James Halstead PLC (AIM:JHD) said in a trading update that it is expecting to report 9-10% growth in turnover in the year ended 30 June.
“We can report that turnover in the year has been robust and will be around 9-10% ahead of the previous year,” the commercial flooring manufacturing and distributor said in a statement to the stock exchange. “The sales growth has been in all our main markets.”
The company has sought to maintain sales volumes and raise stock levels to “historically exceptional” levels to deal with supply challenges, which it said gives it a hedge against “very likely increased costs and shortages”.
It boosted inventory after starting the financial year “with a much lower than optimal level of finished goods” due to Covid-related staff and other material shortages.
Ongoing challenges for the company include price increases in energy, fuel and freight that it said had affected margins.
It has passed on some of these costs to customers by raising prices and delivery surcharges but said selling prices lag behind cost increases.
The flooring manufacturer reported better availability of raw bulk materials sourced from Asia and labour in the last few months, but said it still faces “risks of further shortages and very uncertain future energy costs”.
It reported strong demand for commercial contract flooring compared to last year, partly due to more normalised demand in hospitality and retail.
It also noted a general trend towards vinyl floor covering that has noticeably increased with large increases in raw material costs that have driven up vinyl flooring prices.
“Historic experience of previous periods of expenditure constraint or recession have shown vinyl to have benefited from ‘trading down’ from these alternatives,” the company said. “Analysis of our sales suggests this is, to a degree, already happening.”
The company said its balance sheet “remains strong”, that it is “ungeared with positive cash balances” and that it is in “robust shape to weather the conditions it faces”.