REG - Heath(Samuel) & Sons - Half-year Report
18/11/2022 07:00
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RNS Number : 8236G Heath(Samuel) & Sons PLC 18 November 2022
SAMUEL HEATH & SONS plc
("the Company")
UNAUDITED INTERIM REPORT
Half year ended 30 September 2022
CHAIR'S STATEMENT
As predicted in the year end statement, our trading performance for the six
months to 30 September 2022 reflected continuing resilience in the sales line
but a tightening of margins compared to the outperformance of last year.
Sales increased 9.5% to £7.56m (2021: £6.9m) but this was largely due to
currency movements rather than volume growth. The strength of the dollar
compared to sterling has had a materially beneficial effect as a significant
proportion of our foreign sales is denominated in dollars.
Profit before tax was £521k compared to £776k in the six months to 30
September 2021. As expected, costs have increased disproportionately since
last year for a number of reasons. A proactive decision was taken to restore
selling and marketing costs to pre-pandemic levels, particularly by resuming
attendance at international trade fairs (which were mostly cancelled during
lockdowns), but also in augmenting our sales teams at home and abroad. Another
area where costs were increased is product development where more frequent new
product launches are targeted.
As might be expected, we have been adversely affected by the general rise in
energy and other costs, with our combined electricity and gas cost more than
doubling. Avoiding supply chain disruption has also been a key concern and we
have had to increase order lead times and build stock levels, so as to
minimise delays in production. In addition, the recruitment market is very
tight particularly for the skills required on the factory floor; this is a key
concern in light of inevitable retirements in our loyal but aging workforce.
Credit is therefore due to our operations team for the fact that, despite
these problems, customer order lead times have held up well, with, we believe,
a number of our competitors suffering much worse on this key measure.
First half performance was commendable in the current economic environment and
the executive team are to be congratulated for managing the challenges so
well. The order book has held up well to date, but talk of a worldwide
recession is likely to affect customer sentiment. Strains on the supply chain
and labour market are of increasing concern and energy costs will increase
further. We are therefore hesitant to predict a result for the second half of
the year.
Our balance sheet remains robust with net assets increasing to £11.1m (2021:
£6.1m) and cash and cash equivalents of £3.5m (2021: £4.9m which included
the £950k cash received from the Business Interruption Loan (since repaid)
referenced in note 6). The significant increase in net assets was due to the
reduction of the pension liability from £6.2m to zero, calculated under IAS
19 rules, resulting from higher interest rates and gilt yields (see note 7).
Shareholders should note however that the next formal actuarial valuation is
not due until 31 March 2025.
Anthony Buttanshaw
Chair
17 November 2022
Dividend
The directors recommend the maintenance of the interim dividend at 5.5p per
share (2021: 5.5p). The interim dividend will be paid on 24 March 2023 to
shareholders on the register at the close of business on 24 February 2023. The
ex-dividend date for this payment is 23 February 2023.
For further information, please contact:
Samuel Heath & Sons Plc
Simon Latham, Company
Secretary
0121 766 4200
Cairn Financial Advisers LLP
James Caithie / Jo
Turner
020 7213 0880
This announcement contains inside information for the purposes of the UK
Market Abuse Regulation and the Directors of the Company are responsible for
the release of this announcement.
Unaudited Interim Financial Report
For the Half Year ended 30 September 2022
CONSOLIDATED INCOME STATEMENT
Half year Half year Year
ended 30 ended 30 ended 31
September September March
2022 2021 2022
Unaudited Unaudited Audited
£'000 £'000 £'000
Revenue 7,560 6,904 14,015
Cost of sales (3,938) (3,510) (6,975)
Gross profit 3,622 3,394 7,040
Selling and distribution costs (1,981) (1,510) (2,917)
Administrative expenses (1,031) (1,051) (1,986)
Other operating income - grants (note 5) - 15 15
Operating profit 610 848 2,152
Finance income - 10 10
Finance cost (89) (82) (132)
Profit/(loss) before taxation 521 776 2,030
Taxation (33) (125) (558)
Profit for the period 488 651 1,472
Basic and diluted earnings per ordinary share (note 4) 19.3p 25.7p 58.1p
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Half year ended 30 September Half year ended 30 September Year ended 31 March
2022 2021 2022
Unaudited Unaudited Audited
£'000 £'000 £'000
488 651 1,472
Profit for the period
Items that will not be reclassified to profit or loss:
Actuarial profit/(loss) on defined benefit pension scheme 4,210 (316) 693
Deferred tax on actuarial loss (1,052) 60 (173)
Deferred tax rate change 298 381
3,158 42 901
Total comprehensive income for the period 3,646 693 2,373
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
At 30 September At 30 September At 31 March
2022 2021 2022
Unaudited Unaudited Audited
£'000 £'000 £'000
Non-current assets
Intangible assets 505 191 442
Property, plant and equipment 3,891 3,345 3,670
Deferred tax assets - 997 425
4,396 4,533 4,537
Current assets
Inventories 4,188 3,718 3,916
Trade and other receivables 2,115 2,113 1,836
Cash and cash equivalents 3,479 4,909 4,410
10,740
9,782 10,162
Total assets 14,178 15,273 14,699
Current liabilities
Trade and other payables (2,017) (1,862) (1,982)
Right of use lease liabilities (60) (26) (62)
Borrowings (note 6) - (84) -
Current tax payable (79) (101) (13)
(2,156) (2,073) (2,057)
Non-current liabilities
Right of use liabilities (87) - (129)
Borrowings (note 6) - (866) -
Deferred tax liability (806) - -
Retirement benefit scheme (note 7) - (6,198) (4,837)
(893) (7,064) (4,966)
Total liabilities (3,049) (9,137) (7,023)
Net assets 11,129 6,136 7,676
Equity
Called up share capital 254 254 254
Capital redemption reserve 109 109 109
Revaluation reserve 1,145 1,125 1,186
Retained earnings 9,621 4,548 6,127
Equity shareholders' funds 11,129 6,136 7,676
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Attributable to owners of the Parent Company
Share capital Capital redemption reserve Revaluation reserve Retained earnings Total equity
£000 £000 £000 £000 £000
Balance at 31 March 2021 254 109 1,267 3,987 5,617
Total transactions with owners
Equity dividends paid - - - (174) (174)
Loss for the period - - - 651 651
Other comprehensive income for the period - - - 42 42
Reclassification of depreciation on revaluation
- - (42) 42 -
Total comprehensive income for the period - - (42) 735 693
Balance at 30 September 2021 254 109 1,225 4,548 6,136
Total transactions with owners
Equity dividends paid - - - (140) (140)
Profit for the period - - - 821 821
Other comprehensive income for the period - - - 859 859
Reclassification of depreciation on revaluation
- - (39) 39 -
Total comprehensive income for the period - - (39) 1,719 1,680
Balance at 31 March 2022 254 109 1,186 6,127 7,676
Total transactions with owners - - - (193) (193)
Equity dividends paid
Profit for the period - - - 488 488
Other comprehensive income for the period - - - 3,158 3,158
Reclassification of depreciation on revaluation
- - (41) 41 -
Total comprehensive income for the period - - (41) 3,687 3,646
Balance at 30 September 2022 254 109 1,145 9,621 11,129
CONSOLIDATED CASH FLOW
STATEMENT
Half year ended 30 September Half year ended 30 September Year ended 31 March
2022 2021 2022
Unaudited Unaudited Audited
£'000 £'000 £'000
Cash flow from operating activities
Profit for the period before taxation 521 776 2030
Adjustments for:
Depreciation 168 150 359
Amortisation 48 24 50
Loss/(profit) on disposal of property, plant and equipment (1) 10 4
Net finance costs/(income) - (10) (12)
Defined benefit pension scheme expenses 83 106 170
Contributions to defined benefit pension scheme (533) (518) (1,036)
Operating cash flow before movements in working capital 286 538 1,565
Changes in working capital:
(Increase)/decrease in inventories (272) (36) (234)
(Increase)/decrease in trade and other receivables (279) (33) 272
Increase/(decrease) in trade and other payables 57 124 195
Cash generated from operations (208) 593 1,798
Taxation paid - - -
Net cash from operating activities (208) 593 1,798
Cash flow from investing activities
Payments to acquire property, plant and equipment (390) (93) (444)
Proceeds from the sale of property, plant and equipment 1 - 11
Payments to acquire intangible assets (110) (29) (306)
Net finance income/(costs) - 10 12
Net cash outflow from investing activities (499) (112) (727)
Cash flow from financing activities
Payment for right of use assets (31) (30) (46)
Proceeds from new loans (note 6) - 950 950
Loans repaid - - (950)
Dividends paid (193) (174) (314)
Net cash outflow from financing activities (224) 746 (360)
Net increase in cash and cash equivalents (931) 1,227 711
Effect of exchange rate differences on cash or cash equivalents - - 17
Cash and cash equivalents at beginning of period 4,410 3,682 3,682
Cash and cash equivalents at end of period 3,479 4,909 4,410
NOTES TO THE INTERIM FINANCIAL REPORT
1. BASIS OF PREPARATION OF INTERIM REPORT
As permitted, IAS34 'Interim Financial Reporting' has not been applied in this
interim report. The information for the period ended 30 September 2022 is not
audited and does not constitute statutory accounts as defined in section 434
of the Companies Act 2006. The statutory accounts for the year ended 31
March 2022 were given an unqualified audit report and did not contain
statements under section 498(2) or 498(3) of the Companies Act 2006. A copy of
the statutory accounts for that year has been delivered to the Registrar of
Companies. The interim accounts for the half year ended 30 September 2021 were
also unaudited.
2. ACCOUNTING POLICIES
Basis of accounting
The report has been prepared on a going concern basis in accordance UK-adopted
International Accounting Standards.
The group has not availed itself of early adoption options in standards and
interpretations.
The principal accounting policies adopted are as set out in the Annual Report
for the year ended 31 March 2022. The valuation of inventories is considered
to be the main area in terms of significant accounting estimates and
judgements.
The retirement benefit scheme liability recognised in these interim accounts
reflects the estimated change in the deficit at 30 September 2022 from the
movements in discount rates and inflation during the six months.
3. DIVIDENDS
A final dividend for the financial year 2022 of 7.5625p per share (2021:
6.875p) was paid during the period.
An Interim dividend for the financial year 2023 of 5.5p per share is proposed
(2022: 5.5p), payable on 25 March 2023.
4. EARNINGS/(LOSS) PER SHARE
The basic and diluted earnings per share are calculated by dividing the
relevant profit after taxation of £488,000 (2021: profit £651,000) by the
average number of ordinary shares in issue during the period being 2,534,322
(2021: 2,534,322). The number of shares used in the calculation is the same
for both basic and diluted earnings.
5. OTHER OPERATING INCOME - GRANT FUNDING
Income has been received from government grants
providing support during the Coronavirus pandemic:
Half year ended 30 September Half year ended 30 September Year ended 31 March
2022 2021 2022
Unaudited Unaudited Audited
£'000 £'000 £'000
Job Retention Scheme - 15 15
Total other operating income - 15 15
Income has been accounted for under the accruals method.
NOTES TO THE INTERIM FINANCIAL REPORT
6. BORROWINGS
At the end of April 2021, the Company drew down a loan under the Coronavirus
Business Interruption Loan Scheme (CBILS), for the value of £950,000, which
under the standard terms is interest free for 12 months, with no penalty for
early repayment.
This loan was repaid in full in March 2022.
7. RETIREMENT BENEFIT SCHEME
The retirement benefit scheme is valued in part using yield rates, as
indicated by government bonds. Towards the end of September 2022, the rate of
these bonds increased significantly, causing the valuation of the scheme to
move from a liability to become an asset.
However, based on a review of the scheme deeds it is not clear whether the
Company has an unconditional right to a refund and therefore for the purposes
of the interim financial statements the surplus has not been recognised as an
asset in accordance with the requirements of IAS 19 and IFRIC 14. In addition,
the Directors believe that the gilt yields at 30 September 2022 are not likely
to persist and indeed they have subsequently reduced. A future movement
(reduction) in bond yields may return the scheme to a deficit position.
At 30 September 2022 the scheme had no exposure to Liability Driven
Investments.
Note:
Certain statements made in this announcement are forward-looking statements.
These forward-looking statements are not historical facts but rather are based
on the Company's current expectations, estimates, and projections about its
industry; its beliefs; and assumptions. Words such as 'anticipates,'
'expects,' 'intends,' 'plans,' 'believes,' 'seeks,' 'estimates,' and similar
expressions are intended to identify forward-looking statements. These
statements are not a guarantee of future performance and are subject to known
and unknown risks, uncertainties, and other factors, some of which are beyond
the Company's control, are difficult to predict, and could cause actual
results to differ materially from those expressed or forecasted in the
forward-looking statements. The Company cautions security holders and
prospective security holders not to place undue reliance on these
forward-looking statements, which reflect the view of the Company only as of
the date of this announcement. The forward-looking statements made in this
announcement relate only to events as of the date on which the statements are
made. The Company will not undertake any obligation to release publicly any
revisions or updates to these forward-looking statements to reflect events,
circumstances, or unanticipated events occurring after the date of this
announcement except as required by law or by any appropriate regulatory
authority.
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