James Halstead reports record sales and dividend

Investors in flooring manufacturer James Halstead (JHD) may well be considering a different kind of floor. On 10 March, the company's share price hit 166p, a low not seen since the start of the pandemic. Since then, it has recovered well. In its results for the year to 30 June, the company rewarded the equity market’s faith with some encouraging figures.

Sales hit record levels, which the company said was thanks to increased demand for its products. It had also reported increased sales in its interim results, although it did not raise prices during that period. Cost increases were passed through to customers this time around, yet the sales have kept coming. Inflation means this has not translated into increased pre-tax profit, but there are signs that the worst of global inflation may be over. And the global picture matters for a company like James Halstead. It sells all over the world, offering lots of avenues for future expansion.

Earnings per share (EPS) also hit a record high, which means a record high dividend payment. At its current price, the dividend yield looks attractive. So too does its price/earnings ratio, especially considering analyst Panmure Gordon’s bullish predictions for future record-beating growth. By 2025, it forecasts EPS of 10.25p, £55mn pre-tax profit, £355mn in sales, and a full-year dividend of 8.16p a share. Three months ago, we were on the fence about such predictions. These results have turned us into believers.

The big bear point for James Halstead is the possibility of a global recession hitting sales demand, but all companies should suffer if that happens, and James Halstead’s cash cushion should help it through the storm. All things being equal, this is once again an attractive business. Buy.

Last IC view: Hold, 180p, 31 Mar 2023