JAME S H ALSTEA D PLC
Covering the World
Report and Accounts 2020
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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
Nominated adviser
Panmure Gordon & Co
One New Change
London
EC4M 9AF
Stockbrokers
WH Ireland
24 Martin Lane
London
EC4R 0DR
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 FCA
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 8
Section 172 Statement 12
Governance
Report of the Directors 14
Board Report on Remuneration 19
Corporate Governance 20
Financial Statements
Independent Auditor’s Report to the Members
of James Halstead plc 26
Consolidated Income Statement 30
Consolidated Statement of Comprehensive Income 31
Consolidated Balance Sheet 32
Consolidated Statement of Changes in Equity 33
Consolidated Cash Flow Statement 34
Notes to the Consolidated Financial Statements 35
Company Balance Sheet 62
Company Statement of Changes in Equity 63
Notes to the Company Financial Statements 64
Supplementary Information
Ten Year Summary 71
Shareholder Information 72
Notice of Annual General Meeting 73
2
Chairman’s Statement
Results
For the first time in over a generation we are not reporting
record earnings per share.
Turnover for the year at £238.6 million (2019: £253.0
million) is some 5.7% below last year with the period April
through to June 2020 showing significant decline as the
global lockdown initiatives curtailed normal business with
most of our businesses worldwide resulting in profit before
tax at £43.9 million (2019: £48.3 million), down 9.2%.
Perhaps it is worth noting that extrapolating the numbers
based on performance for the first nine months we
reasonably would have expected turnover to have been circa
£25 million higher and profits some £7 million higher.
In reporting these figures we have, as a board, considered
our approach and actions in the difficult months of the lock-
downs that were thrust upon most of our businesses and
asked what we should have done differently. In short, even
with hindsight, we as a board feel the decisions and actions
were correct and that the depth and quality of our senior
teams’ experience proved, once again, our capability and
resilience.
Crucially in February and March we refocused production on
the assumption of excess healthcare demand and
concentrated on maintaining output whilst altering working
practices to minimise risk to our employees.
These results are more than gratifying against the backdrop
that all our major markets faced.
Our business was awarded the title Contract Flooring
Manufacturer of the year, gratifying as the voting is by the
floor laying contractors that install our products..
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
has been listed on the London Stock Exchange for more
than 70 years.
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.
The company’s strategy is to enhance the brand identity
thereby generating and enhancing goodwill and customer
satisfaction with the aim of achieving 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 and local delivery. Key to the
company ethos is having dedicated sales personnel to
present our product to end users and specifiers rather than
to delegate the representation of products to stockists. Our
businesses are totally flooring focused and by far and away
the majority of this flooring is commercial.
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.
Corporate governance and corporate
social responsibility
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. Increasingly companies are,
their
quite
environmental credentials, supply chain management with
social and economic dimensions and stewardship.
tasked with demonstrating
rightly,
ISO14001 to underline our
Polyflor is certified to Quality Management System
ISO9001 and
robust
environmental procedures. We are certified to BES9001 the
standard for responsible sourcing which takes our
credentials beyond our own factories to our suppliers. Added
to this is our SA8000 accreditation based on the UN
declaration of human rights that audits supplier provision of
sound workplace and standards. Our commitment to our
employees continues and this year saw one of our shop
floor workers achieve the milestone of 50 years with the
business.
We continue to be active members of trade bodies that
bring standards across the industry for example the
European Resilient Flooring Manufacturing Institute ERFMI
(where our Technical Director is President). We publish,
annually, a sustainability report, although given the
disruption of the recent few months it will be a much briefer
interim report.
3
Despite these doubts I can only be confident of continued
progress in the coming year.
Both these issues will, no doubt, have an impact on the
forthcoming financial year but, I believe, we have the
experience and ability to move forward with confidence.
Healthcare has always been an area of core competence for
our businesses and alongside the urgent demands of our
NHS we have supplied flooring to 12 modular hospitals in
Argentina, 13 hospitals in Mexico and 11 hospitals in South
Africa. The pandemic tested supply chains but across the
globe we have supplied
from our stock-holdings.
Notwithstanding these sales our business has suffered as
building projects are delayed and it is far from business as
usual in many parts of the world.
I, and the board, are confident of another solid year
tempered by the uncertainties that currently abound.
Anthony Wild
Chairman
30 September 2020
Dividend
Profits and earnings per share have slightly decreased but
we continue un-geared. Our cash balances stand at £67.4
million (2019: £ 68.7 million), even after dividends paid in
the last year that amounted to £25.2 million, increased
pension scheme payments of £4.1m and taxation of £11.6
million. Our cash reserves continue as the foundation of our
strong balance sheet. I, and the board, believe that the work
done on control of working capital during the final quarter
of the year was sterling.
It is pleasing to report that the board proposes at this point,
and subject to the approval of the shareholders at the
upcoming AGM, to pay a final dividend. The final dividend
will be 10.0p (2019: 10.0p). This, combined with the interim
dividends paid in June and September totalling 4.25p (2019:
4.0p), makes a total of 14.25p (2019: 14.0p) for the year, an
increase of 1.8%.
This is, yet again, a record level of dividend.
Acknowledgements
My thanks go to our staff in the UK and around the world
whose hard work continues to allow us to increase our
business. This year has been particularly challenging as we
all faced uncertainties and a particular mention to those
who have worked hard on the safeguards we have. I would
also like to thank two of our competitors (Altro Group plc
and Amtico International Ltd) for their assistance with PPE
during the lockdown period.
Outlook
Currently, some three months into the new trading year, our
sales are on a par with the record trading of the comparative
period. Business has bounced back with refurbishment in
many sectors buoyant, but with difficulties in sectors such
as catering/hospitality.
Looking ahead there are two external factors that cloud a
clear view of the current year – the pandemic and the final
exit of the UK from the European Union. There are many
reasons to believe that a second wave of the virus will not
lead to a second major lock down – better knowledge and
treatments within healthcare, greater awareness of social
distancing and greater testing capability. That said the
effects of targeted lockdowns does mean uncertainty is
ongoing and we cannot say that the worst is past.
4
Chief Executive’s Review
At this time last year, we thought the major challenge
would be the fast approaching implications of “Brexit”, but
we were tasked with something on a different scale entirely.
We drew on a wealth of experience to protect our company,
our leading market position and our stakeholders. In most
markets we, as manufacturers, deliver bulk for wholesalers
and distributors who in turn break that bulk. Many of our
distributors were closed and thus we faced the challenge of
organising and fulfilling much smaller despatches to health
providers across the UK, Europe and the rest of the world. In
this task we were successful.
Worthy of note were the various government funding
initiatives that were put in place across many markets. At
the start of the lockdowns we assessed liquidity and debtor
risk as major issues but these did not, by and large, transpire.
The contrast with the 2008 recession was stark and it can
only be said that various government initiatives appeared to
have been a success in the continuity of liquidity. In terms
of our sector, flooring, we were well aware of the types of
flooring that would be in immediate demand for the
healthcare sector, not least because of our prior experience
during the SARS-Cov-1 outbreak many years ago.
Turnover at £238.6 million (2019: £253.0 million) was 5.7%
down on the year. The UK sales at £78.9 million (2019:
£88.6 million) were 10.9% below last year. Overseas sales
were 2.9% below last year. The shortfalls all came in the
period April to June 2020.
Profit before tax at £43.9 million (2019: £48.3 million) was
9.2% below last year and though we traded profitably in the
period April to June 2020 the shortfall in turnover inevitably
lead to a major fall in profits.
It has been many years since we have seen profits fall, but
these were far from normal times. I am very encouraged by
the actions and efforts of our key staff during those difficult
weeks when the news seemed to get progressively worse.
Our focus was to protect our workforce and our company
and to continue to supply our global market. To date we
have succeeded.
Reviewing the businesses in more detail:
Objectflor/Karndean and James
Halstead France, our European
operations
Sales overall were slightly behind the prior year by 2.7%
which also had an impact on profitability. The area of
slowdown can be ascribed to the pandemic as there was a
downturn in retail shop fitting in terms of refurbishment
and new store openings. The business supplies a number of
“private-label” collections to various buying groups which
are refreshed on a two/three year cycle and, consequently,
sales in these ranges reduced as the ranges approach re-
launch in the coming financial year. Our own branded
ranges however showed increases in sales. There were
several product launches in the year including Expona
Simplay 19dB and Expona Puzzle (an interlocking tile) both
of which are loose lay products (i.e. not requiring glue).
Loose lay flooring is seen as a growth area and we have
developed over the last years a comprehensive offering in
this area. These projects included the World Fashion Center
in Amsterdam and Le Théatre des Folies Bergère, Paris.
Alongside expansion of the vinyl ranges we have launched a
range of carpet tiles in these markets branded as Expona.
This range closely aligns with our LVT ranges and will act as
both complementary sales as well as new market segments.
Our Expona carpet tiles have been installed in the Friedrich-
Ebert-Allee in Bonn which is a very high profile office
development that includes retail space and a museum.
Another example of Expona carpet are the Mima Furniture
Stores in Croatia.
Furthermore, the Saarflor (rubber sheet) range has been
updated and is being sold across the European markets.
Polyflor sheet vinyl sales continue to grow with Polyflor
“Trend” fitted in many branches of Toys “r” Us across
Germany and “Palettone” installed at Kliniken der Stadt
Köln-Merheim (municipal hospitals of the City of Cologne in
the district of Merheim).
Geographically, prior to the crisis most of the markets were
showing performance ahead of the prior year, most
significantly growth was experienced in France and Eastern
markets with Germany and Austria performing well.
Different markets had different levels of lock down of which
France and Austria were the most significant. In France our
route to market is generally through distribution and these
outlets tend to also sell paint and the majority remained
open and instigated “click and collect” which reduced the
downside of the lockdown to our trade. Our French business
continues to secure prestigious clients of which just one
example is the Nestlé Waters headquarters is Issy-les-
Moulineaux. The central European markets have recovered
well following release of the restrictions and in France we
are seeing the start of enquiries in advance of the 2024 Paris
Olympics though it is noticeable that larger projects in
general are being delayed.
Polyflor Pacific – encompassing
Australia, New Zealand and Asia
Turnover in the region was down 4% at constant exchange
rates (7% down when foreign exchange movements are
included). Profit was however 11% ahead of last year as a
result of a better mix of sales and strong control of costs.
5
Our Australian business faced a series of issues during the
course of the year including bush fires that were widespread
in the most populous states, an ongoing drought that
severely impacted the New South Wales economy, a
relatively weak economy and the significant depreciation of
the Australian dollar against the US dollar. In addition, of
course, the pandemic. Furthermore, the plant breakdown in
Radcliffe affected supply of stock for some time during the
mid-part of the financial year. Sales in Australia have fallen
slightly against the prior year (3.7%) although increased
margins coming from sales mix and lower costs has resulted
in slightly higher profits. A particularly creditable result given
the list of adversities.
The Australian business has continued to operate
throughout the period and managed to continue to supply
despite the various local restrictions that were in place. As
with a number of our businesses good levels of local stock
assisted in us being able to take opportunities from
competitors where they were unable to supply, either
because of issues within their supply chain or them having
closed their operations. Polyflor (UK) continued despatches
to Australia and New Zealand at normal levels in spite of the
local lockdowns in anticipation that sales would quickly
return to normal due to the majority of sales being
refurbishments.
Our Australian business is strong both in the commercial
and domestic sectors, and we have found that softening in
the commercial markets has been offset by stronger
domestic demand, which is thought, partly at least, to be a
factor of travel restrictions meaning people taking fewer
holidays and, instead, investing in their own property. The
team have updated the local website and complemented
this with new social media platforms whilst revamping the
sampling processes across the continent and increasing
sales representation in New South Wales and South
Australia.
The New Zealand business, under new local management
from the latter quarter of last year has shown significant
growth in sales and profit for the first three quarters of the
year. The business was closed for a seven week period during
which New Zealand’s commercial activities were forced to
cease. New Zealand faced the most stringent lockdown of
any market in which we operate. Some government support
was received in this period which, combined with savings in
overheads, has eased the impact on profit which came from
low sales activity. Sales ended up lower than the prior year
as a result of this, however post lockdown activity levels are
showing good recovery. Despite this, profits for the full year
were noticeably higher.
Towards the end of the year we re-secured the Kainga Ora
(New Zealand’s social housing provider) contract for a
period of
four years. This project takes product
manufactured in our Manchester plant.
We continue to increase our sales resource in several of the
Asian markets, including Indonesia, Malaysia and Singapore
whilst also investing in more localised stocks. A warehouse
has been established in Shanghai during the year to service
the market locally. This initiative is in its infancy. Early signs
suggest that it is having a positive impact on sales overall.
Our social media and marketing are also being developed to
be more localised in nature to facilitate a better
understanding of our offering in these markets. China
continues to be an important market but with the
competitive situation there as rigorous as ever.
Polyflor & Riverside Flooring, based in
UK
Turnover for the year was 7.2% below the prior year
comparative and profit was 12% down. The loss of turnover
and increased cost of working in the period of the UK
lockdown is the causal factor behind these results. Looking
at the turnover in more detail the UK turnover was down
10.9% against the prior year, sales from Polyflor to our
overseas subsidiaries were level with the prior year and
exports to third parties were 2.7% down. The closure by
lockdown of the UK and several of our major customers was
the reason for the decline. Extrapolating the period to the
end of March we were expecting about 8-10% growth.
Polyflor is the engine behind the growth of our UK and
overseas trade and there were several major product
launches in the course of the year which, I believe, underline
our market leading position. In August 2019 the Expona
Design collection was re-launched with 24 new innovative
designs of heavy duty commercial luxury vinyl tiles. These
ranges have exceeded expectations for increased sales.
I would also note that the new ranges that we brought to
market in the early months of 2019 have also proved to be
very successful. Firstly, Polysafe Quicklay, a vinyl sheet that
can be installed without adhesive (even on damp sub-floors)
has been very well received and was the floor of choice for
very many of the healthcare initiatives during the early
stages of the pandemic and indeed broadened greatly the
general acceptance by the conservative floor layers of a
“glue – free” installation. In addition, Expona EnCore Rigid
loc, our commercial luxury tile that is also adhesive free has
been very successful and featured in some depth in the BBC
renovation show “Your Home Made Perfect”. It is clear that
quality commercial flooring can gain market share in the
6
Chief Executive’s Review
continued
domestic market, though our focus remains in the
commercial sector. Projects of note in the year include Ibrox
Stadium refurbishment, Knock Airport in County Mayo and
Glenfield Hospital in Leicester.
As noted in last year’s report the Radcliffe factory suffered
a major breakdown in June 2019 that closed one of our four
production lines. This ceased supply from that line for some
12 weeks into the current year and whilst the management
team tried to manage stock and the adverse effects on sales
there were projects that we lost most noticeably in export
markets and in particular our Australian subsidiary.
Riverside, the manufacturing facility at Teesside saw sales of
its product increase during the year by more than 10% and
reported an increase in profits. The Polyflor sales team in
Oldham have marketed and shipped the Riverside portfolio
to an increasing number of countries despite the UK sales
being decimated by the UK lockdown. A commendable
result.
The lockdown of the UK from late March 2020 was a major
focus of efforts in the year. Our production by-and-large
continued but it was at increased cost due to the lower
output and ancillary costs.
Polyflor Nordic comprising Polyflor
Norway based in Oslo and Falck
Design based in Sweden
Sales across this region are broadly comparable with those
of the prior year in what has been a difficult year in both
markets. Business continued to be soft however a few
individually significant projects were delivered. Sales mix is
weighted more towards our own product suite through the
trading year, and whilst this has the consequence of
reducing margins locally it is more beneficial to the group as
a whole.
Although there were restrictions regarding the national
response to the pandemic in Norway the business remained
open throughout. To keep their economy more active,
restrictions in Sweden were less severe however some
negative commercial impacts came later in the year as the
economy and refurbishment slowed. There were many
education projects in Sweden with examples being
Orkerstern School, and the Svärtingeschool. Across the
Scandinavian region, competitors had problems supplying
some specifications to the advantage of our businesses
where we were able to supply from stocks locally or from
the UK. This is a trend that has continued into the new
financial year.
Polyflor Canada, based in Toronto
As has been the case every year since the business was
established, we have increased sales, with a further 6.2%
added this year compared to the last. The growth continues
to come from the territories in which we have our own
dedicated sales force, those being Ontario, British Columbia
and Ottawa.
As the business supplies the healthcare sector it was able to
remain open as an essential supplier and continue to
operate during the period of restrictions in Ontario.
Healthcare and education remain key sectors for this
business selling our core ranges of products. Sales of luxury
vinyl tiles have also increased significantly over the period in
what is a very competitive market. Our product offerings are
attractive given the quality of designs and product
presentation. The City of Orillia Public Library, Trattoria
Nervosa Kitchen
in Toronto and Loblaw’s Toronto
headquarters are examples of key projects supplied in the
year.
Polyflor India, based in Mumbai
The trend of increasing growth since the inception of this
business came to an end during the year with project
specifications facing delays/funding problems and failing to
materialise as sales.
The slowdown was compounded by the effects of the
pandemic that effectively closed the business operations for
a three month period. The majority of sales are new projects
and our business in India has a far lower level of
refurbishment than any other market in which we operate.
Sales have therefore retrenched significantly in this current
period and we pared back some of the operations
accordingly. Notwithstanding
issues projects
completed included Johnson & Johnson Pharma in Mumbai
and Mark & Space Telesystems, Gurgaon.
these
Several significant projects have been delivered post year
end in the healthcare and pharmaceutical sectors, including
material for a manufacturing plant that will be producing
one of the leading vaccines currently being trialled.
Rest of the World
The Polyflor export and marketing offices, based in Royton,
continue to support our international businesses and to
directly sell via a global network of representatives, agents
and distributors.
7
In conclusion
I, and the board, are confident of another solid year
tempered by the uncertainties that currently abound.
In several markets there is general sentiment that the cost
of the recent months will lead to economic slowdown,
business closures and increased unemployment. That said
we have seen a very sharp return to prior levels which may,
in part, be pent-up demand but equally there
is
demonstrable evidence of ongoing demand where there are
buoyant sectors such as modular buildings.
Mark Halstead
Chief Executive
30 September 2020
During the year the export team and our Pacific Asia team
have worked hard to increase our presence in the Far East.
We have added dedicated sales representatives in Malaysia,
Indonesia and Singapore working close with the long
established Polyflor Hong Kong and reporting to the
regional director in Australia. A major programme of
presentations across the regions has re-invigorated the
many contactors and architects we have dealt with over the
years and presented the company and its products to a
much wider audience. With Facebook and Instagram
accounts added for Malaysia, Thailand, Vietnam Singapore,
Indonesia and Tawain and the Philippines. In addition, our
corporate websites have been re-vamped and social media
sites for Wechat, Weibo and LinkedIn are all adding to the
business and feeding enquires.
Our first full year with a sales office in Bogota, Colombia has
seen good progress with projects across the region including
Argentina, Chile, Brazil and Mexico. The team have not only
increased the support to existing distributors in the region
but also brought new opportunities and contacts with
projects such as the Industrial Hospital Medical Centre in
Puerto Rica.
Other local representatives working locally but reporting to
Polyflor continue to represent us in Romania, Indonesia, the
Czech Republic and Hungary. Project Livesport in Prague
being just one example. In March, we appointed an
experienced Spanish sales manager, who is already securing
Polyflor specifications not only in Spain but in other Spanish
speaking countries. The representative office in the Middle
East is now underpinned with stock warehoused in the
United Arab Emirates and supporting increased business in
Dubai, Oman, Qatar and Saudi Arabia. During the year we
supplied six emergency hospitals in the UAE, three more in
Qatar and four in Jordan.
The 100,000 square metres of Polyflor Voyager XL that was
shipped to refurbish the Moscow subway trains was a
notable project. This subway is the fourth longest in the
world with some seven million daily users. In addition the
supply of Palettone to the National Hospital of Iceland in
Landspitali was also of note.
8
Financial Director’s Review
As is usual, we have prepared these accounts by the
consistent application of accounting standards with due
appraisal and judicious accrual for known probable liabilities
with as yet uncertain outcome at the year end. In these
accounts IFRS 16 Leases was adopted for the year ended 30
June 2020, with no restatement of the comparative period,
and it had no significant effect on the profit for the year. The
effect of the adoption of IFRS 16 is set out in note 34. As in
previous years we remain prudent.
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.
Some key statistics:
Group turnover at £238.6 million (2019: £253.0
million) was 5.7% lower than last year.
Profit before tax was £43.9 million (2019: £48.3
million) 9.2% lower than last year.
Finance income was £0.4 million (2019: £0.4 million)
reflecting interest rates that remain very low.
Selling and distribution costs were 7.8% lower than
last year. Administration expenses were 3.0 % lower
than last year
Trade debtors decreased to £24.6 million (2019:
£29.0 million). Trade creditors decreased to £29.6
million (2019: £ 42.0 million).
Stock levels stand at £68.5 million (2019: £69.9
million).
Cash stands at £67.4 million (2019: £68.7 million)
even after the payment of £25.2 million in dividends,
£11.6 million in tax and £4.2 million of capital
expenditure.
Key performance indicators
The board considers growth in profit before tax and growth
in dividend key targets in line with the task of delivering
shareholder value. Control of working capital continues to
be important and the level of cash is monitored. Cash flow
has been a key performance measure.
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. These accounts contain analysis and
more importantly we require each director to undertake a
written report on their area and often these include key
indicators (obvious examples are level of absenteeism in the
factories, debtor days and margin by product line but these
are backed up with detail of the key drivers of these ratios
and the planned response).
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.
is
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
incomplete and wholly accurate.
trade bodies,
Consequently little reliance is placed upon this data. We
subscribe to various third party reports on the flooring
industry which to an extent match and compare us to our
competitors and whilst valid snap-shots of the sector they
are limited. Customer satisfaction awards are always
welcome and we note these in our strategic report.
Principal decisions
The strategic report notes our approach to our Section 172
of the Companies Act 2006 and we have faced many
decisions in the year. We define principal decisions as those
that have a significant impact on the company and/or group
and/or our stakeholders. Principal decisions that are
currently confidential to the group are not included in the
list below. Any such decision would be included in future
report and accounts if and when confidentiality is no longer
a factor.
The potential impact of principal decisions on stakeholders
is assessed in detail by the board. Obviously a significant
number of decisions had to be made in the period of the
lockdown and principally the level of manufacturing activity.
The executive directors kept the board appraised and these
actions are described in the strategic review and in our
interim reporting. To the extent that these decisions affect
employees there
is a bi-annual update on group
performance. Each of the principal decisions has an effect on
employment and hence employees as a whole so this high
level update is important to provide context for the
individuals.
9
During the year the following were considered by the board.
Payment of dividends
The board considered shareholder expectations in setting
these dividends, along with the cash position of the
company. The record interim dividend was in part deferred
as the UK and several of our important markets faced
national lockdowns. The second part of this was paid on 10
September 2020. In reaching its dividend decision, the board
took into account the fact that there is a large employee
shareholder base (through its UK share schemes) and its
commitments to funding the pension schemes. Cash flow
projections are an important part of this and particularly in
this current year and the executive directors were tasked
with keeping the board appraised of debtors and working
capital. In the early stages of the UK national lockdown the
effect of the crisis on liquidity was unknown and discussion
with our bankers on access to temporary funding was
commenced. One major benefit of government policy was
that customers nationally and globally continued payments
by and large as normal (as indeed did our Group).
Defined benefit (DB) pension scheme - deficit funding
The board reviews the DB pension scheme deficit on a
regular basis and continued to fund the deficit as agreed in
the 2017 valuation, the board having considered the cash
position has in recent months, (i.e. since the start of the
pandemic), made additional payments of £4 million above
the agreed plan and are working towards assessing the up to
date position with the tri-annual valuation of the scheme. In
addition, the board took the decision to appoint an
independent trustee and is taking steps to increase the
number of member appointed trustees from one to two. The
board is of the belief that increasing the member nominated
trustee number can only offer more engagement.
Review of long term executive incentives
Our existing share option plan was approved in 2010 and
the board have sought advice to update this plan and it will
be presented to shareholders at the upcoming AGM. Many
companies in recent years have moved to the issue of nil
cost options but the board considers that whilst, on
occasion, this might be appropriate we should issue options
at the market value of our shares and that benefit to
executives is thereby dependant on value creation to
shareholders.
Approval of group budget
A key process is to each year agree budgets with our trading
subsidiaries and this is presented to the board towards the
end of each trading year. Having regard to the
unprecedented situation across our markets for the
pandemic this process this year would be neither accurate
nor a useful use of time. The Board, therefore, will assess
progress against the prior year comparative and re-assess
budgeting in early 2021. In the normal course of budget
preparation manning levels and shift patterns are assessed
and this effect of working hours disseminated to the various
departmental employees.
Warehouse expansion
The board has appraised the need for increased warehouse
capacity in the UK and plans are being finalised for final
approval. The board has agreed in principle and the cost of
this expansion will be in excess of £12 million (excluding
stock holdings).
Whilst not a principal decision in the year there was
significant action in regard to the pandemic and the
national lockdown. As part of assessing the ability of the
group and company to continue as a going concern,
management considered the impact of the pandemic on its
business. Operationally the need was to continue supply of
product to customers including emergency facilities across
the globe and in many markets our businesses were deemed
essential. Equally the priority was to ensure safe working
and the associated PPE and social distancing. Contacts
across the world supplied some of that PPE and our thanks
to them in this regard. The long history we have with
healthcare strengthened and we anticipated the type of
products that would, in the short-term, be in demand.
Similar demand was seen at the time of SARS-Cov-1 in
2002-2004. Priorities and decisions were, by necessity, short
term and reactive since medium term outcomes were
speculation. It is an old adage but sometimes it is easy to
get on with actions than to pontificate. Going concern is
further described in the director’s report. It is clear that this
single subject has been a main focus of the statutory
auditors.
Principal business risks and
uncertainties
The ongoing pandemic is an uncertainty. The actions we
take will necessarily evolve. We have detailed procedures to
minimise risk of transmission within our business.
The situation regarding the UK leaving the EU (“Brexit”) is
an ongoing uncertainty. 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 from the 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.
10
Financial Director’s Review
continued
The board constantly assesses risks and discusses business
issues regularly. To the extent risk is insurable the board is
risk averse and the group is widely insured. A comprehensive
insurance appraisal takes place annually to mitigate
exposure to risks, such as business interruption and fire but
obviously key risks such as escalating raw material prices
and energy costs fall outside any insurable event. 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. During the year the unknowns associated with
the pandemic were a key unknown and consequently a key
risk. 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.
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.
respect of exchange
In
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.
IFRS 7 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 wouldn’t be covered by our current levels of stock
holding. Given the length of service of many senior
managers, succession planning becomes a risk and/or an
uncertainty but again the open style of decision making and
collaboration mitigate the risk.
The activity and progress of our competitors is a significant
risk. Whether there is a new innovation or a gain in
competitive advantage by a new process, or the loss of
market share by any means, any effect on our volume
throughput will have an effect on profitability. The board
looks for market intelligence, and devotes significant time to
understanding the strategy of our competitors. It is clear
that the success this business has achieved over the last 20
years leads our competitors to scour all information we
publish for data on our activities.
I would note that we have overseas subsidiaries with
significant profit and assets which are translated at average
exchange rates (in the case of profit and loss items) and at
year end rates (in the case of balance sheet items). The
effect of this is shown annually in the Consolidated
Statement of Comprehensive Income. Inevitably there is a
translational exposure on these items and since they are not
necessarily cash flows (excepting dividend payments) the
consolidated net worth of the group varies over time. We do
not hedge this translational exposure though we have in the
past hedged overseas assets with matching debt. At present
the cost and complexity in terms of arranging facilities and
complying with local taxation rules would seem to
outweigh the benefits.
The last five years of these exposures in terms of
increase/(decrease) in the value of our overseas assets are as
follows:
2020
2019
2018
2017
2016
£’000
336
(170)
(759)
2,168
4,808
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.
11
merely give some idea of the “affordability” of the deficit to
the group. The dominant assumption that drives up the
deficit is that the current very low gilt yields are used to
determine liabilities. There is an irony in that pension funds
have an unquenchable appetite for government bonds at
ever lower interest rates. The focus on current interest rates
as a determinant of long term liabilities continues and it
should be noted that relatively small increases in this
assumption eliminates the deficit.
It continues to be that our scheme augments past pensions
to RPI though ongoing salaries and future accrual are to the
more appropriate CPI. Several years ago the UK Statistics
Authority balked at changing RPI even though it is widely
discredited as an appropriate measure on which to base
pensions. The latest proposal to alter RPI to the CPIH basis
could reduce the deficit significantly.
Gordon Oliver
Finance Director
30 September 2020
Defined benefit pension scheme
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.
The scheme comprises active members (existing employees),
deferred members (past employees not yet in retirement) and
pensioners. Under the current accounting standard for pensions
the current service costs of active members are dealt with in the
profit and loss account with the costs associated with deferred
members and pensioners dealt with through the Consolidated
Statement of Comprehensive Income. This year there is a net
actuarial loss of £5.1 million against a net actuarial loss in 2019
of £4.5 million which is largely the effect of changing
assumptions 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.
These ratios for this Group based on a share price of 518p
(2019: 514p) are:
The net deficit to market capitalisation is 1.7% (2019:
1.5%);
The total liabilities to market capitalisation is 8.4%
(2019: 7.8%); and,
The deficit to operating profit is 52.6% (2019:
40.5%).
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
12
Section 172 Statement
The directors and the board as a collective consider that they acted in a way that would be most likely to promote the success
of the company for the benefit of its members as a whole (having regard to the stakeholders and matters set out in S172(1)
(a) to (f) of the Act) in the decisions taken during the year ended 30 June 2020.
The group comprises business units in various locations worldwide, all of which have engagement with their local stakeholders
and other companies within the group structure. The group’s governance delegation of authority allows decisions to be made
at local business unit level up to defined limits, which allows them to take account of the needs of their local stakeholders
through their decisions implemented locally. The board routinely monitors these decisions and ultimately takes responsibility
for the interaction with all stakeholders.
In consideration of major matters discussed at board level, the likely impact on all stakeholders are carefully considered and
where possible, decisions are carefully explained and discussed with affected stakeholders before actions are implemented to
ensure they understand and have any necessary support.
The group’s key stakeholders and how we engage with them are set out below.
Stakeholder group
How do we engage with them?
How has the board considered their interests?
Shareholders
Members of the board have regular dialogue
with institutional Investors and individual
shareholders in order to develop an
understanding of their views.
The AGM is an important forum for private
shareholders to meet the board and ask any
questions they may have, directly.
The company’s website has an investors
section which gives investors direct access to
reports, press releases and business
information. There is also contact mailbox
facility.
Customers
We interact with our customers through:
Regular visits and meetings
Industry exhibitions
Customer site tours and
presentations
Business unit websites
Supplying extensive samples and
supporting literature
Delivering a high standard of
technical support
Providing enhanced digital design
services and support
The board understands that shareholders
require sustainable growth and value
creation. In recognising this, it has
implemented a policy which has resulted in
increasing dividend returns and incremental
shareholder returns over a sustained period.
Shareholder views, together with movements
in the shareholder base, are regularly
reported to and discussed by the board and
their views are considered.
Our NOMAD’s views on market sentiment
are fed back on a regular basis, and are
considered by the board where it impacts
strategy.
Our strategy of attaining sustainable growth
in profit and building goodwill in our brands
will only be achieved through an
understanding of the needs of our customers
and the markets we serve.
The board regularly considers the impact on
customers when considering strategic
decisions, for instance the major investment
in a new warehousing facility has been driven
by the need to improve customer service.
Suppliers
Employees
Communities
Engagement with suppliers and business
partners is achieved by holding regular
meetings, regular evaluation reviews and
through audits of the supplier base.
We engage with our employees through site
communications, briefings, performance
reviews, newsletters and notice boards.
Employees are also written to individually on
matters which are deemed important.
We operate from multiple sites and seek to
be a good neighbour with the local
communities. Where possible we create
opportunities to recruit and develop local
people, which helps support the local
economy and look after the environment. We
also support local charities through
fundraising and donations.
13
The board recognises that relationships with
the supplier base is important to the
reputation and long term success of the
group. There is regular dialogue between our
management team and our suppliers, where
quality, price, sustainability and health and
safety are key to the discussions. Any matters
which the board needs to be aware of are
reported back as appropriate.
The board is aware that our employees are
critical to the successful achievement of the
strategic aims. The group prides itself on
providing a friendly and safe working
environment for all employees, and given the
nature of our manufacturing process, health
and safety is taken extremely seriously. There
are a number of employees who have
achieved thirty, forty and even fifty years’
service. The group has operated a share
scheme which enabled employees to build up
personal shareholding in James Halstead plc
and participate in its expansion and success.
The board has a full understanding of the
importance of good community relations
with both internal and external stakeholders.
The impact of our operations from an
environmental perspective is recognised on a
local and global level. Capital expenditure
projects, for example, focus on improving
energy efficiency and reducing environmental
emissions.
The corporate social responsibility section of the latest Polyflor Sustainability Report outlines in further detail, the group’s
commitment to its stakeholders, including the supply chain, employees and the communities.
The principal decisions in the year are included in the Financial Director’s Review.
The strategic report was approved by the
board of directors and signed on behalf of the
board.
D W Drillingcourt
Secretary
30 September 2020
14
Report of the Directors
The directors are pleased to present their report, together
with the audited accounts for the year ended 30 June 2020.
Substantial interests
Results and dividends
The group results for the year and the financial position at
30 June 2020 are shown in the consolidated income
statement on page 30 and the consolidated balance sheet
on page 32.
The directors are recommending a final dividend of 10.00p
(2019: 10.00p) per share on the ordinary share capital for
payment on 11 December 2020 to those shareholders whose
names appear on the register at 20 November 2020. This final
dividend together with the two interim dividends of2.125p
per share paid on 5 June 2020 and 10 September 2020
makes a total dividend of 14.25p (2019: 14.00p) per share for
the year.
Directors
The directors who held office during the year were as
follows:
J A Wild
M Halstead
G R Oliver
S D Hall
M J Halstead
R P Whiting
Mr M J Halstead and Mr R P Whiting 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 2020 30 June 2019
Beneficial As Trustee Beneficial As Trustee
J A Wild 150,300 11,975,360 150,300 11,975,360
M Halstead 13,241,468 11,126,312 13,241,468 11,202,159
G R Oliver 207,550 130,234 207,550 206,081
S D Hall 5,700 – 5,700 –
M J Halstead 688,117 – 688,117 –
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 27.
As at 14 September 2020 the company had been notified of
the following interests which represent 3% or more of the
existing issued share capital:
Number %
Rulegale Nominees 36,955,718 17.8
John Halstead Settlement 35,447,218 17.0
HSBC Global Custody Nominee 13,329,928 6.4
Octopus Investment Nominees 10,394,356 5.0
Share capital
During the year new ordinary shares were issued and
allotted as fully paid to enable share options to be exercised
as follows:
14 January 2020
10,000
10,000
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 2021.
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 £3,469,018
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 2021 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 2021 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
15
5.0% of the company’s issued ordinary share capital. The
resolution also contains provisions to enable the directors to
deal with fractional entitlements and other practical
difficulties which could arise in the event of a rights issue or
similar pre-emptive offer.
Resolution 9 seeks to renew the authority of shareholders to
allow the company to purchase its own shares in respect of
up to 10% of the issued capital at prices not exceeding 5%
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).
Resolution 10 seeks to amend the rules of the James
Halstead plc Share Option Plan that was adopted by the
company in 1998. Substantive changes to the rules of the
plan have been made to take into account changes in
legislation and rules affecting listed companies since the
scheme was last amended in 2010, including Market Abuse
Rules 2014. A significant change to the rules being proposed
is the incorporation of malus and clawback provisions which
takes account of recent case law and aligns the rules with
the Investment Association’s remuneration principals
(November 2019).
Going concern
The group’s performance, position and business activities,
together with the factors likely to affect its future development,
are described in the Chief Executive’s Statement.
The directors have reviewed current performance and
forecasts, combined with capital
investment and
expenditure commitments, and a range of trading scenarios.
The group has no net borrowings and owns the freeholds on
many of its premises (the most significant being the four UK
operating sites).
After making enquiries, the directors have the reasonable
expectation that the group has adequate financial resources
to continue in operation, including contractual and
commercial commitments, for the foreseeable future. The
global pandemic has led to a greater focus on this facet of
the accounts and the audit but in looking at various
scenarios we see some positives when considering the short
to medium term (12 – 18 months). Firstly, the UK (and most
of our other markets) went into the initial wave of the
pandemic unprepared in terms of resources and basic
knowledge of the virus. Over that initial lockdown period we
remained profitable and cash generative (albeit at lower
levels). During that time our focus was on the immediate
upswing in demand from the health sector (for example
“Nightingale” pop-up hospitals), but this by no means offset
the lower levels of trade elsewhere.
It is reasonable to suppose that in a second wave any
lockdown would be less widespread. In addition we and the
markets in which we operate are more aware of the health
and safety issues. The various health services are more
prepared and basic resources such as PPE and sanitisers are
more available. It is clear that infections continue to rise in
many locations but equally across the various markets the
death rate is lower due to better understanding of
treatment, better public awareness and other factors.
Furthermore, we have noted that, in our business, there has
been a marked “bounce back” in trade in the weeks and
months after the various lockdowns our businesses have
faced. The major part of our business is repair and renewal
and it seems clear that whilst sales dropped significantly in
the lockdown these were not lost but were deferred. On
new build there has been a smaller rebound, and still in
many markets the service sector of the building trade are
not working as normal but this work is not cancelled but
merely deferred.
Certain end user segments continue to be hit (restaurant
and hospitality being the most obvious) but others have
grown beyond the norm (portable buildings and school
refurbishment). Given the extreme ease of cleaning vinyl its
use in many projects is being widened. Our competitors and
our customers have all been affected by the pandemic. To
the extent that they have made public their experiences of
trading and outlook we have assessed these in our own
projections. In the most drastic of scenarios significant
wages can be curtailed under statutory lay off for a period
of three months. We are confident that we have not lost
market share.
Working with our teams we have tested extreme scenarios
for the purposes of the statutory audit and, whilst we do not
believe they are likely, this stress testing underpins the going
concern concept. The most practical aspects of our planning
is damage limitation of our ability to continue to
manufacture and supply our global markets by maximising
awareness of basic hygiene and social distancing.
An initial concern was cash flow and it is pleasing to note
that liquidity was not generally compromised in the way it
was in the financial crisis. We have no doubt that the
liquidity injected into the UK economy by grants supporting
the payment of wages helped. As we look to the months
ahead this financial support will cease which is one reason
we have stress tested wider disruption.
16
Report of the Directors
continued
Employment involvement
Within the UK we have both 25 year clubs and 40 year clubs
for all employees. Many employees have worked their entire
career for the group, and retaining an experienced workforce
is important to our long term success. Our workforce
retention rate is very high. Recruitment is biased to the local
area, and we have a number of graduate recruits and offer
internships to support of younger people looking to develop
their employment skills. We look to pass on knowledge and
we are involved in skills training to the flooring industry,
technical knowledge to the industry in general and
involvement in the Chartered Institute of Human Resource
Management’s “Skills Ahead Mentoring Project”. We have a
floor fitting school for the industry and this is accessible to
employees allowing them to gain skills for use in their own
homes.
Promotion or opportunities in different departments are
often recruited from within the business and is preferred to
external candidates. The senior management and the
directors having, in the main, come from lower positions
within the business, including the executive directors of the
main company. Our recycling partnership presents to senior
management and staff on a regular basis to promote a better
understanding of achievements and goals to involve more of
our staff in sustainability.
We have a firm belief in equality and our main subsidiaries are
SA8000 accredited (an independent standard for decent
working environments). Also BS OHAS 18001 accredits our
occupational and safety management protocols.
All our UK employees are offered pension scheme benefits
with company contribution and the majority of UK
employees are shareholders in the company by virtue of a
long standing employee participation scheme. This is
currently being reviewed to make it even more relevant to the
group today. On the more personal level we operate a
company supported social club for employees, we have
outdoor seating, we offer bike sheds and there are shower
facilities at most sites. Also there are break out zones and
facilities to either buy or prepare food at all our sites. The
company looks favourably on providing time for employees
to undertake voluntary work.
Across our sites there are regular consultation meetings with
trade union
employee
representatives).
representatives
(some with
Our employees are an important asset and are kept abreast
of group performance at least twice a year. In this year with
the pandemic we have made provision for many staff to work
from home and created segregated teams to maximise social
distancing. Obviously the production lines need manpower
and much reorganisation has been undertaken to maintain a
safe working environment. During the early days of the
pandemic a great deal of time was spent in collaboration
with external union officials and local health and safety
officials to minimise risk and to allay employee concerns.
In terms of decisions directly affecting employees,
communication is by line managers in the first instance, but
the directors will discuss overall matters with designated
representatives. In regard to the principal decisions of the
business the board has considered the employees as a group
and their well being as a whole.
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
remain totally committed to the continuing
We
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.
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.
17
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;
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.
Emissions and energy consumption
In line with current UK reporting guidelines, the following
table details the group’s UK emissions made and energy
consumed in the year ended 30 June 2020. The information
has been prepared using the reporting guidance set out by
the SECR (Streamlined Energy and Carbon Reporting)
requirements and methodology.
Scope 1 - direct emissions
(UK facilities and vehicles)
Scope 2 - indirect emissions
(UK purchased electricity)
Total Scope 1 and Scope 2 emissions
Intensity metric – total scope
1 & 2 emissions per metric tonne produced
Year ended
30 June 2020
Tonnes of CO2e
8,049
5,495
13,544
0.31
Total UK energy consumption (kWh)
67,086,645
The group is committed to year on year improvements in
our operational energy efficiency. A number of energy
efficiency projects have been identified for completion in
the coming year including the installation of high efficiency
boilers, an LED light replacement schedule, increased
installation of submeters to facilitate more efficient plant
management and the implementation of an energy and
environment strategy in line with the UK’s 2050 net zero
targets. These projects will be accretive to the improvement
in energy efficiencies achieved though the measures
undertaken in the current year.
Risk management
Information in relation to risk management and future
developments can be found in the financial director’s review
in the strategic report.
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
18
Report of the Directors
continued
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
30 September 2020
M26 1JN
Board Report on Remuneration
19
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 14. 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 £463,000 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
20
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 governance. It is part of our
character and, I believe, contributes to our ability to deliver
long-term shareholder value. 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 two sub committees: a remuneration
committee and an audit committee.
The directors are named below along with their membership
of board committees.
Director
Role
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
Remuneration
Audit
Committee
Committee
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 2001 and chairman in 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 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.
21
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 6
S D Hall 6 6
M J Halstead 6 6
R P Whiting 6 6
Senior management team
Mr David Drillingcourt – Corporate Development Director
and Company Secretary
Mr Drillingcourt is a Chartered Accountant and trained with
KPMG before joining the company in 1996 as group
accountant. He served as finance director at two of the
company’s subsidiaries, Phoenix Distribution (NW) Limited
(1999-2005) and Polyflor Limited (2005-2013), before his
appointment as company secretary in 2013 and corporate
development director in 2019. Working closely with the
board and subsidiary directors, the role is designed to help
support the future growth of the business across the globe.
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.
22
Corporate Governance
continued
The key procedures which the directors have established
with a view to providing effective internal control are as
follows:
the audit committee keeps under review the
effectiveness of the system of internal control and
reports its conclusions to the full board;
the group directors are responsible for establishing,
maintaining and reviewing the group’s system of
internal control and meet regularly to consider group
financial performance, business development and
management issues, and to review these against
predetermined objectives;
the group board establishes corporate strategy and
business objectives. Management of subsidiary
companies integrate these objectives into their
business strategies for presentation to the group
board with supporting financial objectives;
subsidiary company budgets, containing financial and
operating targets, capital expenditure proposals and
performance/profitability indicators, are presented to
and reviewed by the group executive directors. The
consolidated group budget is approved by the group
board;
there is an ongoing process for identifying, evaluating
and managing the significant risks faced by the group.
These risks are appraised and evaluated by
responsible executives and endorsed by subsidiary
and group management. This process has been in
place throughout the year and up to the date of
approval of the annual accounts;
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 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.
23
The disclosures below were last reviewed and approved by
the board on 30 September 2020.
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.
Our strategy is focussed on 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
impact on the
improvement with respect to the
environment and communities. This is illustrated by our
annual “Sustainability Report” copies of which are available
on www.polyflor.com which outlines the impact of our
manufacturing operations on the wider environment and
local
improvements over time. Feedback from the
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.
24
Corporate Governance
continued
A monthly report is provided to the board of the financial
and operational performance of the group. Information is
provided in advance of meetings.
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.
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.
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,
and nomination
specifically
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
a regular basis
its performance. The remuneration
committee meets formally and is tasked with not only the
remuneration of the executive directors but also evaluation
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.
25
In terms of publication of results, the company uses the
Stock Exchange regulatory news service (RNS) to advise the
market (i.e. 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.
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.
The board retains ultimate accountability for maintaining
good governance. The executive directors are responsible for
the day-to-day operational management of the group and
the non-executive directors are responsible for bringing
their independent and objective judgement to board
discussions and decisions. The roles of chairman and chief
executive are split in accordance with best practice. The
board are responsible for the implementation of strategy,
the achievement of performance and ensuring the
framework of internal controls is effective. The board has
delegated specific responsibilities to the audit and
remuneration committees.
The audit committee assists the board by ensuring that the
financial performance of the group is properly reported. It
oversees and reviews the internal control processes, its
relationship with external auditors and the process for
ensuring compliance with laws, regulations and corporate
governance.
The remuneration committee is responsible for establishing
a formal and transparent procedure for developing policy on
remuneration and to set the remuneration packages of
individual directors, including, where appropriate, bonuses,
incentive payments and share options.
Due the nature and size of the company, the directors have
determined that a nomination committee is not necessary
and that issues concerning the nomination of directors will
be dealt with by the board directly.
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.
26
Independent Auditor’s Report to the Members of
James Halstead plc
Opinion
We have audited the financial statements of James
Halstead plc (the ‘parent company’) and its subsidiaries (the
‘group’) for the year ended 30 June 2020 which comprise
the Consolidated
Income Statement, Consolidated
Statement of Comprehensive Income, Consolidated and
Parent Company Balance Sheets, Consolidated and Parent
Company Statement of Changes in Equity, Consolidated
Cash Flow Statement and notes to the consolidated and
parent company financial statements, including a summary
of significant accounting policies.
Conclusions relating to going concern
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.
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 2020 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.
Key audit matters
Key audit matters are those matters that, in our professional
judgement, 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 19
(inventories), the group carries inventory at the lower of
cost and net realisable value. Provision is made against slow
moving, obsolete and damaged inventories. As at 30 June
2020, the group held inventories of £68.5m (2019: £69.9m).
judgement
This area represented a key audit matter as significant
management
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 judgements
include management's expectations for future sales.
How we addressed the key audit matter
concerning management's
We obtained evidence
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
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
27
assessing the appropriateness of the percentages
applied within the provision by reviewing historic
sales and the ageing of stock 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 for cost and sales prices.
We also audited the basis 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.
Key observation: Our work did not highlight evidence that
the level of inventory provision is materially misstated.
Pension scheme assumptions
As described in Note 2 (accounting policies) and Note 26
(retirement benefit obligations), the group has a defined
benefit pension plan in the UK. At 30 June 2020, the group
recorded a net
retirement obligation of £23.2m
(2019: £19.6m), comprising scheme assets of £67.3m
(2019: £63.8m) and scheme liabilities of £90.5m (2019:
£83.3m).
The pension valuation is dependent on market conditions
and key assumptions made by management, in particular
relating to investment markets, discount rate, inflation
expectations and life expectancy assumptions.
This area represented a key audit matter given that 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 26.
How we addressed the key audit matter
In testing the pension valuation, we utilised 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 benchmarked the scheme assumptions against other
schemes of a similar size and profile. Specifically we
challenged the discount rate, inflation and mortality
assumptions applied in the calculation by using pension
experts to benchmark the assumptions applied against
comparable
the
appropriateness of the assumptions in the context of the
group’s own position. We have also performed sensitivity
analysis on the assumptions determined by the Directors.
third party data and assessed
Furthermore, we have assessed the disclosure of the net
pension
liability and the related assumptions and
sensitivities in the financial statements against the relevant
accounting framework.
Key observation: We have not identified any evidence to
suggest that the methodology and assumptions applied in
relation to determining the pension valuation are not within
an acceptable range.
Going concern
As disclosed in Note 2, management have assessed that it is
appropriate for the group and the parent company to
continue preparing the consolidated financial statements on
a going concern basis.
The outbreak of Covid-19 has resulted in uncertainty in the
economy and difficulty in accurately forecasting the
performance of the group going forwards.
Management considered implications for the group’s going
concern assessment and the disclosure in the Annual Report
and accounts, by developing stress test scenarios to model
potential impacts.
Management are required to make significant estimates and
judgements when preparing such forecasts as a small
change in the assumptions used may have a significant
impact on the cash flows of the group and profitability. For
this reason we considered the audit of going concern a key
audit matter.
How we addressed the key audit matter
Our audit procedures included examining management’s
business plan covering the period to September 2021. We
examined the cash flow forecasts for key judgements as well
as considering downside sensitivities to these.
We challenged management’s stress test scenarios
including levers available to management to mitigate the
impacts.
We challenged management on the key assumptions
included in the scenarios and confirmed management’s
mitigating actions are within their control.
The forecasts include key assumptions in respect of (1) the
impact of Coronavirus on future sales; and (2) operational
capacity. We challenged each area by considering whether
the assumptions put in place were realistic based on
supporting information such as post year end performance
and historic trends. We also corroborated each key
assumption to supporting documentation.
We also assessed the adequacy of the disclosure within the
financial statements relating to the directors’ assessment of
the going concern basis of preparation.
Our application of materiality
Group materiality Group materiality Basis for
2020 2019 materiality
£2.30 million £2.41 million 5% of 3 year
average profit
before tax
(2019: 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,
28
Independent Auditor’s Report to the Members of
James Halstead plc continued
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.
Pre-tax profit is determined to be a stable basis of assessing
business performance and is considered to be the most
significant determinant of 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 £1.49m (2019: £1.57m)
which represents 65% (2019: 65%) of the above materiality
level.
Materiality in respect of the audit of the Parent Company
has been set at £1.49m (2019: £1.54m) using a benchmark
of 5% of 3 year average profit before tax (2019: 5% of profit
before tax). Pre-tax profit is determined to be a stable basis
of assessing business performance and is considered to be
the most significant determinant of performance used by
shareholders. For the purposes of the group audit, the
amount above was restricted to component materiality.
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 £46,000 (2019:
£48,200). We also agreed to report differences below these
thresholds that, in our view, warranted reporting on
qualitative grounds.
An overview of the scope of our audit
Our group audit was scoped by obtaining an understanding
of the group and its environment, including group-wide
controls, and assessing the risks of material misstatement at
the group level.
Our group audit scope focused on the group’s principal
operating locations being the United Kingdom, Germany
and Australia. The operations in the United Kingdom were
subject to a full scope audit whilst the significant
components in Germany and Australia were audited to
component materiality. The German component is audited
by a non-BDO member firm. The Australian component is
audited by a BDO member firm.
its group
Together with the parent company and
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 £2.30m, each component of the group was audited to
a lower level of materiality. Component materiality was in
the range of £0.46m to £1.61m.
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 were involved during the planning and
risk assessment process of the German component in
addition to during the completion of detailed audit
procedures. We attended key meetings virtually 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 performed by the
group audit team.
Other information
The directors are responsible for the other information. The
other information comprises the information included in the
Report and Accounts 2020, 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.
29
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
at:
www.frc.org.uk/auditorsresponsibilities. This description
forms part of our auditor’s report.
Reporting
Council’s
website
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
30 September 2020
BDO LLP is a limited liability partnership registered in
England and Wales (with registered number OC305127).
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
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 17, 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.
30
Consolidated Income Statement
for the year ended 30 June 2020
Note 2020 2019
£’000 £’000
Revenue 5 238,630 253,038
Cost of sales (138,262) (144,236)
Gross profit 100,368 108,802
Selling and distribution costs (45,297) (49,149)
Administration expenses (10,936) (11,279)
Operating profit 44,135 48,374
Finance income 9 382 357
Finance cost 10 (660) (455)
Profit before income tax 7 43,857 48,276
Income tax expense 11 (9,502) (10,484)
Profit for the year attributable to equity shareholders 34,355 37,792
Earnings per ordinary share of 5p
– basic 12 16.5p 18.2p
– diluted 12 16.5p 18.2p
All amounts relate to continuing operations.
Details of dividends paid and proposed are given in note 13.
31
Consolidated Statement of Comprehensive Income
for the year ended 30 June 2020
Note 2020 2019
£’000 £’000
Profit for the year 34,355 37,792
Other comprehensive income net of tax:
Items that will not be reclassified subsequently
to the income statement:
Remeasurement of the net defined benefit liability 26 (5,062) (4,546)
(5,062) (4,546)
Items that could be reclassified subsequently
to the income statement if specific conditions are met:
Foreign currency translation differences 336 (170)
Fair value movements on hedging instruments (16) (689)
320 (859)
Other comprehensive income for the year net of tax (4,742) (5,405)
Total comprehensive income for the year 29,613 32,387
Attributable to:
Equity holders of the company 29,613 32,387
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 11.
32
Consolidated Balance Sheet
as at 30 June 2020
Note 2020 2019
£’000 £’000
Non-current assets
Property, plant and equipment 15 38,520 37,449
Right of use assets 16 5,872 –
Intangible assets 17 3,232 3,232
Deferred tax assets 18 4,334 3,261
51,958 43,942
Current assets
Inventories 19 68,542 69,921
Trade and other receivables 20 28,361 32,816
Derivative financial instruments 29 73 372
Cash and cash equivalents 21 67,445 68,664
164,421 171,773
Total assets 216,379 215,715
Current liabilities
Trade and other payables 22 47,444 58,354
Derivative financial instruments 29 883 684
Current income tax liabilities 773 3,419
Lease liabilities 23 2,568 –
51,668 62,457
Non-current liabilities
Retirement benefit obligations 26 23,216 19,582
Other payables 22 449 419
Lease liabilities 23 3,371 –
Preference shares 24 200 200
27,236 20,201
Total liabilities 78,904 82,658
Net assets 137,475 133,057
Equity
Equity share capital 27 10,407 10,407
Equity share capital (B shares) 27 160 160
10,567 10,567
Share premium account 4,072 4,044
Capital redemption reserve 1,174 1,174
Currency translation reserve 5,601 5,265
Hedging reserve (37) (21)
Retained earnings 116,098 112,028
Total equity attributable to shareholders of the parent 137,475 133,057
The financial statements were approved and authorised for issue by the board and were signed on its behalf on 30 September 2020.
M Halstead G R Oliver
Director Director
James Halstead plc Registration Number 140269
33
Consolidated Statement of Changes in Equity
for the year ended 30 June 2020
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 2018 10,559 3,805 1,174 5,435 668 107,176 128,817
Profit for the year – – – – – 37,792 37,792
Remeasurement of the net defined
benefit liability – – – – – (4,546) (4,546)
Foreign currency translation
differences – – – (170) – – (170)
Fair value movements on
hedging instruments – – – – (689) – (689)
Total comprehensive income for
the year – – – (170) (689) 33,246 32,387
Transactions with equity shareholders
Dividends – – – – – (28,405) (28,405)
Issue of share capital 8 239 – – – – 247
Share based payments – – – – – 11 11
Balance at 30 June 2019 10,567 4,044 1,174 5,265 (21) 112,028 133,057
Profit for the year – – – – – 34,355 34,355
Remeasurement of the net defined
benefit liability – – – – – (5,062) (5,062)
Foreign currency translation
differences – – – 336 – – 336
Fair value movements on
hedging instruments – – – – (16) – (16)
Total comprehensive income for
the year – – – 336 (16) 29,293 29,613
Transactions with equity shareholders
Dividends – – – – – (25,236) (25,236)
Issue of share capital – 28 – – – – 28
Share based payments – – – – – 13 13
Balance at 30 June 2020 10,567 4,072 1,174 5,601 (37) 116,098 137,475
34
Consolidated Cash Flow Statement
for the year ended 30 June 2020
2020 2019
£’000 £’000
Profit for the year attributable to equity shareholders 34,355 37,792
Income tax expense 9,502 10,484
Profit before income tax 43,857 48,276
Finance cost 660 455
Finance income (382) (357)
Operating profit 44,135 48,374
Depreciation of property, plant and equipment 3,185 3,105
Depreciation of right of use assets 2,937 –
(Profit)/loss on sale of property, plant and equipment (43) 16
Defined benefit pension scheme service cost 611 564
Defined benefit pension scheme employer contributions paid (4,138) (1,780)
Changes in fair value of financial instruments 14 281
Share based payments 13 11
Decrease in inventories 1,717 1,449
Decrease/(increase) in trade and other receivables 4,388 (621)
(Decrease)/increase in trade and other payables (10,450) 9,033
Cash inflow from operations 42,369 60,432
Taxation paid (11,566) (10,487)
Cash inflow from operating activities 30,803 49,945
Purchase of property, plant and equipment (4,215) (4,263)
Proceeds from disposal of property, plant and equipment 110 107
Cash outflow from investing activities (4,105) (4,156)
Interest received 382 357
Interest paid (30) (33)
Lease interest paid (202) –
Lease capital paid (2,873) –
Equity dividends paid (25,236) (28,405)
Shares issued 28 247
Cash outflow from financing activities (27,931) (27,834)
Net (decrease)/increase in cash and cash equivalents (1,233) 17,955
Effect of exchange differences 14 30
Cash and cash equivalents at start of year 68,664 50,679
Cash and cash equivalents at end of year 67,445 68,664
35
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 a going concern basis and on the historical cost basis as modified by the
valuation of certain financial assets and financial liabilities (including derivative instruments) at fair value.
Going concern
The directors have reviewed current performance and forecasts, combined with capital investment and expenditure commitments,
and a range of trading scenarios. The group has no net borrowings and owns the freeholds on many of its premises (the most
significant being the four UK operating sites).
After making enquiries, the directors have the reasonable expectation that the group has adequate financial resources to continue
in operation, including contractual and commercial commitments, for the foreseeable future. The global pandemic has led to a
greater focus on this facet of the accounts and the audit but in looking at various scenarios we see some positives when considering
the short to medium term (12 – 18 months). Firstly, the UK (and most of our other markets) went into the initial wave of the
pandemic unprepared in terms of resources and basic knowledge of the virus. Over that initial lockdown period we remained
profitable and cash generative (albeit at lower levels). During that time our focus was on the immediate upswing in demand from
the health sector (for example “Nightingale” pop-up hospitals), but this by no means offset the lower levels of trade elsewhere.
It is reasonable to suppose that in a second wave any lockdown would be less widespread. In addition we and the markets in which
we operate are more aware of the health and safety issues. The various health services are more prepared and basic resources such
as PPE and sanitisers are more available. It is clear that infections continue to rise in many locations but equally across the various
markets the death rate is lower due to better understanding of treatment, better public awareness and other factors.
Furthermore, we have noted that, in our business, there has been a marked “bounce back” in trade in the weeks and months after the
various lockdowns our businesses have faced. The major part of our business is repair and renewal and it seems clear that whilst sales
dropped significantly in the lockdown these were not lost but were deferred. On new build there has been a smaller rebound, and still
in many markets the service sector of the building trade are not working as normal but this work is not cancelled but merely deferred.
Certain end user segments continue to be hit (restaurant and hospitality being the most obvious) but others have grown beyond
the norm (portable buildings and school refurbishment). Given the extreme ease of cleaning vinyl its use in many projects is being
widened. Our competitors and our customers have all been affected by the pandemic. To the extent that they have made public
their experiences of trading and outlook we have assessed these in our own projections. In the most drastic of scenarios significant
wages can be curtailed under statutory lay off for a period of three months. We are confident that we have not lost market share.
Working with our teams we have tested extreme scenarios for the purposes of the statutory audit and, whilst we do not believe
they are likely, this stress testing underpins the going concern concept. The most practical aspects of our planning is damage
limitation of our ability to continue to manufacture and supply our global markets by maximising awareness of basic hygiene and
social distancing.
An initial concern was cash flow and it is pleasing to note that liquidity was not generally compromised in the way it was in the
financial crisis. We have no doubt that the liquidity injected into the UK economy by grants supporting the payment of wages
helped. As we look to the months ahead this financial support will cease which is one reason we have stress tested wider disruption.
36
Notes to the Consolidated Financial Statements
continued
Accounting policies (continued)
2.
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.
The following standards were adopted in the period.
IFRS 16 Leases was adopted with effect from 1 July 2019. The effect of adopting IFRS 16 is set out in note 34.
IFRIC 23 Uncertainty over income tax treatments had no impact on the 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.
IAS 1 Presentation of financial statements and IAS 8 Accounting policies, changes in accounting estimates and errors (amendment –
definition of material)
IFRS 3 Business combinations (amendment – definition of material)
Revised conceptual framework for Financial Reporting
The impact of these is being assessed, but they are not expected to have a material impact on the financial statements.
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.
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.
37
2.
Accounting policies (continued)
Foreign currencies (continued)
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.
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.
38
Notes to the Consolidated Financial Statements
continued
2.
Accounting policies (continued)
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 provision for lifetime expected credit losses using the simplified approach in IFRS 9. Estimated irrecoverable amounts are based
on historical experience and forward looking information, 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. Cash and cash
equivalents are held at amortised cost.
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.
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.
39
2.
Accounting policies (continued)
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.
Right of use assets and lease liabilities
A right of use asset and a lease liability are recognised for all leased asset contracts on their commencement, except for low value
leases and short term leases of one year or less.
On recognition, the right of use asset and lease liability are measured at the present value of the lease payments discounted over
the lease term. The discount rate used is the rate inherent in the lease if this can be determined, or the incremental borrowing rate.
Subsequent to initial recognition, the right of use assets are depreciated on a straight line basis over the shorter of the lease term
or the useful life of the asset. The lease liabilities are increased by the interest cost and reduced by the lease payments made. A
depreciation charge and an interest cost are recognised in the income statement.
The lease payments for low value and short term leases are expensed in the income statement on a straight line basis over the
lease term.
Revenue recognition
Revenue is from the sales of flooring products and is recognised at the point in time when control of the products has been
transferred to the customer. Sales are recognised on despatch of the goods to the customer. Control passes to the customer at the
point terms of despatch are met. Sales are invoiced at the time of despatch and payment terms are based on the invoice date.
Payment terms vary by customer, but do not exceed six months. Revenue is stated after provision for trade discounts and rebates
due on the sales. Revenue excludes VAT and sales taxes.
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.
40
Notes to the Consolidated Financial Statements
continued
Accounting policies (continued)
2.
Derivative financial instruments and hedging
The group uses derivative financial instruments to hedge its exposure to foreign currency transactional risk. In accordance with its
treasury policy the group does not hold or issue derivative financial instruments for trading purposes.
Derivative financial instruments are recorded at fair value on the date the derivative contract is entered into and are subsequently
remeasured at fair value at each group balance sheet date.
The method by which any gain or loss arising from remeasurement is recognised depends on whether the instrument is designated
as a hedging instrument and, if so, the nature of the item being hedged. The group recognises an instrument as a hedging
instrument by documenting at the inception of the transaction the relationship between the instrument and the hedged items and
the objectives and strategy for undertaking the hedging transaction. To be designated as a hedging instrument, an instrument must
also be assessed, at inception and on an ongoing basis, to be highly effective in offsetting changes in cash flows of hedged items.
For derivatives not used in hedging transactions, the gain or loss on remeasurement of fair value is recognised immediately in the
income statement.
Where a derivative financial instrument is designated as a hedge of the variability in cash flows of a recognised asset or liability, or
of a highly probable forecast future transaction, the gain or loss on remeasurement which relates to the portion of the hedge which
is deemed effective is recognised directly in equity, with the balance of the gain or loss, relating to the ineffective portion, being
recognised immediately in the income statement.
Amounts accumulated in equity are recycled in the income statement in the periods when the hedged item affects profit or loss.
The fair value of forward foreign exchange contracts is determined using forward exchange market rates at the balance sheet date.
Financial risk management
3.
Financial risk and treasury policies
A full description of the James Halstead plc group’s treasury policy is contained in the financial director’s review.
The group’s activities expose it to a number of financial risks as detailed below. These risks are managed, with the objective of
limiting adverse effects, from the group’s head office in accordance with policies determined by and decisions made by the group
board.
There have been no changes in financial risks from the previous year.
Market risks
Market risk is the risk that changes in market prices, such as currency exchange rates and interest rates will affect the group’s results.
The objective of market risk management is to control it within suitable parameters.
(a) Foreign exchange risk
The group operates internationally and is exposed to foreign currency risk on sales and purchases that are denominated in a
currency other than the functional currency of the entity making the sale or purchase. There are a range of currencies giving rise to
this risk, but most significant is the euro. To mitigate risks associated with future exchange rate fluctuations, the group’s policy is
to use forward exchange contracts to hedge its known and certain forecast transaction exposures based on historical experience
and projections. The group hedges at least 25% but rarely more than 100% of the next twelve months’ anticipated exposure.
(b) Interest rate risk
The group does not use derivative financial instruments to mitigate its exposure to interest rate risk. The main element of interest
rate risk concerns sterling deposits which are made on floating market based rates and short-term overdrafts in foreign currencies
which are also on floating rates.
41
3.
Financial risk management (continued)
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.
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:
42
Notes to the Consolidated Financial Statements
continued
4.
Critical accounting estimates and judgements (continued)
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.
Expected credit losses
Provision is made against trade receivables for lifetime expected credit losses using the simplified approach in IFRS 9. 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, the creditworthiness of the customer and forward looking information. 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. Further details are provided
in note 20.
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 26.
43
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, right of use and intangible assets. Geographical disclosures in respect of
revenues and segment assets are provided below and include revenue for Germany of £53,096,000 (2019: £53,293,000) and assets
in Germany of £12,166,000 (2019: £9,899,000).
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.
2020
£’000
78,921
105,732
33,553
20,424
2019
£’000
88,571
108,097
35,396
20,974
238,630
253,038
2020
£’000
30,248
13,679
3,060
637
47,624
4,334
51,958
2019
£’000
27,727
11,249
1,667
38
40,681
3,261
43,942
44
Notes to the Consolidated Financial Statements
continued
Employee profit share
6.
Profit for the year is after charging the cost of the James Halstead plc share ownership plan. Since 1980 the group has operated an
employee share scheme, approved under the Finance Act 1978. In December 2001 the shareholders approved a new share ownership
plan in line with the requirements of legislative changes. The aim of this scheme is to enable employees to build up a personal
shareholding in James Halstead plc and to participate in its continued expansion and success as shareholders as well as employees.
As members of the scheme the following directors received shares to the value of, Mr 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
Depreciation of right of use assets
(Profit)/loss on disposal of property, plant and equipment
Operating lease rentals
Research and development
Government grant income for business support UK and overseas
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
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
2020
£’000
3,185
2,937
(43)
–
1,468
(1,739)
50
112
43
6
1
2020
£’000
35,054
4,196
611
834
13
40,708
2019
£’000
3,105
–
16
3,805
1,588
–
50
112
43
10
1
2019
£’000
36,755
4,357
564
877
11
42,564
2020
Number
2019
Number
668
158
826
2020
£’000
968
926
8
1,902
25
1,927
699
151
850
2019
£’000
934
892
8
1,834
35
1,869
9.
Finance income
Bank deposit interest
Other interest
Finance income
10. Finance cost
Other interest
Preference share dividend
Lease interest
Net pension interest cost
Finance cost
11.
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
45
2019
£’000
350
7
357
2019
£’000
22
11
33
–
422
455
2019
£’000
10,583
(447)
10,136
254
94
348
2020
£’000
377
5
382
2020
£’000
19
11
30
202
428
660
2020
£’000
9,393
(486)
8,907
437
158
595
Total taxation
9,502
10,484
Current tax includes £3,085,000 (2019: £3,501,000) of overseas tax.
The effective tax rate for the year to 30 June 2020 is higher (2019: 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% (2019: 19%)
Effects of:
Adjustments to tax in respect of prior periods
Overseas tax rates
Disallowable items
Other items
Total taxation
2020
£’000
43,857
8,333
(328)
1,228
193
76
9,502
2019
£’000
48,276
9,172
(353)
1,451
240
(26)
10,484
In addition to the amounts above £1,671,000 has been credited (2019: £931,000 credited) as other comprehensive income in
respect of the remeasurement of the net defined benefit liability, and has been netted off the amounts shown in the Consolidated
Statement of Comprehensive Income.
46
Notes to the Consolidated Financial Statements
continued
12. 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
The earnings per 5p ordinary share are attributable to equity shareholders.
13. Dividends
Equity dividends
Final dividend for previous year of 10.00p (2019: 9.65p)
Interim dividend for current year of 2.125p (2019: 4.00p)
Amounts recognised as distributions to equity shareholders in the year
2020
£’000
34,355
2019
£’000
37,792
208,135,698
208,071,633
148,358
70,667
208,284,056
208,142,300
16.5p
16.5p
18.2p
18.2p
2020
£’000
20,813
4,423
25,236
2019
£’000
20,080
8,325
28,405
A second interim dividend of 2.125p per share for the year ended 30 June 2020, amounting to £4,423,000, was declared on 30 July
2020 and paid on 10 September 2020.
A final dividend of 10.00p per share for the year ended 30 June 2020, amounting to £20,814,000 will be proposed at the Annual
General Meeting.
14. 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
£27,818,000 (2019: £55,617,000). The aggregate amount of directors’ emoluments excluding pension contributions was
£1,902,000 (2019: £1,834,000) of which the highest paid director’s emoluments were £912,000 (2019: £878,000). The directors’
salaries or fees for the year ended 30 June 2020 were Mr J A Wild £40,000, Mr M Halstead £445,000, Mr G R Oliver £418,000,
Mr S D Hall £25,000, Mr M J Halstead £20,000 and Mr R P Whiting £20,000.
15. Property, plant and equipment
Cost
At 30 June 2018
Additions
Disposals
Exchange differences
At 30 June 2019
Additions
Disposals
Exchange differences
At 30 June 2020
Depreciation
At 30 June 2018
Charge for the year
Disposals
Exchange differences
At 30 June 2019
Charge for the year
Disposals
Exchange differences
At 30 June 2020
Net book value
At 30 June 2018
At 30 June 2019
At 30 June 2020
16. Right of use assets
Cost
Amount recognised on 1 July 2019 (note 34)
Exchange differences
At 30 June 2020
Depreciation
Charge for the year
Exchange differences
At 30 June 2020
Net book value
At 30 June 2020
Freehold
land and
buildings
£’000
Plant and
equipment
£’000
27,708
224
–
120
28,052
–
–
163
28,215
9,149
658
–
37
9,844
670
–
59
10,573
18,559
18,208
17,642
67,238
4,039
(723)
40
70,594
4,215
(465)
55
74,399
49,473
2,447
(600)
33
51,353
2,515
(398)
51
53,521
17,765
19,241
20,878
47
Total
£’000
94,946
4,263
(723)
160
98,646
4,215
(465)
218
102,614
58,622
3,105
(600)
70
61,197
3,185
(398)
110
64,094
36,324
37,449
38,520
Right of use
assets
£’000
8,869
14
8,883
2,937
74
3,011
5,872
48
Notes to the Consolidated Financial Statements
continued
17.
Intangible assets
Cost and net book value at 30 June 2018, 2019 and 2020
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.
18. Deferred tax assets and liabilities
At 30 June 2018
Credited/(charged) to income
Credited to other comprehensive income
Exchange differences
At 30 June 2019
Credited/(charged) to income
Credited to other comprehensive income
Exchange differences
At 30 June 2020
Pension
scheme
deficit
£’000
Accelerated
tax
depreciation
£’000
Other
timing
differences
£’000
2,533
(135)
931
–
3,329
(589)
1,671
–
4,411
(696)
(120)
–
–
(816)
(308)
–
–
837
(93)
–
4
748
302
–
(3)
(1,124)
1,047
Total
£’000
2,674
(348)
931
4
3,261
(595)
1,671
(3)
4,334
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.
19.
Inventories
Raw materials and consumables
Work in progress
Finished goods
2020
£’000
5,140
1,358
62,044
68,542
2019
£’000
4,625
1,515
63,781
69,921
An amount of £416,000 has been charged (2019: £1,557,000 charged) to the income statement in respect of movements in
inventory write-downs. The cost of inventory recognised as an expense was £138,262,000 (2019: £144,236,000).
20. Trade and other receivables
Trade receivables
Other receivables
Prepayments
49
2020
£’000
24,623
1,749
1,989
28,361
2019
£’000
29,000
1,361
2,455
32,816
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 expected credit losses of £1,588,000 (2019: £2,034,000). The provision
against trade receivables for expected credit losses is based on specific risk assessments taking into account past default experience
and appropriate forward looking information. The provision is analysed as follows:
At 1 July
Exchange movements
Debts written off
Charged/(credited) to income
At 30 June
Not past due
Up to three months past due
Over three months past due
Loss rate
2020
%
1
22
95
Gross
2020
£’000
22,203
3,262
746
26,211
Provision
2020
£’000
146
733
709
1,588
Loss rate
2019
%
1
18
100
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
2020
£’000
2,034
3
(644)
195
1,588
Gross
2019
£’000
25,883
4,048
1,103
31,034
2020
£’000
7,417
9,226
3,171
859
674
2,715
829
1,481
26,372
2019
£’000
3,072
6
(88)
(956)
2,034
Provision
2019
£’000
219
712
1,103
2,034
2019
£’000
9,011
11,318
3,198
934
604
2,732
482
2,082
30,361
50
Notes to the Consolidated Financial Statements
continued
21. 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
22. Trade and other payables
Amounts falling due within one year
Trade payables
Value added, payroll and other taxes
Other payables
Accruals
2020
£’000
54,629
3,100
2,077
226
505
5,527
1,381
67,445
2020
£’000
29,596
4,008
1,383
12,457
47,444
2019
£’000
53,123
4,845
1,588
407
468
6,968
1,265
68,664
2019
£’000
41,971
3,504
1,048
11,831
58,354
Amounts falling due after more than one year
Other payables
449
419
The fair value of amounts included in trade and other payables approximates to book value.
23. Lease liabilities
Amount recognised on 1 July 2019 (note 34)
Lease interest
Lease payments
Exchange differences
At 30 June 2020
Amounts payable in less then one year
Amounts payable in more than one year
All amounts are payable within five years.
£’000
8,869
202
(3,075)
(57)
5,939
2,568
3,371
5,939
24. Preference shares
Preference shares
51
2020
£’000
200
2019
£’000
200
The cumulative preference shares have no fixed repayment date. They are not listed and therefore no market price is available. At
30 June 2020 and 30 June 2019 the fair value of the preference shares was not materially different from their book value.
25. Net cash analysis
At 30 June 2018
Cash flow
Exchange differences
At 30 June 2019
Cash flow
Other changes
Exchange differences
At 30 June 2020
Cash
and cash
equivalents
£’000
50,679
17,955
30
68,664
(1,233)
–
14
67,445
Lease
liabilities
£’000
Preference
shares
£’000
–
–
–
–
3,075
(9,071)
57
(5,939)
(200)
–
–
(200)
–
–
–
(200)
Net
cash
£’000
50,479
17,955
30
68,464
1,842
(9,071)
71
61,306
26. 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 £25,000 and £nil respectively. At 30 June 2020 the accrued pension for the highest paid
director was £122,000 and the transfer value of this accrued benefit was £3,019,000.
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.
52
Notes to the Consolidated Financial Statements
continued
26. Retirement benefit obligations (continued)
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 2020 by a qualified independent actuary. The figures in the following disclosure were measured using the Projected Unit
Method.
On 26 October 2018, the High Court reached a judgement in relation to Lloyds Banking Group’s defined benefit pension schemes
which concluded that schemes should equalise pension benefits for men and women as regards guaranteed minimum pension
benefits. The impact of this judgement on the scheme has been estimated and included in the pension liability.
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 1955
Female born in 1955
Future expected lifetime of future pensioner at age 65:
Male born in 1975
Female born in 1975
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
2020
2019
1.65%
1.80%
2.75%
2.80%
1.80%
2.40%
1.90%
3.00%
3.10%
1.90%
21.7 years
24.2 years
21.7 years
24.1 years
22.5 years
25.1 years
22.5 years
25.1 years
Impact on scheme liabilities
Increase by £1.4m
Increase by £0.9m
Increase by £4.4m
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
2020
£’000
(90,488)
67,272
(23,216)
4,411
2019
£’000
(83,336)
63,754
(19,582)
3,329
(18,805)
(16,253)
26. Retirement benefit obligations (continued)
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/(loss) arising from changes in demographic assumptions
Experience gain/(loss)
Deferred tax
Remeasurement of the net defined benefit liability
The actual return on the scheme assets in the year was a £2,583,000 gain (2019: £3,051,000 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
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/(loss) arising from changes in demographic assumptions
Experience gain/(loss)
Benefits paid
53
2019
£’000
(564)
(422)
(986)
2019
£’000
1,303
(6,469)
(280)
(31)
(5,477)
931
(4,546)
2019
£’000
61,963
1,748
1,303
1,780
212
(3,252)
63,754
2019
£’000
(76,862)
(564)
(2,170)
(212)
(6,469)
(280)
(31)
3,252
2020
£’000
(611)
(428)
(1,039)
2020
£’000
1,042
(7,867)
–
92
(6,733)
1,671
(5,062)
2020
£’000
63,754
1,541
1,042
4,138
202
(3,405)
67,272
2020
£’000
(83,336)
(611)
(1,969)
(202)
(7,867)
–
92
3,405
(90,488)
(83,336)
54
Notes to the Consolidated Financial Statements
continued
26. Retirement benefit obligations (continued)
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/(loss) arising from changes in demographic assumptions
Experience gain/(loss)
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.
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
2020
£’000
(19,582)
(611)
(428)
1,042
(7,867)
–
92
4,138
2019
£’000
(14,899)
(564)
(422)
1,303
(6,469)
(280)
(31)
1,780
(23,216)
(19,582)
2020
£’000
13,591
43,758
8,705
1,218
67,272
2020
£’000
36,945
13,423
40,120
90,488
2020
years
19
19
11
16
2019
£’000
13,104
43,426
6,944
280
63,754
2019
£’000
31,517
12,207
39,612
83,336
2019
years
20
20
11
16
Normal company contributions of £2,547,000 are expected to be paid into the scheme during the year ended 30 June 2021.
27. 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
2020
Number
2019
Number
208,131,108
10,000
207,973,608
157,500
208,141,108
208,131,108
Ordinary B shares of 1p each at 1 July 2019 and 30 June 2020
16,042,530
16,042,530
2020
£’000
10,407
–
10,407
160
55
2019
£’000
10,399
8
10,407
160
Total allotted, issued and fully paid
10,567
10,567
The ordinary shares of 5p each were issued during the year for a consideration of £28,000 (2019: £247,000).
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
2020
£’000
5,559
200
2019
£’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.
56
Notes to the Consolidated Financial Statements
continued
27. 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 10,000
shares and nil share options were granted during the year. Details of those options still outstanding are as follows:
Date of
grant
Date
exercisable
21 Jul 14
12 Jun 17
18 Oct 18
21 Jul 14
12 Jun 17
18 Oct 18
21 Jul 17
12 Jun 20
18 Oct 21
21 Jul 17
12 Jun 20
18 Oct 21
Date of
expiry
20 Jul 24
11 Jun 27
17 Oct 28
20 Jul 24
11 Jun 27
17 Oct 28
Exercise
price
(pence)
270.29
476.50
390.83
270.29
476.50
390.83
9 Apr 14
21 Jul 14
12 Jun 17
22 Dec 17
18 Oct 18
9 Apr 17
21 Jul 17
12 Jun 20
22 Dec 20
18 Oct 21
8 Apr 24
20 Jul 24
11 Jun 27
21 Dec 27
17 Oct 28
290.25
270.29
476.50
436.08
390.83
Director
M Halstead
G R Oliver
Total – directors
Employees
Total – employees
Grand total
The market price of the shares at 30 June 2020 was 518p (2019: 514p).
The share price during the year ranged from 365p to 570p.
The average share price when options were exercised in the year was 540p.
Number
30.06.19
Exercised
in the year
Granted
in the year
Number
30.06.20
20,000
50,000
60,000
20,000
50,000
60,000
260,000
10,000
5,000
190,000
20,000
325,000
–
–
–
–
–
–
–
(10,000)
–
–
–
–
550,000
(10,000)
810,000
(10,000)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
20,000
50,000
60,000
20,000
50,000
60,000
260,000
–
5,000
190,000
20,000
325,000
540,000
800,000
Directors exercised nil (2019: 80,000) share options during the year. Aggregate gains on exercising the share options by directors in
the year amounted to £nil (2019: £255,000) of which £nil (2019: £255,000) related to the highest paid director.
A summary of movements in numbers of share options is as follows:
At 30 June 2018
Exercised in the year
Granted in the year
At 30 June 2019
Exercised in the year
At 30 June 2020
Weighted
average
exercise
price
357p
156p
391p
415p
290p
416p
Number of
options
522,500
(157,500)
445,000
810,000
(10,000)
800,000
At 30 June 2020 there were 45,000 (2019: 55,000) share options exercisable at a weighted average exercise price of 270p
(2019: 274p).
The weighted average remaining contractual life of share options outstanding at 30 June 2020 was 7.6 years (2019: 8.5 years).
57
27. Share capital (continued)
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
2019
3.5 years
10.0%
4.4%
0.5%
391p
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 2020 was £13,000 (2019: £11,000).
28. 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.
58
Notes to the Consolidated Financial Statements
29. 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 ofderivative financial
instruments.
30. 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
Lease liabilities
Total
Non-current:
Other payables
Lease liabilities
Preference shares
Total
2020
Book value
£’000
2020
Fair value
£’000
2019
Book value
£’000
2019
Fair value
£’000
26,372
73
67,445
(43,436)
(883)
(2,568)
47,003
(449)
(3,371)
(200)
(4,020)
26,372
73
67,445
(43,436)
(883)
(2,568)
47,003
(449)
(3,371)
(200)
(4,020)
30,361
372
68,664
(54,850)
(684)
–
43,863
(419)
–
(200)
(619)
30,361
372
68,664
(54,850)
(684)
–
43,863
(419)
–
(200)
(619)
Other than forward exchange contracts which are categorised as derivative instruments, all financial assets are categorised as
financial assets measured at amortised cost and all financial liabilities are categorised as financial liabilities measured at amortised
cost.
59
30. Financial instruments (continued)
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
2020
£’000
(5)
(805)
(810)
2019
£’000
(32)
(280)
(312)
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
£442,000 (2019: £430,000). 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.
2020
Post-tax
profits
£’000
(38)
34
2020
Equity
£’000
(38)
34
2019
Post-tax
profits
£’000
34
(31)
2019
Equity
£’000
34
(31)
Euro 5% stronger against sterling
Euro 5% weaker against sterling
31. Group companies
At 30 June 2020, 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.
60
Notes to the Consolidated Financial Statements
continued
32. 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
2020
Closing
2020
Average
2019
Closing
2019
Average
1.10
1.79
1.92
1.68
11.51
93.29
1.14
1.88
1.98
1.69
12.14
91.04
1.12
1.81
1.89
1.66
11.81
87.85
1.13
1.81
1.93
1.71
11.84
91.15
33. 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 26.
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 £292,000 (2019: £247,000) and the maximum outstanding lease commitments at 30 June 2020
were £45,000 (2019: £226,000).
34. New accounting standard IFRS 16 Leases
IFRS 16 Leases has replaced IAS 17 Leases. The new standard eliminates the distinction between operating and finance leases. All
leases are now accounted for on the balance sheet, except for low value leases and short term leases of one year or less. The leases
are accounted for by recognising a right of use asset and a lease liability.
On recognition, the right of use asset and lease liability are measured at the present value of the lease payments discounted over
the lease term. The discount rate used is the rate inherent in the lease if this can be determined, or the incremental borrowing rate.
Subsequent to initial recognition, the right of use assets are depreciated on a straight line basis over the shorter of the lease term
or the useful life of the asset. The lease liabilities are increased by the interest cost and reduced by the lease payments made. A
depreciation charge and an interest cost are recognised in the income statement.
IFRS 16 has been adopted with effect from 1 July 2019. On adoption the modified retrospective approach has been applied, such
that the right of use assets and lease liabilities are equal to each other, with no adjustment to opening reserves. There is no
restatement of the comparative periods. On adoption all long leases which had less than one year remaining at 1 July 2019 were
classified as short term leases. Leases are primarily for land and buildings and dilapidations, termination and extension options were
not material.
The right of use assets and lease liabilities recognised on adoption at 1 July 2019 were £8,869,000.
For the year ended 30 June 2020 the right of use assets depreciation charge was £2,937,000 and the lease interest cost was
£202,000. The adoption of IFRS 16 had no significant effect on the profit before income tax for the year ended 30 June 2020.
61
34. New accounting standard IFRS 16 Leases (continued)
The effect of the adoption of IFRS 16 on the balance sheet at 1 July 2019 is set out below.
Right of use assets
Lease liabilities
30 June
2019
IAS 17
£’000
–
–
Effect of
IFRS 16
£’000
8,869
8,869
1 July
2019
IFRS 16
£’000
8,869
8,869
A reconciliation of the operating lease commitments at 30 June 2019 under IAS 17 and the lease liabilities recognised at 1 July
2019 under IFRS 16 is set out below.
Operating lease commitments at 30 June 2019
Correction of lease commitments
Undiscounted lease commitments
Discounting using incremental borrowing rate
Lease liabilities recognised at 1 July 2019
£’000
9,002
308
9,310
(441)
8,869
The incremental borrowing rate ranged from 2% to 8% depending on the currency of the lease. The weighted average incremental
borrowing rate was 3%.
62
Company Balance Sheet
as at 30 June 2020
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
2020
£’000
4,580
40,152
44,732
40,952
4,259
45,211
73
56,221
101,505
(9,381)
(883)
91,241
135,973
(200)
(23,216)
112,557
10,407
160
10,567
4,072
1,174
(805)
97,549
112,557
2019
£’000
4,822
40,152
44,974
48,412
3,218
51,630
372
48,449
100,451
(9,438)
(684)
90,329
135,303
(200)
(19,582)
115,521
10,407
160
10,567
4,044
1,174
(280)
100,016
115,521
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 £27,818,000 (2019: £55,617,000).
The financial statements were approved and authorised for issue by the board and were signed on its behalf on 30 September 2020.
M Halstead
Director
G R Oliver
Director
James Halstead plc Registration Number 140269
63
Company Statement of Changes in Equity
for the year ended 30 June 2020
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 2018
10,559
3,805
1,174
848
77,339
93,725
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
–
–
–
–
–
8
–
–
–
–
–
–
239
–
–
–
–
–
–
–
–
–
–
55,617
55,617
(4,546)
(4,546)
(1,128)
–
(1,128)
(1,128)
51,071
49,943
–
–
–
(28,405)
–
11
(28,405)
247
11
Balance at 30 June 2019
10,567
4,044
1,174
(280)
100,016
115,521
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
–
–
–
–
–
–
–
–
–
–
–
–
28
–
–
–
–
–
–
–
–
–
–
27,818
27,818
(5,062)
(5,062)
(525)
–
(525)
(525)
22,756
22,231
–
–
–
(25,236)
–
13
(25,236)
28
13
Balance at 30 June 2020
10,567
4,072
1,174
(805)
97,549
112,557
64
Notes to the Company Financial Statements
continued
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 statement on going concern in the consolidated financial statements also justifies the going concern basis used for the
company financial statements.
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.
Group debtors
Amounts owed by group undertakings are stated after any provision for expected credit loss in line with the three stage model in
IFRS 9.
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 21 (2019: 20).
3.
Tangible fixed assets
2020
£’000
3,042
393
94
13
3,542
Cost
At 30 June 2019
Disposals
At 30 June 2020
Depreciation
At 30 June 2019
Charge for the year
Disposals
At 30 June 2020
Net book value
At 30 June 2020
At 30 June 2019
Investment
land and
buildings
£’000
Freehold
land and
buildings
£’000
Plant and
equipment
£’000
7,978
–
7,978
4,463
172
–
4,635
3,343
3,515
1,311
–
1,311
277
24
–
301
1,010
1,034
671
(57)
614
398
43
(54)
387
227
273
65
2019
£’000
2,852
370
99
11
3,332
Total
£’000
9,960
(57)
9,903
5,138
239
(54)
5,323
4,580
4,822
The investment land and buildings relates to a freehold property that is occupied by a subsidiary company. The rental income was
£600,000 (2019: £600,000).
66
Notes to the Company Financial Statements
continued
4.
Investments
Cost
At 30 June 2019
At 30 June 2020
Provision for impairment
At 30 June 2019
At 30 June 2020
Net book value
At 30 June 2020
At 30 June 2019
Shares in
subsidiary
undertakings
£’000
49,552
49,552
9,400
9,400
40,152
40,152
At 30 June 2020, 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
Polyflor (M) SDN. BHD.
Owned by subsidiaries
Phoenix Distribution (NW) Limited
Polyflor Australia Pty Limited
Colonia Flooring Pty Limited
Polyflor New Zealand Limited
Karndean International GmbH
Polyflor FZE
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
Dormant company
England
England
England
England
England
England
England
Ireland
Australia
Canada
India
Germany
France
Sweden
Malaysia
Dormant company
Flooring distribution
Dormant company
Flooring distribution
Flooring distribution
Sales office
England
Australia
Australia
New Zealand
Germany
UAE
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
67
Investments continued
4.
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
Polyflor FZE
Polyflor (M) SDN. BHD.
Registered office
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
Wankelstrasse 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
Office No LB16112
PO Box 17054
Jafza 16 Building
Jebel Ali Free Zone
Dubai
UAE
802, 8th Floor, Block C
Kelana Square
17 Jalan 557/26
Petaling Jaya
Salangor 47301
Malaysia
68
Notes to the Company Financial Statements
continued
5.
Debtors
Trade debtors
Amounts owed by group undertakings
Corporation tax
Other debtors
Prepayments
Debtors due within one year
Deferred tax assets (note 6)
Debtors due after one year
Total debtors
6.
Deferred tax assets
At 30 June 2019
Charged to income
Credited to other comprehensive income
At 30 June 2020
Pension
scheme
deficit
£’000
Accelerated
tax
depreciation
£’000
Other
timing
differences
£’000
3,329
(589)
1,671
4,411
(153)
(23)
–
(176)
42
(18)
–
24
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
2020
£’000
238
6,631
–
133
516
1,863
9,381
2020
£’000
73
40,447
110
73
249
40,952
4,259
4,259
2019
£’000
84
47,835
–
65
428
48,412
3,218
3,218
45,211
51,630
Total
£’000
3,218
(630)
1,671
4,259
2019
£’000
329
6,638
114
132
539
1,686
9,438
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
69
2020
£’000
200
2019
£’000
200
2020
£’000
(90,488)
67,272
2019
£’000
(83,336)
63,754
(23,216)
(19,582)
The company sponsors the Halstead Group Pension Scheme. Disclosure information is provided in note 26 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
2020
Number
2019
Number
208,131,108
10,000
207,973,608
157,500
208,141,108
208,131,108
Ordinary B shares of 1p each at 1 July 2019 and 30 June 2020
16,042,530
16,042,530
2020
£’000
10,407
–
10,407
160
2019
£’000
10,399
8
10,407
160
Total allotted, issued and fully paid
10,567
10,567
The ordinary shares of 5p each were issued during the year for a consideration of £28,000 (2019: £247,000).
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
2020
£’000
5,559
200
2019
£’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.
70
Notes to the Company Financial Statements
continued
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.
71
Ten Year Summary (Unaudited)
2011
£’000
2012
£’000
2013
£’000
2014
£’000
2015
£’000
2016
£’000
2017
£’000
2018
£’000
2019
£’000
2020
£’000
Revenue
213,944 226,335 217,082 223,488 227,261 226,141 240,784 249,510 253,038 238,630
Profit before income tax
37,538
41,726
40,495
41,753
44,184
45,499
46,616
46,702
48,276
43,857
Income tax
(10,768) (11,941) (10,446) (10,301) (10,250) (10,243) (10,106)
(9,994) (10,484)
(9,502)
Profit after income tax
26,770
29,785
30,049
31,452
33,934
35,256
36,510
36,708
37,792
34,355
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Basic earnings per 5p share
Dividends per 5pshare
12.9p
7.2p
14.4p
8.0p
14.5p
8.8p
15.2p
10.0p
16.4p
11.0p
17.0p
12.0p
17.6p
13.0p
17.7p
13.5p
18.2p
14.0p
16.5p
14.3p
Figures for previous years 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 issue in the year ended 30 June 2013.
Special dividends are not included.
72
Shareholder Information
Financial calendar
Annual general meeting
Announcement of results
For the half year
For the full year
Dividend payments
Ordinary shares – interim
– final
12 November 2020
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 2020
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
Private individuals
Banks and nominee companies
Other limited companies/corporate bodies
Miscellaneous bodies/pension funds
Investment trusts and funds
Number of
holders
Number of
shares
1,803
485
77
83
50
5,215,852
10,861,260
5,429,708
18,353,524
168,280,764
%
2.5
5.2
2.6
8.8
80.9
2,498
208,141,108
100.0
Number of
holders
Number of
shares
1,832
623
29
8
6
104,047,006
103,137,568
768,768
81,950
105,816
%
50.0
49.5
0.4
0.0
0.1
2,498
208,141,108
100.0
73
Notice of Annual General Meeting
NOTICE IS HEREBY GIVEN that the ONE HUNDREDTH and FIFTH ANNUAL GENERAL MEETING of the company will be held
at its registered office, Beechfield, Hollinhurst Road, Redcliffe, Manchester M26 1JN, on 12 November 2020 at 9.00am.
The company’s priority in the current climate is the health and safety of shareholders and colleagues and in light of the recent
UK government’s updated restrictions on public gatherings, the board has reluctantly decided that shareholders will not be
invited to attend this meeting. The AGM will therefore be conducted as a closed meeting with the minimum number of
members in attendance as is required to form a quorate meeting.
Shareholders are strongly encouraged to vote ahead of the AGM by completing and returning their form of proxy and to
appoint the chairman of the meeting as their proxy to ensure that their vote will be counted.
In the spirit of transparency and engagement, should shareholders wish to ask any questions in relation to the resolutions set
out in the Notice of AGM, which they may otherwise have asked at the AGM had they been in attendance, they are
encouraged to contact the company prior to the AGM by email to secretary@jameshalstead.plc.uk. Please label your email
with “AGM Question” to enable swift identification. We will endeavour to respond to all questions received. Answers to
common questions asked will be published in a Q&A document on the company’s website at www.jameshalstead.com.
Ordinary business
1
To receive and adopt the report of the directors and the statement of accounts for the year ended 30 June 2020
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 2020.
To re-elect Mr M J Halstead who is retiring by rotation under the articles of association as a director.
To re-elect Mr R P Whiting 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, 7 and 10 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:
7
(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.
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 £3,469,018 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.
74
Notice of Annual General Meeting
continued
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% 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).
10
That the amendments to the rules of the James Halstead PLC Share Option Plan (the “Rules”) of which Part A is
intended to meet the requirements for a tax-advantaged company share option plan (CSOP) in Schedule 4 of the
Income Tax (Earnings and Pensions) Act 2003. The directors and the company secretary are authorised to do all things
necessary in order to adopt the amendments to the Rules and carry into effect the changes to the Rules, including
notifying any existing option holders of the amendments to the Rules, as appropriate. A summarised schedule of the
amendments can be found on the company’s website at www.jameshalstead.com.
By order of the board
D W Drillingcourt
Secretary
16 October 2020
Beechfield
Hollinhurst Road
Radcliffe
Manchester
M26 1JN
75
Notes
1
Preference shareholders are advised that they are not entitled to attend or vote at the annual general meeting.
2
3
4
5
6
7
8
9
10
11
Please do not travel to the AGM as any person who seeks to attend in person will be refused entry. All shareholders are therefore strongly
urged to register their votes in advance by appointing the chairman of the AGM as their proxy and advise them of the voting
instructions. We do not recommend you appoint any other person as your proxy as they will be unable to attend the AGM and your
votes will not be counted.
You can vote either:
i.
By logging on to www.signalshares.com and following the instructions. If you experience difficulties in logging in or require
assistance, please contact Link Asset Services (previously called Capita), directly on Tel: 0371 664 0300 (Calls are charged at the
standard geographic rate and will vary by provider. Calls outside the United Kingdom will be charged at the applicable
international rate. Lines are open between 09:00 – 17:30, Monday to Friday excluding public holidays in England and Wales).
You may request a hard copy of the form of proxy directly from the registrars, Link Asset Services using the telephone number
above (same call terms and conditions apply)
In the case of CREST members, by utilising the CREST electronic proxy appointment service in accordance with the procedures
set out below.
ii.
iii.
In order for a proxy appointment to be valid a form of proxy must be completed. In each case the form of proxy must be received by
Link Asset Services at 34 Beckenham Road, Beckenham, Kent, BR3 4TU by 9.00am on 10 November 2020.
If you return more than one proxy appointment, either by paper or electronic communication, the appointment received last by the
Registrar before the latest time for the receipt of proxies will take precedence. You are advised to read the terms and conditions of use
carefully. Electronic communication facilities are open to all shareholders and those who use them will not be disadvantaged
CREST members who wish to appoint a proxy or proxies through the CREST electronic proxy appointment service may do so for the
Meeting (and any adjournment of the Meeting) by using the procedures described in the CREST Manual (available from
www.euroclear.com/site/public/EUI). CREST Personal Members or other CREST sponsored members, and those CREST members who
have appointed a service provider(s), should refer to their CREST sponsor or voting service provider(s), who will be able to take the
appropriate action on their behalf. In order for a proxy appointment or instruction made by means of CREST to be valid, the appropriate
CREST message (a ‘CREST Proxy Instruction’) must be properly authenticated in accordance with Euroclear UK & Ireland Limited’s
specifications and must contain the information required for such instructions, as described in the CREST Manual. The message must
be transmitted so as to be received by the issuer’s agent (ID RA10) by 9.00am on 10 November 2020. For this purpose, the time of
receipt will be taken to mean the time (as determined by the timestamp applied to the message by the CREST application host) from
which the issuer’s agent is able to retrieve the message by enquiry to CREST in the manner prescribed by CREST. After this time, any
change of instructions to proxies appointed through CREST should be communicated to the appointee through other means.
CREST members and, where applicable, their CREST sponsors or voting service providers should note that Euroclear UK & Ireland Limited
does not make available special procedures in CREST for any particular message. Normal system timings and limitations will, therefore,
apply in relation to the input of CREST Proxy Instructions. It is the responsibility of the CREST member concerned to take (or, if the
CREST member is a CREST personal member, or sponsored member, or has appointed a voting service provider(s), to procure that his
CREST sponsor or voting service provider(s) take(s)) such action as shall be necessary to ensure that a message is transmitted by means
of the CREST system by any particular time. In this connection, CREST members and, where applicable, their CREST sponsors or voting
system providers are referred, in particular, to those sections of the CREST Manual concerning practical limitations of the CREST system
and timings. The Company may treat as invalid a CREST Proxy Instruction in the circumstances set out in Regulation 35(5)(a) of the
Uncertificated Securities Regulations 2001.
Any corporation which is a shareholder can appoint one or more corporate representatives who may exercise on its behalf all of its
powers as a shareholder provided that no more than one corporate representative exercises powers in relation to the same shares.
As at 30 September 2020 (being the latest practicable business day prior to the publication of this Notice), the company’s ordinary
issued share capital consisted of 208,141,108 ordinary shares, carrying one vote each. Therefore, the total voting rights in the company
as at 30 September 2020 were 208,141,108.
You may not use any electronic address (within the meaning of Section 333(4) of the Companies Act 2006) provided in either this
Notice or any related documents (including the form of proxy) to communicate with the company for any purposes other than those
expressly stated.
A copy of this Notice, and other information required by Section 311A of the Companies Act 2006, can be found on the company’s
website at www.jameshalstead.com.
The documents listed below will be available for inspection at an agreed time at the registered office of the company during the usual
business hours on any weekday except bank holidays. Please e-mail secretary@jameshalstead.plc.uk (Label your e-mail “AGM
documents”) to book an appointment to view the following documents:
i.
ii.
The register of interests of the directors in the share capital of the company: and
Copy of the service contract of Mr G R Oliver.
12
The final dividend, if approved, will be paid on 11 December 2020 to shareholders on the register as at 20 November 2020.
JAME S H ALSTEA D PLC
Covering the World
Report and Accounts 2020
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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