JAME S H ALSTE AD PLC
Covering the World
Report and Accounts 2021
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IMAX Cinema, Aruba
Livesport Office, Prague, Czech Republic
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 and stockbrokers
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 N Fletcher ACMA ACG
Registered office
Beechfield
Hollinhurst Road
Radcliffe
Manchester
M26 1JN
Company registration No.
140269
Website
www.jameshalstead.com
Bankers
National Westminster Bank plc
1 Hardman Boulevard
Manchester
M3 3AQ
Registrars
Link Group
Central Square
29 Wellington Street
Leeds
LS1 4DL
1
Contents
Strategic Report
Chairman’s Statement 2
Chief Executive’s Review 5
Financial Director’s Review 9
Section 172 Statement 13
Governance
Report of the Directors 15
Board Report on Remuneration 20
Corporate Governance 21
Financial Statements
Independent Auditor’s Report to the Members
of James Halstead plc 27
Consolidated Income Statement 33
Consolidated Statement of Comprehensive Income 34
Consolidated Balance Sheet 35
Consolidated Statement of Changes in Equity 36
Consolidated Cash Flow Statement 37
Notes to the Consolidated Financial Statements 38
Company Balance Sheet 64
Company Statement of Changes in Equity 65
Notes to the Company Financial Statements 66
Supplementary Information
Ten Year Summary 73
Shareholder Information 74
Notice of Annual General Meeting 75
2
Chairman’s Statement
Results
I am pleased to report turnover in the year was £266.4
million (2020: £238.6 million), 11.6% ahead of last year.
Profit before tax at £51.3 million (2020: £43.9 million), was
up 16.9%. Both sales and profits are at record levels. The
projects we have been associated with in the year are as
diverse as ever from Knattspyrnufélagið Fram – perhaps the
largest football stadium in Iceland – to the Optimed Eye-
Clinic in Belarus.
Our business, as have many, suffered disruptions in the year
with production at our factories affected by labour
shortages and raw material scarcity. However, healthy stock
holdings supported sales. I am pleased to report these
efforts were greatly appreciated by the trade and indeed we
were recognised for those efforts by, for example, ProCure22
(the Construction Procurement Framework administrated
by NHS England) with an award for outstanding support to
the NHS during the pandemic.
The board, and I, are pleased to report we were able to
continue to supply the many independent flooring
contractors who worked on through the lock-downs. Our
network of stockists were key to supplying these contractors
and I would note that our business was also awarded the
title “Flooring Manufacturer of the Year”, which was
particularly gratifying as the voting for this award was by
the floor laying contractors (the Contract Flooring
Association) that install our products.
These results are more than satisfying against the backdrop
that all our major markets were faced with lockdowns of
various durations and severity affecting many of our end
users’ needs for flooring. There were numerous delays and
deferrals of maintenance and refurbishment work as well as
new build projects as priorities and funding were diverted.
That said, the many global projects that we undertook
involved healthcare and Covid-19 related installations
(whether in temporary hospital wards, vaccination centres,
test facilities or vaccine manufacturing) but it did not fully
replace our normal level of healthcare directed flooring. One
example was the flooring for a significant number of
“campaign” hospitals for Covid patients next to main
hospitals in eight different towns/cities in Portugal. Another
example was a series of mobile hospitals within the seven
emirates (Abu Dhabi, Dubai, Sharjah, Umm al-Qaiwain,
Fujairah, Ajman, and Ra’s al-Khaimah), where each field
hospital contained 150 to 259 beds. Our ability to respond
to these demands from stock was key to our strong
performance.
The supply chain was under constant pressure over the year.
Raw material costs rose and availability was challenging
particularly on the supply of basic polymers as the global
petrochemical companies struggled to maintain production.
The reasons for this were varied but the most significant
factors were:
the ravaging of one of the world’s largest production
plants in Louisiana, USA, which was put out of action
by Hurricane Ida. This one plant serviced 40% of US
demand for PVC and its closure meant that these
materials across the globe were in shorter supply;
many of our basic materials are derived from the
cracking process that produces aviation fuel and the
decimation of that industry by the pandemic led to
several refineries being temporarily closed;
the Covid-19 virus and the related self-isolation
protocols led to severe shortages of labour and
consequent output reduction.
It was due to the dedication of our sourcing team and our
long and close relationships with suppliers that we kept our
production lines fed. It was not an easy task and this was at
a time when we also had severe production pressure owing
to the non-availability of labour.
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 constantly develop its brand
identity and its reputation for quality, durability and
availability thereby enhancing and maintaining goodwill
with the aim of achieving repeat business. Our focus is to
work with stockists who in turn distribute those bulk
deliveries whilst promoting and representing the products
to the end users and specifiers who will purchase the stock
from those stockists.
This approach is designed to increase and secure revenue
streams and drive profitability and cash flow which enables
3
the continuation of dividends thereby creating shareholder
wealth. In the normal course of business one key element of
the company ethos is having dedicated sales personnel to
present our product to our customers’ clientele. In this last
year face to face relationships were not possible but I am
pleased to say that our customer service and reputation for
delivery were enhanced despite the trials and tribulations of
the last year.
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. I can be confident in saying that the loose
lay flooring (both in sheet and tile) that we have launched
into the market some two years ago was very well regarded
over the last difficult year.
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,
quite rightly, tasked with demonstrating that their
environmental credentials and supply chain management
are supported by social and economic dimensions and
stewardship.
We can now say that almost 100% of our electric usage is
now derived from renewables. Our bi-annual Sustainability
Report is about to be published and we have this report
independently audited to further underline our credentials.
PVC polymer is one of our main raw materials and we began
recycling waste into our processes in the 1950s and have
continued to use waste PVC as part of the process of
manufacturing in ever increasing volumes. For many years
we have funded waste collection with Recofloor – our UK
joint venture that collects post installation waste PVC
within our industry. We are also founder members of the
European PVC recycling venture, the AgPr, which funds the
recycling of post-consumer PVC waste and diverts waste
from landfill back into the manufacturing process.
consumption of primary energy of any of the major
commodity plastics and our PVC flooring is made with over
80% renewable materials (excluding recyclates which
further lessen the use of non-renewables).
As part of our focus on the future and the footprint of our
industry we are major partners in industry wide bodies. One
example is that our Technical Director is Chairman of the
ERFMI (the European Resilient Flooring Manufacturing
Institute). ERFMI activities range from involvement in the
EU carbon neutral strategy through to funding new
recycling initiatives to extend the ability of PVC to be
recovered and recycled. In the past year initiatives include:
The Circular Plastics Alliance, a plastics industry association,
to which ERFMI are a signatory has a target to achieve ten
million tonnes of recycled plastic in new products in Europe
by 2025.
In addition ERFMI has engaged consultants, based in
Belgium, to undertake the following research:
Recycling technologies that can be used for the
recycling of PVC floor coverings, with particular focus
on extraction of legacy additives.
Identification and sorting technologies that can
identify flooring containing legacy additives and the
ability to sort it from flooring that does not contain
legacy additives.
The scope of this engagement is to review technologies that
have been tried in the past, that are emerging or used for
other applications. This is just one example of working
together for the future and we feel it is part of our duty as
a responsible manufacturer (as opposed to importers) to be
involved in a sustainable future.
The UK may have left the EU but our work on standards, the
circular economy, sustainability and meaningful recycling is
both Europe wide and globally focused and is progressing at
pace. In no way has “Brexit” lessened our involvement as
Europeans in the flooring industry.
Dividend
An important point to note about PVC is that it has evolved
and it is no longer just derived from petrochemicals. It is
increasingly produced from bio-mass. Indeed, the by-
products of PVC manufacturing, chlorine and caustic soda,
are indispensable to the medical and food industries. Often
a maligned material, PVC manufacture has the lowest
Profits and earnings per share have increased and we
continue un-geared. Our cash balances stand at £83.3
million (2020: £67.4 million), even after dividends paid in
the last year that amounted to £34.1 million, and taxation
of £9.9 million. Our cash reserves continue to provide the
foundation of our strong balance sheet.
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 beyond our prior
expectations with refurbishment in some sectors buoyant, it
is to be expected that our markets around the globe will
further recover as more countries vaccination rollouts
extend and they follow the European model of a return to
“normality”.
Supply shortages continue to frustrate whether they be due
to the lack of availability of raw materials or to the widely
publicised shortages of drivers and ongoing concerns with
international freight. The cost of moving goods, the
availability of shipping space and extended delivery times
are both ongoing challenges. Our UK factories are in
production and are tasked with raising stock levels and we
have taken on extra shop-floor labour to assist in this task.
It is clear that ongoing issues with the global pandemic are
not at an end and the cost pressures continue to persist but
we do see signs of certain materials becoming more
available and at a lower, albeit still high, cost.
Notwithstanding these concerns, I, and the board, can only
be confident of another solid year of progress.
Anthony Wild
Chairman
1 October 2021
4
Chairman’s Statement
continued
It is pleasing to report that the Board proposes, subject to
the approval of the shareholders at the upcoming AGM, to
pay a record final dividend. The final dividend will be 11.0p
(2020: 10.0p). This, combined with the interim dividends
paid in June of 4.25p (2020: 4.25p), makes a total of 15.25p
(2020: 14.25p) for the year, an increase of 7.0%.
Bonus Issue
The board considered the merits and will be proposing a
bonus issue of one ordinary share for every share held at the
upcoming AGM.
James Halstead plc has a long history of such issues and
these have always been in addition to dividends not in
substitution. The board believes that bonus issues are
welcomed by the smaller holders of shares and promote
liquidity amongst retail investors. A bonus issue such as this
is not an economic event in that no wealth changes hands
but nevertheless these issues have been popular with
shareholders and it emphasises the history of our share
price growth.
We would anticipate that, as in the past, the bonus will
increase liquidity of the shares.
Acknowledgements
I would like to thank our staff for outstanding diligence in the
face of significant turmoil during the course of the year.
Many employees faced confusion and concern as we entered
the pandemic tunnel and in many respects this was not
helped by the headlines and media reporting. Whilst as a
Board we knew that our flooring would be needed by
healthcare authorities quickly and in volume, the authorities
did not, initially, identify key industries or manufacturing as
something to be encouraged to continue. We were able to
source PPE, sanitising equipment and supplies from our
global contacts to protect our workforce. Our health and
safety teams and management rose well to these challenges.
My thanks go to our staff in the UK and around the world
whose hard work continues to allow us to continue to grow
the business. This year was particularly challenging as we all
faced uncertainties and I would make particular mention of
those who have worked hard, not to just put the safeguards
in place, but to move the business forward in a positive way
despite the prevailing challenges. Our senior management
across the globe have faced dynamic challenges and have
worked hard – thank you from myself and the board.
Chief Executive’s Review
Turnover of £266.4 million (2020: £238.6 million) is a record
level for the group and an increase against last year of
11.6%. Since the comparative year was affected by the first
UK lockdown a more relevant comparison is against the year
ended 30 June 2019 and turnover is some 5.3% ahead of
that year.
Profit before tax at £51.3 million (2020: £43.9 million) is
16.9% ahead of the last year and against the 2019
comparative some 6.2% ahead.
As we entered this year our goal was to get back on track
with the 2019 levels and to surpass this was a major
achievement. Regarding sales turnover the split across areas
was Europe 42%, UK 37%, Australasia 14% and the rest of
the world 7% which is in line with the spilt over recent
years. The largest sales growth year on year was in the sales
within the UK with an increase of 24.0% compared to last
year though, of course last year was impacted by the first
national lockdown which had seen sales fall from 2019
levels. That being said, UK turnover was 10.9% ahead of
2019 levels.
Our contracts across the globe continue to expand and, for
example, we have been involved with many installations in
the Lebanon where we have supplied product used in the
repair and refurbishment of the ruined hospitals and
buildings that were devastated following the Beirut Port
explosion in August 2020.
Overall there was a modest diminution in the gross margin
percentage which was due to the adverse effects of raw
material price increases, freight and other costs rising and
adverse manufacturing efficiencies due to lower volume
throughput and labour shortages. The labour shortages were
principally due to absenteeism and “self-isolation”
protocols. These adverse gross margin effects were offset to
a large degree by a change in the sales product mix (i.e. the
sales were more biased to higher value products) and the
focus away from keenly priced volume projects.
Our business has always been able to respond quickly to
large projects across the globe which are efficient to
produce but almost always very keenly priced. Given
material and labour shortages we placed less emphasis on
this area of business during the year.
Overheads in the year rose as the administrative cost
returned to a normalised level of about 5% of turnover.
The balance sheet shows its normal level of robustness but
some key numbers do stand out. Stock has reduced and
whilst this in isolation is positive for cash flow and bank
balances it is below optimal levels and a key management
5
focus is to increase stock levels. Trade debtors and other
receivables are much higher than last year (£42.9 million
this year and £28.4 million in the prior year) but last year
we had seen the UK closed in the three months prior to the
year end. The comparison of these two balance sheet dates
is mainly a contrast of two different situations and is best
summarised as healthy.
ISO14001 to underline our
It continues to be the case that our worldwide
manufacturing 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 conditions and standards. Our quality of
product, availability of stock and adherence to strict
standards set us apart from many other manufacturers as
we continue to cover the world.
Reviewing the businesses in more detail:
Objectflor/Karndean and James
Halstead France, our European
operations
The level of turnover in our Central European business was
higher than last year by around 6%. This market
encompasses Germany, France, Austria, Benelux and several
Eastern European countries. Turnover increased in all these
countries and we can only describe this as a satisfactory
situation. Our gross margins in the region held up and
consequently we have seen the increased sales translate
into an increased level of profit.
This was not an easily achieved result and the control of
costs has been an ongoing challenge. Freight costs into the
region and within the markets have seen upward pressure
and our businesses have, in common with many businesses
in Europe, introduced freight surcharges.
James Halstead France remained open but the staff faced
restrictions on movement and curfews. Stock movement
was an ongoing issue with inflationary pressure on the cost
of transport. France in particular faced difficulties in the
weeks after “Brexit” and whilst this is working better now,
the situation is far from ideal. The near 9% increase in sales
was, I believe, commendable in the circumstances. The sales
force worked throughout the year although face to face
meetings could not take place. Our major competitors
manufacture in France and they were faced with raw
6
Chief Executive’s Review
continued
material shortages and consequent lack of product, factors
which no doubt helped in achieving this result.
Objectflor traded well but stock levels have been reducing
as suppliers have struggled with international freight.
However, it would seem clear that our competitors were
worse hit and I believe Objectflor took market share. There
were shortages in the wood laminate sector which is a
competing product to our luxury vinyl tile and this pushed
demand up for our businesses. Whilst our warehouses
remained open throughout the year there were additional
procedures regarding personal protection that did affect
efficiency. There were no exhibitions during the year and
much less travel which reduced costs but Objectflor did re-
open their in house “campus” marketing facility and hosted
many customer visits. Throughout the year the cost and
availability of shipping to Germany became more
problematic and Objectflor stock levels have been under
pressure due to increased demand. The company introduced
freight surcharges on sales which seems to have been
generally accepted in this marketplace.
Polyflor Pacific – encompassing
Australia, New Zealand and Asia
The region has been one the hardest hit by successive
lockdowns with Australia in particular lurching in and out of
various restrictions on a state by state basis. The confusion
has affected staff morale and made it difficult to forward
plan. Having said this, the turnover in Australia was some
8.2% ahead of the comparative year and we have sought to
hold stock at higher levels to mitigate the uncertainty. We
are confident that this has differentiated us from our
competitors and allowed us to take market share. In
addition, our regional warehousing in each of the federal
states has helped us to progress as individual state
lockdowns hampered interstate deliveries. As noted, in many
markets domestic demand was bolstered by spend being
redirected from holidays, car purchases etc to home
improvement as a greater number of people worked from
home.
The almost weekly “knee-jerk” restrictions saw disruption to
logistics with customers premises sometimes closed as well
as several periods of congestion at the main import point in
Sydney Harbour.
In New Zealand we achieved record turnover with sales
some 28% above the prior year (albeit that the comparative
was affected by a closure of the economy in the spring of
2020). Having said this turnover was still some 23% ahead
of the 2019 comparative. As with Australia the plan to
bolster our stock levels in the market was correct and the
lack of availability of competitors stock (largely supplied
from Europe)
increased sales and was very much
appreciated by our customers – the flooring contractors. In
New Zealand we continued to supply flooring to the
national social housing upgrades and new product launches
of loose lay flooring projects were very successful.
As noted in previous years the Asian markets have been
brought under the management of our Australian business
and despite the effects of the pandemic, we continue to
progress.
In Malaysia we incorporated a new company and took on
the trade of our former long-term distributor in November
2020. This will now act as our base for the South Asia
markets of Malaysia, Singapore, Indonesia, Thailand, the
Philippines and Vietnam. This gives us a local stockholding in
Malaysia to continue and growing the sales of our previous
distributor, as well as holding stock in a free trade zone that
will be used to service the other countries listed above on a
timelier basis rather than shipping from the UK.
Unfortunately, activity since we began trading in Malaysia
has been hampered by movement controls and full
lockdowns, but despite this, sales across the region of
Southern Asia for the period increased by 23% over last year.
Our North Asian markets (China, Hong Kong, South Korea,
Taiwan and Japan) were similarly hampered by the
pandemic with travel restrictions, lockdowns and a
slowdown and delay in projects and renovation work. The
effect was to reduce the sales in the region from the
previous year by 21%. In last year’s annual report, we noted
plans to have a stock presence in mainland China and this is
now operational. This has helped service smaller ad hoc
projects in the region as well as helping supply some smaller
orders to Hong Kong and Macau. China sales have remained
in line with last year, helped by securing the prestigious
Gansu Province Women & Children’s Medical Complex.
We expect further growth for the Pacific/Asia region as we
start to see the effects of easing lockdowns and travel
restrictions, vaccination rollouts and government stimulus
packages.
Polyflor & Riverside Flooring, based in
UK
Sales at Polyflor were 11.4% ahead of last year. There was
strong sales growth in sales in the UK (increased by 24%)
and a continuation of good sales through our international
businesses though there was a decline in exports. The export
7
business suffered as a result of delays in government funded
healthcare projects in many parts of the globe as attention
was focused on the immediate issue of the pandemic and
vaccine rollout. In addition, with raw materials in short
supply and manufacturing hampered by employee
absenteeism, the smooth flow of production was hampered
throughout the year. Raw material prices did start the
financial year at lower prices than we had seen in the period
from March 2020 through to June 2020 but very quickly
rose to levels that were 70-80% higher.
Riverside, which sells only to Polyflor had around an 8%
increase in turnover.
During the year for both our UK based companies were
dogged by manufacturing problems due to the shortage of
basic raw materials. Polymers, plasticisers, packaging and
pallets were in short supply. Each of our competitors faced
the same problems and prices were consequently higher
and largely non-negotiable. As manufacturers we have
commitments to stockists in terms of price commitments
that we ourselves are not able to get. That said we put into
the market price increases. The increased volume of sales,
most notably in the UK, meant that we were able to
increase profitability though it was greatly assisted by stock
levels. For many years as a manufacturer we have
committed to stock in the warehouse to smooth production
pressures and to be able to supply large projects “off the
shelf” rather than make to order. It is a key differentiator of
our business and it can have its challenges but in this year it
was a key strength. Despite the difficulties in maintaining
output the manufactured output was higher than the
previous year but the prior year included a ten week
shutdown during the first lockdown and the start of that
year was affected by a significant breakdown that affected
one of the main production lines. In short output was below
our potential and indeed the demand requirements but
better than the year that preceded.
In our home market we have an extensive network of
stockists and this helped us to capitalise on a return to more
normal levels of demand for flooring as the year progressed.
Our stock holding was key to this. In addition there were
new distributors added to the UK market and there was a
cross-over of our commercial product into the domestic
segment as the demand driven by household refurbishment
sought credible flooring solutions. In the year we saw a
significant growth in internet supply of our flooring by a
number of our existing customers and indeed some
contractors have extended their business model to online
supply.
New product launches were deferred. This was not a cap on
the year’s growth as there was simply not the need to
compound the complications of supply and delivery. It
would seem to be clear that Polyflor took market share in
the UK during the year. In part this gain was from overseas
competitors that faced difficulties in their own markets. It
was perhaps also in part due to the “Brexit” changes in
January 2021 but more significantly due to the import
sector that sources Far Eastern product and re-brands for UK
consumers. I have no reason to doubt that the extension of
Polyflor into a wider consumer market (ie that of high end
domestic) will lessen; the very high demand levels of
household spending may be less pronounced but the
product has performed and gained consumer credibility. The
lockdown shortages have brought Polyflor ranges to a wider
consumer base and contractor recommendation has
become a key driver of consumer choice.
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 though the situation in Norway and
Sweden contrasted sharply. In Norway sales were 11%
ahead of the prior year but in Sweden down by a similar
percentage. In Sweden the pandemic started with the
lightest of touches but has been the most affected over the
course of the year with staff on short time for a long time
and commercial flooring projects at a much lower level.
Norway in contrast remained open and adopted new
working practices and procedures.
Although there were restrictions arising out of 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 2021/22
financial year.
Polyflor Canada, based in Toronto
Turnover in Canada was modestly ahead of last year and
profit increased. Canada as a market faced severe disruption
with long periods of business restrictions particularly in
Ontario (where our warehousing is based). In recent years
However, the challenges have not lessened. Though in many
markets the task of living with the Covid-19 virus is
underway there are issues in manufacturing manning levels
at our UK factories and logistical and transportation issues.
At this point in time it is frustrating that even where we
have orders and stock it is difficult to move goods
internationally. The difficulties of the Suez blockage and
disruption of the Yantian port in China continue to ripple
into the present but should ameliorate.
In the UK our stockists handle distribution to end users and
there has been many issues within our sector relating to
customer delivery. Internationally it is difficult to compare
the current situation with any other time that has been as
difficult.
To date we have continued to fulfil customer orders and
demand levels continue to be positive. Raw material prices
continue to be under pressure and we have in many cases
had to pass on cost increases to customers. Despite these
pressures we are starting to see some positives in raw
material availability and though these adversities may
persist for several months I am confident we can continue
to grow our global activities.
Mark Halstead
Chief Executive
1 October 2021
8
Chief Executive’s Review
continued
Polyflor Canada has undertaken a lot of business in
hospitality and retail and these sectors were hardest hit by
the successive lockdowns. Our strategy in Canada has been
defensive – controlling costs and deferring expenditure on
expansion.
With broadly the same turnover and profit as the prior year
we are satisfied with the outcome but this was not easy to
achieve. Travel across the various regions has been subject to
restrictions for much of the year and day to day
refurbishment was restricted by the governments Covid-19
regulations.
Polyflor India, based in Mumbai
During the year we scaled back our business in India. It was
difficult to undertake local sales due to the scale of the
reduced our sales
reluctantly
pandemic and we
representation. The business
remained operational
throughout the year and it was noticeable that projects
were delayed or protracted due to working restrictions.
Despite this, our turnover in India increased as did profits. In
part this was the result of product being sold to the Serum
Institute for vaccine manufacturing. Our business is largely
focused on healthcare, education and pharma and there is
every expectation of growth in the coming year. There are
significant challenges in terms of cost and availability of
shipping to the Indian continent which will resolve over
time.
Rest of the World
During the year some of our markets did reduce their level
of sales and the common theme in these markets is that
there were delays in infrastructure projects that are
government funded. The Middle East, Hong Kong, Africa and
North America were the markets most affected. Projects
such as Hamad International Airport and the extension of
the Aspire Museum both in Qatar and Extra Foods
Supermarkets in Trinidad and Tobago are examples of
breadth of our exports. In Argentina we have supplied the
flooring for twelve modular hospitals built for dealing with
Covid-19.
Conclusion and outlook
Given the circumstances we can only be pleased with the
results for the year. The hard work, dedication and
experience of our subsidiary directors and management has
been a key factor in this achievement.
9
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. As in
previous years we, as a board, look to be 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 £266.4 million (2020: £238.6
million) was 11.6% higher than last year.
Profit before tax was £51.3 million (2020: £43.9
million) 16.9% higher than last year.
Finance income was £0.05 million (2020: £0.4
million) reflecting interest rates that remain very low.
Selling and distribution costs were 2.3% higher than
last year. Administration expenses were 23.7% higher
than last year
Trade debtors increased to £39.3 million (2020: £24.6
million). Trade creditors increased to £40.9 million
(2020: £ 29.6 million). In both cases the comparative
was affected by the UK lockdown in the months just
prior to our year end.
Stock levels stand at £60.7 million (2020: £68.5
million).
Cash stands at £83.3 million (2020: £67.4 million)
even after the payment of £34.1 million in dividends,
£9.9 million in tax and £2.8 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. One such indicator that is
under close scrutiny is absenteeism.
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 they are collated by
various trade bodies, is complete and wholly accurate.
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.
During the year the following were considered by the board.
10
Financial Director’s Review
continued
Payment of dividends
The board considered shareholder expectations in setting
these dividends, along with the cash position of the
company. Cash flow projections are an important part of
this, particularly in the current economic environment - the
executive directors were tasked with keeping the board
appraised of debtors and working capital.
Bonus issue
The board considered and has proposed a bonus issue of one
ordinary share for every share held. James Halstead plc has
a long history of such issues and these are in addition to
dividends not in substitution. The board believes that these
issues are welcomed by the smaller holders of shares and
promote liquidity amongst retail investors. A bonus issue
such as this is not an economic event in that no wealth
changes hands but nevertheless these issues have been
popular with our shareholders and it emphasises the history
of share price growth. We would anticipate an increase in
liquidity of the shares.
Defined benefit (DB) pension scheme - deficit funding
During the year the tri-annual valuation took place. This was
based on the position of the scheme at 5 April 2020. Given
the turmoil in financial markets at that point, together with
a drastic reduction in national interest rates there were large
negative implications to the fund at that time. The board
took the decision to fund a covenant review to give the
trustees of the scheme some comfort on the future. With
the recovery of financial markets it was agreed (in line with
guidance from the Pension Scheme Regulator (TPR) to take
a more balanced view on the assets of the scheme rather
than focus on a single date. A new deficit reduction plan was
agreed in July 2021. It can be seen from these accounts that
the deficit is greatly reduced.
The board have discussed with the trustees the future
accrual of benefits and the trustees made clear that an
equitable payment by members would see an increase in
member contributions of around 12-15%.
Review of long term executive incentives
Our last share option plan was approved by shareholders in
2010 and the board have revised this and a new plan was
approved at the AGM on 12 November 2020. Many
companies in recent years have moved to the issue of nil
cost options: the board considers that whilst, on occasion,
this might be appropriate (though has never done so) we
should issue options at the market value of our shares and
that benefit to executives is thereby dependant on value
creation to shareholders. One relevant change was to give
the board the power to waive the requirement for earnings
per share to exceed the retail price index. The board feels
that the effects of the lockdown on various economies had
an effect on earnings and that the board should be able to
reflect performance in the face of challenges that reduced
earnings but were inevitably outside the control of the
business.
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 such a process this year would be neither
accurate nor a useful use of time. The Board, therefore, has
assessed progress against the prior year comparative. This
year has allowed us to re-introduce a budget (i.e. for
2021/22) process but the flow of trade is still far from
normal. 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. Our business, as many others, is
still experiencing unprecedented levels of absenteeism and
this remains a challenge to the manufacturing process.
Warehouse expansion
Last year the board appraised the need for increased
warehouse capacity in the UK and plans are being finalised
for final approval. The board has agreed this in principle and
the cost of this expansion will be in excess of £15 million
(excluding stock holdings).
Little progress has been made on this project. Land has been
identified and the scale of the project agreed but there have
been delays in the planning process.
Price increases and settlement discounts
The increase in costs over many months has been reported
in our financial results and in common with many other
companies we have had to increase our prices and will
undoubtedly have to do so again. As manufacturers there is
no holding gain on a price increase. Many stockists can make
a gain on the stock they hold.
In addition, our industry in common with some others offers
a discount for payment within terms. These discounts were
common in the manufacturing sector for many years but
the rate (at 2.5%) has been out of proportion to interest
rates in the current era and the board resolved to change
this after the year end.
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. During
the year with employees self-isolating and shielding we
have struggled to run all of our production lines at once and
there has been overtime costs of employees covering for
11
those absent. Many governments have offered a range of
financial support packages to help companies and these
have been taken advantage of where appropriate. There is
little doubt that whilst we offered secure employment there
was among a number of people a degree of resentment that
other people were paid to stay at home, not within the
organisation but within the economy in general.
The situation regarding the UK leaving the EU (“Brexit”) is
still an ongoing uncertainty. The availability and free flow of
raw materials has been disrupted but the complexities of
the pandemic have superimposed themselves on the issue
of border controls. The transport industry has not seen a
normal period of activity and in the melee includes a mix of
increased paperwork, employee shortages and excess
demand.
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
twenty 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.
12
Financial Director’s Review
continued
The last five years of these exposures in terms of
increase/(decrease) in the value of our overseas assets are as
follows:
In an effort to offer some perspective by which to view the
pension scheme deficit the following statistics are used by some
investors:
2021
2020
2019
2018
2017
£’000
(615)
336
(170)
(759)
2,168
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.
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.
Actuaries undertake a tri-annual valuation of the scheme.
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.
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
income statement with actuarial gains / losses on the accrued
benefits dealt with through the Consolidated Statement of
Comprehensive Income. This year there is a net actuarial gain of
£12.7 million against a net actuarial loss in 2020 of £5.1 million.
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.
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 520p
(2020: 518p) are:
The net deficit to market capitalisation is 0.3% (2020:
1.7%);
The total liabilities to market capitalisation is 7.5%
(2020: 8.4%); and,
The deficit to operating profit is 8.4% (2020: 52.6%).
I pass no comment on the merits of these ratios but note
that with the assumptions changing annually (despite the
long term nature of the liability) there does not seem to be
a consistent long term measure of the deficit. The above
merely give some idea of the “affordability” of the deficit to
the group. The dominant assumption that drives up the
deficit is that the current very low gilt yields are used to
determine liabilities. There is an irony in that pension funds
have an unquenchable appetite for government bonds at
ever lower interest rates. The 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 pensionable 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
1 October 2021
13
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 2021.
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 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 a 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.
14
Section 172 Statement
continued
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.
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 N Fletcher
Secretary
1 October 2021
15
Report of the Directors
The directors are pleased to present their report, together
with the audited accounts for the year ended 30 June 2021.
Substantial interests
Results and dividends
The group results for the year and the financial position at
30 June 2021 are shown in the consolidated income
statement on page 33 and the consolidated balance sheet
on page 35.
The directors are recommending a final dividend of 11.00p
(2020: 10.00p) per share on the ordinary share capital for
payment on 17 December 2021 to those shareholders on the
register at 26 November 2021. This final dividend together
with the interim dividend of 4.25p per share paid on 4 June
2021 makes a total dividend of 15.25p (2020: 14.25p) per
share for the year.
Directors
As at 14 September 2021 the company had been notified of
the following interests which represent 3% or more of the
existing issued share capital:
Number %
Rulegale Nominees 36,943,534 17.7
John Halstead Settlement 35,447,218 17.0
Octopus Investment Nominees 11,466,214 5.5
Nortrust Nominees 8,340,872 4.0
Share capital
During the year new ordinary shares were issued and
allotted as fully paid to enable share options to be exercised
as follows:
22 June 2021
18,808
18,808
The directors who held office during the year were as
follows:
Bonus issue
J A Wild
M Halstead
G R Oliver
S D Hall
M J Halstead
R P Whiting
Mr J A Wild and Mr M Halstead are the directors retiring by
rotation, and offer themselves for re-election at the annual
general meeting.
The interests of the directors and their families in the share
capital of the company were as follows:
30 June 2021 30 June 2020
Beneficial As Trustee Beneficial As Trustee
J A Wild 150,300 11,975,360 150,300 11,975,360
M Halstead 13,252,567 11,126,112 13,241,468 11,126,312
G R Oliver 215,259 130,034 207,550 130,234
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.
The board proposes that the group should initiate a Bonus
Issue of fully paid ordinary shares to the holders of ordinary
shares on the register at the close of business on the record
date of 13 January 2022 (the “Bonus Issue”), equating to
1 new ordinary share for every 1 ordinary share then held.
The proposal is subject to shareholder approval at the
Annual General Meeting of the company to be held on 18
November 2021.
The Bonus Issue is intended to increase the marketability
and liquidity of the company’s ordinary shares.
It is proposed that an amount equal to the aggregate
nominal value of the ordinary shares of 5.0p each in the
company in issue at close of business on 13 January 2022,
being the credit balances on the capital redemption reserve
and share premium accounts and part of the amount now
standing to the credit of the profit and loss account of the
company, will be utilised in paying up at par the new
ordinary shares to be issued pursuant to the Bonus Issue
(the “Bonus Shares”).
Terms of Issue of the Bonus Shares
The rights and restrictions attaching to the Bonus Shares
will be as currently set out in the articles of association of
the company in relation to the existing ordinary shares. The
Bonus Shares will rank pari passu in all respects with the
existing ordinary shares, save that they will not rank for any
dividend declared prior to the record date or for the
proposed final dividend of the company in respect of the
financial period ended 30 June 2021 referred to in resolution
number 2 proposed for consideration at the Annual General
Meeting of the company convened for 18 November 2021.
16
Report of the Directors
continued
The Bonus Shares, which will be capable of being held in
either certificated or uncertificated (CREST) form as
appropriate, will be issued to each shareholder and are not
being marketed. Where ordinary shares are held in
certificated form on the record date, shareholders will
receive non-renounceable share certificates, which will be
posted at the risk of the shareholders, in respect of their
entitlements to Bonus Shares. Where ordinary shares are
held in uncertificated form on the record date, the
appropriate CREST accounts will be credited with the
relevant number of Bonus Shares, save that the company
reserves the right to issue the Bonus Shares in certificated
form in exceptional circumstances, such as for example, in
the event of any failure or breakdown of CREST. No
temporary or renounceable documents of title will be
issued. Definitive certificates for the Bonus Shares will be
posted to shareholders no later than 27 January 2022 and
stock accounts in CREST will be credited with the new
ordinary shares on 14 January 2022.
Special business at the annual general
meeting
The Bonus Issue is conditional on resolutions 8 and 9 set out
in the notice of the Annual General Meeting being passed at
the Annual General Meeting and upon Admission. The
directors also reserve the right to elect not to proceed with
the Bonus Issue in the event of a change of circumstances
such that, in the directors’ opinion, the Bonus Issue is no
longer in the best interests of the company and/or
shareholders as a whole.
Resolution 6 authorises the directors to apply an amount
(which based on the current issued ordinary share capital of
the company would be approximately £10,407,996, being
the credit balances on the capital redemption reserve and
share premium accounts and part of the amount now
standing to the credit of the profit and loss account of the
company), in paying up in full the Bonus Shares at par value
for the purposes of the Bonus Issue.
Resolution 7 renews the directors’ authority to offer
ordinary shareholders the opportunity to take ordinary
shares in lieu of any cash dividends which may be payable
prior to the Annual General Meeting in 2022.
Resolution 8 authorises the directors to allot relevant
securities pursuant to section 551 of the Companies Act
2006 up to a maximum nominal amount of £6,938,664
(including the Bonus Shares to be issued pursuant to
resolution 6). This figure represents approximately 33.33%
of the total enlarged ordinary share capital as enlarged by
the 208,159,916 Bonus Shares (which is the number of
Bonus Shares which would be issued on the basis of the
current issued share capital of the company as at 30
September 2021). The authority will expire at the next
Annual General Meeting of the company to be held in 2022
or six months after the next accounting reference date of
the company (whichever is the earlier).
Except for the issue of shares under the Bonus Issue and the
allotment of shares to satisfy the exercise of share options
granted under the share schemes, the board has no present
intention of issuing any ordinary share capital of the
company. As at the date of this document, the company
holds no treasury shares.
Resolution 9 invites shareholders to renew the board’s
authority to issue shares for cash without first being
required to offer them pro rata to existing shareholders.
The proposed authority will terminate at the next Annual
General Meeting of the company to be held in 2022 or six
months after the next accounting reference date of the
company (whichever is earlier). The authority is limited to
equity securities up to an aggregate nominal amount of
5.0% of the company’s issued ordinary share capital as
enlarged by the Bonus Issue. The resolution also contains
provisions to enable the directors to deal with fractional
entitlements and other practical difficulties which could
arise in the event of a rights issue or similar pre-emptive
offer.
Resolution 10 seeks to renew the authority of shareholders
to allow the company to purchase its own shares in respect
of up to 10% 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).
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.
As the global pandemic continues, but with many markets
at advanced stages of vaccination, 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 flooring, its use in many
projects is being widened.
Working with our teams we have tested extreme scenarios
for the purpose of the statutory audit and, whilst we do not
believe they are likely, this stress testing underpins the going
concern concept. The cost and availability of international
freight is frustrating stock holdings, and as part of the going
concern review we have factored in the scenario that this
will continue for another year.
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 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.
17
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
employee
trade union
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 wellbeing 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
We
remain totally committed to the continuing
development of our processes and our products to both
satisfy the needs of our customers and ensure that we
remain at the forefront of our industry.
18
Report of the Directors
continued
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.
Emissions and energy consumption
Scope 1 and 2 consumption and carbon dioxide emission
data has been calculated in line with the 2019 UK
Government environmental reporting guidance.
Year ended 30 June
2020
Tonnes
of CO2e
2021
Tonnes
of CO2e
8,011
8,049
5,260
5,495
13,544
Scope 1 - direct emissions
(UK facilities and vehicles)
Scope 2 - indirect emissions
(UK purchased electricity)
Total Scope 1 and Scope 2 emissions
13,271
Intensity metric – total scope
1 & 2 emissions per metric tonne
produced
0.27
0.31
Total UK energy consumption
(kWh)
68,377,491 67,086,645
The group is committed to year on year improvements in
operational energy efficiency. A number of energy efficiency
projects were completed in the year. These included the
installation of LED lighting, in conjunction with PIR sensors
to ensure that lighting is not in use when not required, the
replacement of Fixed Speed Drives with Variable Speed
Drives, which reduces the speed of plant motors to ensure
they run no faster than is required, and the replacement of
high voltage transformers with more energy efficient and
reliable models. The group is mandated to comply with the
Energy Savings Opportunity Scheme (ESOS), and the
available energy efficiency improvements identified in phase
2 reporting are being reviewed and implemented where
possible. Training in energy conservation and sustainability
awareness is being considered for all staff across the business
in the coming year. All these projects and initiatives reinforce
the commitment to implementing an Energy & Environment
strategy, which reduces energy and carbon usage, and is in
line with the UK’s 2050 net zero targets.
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 accounting
standards in conformity with the requirements of the
Companies Act 2006. The directors have elected to prepare
the parent company financial statements in accordance
with United Kingdom Generally Accepted Accounting
Practice (United Kingdom Accounting Standards and
applicable law) including Financial Reporting Standard 101
Reduced Disclosure Framework. Under company law the
directors must not approve the financial statements unless
they are satisfied that they give a true and fair view of the
state of affairs of the group and the company and of the
profit or loss of the group for that period.
The directors are also required to prepare financial
statements in accordance with the rules of the London
Stock Exchange for companies trading securities on the
Alternative Investment Market.
In preparing these financial statements the directors are
required to:
select suitable accounting policies and then apply
them consistently;
make judgements and accounting estimates that are
reasonable and prudent;
state whether the group financial statements have
been prepared in accordance with international
accounting standards
in conformity with the
requirements of the Companies Act 2006 subject to
any material departures disclosed and explained in
the financial statements; and
19
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 N Fletcher
Secretary
1 October 2021
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.
Auditor’s remuneration – non-audit
related fees
During the year new rules were introduced by the UK audit
profession on the non-audit work that can be undertaken by
the group’s auditors. For many years we have, as a board,
put non-audit work to other firms though our auditors did
undertake tax compliance services. The board had overseen
changes in advance of these regulations (the Financial
Reporting Council Ethical Guidance).
20
Board Report on Remuneration
the aggregate price payable on the exercise of all options or
rights to subscribe for ordinary shares granted to an
individual employee under the share option plan and under
all other discretionary schemes.
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.
Increase in
pensionable salary is restricted to the increase in the
consumer price index.
Other benefits within the schemes are death in service lump
sums, spouse’s and dependant’s 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
relating to the 2020 financial year 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
21
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 four 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.
22
Corporate Governance
continued
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
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). He served
as company secretary (2013 – 2021). He was appointed
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.
23
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 with 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.
24
Corporate Governance
continued
The disclosures below were last reviewed and approved by
the board on 1 October 2021.
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.
25
A monthly report is provided to the board of the financial and
operational performance of the group. Information is
provided in advance of meetings.
The board is responsible for all strategic decisions and the
overall governance and culture of the group.
All the directors have access to the services and advice of the
company secretary and are able to take independent
professional advice to enable them to do so. This may be done
at the group’s expense.
The board has a majority of non-executive directors and
consider that they bring independent thought and judgement
to bear as well as business experience out-with the group.
The board has sub committees with specific remits,
specifically remuneration and audit committees and detail of
the number of meetings and attendance by directors is noted
in the Annual Report.
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).
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 of performance.
To this end the board is circulated with press comment and
market feedback on the business. Market share data and peer
group analysis is available.
In terms of the financial performance the auditors meet the
audit committee (comprising the non-executives) bi-
annually and beyond the audit report do comment on the
systems, procedures and efficacy of the management. The
nominated advisor has access to the Chairman and meets
the non-executives annually.
A rigorous recruitment process is undertaken for new
directors prior to their proposal and election. In terms of re-
election their performance is reconsidered prior to them
being proposed to ensure they remain effective in their role
and that they retain their independence.
Re-election is considered by the shareholders at the AGM at
which shareholders have the opportunity as a body to
approve or otherwise board membership. Succession
planning for the board and as importantly the key
executives around the world who manage our businesses is
an ongoing topic of discussion.
8. Promote a corporate culture that is based on ethical
values and behaviours.
The board expects the highest ethical standards of its
members and management across the group.
The group has documented procedures with respect to its
responsibilities regarding ethical behaviour, specifically
bribery and corrupt practices and modern slavery and these
are applicable across its operations including supply and
customer chains.
The board also takes seriously its responsibilities towards
sustainability of its operations and the impact of our
operations on the environment. This is documented and
reported on annually in Polyflor’s Sustainability Report.
As an employer and member of many communities
throughout the world, the board consider that strong ethical
values to be a good member of these communities is a mind-
set not one underpinned by rules and procedures. Ensuring,
via recruitment processes and cultural values that this
cascades through the business is critical to ensuring the
group is a “good member of the community”. All directors of
the group’s companies are expected to comply and are given
a manual on procedures and expectations. This covers
authority levels and gives guidance on appropriate behaviour.
Ultimately service contracts underpin this by indicating
behaviour that can be deemed a breach of contract and the
directors are clear about their statutory duties as formally
set out in sections 171 – 177 of the Companies Act 2006.
26
Corporate Governance
continued
9. Maintain governance structures and processes that are
fit for purpose and support good decision making by the
board
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.
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.
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.
27
Independent Auditor’s Report to the Members of
James Halstead plc
Opinion on the financial statements
In our opinion:
Independence
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 2021 and of the group’s profit for
the year then ended;
the group financial statements have been properly
prepared in accordance with international accounting
standards in conformity with the requirements of the
Companies Act 2006;
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.
We have audited the financial statements of James
Halstead plc (the ‘parent company’) and its subsidiaries (the
‘group’) for the year ended 30 June 2021 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.
The financial reporting framework that has been applied in
the preparation of the group financial statements is
applicable law and international accounting standards in
conformity with the requirements of the Companies Act
2006. The financial reporting framework that has been
applied in the preparation of the parent company financial
law and United Kingdom
statements
Accounting Standards,
including Financial Reporting
Standard 101 Reduced Disclosure Framework (United
Kingdom Generally Accepted Accounting Practice).
is applicable
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 believe that
the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion.
We remain 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.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that
the directors’ use of the going concern basis of accounting
in the preparation of the financial statements is appropriate.
Our evaluation of the directors’ assessment of the group
and the parent company’s ability to continue to adopt the
going concern basis of accounting included:
Examining the directors’ business plan covering the
period to October 2022. We examined the cash flow
forecasts for key judgements as well as considering
downside sensitivities to these;
Testing their mechanical accuracy and assessing
historical forecast accuracy;
Challenge of the directors’ stress test scenarios
including levers available to the directors to mitigate
the impacts;
Challenge of the directors on the key assumptions
included in the scenarios and confirming the
directors’ mitigating actions are within their control;
and
Assessing the adequacy of the disclosures within the
financial statements relating to the directors’
assessment of the going concern basis of preparation.
Based on the work we have performed, we have not
identified any material uncertainties relating to events or
conditions that, individually or collectively, may cast
significant doubt on the group and the parent company’s
ability to continue as a going concern for a period of at least
twelve months from when the financial statements are
authorised for issue.
Our responsibilities and the responsibilities of the directors
with respect to going concern are described in the relevant
sections of this report.
28
Independent Auditor’s Report to the Members of
James Halstead plc continued
Overview
Coverage
97% (2020: 99%) of group profit before tax
90% (2020: 93%) of group revenue
96% (2020: 97%) of group total assets
Key audit matters
Inventory provisioning
Pension scheme assumptions
Going concern
2021
(cid:0)(cid:0)
(cid:0)(cid:0)
x
2020
(cid:0)(cid:0)
(cid:0)(cid:0)
(cid:0)(cid:0)
Going concern is no longer considered to be a key audit
matter given the reduced level of uncertainty regarding the
economic implications of Covid-19.
Materiality
Group financial statements as a whole: £2.56m (2020:
£2.30m) based on 5% of profit before tax (2020: 5% of 3
year average profit before tax).
An overview of the scope of our audit
Our group audit was scoped by obtaining an understanding
of the group and its environment, including the group’s
system of internal control, and assessing the risks of
material misstatement in the financial statements. We also
addressed the risk of management override of internal
controls, including assessing whether there was evidence of
bias by the directors that may have represented a risk of
material misstatement.
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 given the statutory audit
requirements 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. The remaining components of the Group were
considered non-significant and these components were
principally subject to analytical review procedures by the
group engagement team.
Our involvement with component auditors
For the work performed by component auditors, we
determined the level of involvement needed in order to be
able to conclude whether sufficient appropriate audit
evidence has been obtained as a basis for our opinion on the
group financial statements as a whole. Our involvement
with component auditors included the following:
The German 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.
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) that 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.
Key audit matter – Inventory 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 2021, the group held
inventories of £60.7m (2020: £68.5m).
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.
29
How the scope of our audit addressed the key
audit matter
How the scope of our audit addressed the key
audit matter
We obtained evidence concerning management’s
assumptions applied in calculating the value of inventory
provisions by:
Challenging the group’s inventory provisioning policy
with specific consideration given to slow moving or
obsolete stock lines. This involved a review of
production and sales records for a sample of products
to ascertain when they were last made or sold and
whether they had been appropriately provided for;
assessing the 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.
Key audit matter – 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 2021, the group recorded a net retirement
obligation of £4.4m (2020: £23.2m), comprising scheme
assets of £77.3m (2020: £67.3m) and scheme liabilities of
£81.6m (2020: £90.5m).
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 and the related disclosures 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.
In testing the pension valuation, with the help of external
pension actuarial experts, we reviewed 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
We have tested the accuracy of the scheme asset
statements by reference to service organisation control
reports to gain assurance over the robustness of the
provider’s internal controls. Further, we have sample tested
assets to third party sources in order to confirm ownership
and valuation.
Furthermore, we have assessed the disclosure of the net
liability and the related assumptions and
pension
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. Furthermore, the disclosures made are
in accordance with the relevant accounting framework.
Our application of materiality
We apply the concept of materiality both in planning and
performing our audit, and in evaluating the effect of
misstatements. We consider materiality to be the
magnitude by which misstatements, including omissions,
could influence the economic decisions of reasonable users
that are taken on the basis of the financial statements.
In order to reduce to an appropriately low level the
probability that any misstatements exceed materiality, we
use a lower materiality level, performance materiality, to
determine the extent of testing needed. 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.
30
Independent Auditor’s Report to the Members of
James Halstead plc continued
Based on our professional judgement, we determined
materiality for the financial statements as a whole and
performance materiality as follows:
Group financial statements
2021
£2.56m
2020
£2.30m
5% of profit before tax
Materiality
Basis for determining
materiality
Performance materiality £1.67m
5% of 3 year average
profit before tax
£1.49m
Parent company financial statements
Materiality
Basis for determining
materiality
£1.66m
5% of profit before tax.
For the purposes of the
group audit, the amount
above was restricted to
component materiality.
Performance materiality £1.08m
£1.49m
5% of 3 year average
profit before tax.
For the purposes of
the group audit, the
amount above was
restricted to
component materiality.
£0.97m
Rationale for the materiality benchmark applied - 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.
Basis for determining performance materiality - 65% of the
above materiality level. This is considered the appropriate
basis given the multiple significant components across three
geographic regions (United Kingdom, Germany and
Australia), the level of misstatements in the past and our
overall risk assessment.
Component materiality
We set materiality for each significant component of the
group based on a percentage of between 20% and 70% of
group materiality dependent on the size and our assessment
of the risk of material misstatement of that component.
Component materiality ranged from £0.51m to £1.79m. In
the audit of each component, we further applied
performance materiality levels of 65% of the component
materiality to our testing to ensure that the risk of errors
exceeding component materiality was appropriately
mitigated.
Reporting threshold
We agreed with the Audit Committee that we would report
to them all individual audit differences in excess of £51,260
(2020: £46,000). We also agreed to report differences below
this threshold that, in our view, warranted reporting on
qualitative grounds.
Other information
The directors are responsible for the other information. The
other information comprises the information included in
the Report and Accounts 2021 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. 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
course of 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 this gives rise to a material
misstatement in the financial statements themselves. 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.
Other Companies Act 2006 reporting
Based on the responsibilities described below and our work
performed during the course of the audit, we are required by
the Companies Act 2006 and ISAs (UK) to report on certain
opinions and matters as described below.
Strategic report and directors’ report
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.
In the light of the knowledge and understanding of the
group and 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.
31
Matters on which we are required to report by
exception
Extent to which the audit was capable of detecting
irregularities, including fraud
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 by
the parent company, 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, the directors are responsible for the preparation
of the financial statements and for being satisfied that they
give a true and fair view, and for such internal control as the
directors determine is necessary to enable the preparation
of financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are
responsible for assessing the group’s and the parent
company’s ability to continue as a going concern, disclosing,
as applicable, matters related to going concern and using
the going concern basis of accounting unless the directors
either intend to liquidate the group or the parent company
or to cease operations, or have no realistic alternative but to
do so.
Auditor’s responsibilities for the audit
of the financial statements
Our objectives are to obtain reasonable assurance about
whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error, and
to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not
a guarantee that an audit conducted in accordance with
ISAs (UK) will always detect a material misstatement when
it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they
could reasonably be expected to influence the economic
decisions of users taken on the basis of these financial
statements.
Irregularities, including fraud, are instances of non-
laws and regulations. We design
compliance with
procedures in line with our responsibilities, outlined above,
to detect material misstatements in respect of irregularities,
including fraud. The extent to which our procedures are
capable of detecting irregularities, including fraud is detailed
below.
Based on our understanding and accumulated knowledge of
the group and the sector in which it operates we considered
the risk of acts by the group which were contrary to
applicable laws and regulations, including fraud and whether
such actions or non-compliance might have a material
effect on the Financial Statements. These included but were
not limited to those that relate to the form and content of
the Financial Statements, such as the group accounting
policies, international accounting standards, the UK
Companies Act 2006 and the UK Corporate Governance
Code; those that relate to the payment of employees; and
industry related such as compliance with health and safety
requirements. All team members were briefed to ensure
they were aware of any relevant regulations in relation to
their work and potential fraud risks.
We assessed the susceptibility of the financial statements
to material misstatement including fraud and evaluated
management’s incentives and opportunities for fraudulent
manipulation of the financial statements (including the risk
of override of controls) and determined that the principal
risks were related to posting inappropriate journal entries,
revenue recognition and management bias in accounting
estimates.
Our audit procedures included, but were not limited to:
the control
Obtaining an understanding of
environment in monitoring compliance with laws and
regulations;
Enquiring of management concerning potential
litigations and claims;
Performing analytical procedures to identify any
unusual or unexpected relationships that may
indicate risks of material misstatement due to fraud;
Reading minutes of meetings of those charged with
governance;
in
their
Challenging assumptions and judgements made by
significant accounting
management
estimates, in particular in relation to the group’s
defined benefit pension scheme liabilities, accruals,
stock provisions (as set out in the key audit matters
section above) and forecasts used within impairment
models utilised to assess goodwill impairment;
32
Independent Auditor’s Report to the Members of
James Halstead plc continued
A critical assessment of the consolidation and
consideration of manual or late journals posted at
consolidation level;
Identification and testing of journal entries, in
particular any journal entries posted with unusual
account combinations or including specific keywords
using data analytics; and
Agreement of the Financial Statement disclosures to
underlying supporting documentation.
We communicated relevant identified laws and regulations
and potential fraud risks to all engagement team members
and remained alert to any indications of fraud or non-
compliance with laws and regulations throughout the audit.
Our audit procedures were designed to respond to risks of
material misstatement
in the financial statements,
recognising that the risk of not detecting a material
misstatement due to fraud is higher than the risk of not
detecting one resulting from error, as fraud may involve
deliberate concealment by,
forgery,
misrepresentations or through collusion. There are inherent
limitations in the audit procedures performed and the
further removed non-compliance with laws and regulations
is from the events and transactions reflected in the financial
statements, the less likely we are to become aware of it.
for example,
Financial
A further description of our responsibilities is available on
the
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
1 October 2021
BDO LLP is a limited liability partnership registered in
England and Wales (with registered number OC305127).
33
Consolidated Income Statement
for the year ended 30 June 2021
Note 2021 2020
£’000 £’000
Revenue 5 266,362 238,630
Cost of sales (154,722) (138,262)
Gross profit 111,640 100,368
Selling and distribution costs (46,335) (45,297)
Administration expenses (13,532) (10,936)
Operating profit 51,773 44,135
Finance income 9 48 382
Finance cost 10 (553) (660)
Profit before income tax 7 51,268 43,857
Income tax expense 11 (11,407) (9,502)
Profit for the year attributable to equity shareholders 39,861 34,355
Earnings per ordinary share of 5p
– basic 12 19.2p 16.5p
– diluted 12 19.1p 16.5p
All amounts relate to continuing operations.
Details of dividends paid and proposed are given in note 13.
34
Consolidated Statement of Comprehensive Income
for the year ended 30 June 2021
Note 2021 2020
£’000 £’000
Profit for the year 39,861 34,355
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 12,708 (5,062)
12,708 (5,062)
Items that could be reclassified subsequently
to the income statement if specific conditions are met:
Foreign currency translation differences (615) 336
Fair value movements on hedging instruments 1,089 (16)
474 320
Other comprehensive income for the year net of tax 13,182 (4,742)
Total comprehensive income for the year 53,043 29,613
Attributable to:
Equity holders of the company 53,043 29,613
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.
35
Consolidated Balance Sheet
as at 30 June 2021
Note 2021 2020
£’000 £’000
Non-current assets
Property, plant and equipment 15 37,242 38,520
Right of use assets 16 6,015 5,872
Intangible assets 17 3,232 3,232
Deferred tax assets 18 254 4,334
46,743 51,958
Current assets
Inventories 19 60,684 68,542
Trade and other receivables 20 42,949 28,361
Derivative financial instruments 29 848 73
Cash and cash equivalents 21 83,261 67,445
187,742 164,421
Total assets 234,485 216,379
Current liabilities
Trade and other payables 22 65,551 47,444
Derivative financial instruments 29 92 883
Current income tax liabilities 1,160 773
Lease liabilities 23 2,948 2,568
69,751 51,668
Non-current liabilities
Retirement benefit obligations 26 4,357 23,216
Other payables 22 447 449
Lease liabilities 23 3,236 3,371
Preference shares 24 200 200
8,240 27,236
Total liabilities 77,991 78,904
Net assets 156,494 137,475
Equity
Equity share capital 27 10,408 10,407
Equity share capital (B shares) 27 160 160
10,568 10,567
Share premium account 4,122 4,072
Capital redemption reserve 1,174 1,174
Currency translation reserve 4,986 5,601
Hedging reserve 1,052 (37)
Retained earnings 134,592 116,098
Total equity attributable to shareholders of the parent 156,494 137,475
The financial statements were approved and authorised for issue by the board and were signed on its behalf on 1 October 2021.
M Halstead G R Oliver
Director Director
James Halstead plc Registration Number 140269
36
Consolidated Statement of Changes in Equity
for the year ended 30 June 2021
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 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
Profit for the year – – – – – 39,861 39,861
Remeasurement of the net defined
benefit liability – – – – – 12,708 12,708
Foreign currency translation
differences – – – (615) – – (615)
Fair value movements on
hedging instruments – – – – 1,089 – 1,089
Total comprehensive income for
the year – – – (615) 1,089 52,569 53,043
Transactions with equity shareholders
Dividends – – – – – (34,083) (34,083)
Issue of share capital 1 50 – – – – 51
Share based payments – – – – – 8 8
Balance at 30 June 2021 10,568 4,122 1,174 4,986 1,052 134,592 156,494
37
Consolidated Cash Flow Statement
for the year ended 30 June 2021
2021 2020
£’000 £’000
Profit for the year attributable to equity shareholders 39,861 34,355
Income tax expense 11,407 9,502
Profit before income tax 51,268 43,857
Finance cost 553 660
Finance income (48) (382)
Operating profit 51,773 44,135
Depreciation of property, plant and equipment 3,541 3,185
Depreciation of right of use assets 3,115 2,937
Profit on sale of property, plant and equipment (64) (43)
Defined benefit pension scheme service cost 620 611
Defined benefit pension scheme employer contributions paid (4,144) (4,138)
Changes in fair value of financial instruments (90) 14
Share based payments 8 13
Decrease in inventories 6,346 1,717
(Increase)/decrease in trade and other receivables (15,573) 4,388
Increase/(decrease) in trade and other payables 20,248 (10,450)
Cash inflow from operations 65,780 42,369
Taxation paid (9,895) (11,566)
Cash inflow from operating activities 55,885 30,803
Purchase of property, plant and equipment (2,811) (4,215)
Proceeds from disposal of property, plant and equipment 131 110
Cash outflow from investing activities (2,680) (4,105)
Interest received 48 382
Interest paid (26) (30)
Lease interest paid (173) (202)
Lease capital paid (3,010) (2,873)
Equity dividends paid (34,083) (25,236)
Shares issued 51 28
Cash outflow from financing activities (37,193) (27,931)
Net increase/(decrease) in cash and cash equivalents 16,012 (1,233)
Effect of exchange differences (196) 14
Cash and cash equivalents at start of year 67,445 68,664
Cash and cash equivalents at end of year 83,261 67,445
38
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 accounting standards in conformity with
the requirements of the Companies Act 2006. 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 (being 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.
As the global pandemic continues, but with many markets at advanced stages of vaccination, 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 flooring, its use in many projects is being widened.
Working with our teams we have tested extreme scenarios for the purpose of the statutory audit and, whilst we do not believe
they are likely, this stress testing underpins the going concern concept. The cost and availability of international freight is frustrating
stock holdings, and as part of the going concern review we have factored in the scenario that this will continue for another year.
Recent accounting developments
The financial statements are prepared in accordance with international accounting standards in conformity with the requirements
of the Companies Act 2006 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.
IAS 1 Presentation of financial statements and IAS 8 Accounting policies, changes in accounting estimates and errors (amendment –
definition of material)
Amendments to IFRS 3 Business Combinations: Definition of a Business
Amendments to References to the Conceptual Framework in IFRS Standards
There were no new standards, interpretations and amendments, which are not yet effective and have not been adopted early in
these financial statements, which will or may have an effect on the group’s future financial statements.
39
Accounting policies (continued)
2.
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.
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.
40
Notes to the Consolidated Financial Statements
continued
2.
Accounting policies (continued)
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.
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.
41
2.
Accounting policies (continued)
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.
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. 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.
42
Notes to the Consolidated Financial Statements
continued
2.
Accounting policies (continued)
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.
Grants
Grants that compensate for expenses are recognised in the income statement in the same period and category in which the
expenses are recognised.
Dividends
Interim dividends are recognised when they are paid. Final dividends are recognised when they are approved by the shareholders.
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.
43
Accounting policies (continued)
2.
Derivative financial instruments and hedging (continued)
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.
44
Notes to the Consolidated Financial Statements
continued
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:
45
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.
46
Notes to the Consolidated Financial Statements
continued
Segmental information
5.
Operating segments are those segments for which results are reviewed by the group’s chief operating decision maker (CODM) to
assess performance and make decisions about resources to be allocated. The CODM is the group board which meets regularly
throughout the year to discuss the performance and results of the group as a whole. The business of the group is focussed almost
entirely on the manufacture and distribution of flooring products. The directors consider that under the definitions contained within
IFRS 8 there is only one reportable segment, which is the group as a whole. This is consistent with the core principle of IFRS 8, which
is to disclose information to enable users of the financial statements to evaluate the nature and financial effects of the business
activities in which the group engages and the economic activities in which it operates. Therefore the majority of the disclosures
required under IFRS 8 have already been given in these financial statements.
Segment assets comprise property, plant and equipment, right of use and intangible assets. Geographical disclosures in respect of
revenues and segment assets are provided below and include revenue for Germany of £55,656,000 (2020: £53,096,000) and assets
in Germany of £10,560,000 (2020: £12,166,000).
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
2021
£’000
98,243
111,863
38,386
17,870
2020
£’000
78,921
105,732
33,553
20,424
266,362
238,630
2021
£’000
30,213
12,021
3,900
355
46,489
254
46,743
2020
£’000
30,248
13,679
3,060
637
47,624
4,334
51,958
Revenue is by location of customer. Assets are by location of asset.
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 on disposal of property, plant and equipment
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
47
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
2021
£’000
3,541
3,115
(64)
1,484
(1,668)
50
122
39
–
3
2021
£’000
36,284
4,353
620
836
8
42,101
2021
Number
2020
Number
660
159
819
2021
£’000
968
926
24
1,918
25
1,943
668
158
826
2020
£’000
968
926
8
1,902
25
1,927
Social security costs related to this remuneration
257
255
48
Notes to the Consolidated Financial Statements
continued
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
Total taxation
Current tax includes £3,666,000 (2020: £3,085,000) of overseas tax.
2021
£’000
44
4
48
2021
£’000
15
11
26
173
354
553
2021
£’000
10,733
(415)
10,318
874
215
1,089
11,407
2020
£’000
377
5
382
2020
£’000
19
11
30
202
428
660
2020
£’000
9,393
(486)
8,907
437
158
595
9,502
The effective tax rate for the year to 30 June 2021 is higher (2020: 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% (2020: 19%)
Effects of:
Adjustments to tax in respect of prior periods
Overseas tax rates
Disallowable items
Change in deferred tax rate
Total taxation
2021
£’000
51,268
9,741
(200)
1,469
173
224
11,407
2020
£’000
43,857
8,333
(328)
1,228
193
76
9,502
In addition to the amounts above £2,981,000 has been charged (2020: £1,671,000 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.
The UK corporation tax rate will change from 19% to 25% on 1 April 2023. The UK deferred tax balances are measured at 19% or
25% as appropriate.
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
Interim dividend for previous year of 2.125p
Final dividend for previous year of 10.00p (2020: 10.00p)
Interim dividend for current year of 4.25p (2020: 2.125p)
Amounts recognised as distributions to equity shareholders in the year
49
2021
£’000
39,861
2020
£’000
34,355
208,141,520
208,135,698
123,165
148,358
208,264,685
208,284,056
19.2p
19.1p
16.5p
16.5p
2021
£’000
4,423
20,814
8,846
34,083
2020
£’000
–
20,813
4,423
25,236
A final dividend of 11.00p per share for the year ended 30 June 2021, amounting to £22,898,000 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
£43,332,000 (2020: £27,818,000). The aggregate amount of directors’ emoluments excluding pension contributions was
£1,918,000 (2020: £1,902,000) of which the highest paid director’s emoluments were £922,000 (2020: £912,000). The directors’
salaries or fees for the year ended 30 June 2021 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.
50
Notes to the Consolidated Financial Statements
continued
15. Property, plant and equipment
Cost
At 30 June 2019
Additions
Disposals
Exchange differences
At 30 June 2020
Additions
Disposals
Exchange differences
At 30 June 2021
Depreciation
At 30 June 2019
Charge for the year
Disposals
Exchange differences
At 30 June 2020
Charge for the year
Disposals
Exchange differences
At 30 June 2021
Net book value
At 30 June 2019
At 30 June 2020
At 30 June 2021
Freehold
land and
buildings
£’000
Plant and
equipment
£’000
28,052
–
–
163
28,215
406
–
(579)
28,042
9,844
670
–
59
10,573
680
–
(199)
11,054
18,208
17,642
16,988
70,594
4,215
(465)
55
74,399
2,405
(733)
(341)
75,730
51,353
2,515
(398)
51
53,521
2,861
(666)
(240)
55,476
19,241
20,878
20,254
Total
£’000
98,646
4,215
(465)
218
102,614
2,811
(733)
(920)
103,772
61,197
3,185
(398)
110
64,094
3,541
(666)
(439)
66,530
37,449
38,520
37,242
16. Right of use assets
Cost
At 30 June 2019
Exchange differences
At 30 June 2020
Additions
Disposals
Exchange differences
At 30 June 2021
Depreciation
At 30 June 2019
Charge for the year
Exchange differences
At 30 June 2020
Charge for the year
Disposals
Exchange differences
At 30 June 2021
Net book value
At 30 June 2019
At 30 June 2020
At 30 June 2021
17.
Intangible assets
Cost and net book value at 30 June 2019, 2020 and 2021
51
Right of use
assets
£’000
8,869
14
8,883
3,471
(696)
(332)
11,326
–
2,937
74
3,011
3,115
(675)
(140)
5,311
8,869
5,872
6,015
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 3%, which is the cost of capital for the group. The result of the review indicated that no impairment was required with no
reasonable sensitivities indicating an impairment.
52
Notes to the Consolidated Financial Statements
continued
18. Deferred tax assets and liabilities
At 30 June 2019
Credited/(charged) to income
Credited to other comprehensive income
Exchange differences
At 30 June 2020
Credited/(charged) to income
Charged to other comprehensive income
Exchange differences
At 30 June 2021
Pension
scheme
deficit
£’000
Accelerated
tax
depreciation
£’000
Other
timing
differences
£’000
3,329
(589)
1,671
–
4,411
(602)
(2,981)
–
828
(816)
(308)
–
–
(1,124)
(585)
–
–
(1,709)
748
302
–
(3)
1,047
98
–
(10)
1,135
Total
£’000
3,261
(595)
1,671
(3)
4,334
(1,089)
(2,981)
(10)
254
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
2021
£’000
4,726
1,262
54,696
60,684
2020
£’000
5,140
1,358
62,044
68,542
An amount of £904,000 has been credited (2020: £416,000 charged) to the income statement in respect of movements in
inventory write-downs. The cost of inventory recognised as an expense was £154,722,000 (2020: £138,262,000).
20. Trade and other receivables
Trade receivables
Other receivables
Prepayments
53
2021
£’000
39,262
1,258
2,429
42,949
2020
£’000
24,623
1,749
1,989
28,361
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 £1,746,000 (2020: £1,588,000). 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 differences
Debts written off
Charged to income
At 30 June
Not past due
Up to three months past due
Over three months past due
Loss rate
2021
%
2
21
100
Gross
2021
£’000
38,013
2,433
562
41,008
Provision
2021
£’000
674
512
560
1,746
Loss rate
2020
%
1
22
95
The maximum exposure to credit risk for trade and other receivables by currency was:
Sterling
Euro
Australian Dollars
New Zealand Dollars
Canadian Dollars
Norwegian Krone
US Dollars
Hong Kong Dollars
Other currencies
Total
2021
£’000
1,588
(14)
(66)
238
1,746
Gross
2020
£’000
22,203
3,262
746
26,211
2021
£’000
19,852
11,574
3,429
1,012
1,057
586
1,178
753
1,079
40,520
2020
£’000
2,034
3
(644)
195
1,588
Provision
2020
£’000
146
733
709
1,588
2020
£’000
7,417
9,226
3,171
859
758
674
2,715
829
723
26,372
54
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
Canadian 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
2021
£’000
64,530
3,258
2,615
161
808
805
10,061
1,023
83,261
2021
£’000
40,949
6,238
2,594
15,770
65,551
2020
£’000
54,629
3,100
2,077
226
601
505
5,527
780
67,445
2020
£’000
29,596
4,008
1,383
12,457
47,444
Amounts falling due after more than one year
Other payables
447
449
The fair value of amounts included in trade and other payables approximates to book value.
23. Lease liabilities
Opening balance
Leases started
Leases cancelled
Lease interest
Lease payments
Exchange differences
Closing balance
Amounts payable in less than one year
Amounts payable in more than one year
All amounts are payable within five years.
2021
£’000
5,939
3,471
(21)
173
(3,183)
(195)
6,184
2,948
3,236
6,184
2020
£’000
8,869
–
–
202
(3,075)
(57)
5,939
2,568
3,371
5,939
24. Preference shares
Preference shares
55
2021
£’000
200
2020
£’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 2021 and 30 June 2020 the fair value of the preference shares was not materially different from their book value.
25. Net cash analysis
At 30 June 2019
Cash flow
Other changes
Exchange differences
At 30 June 2020
Cash flow
Other changes
Exchange differences
At 30 June 2021
Cash
and cash
equivalents
£’000
68,664
(1,233)
–
14
67,445
16,012
–
(196)
83,261
Lease
liabilities
£’000
Preference
shares
£’000
(8,869)
3,075
(202)
57
(5,939)
3,183
(3,623)
195
(6,184)
(200)
–
–
–
(200)
–
–
–
(200)
Net
cash
£’000
59,595
1,842
(202)
71
61,306
19,195
(3,623)
(1)
76,877
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 2021 the accrued pension for the highest paid
director was £125,000 and the transfer value of this accrued benefit was £2,968,000.
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.
56
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 2020. The results of that valuation have been projected forward to
30 June 2021 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 1956
Female born in 1956
Future expected lifetime of future pensioner at age 65:
Male born in 1976
Female born in 1976
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
2021
2020
2.05%
2.55%
3.00%
3.15%
2.55%
1.65%
1.80%
2.75%
2.80%
1.80%
20.9 years
23.3 years
21.7 years
24.2 years
22.3 years
24.8 years
22.5 years
25.1 years
Impact on scheme liabilities
Increase by £1.2m
Increase by £0.8m
Increase by £3.8m
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
2021
£’000
(81,622)
77,265
(4,357)
828
(3,529)
2020
£’000
(90,488)
67,272
(23,216)
4,411
(18,805)
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 arising from changes in demographic assumptions
Experience gain
Deferred tax
Remeasurement of the net defined benefit liability
The actual return on the scheme assets in the year was a £10,118,000 gain (2019: £2,583,000 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 arising from changes in demographic assumptions
Experience gain
Benefits paid
57
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
2021
£’000
(620)
(354)
(974)
2021
£’000
9,009
877
3,405
2,398
15,689
(2,981)
12,708
2021
£’000
67,272
1,109
9,009
4,144
181
(4,450)
77,265
2021
£’000
(90,488)
(620)
(1,463)
(181)
877
3,405
2,398
4,450
(81,622)
(90,488)
58
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 arising from changes in demographic assumptions
Experience gain
Employer contributions
Major categories of scheme assets
UK and overseas equities
Diversified growth fund
Liability driven assets
Cash
Total market value of assets
The scheme has no investments in the company or in property occupied by the company.
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
2021
£’000
(23,216)
(620)
(354)
9,009
877
3,405
2,398
4,144
2020
£’000
(19,582)
(611)
(428)
1,042
(7,867)
–
92
4,138
(4,357)
(23,216)
2021
£’000
17,023
51,090
8,057
1,095
77,265
2021
£’000
28,842
11,877
40,903
81,622
2021
years
17
18
11
14
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
Normal company contributions of £2,025,000 are expected to be paid into the scheme during the year ended 30 June 2022.
59
2020
£’000
10,407
–
10,407
160
2021
Number
2020
Number
208,141,108
18,808
208,131,108
10,000
208,159,916
208,141,108
16,042,530
16,042,530
2021
£’000
10,407
1
10,408
160
10,568
10,567
27. Share capital
Ordinary shares – allotted, issued and fully paid
Opening ordinary shares of 5p each
Ordinary shares of 5p each issued
Closing ordinary shares of 5p each
Ordinary B shares of 1p each
Total allotted, issued and fully paid
The ordinary shares of 5p each were issued during the year for a consideration of £51,000 (2020: £28,000).
The preference shares detailed below are included as financial instruments within creditors. Full details of these are given in note
11 of the financial statements of the company.
Allotted, issued and fully paid
200,000 5.5% preference shares of £1 each
2021
£’000
2020
£’000
200
200
The respective rights of each class of shares are detailed in note 11 of the financial statements of the company.
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 18,808
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
21 Jul 14
12 Jun 17
22 Dec 17
18 Oct 18
21 Jul 17
12 Jun 20
22 Dec 20
18 Oct 21
20 Jul 24
11 Jun 27
21 Dec 27
17 Oct 28
270.29
476.50
436.08
390.83
Director
M Halstead
G R Oliver
Total – directors
Employees
Total – employees
Grand total
Number
30.06.20
Exercised
in the year
Lapsed
in the year
Number
30.06.21
20,000
50,000
60,000
20,000
50,000
60,000
(11,099)
–
–
(7,709)
–
–
260,000
(18,808)
5,000
190,000
20,000
325,000
540,000
–
–
–
–
–
–
–
–
–
–
–
–
–
(20,000)
–
–
8,901
50,000
60,000
12,291
50,000
60,000
241,192
5,000
170,000
20,000
325,000
(20,000)
520,000
800,000
(18,808)
(20,000)
761,192
60
Notes to the Consolidated Financial Statements
continued
27. Share capital (continued)
The market price of the shares at 30 June 2021 was 520p (2020: 518p). The share price during the year ranged from 438p to 532p.
Directors exercised 18,808 (2020: nil) share options during the year. Aggregate gains on exercising the share options by directors in
the year amounted to £46,000 (2020: £nil) of which £27,000 (2020: £nil) related to the highest paid director.
A summary of movements in numbers of share options is as follows:
At 30 June 2019
Exercised in the year
At 30 June 2020
Exercised in the year
Lapsed in the year
At 30 June 2021
Weighted
average
exercise
price
415p
290p
416p
270p
477p
418p
Number of
options
810,000
(10,000)
800,000
(18,808)
(20,000)
761,192
At 30 June 2021 there were 26,192 (2020 45,000) share options exercisable at a weighted average exercise price of 270p
(2020: 270p).
The weighted average remaining contractual life of share options outstanding at 30 June 2021 was 6.7 years (2020: 7.6 years).
Share based payments
The group’s equity settled share based payments comprise the grant of share options to certain employees under the group’s
executive share option scheme. Details of such options are given above. The group calculated the fair value of the options at the
date of grant using the Black Scholes model.
An expense based on the fair value calculated at the date of grant was recognised in the income statement over the vesting period
of the options. The share based payment expense for the year ended 30 June 2021 was £8,000 (2020: £13,000).
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.
61
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 of derivative 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
2021
Book value
£’000
2021
Fair value
£’000
2020
Book value
£’000
2020
Fair value
£’000
40,520
848
83,261
(59,313)
(92)
(2,948)
62,276
(447)
(3,236)
(200)
(3,883)
40,520
848
83,261
(59,313)
(92)
(2,948)
62,276
(447)
(3,236)
(200)
(3,883)
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)
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.
62
Notes to the Consolidated Financial Statements
continued
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
2021
£’000
8
749
757
2020
£’000
(5)
(805)
(810)
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
£523,000 (2020: £442,000). 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.
2021
Post-tax
profits
£’000
2
(2)
2021
Equity
£’000
2
(2)
2020
Post-tax
profits
£’000
(38)
34
2020
Equity
£’000
(38)
34
Euro 5% stronger against sterling
Euro 5% weaker against sterling
31. Group companies
At 30 June 2021, 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
Polyflor (M) SDN BHD
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
Flooring distribution
Country of
incorporation
England
England
Australia
New Zealand
Canada
India
Malaysia
Germany
Germany
France
Sweden
Proportion
owned
(%)
100
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.
63
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
Malaysian ringgit
2021
Closing
1.16
1.84
1.98
1.71
11.81
102.68
5.74
2021
Average
2020
Closing
2020
Average
1.13
1.80
1.94
1.73
11.53
99.11
5.55
1.10
1.79
1.92
1.68
11.51
93.29
–
1.14
1.88
1.98
1.69
12.14
91.04
–
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 £81,000 (2020 £292,000) and the maximum outstanding lease commitments at 30 June 2021
were £18,000 (2020: £45,000).
64
Company Balance Sheet
as at 30 June 2021
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
2021
£’000
4,363
40,152
44,515
36,148
615
36,763
848
69,860
107,471
(11,210)
(92)
96,169
140,684
(200)
(4,357)
136,127
10,408
160
10,568
4,122
1,174
749
119,514
136,127
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
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 £43,332,000 (2020: £27,818,000).
The financial statements were approved and authorised for issue by the board and were signed on its behalf on 1 October 2021.
M Halstead
Director
G R Oliver
Director
James Halstead plc Registration Number 140269
65
Company Statement of Changes in Equity
for the year ended 30 June 2021
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 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
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
–
–
–
–
–
1
–
–
–
–
–
–
50
–
–
–
–
–
–
–
–
–
–
43,332
43,332
12,708
12,708
1,554
–
1,554
1,554
56,040
57,594
–
–
–
(34,083)
–
8
(34,083)
51
8
Balance at 30 June 2021
10,568
4,122
1,174
749
119,514
136,127
66
Notes to the Company Financial Statements
1.
Accounting policies
Basis of preparation
The separate financial statements of the company are presented as required by the Companies Act 2006. The company meets the
definition of a qualifying entity under FRS 100 Application of Financial Reporting Requirements issued by the Financial Reporting
Council. Accordingly, the financial statements have been prepared in accordance with FRS 101 Reduced Disclosure Framework as
issued by the Financial Reporting Council.
The company has used the disclosure exemptions available under FRS 101 in relation to presentation of a cash flow statement,
comparative information for certain assets, capital management, transactions with other group companies, compensation of key
management personnel and the effects of new but not yet effective IFRS.
As the consolidated financial statements include the equivalent disclosures, the company has used the disclosure exemptions
available under FRS 101 in relation to share based payments, and financial instruments. The disclosures for the defined benefit
retirement obligations are included in the consolidated financial statements.
The financial statements are prepared on a going concern basis and in accordance with the historical cost convention, except for
certain financial instruments that have been measured at fair value.
The 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 22 (2020: 21).
3.
Tangible fixed assets
2021
£’000
3,105
399
99
8
3,611
Cost
At 30 June 2020
Disposals
At 30 June 2021
Depreciation
At 30 June 2020
Charge for the year
Disposals
At 30 June 2021
Net book value
At 30 June 2021
At 30 June 2020
Investment
land and
buildings
£’000
Freehold
land and
buildings
£’000
Plant and
equipment
£’000
7,978
–
7,978
4,635
161
–
4,796
3,182
3,343
1,311
–
1,311
301
24
–
325
986
1,010
614
(33)
581
387
32
(33)
386
195
227
67
2020
£’000
3,042
393
94
13
3,542
Total
£’000
9,903
(33)
9,870
5,323
217
(33)
5,507
4,363
4,580
The investment land and buildings relates to a freehold property that is occupied by a subsidiary company. The rental income was
£600,000 (2020: £600,000).
68
Notes to the Company Financial Statements
continued
4.
Investments
Cost
At 30 June 2020
At 30 June 2021
Provision for impairment
At 30 June 2020
At 30 June 2021
Net book value
At 30 June 2021
At 30 June 2020
Shares in
subsidiary
undertakings
£’000
49,552
49,552
9,400
9,400
40,152
40,152
At 30 June 2021, 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
James Halstead Pension Co Limited
Halstead Floorings Limited
Halstead Flooring Concepts Pty Limited
Polyflor Canada Inc
Polyflor India Pvt Limited
Polyflor (M) SDN BHD
Objectflor Art und Design Belags GmbH
James Halstead France SAS
Falck Design AB
Owned by subsidiaries
Phoenix Distribution (NW) Limited
Polyflor Australia Pty Limited
Colonia Flooring Pty Limited
Polyflor New Zealand Limited
Karndean International GmbH
Polyflor FZE
Activity
Flooring manufacturing and distribution
Flooring manufacturing
Holding company
Dormant company
Dormant company
Dormant company
Dormant company
Dormant company
Dormant company
Holding company
Flooring distribution
Flooring distribution
Flooring distribution
Flooring distribution
Flooring distribution
Flooring distribution
Dormant company
Flooring distribution
Dormant company
Flooring distribution
Flooring distribution
Sales office
Country of
incorporation
Proportion
owned
(%)
England
England
England
England
England
England
England
England
Ireland
Australia
Canada
India
Malaysia
Germany
France
Sweden
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
100
69
Investments continued
4.
Subsidiary
Polyflor Limited
Riverside Flooring Limited
Titan Leisure Group Limited
Halstead Flooring International Limited
Expona Limited
JHL Limited
Arai (UK) Limited
James Halstead Pension Co 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
Polyflor (M) SDN BHD
Objectflor Art und Design Belags GmbH
Karndean International GmbH
James Halstead France SAS
Falck Design AB
Polyflor New Zealand Limited
Polyflor FZE
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
802, 8th Floor, Block C
Kelana Square
17 Jalan 557/26
Petaling Jaya
Salangor 47301
Malaysia
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
70
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 2020
Charged to income
Charged to other comprehensive income
At 30 June 2021
Pension
scheme
deficit
£’000
4,411
(602)
(2,981)
828
Accelerated
tax
depreciation
£’000
Other
timing
differences
£’000
(176)
(55)
–
(231)
24
(6)
–
18
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
Other taxation and social security
Other creditors
Accruals
2021
£’000
241
7,367
117
601
2,884
11,210
2021
£’000
26
35,691
90
86
255
36,148
615
615
2020
£’000
73
40,447
110
73
249
40,952
4,259
4,259
36,763
45,211
Total
£’000
4,259
(663)
(2,981)
615
2020
£’000
238
6,631
133
516
1,863
9,381
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
71
2021
£’000
200
2020
£’000
200
2021
£’000
(81,622)
77,265
2020
£’000
(90,488)
67,272
(4,357)
(23,216)
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
Opening ordinary shares of 5p each
Ordinary shares of 5p each issued
Closing ordinary shares of 5p each
Ordinary B shares of 1p each
Total allotted, issued and fully paid
2021
Number
2020
Number
208,141,108
18,808
208,131,108
10,000
208,159,916
208,141,108
16,042,530
16,042,530
2021
£’000
10,407
1
10,408
160
2020
£’000
10,407
–
10,407
160
10,568
10,567
The ordinary shares of 5p each were issued during the year for a consideration of £51,000 (2019: £28,000).
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”), which were issued on 14 January 2005. Following
the issue of the B shares, holders received a single dividend of 60 pence per B share. The B shares are not listed, have extremely
limited rights and are of negligible value.
The preference shares detailed below are included as financial instruments within creditors.
Allotted, issued and fully paid
200,000 5.5% preference shares of £1 each
2021
£’000
2020
£’000
200
200
72
Notes to the Company Financial Statements
continued
11. Share capital (continued)
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 shares 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.
73
Ten Year Summary (Unaudited)
2012
£’000
2013
£’000
2014
£’000
2015
£’000
2016
£’000
2017
£’000
2018
£’000
2019
£’000
2020
£’000
2021
£’000
Revenue
226,335 217,082 223,488 227,261 226,141 240,784 249,510 253,038 238,630 266,362
Profit before income tax
41,726
40,495
41,753
44,184
45,499
46,616
46,702
48,276
43,857
51,268
Income tax
(11,941) (10,446) (10,301) (10,250) (10,243) (10,106)
(9,994) (10,484)
(9,502) (11,407)
Profit after income tax
29,785
30,049
31,452
33,934
35,256
36,510
36,708
37,792
34,355
39,861
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
Basic earnings per 5p share
Dividends per 5p share
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
19.2p
15.3p
Figures for the 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 the previous year 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.
74
Shareholder Information
Financial calendar
Annual general meeting
Announcement of results
For the half year
For the full year
Dividend payments
Ordinary shares – interim
– final
18 November 2021
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 2021
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
1,750
461
66
84
50
5,167,751
10,594,979
4,671,310
17,700,849
170,025,027
%
2.5
5.1
2.2
8.5
81.7
2,411
208,159,916
100.0
Number of
holders
Number of
shares
1,772
595
31
8
5
102,860,087
104,332,090
777,313
108,010
82,416
%
49.4
50.1
0.4
0.1
0.0
2,411
208,159,916
100.0
75
Notice of Annual General Meeting
NOTICE IS HEREBY GIVEN that the ONE HUNDREDTH and SIXTH ANNUAL GENERAL MEETING of the company will be held
at its registered office, Beechfield, Hollinhurst Road, Radcliffe, Manchester M26 1JN, on 18 November 2021 at 9.30am.
In the interests of protecting the health and safety of our shareholders, colleagues and the general public, the directors
recommend that shareholders do not attend the AGM in person. Members of the Board will form the required quorum for
the 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 2021
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 2021.
To re-elect Mr J A Wild who is retiring by rotation under the articles of association as a director.
To re-elect Mr M Halstead who is retiring by rotation under the articles of association as a director.
To re-appoint BDO LLP as auditors of the company and authorise the directors to fix their remuneration for the
ensuing year.
Special business
To consider and, if thought fit, pass the following resolutions of which resolutions 6, 7 and 10 shall be proposed as ordinary
resolutions and resolutions 8 and 9 will be proposed as special resolutions:
6
The directors be and are hereby authorised, pursuant to article 36.2 of the articles of association of the company, to
capitalise an amount, being the credit balances on the capital redemption reserve and share premium account and
part of the amount now standing to the credit of the profit and loss account of the company, equal to the aggregate
nominal value of the ordinary shares of 5.0p each in the company in issue at close of business on 13 January 2022
(“Record Date”), and accordingly that the Directors be authorised and directed to appropriate such sum to the
members who are, at the Record Date, registered as the holders of the issued ordinary shares of 5.0p each in the capital
of the company in the same proportions in which such sum would have been divisible amongst them if it were
distributed by way of dividend and to apply such sum on their behalf in paying up in full new ordinary shares of 5.0p
each and allot such ordinary shares credited as fully paid to those members in the proportion of one new ordinary
share for each existing ordinary share held on such date and so that such new ordinary shares shall rank pari passu in
all respects with the existing ordinary shares of 5.0p each but shall not rank for the proposed final dividend of the
company of 11.0p per ordinary share in respect of the financial year ended 30 June 2021 or for any other dividend
declared prior to the Record Date.
7
That, subject to the passing of the ordinary and special resolutions numbered 8 and 9 below, the directors be and they
are hereby authorised, pursuant to article 35.14 of the company’s articles of association:
(i)
(ii)
to exercise the power contained in article 35.14 so that, to the extent determined by the directors, the holders of
ordinary shares be permitted to elect to receive new ordinary shares of 5.0p each in the capital of the company,
credited as fully paid, instead of all or part of any interim or final dividends which shall be declared before the
conclusion of the next annual general meeting of the company after the passing of this resolution; and
to capitalise the appropriate amount of new ordinary shares falling to be allotted pursuant to any elections made
as aforesaid out of profits, or sums standing to the credit of any share premium account or capital reserves of
the company, to apply such sums in paying up such new ordinary shares and to allot such new ordinary shares
to the members of the company making such elections in accordance with their respective entitlements.
8
That in substitution for all existing and unexercised authorities and powers, the directors of the company be and they
are hereby generally and unconditionally authorised for the purpose of section 551 Companies Act 2006 (the “Act”)
to exercise all or any of the powers of the company to allot shares of the company or to grant rights to subscribe for,
76
Notice of Annual General Meeting
continued
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 £6,938,664 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.
9
That subject to the passing of the ordinary resolution numbered 8 above the directors be and they are hereby
empowered pursuant to Section 570 of the Companies Act 2006 to allot equity securities (within the meaning of
Section 560 subsection (1) of the said Act) for cash pursuant to the authority conferred by resolution numbered 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
and shall expire at the conclusion of the next annual general meeting or on the date which is six months after the next
accounting reference date of the company (if earlier) save that the company may before such expiry make an offer or
agreement which would or might require equity securities to be allotted after such expiry and the directors may allot
equity securities in pursuance of such an offer or agreement as if the power conferred hereby had not expired.
10
That the company is hereby generally and unconditionally authorised for the purposes of section 693 and 701 of the
Companies Act 2006 to make one or more market purchases (within the meaning of section 693(4) of the said Act)
of fully paid ordinary shares of 5 pence each in the capital of the company (“ordinary shares”) provided that:
(i)
(ii)
(iii)
(iv)
(v)
the maximum aggregate number of ordinary shares hereby authorised to be purchased is 10% of the ordinary
shares in issue at the date of passing of this resolution;
the maximum price (exclusive of any expenses) which may be paid for an ordinary share shall not be more
than 5% above the average of the middle market quotations for an ordinary share as derived from the Daily
Official List of The London Stock Exchange plc for the five business days immediately preceding the day on
which the ordinary share is purchased;
the minimum price which may be paid for each ordinary share is 5 pence (exclusive of any expenses);
unless previously revoked or varied, the authority hereby conferred shall expire at the conclusion of the next
annual general meeting of the company or twelve months from the date, if earlier, of passing this resolution;
the company may make a contract or contracts to purchase its ordinary shares under the authority hereby
conferred prior to the expiry of such authority which will or may be executed wholly or partly after the expiry
of such authority and the company may make a purchase of its ordinary shares in pursuance of such contract
as if the authority hereby conferred had not expired; and
(vi)
the directors may elect to hold shares purchased under this authority in the form of treasury shares (subject
to a maximum of 10% of the issued ordinary share capital of the company at any one time).
By order of the board
D N Fletcher
Secretary
15 October 2021
Beechfield
Hollinhurst Road
Radcliffe
Manchester
M26 1JN
77
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
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In the interests of protecting the health and safety of shareholders, colleagues, and the general public, the directors recommend that
shareholders, or any proxy appointed by the shareholder, do not attend the meeting in person. 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.
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 Group 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 Group 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 Group, Central Square, 29 Wellington Street, Leeds, LS1 4DL by 9.30am on 16 November 2021.
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 9.30am on 16 November 2021. 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 their
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 2021 (being the latest practicable business day prior to the publication of this Notice), the company’s ordinary
issued share capital consisted of 208,159,916 ordinary shares, carrying one vote each. Therefore, the total voting rights in the company
as at 30 September 2021 were 208,159,916.
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 17 December 2021 to shareholders on the register as at 26 November 2021.
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JAME S H ALSTE AD PLC
Covering the World
Report and Accounts 2021
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IMAX Cinema, Aruba
Livesport Office, Prague, Czech Republic
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