James Latham maintains confidence despite fall in revenue

Timber and panels specialist James Latham reported a 10.3% decrease in first-half revenue on Thursday, to £190.9m.

The AIM-traded firm put the decline down to changing customer preferences, with some opting for more affordable alternatives due to the impact of high inflation.

Its gross profit percentage, including warehouse costs, stood at 16.8% for the six months ended 30 September, down from 19.4% during the same period last year.

Increased competition in a challenging market contributed to the decrease, slightly below the long-term average of 17.5%.

Despite persistent high inflation rates, James Latham said it effectively controlled overhead costs, which were slightly lower than the prior year.

Operating profit for the period totalled £14.5m, a £9m decrease from the £23.5m profit reported in the same period in 2022.

The reduction was expected as the company returned to more typical trading conditions after exceptional results in the last two years.

Profit before tax fell to £16.4m from £23.7m in the corresponding period last year.

The company said a tax charge of £4m reflected an effective rate of 24.6% due to an increase in the UK basic corporation tax rate.

Earnings per ordinary share for the first half came in at 61.5p, down from 95.6p in the same period in 2022.

As of 30 September, James Latham’s net assets totalled £203.8m, up from £180.5m in the prior year.

Inventory levels decreased from £74.6m to £66.1m as supply chains stabilised, while trade and other receivables also slightly reduced, with low bad debt figures.

Cash and cash equivalents increased to £66m, compared to £36.9m in 2022, thanks to early settlement discount opportunities and improved interest receipts.

The company reported a surplus of £11.2m in the IAS19 pension scheme valuation as of 30 September, up from £7.2m a year earlier.

It said the triennial valuation on 31 March showed a surplus of £10m and a funding level of 118%.

The company said the strong position enabled the trustees to de-risk their investments, reducing the volatility of the IAS19 valuation.

Additionally, the deficit recovery funding payment of £3m annually would cease from 1 December.

James Latham’s board declared an increased interim dividend of 7.75p per share, up from 7.25p for the first half of 2022.

The dividend would be paid on 26 January, with an ex-dividend date of 4 January, to shareholders on the register at the close of business on 5 January.

“The second half has started with similar volumes to the previous six month period to 30 September, with similar margins,” the board said of the firm’s current trading.

“Cost prices of the majority of our products are stable at the moment, but we are mindful that the market in continental Europe is quiet at the moment, with European panel manufacturers exporting more product to the UK, where the market is currently more robust.

“There remain significant cost pressures on all our manufacturers, so we expect any further price weakness to be limited.”

James Latham said its customers still had reasonable order books, but there were indications that some contracts were postponed rather than cancelled.

“We are seeing a continued shift in our market sectors to more lower value products, where we have gained market share, and we expect this trend to continue as customers look for more cost-effective solutions.

“The strength of our customer base and the diverse markets in which we operate will help us during the more challenging macroeconomic climate that we are all facing.

“The board anticipates that the results for the year ended 31 March 2024 will be in line with market expectations.”

At 1031 GMT, shares in James Latham were up 1.35% at 1,049p.

Reporting by Josh White for Sharecast.com.