JAME S HA LSTEA D PLC
Covering the World
Report and Accounts 2018
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Discover a new world of colour
Discover a new world of colour
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 2018 A4 5.3mm spine.indd 1
01/10/2018 11:57
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
J A Wild FCA
M Halstead
G R Oliver FCA MCT
S D Hall
M J Halstead
R P Whiting
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
Link Asset Services
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 4
Financial Director’s Review 7
Governance
Report of the Directors 10
Board Report on Remuneration 13
Corporate Governance 14
Financial Statements
Independent Auditor’s Report to the Members
of James Halstead plc 20
Consolidated Income Statement 24
Consolidated Statement of Comprehensive Income 25
Consolidated Balance Sheet 26
Consolidated Statement of Changes in Equity 27
Consolidated Cash Flow Statement 28
Notes to the Consolidated Financial Statements 29
Company Balance Sheet 55
Company Statement of Changes in Equity 56
Notes to the Company Financial Statements 57
Supplementary Information
Ten Year Summary 64
Shareholder Information 65
Notice of Annual General Meeting 66
2
Chairman’s Statement
Results
I am pleased to report in my first year as Chairman that we
have, again, achieved record turnover with sales of £249.5
million (2017: £240.8 million). In addition, we have also
achieved a record profit before tax of £46.7 million (2017:
£46.6 million).
The growth in profit is modest but we have made some
significant investment in new product during the year and
this is reflected in the profit before tax figure. The breadth of
projects that we have been associated with is impressive
and includes the Aston Martin DBX factory in Llandough,
Amazon’s sales office in Cape Town and the Guizhou
Provincial Cancer Hospital in China.
As the “Brexit” deadline grows ever nearer I, and the Board,
remain vigilant for issues that may arise though obviously
the detail remains somewhat hazy. Notwithstanding this
lack of clarity, I believe we are well placed in that we export
to far more countries outside the EU than are members of
the EU. In addition, we have attained full Authorised
Economic Operator (AEO) status with HMRC. AEO status is
an internationally recognised quality mark indicating that
our role in the international supply chain is secure, and that
our customs controls and procedures are efficient and
compliant. It is considered, depending on the exact details of
Brexit, that this will minimise the risk of any post Brexit
border delays.
With projects as diverse as The Irish Whiskey Museum on
Grafton Street in Dublin and the Universal Church, Sao
Paolo our portfolio continues to reach far across the globe.
The company and our strategy
James Halstead plc is a group of companies involved in the
manufacture and supply of flooring for commercial and
domestic purposes, based in Bury UK. James Halstead plc is
listed on the AIM market of the London Stock Exchange and
celebrates 70 years as a listed company this year.
The group was established in 1914 and continues to operate
out of the original premises in Bury. In its factories in Bury
and Teesside
it manufactures resilient flooring for
distribution in the UK and worldwide.
It also sources other flooring products, in particular luxury
vinyl tiles and rubber flooring from key partners
manufacturing on the group’s behalf, predominantly under
Halstead brand names.
The key brands the group operates under are Polyflor,
Objectflor and Expona. There are other brands that the
group operates under that are more regionally based or
territory specific.
James Halstead utilises a global distribution chain for
export. Parts of this network are controlled by the group, in
particular, Western Europe, Australia, New Zealand, Canada
and India. The group employs around 830 people worldwide,
the majority of whom are in the UK.
The company’s strategy is designed to enhance the brand
identity thereby generating and enhancing goodwill and
customer satisfaction with the aim of continued repeat
business. This approach is designed to increase revenue and
consequently profitability and cash flow to enable the
continuation of dividends thereby creating shareholder
wealth. As a manufacturer our supply is in bulk to
distributors responsible for regional/local delivery. Key to
the company ethos is to have dedicated sales personnel to
present our product to end users and specifiers rather than
to delegate the representation of product to stockists. Our
businesses are totally flooring focused and predominantly
commercial flooring.
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.
Sustainability is a key area of focus and from our award
winning recycling initiatives through to our environmental
policies, we are recognised as leaders within our industry.
I think it is worthy to note that our credentials for
responsible sourcing have been recognised with our UK
businesses awarded an “excellent“ rating under the
BES6001 certification process. We were awarded 51 points
out of a maximum 52 which I believe is the highest rating
given by the British Research Establishment (the BRE). In
addition, we have published our latest “Sustainability
Report” which communicates our performance to all
stakeholders.
Corporate governance
The board has over many years recognised its responsibility
towards good corporate governance. It is part of our
character and, I believe, contributes to our ability to deliver
long-term shareholder value. During this calendar year the
Financial Reporting Council and the Quoted Company
Alliance have both issued guidance on governance and
having assessed these codes we have aligned our approach
to the latter. In many ways this is a continuing process but
in the annual accounts we outline how we affect this code
and I trust our shareholders will take the time to review our
comments.
3
Dividend
Profits and earnings per share have increased and we
continue un-geared. With our cash balances standing at
£50.7 million, even after dividends paid in the last year that
amounted to £27.2 million. Our cash reserves continue as
the bedrock of a strong balance sheet.
It is pleasing to report that the board proposes, yet again, an
increased final dividend. The final dividend will be 9.65p
(2017: 9.25p) representing a 4.3% increase which combined
with the interim dividend paid in June 2018 of 3.85p (2017:
3.75p), makes a total of 13.5p (2017: 13.0p) for the year, an
increase of 3.85%. Once again a record dividend.
Acknowledgements
During the financial year the general manager of our
Norwegian business sadly died after battling cancer for
many months. Jan-Eric Jorgensen had been with us since
2001 and led his team to create a strong business and is a
sad loss to us all. I would also note the retirement from the
board of Mr Geoffrey Halstead after 55 years and thank him
for his continued support. In addition, my thanks go also to
our staff in the UK and around the world whose hard work
continues to push us forward.
Outlook
Trading since our year-end continues to be solid, particularly
in the UK. Given the adverse raw material cost increases
over the last twelve months or so we have increased our
prices which our trade partners have accepted.
In addition, we have updated our product portfolio – not
least in the homogenous sheet vinyl with Palettone – and to
date the new products have received a very good reaction
from customers. Shortly this will be augmented by Polysafe
Verona, offering enhanced slip resistance and with
decoration optimised for dementia friendly environments.
As is our way, we have sought third-party certification for
this innovative product and the range has been described as
“excellent” by the Dementia Services Development Centre
(DSDC) at The University of Stirling.
I can only be confident of continued progress in the coming
year.
Anthony Wild
Chairman
25 September 2018
4
Chief Executive’s Review
A year of record turnover and one of record profit but the
year was challenging. As an exporter we had the advantage
of a weaker sterling, but against this raw material prices
continued to rise.
The year on year adverse effect of raw material price
increases was 9.5% which equates to about £1.8 million. To
an extent this was the result of a weak sterling and was
offset by sales outside the UK at better exchange rates.
Nevertheless, it did affect profitability on sales in the UK but
we took an active decision to hold back on price increases
to maximise sales volumes. Favourable mix of sales largely
offset the bottom line effect of these raw material costs.
The launch, in May 2018, of Palettone was costly but very
worthwhile in the longer term. The costs of development
trials, sampling, marketing material and related expenditure
were around £2 million and the product has just been
launched into the global market place. More than half of
these costs were above the gross margin line. We believe
that the timing of this was important following the closure
of one of our competitor’s factories.
The Palettone range is a premium homogenous sheet vinyl
collection. It is the largest new range by any manufacturer in
this core product area for many years and offers a collection
of 50 colours optimised for our global market. In recent
years a lot of competitor focus has been in the area of
luxury vinyl tile but vinyl sheet continues to be a large
sector of the market.
Palettone is presented in a unique, innovative sample
package with full customer support from specification to
installation. The feedback we have received on the collection
since its launch has been exceptional.
In addition to the existing businesses we have, during the
year, taken considerable time to assess various acquisition
opportunities. The most visible of these, which resulted in
several announcements, was our approach to Airea plc to
look to adding their carpet tile ranges to our portfolio.
Having looked in some detail we decided not to progress
our ambitions in this area with that company.
Reviewing the businesses in more detail:
Objectflor/Karndean and James
Halstead France, our European
operations
This year has been one of significant product re-launches for
this business.
Firstly, the Karndean ranges which are aimed at the
wholesale market were launched at the beginning of the
year. Secondly, the flagship Expona Domestic range was
launched at the Domotex show in January 2018 and thirdly
Polyflor’s new Palettone range was launched late in the
financial year. The gestation period for a new launch is
typically a number of months so the positive impact arising
from such major product changes has only been partially
seen in the current financial year.
Sales increased by 2% across the business however
profitability was negatively impacted by a number of
factors, principally, the adverse effect of exchange rates and
price increases from suppliers.
All the key markets the business operates in grew, with the
exception of Benelux. France in particular has grown again,
and is very much accepted as a “local” within that market.
Polyflor Pacific – encompassing
Australia, New Zealand and Asia
Our Australian business had a record year both in terms of
turnover and profit.
The ongoing projects that the business continues to win and
supply include the Howard Solomon Aged Care Facility in
Ferndale, Western Australia and The Australian Embassy in
Port Moresby. Another impressive flooring installation is the
Pier 33 Yacht Club in Mooloolaba, Queensland. Given that
we are the only manufacturer/distributor with warehousing
in every state and with the sales representation local to
each major city, the business is soundly based for continued
growth.
The business uses product launches not just to present the
new product but to also renew contact with specifiers and
users of our products.
During the year we added warehousing in South Australia
and this has enhanced our service offering to customers
with the Angaston, Strathalbyn, Goolwa and Barossa
Hospitals all examples of our penetration in this region.
New Zealand had another year of modest 1% growth,
which similarly to last year showed good growth on the
North Island offset by contraction on the South Island
which continues to be slow. Product mix has had some
negative impact on margin locally for bought in products as
one key supplier had some supply interruptions and the
shortfalls in this product were made up with greater sales of
lower margin products.
Our UK manufactured products continue to have a
dominating market share and the New Zealand social
housing contract referred to last year continues to be an
important component of this. Our service led approach
remains important to that business and continues to be a
key distinguishing feature over our competitors.
5
We have changed the management structure of the Asia
business during the course of the year to align it with our
larger Australian business. This will ensure that we have a
clearer decision making process and aligns more effectively
with regional time zones. A key theme for the group in
recent years is taking greater control of our markets and
plans are in place to extend and make more effective the
footprint of our Hong Kong operation both in China and
other key markets around Asia. The presence of Chinese
manufactured product makes many of these markets very
price sensitive and allows for competitors to claim better
servicing at least. The restructuring of this part of the
business continues to ensure our response to these market
pressures is robust. Projects such as the HPA Electronics
Factory in Malaysia, Hamazushi Chain Stores across Japan,
The Water Market in Macau and Chengdu Woman and
Children’s Hospital in China illustrate just a few of the many
new installations we are proud to have been involved with.
Polyflor & Riverside Flooring, based in
UK
There was a dearth of large government funded projects in
the UK throughout the year as spending cuts continued to
be applied across the board. Nevertheless sales into the
refurbishment sector remained strong and with a 24 hour
delivery service across the UK, Polyflor was able to make the
most out of a weak market. Our UK sales were 3% ahead of
the prior year. Polyflor overall reported 4.9% growth in
turnover and Riverside some 7%.
New products such as the “next generation” barefoot safety
flooring, Polysafe Quattro, which offers sustainable wet slip
resistance and the extensive new Palettone collection
further helped confidence and sales.
A restructuring of the Polyflor board was carried out during
the year which included succession planning and also
greater focus on sales into markets where we have identified
strong opportunities, such as Eastern Europe and the South
Americas. This has not involved adding to the headcount in
the UK but will result in the employment of further staff in
the local market places.
Also during the year extensive research was undertaken into
the development of a totally new format of manufacturing
flooring, the results of which are now under board
consideration. We plan to acquire a new production plant
and our technical teams are working with suppliers on a
final specification. To pave the way for this we have spent
many months removing old and surplus equipment to
create space for this facility on the Radcliffe site.
success
in our
continued
Investment
endures.
Notwithstanding the development of new ranges, our long
term performance depends on continuous improvement of
our productivity and plant performance. In the early part of
the year we upgraded the chilling units at the Radcliffe site
with more effective equipment which reduced energy
consumption and with the prolonged heat of this summer
this paid for itself, with production at full line speed
throughout. Our non-directional sheet vinyl plant was
modified with increased automation allowing us to achieve
96% utilisation. Over the coming year this should ensure
25% higher output for the same man-hours. Our high
voltage and low voltage equipment was completely
revamped which will again reduce down-time and improve
quality control. At the same time we have installed new LED
lighting across the site which not only improves visibility
but does so at a reduced energy level. Given that the
per/unit cost of electricity is 2% higher year on year and gas
some 9%, these changes have negated cost increases.
Investment at Teesside also continued. We have completed
the upgrade to allow in-line register emboss on our
heterogeneous sheet as well as upgrading our inspection to
an in-line facility. The former offers pay-back with improved
designs and the latter with reduced manpower. In addition
we have increased the number of racks in the warehouse at
Teesside to give us greater capacity and flexibility in our
distribution and have also replaced our chilled water system
for cooling rolls on the finishing line.
These enhancements to processes are as important as
product development because as manufacturers we need to
stay at the forefront of competitiveness.
Notable projects in the year included the new Kellogg HQ in
Manchester, the S4C HQ (BBC Welsh Language Channel) –
Carmarthen, Wales (which used our new Palettone), Adidas
UK Head Office in Stockport and Alexander McQueen Head
Office in London.
Polyflor Nordic comprising Polyflor
Norway based in Oslo and Falck
Design based in Sweden
The Scandinavian business has posted a 6% increase in
turnover over the prior year.
Sweden has had a record year for sales and profitability
along with growth in sales of UK manufactured products
which showed an increase in sales by some 51%.
The Norwegian business had a change in management late
in the year following the sad death of the Managing Director
following a short illness. During the year the business was
6
Chief Executive’s Review
continued
re-focused on the core portfolio of Polyflor vinyl sheet. One
highlight was one of the first Palettone specifications for
Helly Hansen (the sailing and outdoor clothing retailer) in
central Oslo. Sales in this business fell back slightly on the
prior year as major projects were keenly contested by our
competitors. Nevertheless projects such as the FlipZone
trampoline park in Bergen and supplying the Swedish
government controlled pharmacy Apoteket (which has 400
stores across Sweden) were examples of our solid presence.
Polyflor Canada, based in Toronto
Turnover in this business continued to grow with 15%
growth in sales overall. The mining sector, previously the
major part of our business in Canada, continues to be in the
doldrums and the growth comes from the sales force
obtaining specifications from end users.
During the year we relocated to larger premises and we have
now put in place a training facility which is a common
feature of our businesses around the world. Though initially
this facility is only based in the Toronto area it is already
raising the profile of our business and adds to our reputation
of being a manufacturer that does far more than just sell
flooring. Furthermore we have added more sales
representation with a team now based in British Colombia.
Rest of the World
Our global reach continues with our flooring being supplied
to Parmaco Pre-Fabricated buildings in Finland, the Malvern
College in Cairo and Aksaray Public Hospital in Central
Anatolia, Turkey.
In order to further support our activities we opened Polyflor
PZE (within the Dubai free trade zone) in February 2018, as
a representative office to support our trade in the region
and enable us to employ local sales staff. We were pleased
to win the contract to supply Al Hokair Play Centres across
Saudi Arabia and the UAE and we have every expectation of
increased penetration of these markets.
Outlook
In addition to the Verona range noted in the Chairman’s
outlook we are at an advanced stage of another new range
– Polyflor Wovon. A first of its kind for our company, Polyflor
Wovon is an exciting collection of interwoven vinyl tiles,
a low maintenance alternative to traditional textile
materials and has a stylish, tactile design as well as a heavy
commercial vinyl construction, perfect for specification
within busy interior environments. It should broaden the
possibilities for vinyl installations.
In the current year we have had products installed in as
diverse places as the Canadian Hockey Hall of Fame and in
CBC’s radio studios.
With the investments in product, processes and structures I
believe we have undertaken significant groundwork in the
year to put us in good stead for continued progress in 2019.
Mark Halstead
Chief Executive
25 September 2018
Polyflor India, based in Mumbai
As reported at the half year the introduction of general sales
tax (GST) in July 2017 severely disrupted the performance
of this fledgling business for much of the year. As the year
progressed the business community overcame the initial
shock and more significantly, following a reduction in the
GST rates applicable to our product, business activity
increased considerably in the latter months of the year
allowing the business to break-even for the year as a whole.
This level of activity has continued in the first months of the
new year. The portfolio of projects continues to increase
monthly as the sales extended Polyflor’s footprint across
the country. Healthcare remains at the core of opportunities
but the year has seen sales to the Indian Space Research
Organisation, Goldman Sachs’ offices in Bangalore and the
Chaitanya Bharati Institute of Technology. Although
competition from both global and local players is tough
throughout the market we are seeing increasing levels of
specifications of our products which bodes well for the
future of this business.
7
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
judicious accrual for known probable liabilities with as yet
uncertain outcome at the year-end. Prudence is less
regarded by the accounting profession in the preparation of
published accounts than it was even a decade ago but to us
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 0.2% ahead of
the profit for the year to 30 June 2017.
Profit after tax is also at a record level being 0.5% ahead of
the prior year to 30 June 2017.
Our gross margins decreased as a percentage and in
absolute terms. The main reason was, broadly, the adverse
effects of increased raw material and plant trial and
development costs of the Palettone range.
Some key statistics:
Group turnover at £249.5 million (2017: £240.8
million) was 3.6% higher than last year.
Net finance income (excluding the effects of IAS19
accounting for pensions) was £0.11 million (2017:
£0.10 million) reflecting interest rates that remain
very low.
Selling and distribution costs were 0.9% ahead of last
year. Administration cost were 5.9% below last year.
Trade debtors decreased to £28.3 million (2017:
£28.5million). Trade creditors were lower at £32.6
million (2017: £ 41.3 million).
Stock levels stand at £71.1 million (2017: £72.9
million) reflecting stock for new ranges, principally
Palletone.
Cash stands at £50.7 million (2017: £52.5 million)
even after the payment of £27.2 million in dividends,
£9.6 million in tax and £3.6 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. As we approach
the date for our exit (albeit followed by a transition period),
we continue to digest government guidance. On the plus
side we export to many countries outside the EU and are
very familiar with global customs procedures. There are
concerns in the press over interruptions to supplies into the
UK post Brexit but we have sourced raw materials widely
and our key European suppliers are very large organisations
that have huge trade into the UK and we are confident
supplies will continue. To the extent that imports will attract
duty we have procedures in place to reclaim any duty on
imports that are then re-exported around the globe
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
is widely
8
Financial Director’s Review
continued
prices and energy costs fall outside any insurable event.
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 denominated 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
(decrease)/increase in the value of our overseas assets are as
follows:
2018
2017
2016
2015
2014
£’000
(759)
2,168
4,808
(3,868)
(2,260)
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.
9
Defined Benefit Pension Scheme
These ratios for this Group based on a share price of £4.02
(2017: £4.68) are:
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 20%
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 as driven by the
actuarial profession.
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).
scheme comprises active members
The
(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 £4.9 million against a net actuarial gain in 2017 of
£2.4 million which is largely the effect of changing
assumptions and experience gains on liabilities. It is of note
that since the adoption of the pension scheme into the
balance sheet some years ago the deficit has had the
potential 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.
The net deficit to market capitalisation is 1.8% (2017:
2.2%);
The total liabilities to market capitalisation is 9.2%
(2017: 8.5%); and,
The deficit to operating profit is 31.6% (2017:
45.0%).
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.
Given the ongoing costs of the pension protection fund levy
and to give the trustees ongoing comfort, the group is at an
advanced stage of adopting asset backed contributions
(ABC) in the form of security over some of the group’s land
and buildings. These stand in the books at historic cost but
have a much higher real value.
Gordon Oliver
Finance Director
25 September 2018
The strategic report was approved by the board of directors
and signed on behalf of the board.
D W Drillingcourt
Secretary
25 September 2018
10
Report of the Directors
The directors are pleased to present their report, together
with the audited accounts for the year ended 30 June 2018.
Substantial interests
Results and dividends
The group results for the year and the financial position at
30 June 2018 are shown in the consolidated income
statement on page 24 and the consolidated balance sheet
on page 26.
The directors are recommending a final dividend of 9.65p
(2017: 9.25p) per share on the ordinary share capital for
payment on 7 December 2018 to those shareholders whose
names appear on the register at 9 November 2018. This final
dividend together with the interim dividend of 3.85p
(2017: 3.75p) per share paid on 6 June 2018 makes a total
dividend of 13.5p (2017: 13.0p) per share for the year.
As at 14 September 2018 the company had been notified of
the following interests which represent 3% or more of the
existing issued share capital:
Number %
Rulegale Nominees 37,202,143 17.9
John Halstead Settlement 35,447,218 17.0
Octopus Investment Nominees 8,581,475 4.1
HSBC Global Custody Nominee 7,222,735 3.5
Share capital
During the year new ordinary shares were issued and
allotted as fully paid to enable share options to be exercised
as follows:
Directors
21 July 2017
31 July 2017
The directors who held office during the year were as
follows:
49,000
60,000
109,000
J A Wild
M Halstead
G R Oliver
S D Hall
M J Halstead (appointed 1 December 2017)
R P Whiting (appointed 1 December 2017)
G Halstead (retired 1 December 2017)
E K Lotz (retired 1 December 2017)
Mr J A Wild and Mr M Halstead are the directors retiring by
rotation, and offer themselves for re-election at 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
or later date of
30 June 2018 appointment
Beneficial As Trustee Beneficial As Trustee
J A Wild 150,300 11,975,360 150,300 12,512,032
M Halstead 13,241,468 11,410,754 13,241,468 11,541,547
G R Oliver 207,550 301,248 207,550 432,041
S D Hall 5,700 – 5,700 –
M J Halstead 908,117 – 2,000 –
R P Whiting – – – –
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.
Special business at the annual general
meeting
Resolution 6 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 2019.
Resolution 7 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 2019 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 8 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.
The proposed authority will terminate at the next Annual
General Meeting of the company to be held in 2019 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
11
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 9 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
The group operates a
totally non-discriminatory
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.
In preparing these financial statements the directors are
required to:
select suitable accounting policies and then apply
them consistently;
12
Report of the Directors
continued
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.
Risk management
Information in relation to risk management and future
developments can be found in the financial director’s review
in the strategic report.
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.
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
25 September 2018
M26 1JN
Board Report on Remuneration
13
rights to subscribe for ordinary shares granted to an
individual employee under the share option plan and under
all other discretionary schemes.
Pensions
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, Mr M J Halstead and Mr R P Whiting
each 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.
S D Hall
Chairman of the Remuneration Committee
Remuneration committee
The remuneration committee comprises the non-executive
directors, with Mr S D Hall, 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 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
The directors salaries and fees for the year are disclosed in
note 13. Annual bonus schemes are in place which reward
the executive directors on achieving performance
objectives. Performance is determined by 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 £430,000 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
14
Corporate Governance
Chairman’s introduction to
governance
The board
The role of the board is summarised as follows:
The board has over many years recognised its responsibility
towards good corporate goverance. It is part of our character
and, I believe, contributes to our ability to deliver long-term
shareholder value. During this year the Financial Reporting
Council and the Quoted Company alliance have both issued
guidance on governance and having assessed these codes
we have aligned our approach to the latter. In many ways
this is a continuing process but in the following paragraphs
we outline how we effect this code and I trust our
shareholders will take the time to review our comments.
It is my belief that good governance is accountability to
shareholders as a whole over time rather than being swayed
by current short term objectives of individual holders. For
many companies some shareholders are transient and focus
short term, looking for ambitious acquisitions or risky
strategies and yet quick to exit at the first sign of problems.
Management need to be focused on the medium to long
term goal as much as current issues.
Anthony Wild
Chairman
Directors and committees
The Company is controlled by the board of directors. The
board consists of a non-executive chairman, two executive
directors, a senior independent director and two non-
executive directors.
The board has three sub committees: a remuneration
committee, an audit committee and a nominations
committee.
The directors are named below along with their membership
of board committees.
Director
Role
Committee Committee Committee
Remuneration
Audit
Nomi-
nations
Mr Anthony Wild
Mr Mark Halstead
Mr Gordon Oliver
Mr Steve Hall
Non-executive
Chairman
Chief
Executive
Finance
Director
Senior
Independent
Director
Mr Michael Halstead Non-executive
Mr Russell Whiting
Director
Non-executive
Director
X
X
X
X
X
X
X
X
X
X
X
X
X
X
To establish and maintain the group’s vision, mission
and values;
Decide on the current and future strategy to ensure
the group’s longevity;
To delegate to management the implementation of
policies, strategies and business plans while ensuring
the framework of internal controls is effective;
Account to shareholders and stakeholders to promote
their interests and the goodwill to the group.
The board comprises two executive directors and three non-
executive directors. The roles of chairman and chief
executive are separated.
Directors
Mr Anthony Wild – non-executive Chairman
Mr Wild was appointed to the board as senior independent
director in March 2001 and chairman in December 2017. He
is a Chartered Accountant and was senior partner in a local
firm for many years offering management consultancy
services. He brings a long and in depth knowledge of James
Halstead plc, its heritage and strategy over many years along
with business and commercial knowledge obtained in a career
of business advice. A key responsibility of the chairman is to
lead the board effectively and to oversee the adoption,
delivery and communication of the company’s corporate
governance model. The chairman as a non-executive director
has adequate separation from the day-to-day business to be
able to have an independent view. The chairman ensures that
the board receives accurate, timely and clear information and
there should be good information flows within the board and
its committees as well as between the NEDs and senior
management. Mr Wild is chairman of the nominations
committee.
Mr Mark Halstead – Chief Executive
Mr Halstead has over 30 years’ experience in the group
holding senior management positions within Polyflor prior
to his appointment as group chief executive in 2002. Having
gained his grounding in many aspects of the group’s flooring
activities Mr Halstead focused on exports and founded our
operations in Europe. He brings unparalleled knowledge of
the group’s activities, the products and positioning in
markets and experience to allow for the assessment of
future opportunities for the group both in commercial terms
and product related. Mr Halstead is tasked with the delivery
of the business model agreed within the strategy set by the
board.
15
Mr Gordon Oliver – Finance Director
Mr Russell Whiting – non-executive director
Mr Oliver is a Chartered Accountant. He trained with KPMG
and held a number of financial positions in industry prior to
joining James Halstead in 1987 as Group Financial
Controller. He was instrumental in the disposal of non-core
businesses in the UK and overseas and became finance
director of the group in 1999. He brings knowledge of
financial management and control, corporate governance
and business acumen to the business as well as
development of future strategy arising from a long period as
a member of the board. During his time with the company
Mr Oliver’s standing has been recognised by several awards
from his peers and the financial press. Mr Oliver is tasked
with working closely with the Chief Executive to progress
the business and to have regard to mitigation of risk. In
addition a key role is integrity of the financial information
and communicating to the board the financial implications
of areas of subjective judgement.
Mr Steve Hall – Senior independent director
Mr Hall was appointed to the board in 2012 as a non-
executive director. He has 21 years’ experience as a Director
of Corporate Banking for the Royal Bank of Scotland where
he was responsible for corporate SMEs and quoted clients.
For several years he has acted as a consultant outside of
banking and is a non-executive director to a large retail
chemist chain. He brings with him this banking experience
as well as broad experience of mergers, acquisitions and
disposals and the financing thereof. One of the key
responsibilities of the SID is leading the performance
evaluation of the chairman, or the search for a new
chairman. As SID, Mr Hall is an alternative route of access
for shareholders and other directors who have a concern
that cannot be raised through the normal channels of the
chair or the executive directors. Mr Hall is chairman of the
remuneration and the audit committees.
Mr Michael Halstead – non-executive director
Mr Halstead was appointed to the board in 2017. He has
many years’ experience in the advertising industry having
been an account director for Saatchi and Saatchi and more
recently running his own company HH&S Group Limited.
He brings general business acumen to the board along with
specifics relating to marketing and public relations arising
from his background. Mr Halstead provides oversight and
scrutiny of the performance of the executive directors,
whilst both constructively challenging and inspiring them,
thereby ensuring the business develops, communicates and
executes the agreed strategy and operates with reference to
the risk management framework. Mr Halstead is in the 4th
generation after the founder and has never worked within
the business but is passionate to preserve the principles of
the company and to contribute to its continued success.
Mr Whiting was appointed to the board in 2017. He is a
local businessman and is director of a company involved in
leasing of assets, Associated Credits Holdings Ltd. As well as
general business acumen he brings specific understanding of
business and asset financing to a broad range of commercial
enterprises. He has known the group for a number of years
through his business. Mr Whiting possesses the critical skills
that are relevant to modern companies, which includes both
technical experience and the ability to positively challenge
and to listen in equal measure.
Attendance at the six board meetings during the year was as
follows:
Possible Actual
J A Wild 6 6
M Halstead 6 6
G R Oliver 6 5
S D Hall 6 6
M J Halstead (appointed 1/12/17) 4 4
R P Whiting (appointed 1/12/17) 4 4
G Halstead (retired 1/12/17) 3 3
E K Lotz (retired 1/12/17) 3 3
Internal control
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;
16
Corporate Governance
continued
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;
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.
The Quoted Company Alliance Code
(“QCA code”)
The directors recognise the importance of good corporate
governance and have chosen to apply the QCA code as their
framework to do so. The QCA code was developed by the
Quoted Company Alliance in consultation with a number of
institutional small company investors as an alternative code
applicable to AIM companies. The QCA code was published
in April 2018.
The QCA code sets out ten principles which seek to ensure
that the overall framework for corporate governance is
robust. The directors believe that this framework is
appropriate to the size and operations of the business and
each of the principles is commented on below. Many of the
disclosures relevant to the code are already made in our
annual report and accounts.
The chairman has the responsibility for corporate
governance and has taken a lead on this matter. The
executive team are directed to day to day management and
are accountable to the rest of the board. The chairman
expects and demands open discussion of issues facing the
business and in the application of this code has sought input
from the auditors, the company’s advisors and a review by
the company lawyer. The board is tasked with continuing
the success of the business over time and through
successive generations of management and the importance
of corporate governance is to oversee the division of
ownership and stewardship. The executive directors have the
day to day responsibility of stewardship and the chairman
and non-executives monitor and evaluate this on behalf of
the owners.
James Halstead plc has been listed on the London stock
exchange for over 70 years and continues to look for growth
in sales and profit to continue its strong record of reward to
shareholders in the form of dividend. Whilst this is a primary
role, the board is proud of its reputation within its industry
and the financial markets and corporate control is central to
the ethos.
The disclosures below were last reviewed and approved by
the board on 25 September 2018.
QCA Principles and James Halstead
plc’s approach
1. Establish a strategy and business model which promote
long-term value for shareholders
James Halstead plc’s strategy is explained fully within our
Strategic Report section in our Report and Accounts each
financial year.
17
Our strategy is focussed around stable profitable growth
from building the goodwill in our brands and products
leading to increasing dividends over time.
Key risks and mitigating factors to our business are also
detailed annually in our Report and Accounts.
2. Seek to understand and meet shareholder needs and
expectations
The board has a track record of increasing dividends over
many years. Where the business has generated funds in
excess of its medium-term requirements and no specific
investment requirements exist the board has also
encouraged the payment of special dividends over the years.
Members of the board talk regularly to both institutional
and private investors and the financial press to ensure that
company’s strategy and objectives are communicated. The
group has a large number of shareholders and regular broker
updates are published.
The company regularly hosts institution and broker site
visits to update on progress and the executive directors are
in ongoing contact with the nominated advisor who
communicates more closely with the market.
Shareholders can contact the Company Secretary with
questions and may be referred to the directors.
In addition, the AGM acts as a forum for all shareholders to
meet with the board and raise any questions they may have.
3. Take into account wider stakeholder and social
responsibilities and their implications for long-term
success.
The board recognises that the group has responsibilities to
many stakeholders other than its shareholders. This includes
employees, customers, suppliers and the wider societies in
which we operate.
In terms of communications with stakeholders this is done
in ways appropriate to the stakeholder and may take the
form of formal announcements, individual meetings (for
example appraisals with employees) and negotiations with
other stakeholders.
The environmental impact of our manufacturing and our
output is of significant importance to our medium term
prospects not only to demonstrate our commitment to the
community at large but also to customers who increasingly,
and rightly, look for suppliers with strong ethical values.
As a member of the communities in which we operate the
board takes seriously the impact the business has, positively
in terms of being an employer and seeking continuous
improvement with respect to the
impact on the
environment and communities. This is illustrated by our
annual “Sustainability Report” copies of which are available
on www.polyfor.com which outlines the impact of our
manufacturing operations on the wider environment and
improvements over time. Feedback from the
local
community is received directly to the head office. This
report has been published for nearly two decades and is now
an annual report.
We understand continuous development of our products
also contributes to our responsibilities as well as the success
of the business. This is illustrated, for example, by
development of “dementia friendly” flooring in recent years.
The operating businesses encourage feedback from
customers through their relationship managers in the
business and customer service teams.
4. Embed effective risk management, considering both
opportunities and threats, throughout the organisation.
Risk management is reported annually in our Report and
Accounts along with how those risks are mitigated and how
they change over time.
The board meets six times a year during which business and
other risks are assessed. Key subsidiaries have their own
management boards which meet regularly and assess the
risks relevant to that specific business and relevant
responses. These are communicated to the main board
either by direct representation or via group management
structures that are in place. There are also formal and
informal communication routes that allow for risks to be
communicated to board members in a timely manner from
all operational entities.
5. Maintain the board as a well-functioning, balanced
team led by the chair.
Anthony Wild, the non-executive chairman is responsible for
the running of the board and Mark Halstead as chief
executive has responsibility for implementation of the
board’s direction.
A monthly report is provided to the board of the financial
and operational performance of the group. Information is
provided in advance of meetings.
The board is responsible for all strategic decisions and the
overall governance and culture of the group.
All the directors have access to the services and advice of
the company secretary and are able to take independent
professional advice to enable them to do so. This may be
done at the group’s expense.
18
Corporate Governance
continued
The board has a majority of non-executive directors and
consider that they bring independent thought and
judgement to bear as well as business experience out-with
the group.
The board has sub committees with specific remits,
specifically
and nomination
committees and detail of the number of meetings and
attendance by directors is noted in the Annual Report.
remuneration,
audit
6. Ensure that between them the directors have the
necessary up-to-date experience, skills and capabilities
The board evaluates consistently those skills that are
required and whether they are adequately provided for. In
doing so and where relevant it will consider guidance
available on appointment and training of board members. The
Company Secretary has the responsibility to make the board
aware of legal changes and will advise on the company’s
approach. For example the recent GDPR requirements and
previously the Market Abuse Regulations (MAR).
Where vacancies arise or gaps are identified that must be
addressed, the nomination committee oversees the process
of identifying candidates and makes recommendations to
the board. Appointments are made on merit against
objective criteria and with regard to the benefits that will be
brought to the board and the group. The nomination
committee also considers succession planning.
The company secretary supports the chairman in addressing
the training and development needs of the directors. In the
case of new directors there is an induction process to ensure
they become aware of the operations of the group.
The directors are aware of their individual responsibility to
undertake appropriate continuing development.
7. Evaluate board performance based on clear and relevant
objectives seeing continuous improvement.
The board will take account of the Financial Reporting
Council’s Guidance on Board Effectiveness as it evaluates on
its performance. The remuneration
a regular basis
committee meets formally and is tasked with not only the
remuneration of the executive directors but also evaluation
of performance. To this end the board is circulated with
press comment and market feedback on the business.
Market share data and peer group analysis is available.
In terms of the financial performance the auditors meet the
audit committee (comprising the non-executives) bi-
annually and beyond the audit report do comment on the
systems, procedures and efficacy of the management. The
nominated advisor has access to the Chairman and meets
the non-executives annually.
A rigorous recruitment process is undertaken for new
directors prior to their proposal and election. In terms of re-
election their performance is reconsidered prior to them
being proposed to ensure they remain effective in their role
and that they retain their independence.
Re-election is considered by the shareholders at the AGM at
which shareholders have the opportunity as a body to
approve or otherwise board membership. Succession
planning for the board and as importantly the key
executives around the world who manage our businesses is
an ongoing topic of discussion.
8. Promote a corporate culture that is based on ethical
values and behaviours.
The board expects the highest ethical standards of its
members and management across the group.
The group has documented procedures with respect to its
responsibilities regarding ethical behaviour, specifically
bribery and corrupt practices and modern slavery and these
are applicable across its operations including supply and
customer chains.
The board also takes seriously its responsibilities towards
sustainability of its operations and the impact of our
operations on the environment. This is documented and
reported on annually in Polyflor’s Sustainability Report.
As an employer and member of many communities
throughout the world, the board consider that strong ethical
values to be a good member of these communities is a
mind-set not one underpinned by rules and procedures.
Ensuring, via recruitment processes and cultural values that
this cascades through the business is critical to ensuring the
group is a “good member of the community”. All directors
of the group’s companies are expected to comply and are
given a manual on procedures and expectations. This covers
authority levels and gives guidance on appropriate
behaviour.
Ultimately service contracts underpin this by indicating
behaviour that can be deemed a breach of contract and the
directors are clear about their statutory duties as formally
set out in sections 171 – 177 of the Companies Act 2006.
9. Maintain governance structures and processes that are
fit for purpose and support good decision making by the
board
Corporate governance disclosures are assessed at least
annually, including whether the structures and processes are
fit for purpose.
19
10. Communicate how the company is governed and is
performing by maintaining a dialogue with shareholders
and other relevant stakeholders
The AGM is a key forum for communications with any
shareholders who wish to attend, and the directors are
available here to listen to views expressed both formally and
informally. This combined with the normal cycle of
announcements is the key method of communication. The
outcome of resolutions put to the AGM are published and
are available on the company website.
It terms of publication of results, the company uses the
Stock Exchange regulatory news service (RNS) to advise the
market (ie shareholders and others) of performance and
significant matters. As a group we do not find social media
(Facebook, twitter etc) an appropriate medium for
dissemination of news due to the “sound-bite” nature of the
medium. Brokers are updated and circulate notes regularly.
The group has, where appropriate, communications with
major institutional and private shareholders and encourages
dialogue.
20
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 2018 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 2018 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 2018, the Group
held inventories of £71.1m (2017: £72.9m).
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:
Challenging the Group’s inventory provisioning policy
with specific consideration given to slow moving or
obsolete stock lines. This involved a review of
21
Our application of materiality
Group materiality Group materiality Basis for
2018 2017 materiality
£2.34 million £3.49 million 5% of profit
before tax
(2017: 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
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.
We consider profit before tax to be the most significant
determinant of the group’s financial performance used by
shareholders.
Performance materiality is the application of materiality at
the individual account or balance level set at an amount to
reduce to an appropriately low level the probability that the
aggregate of uncorrected and undetected misstatements
exceeds materiality for the financial statements as a whole.
Performance materiality was set at £1.52m (2017: £2.27m)
which represents 65% (2017: 65%) of the above materiality
level.
Materiality in respect of the audit of the Parent Company
has been set at £1.66m (2017: £1.7m) using a benchmark of
5% of profit before tax (2017: 7.5% of profit before tax).
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 £46,700 (2017:
£60,000). 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.
production and sales records for a sample of products
to ascertain when they were last made or sold and
whether they had been appropriately provided for;
assessing the percentages applied within the
provision by reviewing historic sales, the ageing of
stock and understanding the production process; and
testing 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
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.
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 2018, the Group
recorded a net retirement obligation of £14.9m (2017:
£21.3m), comprising scheme assets of £62.0m (2017:
£61.1m) and scheme liabilities of £76.9m (2017: £82.4m).
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. The related sensitivities of
any changes in assumptions are disclosed in note 22.
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 appropriateness of the methodology utilised
to derive these assumptions.
We have used actuarial experts to benchmark the scheme
assumptions against other schemes of a similar size and
profile. We have also performed sensitivity analysis on the
assumptions determined by the Directors.
We tested the membership data utilised in the valuation of
the schemes to source data 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 against the
relevant accounting framework.
22
Independent Auditor’s Report to the Members of
James Halstead plc continued
An overview of the scope of our audit
Other information
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 whilst the significant
components in Germany and Australia were audited to
component materiality. The Germany component is audited
by non- BDO firm. 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 93% of the group’s revenue, 97% of the
group’s total assets and 99% of the group’s profit before tax.
Whilst materiality for the financial statements as a whole
was £2.34m, each component of the group was audited to
a lower level of materiality. Component materiality was in
the range of £135,000 to £752,000.
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.
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 which makes up 92%
of the Central European operations. 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
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.
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.
Opinions on other matters prescribed
by the Companies Act 2006
In our opinion, based on the work undertaken in the course
of the audit:
the information given in the strategic report and the
directors’ report for the financial year for which the
financial statements are prepared is consistent with
the financial statements; and
the strategic report and the directors’ report 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
directors’ report.
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
23
Use of our report
This report is made solely to the parent 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 parent 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 parent company and
the parent company’s members as a body, for our audit
work, for this report, or for the opinions we have formed.
Gary Harding (Senior Statutory Auditor)
For and on behalf of BDO LLP, Statutory Auditor
Manchester
United Kingdom
25 September 2018
BDO LLP is a limited liability partnership registered in
England and Wales (with registered number OC305127).
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 11, 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,
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.
Auditor’s responsibilities for the audit
of the financial statements
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.
A further description of our responsibilities for the audit of
the financial statements is located on the Financial Reporting
Council’s website at: www.frc.org.uk/auditorsresponsibilities.
This description forms part of our auditor’s report.
24
Consolidated Income Statement
for the year ended 30 June 2018
Note 2018 2017
£’000 £’000
Revenue 5 249,510 240,784
Cost of sales (144,993) (135,974)
Gross profit 104,517 104,810
Selling and distribution costs (48,087) (47,659)
Administration expenses (9,282) (9,867)
Operating profit 47,148 47,284
Finance income 9 150 134
Finance cost 9 (596) (802)
Profit before income tax 7 46,702 46,616
Income tax expense 10 (9,994) (10,106)
Profit for the year attributable to equity shareholders 36,708 36,510
Earnings per ordinary share of 5p
– basic 11 17.7p 17.6p
– diluted 11 17.6p 17.6p
All amounts relate to continuing operations.
Details of dividends paid and proposed are given in note 12.
25
Consolidated Statement of Comprehensive Income
for the year ended 30 June 2018
2018 2017
£’000 £’000
Profit for the year 36,708 36,510
Other comprehensive income net of tax:
Items that will not be reclassified subsequently
to the income statement:
Remeasurement of the net defined benefit liability 4,895 2,404
4,895 2,404
Items that could be reclassified subsequently
to the income statement if specific conditions are met:
Foreign currency translation differences (759) 2,168
Fair value movements on hedging instruments 957 410
198 2,578
Other comprehensive income for the year net of tax 5,093 4,982
Total comprehensive income for the year 41,801 41,492
Attributable to:
Equity holders of the company 41,801 41,492
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.
26
Consolidated Balance Sheet
as at 30 June 2018
Note 2018 2017
£’000 £’000
Non-current assets
Property, plant and equipment 14 36,324 36,103
Intangible assets 15 3,232 3,232
Deferred tax assets 16 2,674 4,151
42,230 43,486
Current assets
Inventories 17 71,096 72,936
Trade and other receivables 18 32,040 31,176
Derivative financial instruments 27 971 416
Cash and cash equivalents 19 50,679 52,532
154,786 157,060
Total assets 197,016 200,546
Current liabilities
Trade and other payables 20 48,721 59,321
Derivative financial instruments 27 119 1,362
Current income tax liabilities 3,769 3,860
52,609 64,543
Non-current liabilities
Retirement benefit obligations 22 14,899 21,257
Borrowings 21 200 200
Other payables 20 491 486
15,590 21,943
Total liabilities 68,199 86,486
Net assets 128,817 114,060
Equity
Equity share capital 23 10,399 10,393
Equity share capital (B shares) 23 160 160
10,559 10,553
Share premium account 3,805 3,615
Capital redemption reserve 1,174 1,174
Currency translation reserve 5,435 6,194
Hedging reserve 668 (289)
Retained earnings 107,176 92,813
Total equity attributable to shareholders of the parent 128,817 114,060
The financial statements were approved and authorised for issue by the board and were signed on its behalf on 25 September 2018.
M Halstead G R Oliver
Director Director
James Halstead plc Registration Number 140269
27
Consolidated Statement of Changes in Equity
for the year ended 30 June 2018
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 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
Transactions with equity shareholders
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
Profit for the year – – – – – 36,708 36,708
Remeasurement of the net defined
benefit liability – – – – – 4,895 4,895
Foreign currency translation
differences – – – (759) – – (759)
Fair value movements on
hedging instruments – – – – 957 – 957
Total comprehensive income for
the year – – – (759) 957 41,603 41,801
Transactions with equity shareholders
Dividends – – – – – (27,245) (27,245)
Issue of share capital 6 190 – – – – 196
Share based payments – – – – – 5 5
Balance at 30 June 2018 10,559 3,805 1,174 5,435 668 107,176 128,817
28
Consolidated Cash Flow Statement
for the year ended 30 June 2018
Note 2018 2017
£’000 £’000
Cash inflow from operations 25 38,175 47,478
Interest received 150 134
Interest paid (36) (33)
Taxation paid (9,642) (10,682)
Cash inflow from operating activities 28,647 36,897
Purchase of property, plant and equipment (3,567) (4,234)
Proceeds from disposal of property, plant and equipment 232 234
Cash outflow from investing activities (3,335) (4,000)
Equity dividends paid (27,245) (25,438)
Shares issued 196 538
Cash outflow from financing activities (27,049) (24,900)
Net (decrease)/increase in cash and cash equivalents (1,737) 7,997
Effect of exchange differences (116) 439
Cash and cash equivalents at start of year 52,532 44,096
Cash and cash equivalents at end of year 50,679 52,532
29
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 certain 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 2017. 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. An assessment of the effect of adopting this standard is in progress. Following an initial review
the effect of adopting this standard is not expected to be significant.
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. An assessment of the effect of adopting
this standard is in progress. Following an initial review the effect of adopting this standard is not expected to be significant.
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. The operating lease charge was £3,438,000 for the year
ended 30 June 2018 and the operating lease commitments at 30 June 2018 were £8,061,000. When the standard is adopted the
30
Notes to the Consolidated Financial Statements
continued
2.
Accounting policies (continued)
Recent accounting developments (continued)
operating lease charge will be replaced by a depreciation charge and a finance cost. The operating lease committments will be
discounted and the resulting right-of-use assets and lease liabilities will be recognised in the balance sheet. An assessment of the
effect of adopting this standard is in progress. Following an initial review the effect on profit before income tax and total equity is
not expected to be significant.
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.
31
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.
Financial assets and liabilities
Financial assets comprise trade and other receivables and cash and cash equivalents. Financial liabilities comprise trade and other
payables.
Trade and other receivables
Trade and other receivables are non-interest bearing and are initially stated at fair value and then subsequently at amortised cost
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 collectable. 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.
Trade and other payables
Trade and other payables are non-interest bearing and are initially stated at fair value and then subsequently at amortised cost.
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.
32
Notes to the Consolidated Financial Statements
continued
Accounting policies (continued)
2.
Pension scheme arrangements (continued)
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.
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.
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.
33
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.
34
Notes to the Consolidated Financial Statements
continued
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. There are no significant
judgements.
The estimates that have had the most significant effect on the amounts included in these consolidated financial statements are as
follows:
35
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.
36
Notes to the Consolidated Financial Statements
continued
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 £57,545,000 (2017: £55,427,000) and Australia
£24,659,000 (2017: £26,400,000), and assets in Germany of £10,011,000 (2017: £10,255,000).
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.
2018
£’000
82,608
109,488
37,700
19,714
2017
£’000
80,189
103,440
39,761
17,394
249,510
240,784
2018
£’000
26,384
11,334
1,801
37
39,556
2,674
42,230
2017
£’000
25,858
11,524
1,948
5
39,335
4,151
43,486
37
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 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
2018
£’000
3,055
2,398
1,040
3,135
31
42
107
39
–
4
2017
£’000
2,830
2,185
1,116
2,388
8
41
106
34
1
11
38
Notes to the Consolidated Financial Statements
continued
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)
Bank deposit interest
Other interest
Finance income
Preference share dividend
Other interest
Net pension interest cost
Finance cost
Net finance cost
2018
£’000
34,209
4,107
497
844
5
39,662
2017
£’000
33,441
3,829
542
735
1
38,548
2018
Number
2017
Number
685
143
828
2018
£’000
955
860
13
1,828
54
1,882
2018
£’000
141
9
150
(11)
(25)
(36)
(560)
(596)
(446)
683
141
824
2017
£’000
961
830
12
1,803
54
1,857
2017
£’000
127
7
134
(11)
(22)
(33)
(769)
(802)
(668)
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
39
2017
£’000
10,726
(518)
10,208
76
(178)
(102)
2018
£’000
10,245
(688)
9,557
276
161
437
Total taxation
9,994
10,106
The effective tax rate for the year to 30 June 2018 is higher (2017: 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% (2017: 19.75%)
Effects of:
Adjustments to tax in respect of prior periods
Overseas tax rates
Disallowable items
Other items
Total taxation
2018
£’000
2017
£’000
46,702
46,616
8,873
9,207
(527)
1,428
246
(26)
9,994
(696)
1,486
128
(19)
10,106
In addition to the amounts above £1,003,000 has been charged (2017: £492,000 charged) 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. The UK deferred tax balances are measured at 17%
(2017: 17%).
40
Notes to the Consolidated Financial Statements
continued
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 3.85p (2017: 3.75p)
Final dividend for previous year of 9.25p (2017: 8.5p)
Amounts recognised as distributions to equity shareholders in the year
2018
£’000
36,708
2017
£’000
36,510
207,965,693
207,620,432
121,068
216,506
208,086,761
207,836,938
17.7p
17.6p
17.6p
17.6p
2018
£’000
8,007
19,238
27,245
2017
£’000
7,792
17,646
25,438
A final dividend of 9.65p per share for the year ended 30 June 2018, amounting to £20,069,000, 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
£32,994,000 (2017: £53,777,000). The aggregate amount of directors’ emoluments excluding pension contributions was
£1,828,000 (2017: £1,803,000) of which the highest paid director’s emoluments were £846,000 (2017: £815,000). The directors’
salaries or fees for the year ended 30 June 2018 were Mr J A Wild £37,000, Mr M Halstead £412,000, Mr G R Oliver £385,000,
Mr S D Hall £22,000, Mr M J Halstead £12,000, Mr R P Whiting £12,000, Mr G Halstead £49,000 and Mr E K Lotz £26,000. The
directors’ salaries and fees reflect the period served by each director.
14. Property, plant and equipment
Cost
At 30 June 2016
Additions
Disposals
Exchange differences
At 30 June 2017
Additions
Disposals
Exchange differences
At 30 June 2018
Depreciation
At 30 June 2016
Charge for the year
Disposals
Exchange differences
At 30 June 2017
Charge for the year
Disposals
Exchange differences
At 30 June 2018
Net book value
At 30 June 2016
At 30 June 2017
At 30 June 2018
41
Total
£’000
93,661
4,234
(3,038)
913
95,770
3,567
(4,312)
(79)
94,946
59,277
2,830
(2,796)
356
59,667
3.055
(4,049)
(51)
58,622
34,384
36,103
36,324
Freehold
land and
buildings
£’000
Plant and
equipment
£’000
26,663
383
–
526
27,572
65
–
71
27,708
7,619
671
–
131
8,421
709
–
19
9,149
19,044
19,151
18,559
66,998
3,851
(3,038)
387
68,198
3,502
(4,312)
(150)
67,238
51,658
2,159
(2,796)
225
51,246
2,346
(4,049)
(70)
49,473
15,340
16,952
17,765
42
Notes to the Consolidated Financial Statements
continued
15.
Intangible assets
Cost and net book value at 30 June 2016, 2017 and 2018
Goodwill
£’000
3,232
An impairment review of goodwill was done by reference to value in use. Value in use was determined using conservative ten year
cash flow projections, based on current levels of profitability and assumed conservative growth rates of 0% to 5% and a discount
rate of 4%, which is the cost of capital for the group. The result of the review indicated that no impairment was required.
16. Deferred tax assets and liabilities
At 30 June 2016
Credited/(charged) to income
Charged to other comprehensive income
Exchange differences
At 30 June 2017
Credited/(charged) to income
Charged to other comprehensive income
Exchange differences
At 30 June 2018
Pension
scheme
deficit
£’000
Accelerated
tax
depreciation
£’000
Property
revaluation
£’000
Other
timing
differences
£’000
4,323
(217)
(492)
–
3,614
(78)
(1,003)
–
2,533
(419)
(157)
–
–
(576)
(120)
–
–
(696)
(603)
–
–
–
(603)
–
–
–
(603)
1,225
476
–
15
1,716
(239)
–
(37)
1,440
Total
£’000
4,526
102
(492)
15
4,151
(437)
(1,003)
(37)
2,674
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. All deferred tax assets and liabilities are analysed as non-
current.
17.
Inventories
Raw materials and consumables
Work in progress
Finished goods
2018
£’000
4,046
1,539
65,511
71,096
2017
£’000
2,926
1,774
68,236
72,936
An amount of £2,625,000 has been charged (2017: £1,260,000 credited) to the income statement in respect of movements in
inventory write-downs. The cost of inventory recognised as an expense was £144,993,000 (2017: £135,974,000).
18. Trade and other receivables
Trade receivables
Other receivables
Prepayments and accrued income
43
2018
£’000
28,315
1,261
2,464
32,040
2017
£’000
28,496
1,129
1,551
31,176
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 £3,072,000 (2017: £3,202,000). 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
(Credited)/charged to the income statement – selling and distribution costs
At 30 June
2018
£’000
3,202
(11)
(119)
3,072
2017
£’000
3,048
39
115
3,202
As at 30 June 2018, trade receivables of £3,432,000 (2017: £2,348,000) 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
2018
£’000
2,903
529
3,432
2018
£’000
7,158
12,270
3,416
922
554
2,203
820
2,233
29,576
2017
£’000
2,055
293
2,348
2017
£’000
7,111
12,295
3,591
833
517
2,485
991
1,802
29,625
44
Notes to the Consolidated Financial Statements
continued
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
2018
£’000
38,530
1,341
2,314
419
612
6,597
866
50,679
2018
£’000
32,610
3,060
1,059
11,992
48,721
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
491
486
2018
£’000
2017
£’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 2018 and 30 June 2017 the fair value of the preference shares was not materially different from their book value.
45
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 2018 the accrued pension for the highest paid
director was £114,000 and the transfer value of this accrued benefit was £2,483,000.
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 2017. The results of that valuation have been projected forward to
30 June 2018 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 1953
Female born in 1953
Future expected lifetime of future pensioner at age 65:
Male born in 1973
Female born in 1973
2018
2017
2.85%
1.80%
2.90%
3.00%
1.80%
2.70%
1.90%
3.00%
3.10%
1.90%
21.6 years
24.1 years
21.6 years
24.1 years
22.4 years
25.0 years
22.4 years
25.0 years
46
Notes to the Consolidated Financial Statements
continued
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 £1.1m
Increase by £0.8m
Increase by £3.2m
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
Gain/(loss) arising from changes in financial assumptions
Gain arising from changes in demographic assumptions
Experience gain
Deferred tax
Remeasurement of the net defined benefit liability
The actual return on the scheme assets in the year was a £2,855,000 gain (2017: £6,012,000 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
2018
£’000
(76,862)
61,963
(14,899)
2,533
(12,366)
2018
£’000
(497)
(560)
2017
£’000
(82,370)
61,113
(21,257)
3,614
(17,643)
2017
£’000
(542)
(769)
(1,057)
(1,311)
2018
£’000
1,232
2,374
–
2,292
5,898
(1,003)
4,895
2018
£’000
61,113
1,623
1,232
1,517
197
(3,719)
61,963
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
47
2017
£’000
(81,655)
(542)
(2,522)
(233)
(4,831)
3,468
–
3,945
2018
£’000
(82,370)
(497)
(2,183)
(197)
2,374
–
2,292
3,719
(76,862)
(82,370)
2018
£’000
(21,257)
(497)
(560)
1,232
2,374
–
2,292
1,517
2017
£’000
(25,431)
(542)
(769)
4,259
(4,831)
3,468
–
2,589
(14,899)
(21,257)
2018
£’000
11,976
42,894
6,583
510
61,963
2017
£’000
11,753
43,639
5,250
471
61,113
22. Retirement benefit obligations (continued)
Changes in the present value of the scheme obligations
Opening defined benefit obligations
Service cost
Interest cost
Employee contributions
Gain/(loss) arising from changes in financial assumptions
Gain arising from changes in demographic assumptions
Experience gain
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
Gain/(loss) arising from changes in financial assumptions
Gain arising from changes in demographic assumptions
Experience gain
Employer contributions
Major categories of scheme assets
UK and overseas equities
Diversified growth fund
Liability driven assets
Cash
Total market value of assets
The scheme has no investments in the company or in property occupied by the company.
48
Notes to the Consolidated Financial Statements
continued
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
2018
£’000
27,023
11,128
38,711
76,862
2018
years
19
19
11
15
2017
£’000
36,090
13,134
33,146
82,370
2017
years
20
21
11
16
Normal company contributions of £1,184,000 are expected to be paid into the scheme during the year ended 30 June 2019.
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
2018
Number
2017
Number
207,864,608
109,000
207,470,508
394,100
207,973,608
207,864,608
Ordinary B shares of 1p each at 1 July 2017 and 30 June 2018
16,042,530
16,042,530
2018
£’000
10,393
6
10,399
160
2017
£’000
10,374
19
10,393
160
Total allotted, issued and fully paid
10,559
10,553
The ordinary shares of 5p each were issued during the year for a consideration of £196,000 (2017: £538,000).
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 11 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
2018
£’000
5,559
200
2017
£’000
5,559
200
200
200
The respective rights of each class of shares are detailed in note 11 of the financial statements of the company.
49
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 109,000
shares and 20,000 share options were granted during the year. Details of those options still outstanding are as follows:
Number
01.07.17
Exercised
in the year
Granted
in the year
Number
30.06.18
Director
M Halstead
Date of
grant
Date
exercisable
6 Oct 08
21 Jul 14
12 Jun 17
6 Oct 11
21 Jul 17
12 Jun 20
Date of
expiry
5 Oct 18
20 Jul 24
11 Jun 24
Exercise
price
(pence)
105.2500
270.2900
476.5000
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
80,000
20,000
50,000
20,000
50,000
–
–
–
–
–
E K Lotz
6 Oct 08
6 Oct 11
5 Oct 18
105.2500
60,000
(60,000)
Total – directors
280,000
(60,000)
Employees
Date of
grant
Date
exercisable
4 Jul 07
6 Oct 08
9 Apr 14
21 Jul 14
12 Jun 17
22 Dec 17
4 Jul 10
6 Oct 11
9 Apr 17
21 Jul 17
12 Jun 20
22 Dec 20
Date of
expiry
3 Jul 17
5 Oct 18
8 Apr 24
20 Jul 24
11 Jun 27
21 Dec 27
Exercise
price
(pence)
144.7125
105.2500
290.2500
270.2900
476.5000
436.0800
Number
01.07.17
Exercised
in the year
30,000
30,000
20,000
91,500
190,000
–
–
–
–
(49,000)
–
–
Granted/
(lapsed)
in the year
(30,000)
–
–
–
–
20,000
Total – employees
Grand total
361,500
(49,000)
(10,000)
302,500
641,500
(109,000)
(10,000)
522,500
The market price of the shares at 30 June 2018 was 402p (2017: 468p).
The share price during the year ranged from 377p to 489p.
The average share price when options were exercised in the year was 463p.
Directors exercised 60,000 (2017: 230,000) share options during the year. Aggregate gains on exercising the share options by
directors in the year amounted to £212,000 (2017: £812,000) of which £nil (2017: £38,000) related to the highest paid director.
–
–
–
–
–
–
–
80,000
20,000
50,000
20,000
50,000
–
220,000
Number
30.06.18
–
30,000
20,000
42,500
190,000
20,000
50
Notes to the Consolidated Financial Statements
continued
23. Share capital (continued)
Issue of ordinary shares and number of ordinary shares under option (continued)
A summary of movements in numbers of share options is as follows:
At 30 June 2016
Exercised in the year
Granted in the year
At 30 June 2017
Exercised in the year
Lapsed in the year
Granted in the year
At 30 June 2018
Weighted
average
exercise
price
158p
137p
477p
315p
179p
145p
436p
357p
Number of
options
745,600
(394,100)
290,000
641,500
(109,000)
(30,000)
20,000
522,500
At 30 June 2018 there were 212,500 (2017: 220,000) share options exercisable at a weighted average exercise price of 187p
(2017: 127p).
The weighted average remaining contractual life of share options outstanding at 30 June 2018 was 6.6 years (2017: 6.5 years).
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
2018
2017
3.5 years
10.0%
5.5%
0.5%
436p
3.5 years
10.0%
5.5%
0.5%
477p
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 2018 was £5,000 (2017: £1,000).
51
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 on sale of property, plant and equipment
Decrease/(increase) in inventories
(Increase)/decrease in trade and other receivables
(Decrease)/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
2018
£’000
36,708
9,994
46,702
596
(150)
47,148
3,055
31
1,247
(1,093)
(11,448)
497
(1,517)
250
5
38,175
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
52
Notes to the Consolidated Financial Statements
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
2018
Land and
buildings
£’000
2,690
3,162
228
6,080
2018
Other
£’000
968
1,011
2
1,981
2017
Land and
buildings
£’000
2,318
4,159
257
6,734
2017
Other
£’000
561
753
70
1,384
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 the US Dollar and
the Euro. Forward exchange contracts are used to manage this exposure to fluctuations in foreign exchange rates. The group buys
or sells foreign currency at spot where necessary to address any short-term imbalances.
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. The forward exchange contracts have maturities of less than one
year after the balance sheet date.
The group classifies its forward exchange contracts hedging forecasted transactions as cash flow hedges and states them at fair
value. The hedged cash flows are expected to occur within one year after the balance sheet date.
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.
53
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
2018
Book value
£’000
2018
Fair value
£’000
2017
Book value
£’000
2017
Fair value
£’000
29,576
971
50,679
(45,661)
(119)
35,446
29,576
971
50,679
(45,661)
(119)
35,446
29,625
416
52,532
(55,818)
(1,362)
25,393
29,625
416
52,532
(55,818)
(1,362)
25,393
(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
2018
£’000
4
848
852
2017
£’000
37
(983)
(946)
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
£312,000 (2017: £304,000). 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
2018
Post-tax
profits
£’000
4
(4)
2018
Equity
£’000
4
(4)
2017
Post-tax
profits
£’000
41
(37)
2017
Equity
£’000
41
(37)
54
Notes to the Consolidated Financial Statements
continued
29. Group companies
At 30 June 2018, 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
Proportion
owned
(%)
100
100
100
100
100
100
100
100
100
100
A complete list of the group’s subsidiaries is provided in note 4 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
2018
Closing
2018
Average
2017
Closing
2017
Average
1.13
1.79
1.95
1.74
11.81
90.46
1.13
1.74
1.89
1.71
11.20
87.77
1.14
1.69
1.77
1.69
10.96
83.96
1.16
1.68
1.78
1.68
11.20
84.43
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.
Polyflor Limited, a subsidiary of the company, leases cars from a company of which Mr Russell Whiting is a director. The lease
payments during the year were £162,000 and the maximum outstanding lease committments at 30 June 2018 were £226,000.
Company Balance Sheet
as at 30 June 2018
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
3
4
5
7
8
7
9
10
11
55
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
2018
£’000
4,809
40,152
44,961
35,807
2,443
38,250
971
34,059
73,280
(9,298)
(119)
63,863
108,824
(200)
(14,899)
93,725
10,399
160
10,559
3,805
1,174
848
77,339
93,725
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 £32,994,000 (2017: £53,777,000).
The financial statements were approved and authorised for issue by the board and were signed on its behalf on 25 September 2018.
M Halstead
Director
G R Oliver
Director
James Halstead plc Registration Number 140269
56
Company Statement of Changes in Equity
for the year ended 30 June 2018
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 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
Transactions with equity shareholders
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
Profit for the year
Remeasurement of the net defined
benefit liability
Fair value movements on
hedging instruments
Total comprehensive income for
the year
Transactions with equity shareholders
Dividends
Issue of share capital
Share based payments
–
–
–
–
–
6
–
–
–
–
–
–
190
–
–
–
–
–
–
–
–
–
–
32,994
32,994
4,895
4,895
1,831
–
1,831
1,831
37,889
39,720
–
–
–
(27,245)
–
5
(27,245)
196
5
Balance at 30 June 2018
10,559
3,805
1,174
848
77,339
93,725
57
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.
58
Notes to the Company Financial Statements
continued
2.
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 (2017: 20).
3.
Tangible fixed assets
2018
£’000
2,821
364
117
5
3,307
Cost
At 30 June 2017
Additions
Disposals
At 30 June 2018
Depreciation
At 30 June 2017
Charge for the year
Disposals
At 30 June 2018
Net book value
At 30 June 2018
At 30 June 2017
Investment
land and
buildings
£’000
Freehold
land and
buildings
£’000
Plant and
equipment
£’000
7,978
–
–
7,978
4,086
218
–
4,304
3,674
3,892
1,311
–
–
1,311
228
25
–
253
1,058
1,083
443
57
(66)
434
367
35
(45)
357
77
76
2017
£’000
2,834
361
115
1
3,311
Total
£’000
9,732
57
(66)
9,723
4,681
278
(45)
4,914
4,809
5,051
The investment land and buildings relates to a freehold property that is occupied by a subsidiary company. The rental income was
£600,000 (2017: £600,000).
4.
Investments
Cost
At 30 June 2017
At 30 June 2018
Provision for impairment
At 30 June 2017
At 30 June 2018
Net book value
At 30 June 2018
At 30 June 2017
59
Shares in
subsidiary
undertakings
£’000
49,552
49,552
9,400
9,400
40,152
40,152
At 30 June 2018, 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
60
Notes to the Company Financial Statements
continued
4.
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
3209 Orlando Drive
Mississauga
Ontario L4V IC5
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
5.
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 6)
Debtors due after one year
Total debtors
6.
Deferred tax assets
At 30 June 2017
Charged to income
Charged to other comprehensive income
At 30 June 2018
Pension
scheme
deficit
£’000
3,614
(78)
(1,003)
2,533
Accelerated
tax
depreciation
£’000
Other
timing
differences
£’000
(141)
(11)
–
(152)
70
(8)
–
62
Derivative financial instruments
7.
Derivative financial instruments are forward foreign exchange contracts recognised in the balance sheet at fair value.
8.
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
2018
£’000
401
6,631
73
119
176
1,898
9,298
61
2017
£’000
131
31,031
265
81
235
31,743
3,543
3,543
2018
£’000
77
35,434
–
75
221
35,807
2,443
2,443
38,250
35,286
Total
£’000
3,543
(97)
(1,003)
2,443
2017
£’000
470
6,644
–
246
153
2,021
9,534
62
Notes to the Company Financial Statements
continued
9.
Creditors – amounts falling due after more than one year
Preference shares
10. Retirement benefit obligations
Present value of funded obligations
Fair value of scheme assets
Net liability
2018
£’000
200
2017
£’000
200
2018
£’000
(76,862)
61,963
2017
£’000
(82,370)
61,113
(14,899)
(21,257)
The company sponsors the Halstead Group Pension Scheme. Disclosure information is provided in note 22 to the consolidated
financial statements.
11. 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
2018
Number
2017
Number
207,864,608
109,000
207,470,508
394,100
207,973,608
207,864,608
Ordinary B shares of 1p each at 1 July 2017 and 30 June 2018
16,042,530
16,042,530
2018
£’000
10,393
6
10,399
160
2017
£’000
10,374
19
10,393
160
Total allotted, issued and fully paid
10,559
10,553
The ordinary shares of 5p each were issued during the year for a consideration of £196,000 (2017: £538,000).
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
2018
£’000
5,559
200
2017
£’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.
63
11. 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.
12. 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.
64
Ten Year Summary (Unaudited)
2009
£’000
2010
£’000
2011
£’000
2012
£’000
2013
£’000
2014
£’000
2015
£’000
2016
£’000
2017
£’000
2018
£’000
Revenue
169,263 186,424 213,944 226,335 217,082 223,488 227,261 226,141 240,784 249,510
Profit before income tax
32,604
35,307
37,538
41,726
40,495
41,753
44,184
45,499
46,616
46,702
Income tax
(8,036)
(9,948) (10,768) (11,941) (10,446) (10,301) (10,250) (10,243) (10,106)
(9,994)
Profit after income tax
24,568
25,359
26,770
29,785
30,049
31,452
33,934
35,256
36,510
36,708
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
Basic earnings per 5p share
Dividends paid per 5p share
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
17.7p
13.1p
Figures for the years ended 30 June 2009 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.
65
Shareholder Information
Financial calendar
Annual general meeting
Announcement of results
For the half year
For the full year
Dividend payments
Ordinary shares – interim
– final
7 December 2018
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 14 September 2018
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
1,907
549
81
98
50
5,581,506
12,354,250
5,572,155
21,367,247
163,098,450
%
2.7
5.9
2.7
10.3
78.4
2,685
207,973,608
100.0
Number of
holders
Number of
shares
665
35
7
1,972
6
100,367,372
1,113,168
228,779
106,158,473
105,816
%
48.3
0.5
0.2
51.0
0.1
2,685
207,973,608
100.0
66
Notice of Annual General Meeting
NOTICE IS HEREBY GIVEN that the ONE HUNDREDTH and THIRD ANNUAL GENERAL MEETING of the company will be held
at the Oldham Event Centre, off Hilbre Avenue, Oldham, Lancs, OL2 5BL, on 7 December 2018 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 2018
together with the report of the auditors.
2
3
4
5
To declare a final dividend on the ordinary shares in the capital of the company for the year ended 30 June 2018.
To re-elect Mr J A Wild who is retiring by rotation under the articles of association as a director.
To re-elect Mr M Halstead who is retiring by rotation under the articles of association as a director.
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 6 and 7 shall be proposed as ordinary
resolutions and resolutions 8 and 9 will be proposed as special resolutions:
6
That, subject to the passing of the ordinary and special resolutions numbered 7 and 8 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.
7
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.
67
8
That subject to the passing of the ordinary resolution numbered 7 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 6
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.
9
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
12 October 2018
Beechfield
Hollinhurst Road
Radcliffe
Manchester
M26 1JN
4146 - Halsteads RA 003_003 15/10/2018 09:22 Page 68
68
Notice of Annual General Meeting
continued
Notes
1
2
3
4
5
6
7
8
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 Link Asset Services, 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 Link Asset Services at FREEPOST PXS, 34 Beckenham Road, BR3 9ZA, in each case no later than
12 noon on 5 December 2018. 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.
You may submit your Proxy electronically using the Share Portal Service at www.signalshares.com.
If you wish to attend the meeting in person, please attend at the address set out at the beginning of this notice on 7 December 2018
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 5 December 2018.
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.
9
Warrants for the final dividend, if approved, will be posted on 7 December 2018 to shareholders on the register as at 9 November 2018.
JAME S HA LSTEA D PLC
Covering the World
Report and Accounts 2018
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Discover a new world of colour
Discover a new world of colour
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 2018 A4 5.3mm spine.indd 1
01/10/2018 11:57