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James Halstead to benefit from weak sterling

Trading in Europe has been very competitive, but sterling's recent weakness will help
November 1, 2016

Flooring specialist James Halstead (JHD) generates two-thirds of its business from exports, so delivering a small increase in profits in the face of a strong pound was impressive. And trading is likely to improve because unlike sterling's strength in the reported year to the end of June, it has weakened significantly since then.

IC TIP: Hold at 457.5p

These results, published last month, showed trading in Europe remained competitive in the period, especially as the euro was weak against sterling. However, sales in Germany, the largest market for vinyl flooring in Europe, grew by 3.7 per cent, while James Halstead France pushed turnover ahead by 12.5 per cent, helped by an expanded sales network and improved customer service.

Trading in Australia, New Zealand and Asia saw turnover up by 7 per cent in local currency terms, although this was wiped out by adverse currency movements. But against a rather flat economic backdrop in Australia, the group won a number of key projects, including flooring for 135 Woolworths stores and 55 Kmart outlets. UK turnover showed a marginal decline, although margins held well, helped by lower raw material prices and improved productivity. However, trading in the current financial year will be affected by a cut back in the NHS repair budget.

Prior to these numbers, Panmure Gordon was forecasting adjusted pre-tax profits of £47.4m and EPS of 17.1p for the year to June 2017.

 

JAMES HALSTEAD (JHD)
ORD PRICE:457.5pMARKET VALUE:£949m
TOUCH:456.75-459.5p12-MONTH HIGH:521pLOW: 365p
DIVIDEND YIELD:2.6%PE RATIO:27
NET ASSET VALUE:47pNET CASH:£44m

Year to 30 JunTurnover (£m)Pre-tax profit (£m)Earnings per share (p)*Dividend per share (p)*
201222642.714.78
201321740.514.58.75**
201422341.815.210
201522744.216.411
201622645.517.012
% change-0+3+4+9

Ex-div: 3 Nov

Payment: 2 Dec

*Adjusted for January 2013's one-for-one bonus issue

**Excludes special dividend of 7p a share