Commercial, contract, and consumer flooring manufacturer James Halstead (LSE: JHD) has a consistent record of raising its dividend a little each year. On top of that, shareholders hanging on since around 2009 will have enjoyed an almost 300% increase in their invested capital because of the generally rising share price.
The firm is a success story and has been pushing into new international markets. But in today’s full-year results report, chief executive Mark Halstead talked of a “challenging” year with European markets “slothful” on top of the drag from the “never-ending saga over Brexit.” But the firm is a net exporter of goods, which means the weak pound offered some advantage.
Encouraging figures
Considering the weakness in the firm’s markets, today’s figures are pretty good. Revenue came in 1.4% higher than the previous year, earnings per share moved 3.4% higher, and Halstead managed to increase the cash figure on the balance sheet by 36% to almost £69m. The directors pushed up the total dividend for the year by 3.7%.
The strong cash performance proves that Halstead runs a decent business, in my view. Furthermore, borrowings are negligible, so the cash pile should help see the company through any future periods of macroeconomic weakness. However, there is a chunky figure for pension obligations in the accounts, which is an almost unavoidable consequence of trading for a long time. Halstead has been going since 1915.
The directors have plans in the pipeline to expand plant and infrastructure, which means growth is very much on the agenda beyond any short-term general economic weakness we may see. Indeed, 15 years ago the company set up a training school in Radcliffe to combat a “growing skills gap” in the UK and to generate the trained and effective staff it needed to grow.
Last year the firm awarded 198 delegates with certificates of accomplishment. On top of that, Halstead offers similar training in Europe and Australia, but Mark Halstead points out in the report that “no government funding is available” to support the firm with its training activities.
An optimistic outlook
I reckon the ‘skills gap’ problem is rife across many industries in the UK today. Perhaps because many young people have been choosing university rather than hands-on technical education and apprenticeships. But Halstead has done a good job of helping itself to overcome the issue.
Meanwhile, the outlook is optimistic. But the current share price of close to 514p throws up a forward-looking earnings multiple for the current trading year to June 2020 of just over 26 and the anticipated dividend yield is a little under 3%. That’s a rich valuation, suggesting investors like the firm’s consistency.
I’d handle this one by looking to buy some of the shares on dips and down-days and holding for the long term to help finance my retirement.
