Home Business NewsBusiness Inflation worries scuff up James Halstead shares despite latest dividend increase

Inflation worries scuff up James Halstead shares despite latest dividend increase

by LLB Reporter
31st Mar 22 12:09 pm

Record first-half sales and yet another dividend increase are failing to put a shine on the share price of flooring specialist James Halstead, as investors focus instead on how increasing materials and energy prices are pressuring margins and profits.

The Manchester-headquartered firm is putting up prices, and this is not as yet hitting demand, which remains strong, but uncertainties over costs, product availability and the overall direction of the global economy remain and the shares are now down by more than a quarter from the late 2021 high.

Chief executive Mark Halstead had already flagged these issues, and the likelihood of a slight drop in first-half profits, alongside February’s trading update so in some ways these issues should not be a surprise.

“In the first half, pre-tax profit slipped by 2% even as sales rose 5%, but an operating margin of 18.6% would still be the envy of many a firm, even if that represented a dip from 20.1% in the first half of the fiscal year to June 2021,” says AJ Bell Investment Director Russ Mould.

“The question now is whether analysts and shareholders will remain comfortable with the consensus estimates for the full year to June 2022. Going into the first-half results, analysts were currently looking for a 4% increase in sales to £276 million and a 2% increase in operating profit to £52.7 million (for a margin of 19.1% compared to 19.4% in the year to June 2021).

“That implies a 3% year-on-year increase in second-half sales and a 6% advance in operating profit. It also calls for an improved second-half of operating margin of 19.5% against 18.5% in the equivalent period of a year ago. The secret will be to what degree price increases can offset input cost inflation and impact to factory capacity utilisation that results from supply chain and raw material availability issues.”

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