James Latham revenue falls amid weaker markets

James Latham reported a revenue decline of 10.2% for the financial year ended 31 March on Thursday, to £366.5m, down from £408.4m the prior year.

The AIM-traded firm put the decrease down to a shift in product mix towards lower-cost items, despite a slight growth in delivered business volumes from the company's own warehouses.

Its gross profit margin for the year fell to 16.9% from 19.6% due to a competitive market environment and changes in product mix.

Despite high inflation, overheads remained stable.

Profit before tax decreased to £30.3m from £44.5m a year earlier, with profit after tax at £22.7m, down from £35.9m.

Earnings per share dropped to 112.7p from 179.5p.

Net assets increased to £215.2m from £195.6m as of 31 March, as inventory levels decreased to £61.7m from £67.5m due to normalised supply chains and a shift to lower-value products.

Trade and other receivables were £2m lower than the previous year, with low bad debts at 0.11% of revenues.

Cash and cash equivalents rose to £75.9m from £62.6m, reflecting strong cash flows from operations.

The board declared a final dividend of 26p per share, bringing the total dividend for the year to 33.75p, covered 3.3 times by earnings.

Additionally, a special dividend of 45p per share was declared as a result of the company's strong cash position.

Both dividends would be payable on 23 August, with an ex-dividend date of 1 August.

Current trading aligned with the second half of the 2024 financial year, with similar volumes and margins.

While most customers had improved order books, certain sectors, such as the merchant sector, remained challenging.

Container freight rate increases were expected to raise cost prices for about 25% of products, with market prices expected to adjust accordingly.

The company noted stable cost prices from most manufacturers and anticipated gradual improvement in demand for panel products, though timber demand remained challenging.

Increased volumes in lower-value products were expected to shift as overall demand and confidence improve.

James Latham remained cautious of geopolitical instability and the upcoming UK general election, but said it was optimistic about a gradually improving macroeconomic climate.

“I am very pleased to report good trading results for the financial year to 31 March,” said chairman Nick Latham.

“The financial year was a year where normal market conditions returned following three years of unprecedented challenges and opportunities, which had provided the group with exceptional profits.

“Product values reduced at a faster rate and earlier in the financial year than we had predicted.”

Latham said the lack of demand for the company’s type of products in continental Europe led to UK manufacturers having to react to price weakness from European manufacturers, who were looking to sell more products in the UK.

“Global supply chains have been much easier this year, but we have seen how the position can quickly change with the impact that the shipping attacks in the Red Sea have had on container rates.

“The impact of inflation and higher interest rates has continued to be challenging with negative consumer confidence levels for much of the year affecting outputs in some of our key sectors.”

Construction had a challenging year, Nick Latham added, and although that did not directly affect the firm, he said many of its larger manufacturing customers supplied product into the sector.

“The strength of our results are testament to the depth and breadth of our customer base and the diverse market sectors within which we operate.”

At 1520 BST, shares in James Latham were up 3.27% at 1,265p.

Reporting by Josh White for Sharecast.com.