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James Latham lifts half-year dividend as sales recover

UK timber demand has been largely resilient this year
James Latham lifts half-year dividend as sales recover
  • The timber and panel products distributor increased its dividend despite coronavirus headwinds
  • Industry data shows growth in UK timber and joinery sales in every month this year apart from April and May
IC TIP: Buy at 864p

James Latham (LTHM) is the latest in a line of home improvements companies to report a sales rebound. After experiencing heavy disruption in its first quarter, second quarter sales rose by 5.3 per cent compared with last year and this momentum has been sustained, with September sales ahead of the same month in 2019. The second quarter surge did, however, put temporary pressure on the company’s inventories, which edged down 6.6 per cent to £41.4m compared with the end of March.

Industry data suggests James Latham is operating in a resilient market. UK timber and joinery sales increased every month this year with the exception of April and May, according to GfK data, while timber demand has driven gains in the category over the third quarter. The company’s outlook is mixed. Coronavirus headaches for industries such as hospitality and shops have weighed upon business levels, though, conversely, demand for its commodity panel products is high. As a result, margins have increased since the end of the interim period. With Brexit on the horizon, James Latham has increased stock levels in product categories most likely to be affected by the UK’s exit from the EU. 

The dividend boost is a show of confidence even if the meagre yield isn’t anything to write home about. But a net cash position should help to buttress James Latham for any volatility in its end markets for the months ahead, while the revival of certain troubled sectors should help to return additional business to the company. Buy.

Last IC View: Hold, 864p, 1 Dec 2019

JAMES LATHAM (LTHM)  
ORD PRICE:864pMARKET VALUE:£ 172m
TOUCH:830-870p12-MONTH HIGH:1,020pLOW: 485p
DIVIDEND YIELD:1.8%PE RATIO:16
NET ASSET VALUE: 548pNET CASH:£21m
Half-year to 30 SepTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20191268.333.85.5
20201076.325.65.7
% change-15-24-24+4
Ex-div:03 Jan   
Payment:29 Jan