony in that pension funds
have an unquenchable appetite for government bonds at
ever lower interest rates.
The strategic report was approved by the board.
On behalf of the board
Gordon Oliver
Finance Director
29 September 2017
In common with other long established businesses we have
the complications and uncertainty associated with having a
“final salary” pension scheme. The scheme has been closed
to new entrants since 2002 and was only offered to UK
based employees; of our UK based work force around 30%
of employees are members of this scheme. At this moment
in time we are considering closure of the scheme to future
accrual.
Accounting for this defined benefit scheme is prescribed by
IAS 19 and the quantum of the deficit is ever more volatile
due to the nature of using current (low) gilt yields and
arguably over prudent assumptions.
Actuaries undertake a tri-annual valuation of the scheme.
Our defined benefit scheme is “contracted-out” and with
the cessation of contracted-out status in 2016 there is an
added cost (increased employer national
insurance
contributions). There was much debate recently over the old
British Steel pension fund and talk of legislation to cap
pension in payments at CPI rather than the discredited RPI.
The implications are broadly beneficial to the group, but
since the issue was raised the effects of “Brexit” have taken
precedence.
The scheme comprises active members (existing employees),
deferred members (past employees not yet in retirement)
and pensioners. Under the current accounting standard for
pensions the current service costs of active members are
dealt with in the profit and loss account with the costs
associated with deferred members and pensioners dealt with
through the Consolidated Statement of Comprehensive
Income. This year there is a net actuarial gain of £2.4 million
against a net actuarial loss in 2016 of £7.4 million which is
largely the effect of changing assumptions. It is of note that
since the adoption of the pension scheme into the balance
sheet (2006) the deficit has had the effect of improving the
return on capital employed (since it is a deficit and a liability)
and for this reason it is excluded from any performance
measure (or related bonus remuneration) internally. The
majority of UK employees are in one or other of our defined
contribution schemes.
In an effort to offer some perspective by which to view the
pension scheme deficit the following statistics are used by
some investors:
The comparison of scheme deficit to market
capitalisation as a percentage;
The comparison of scheme liabilities to market
capitalisation; and,
The comparison of the deficit to operating profit.
9
Report of the Directors
The directors are pleased to present their report, together
with the audited accounts for the year ended 30 June 2017.
Substantial interests
Results and dividends
The group results for the year and the financial position at
30 June 2017 are shown in the consolidated income
statement on page 19 and the consolidated balance sheet
on page 21.
The directors are recommending a final dividend of 9.25p
per share on the ordinary share capital for payment on
1 December 2017 to those shareholders whose names
appear on the register at 3 November 2017. This final
dividend together with the interim dividend paid on 6 June
2017 makes a total of 13.0p per share (2016: 12.0p).
Directors
Mr S D Hall and Mr E K Lotz are the directors retiring by
rotation. Mr S D Hall will offer himself for re-election at the
annual general meeting. Mr E K Lotz has decided to retire as
a director of the company and will not seek re-election at
the annual general meeting.
Two new directors will be appointed by the board and will
offer themselves for election at the annual general meeting.
Further details of these appointments will be given in the
notice of the annual general meeting.
The interests of the directors and their families in the share
capital of the company were as follows:
30 June 2017 30 June 2016
Beneficial As Trustee Beneficial As Trustee
Ordinary shares
G Halstead 8,621,937 – 8,401,937 –
G R Oliver 207,550 432,041 207,550 583,575
M Halstead 13,241,468 11,541,547 13,241,468 11,693,081
E K Lotz – – – –
J A Wild 150,300 12,512,032 150,300 12,512,032
S D Hall 5,700 – 5,700 –
Preference shares
G Halstead 86,405 – 86,405 –
The directors consider that the board of directors include
key management for all areas of the business and that there
are no other key management which require disclosure.
Details of the directors’ options under the terms of the
executive share option scheme are set out in note 23.
As at 21 September 2017 the company had been notified of
the following interests which represent 3% or more of the
existing issued share capital:
Number %
John Halstead Settlement 35,447,218 17.0
Rulegale Nominees 35,276,816 17.0
Octopus Investment Nominees 6,639,982 3.2
Share capital
During the year new ordinary shares were issued and
allotted as fully paid to enable share options to be exercised
as follows:
22 August 2016
24 August 2016
19 October 2016
1 November 2016
22 November 2016
5 April 2017
3 May 2017
12 May 2017
15 May 2017
23 June 2017
25,232
42,868
45,000
21,000
5,000
160,000
10,000
20,000
5,000
60,000
394,100
Special business at the annual general
meeting
Resolution 7 renews the directors’ authority to offer
ordinary shareholders the opportunity to take ordinary
shares in lieu of any cash dividends which may be payable
prior to the Annual General Meeting in 2018.
Resolution 8 authorises the directors to allot relevant
securities pursuant to section 551 of the Companies Act
2006 up to a maximum nominal amount of £3,466,227
representing approximately 33.33% of the total ordinary
share capital. The authority will expire at the next Annual
General Meeting of the company to be held in 2018 or six
months after the next accounting reference date of the
company (whichever is the earlier).
Except for the issue of shares to satisfy the exercise of share
options granted under the share schemes, the board has no
present intention of issuing any ordinary share capital of the
company. As at the date of this document, the company
holds no treasury shares.
Resolution 9 invites shareholders to renew the board’s
authority to issue shares for cash without first being
required to offer them pro rata to existing shareholders.
10
Report of the Directors
continued
The proposed authority will terminate at the next Annual
General Meeting of the company to be held in 2018 or six
months after the next accounting reference date of the
company (whichever is earlier). The authority is limited to
equity securities up to an aggregate nominal amount of
5.0% of the company’s issued ordinary share capital. The
resolution also contains provisions to enable the directors to
deal with fractional entitlements and other practical
difficulties which could arise in the event of a rights issue or
similar pre-emptive offer.
Resolution 10 seeks to renew the authority of shareholders
to allow the company to purchase its own shares in respect
of up to 10.0% of the issued capital at prices not exceeding
5.0% above the average of the middle market quotations for
the five business days preceding the purchase. The directors
undertake that the authority would only be exercised if the
directors were satisfied that a purchase would result in an
increase in expected earnings per share and was in the best
interests of the company at that time. The directors may
choose to hold shares purchased under such authority in the
form of treasury shares (subject to a maximum of 10% of
the issued ordinary share capital at any one time).
Employment policies and involvement
totally non-discriminatory
The group operates a
employment policy, an integral part of which is the proper
consideration of all applications for employment from
disabled persons who, after appointment, receive training for
career development and promotion consistent with both
the needs of the group and their own particular abilities.
Employee involvement in the overall performance of the
group continues to be encouraged through the employee
profit sharing scheme and the share option plan. There are in
existence various well established committees and
discussion groups which range from formal structures to less
formal gatherings and which deal with a whole range of
issues from the group’s financial performance to health and
safety issues. Copies of this annual report are available to all
employees.
Environmental policy
A policy has been issued and implemented on safeguarding
against air, water, noise and land pollution. The management
team constantly reviews and
implements at every
opportunity the most effective use of materials and energy.
A number of control measures have been introduced and
these, combined with materials storage and handling
methods, together with training, form the basis of the
environmental programme. The policy is fully endorsed by
the directors and is under constant review to ensure full
compliance with the UK Environmental Protection Act 1990.
All employees, suppliers and contractors are made aware of
the environmental policy which is also freely available to
the general public and regulatory authorities.
Health and safety
The health and safety of the group’s employees, customers
and members of the general public who may be affected by
the group’s activities continue to be matters of primary
concern. It is therefore the group’s policy to manage its
activities so far as to avoid causing any unnecessary or
unacceptable risk to the health and safety of all those
affected by its activities. In order to ensure that the group’s
high standards in this area are maintained, a substantial
programme of training and retraining of employees took
place throughout the year.
Research and development
We
remain totally committed to the continuing
development of our processes and our products to both
satisfy the needs of our customers and ensure that we
remain at the forefront of our industry.
Directors’ responsibilities statement
The directors are responsible for preparing the annual report
and the financial statements in accordance with applicable
law and regulations.
Company law requires the directors to prepare financial
statements for each financial year. Under that law the
directors have, as required by the AIM Rules of the London
Stock Exchange, elected to prepare the group financial
statements in accordance with International Financial
Reporting Standards as adopted by the European Union. The
directors have elected to prepare the parent company
financial statements in accordance with United Kingdom
Generally Accepted Accounting Practice (United Kingdom
Accounting Standards and applicable law) including
Financial Reporting Standard 101 Reduced Disclosure
Framework. Under company law the directors must not
approve the financial statements unless they are satisfied
that they give a true and fair view of the state of affairs of
the group and the company and of the profit or loss of the
group for that period.
The directors are also required to prepare financial
statements in accordance with the rules of the London
Stock Exchange for companies trading securities on the
Alternative Investment Market.
11
Auditor’s remuneration – non-audit
related fees
Our auditor may undertake non-audit related work. This
work would be tendered for separately from audit work.
The board has always sought to ensure that the auditor does
not automatically receive additional fees. This approach, the
board believes, enables the company to ensure value for
money on the company’s part, and maintains the
independence of the auditor.
Auditor
A resolution to re-appoint BDO LLP as auditor will be
proposed at the forthcoming annual general meeting.
Directors’ statement as to the disclosure
of information to the auditor
All of the current directors have taken all the steps that they
ought to have taken to make themselves aware of any
information needed by the company’s auditor for the
purposes of their audit and to establish that the auditor is
aware of that information. The directors’ are not aware of any
relevant audit information of which the auditor is unaware.
Approved by the board of directors and signed on behalf of
the board.
D W Drillingcourt Beechfield
Secretary Hollinhurst Road
Radcliffe
Manchester
29 September 2017
M26 1JN
In preparing these financial statements the directors are
required to:
select suitable accounting policies and then apply
them consistently;
make judgements and accounting estimates that are
reasonable and prudent;
state whether the group financial statements have
been prepared in accordance with IFRSs as adopted
by the European Union subject to any material
departures disclosed and explained in the financial
statements; and
prepare the financial statements on the going
concern basis unless it is inappropriate to presume
that the group and company will continue in
business.
The directors are responsible for keeping adequate
accounting records that are sufficient to show and explain
the company’s transactions, to disclose with reasonable
accuracy at any time the financial position of the company
and enable them to ensure that the financial statements
comply with the Companies Act 2006. They are also
responsible for safeguarding the assets of the company and
the group and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
The directors are responsible for ensuring the annual report
and financial statements are made available on a website.
Financial statements are published on the company’s
website in accordance with legislation in the United
Kingdom governing the preparation and dissemination of
financial statements which may vary from legislation in
other jurisdictions.
The directors are responsible for the maintenance and
integrity of the corporate and financial information included
on the company's website. The directors’ responsibilities
also extend to the ongoing integrity of the financial
statements contained therein.
Going concern
After making enquiries the directors have formed a
judgement at the time of approving the financial
statements that there is a reasonable expectation that the
group has adequate resources to continue in operational
existence for the foreseeable future. For this reason they
continue to adopt the going concern basis in preparing the
accounts.
12
Board Report on Remuneration
Remuneration committee
Pensions
The remuneration committee comprises the non-executive
directors, with Mr J A Wild, as chairman. The committee
meets at least once a year, although usually more
frequently, to determine the remuneration packages of the
executive directors of the group.
The company operates Inland Revenue Approved defined
benefit and defined contribution pension schemes. The
group chief executive and group finance director are
members of the defined benefit scheme. Pension
entitlements are calculated on basic salary only.
All members of the schemes are required to contribute a
percentage of their pensionable earnings. Several years ago
pensionable salary was restricted to the growth in the
consumer price index.
Other benefits within the schemes are death in service lump
sums, spouse’s and dependants’ pensions following death in
service of the member and ill health early retirement where
the appropriate circumstances arise.
Service agreements
The chairman and the group chief executive do not have
service agreements. The group finance director has a service
agreement which terminates within or is terminable by the
company and the executive on not more than one year’s
notice. The remuneration committee has taken the view
that notice periods of one year are reasonable and in the
interests of both the company and its executive directors
having regard to prevailing market conditions and current
practice. Mr S D Hall has a service contract for an initial
term of two years from the date of his appointment, which
can be terminated by either party by one month’s written
notice. Mr J A Wild does not have a service agreement.
J A Wild
Chairman of the Remuneration Committee
The remuneration policy for the non-executive directors is
determined by the board as a whole by reference to market
rates. They do not participate in the group bonus scheme,
pension scheme or share option scheme. No director can
vote in regard to his own remuneration.
Remuneration policy
The remuneration policy is to provide terms of employment
such that the recruitment, motivation and retention of high
calibre personnel is achieved and maintained to the mutual
benefit of shareholders and employees. The committee is
assisted from time to time by data supplied by independent
professional remuneration consultants as to comparable
companies, although identical circumstances are rarely
found.
Basic salary and bonus payments
is determined by
Annual bonus schemes are in place which reward the
executive directors on achieving performance objectives.
Performance
index-linked profit
improvements through a trend of earnings per share growth.
UK based executives are eligible members of the employee
share scheme. Performance bonuses of £415,000 to each of
the group chief executive and group finance director were
paid during the year.
Share option schemes
The remuneration committee believes that share option
plans are an important long term incentive to executive
directors and other senior employees. They are intended to
link the exercise of the option to a sustained and significant
improvement in the underlying financial performance of the
group.
The share option plan is reviewed by the remuneration
committee and is open to executive directors and selected
employees of the group. The option price per ordinary share
will not be less than the market value on the day of grant. A
limit of four times earnings has been placed on the value of
the aggregate price payable on the exercise of all options or
rights to subscribe for ordinary shares granted to an
individual employee under the share option plan and under
all other discretionary schemes.
13
Corporate Governance
As an AIM listed company, the company is not required to
comply with the provision of the UK Corporate Governance
Code. However, the board recognises the importance of, and
is committed to, ensuring that effective corporate
governance procedures relevant to smaller listed companies
are in place.
The board
The Remuneration Committee – comprising Mr J A Wild as
chairman, Mr G Halstead and Mr S D Hall decides on the
remuneration of the executive directors.
The Nomination Committee – comprising the whole board
is chaired by Mr G Halstead and considers the appointment
of directors. As a result, the committee consists of three
executive directors and three non-executive directors.
The membership of the board during the year comprised
three executive directors and three non-executive directors.
Internal control
The board, which meets regularly (six times during the last
financial year including the annual general meeting)
determines the policies and objectives of the group and
provides overall strategic direction to ensure that the
policies and objectives are carried out. There is a list of
matters which are specifically the responsibility of the board
to resolve. Monthly management accounts are circulated to
the directors. An agenda of matters to be discussed,
including latest group management accounts, is circulated
to board members in advance of each main board meeting
and discussions and decisions taken at those meetings are
minuted in full.
The board believes Mr S D Hall and Mr J A Wild to be
independent.
Given the size of the group, the board does not consider it
necessary to change the ratio of non-executives to
executive directors, or to have formal procedures for the
directors, in the furtherance of their duties, to take
independent professional advice at the company’s expense.
All directors have access to company secretarial services and
advice.
Attendance at the six board meetings was as follows:
Possible Actual
G Halstead – non-executive 6 6
M Halstead 6 6
G R Oliver 6 6
E K Lotz 6 3
J A Wild – non-executive 6 6
S D Hall – non-executive 6 6
Board committees
The following board committees have been in operation
throughout the year:
The Audit Committee – comprising Mr J A Wild as chairman,
Mr G Halstead and Mr S D Hall meets twice a year. The
external auditor
is present at the meetings and the
executive directors may attend at the request of the
committee.
The board has ultimate responsibility for the system of
internal control operating throughout the group and for
reviewing its effectiveness. Internal control systems in any
group are designed to meet the particular needs of that
group and the risks to which it is exposed. No system of
internal control can provide absolute assurance against
material misstatement or loss. The group’s system is
designed to manage rather than eliminate the risk of failure
in order to achieve business objectives and to provide the
board with reasonable assurance that potential problems
will normally be prevented or will be detected in a manner
which will enable appropriate action to be taken.
The key procedures which the directors have established
with a view to providing effective internal control are as
follows:
the group directors are responsible for establishing,
maintaining and reviewing the group’s system of
internal control and meet regularly to consider group
financial performance, business development and
management issues, and to review these against
predetermined objectives;
the group board establishes corporate strategy and
business objectives. Management of subsidiary
companies integrate these objectives into their
business strategies for presentation to the group
board with supporting financial objectives;
subsidiary company budgets, containing financial and
operating targets, capital expenditure proposals and
performance/profitability indicators, are presented to
and reviewed by the group executive directors. The
consolidated group budget is approved by the group
board;
there is an ongoing process for identifying, evaluating
and managing the significant risks faced by the group.
These risks are appraised and evaluated by
responsible executives and endorsed by subsidiary
and group management. This process has been in
place throughout the year and up to the date of
approval of the annual accounts;
14
Corporate Governance
continued
as part of the regular monitoring and review, the
group executive directors hold regular meetings with
the management of the subsidiary companies at
which reports covering such areas as forecasts,
business development, strategic planning, risk
exposure and performance against budget, are
presented and discussed. These are then reported to
the group board, on a quarterly basis;
the group board reviews and considers any major
problem which may have occurred and assesses how
the risks have changed in the period under review;
there is a group-wide policy governing appraisal and
approval of capital expenditure and asset disposals;
to underpin the effectiveness of controls, it is the
group’s policy to recruit management and staff of
high calibre, integrity and appropriate disciplines.
High standards of integrity, business ethics and
compliance with laws, regulations and internal
policies are demanded from staff at all levels;
the audit committee keeps under review the
effectiveness of the system of internal control and
reports its conclusions to the full board;
the board also conducts an assessment of the
effectiveness of the
internal control system.
This assessment consists of a review of all the
significant areas of internal control, including risk
assessment, the control environment, control
activities, information and communication, and
monitoring.
Relations with shareholders
The executive directors are available to meet institutional
shareholders and fund managers, given reasonable notice.
The entire board is available to answer shareholders’
questions at the annual general meeting.
15
Independent Auditor’s Report to the Members of
James Halstead plc
Opinion
Conclusions relating to going concern
We have audited the financial statements of James Halstead
plc (the ‘parent company’) and its subsidiaries (the ‘group’)
for the year ended 30 June 2017 which comprise the
consolidated income statement, the consolidated statement
of comprehensive income, the consolidated and parent
company balance sheets, the consolidated and parent
company statement of changes in equity, the consolidated
cash flow statement and notes to the financial statements,
including a summary of significant accounting policies.
The financial reporting framework that has been applied in
the preparation of the group financial statements is
applicable law and International Financial Reporting
Standards (IFRSs) as adopted by the European Union. The
financial reporting framework that has been applied in the
preparation of the parent company financial statements is
applicable law and United Kingdom Accounting Standards,
including Financial Reporting Standard 101 Reduced
Disclosure Framework (United Kingdom Generally Accepted
Accounting Practice).
In our opinion:
the financial statements give a true and fair view of
the state of the group’s and of the parent company’s
affairs as at 30 June 2017 and of the group’s profit for
the year then ended;
the group financial statements have been properly
prepared in accordance with IFRSs as adopted by the
European Union;
the parent company financial statements have been
properly prepared
in accordance with United
Kingdom Generally Accepted Accounting Practice; and
the financial statements have been prepared in
accordance with the requirements of the Companies
Act 2006.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (ISAs (UK)) and applicable law.
Our responsibilities under those standards are further
described in the Auditor’s responsibilities for the audit of the
financial statements section of our report. We are
independent of the group and the parent company in
accordance with the ethical requirements that are relevant
to our audit of the financial statements in the UK, including
the FRC’s Ethical Standard as applied to listed entities, and
we have fulfilled our other ethical responsibilities in
accordance with these requirements. We believe that the
audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion.
We have nothing to report in respect of the following
matters in relation to which the ISAs (UK) require us to
report to you where:
the directors’ use of the going concern basis of
accounting in the preparation of the financial
statements is not appropriate; or
the directors have not disclosed in the financial
statements any identified material uncertainties that
may cast significant doubt about the group’s or the
parent company’s ability to continue to adopt the
going concern basis of accounting for a period of at
least twelve months from the date when the financial
statements are authorised for issue.
Key audit matters
Key audit matters are those matters that, in our professional
judgment, were of most significance in our audit of the
financial statements of the current period and include the
most significant assessed risks of material misstatement
(whether or not due to fraud) we identified, including those
which had the greatest effect on: the overall audit strategy,
the allocation of resources in the audit; and directing the
efforts of the engagement team. These matters were
addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon,
and we do not provide a separate opinion on these matters.
Inventory valuation and provisioning
As described in Note 2 (accounting policies) and Note 17
(inventories), the Group carries inventory at the lower of
cost and net realisable value. As at 30 June 2017, the Group
held inventories of £72.9m (2016: £62.8m).
Judgement is required to assess the appropriate level of
provisioning for items which may be sold below cost as a
result of a reduction in consumer demand particularly in
light of changing consumer tastes and new products being
developed. Such
include management’s
expectations for future sales. This is a significant risk for the
audit.
judgements
How we addressed the key audit matter
We obtained assurance over management’s assumptions
applied in calculating the value of inventory provisions by:
assessing the Group’s inventory provisioning policy,
with specific consideration given to slow moving or
obsolete stock lines;
16
Independent Auditor’s Report to the Members of
James Halstead plc continued
verifying the value of a sample of inventory to
confirm it is held at the lower of cost and net
realisable value, through comparison to invoices and
sales prices; and
We also reviewed the bases of stock provisioning applied by
all group entities and considered whether these were being
applied consistently and reflected the nature of the stock
held in each location.
Accruals
As described in Note 2 (accounting policies) and Note 20,
the Group records a significant number of accrual balances
which are specific to the business and its operations.
At 30 June 2017, the aggregate of all accruals was £13.7m
(2016: £15.2m). The accruals balance includes a large
volume of accruals and whilst some accruals are easily and
ordinarily calculated, others contain an element of
judgement and are more complex in nature, for example,
customer warranty claims in respect of manufactured stock,
rectification accruals and self-insurance accruals.
We focused on these areas because there is an inherent level
of complexity in management estimating certain accruals
owing to their nature and the risk of management bias.
These types of accruals are not individually material but
may, under certain circumstances, be material in the
aggregate.
How we addressed the key audit matter
We understood and evaluated the processes, procedures and
controls in place in respect of these judgmental accrual
balances and assessed key account reconciliation processes.
We tested and challenged the reasonableness of the key
assumptions underlying the judgmental accruals which
included:
Claim history;
Levels of customer claims; and
Time periods over which the assessment is made.
We tested the input data of the judgmental accruals, re-
performed the underlying calculations and performed
sensitivity analysis over the key drivers of the estimation of
the accruals.
For warranty and rectification accruals, we reviewed
correspondence with third parties, critically assessed the
assumptions around relay costs and costs per square metre
and held conversations with members outside the finance
team to understand the nature of each claim.
For the self-insurance accruals, we have reviewed the
assumptions against data from the insurance company,
reviewed against historic actual claims and performed
sensitivity analysis to confirm the reasonableness of the
accrual made by management.
Pension scheme assumptions
As described in Note 2 (accounting policies) and Note 22
(retirement benefit obligations), the Group has a defined
benefit pension plan in the UK. At 30 June 2017, the Group
recorded a net retirement obligation of £21.3m (2016:
£25.4m), comprising scheme assets of £61.1m (2016:
£56.2m) and scheme liabilities of £82.4m (2016: £81.7m).
The pension valuation is dependent on market conditions
and key assumptions made, in particular relating to
investment markets, discount rate, inflation expectations
and life expectancy assumptions.
The setting of these assumptions is complex and requires
the exercise of significant management judgement with the
support of third party actuaries.
How we addressed the key audit matter
In testing the pension valuation, we have utilised internal
pension actuarial experts to review the key actuarial
assumptions used, both financial and demographic, and
considered the methodology utilised to derive these
assumptions.
We have benchmarked and performed a sensitivity analysis
on the key assumptions determined by the Directors.
We tested the membership data utilised in the valuation of
the schemes to assess whether the basis of the valuation is
appropriate.
Furthermore, we have assessed the disclosure of the pension
scheme assumptions in the financial statements.
Our application of materiality
Group materiality Group materiality Basis for
FY 2017 FY 2016 materiality
£3.49 million £3.41 million 7.5% of profit
before tax
We apply the concept of materiality both in planning and
performing our audit, and in evaluating the effect of
misstatements. We consider materiality to be the
magnitude by which misstatements, including omissions,
could influence the economic decisions of reasonable users
17
The Central European operations form a significant part of
group turnover and profitability. As part of our audit
strategy, the Responsible Individual and senior members of
the group audit team visited Germany. The audit visits by
the Group audit team were timed to enable us to be
involved during the planning and risk assessment process in
addition to during the completion of detailed audit
procedures. During our visits, we attended key meetings
with component management and auditors, and reviewed
detailed component auditor work papers.
The Australian operations form a further significant part of
group turnover and profits. Again the Responsible Individual
and senior members of the group audit team were involved
at all stages of the audit process, directing the planning and
risk assessment work performed through calls with the
overseas component auditors and local management.
Reviews of the component auditor working papers were also
completed.
The remaining components of the group were considered
non-significant and these components were principally
subject to analytical review procedures.
Other information
The directors are responsible for the other information. The
other information comprises the information included in
the annual report, other than the financial statements and
our auditor’s report thereon. Our opinion on the financial
statements does not cover the other information and,
except to the extent otherwise explicitly stated in our
report, we do not express any form of assurance conclusion
thereon.
In connection with our audit of the financial statements, our
responsibility is to read the other information and, in doing
so, consider whether the other information is materially
inconsistent with the financial statements or our knowledge
obtained in the audit or otherwise appears to be materially
misstated. If we identify such material inconsistencies or
apparent material misstatements, we are required to
determine whether there is a material misstatement in the
financial statements or a material misstatement of the
other information. If, based on the work we have performed,
we conclude that there is a material misstatement of this
other information, we are required to report that fact. We
have nothing to report in this regard.
that are taken on the basis of the financial statements.
Importantly, misstatements below these levels will not
necessarily be evaluated as immaterial as we also take
account of the nature of identified misstatements, and the
particular circumstances of their occurrence, when
evaluating their effect on the financial statements as a
whole.
Our determination of materiality increased from FY 2016
with the higher profitability of the group. We consider profit
before tax to be the most significant determinant of the
group’s financial performance used by shareholders.
We agreed with the Audit Committee that we would report
to the committee all individual audit differences identified
during the course of our audit in excess of £60,000 (2016:
£68,000). We also agreed to report differences below these
thresholds that, in our view, warranted reporting on
qualitative grounds.
There were no misstatements identified during the course
of our audit that were individually, or in aggregate,
considered to be material in terms of their absolute
monetary value or on qualitative grounds.
An overview of the scope of our audit
Our group audit was scoped by obtaining an understanding
of the Group and its environment, including group-wide
controls, and assessing the risks of material misstatement at
the group level.
Our group audit scope focused on the group’s principal
operating locations being the United Kingdom, Germany
and Australia. The operations in the United Kingdom were
subject to a full scope audit while the significant
components in Germany and Australia were audited to
component materiality. The Australian component is
audited by a BDO member firm.
Together with the parent company and
its group
consolidation, which was also subject to a full scope audit,
these locations represent the principal business units of the
group and account for 95% of the group’s revenue, 98% of
the group’s total assets and 98% of the group’s profit before
tax.
Whilst materiality for the financial statements as a whole
was £3.49m, each component of the group was audited to
a lower level of materiality.
Audits of the components were performed at a materiality
level calculated by reference to a proportion of group
materiality appropriate to the relative scale of the business
concerned.
18
Independent Auditor’s Report to the Members of
James Halstead plc continued
Opinions on other matters prescribed
by the Companies Act 2006
as applicable, matters related to going concern and using
the going concern basis of accounting unless the directors
either intend to liquidate the group or the parent company
or to cease operations, or have no realistic alternative but to
do so.
In our opinion, based on the work undertaken in the course
of the audit:
the information given in the strategic report and the
report of the directors for the financial year for which
the financial statements are prepared is consistent
with the financial statements; and
the strategic report and the report of the directors
have been prepared in accordance with applicable
legal requirements.
Matters on which we are required to
report by exception
In the light of the knowledge and understanding of the
group and the parent company and its environment
obtained in the course of the audit, we have not identified
material misstatements in the strategic report or the report
of the directors.
We have nothing to report in respect of the following
matters in relation to which the Companies Act 2006
requires us to report to you if, in our opinion:
adequate accounting records have not been kept, or
returns adequate for our audit have not been received
from branches not visited by us; or
the parent company financial statements are not in
agreement with the accounting records and returns;
or
certain disclosures of directors’ remuneration
specified by law are not made; or
we have not received all the information and
explanations we require for our audit.
Responsibilities of directors
As explained more fully in the directors’ responsibilities
statement set out on page 10, the directors are responsible
for the preparation of the financial statements and for being
satisfied that they give a true and fair view, and for such
internal control as the directors determine is necessary to
enable the preparation of financial statements that are free
from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are
responsible for assessing the group’s and the parent
company’s ability to continue as a going concern, disclosing,
Auditor’s responsibilities for the audit
of the financial statements
This report is made solely to the company’s members, as a
body, in accordance with Chapter 3 of Part 16 of the
Companies Act 2006. Our audit work has been undertaken
so that we might state to the company’s members those
matters we are required to state to them in an auditor’s
report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility
to anyone other than the company and the company’s
members as a body, for our audit work, for this report, or for
the opinions we have formed.
Our objectives are to obtain reasonable assurance about
whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error, and
to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not
a guarantee that an audit conducted in accordance with
ISAs (UK) will always detect a material misstatement when
it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they
could reasonably be expected to influence the economic
decisions of users taken on the basis of these financial
statements.
financial
A further description of our responsibilities for the audit
of
the
the
at:
Financial
www.frc.org.uk/auditorsresponsibilities. This description
forms part of our auditor’s report.
located on
website
is
Council’s
statements
Reporting
Gary Harding (Senior Statutory Auditor)
For and on behalf of BDO LLP, Statutory Auditor
Manchester
United Kingdom
29 September 2017
BDO LLP is a limited liability partnership registered in
England and Wales (with registered number OC305127).
19
Consolidated Income Statement
for the year ended 30 June 2017
Note 2017 2016
£’000 £’000
Revenue 5 240,784 226,141
Cost of sales (135,974) (130,177)
Gross profit 104,810 95,964
Selling and distribution costs (47,659) (41,105)
Administration expenses (9,867) (8,776)
Operating profit 47,284 46,083
Finance income 9 134 177
Finance cost 9 (802) (761)
Profit before income tax 7 46,616 45,499
Income tax expense 10 (10,106) (10,243)
Profit for the year attributable to equity shareholders 36,510 35,256
Earnings per ordinary share of 5p
– basic 11 17.6p 17.0p
– diluted 11 17.6p 17.0p
All amounts relate to continuing operations.
Details of dividends paid and proposed are given in note 12.
20
Consolidated Statement of Comprehensive Income
for the year ended 30 June 2017
2017 2016
£’000 £’000
Profit for the year 36,510 35,256
Other comprehensive income net of tax:
Items that will not be reclassified subsequently
to the income statement:
Remeasurement of the net defined benefit liability 2,404 (7,360)
Deferred taxation – change of rate – 106
2,404 (7,254)
Items that could be reclassified subsequently
to the income statement if specific conditions are met:
Foreign currency translation differences 2,168 4,808
Fair value movements on hedging instruments 410 (2,126)
2,578 2,682
Other comprehensive income for the year net of tax 4,982 (4,572)
Total comprehensive income for the year 41,492 30,684
Attributable to:
Equity holders of the company 41,492 30,684
Items in the statement above are disclosed net of tax. The income tax relating to each component of other comprehensive income
is disclosed in note 10.
21
Consolidated Balance Sheet
as at 30 June 2017
Note 2017 2016
£’000 £’000
Non-current assets
Property, plant and equipment 14 36,103 34,384
Intangible assets 15 3,232 3,232
Deferred tax assets 16 4,151 5,129
43,486 42,745
Current assets
Inventories 17 72,936 62,828
Trade and other receivables 18 31,176 33,820
Derivative financial instruments 27 416 433
Cash and cash equivalents 19 52,532 44,096
157,060 141,177
Total assets 200,546 183,922
Current liabilities
Trade and other payables 20 59,321 53,395
Derivative financial instruments 27 1,362 2,066
Current income tax liabilities 3,860 4,300
64,543 59,761
Non-current liabilities
Retirement benefit obligations 22 21,257 25,431
Deferred tax liabilities 16 – 603
Borrowings 21 200 200
Other payables 20 486 460
21,943 26,694
Total liabilities 86,486 86,455
Net assets 114,060 97,467
Equity
Equity share capital 23 10,393 10,374
Equity share capital (B shares) 23 160 160
10,553 10,534
Share premium account 3,615 3,096
Capital redemption reserve 1,174 1,174
Currency translation reserve 6,194 4,026
Hedging reserve (289) (699)
Retained earnings 92,813 79,336
Total equity attributable to shareholders of the parent 114,060 97,467
The financial statements were approved and authorised for issue by the board and were signed on its behalf on 29 September 2017.
M Halstead G R Oliver
Director Director
James Halstead plc Registration Number 140269
22
Consolidated Statement of Changes in Equity
for the year ended 30 June 2017
Capital Currency
Share Share redemption translation Hedging Retained Total
capital premium reserve reserve reserve earnings equity
£'000 £'000 £'000 £'000 £’000 £’000 £'000
Balance at 30 June 2015 10,524 2,917 1,174 (782) 1,427 91,200 106,460
Profit for the year – – – – – 35,256 35,256
Remeasurement of the net defined
benefit liability – – – – – (7,360) (7,360)
Deferred taxation change of rate – – – – – 106 106
Foreign currency translation
differences – – – 4,808 – – 4,808
Fair value movements on
hedging instruments – – – – (2,126) – (2,126)
Total comprehensive income for
the year – – – 4,808 (2,126) 28,002 30,684
Dividends – – – – – (39,867) (39,867)
Issue of share capital 10 179 – – – – 189
Share based payments – – – – – 1 1
Balance at 30 June 2016 10,534 3,096 1,174 4,026 (699) 79,336 97,467
Profit for the year – – – – – 36,510 36,510
Remeasurement of the net defined
benefit liability – – – – – 2,404 2,404
Foreign currency translation
differences – – – 2,168 – – 2,168
Fair value movements on
hedging instruments – – – – 410 – 410
Total comprehensive income for
the year – – – 2,168 410 38,914 41,492
Dividends – – – – – (25,438) (25,438)
Issue of share capital 19 519 – – – – 538
Share based payments – – – – – 1 1
Balance at 30 June 2017 10,553 3,615 1,174 6,194 (289) 92,813 114,060
23
Consolidated Cash Flow Statement
for the year ended 30 June 2017
Note 2017 2016
£’000 £’000
Cash inflow from operations 25 47,478 50,325
Interest received 134 177
Interest paid (33) (43)
Taxation paid (10,682) (10,220)
Cash inflow from operating activities 36,897 40,239
Purchase of property, plant and equipment (4,234) (4,842)
Proceeds from disposal of property, plant and equipment 234 200
Cash outflow from investing activities (4,000) (4,642)
Equity dividends paid (25,438) (39,867)
Shares issued 538 189
Cash outflow from financing activities (24,900) (39,678)
Net increase/(decrease) in cash and cash equivalents 7,997 (4,081)
Effect of exchange differences 439 749
Cash and cash equivalents at start of year 44,096 47,428
Cash and cash equivalents at end of year 52,532 44,096
24
Notes to the Consolidated Financial Statements
1. General information
James Halstead plc (“the company” or “the parent company”) is a limited liability company, registered in England and Wales,
domiciled in the United Kingdom and listed on AIM on the London Stock Exchange. The address of its registered office is Beechfield,
Hollinhurst Road, Radcliffe, Manchester, M26 1JN.
Accounting policies
2.
Basis of preparation
The group financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs and IFRIC
interpretations) as endorsed by the European Union (“endorsed IFRS”) and with those parts of the Companies Act 2006 applicable to
companies preparing their accounts under endorsed IFRS. The company financial statements have been prepared in accordance with
Financial Reporting Standard 101 Reduced Disclosure Framework, and are presented separately following the group financial statements.
The group financial statements have been prepared on the historical cost basis as modified by the valuation of financial assets and
financial liabilities (including derivative instruments) at fair value.
Basis of consolidation
The group financial statements consolidate the financial statements of the parent company and all its subsidiaries, as if they formed
a single entity. Subsidiaries are entities controlled by the group. Control exists if all three of the following elements are present:
power over the entity, exposure to variable returns from the entity, and the ability to affect those variable returns. Control is
reassessed whenever facts and circumstances indicate that there may be a change in any of these elements of control. Control is
normally achieved by a majority shareholding. The company, directly or through an intermediate subsidiary owned 100% of the
share capital of all of its subsidiaries. The results of subsidiaries acquired are consolidated from the date on which control passes to
the group. The results of disposed subsidiaries are consolidated up to the date on which control passes from the group. All intra-
group transactions and balances are eliminated on consolidation.
Recent accounting developments
The financial statements are prepared in accordance with International Financial Reporting Standards and interpretations in force
at the reporting date. The group has not adopted any standards or interpretations in advance of the required implementation dates.
There were no new standards or interpretations effective for the first time for periods beginning on or after 1 July 2016. None of
the amendments to standards that are effective from that date had a significant effect on the group’s financial statements.
The following new standards, interpretations and amendments, which are not yet effective and have not been adopted early in
these financial statements, will or may have an effect on the group’s future financial statements:
IFRS 9 Financial Instruments replaces IAS 39 Financial Instruments: Recognition and Measurement, and is effective for accounting
periods beginning on or after 1 January 2018. The final standard contains new requirements which cover classification and
measurement, impairment, and hedge accounting. The recognition and derecognition requirements for financial assets and financial
liabilities are unchanged from IAS 39. In particular IFRS 9 sets out a new forward looking expected credit loss model which replaces
the incurred loss model in IAS 39.
IFRS 15 Revenue from contracts with customers replaces IAS 18 Revenue and IAS 11 Construction contracts and related
interpretations, and is effective for accounting periods beginning on or after 1 January 2018. The standard establishes principles for
reporting useful information to users of financial statements about the nature, amount, timing and uncertainty of revenue and cash
flows arising from an entity’s contracts with customers. Revenue is recognised when a customer obtains control of a good or service
and thus has the ability to direct the use and obtain the benefits from the good or service.
IFRS 16 Leases replaces the existing accounting requirements in IAS 17 Leases, and is effective for accounting periods beginning on
or after 1 January 2019. A single model for lessees will be required, eliminating off balance sheet accounting for non-exempt
operating leases. Related lease assets and liabilities will therefore come onto the balance sheet and the presentation and timing of
income and expense recognition in the income statement will change.
Beyond the information above, it is not practicable to provide a reasonable estimate of the effect of IFRS 9, IFRS 15 and IFRS 16
until the detailed reviews have been completed.
25
Accounting policies (continued)
2.
Segment reporting
Operating segments are those segments for which results are reviewed by the group’s chief operating decision maker (CODM) to
assess performance and make decisions about resources to be allocated. The CODM is the group board which meets regularly
throughout the year to discuss the performance and results of the group as a whole. The business of the group is the manufacture
and distribution of flooring products. The group operates through separate legal entities in certain areas of the world and in order
to provide information in a structured manner to readers of the accounts who are unfamiliar with the internal management
reporting of the group, these operations are discussed by the chief executive in his report. However, the directors consider that
under the definitions contained within IFRS 8 there is only one reportable segment, which is the group as a whole. This is consistent
with the core principle of IFRS 8, which is to disclose information to enable users of the financial statements to evaluate the nature
and financial effects of the business activities in which the group engages and the economic activities in which it operates.
Foreign currencies
Functional and presentation currency – the group’s consolidated financial statements are presented in pounds sterling, the
functional currency of the parent company, being the currency of the primary economic environment in which the parent company
operates.
Transactions and balances – transactions in foreign currencies are recorded at the rate ruling at the date of the transaction.
Monetary assets and liabilities denominated in foreign currencies are reported at the rates of exchange prevailing at the balance
sheet date. Exchange differences on retranslating monetary assets and liabilities are recognised in the income statement except
where they relate to qualifying cash flow hedges, in which case the exchange differences are deferred in equity.
Foreign subsidiaries – the results of foreign subsidiaries (none of which has the currency of a hyperinflationary economy), that have
a functional currency different from the group’s presentation currency, are translated at the average rates of exchange for the year.
Assets and liabilities of foreign subsidiaries, that have a functional currency different from the group’s presentation currency, are
translated at the exchange rates prevailing at the balance sheet date. Exchange differences arising from the translation of the results
of foreign subsidiaries and their opening net assets are recognised as a separate component of equity.
When a foreign subsidiary is sold the cumulative exchange differences relating to the retranslation of the net investment in that
foreign subsidiary are recognised in the income statement as part of the gain or loss on disposal. This applies only to exchange
differences recorded in equity after 1 July 2006. Exchange differences arising prior to 1 July 2006 remain in equity on disposal as
permitted by IFRS 1.
Intangible assets
Goodwill – goodwill arising on the acquisition of a subsidiary undertaking is the excess of the aggregate of the fair value of the
consideration transferred, the fair value of any previously held interests, and the recognised value of the non-controlling interest in
the acquiree over the net of the acquisition date amounts of the identifiable assets acquired and liabilities assumed. Goodwill is
reviewed for impairment at least annually and when there are indications that the carrying amount may not be recoverable. For
the purpose of impairment review, goodwill is allocated to the relevant cash generating unit (CGU) within the group. An impairment
loss is recognised if the carrying value of the goodwill or its CGU exceeds its recoverable amount. Any impairment loss is recognised
immediately in the income statement and is not subsequently reversed. On disposal of a subsidiary, the attributable amount of
goodwill is included in the calculation of the profit or loss on disposal. Goodwill arising on acquisitions before the date of transition
to IFRS has been retained at the UK GAAP value as at that date having been reviewed for impairment at that date and subsequently
at least annually.
26
Notes to the Consolidated Financial Statements
continued
Accounting policies (continued)
2.
Taxation
Income tax on the profit for the year comprises current and deferred tax. Income tax is recognised in the income statement except
to the extent that it relates to items recognised in other comprehensive income.
Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to taxation authorities based
on tax rates and laws that are enacted at the balance sheet date. Deferred income tax is provided in full, using the liability method,
on temporary differences arising between the tax bases of assets and liabilities and their corresponding book values as recorded in
the group’s financial statements with the following exceptions:
where the temporary difference arises from the initial recognition of goodwill or of an asset or liability in a transaction that
is not a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss;
deferred income tax assets are recognised only to the extent that it is probable that taxable profit will be available against
which the deductible temporary differences can be utilised;
deferred income tax is not provided on unremitted earnings of foreign subsidiaries where there is no likelihood to remit the
earnings.
Deferred income tax assets and liabilities are based on tax rates and laws that are substantively enacted at the balance sheet date.
Share-based payments
The group grants share options to certain of its employees. An expense in relation to such options based on their fair value at the
date of grant, is recognised over the vesting period. The group uses the Black Scholes model for the purpose of computing fair value.
Inventories
Inventories are measured at the lower of cost and net realisable value on a weighted average cost basis. Cost includes expenditure
incurred in acquiring the inventories and bringing them to their existing location and condition. In the case of finished and partly
finished goods, cost represents the cost of raw materials, direct labour, other direct costs and related production overheads on bases
consistently applied from year to year. In all cases provision is made for obsolete, slow-moving or defective items where appropriate.
Trade and other receivables
Trade and other receivables are non-interest bearing and are stated at their nominal amount less provisions made for estimated
irrecoverable amounts. Estimated irrecoverable amounts are based on historical experience together with specific amounts that are
not expected to be collectible. Individual amounts are written off when management deems them not to be collectible.
Cash and cash equivalents
Cash and cash equivalents include cash in hand, deposits held at call with banks, short-term (with an original maturity of three
months or less) deposits and bank overdrafts. Bank overdrafts are disclosed as current liabilities except where the group participates
in offset arrangements with certain banks whereby cash and overdraft amounts are offset against each other.
Pension scheme arrangements
The group operates several defined contribution pension schemes and a defined benefit pension scheme for certain of its United
Kingdom domiciled employees.
A defined contribution scheme is a scheme in which the group pays contributions into publicly or privately administered schemes
on a voluntary, statutory or contractual basis. The group has no further payment obligations once the contributions have been
made. The amount charged to the income statement is the contribution payable in the year. Differences between contributions
payable in the year and contributions actually paid are shown as receivables or payables in the balance sheet.
27
Accounting policies (continued)
2.
Pension scheme arrangements (continued)
A defined benefit scheme is a scheme in which the amount of pension benefit that an employee will receive on retirement is
defined. For the defined benefit scheme, pension costs and the costs of providing other post retirement benefits are charged to the
income statement in accordance with the advice of qualified independent actuaries. Past service costs are recognised immediately
in the income statement. The service cost is charged against operating profit and the net interest cost is charged as a finance cost.
The net interest cost is calculated using the discount rate at the beginning of the period. The retirement benefit obligations
recognised on the balance sheet represent the difference between the fair value of the scheme’s assets and the present value of
the scheme’s defined benefit obligations measured at the balance sheet date. The defined benefit obligation is calculated annually
by independent actuaries using the projected unit method.
Remeasurements of the net defined benefit liability are recognised in the period in which they arise in other comprehensive income.
Property, plant and equipment
Property, plant and equipment is recorded at cost less subsequent depreciation and impairment except for land which is shown at
cost less any impairment. Cost includes expenditure that is directly attributable to the acquisition of the asset. The group has taken
advantage of the exemption under IFRS 1 not to restate property previously revalued under UK GAAP and to treat these earlier
revaluations as deemed cost. Depreciation is calculated on the depreciable amount (being cost less the estimated residual value)
on a straight line basis over the estimated useful lives of the assets as follows:
Freehold land: Not depreciated
Freehold buildings: 10 to 50 years
Plant and equipment: 2 to 20 years
Residual values and useful lives are reviewed at each group balance sheet date for continued appropriateness and indications of
impairment and adjusted if appropriate.
Trade and other payables
Trade and other payables are non-interest bearing and are stated at their nominal value.
Revenue recognition
Revenue comprises the amounts received or receivable in respect of the sale of goods provided in the normal course of business,
net of trade discounts, rebates, VAT and other sales related taxes.
Revenue is recognised when the significant risks and rewards of ownership have been transferred to the buyer.
Research and development
Expenditure on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and
understanding, is recognised in the income statement as an expense as incurred.
Development expenditure not meeting all the criteria for capitalisation contained in IAS 38 – Intangible Assets, is recognised in the
income statement as an expense as incurred.
Dividends
Interim dividends are recognised when they are paid. Final dividends are recognised when they are approved by the shareholders.
Leases
Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are accounted for as operating
leases. Payments made under such leases are charged to the income statement on a straight line basis over the period of the lease.
28
Notes to the Consolidated Financial Statements
continued
Accounting policies (continued)
2.
Derivative financial instruments and hedging
The group uses derivative financial instruments to hedge its exposure to foreign currency transactional risk. In accordance with its
treasury policy the group does not hold or issue derivative financial instruments for trading purposes.
Derivative financial instruments are recorded at fair value on the date the derivative contract is entered into and are subsequently
remeasured at fair value at each group balance sheet date.
The method by which any gain or loss arising from remeasurement is recognised depends on whether the instrument is designated
as a hedging instrument and, if so, the nature of the item being hedged. The group recognises an instrument as a hedging
instrument by documenting at the inception of the transaction the relationship between the instrument and the hedged items and
the objectives and strategy for undertaking the hedging transaction. To be designated as a hedging instrument, an instrument must
also be assessed, at inception and on an ongoing basis, to be highly effective in offsetting changes in cash flows of hedged items.
For derivatives not used in hedging transactions, the gain or loss on remeasurement of fair value is recognised immediately in the
income statement.
Where a derivative financial instrument is designated as a hedge of the variability in cash flows of a recognised asset or liability, or
of a highly probable forecast future transaction, the gain or loss on remeasurement which relates to the portion of the hedge which
is deemed effective is recognised directly in equity, with the balance of the gain or loss, relating to the ineffective portion, being
recognised immediately in the income statement.
Amounts accumulated in equity are recycled in the income statement in the periods when the hedged item affects profit or loss.
The fair value of forward foreign exchange contracts is determined using forward exchange market rates at the balance sheet date.
Financial risk management
3.
Financial risk and treasury policies
A full description of the James Halstead plc group’s treasury policy is contained in the financial director’s review.
The group’s activities expose it to a number of financial risks as detailed below. These risks are managed, with the objective of
limiting adverse effects, from the group’s head office in accordance with policies determined by and decisions made by the group
board.
There have been no changes in financial risks from the previous year.
Market risks
Market risk is the risk that changes in market prices, such as currency exchange rates and interest rates will affect the group’s results.
The objective of market risk management is to control it within suitable parameters.
(a) Foreign exchange risk
The group operates internationally and is exposed to foreign currency risk on sales and purchases that are denominated in a
currency other than the functional currency of the entity making the sale or purchase. There are a range of currencies giving rise to
this risk, but most significant is the euro. To mitigate risks associated with future exchange rate fluctuations, the group’s policy is
to use forward exchange contracts to hedge its known and certain forecast transaction exposures based on historical experience
and projections. The group hedges at least 25% but rarely more than 100% of the next twelve months’ anticipated exposure.
(b) Interest rate risk
The group does not use derivative financial instruments to mitigate its exposure to interest rate risk. The main element of interest
rate risk concerns sterling deposits which are made on floating market based rates and short-term overdrafts in foreign currencies
which are also on floating rates.
29
Financial risk management (continued)
3.
Credit risk
Credit risk is the risk of financial loss to the group if a customer or counterparty to a financial instrument fails to meet its
contractual obligations and arises principally from the group’s trade receivables from customers and monies on deposit with
financial institutions.
With regard to trade receivables, the group is not subject to significant concentration of credit risk. Exposure is spread across a large
number of companies and the underlying local economic and sovereign risks vary across the world. Trade receivable exposures are
managed locally in the individual operating units where they arise and credit limits are set as deemed appropriate. Where
practicable and deemed necessary the group endeavours to minimise credit risks by the use of trade finance instruments such as
letters of credit and insurance.
The group controls credit risk in relation to counterparties to other financial instruments by dealing only with highly rated financial
institutions.
The group’s maximum credit exposure on financial assets is represented by their book value.
Liquidity risk
Liquidity risk is the risk that the group will not be able to meet its financial obligations as they fall due. The group’s approach to
managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due.
Capital risk
The group’s objectives in managing capital are to safeguard the ability of all entities within the group to continue as going concerns,
whilst maximising the overall return to shareholders over time. The capital structure of the group consists of equity attributable
to equity holders of the parent company less cash and cash equivalents.
The group will only usually take on borrowings where those borrowings would be financed by the cash expected to be generated
by the related investment opportunity and where the borrowing would not significantly increase the group’s exposure to risk.
At the year end the group had preference shares classified as debt of £200,000 and no other debt.
Critical accounting estimates and judgements
4.
The preparation of financial statements in conformity with generally accepted accounting principles requires the use of certain
estimates and associated assumptions that affect the application of policies, the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Although these
estimates are based on management’s best assessments of amounts, events or actions, actual results may ultimately differ from
those estimates. The estimates and underlying assumptions are reviewed on a regular and ongoing basis.
The estimates and judgements that have had the most significant effect on the amounts included in these consolidated financial
statements are as follows:
30
Notes to the Consolidated Financial Statements
continued
Critical accounting estimates and judgements (continued)
4.
Inventories
For financial reporting purposes the group evaluates its inventory to ensure it is carried at the lower of cost or net realisable value.
Provision is made against slow moving, obsolete and damaged inventories. Damaged inventories are identified and written down
through the inventory counting procedures conducted within each business. Provision for slow moving and obsolete inventories is
assessed by each business as part of their ongoing financial reporting. Obsolescence is assessed based on comparison of the level
of inventory holding to the projected likely future sales. Future sales are assessed based on historical experience, and adjusted where
the market conditions are known to have changed. To the extent that future events impact the saleability of inventory these
provisions could vary significantly. For example, changes in specifications or regulations may render inventory, previously considered
to have a realisable value in excess of cost, obsolete and require such inventory to be fully written off.
Allowance for doubtful debts
Provision is made against accounts that in the estimation of management may be impaired. Within each of the operating units,
assessment is made locally of the recoverability of trade receivables based on a range of factors including the age of the receivable
and the creditworthiness of the customer. Determining the recoverability of an account involves estimation as to the likely financial
condition of the customer and their ability to subsequently make payment. If the group is cautious as to the financial condition of
the customer the group may provide for accounts that are subsequently recovered. Similarly, if the group is optimistic as to the
financial condition of the customer, the group may not provide for an account that is subsequently determined to be irrecoverable.
In recent years the group has not experienced significant variation in the amount charged to the income statement in respect of
doubtful accounts, when compared to sales.
Income taxes
In determining the group’s provisions for income tax and deferred tax it is necessary to consider transactions in a small number of
key tax jurisdictions for which the ultimate tax determination is uncertain. To the extent that the final outcome differs from the
tax that has been provided, adjustments will be made to income tax and deferred tax provisions held in the period the
determination is made.
Retirement benefit obligations
The liability recognised in respect of retirement benefit obligations is dependent on a number of estimates including those relating
to mortality, inflation, salary increases, and the rate at which liabilities are discounted. Any change in these assumptions would
impact the retirement benefit obligations recognised. Further details on these estimates are provided in note 22.
Goodwill
Each year the group carries out impairment tests of its goodwill balances. This requires estimates to be made of the value in use
of the relevant cash generating units (CGUs). These value in use calculations are dependent on estimates of the future cash flows
and long-term growth rates of the relevant CGUs.
31
Segmental information
5.
Operating segments are those segments for which results are reviewed by the group’s chief operating decision maker (CODM) to
assess performance and make decisions about resources to be allocated. The CODM is the group board which meets regularly
throughout the year to discuss the performance and results of the group as a whole. The business of the group is focussed almost
entirely on the manufacture and distribution of flooring products. The directors consider that under the definitions contained
within IFRS 8 there is only one reportable segment, which is the group as a whole. This is consistent with the core principle of IFRS
8, which is to disclose information to enable users of the financial statements to evaluate the nature and financial effects of the
business activities in which the group engages and the economic activities in which it operates. Therefore the majority of the
disclosures required under IFRS 8 have already been given in these financial statements.
Segment assets comprise property, plant and equipment and intangibles. Geographical disclosures in respect of revenues and
segment assets are provided below and include revenue for Germany of £55,427,000 (2016: £49,574,000) and Australia
£26,400,000 (2016: £20,704,000), and assets in Germany of £10,255,000 (2016: £10,098,000).
Revenue
United Kingdom
Europe and Scandinavia
Australasia and Asia
Rest of the World
Assets
United Kingdom
Europe and Scandinavia
Australasia and Asia
Rest of the World
Total segment assets
Deferred tax assets
Total non-current assets
Revenue is by location of customer. Assets are by location of asset.
2017
£’000
80,189
103,440
39,761
17,394
2016
£’000
84,579
91,013
34,243
16,306
240,784
226,141
2017
£’000
25,858
11,524
1,948
5
39,335
4,151
43,486
2016
£’000
24,857
11,429
1,329
1
37,616
5,129
42,745
32
Notes to the Consolidated Financial Statements
continued
Employee profit share
6.
Profit for the year is after charging the cost of the James Halstead plc share ownership plan. Since 1980 the group has operated an
employee share scheme, approved under the Finance Act 1978. In December 2001 the shareholders approved a new share
ownership plan in line with the requirements of legislative changes. The aim of this scheme is to enable employees to build up a
personal shareholding in James Halstead plc and to participate in its continued expansion and success as shareholders as well as
employees.
As members of the scheme the following directors received shares to the value of, Mr G Halstead £nil,
Mr M Halstead £nil and Mr G R Oliver £nil.
Profit before income tax
7.
Profit before tax is stated after charging/(crediting) the following:
Depreciation of property, plant and equipment
Operating lease rentals – land and buildings
Operating lease rentals – other
Research and development
Loss/(profit) on disposal of property, plant and equipment
Fees payable to the group’s auditor for the audit of the parent company and
consolidated financial statements
Fees payable to the group’s auditor and its associates for other services:
The audit of the group’s subsidiaries pursuant to legislation
Taxation compliance
Taxation advisory
Other services
2017
£’000
2,830
2,185
1,116
2,388
8
41
106
34
1
11
2016
£’000
2,872
1,889
1,057
2,144
(46)
41
88
31
7
11
8.
Staff costs and numbers
Staff costs comprised:
Wages and salaries
Social security costs
Pension costs – defined benefit scheme
– defined contribution schemes
Share based payments
The average monthly number of employees during the year was:
Manufacturing, selling and distribution
Administration
The directors’ remuneration was:
Salary or fees
Bonuses
Benefits
Total remuneration excluding pension contributions
Pension contributions
9.
Finance income/(cost)
Interest receivable and similar income:
On bank deposits
Other
Finance income
Preference share dividend
Interest on short-term borrowing and other financing costs
Net pension interest cost
Finance cost
Net finance cost
33
2016
£’000
31,467
3,534
544
825
1
36,371
2017
£’000
33,441
3,829
542
735
1
38,548
2017
Number
2016
Number
683
141
824
2017
£’000
961
830
12
1,803
54
1,857
2017
£’000
127
7
134
(11)
(22)
(33)
(769)
(802)
(668)
694
138
832
2016
£’000
924
780
14
1,718
53
1,771
2016
£’000
163
14
177
(11)
(32)
(43)
(718)
(761)
(584)
34
Notes to the Consolidated Financial Statements
continued
10.
Income tax expense
Current tax
Current tax – current year
Current tax – adjustments in respect of prior years
Deferred tax
Deferred tax – current year
Deferred tax – adjustments in respect of prior years
2017
£’000
10,726
(518)
10,208
76
(178)
(102)
2016
£’000
10,251
(653)
9,598
418
227
645
Total taxation
10,106
10,243
The effective tax rate for the year to 30 June 2017 is higher (2016: higher) than the standard rate of corporation tax in the UK. The
differences are explained below:
Profit before tax
Profit before tax multiplied by the standard rate of corporation tax in
the UK of 19.75% (2016: 20.00%)
Effects of:
Adjustments to tax in respect of prior periods
Overseas tax rates
Disallowable items
Remeasurement of deferred tax due to change in UK tax rate
Total taxation
2017
£’000
2016
£’000
46,616
45,499
9,207
9,100
(696)
1,486
128
(19)
(426)
1,143
360
66
10,106
10,243
In addition to the amounts above £492,000 has been charged (2016: £839,000 credited) as other comprehensive income in respect
of the remeasurement of the net defined benefit liability, and have been netted off the amounts shown in the Consolidated
Statement of Comprehensive Income.
The UK corporation tax rate will change from 19% to 17% on 1 April 2020.
11. Earnings per share
Profit for the year attributable to equity shareholders
Weighted average number of shares in issue
Dilution effect of outstanding share options
Diluted weighted average number of shares
Basic earnings per 5p ordinary share
Diluted earnings per 5p ordinary share
12. Dividends
Equity dividends
Interim dividend for current year of 3.75p (2016: 3.5p)
Final dividend for previous year of 8.5p (2016: 7.858p)
Special dividend of nil p (2016: 7.858p)
Amounts recognised as distributions to equity shareholders in the year
35
2017
£’000
36,510
2016
£’000
35,256
207,620,432
207,431,307
216,506
473,629
207,836,938
207,904,936
17.6p
17.6p
17.0p
17.0p
2017
£’000
7,792
17,646
–
25,438
2016
£’000
7,262
16,302
16,303
39,867
A final dividend of 9.25p per share for the year ended 30 June 2017, amounting to £19,238,000, will be proposed at the Annual
General Meeting. This dividend is not reflected in these financial statements as it is not approved at the balance sheet date.
13. Profit of the parent company
The company has taken advantage of the provisions of Section 408 of the Companies Act 2006 and elected not to present its own
profit and loss account. The profit after taxation for the financial year dealt with in the financial statements of the company was
£53,777,000 (2016: £33,474,000). The aggregate amount of directors’ emoluments excluding pension contributions was
£1,803,000 (2016: £1,718,000) of which the highest paid director’s emoluments were £815,000 (2016: £775,000). The directors’
salaries or fees for the year ended 30 June 2017 were Mr G Halstead £90,000, Mr M Halstead £397,000, Mr G R Oliver £370,000,
Mr J A Wild £32,000, Mr E K Lotz £52,000 and Mr S D Hall £20,000.
36
Notes to the Consolidated Financial Statements
continued
14. Property, plant and equipment
Cost
At 30 June 2015
Additions
Disposals
Exchange differences
At 30 June 2016
Additions
Disposals
Exchange differences
At 30 June 2017
Depreciation
At 30 June 2015
Charge for the year
Disposals
Exchange differences
At 30 June 2016
Charge for the year
Disposals
Exchange differences
At 30 June 2017
Net book value
At 30 June 2015
At 30 June 2016
At 30 June 2017
Freehold
land and
buildings
£’000
Plant and
equipment
£’000
23,888
1,405
–
1,370
26,663
383
–
526
27,572
6,661
639
–
319
7,619
671
–
131
8,421
17,227
19,044
19,151
63,450
3,437
(694)
805
66,998
3,851
(3,038)
387
68,198
49,505
2,233
(540)
460
51,658
2,159
(2,796)
225
51,246
13,945
15,340
16,952
Total
£’000
87,338
4,842
(694)
2,175
93,661
4,234
(3,038)
913
95,770
56,166
2,872
(540)
779
59,277
2,830
(2,796)
356
59,667
31,172
34,384
36,103
15.
Intangible assets
Cost and net book value at 30 June 2015, 2016 and 2017
37
Goodwill
£’000
3,232
An impairment review of goodwill was done by reference to value in use. Value in use was determined using ten year cash flow
projections, based on current levels of profitability and assumed growth of 0% to 5% and a discount rate of 4%. The result of the
review indicated that no impairment was required.
16. Deferred tax assets and liabilities
At 30 June 2015
Charged to income
Credited to other comprehensive income
Exchange differences
At 30 June 2016
Credited/(charged) to income
Charged to other comprehensive income
Exchange differences
At 30 June 2017
Pension
scheme
deficit
£’000
Accelerated
tax
depreciation
£’000
Property
revaluation
£’000
Other
timing
differences
£’000
3,698
(214)
839
–
4,323
(217)
(492)
–
3,614
(381)
(38)
–
–
(419)
(157)
–
–
(576)
(709)
–
106
–
(603)
–
–
–
(603)
1,591
(393)
–
27
1,225
476
–
15
1,716
Total
£’000
4,199
(645)
945
27
4,526
102
(492)
15
4,151
Deferred tax assets and liabilities are offset where there is a legally enforceable right to offset current tax assets against current tax
liabilities and the deferred income taxes relate to the same tax authority. The balances after allowing for such offsets are as follows:
At 30 June 2015
At 30 June 2016
At 30 June 2017
All deferred tax assets and liabilities are analysed as non-current.
17.
Inventories
Raw materials and consumables
Work in progress
Finished goods
Asset
£’000
4,908
5,129
4,151
Liability
£’000
(709)
(603)
–
2017
£’000
2,926
1,774
68,236
72,936
Total
£’000
4,199
4,526
4,151
2016
£’000
3,306
1,284
58,238
62,828
An amount of £1,260,000 has been credited (2016: £1,218,000 credited) to the income statement in respect of movements in
inventory write-downs. The cost of inventory recognised as an expense was £135,974,000 (2016: £130,177,000).
38
Notes to the Consolidated Financial Statements
continued
18. Trade and other receivables
Trade receivables
Other receivables
Prepayments and accrued income
2017
£’000
28,496
1,129
1,551
31,176
2016
£’000
30,688
1,146
1,986
33,820
All amounts within trade and other receivables are due within one year. The fair value of amounts included in trade and other
receivables approximates to book value. The maximum exposure to credit risk at the reporting date is the fair value of each class
of receivable. The group does not hold any collateral as security.
The group’s trade receivables are stated after a provision for impairment of £3,202,000 (2016: £3,048,000). Other balances within
trade and other receivables do not contain impaired assets. The provision for impairment against trade receivables is based on
specific risk assessments taking into account past default experience and is analysed as follows:
At 1 July
Exchange movements
Charged to the income statement – selling and distribution costs
At 30 June
2017
£’000
3,048
39
115
3,202
2016
£’000
2,810
91
147
3,048
As at 30 June 2017, trade receivables of £2,348,000 (2016: £6,014,000) were past due but not impaired. These relate to a number
of independent customers for whom there is no recent history of default. The ageing analysis of these trade receivables is as follows:
Up to three months overdue
Over three months overdue
Total
The maximum exposure to credit risk for trade and other receivables by currency was:
Sterling
Euro
Australian Dollars
New Zealand Dollars
Norwegian Krone
US Dollars
Hong Kong Dollars
Other currencies
Total
2017
£’000
2,055
293
2,348
2017
£’000
7,111
12,295
3,591
833
517
2,485
991
1,802
29,625
2016
£’000
5,938
76
6,014
2016
£’000
9,733
11,105
3,663
877
486
3,265
582
2,123
31,834
19. Cash and cash equivalents
The fair values of cash and cash equivalents approximate to book value due to their short maturities.
The currency analysis of cash and cash equivalents is as follows:
Sterling
Euro
Australian Dollars
New Zealand Dollars
Norwegian Krone
US Dollars
Other currencies
Total
20. Trade and other payables
Amounts falling due within one year
Trade payables
Value added, payroll and other taxes
Other payables
Accruals
Amounts falling due after more than one year
Other payables
The fair value of amounts included in trade and other payables approximates to book value.
21. Borrowings
Non-current liabilities
Preference shares
39
2016
£’000
30,428
4,451
2,251
385
703
4,916
962
44,096
2016
£’000
32,806
3,891
1,533
15,165
53,395
2017
£’000
37,907
3,677
2,701
296
559
6,671
721
52,532
2017
£’000
41,309
3,503
820
13,689
59,321
486
460
2017
£’000
2016
£’000
200
200
All items included within borrowings are denominated in pounds sterling.
The cumulative preference shares have no fixed repayment date. They are not listed and therefore no market price is available. At
30 June 2017 and 30 June 2016 the fair value of the preference shares was not materially different from their book value.
40
Notes to the Consolidated Financial Statements
continued
22. Retirement benefit obligations
In the UK the group operates a defined benefit pension scheme which was closed to new members in 2002. In addition some
employees both in the UK and overseas are provided with retirement benefits through defined contribution arrangements.
Executive directors Mr M Halstead and Mr G R Oliver are members of the defined benefit scheme and the employer pension
contributions for the year were £28,000 and £26,000 respectively. At 30 June 2017 the accrued pension for the highest paid
director was £108,000 and the transfer value of this accrued benefit was £2,228,000.
Disclosures relating to the defined benefits pension scheme are as follows:
The company sponsors the Halstead Group Pension Scheme, a funded defined benefit pension scheme in the UK. The scheme is
administered within a trust which is legally separate from the company. Trustees are appointed by both the company and the
scheme’s membership and act in the interest of the scheme and all relevant stakeholders, including the members and the company.
The trustees are also responsible for the investment of the scheme’s assets.
Existing members accrue an annual pension of 1/60th or 1/80th (depending on category) of final salary for each year of pensionable
service, increasing in line with inflation whilst in payment. On the death of an active member the scheme provides the widow(er)
a lump sum and a spouse’s pension. Members who leave service before retirement are entitled to a deferred pension.
Active members of the scheme pay contributions at the rate of either 7.5% or 6% of salary depending on category and the
company pays the balance of the cost as determined by regular actuarial valuations.
The scheme poses a number of risks to the company, for example, longevity risk, investment risk, interest rate risk, inflation risk and
salary risk. The trustees are aware of these risks and use various techniques to control them. The trustees have a number of internal
control policies including a risk register, which are in place to manage and monitor the various risks they face.
The scheme is subject to regular actuarial valuations, which are usually carried out every three years. These actuarial valuations are
carried out in accordance with the requirements of the Pensions Act 2004 and so include margins for prudence. This contrasts with
these accounting disclosures, which are determined using best estimate assumptions.
The last formal actuarial valuation was carried out as at 5 April 2014. The results of that valuation have been projected forward to
30 June 2017 by a qualified independent actuary. The figures in the following disclosure were measured using the Projected Unit
Method.
Principal actuarial assumptions at the balance sheet date
Discount rate at end of year
Future salary increases
Future pension increases
Rate of inflation – RPI
– CPI
Future expected lifetime of current pensioner at age 65:
Male born in 1952
Female born in 1952
Future expected lifetime of future pensioner at age 65:
Male born in 1972
Female born in 1972
2017
2016
2.70%
1.90%
3.00%
3.10%
1.90%
3.15%
2.20%
2.95%
2.95%
2.20%
21.6 years
24.1 years
22.1 years
25.0 years
22.4 years
25.0 years
23.1 years
26.1 years
41
22. Retirement benefit obligations (continued)
The sensitivities of the principal assumptions used to measure the scheme liabilities are as follows:
Assumption
Discount rate
Rate of inflation
Expected lifetime
Change in assumption
Decrease by 0.1%
Increase by 0.1%
Increase by 1 year
Impact on scheme liabilities
Increase by £1.3m
Increase by £0.9m
Increase by £3.9m
The sensitivities may not be representative of the actual change in the present value of the scheme obligations, as it is unlikely that
the change in assumptions would occur in isolation of each other, as the assumptions may be linked.
Amounts recognised in the balance sheet
Present value of funded obligations
Fair value of scheme assets
Net liability before deferred taxation
Related deferred tax asset
Net liability after deferred taxation
Amounts recognised in the income statement
Current service cost
Net interest cost
Amounts recognised in other comprehensive income
Return on assets excluding amount included in net interest cost
Loss arising from changes in financial assumptions
Gain arising from changes in demographic assumptions
Deferred tax
Remeasurement of the net defined benefit liability
The actual return on the scheme assets in the year was a £6,012,000 gain (2016: £2,266,000 gain).
Changes in the present value of the scheme assets
Opening fair value of scheme assets
Interest income
Return on assets excluding interest income
Employer contributions
Employee contributions
Benefits paid
2017
£’000
(82,370)
61,113
(21,257)
3,614
(17,643)
2017
£’000
(542)
(769)
2016
£’000
(81,655)
56,224
(25,431)
4,323
(21,108)
2016
£’000
(544)
(718)
(1,311)
(1,262)
2017
£’000
4,259
(4,831)
3,468
2,896
(492)
2,404
2017
£’000
56,224
1,753
4,259
2,589
233
(3,945)
61,113
2016
£’000
49
(8,248)
–
(8,199)
839
(7,360)
2016
£’000
54,200
2,217
49
2,522
272
(3,036)
56,224
42
Notes to the Consolidated Financial Statements
continued
22. Retirement benefit obligations (continued)
Changes in the present value of the scheme obligations
Opening defined benefit obligations
Service cost
Interest cost
Employee contributions
Loss arising from changes in financial assumptions
Gain arising from changes in demographic assumptions
Benefits paid
Changes in the net defined benefit liability
Opening net defined benefit liability
Service cost
Net interest cost
Return on assets excluding interest income
Loss arising from changes in financial assumptions
Gain arising from changes in demographic assumptions
Employer contributions
Major categories of scheme assets
Return seeking
UK equities
Overseas equities
Diversified growth fund
Debt instruments
Corporates
Gilts
Index linked
Other
Property
Cash
Total market value of assets
2017
£’000
(81,655)
(542)
(2,522)
(233)
(4,831)
3,468
3,945
(82,370)
2017
£’000
(25,431)
(542)
(769)
4,259
(4,831)
3,468
2,589
(21,257)
2017
£’000
682
31,931
10,517
43,130
6,328
785
5,250
2016
£’000
(72,692)
(544)
(2,935)
(272)
(8,248)
–
3,036
(81,655)
2016
£’000
(18,492)
(544)
(718)
49
(8,248)
–
2,522
(25,431)
2016
£’000
953
24,707
12,105
37,765
5,178
1,625
7,801
12,363
14,604
1,876
3,744
5,620
1,592
2,263
3,855
61,113
56,224
All of the scheme assets are held in pooled managed funds which can be classified as level 2 instruments based on the definition
in IFRS 13.
The scheme has no investments in the company or in property occupied by the company.
22. Retirement benefit obligations (continued)
Scheme liabilities by category of membership
Active members
Deferred pensioners
Pensions in payment
Average duration of scheme liabilities
Active members
Deferred pensioners
Pensions in payment
All scheme liabilities
43
2016
£’000
33,158
13,415
35,082
81,655
2016
years
20
21
11
16
2017
£’000
36,090
13,134
33,146
82,370
2017
years
20
21
11
16
Normal company contributions of £1,235,000 (2016: £1,350,000) are expected to be paid into the scheme during the year ended
30 June 2018.
23. Share capital
Ordinary shares – allotted, issued and fully paid
At 1 July ordinary shares of 5p each
Ordinary shares of 5p each issued
At 30 June ordinary shares of 5p each
2017
Number
2016
Number
207,470,508
394,100
207,282,508
188,000
207,864,608
207,470,508
Ordinary B shares of 1p each at 1 July 2016 and 30 June 2017
16,042,530
16,042,530
2017
£’000
10,374
19
10,393
160
2016
£’000
10,364
10
10,374
160
Total allotted, issued and fully paid
10,553
10,534
The group also has preference shares in issue as detailed below which are required, under accounting rules, to be disclosed as
financial instruments within creditors. Full details of these are given in note 12 of the financial statements of the company.
Authorised
9,265,580 C preference shares of 60p each
200,000 5.5% preference shares of £1 each
Allotted, issued and fully paid
200,000 5.5% preference shares of £1 each
2017
£’000
5,559
200
2016
£’000
5,559
200
200
200
The respective rights of each class of shares are detailed in note 12 of the financial statements of the company.
44
Notes to the Consolidated Financial Statements
continued
23. Share capital (continued)
Issue of ordinary shares and number of ordinary shares under option
Under the terms of the executive share option scheme approved on 3 December 1998, options were exercised on 394,100
shares and 290,000 share options were granted during the year. Details of those options still outstanding are as follows:
Date of
grant
Date
exercisable
Date of
expiry
Exercise
price
(pence)
Number
01.07.16
Exercised
in the year
Granted
in the year
Number
30.06.17
4 Jul 07
6 Oct 08
4 Jul 10
3 Jul 17
6 Oct 11 5 Oct 18
144.7125
105.2500
160,000
60,000
(160,000)
(60,000)
Director
G Halstead
M Halstead
4 Jul 07
6 Oct 08
21 Jul 14
12 Jun 17
4 Jul 10
6 Oct 11
21 Jul 17
12 Jun 20
3 Jul 17
5 Oct 18
20 Jul 24
11 Jun 24
144.7125
105.2500
270.2900
476.5000
–
–
–
–
–
50,000
–
50,000
–
–
–
80,000
20,000
50,000
20,000
50,000
–
60,000
10,000
80,000
20,000
–
20,000
–
(10,000)
–
–
–
–
–
–
G R Oliver
21 Jul 14
12 Jun 17
21 Jul 17
12 Jun 20
20 Jul 24
11 Jun 27
270.2900
476.5000
E K Lotz
6 Oct 08
6 Oct 11
5 Oct 18
105.2500
60,000
Total – directors
410,000
(230,000)
100,000
280,000
Date of
grant
Date
exercisable
4 Jul 07
6 Oct 08
9 Apr 14
21 Jul 14
12 Jun 17
4 Jul 10
6 Oct 11
9 Apr 17
21 Jul 17
12 Jun 20
Date of
expiry
3 Jul 17
5 Oct 18
8 Apr 24
20 Jul 24
11 Jun 27
Exercise
price
(pence)
144.7125
105.2500
290.2500
270.2900
476.5000
Employees
Total – employees
Grand total
The market price of the shares at 30 June 2017 was 468p (2016: 409p).
The share price during the year ranged from 379p to 542p.
Number
01.07.16
Exercised
in the year
Granted
in the year
81,232
122,868
40,000
91,500
–
(51,232)
(92,868)
(20,000)
–
–
–
–
–
–
190,000
Number
30.06.17
30,000
30,000
20,000
91,500
190,000
335,600
(164,100)
190,000
361,500
745,600
(394,100)
290,000
641,500
45
23. Share capital (continued)
Issue of ordinary shares and number of ordinary shares under option (continued)
The average share price when options were exercised in the year was £4.76.
Directors exercised 230,000 (2016: 170,000) share options during the year. Aggregate gains on exercising the share options by
directors in the year amounted to £812,000 (2016: £584,000) of which £38,000 (2016: £nil) related to the highest paid director.
A summary of movements in numbers of share options is as follows:
At 30 June 2015
Exercised in the year
Lapsed in the year
At 30 June 2016
Exercised in the year
Granted in the year
At 30 June 2017
Weighted
average
exercise
price (£)
1.42
1.00
0.80
1.58
1.37
4.77
3.15
Number of
options
1,013,600
(188,000)
(80,000)
745,600
(394,100)
290,000
641,500
At 30 June 2017 there were 220,000 (2016: 574,100) share options exercisable at a weighted average exercise price of £1.27
(2016: £1.23).
Share based payments
The group’s equity settled share based payments comprise the grant of share options to certain employees under the group’s
executive share option scheme. Details of such options are given above. The group calculated the fair value of the options at the
date of grant using the Black Scholes model. The inputs into the model were as follows:
Expected life of option
Expected share price volatility
Expected dividend yield
Risk free interest rate
Exercise price
2017
2016
3.5 years
10.0%
5.50%
0.50%
476.5p
–
–
–
–
–
An expense based on the fair value calculated at the date of grant was recognised in the profit and loss account over the vesting
period of the options. The share based payment expense for the year ended 30 June 2017 was £1,000 (2016: £1,000).
46
Notes to the Consolidated Financial Statements
continued
24. Reserves
The nature and purpose of each reserve within equity is as follows.
Reserve
Equity share capital
Share premium account
Capital redemption reserve
Currency translation reserve
Hedging reserve
Retained earnings
Description and purpose
Nominal value of equity share capital issued.
Amount subscribed for equity share capital in excess of nominal value.
Amounts transferred from share capital on redemption of issued shares.
Cumulative currency translation gains and losses arising on the
retranslation of the net assets of the group’s foreign operations.
Gains and losses arising on the fair value of financial instruments in an
effective designated cash flow hedging relationship.
All other gains and losses and transactions with owners, such as
dividends, not recognised in other reserves.
25. Cash inflow from operations
Profit for the year attributable to equity shareholders
Income tax expense
Profit before income tax
Finance cost
Finance income
Operating profit
Depreciation
Loss/(profit) on sale of property, plant and equipment
(Increase)/decrease in inventories
Decrease in trade and other receivables
Increase in trade and other payables
Defined benefit pension scheme service cost
Defined benefit pension scheme employer contributions paid
Changes in fair value of financial instruments
Share based payments
2017
£’000
36,510
10,106
46,616
802
(134)
47,284
2,830
8
(8,054)
2,838
4,982
542
(2,589)
(364)
1
47,478
2016
£’000
35,256
10,243
45,499
761
(177)
46,083
2,872
(46)
539
842
2,051
544
(2,522)
(39)
1
50,325
47
26. Operating lease commitments
The group leases various warehouses and items of plant and equipment under non-cancellable leases over various periods. The
future minimum aggregate lease payments under non-cancellable operating leases are as follows:
Not later than one year
Later than one year and not later than five years
Later than five years
2017
Land and
buildings
£’000
2,318
4,159
257
6,734
2017
Other
£’000
561
753
70
1,384
2016
Land and
buildings
£’000
1,911
4,965
691
7,567
2016
Other
£’000
709
489
11
1,209
27. Derivative financial instruments
The group is exposed to foreign currency risk on sales and purchases that are denominated in a currency other than the functional
currency of the entity concerned. The currencies giving rise to this risk are various, but the most significant are US Dollar and Euro.
Forward exchange contracts are used to manage this exposure to fluctuations in foreign exchange rates.
The group hedges, using forward exchange contracts, transactions denominated in a foreign currency which are not matched
against other transactions in the same currency within the group. Most of the forward exchange contracts have maturities of less
than one year after the balance sheet date. The group buys or sells foreign currency at spot where necessary to address any short-
term imbalances.
The group classifies its forward exchange contracts hedging forecasted transactions as cash flow hedges and states them at fair
value.
The fair values have been calculated by applying (where relevant), for equivalent maturity profiles, the rate at which forward
currency contracts with the same principal amounts could be acquired at the balance sheet date.
Changes in the fair value of forward exchange contracts for which no hedge accounting is applied or where the hedge is considered
ineffective are recognised in the income statement.
Other than the use of forward exchange contracts as detailed above, the group does not make use of derivative financial
instruments.
48
Notes to the Consolidated Financial Statements
28. Financial instruments
For cash and cash equivalents and trade and other payables and receivables the fair value approximates to their book value due to
the short maturity profile of these financial instruments. On receivables, allowances are made within the book value for credit risk.
The fair value of forward exchange contracts is determined by reference to spot rates adjusted for the forward points to the contract
value date.
The book values and fair values of financial instruments are set out below:
Current:
Trade and other receivables
Forward exchange contracts
Cash and cash equivalents
Trade and other payables
Forward exchange contracts
Total
Non-current:
Borrowings
2017
Book value
£’000
2017
Fair value
£’000
2016
Book value
£’000
2016
Fair value
£’000
29,625
416
52,532
(55,818)
(1,362)
25,393
29,625
416
52,532
(55,818)
(1,362)
25,393
31,834
433
44,096
(49,504)
(2,066)
24,793
31,834
433
44,096
(49,504)
(2,066)
24,793
(200)
(200)
(200)
(200)
Other than forward exchange contracts which are categorised as derivative instruments, all financial assets are categorised as loans
and receivables and all financial liabilities are categorised as financial liabilities measured at amortised cost.
The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value.
IFRS 7 requires that these be grouped into Levels 1 to 3 based on the degree to which the fair value is observable. All items in the
table below are categorised as Level 2 which, as defined by IFRS 7, refers to those items whose fair value measurement is derived
from inputs other than that are observable for the asset or liability either directly or indirectly.
Forward exchange contracts at fair value through profit and loss account
Forward exchange contracts at fair value through hedging reserve
2017
£’000
37
(983)
(946)
2016
£’000
(195)
(1,438)
(1,633)
Sensitivity analysis
The group’s principal exposures in relation to market risks are to changes in the euro exchange rate against sterling and to changes
in UK interest rates. The group does not fix the interest rate receivable on its sterling balances, and based on balances held at the
year end, a 1% increase or decrease in sterling interest rates would lead to an increase or decrease in post-tax earnings of
£304,000 (2016: £249,000). The table below details the notional impact of changes in the euro exchange rate against sterling on
the group’s post-tax profit and equity. The gains and losses arise from the translation of receivables, payables, cash and forward
exchange contracts which are denominated in currencies other than each subsidiary’s reporting currency.
Euro 5% stronger against sterling
Euro 5% weaker against sterling
2017
Post-tax
profits
£’000
41
(37)
2017
Equity
£’000
41
(37)
2016
Post-tax
profits
£’000
20
(18)
2016
Equity
£’000
20
(18)
49
Proportion
owned
(%)
100
100
100
100
100
100
100
100
100
100
29. Group companies
At 30 June 2017, the trading subsidiaries of the group were:
Name of subsidiary
Activity
Polyflor Limited
Riverside Flooring Limited
Polyflor Australia Pty Limited
Polyflor New Zealand Limited
Polyflor Canada Inc.
Polyflor India Pvt Limited
Objectflor Art und Design Belags GmbH
Karndean International GmbH
James Halstead France SAS
Falck Design AB
Flooring manufacturing and distribution
Flooring manufacturing
Flooring distribution
Flooring distribution
Flooring distribution
Flooring distribution
Flooring distribution
Flooring distribution
Flooring distribution
Flooring distribution
Country of
incorporation
England
England
Australia
New Zealand
Canada
India
Germany
Germany
France
Sweden
A complete list of the group’s subsidiaries is provided in note 5 of the financial statements of the company.
30. Exchange rates
The currency exchange rates used to translate the results, assets and liabilities of foreign subsidiaries were:
Euro
Australian dollar
New Zealand dollar
Canadian dollar
Swedish krona
Indian rupee
2017
Closing
1.14
1.69
1.77
1.69
10.96
83.96
2017
Average
1.16
1.68
1.78
1.68
11.20
84.43
2016
Closing
1.20
1.80
1.88
1.74
11.33
90.23
2016
Average
1.34
2.04
2.23
1.97
12.50
98.48
31. Related parties
Transactions between the company and its subsidiaries have been eliminated on consolidation and are not disclosed in this note.
The group’s contributions to the defined benefit pension scheme are disclosed in note 22.
Details of other related party transactions for the group are shown in the directors' report, board report on remuneration and in
the notes to the financial statements. The key management personnel are the directors.
50
Company Balance Sheet
as at 30 June 2017
Fixed assets
Tangible fixed assets
Investments
Current assets
Debtors due within one year
Debtors due after one year
Total debtors
Derivative financial instruments
Cash at bank and in hand
Total current assets
Creditors – amounts falling due within one year
Derivative financial instruments
Net current assets
Total assets less current liabilities
Creditors – amounts falling due after more than one year
Retirement benefit obligations
Net assets
Capital and reserves
Equity share capital
Equity share capital (B shares)
Called up share capital
Share premium account
Capital redemption reserve
Hedging reserve
Profit and loss account
Total shareholders’ funds
Note
4
5
6
8
9
8
10
11
12
2017
£’000
5,051
40,152
45,203
31,743
3,543
35,286
416
32,497
68,199
(9,534)
(1,362)
57,303
102,506
(200)
(21,257)
81,049
10,393
160
10,553
3,615
1,174
(983)
66,690
81,049
2016
£’000
4,987
19,152
24,139
35,983
4,339
40,322
433
21,952
62,707
(9,837)
(2,066)
50,804
74,943
(200)
(25,431)
49,312
10,374
160
10,534
3,096
1,174
(1,438)
35,946
49,312
The company has taken advantage of the provisions of Section 408 of the Companies Act 2006 and has elected not to present its
own profit and loss account. The profit after taxation for the financial year dealt with in the financial statements of the company
was £53,777,000 (2016: £33,474,000).
The financial statements were approved and authorised for issue by the board and were signed on its behalf on 29 September 2017.
M Halstead
Director
G R Oliver
Director
James Halstead plc Registration Number 140269
51
Company Statement of Changes in Equity
for the year ended 30 June 2017
Share
capital
£'000
Share
premium
£'000
Capital
redemption
reserve
£'000
Hedging
reserve
£’000
Profit
and loss
account
£’000
Total
shareholders’
funds
£'000
Balance at 30 June 2015
10,524
2,917
1,174
2,206
49,698
66,519
Profit for the year
Remeasurement of the net defined
benefit liability
Fair value movements on
hedging instruments
Total comprehensive income for
the year
Dividends
Issue of share capital
Share based payments
–
–
–
–
–
10
–
–
–
–
–
–
179
–
–
–
–
–
–
–
–
–
–
33,474
33,474
(7,360)
(7,360)
(3,644)
–
(3,644)
(3,644)
26,114
22,470
–
–
–
(39,867)
–
1
(39,867)
189
1
Balance at 30 June 2016
10,534
3,096
1,174
(1,438)
35,946
49,312
Profit for the year
Remeasurement of the net defined
benefit liability
Fair value movements on
hedging instruments
Total comprehensive income for
the year
Dividends
Issue of share capital
Share based payments
–
–
–
–
–
19
–
–
–
–
–
–
519
–
–
–
–
–
–
–
–
–
–
53,777
53,777
2,404
2,404
455
–
455
455
56,181
56,636
–
–
–
(25,438)
–
1
(25,438)
538
1
Balance at 30 June 2017
10,553
3,615
1,174
(983)
66,690
81,049
52
Notes to the Company Financial Statements
1.
Accounting policies
Basis of preparation
The separate financial statements of the company are presented as required by the Companies Act 2006. The company meets the
definition of a qualifying entity under FRS 100 Application of Financial Reporting Requirements issued by the Financial Reporting
Council. Accordingly, the financial statements have been prepared in accordance with FRS 101 Reduced Disclosure Framework as
issued by the Financial Reporting Council.
The company has used the disclosure exemptions available under FRS 101 in relation to presentation of a cash flow statement,
comparative information for certain assets, capital management, transactions with other group companies, compensation of key
management personnel and the effects of new but not yet effective IFRS.
As the consolidated financial statements include the equivalent disclosures, the company has used the disclosure exemptions
available under FRS 101 in relation to share based payments, and financial instruments. The disclosures for the defined benefit
retirement obligations are included in the consolidated financial statements.
The financial statements are prepared on a going concern basis and in accordance with the historical cost convention, except for
certain financial instruments that have been measured at fair value.
The accounting policies of the company are the same as those set out in the consolidated financial statements. The critical
accounting estimates and judgements are income taxes and retirement benefit obligations as set out in the consolidated financial
statements.
The following additional accounting policies are specific to the company’s financial statements.
Investments
Investments in subsidiaries are stated at cost less provision for impairment in value.
Investment land and buildings
Investment land and buildings are stated at cost less depreciation and any provision for impairment. Depreciation is calculated to
write off the buildings on a straight line basis over their estimated economic life of fifty years. No depreciation is charged in respect
of land.
Profit for the year
2.
The company has taken advantage of the provisions of Section 408 of the Companies Act 2006 and has elected not to present its
own profit and loss account. The profit after taxation for the financial year dealt with in the financial statements of the company
was £53,777,000 (2016: £33,474,000).
3.
Staff costs and numbers
Staff costs comprised
Wages and salaries
Social security costs
Pension costs
Share based payments
The average monthly number of employees during the year was 20 (2016: 23).
4.
Tangible fixed assets
2017
£’000
2,834
361
115
1
3,311
Cost
At 30 June 2016
Additions
Disposals
At 30 June 2017
Depreciation
At 30 June 2016
Charge for the year
Disposals
At 30 June 2017
Net book value
At 30 June 2017
At 30 June 2016
Investment
land and
buildings
£’000
Freehold
land and
buildings
£’000
Plant and
equipment
£’000
7,671
307
–
7,978
3,898
188
–
4,086
3,892
3,773
1,311
–
–
1,311
204
24
–
228
1,083
1,107
440
41
(38)
443
333
62
(28)
367
76
107
53
2016
£’000
2,840
351
125
1
3,317
Total
£’000
9,422
348
(38)
9,732
4,435
274
(28)
4,681
5,051
4,987
The investment land and buildings relates to a freehold property that is occupied by a subsidiary company. The rental income was
£600,000 (2016: £500,000).
54
Notes to the Company Financial Statements
continued
5.
Investments
Cost
At 30 June 2016
Additions
At 30 June 2017
Provision for impairment
At 30 June 2016
At 30 June 2017
Net book value
At 30 June 2017
At 30 June 2016
Shares in
subsidiary
undertakings
£’000
28,552
21,000
49,552
9,400
9,400
40,152
19,152
The additions to investments comprised Polyflor Limited £17,000,000 and Riverside Flooring Limited £4,000,000.
At 30 June 2017, the company held directly and indirectly 100% of the equity and voting rights of the following undertakings:
Subsidiary
Owned by the company
Polyflor Limited
Riverside Flooring Limited
Titan Leisure Group Limited
Halstead Flooring International Limited
Expona Limited
JHL Limited
Arai (UK) Limited
Halstead Floorings Limited
Halstead Flooring Concepts Pty Limited
Polyflor Canada Inc.
Polyflor India Pvt Limited
Objectflor Art und Design Belags GmbH
James Halstead France SAS
Falck Design AB
Owned by subsidiaries
Phoenix Distribution (NW) Limited
Polyflor Australia Pty Limited
Colonia Flooring Pty Limited
Polyflor New Zealand Limited
Karndean International GmbH
Activity
Country of
incorporation
Proportion
owned
(%)
Flooring manufacturing and distribution
Flooring manufacturing
Holding company
Dormant company
Dormant company
Dormant company
Dormant company
Dormant company
Holding company
Flooring distribution
Flooring distribution
Flooring distribution
Flooring distribution
Flooring distribution
England
England
England
England
England
England
England
Ireland
Australia
Canada
India
Germany
France
Sweden
Dormant company
Flooring distribution
Dormant company
Flooring distribution
Flooring distribution
England
Australia
Australia
New Zealand
Germany
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
55
5.
Investments continued
Subsidiary
Polyflor Limited
Riverside Flooring Limited
Titan Leisure Group Limited
Halstead Flooring International Limited
Expona Limited
JHL Limited
Arai (UK) Limited
Phoenix Distribution (NW) Limited
Halstead Floorings Limited
Halstead Flooring Concepts Pty Limited
Polyflor Australia Pty Limited
Colonia Flooring Pty Limited
Polyflor Canada Inc.
Polyflor India Pty Limited
Objectflor Art und Design Belags GmbH
Karndean International GmbH
James Halstead France SAS
Falck Design AB
Polyflor New Zealand Limited
Address
Beechfield
Hollinhurst Road
Radcliffe
Manchester
M26 1JN
England
24/26 City Quay
Dublin 2
D02NY19
Ireland
101 Prosperity Way
Dandenong
VIC 3175
Australia
6350 Northwest Drive
Mississauga
Ontario L4V 1J7
Canada
B-408 Knox Plaza
Mindspace, Malad West
Mumbai 400 064
India
Wankelstrase 50
D 50996 Koln
Germany
Parc Saint Christophe
10 Avenue de l’Enterprise
95861 Cergy Pontoise
France
Box 102 51
434 23 Kungsbacka
Besoksadress
Energigatan 9
Sweden
2 Narek Place
Manukau City
Auckland 2104
New Zealand
56
Notes to the Company Financial Statements
continued
6.
Debtors
Trade debtors
Amounts owed by group undertakings
Corporation tax
Other debtors
Prepayments and accrued income
Debtors due within one year
Deferred tax assets (note 7)
Debtors due after one year
Total debtors
7.
Deferred tax assets
At 30 June 2016
Charged to income
Charged to other comprehensive income
At 30 June 2017
Pension
scheme
deficit
£’000
Accelerated
tax
depreciation
£’000
Other
timing
differences
£’000
4,323
(217)
(492)
3,614
(119)
(22)
–
(141)
135
(65)
–
70
Derivative financial instruments
8.
Derivative financial instruments are forward foreign exchange contracts recognised in the balance sheet at fair value.
9.
Creditors – amounts falling due within one year
Trade creditors
Amounts due to group undertakings
Corporation tax
Other taxation and social security
Other creditors
Accruals and deferred income
2017
£’000
470
6,644
–
246
153
2,021
9,534
2017
£’000
131
31,031
265
81
235
31,743
3,543
3,543
2016
£’000
76
35,594
–
136
177
35,983
4,339
4,339
35,286
40,322
Total
£’000
4,339
(304)
(492)
3,543
2016
£’000
517
6,631
11
114
231
2,333
9,837
10. Creditors – amounts falling due after more than one year
Preference shares
11. Retirement benefit obligations
Present value of funded obligations
Fair value of scheme assets
Net liability
57
2017
£’000
200
2016
£’000
200
2017
£’000
(82,370)
61,113
2016
£’000
(81,655)
56,224
(21,257)
(25,431)
The company sponsors the Halstead Group Pension Scheme. Disclosure information is provided in note 22 to the consolidated
financial statements.
12. Share capital
Ordinary shares – allotted, issued and fully paid
At 1 July ordinary shares of 5p each
Ordinary shares of 5p each issued
At 30 June ordinary shares of 5p each
2017
Number
2016
Number
207,470,508
394,100
207,282,508
188,000
207,864,608
207,470,508
Ordinary B shares of 1p each at 1 July 2016 and 30 June 2017
16,042,530
16,042,530
2017
£’000
10,374
19
10,393
160
2015
£’000
10,364
10
10,374
160
Total allotted, issued and fully paid
10,553
10,534
The group also has preference shares as detailed below which are required, under accounting rules to be disclosed as financial
instruments within creditors.
Authorised
9,265,580 C preference shares of 60p each
200,000 5.5% preference shares of £1 each
Allotted, issued and fully paid
200,000 5.5% preference shares of £1 each
2017
£’000
5,559
200
2016
£’000
5,559
200
200
200
Shareholders approved a proposal for the return of capital (“return of capital”) at an extraordinary general meeting on 6 December
2004. This resulted in the creation of the 1 pence B ordinary shares (“B shares”) and the 60 pence C preference shares (“C shares”)
as described below.
58
Notes to the Company Financial Statements
continued
12. Share capital (continued)
The B shares were issued on 14 January 2005 on the basis of 1 B share for every ordinary share held on the record date by those
shareholders who either (a) elected to receive B shares or (b) elected to receive C shares, but whose allocation was scaled back
according to the restriction on the number of C shares available for issue. Following the issue of the B shares, holders received a
single dividend of 60p for every B share held, after which all B shares were automatically converted into deferred shares. These
shares are not listed, have extremely limited rights and are of negligible value.
The 5.5% cumulative preference shares of £1 shall confer on the holders thereof the right to receive in priority to all other shares
in the capital of the company out of the profits of the company which it shall be determined to distribute, a fixed cumulative
preferential dividend at the rate of 5.5% per annum on the capital for the time being paid up thereon and the right in the event of
a winding up, in priority to all other shares in the capital of the company, to repayment of the capital paid up thereon together
with a premium of 5p per share and a sum equivalent to any arrears and accruals of the said fixed cumulative preferential dividend
thereon (whether earned or declared or not) calculated up to the date of such repayment of capital but shall not confer any further
right to participate in profits or assets of James Halstead plc.
The company shall not be at liberty to create or issue any further share ranking in priority to or pari passu with the preference
shares without the consent in writing of the holders of three-fourths of the issued preference shares or the sanction of an
extraordinary resolution of the holders of such preference shares passed at a separate general meeting of such holders. The
preference shares shall not confer upon the holders thereof the right to attend or vote at any general meeting of the company or
to receive notice thereof, unless either:
(i) At the date of the notice convening the meeting the fixed cumulative preferential dividend on the preference shares is six
months in arrears and then so long only as such dividend shall remain unpaid, and so that for this purpose the dividend on the
preference shares shall be deemed to accrue due and be payable by equal half-yearly instalments on 30 June and 31 December in
every year, or
(ii) The business of the meeting includes the consideration of a resolution for reducing the capital or winding up the company or
for the sale of its undertaking or of any resolution directly abrogating or varying any of the special rights or privileges attached to
the preference shares.
The preference shares shall nevertheless entitle the holders thereof to receive notice of every general meeting. At a general
meeting at which the holders of preference shares are entitled to attend and vote, the preference shares shall entitle a holder
thereof, or his proxy, to vote only for every preference share held by him.
13. Related party transactions
The company has taken advantage of the exemption granted by FRS 101 not to disclose transactions and balances with other group
companies.
59
Ten Year Summary (Unaudited)
2008
£’000
2009
£’000
2010
£’000
2011
£’000
2012
£’000
2013
£’000
2014
£’000
2015
£’000
2016
£’000
2017
£’000
Revenue
158,740 169,263 186,424 213,944 226,335 217,082 223,488 227,261 226,141 240,784
Profit before income tax
29,605
32,604
35,307
37,538
41,726
40,495
41,753
44,184
45,499
46,616
Income tax
(9,431)
(8,036)
(9,948) (10,768) (11,941) (10,446) (10,301) (10,250) (10,243) (10,106)
Profit after income tax
20,174
24,568
25,359
26,770
29,785
30,049
31,452
33,934
35,256
36,510
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
Basic earnings per 5p share
Dividends paid per 5p share
9.8p
4.4p
11.9p
5.6p
12.3p
6.3p
12.9p
6.9p
14.4p
7.4p
14.5p
8.3p
15.2p
9.0p
16.4p
10.1p
17.0p
11.4p
17.6p
12.3p
Figures for the years ended 30 June 2008 to 2013 have been restated to reflect the impact of the revision to IAS 19 which was
implemented in the year ended 30 June 2014.
Figures for previous years have been restated to take account of the one for one bonus share issues in the years ended 30 June
2011 and 2013.
Special dividends are not included.
60
Shareholder Information
Financial calendar
Annual general meeting
Announcement of results
For the half year
For the full year
Dividend payments
Ordinary shares – interim
– final
1 December 2017
March
September
June
December
Preference shares
June and December
Share dealing information
The ordinary shares of the company are traded on the Alternative Investment Market of the London Stock Exchange.
Information concerning the day-to-day movement of the share price can be found on the London Stock Exchange website.
Shareholder analysis
as at 21 September 2017
By size of holding
1-10,000
10,001-50,000
50,001-100,000
100,001-500,000
500,001 and over
By category
Banks and nominee companies
Other limited companies/corporate bodies
Miscellaneous bodies/pension funds
Private individuals
Investment trusts and funds
Number of
holders
Number of
shares
1,820
588
91
97
54
5,535,914
13,341,159
6,448,635
20,922,231
161,725,669
%
2.7
6.4
3.1
10.1
77.7
2,650
207,973,608
100.0
Number of
holders
Number of
shares
629
34
13
1,968
6
97,169,401
1,130,913
304,062
109,263,416
105,816
%
46.7
0.5
0.1
52.6
0.1
2,650
207,973,608
100.0
61
Notice of Annual General Meeting
NOTICE IS HEREBY GIVEN that the ONE HUNDREDTH and SECOND ANNUAL GENERAL MEETING of the company will be
held at the Oldham Event Centre, off Hilbre Avenue, Oldham, Lancs, OL2 5BL on 1 December 2017 at 12 Noon for the
following purposes:
Ordinary Business
1
To receive and adopt the report of the directors and the statement of accounts for the year ended 30 June 2017
together with the report of the auditors.
2
3
4
5
6
To declare a final dividend on the ordinary shares in the capital of the company for the year ended 30 June 2017.
To re-elect Mr S D Hall who is retiring by rotation under the articles of association as a director.
To elect Mr M J Halstead as a director under the articles of association (note 9).
To elect Mr R P Whiting as a director under the articles of association (note 10).
To re-appoint BDO LLP as auditors of the company and authorise the directors to fix their remuneration for the
ensuing year.
Special Business
To consider and, if thought fit, pass the following resolutions of which resolutions 7 and 8 shall be proposed as ordinary
resolutions and resolutions 9 and 10 will be proposed as special resolutions:
7
That, subject to the passing of the ordinary and special resolutions numbered 8 and 9 below, the directors be and they
are hereby authorised, pursuant to article 35.14 of the company’s articles of association:
(i)
(ii)
to exercise the power contained in article 35.14 so that, to the extent determined by the directors, the holders of
ordinary shares be permitted to elect to receive new ordinary shares of 5.0p each in the capital of the company,
credited as fully paid, instead of all or part of any interim or final dividends which shall be declared before the
conclusion of the next annual general meeting of the company after the passing of this resolution; and
to capitalise the appropriate amount of new ordinary shares falling to be allotted pursuant to any elections made
as aforesaid out of profits, or sums standing to the credit of any share premium account or capital reserves of
the company, to apply such sums in paying up such new ordinary shares and to allot such new ordinary shares
to the members of the company making such elections in accordance with their respective entitlements.
8
That in substitution for all existing and unexercised authorities and powers, the directors of the company be and they
are hereby generally and unconditionally authorised for the purpose of section 551 Companies Act 2006 (the “Act”)
to exercise all or any of the powers of the company to allot shares of the company or to grant rights to subscribe for,
or to convert any security into, shares of the company (such shares and rights being together referred to as “Relevant
Securities”) up to an aggregate nominal value of £3,466,227 to such persons at such times and generally on such
terms and conditions as the directors may determine (subject always to the articles of association of the company)
PROVIDED THAT this authority shall, unless previously renewed, varied or revoked by the company in general meeting,
expire at the conclusion of the next annual general meeting or on the date which is six months after the next
accounting reference date of the company (if earlier) save that the directors of the company may, before the expiry
of such period, make an offer or agreement which would or might require relevant securities or equity securities (as
the case may be) to be allotted after the expiry of such period and the directors of the company may allot relevant
securities or equity securities (as the case may be) in pursuance of such offer or agreement as if the authority
conferred hereby had not expired.
62
Notice of Annual General Meeting
continued
9
That subject to the passing of the ordinary resolution numbered 8 above the directors be and they are hereby
empowered pursuant to Section 570 of the Companies Act 2006 to allot equity securities (within the meaning of
Section 560 subsection (1) of the said Act) for cash pursuant to the authority conferred by resolution numbered 7
above as if Section 561 of the said Act did not apply to any such allotment provided that this power shall be limited
to:
(i)
(ii)
the allotment of equity securities in connection with an offer of such securities by way of rights to holders of
ordinary shares in proportion (as nearly as may be practical) to their respective holdings of such shares, but
subject to such exclusions or other arrangements as the directors may deem necessary or expedient in relation
to fractional entitlements or any legal or practical problems under the laws of any territory, or the
requirements of any regulatory body or stock exchange; and
the allotment (otherwise than pursuant to sub-paragraph (i) above) of equity securities up to an aggregate
nominal amount of 5 per cent. of the ordinary share capital of the company in issue at the date of the passing
of this resolution;
and shall expire at the conclusion of the next annual general meeting or on the date which is six months after the
next accounting reference date of the company (if earlier) save that the company may before such expiry make an
offer or agreement which would or might require equity securities to be allotted after such expiry and the directors
may allot equity securities in pursuance of such an offer or agreement as if the power conferred hereby had not
expired.
10
That the company is hereby generally and unconditionally authorised for the purposes of section 693 and 701 of the
Companies Act 2006 to make one or more market purchases (within the meaning of section 693(4) of the said Act)
of fully paid ordinary shares of 5 pence each in the capital of the company (“ordinary shares”) provided that:
(i)
(ii)
(iii)
(iv)
(v)
the maximum aggregate number of ordinary shares hereby authorised to be purchased is 10% of the ordinary
shares in issue at the date of passing of this resolution;
the maximum price (exclusive of any expenses) which may be paid for an ordinary share shall not be more
than 5% above the average of the middle market quotations for an ordinary share as derived from the Daily
Official List of The London Stock Exchange plc for the five business days immediately preceding the day on
which the ordinary share is purchased;
the minimum price which may be paid for each ordinary share is 5 pence (exclusive of any expenses);
unless previously revoked or varied, the authority hereby conferred shall expire at the conclusion of the next
annual general meeting of the company or twelve months from the date, if earlier, of passing this resolution;
the company may make a contract or contracts to purchase its ordinary shares under the authority hereby
conferred prior to the expiry of such authority which will or may be executed wholly or partly after the expiry
of such authority and the company may make a purchase of its ordinary shares in pursuance of such contract
as if the authority hereby conferred had not expired; and
(vi)
the directors may elect to hold shares purchased under this authority in the form of treasury shares (subject
to a maximum of 10% of the issued ordinary share capital of the company at any one time).
By order of the board
D W Drillingcourt
Secretary
13 October 2017
Beechfield
Hollinhurst Road
Radcliffe
Manchester
M26 1JN
63
Notes
1
2
3
4
5
6
7
8
9
Preference shareholders are advised that they are not entitled to attend or vote at the annual general meeting.
Members entitled to attend and to speak and vote at the AGM are entitled to appoint a proxy to exercise all or any of their rights to
attend and to speak and vote on their behalf at the meeting. A shareholder may appoint more than one proxy in relation to the meeting
provided that each proxy is appointed to exercise the rights attached to a different share or shares held by that shareholder. A proxy
need not be a shareholder of the company. A proxy form which may be used to make such appointment and give proxy instructions
accompanies this notice. If you require additional forms, please contact the company’s registrars at, PXS, 34 Beckenham Road,
Beckenham, Kent, BR3 4TU.
To be valid any proxy form or other instrument appointing a proxy must be received by post or (during normal business hours only) by
hand by the company’s registrars at, PXS, 34 Beckenham Road, Beckenham BR3 4TU, in each case no later than 12 noon on
29 November 2017. Any power of attorney or other authority under which the proxy form is signed (or a duly certified copy of such
power or authority) must be enclosed with the proxy form.
If you wish to attend the meeting in person, please attend at the address set out at the beginning of this notice on 1 December 2017
bringing either your attendance card or other appropriate identification so that you can be identified by the company’s registrars. It is
recommended that you arrive at least 15 minutes before the time appointed for the meeting to begin.
To be entitled to attend and vote at the meeting (and for the purpose of the determination by the company of the votes they may
cast), shareholders must be registered in the register of members of the company at close of business on 29 November 2017.
Any corporation which is a member can appoint one or more corporate representatives who may exercise on its behalf all of its powers
as a member provided that they do not do so in relation to the same shares.
The following documents will be available for inspection at the company’s registered office during normal business hours from the date
of this notice until the time of the meeting and at the address set out at the beginning of this notice from 15 minutes before the
meeting until it ends:
(i)
the register of interests of the directors in the share capital of the company; and
(ii)
copy of the service contract of Mr G R Oliver.
Warrants for the final dividend, if approved, will be posted on 1 December 2017 to shareholders on the register as at 3 November 2017.
Mr Michael Halstead, aged 60, is an executive of many years standing in the advertising industry, in recent years for his own company
(HH&S Group Ltd) and formerly as an account director for Saatchi & Saatchi.
10 Mr Russell Whiting, aged 51, who is a local businessman and a director and shareholder of Associated Credit Holdings Ltd. Mr Whiting
has extensive experience of offering leasing solutions to a broad range of commercial enterprises.
64
JAME S HA LSTEA D PLC
Covering the World
Report and Accounts 2017
J
a
m
e
s
H
a
l
s
t
e
a
d
p
l
c
•
A
n
n
u
a
l
R
e
p
o
r
t
&
A
c
c
o
u
n
t
s
2
0
1
7
Beechfield
Hollinhurst Road
Radcliffe
Manchester
M26 1JN
J A M E S H A L S T E A D p l c
Tel +44 (0)161 767 2500
Fax +44 (0)161 766 7499
www.jameshalstead.com
James Halstead Cover 2017 A4 5.3mm spine.indd 1
04/10/2017 15:34