James Halstead saved by exports

The weakness of sterling helped to drive Halstead’s UK exports during the period. However, the sale of one of its largest distributors to private equity resulted in significant de-stocking, while another distribution chain also reduced its stock to focus on margin improvement. So despite a marked increase in sales of its Polyflor flooring line, UK sales fell by 5 per cent.

In continental Europe – which accounted for 43 per cent of group sales – an uplift in demand for its Expona branded products was offset by a 6 per cent reduction in sales of its Karndean range. Rising competition in Germany resulted in a decline in sales in this core territory. However, an improved showing in Belgium, Austria and eastern Europe compensated for this. In France, a shift towards higher-margin products meant profits rose despite flat sales.

Turnover at the Polyflor Pacific division – which includes Australia, New Zealand and Asia – was up 7 per cent. Margins also improved by more than 5 per cent following the cessation of the sale of dis-continued stock, which constricted profitability last year. In Australia, the group rolled out Polyflor across the vast Woolworths chain nationally, along with a diverse range of sites, including the Western Sydney University.

More than 70 per cent of manufacturing occurs in the UK, with the remainder outsourced predominately to China. Chief executive Gordon Oliver says the group is trying to reduce manufacturing costs by exploring supply opportunities from Europe. It also increased products imported from Korea, which are free of import tariffs.

Analysts at house broker Panmure Gordon expect adjusted pre-tax profits of £48.7m during the 12 months to June 2018, giving EPS of 18.3p (from £46.6m and 17.5p in FY2016).