James Latham sees business rebound strongly, but supply chain issues persist

The company’ trading statement shows revenue rose strongly in the six months ended September 30, 2021, to £193.9m, up 81.2% on the £107m recorded for the same period last year. Revenue in the six months to September 30, 2020 had been significantly impacted by the first lockdown.

Pre-tax profits for the six months to Sept 30, 2021 were £34m (2020: £6.54m) while audited pre-tax profits in the year to March 31, 2021 were £18.5m. Operating profits were very similar.

Nick Latham, chairman of James Latham, said cost prices on both timber and panels had risen significantly since the start of the financial year, with average cost prices up over 25%. He said the company experienced strong volume growth in the first quarter of the financial year, although these volumes returned to normal levels in the second quarter, and overall volumes are 4.9% higher than in the six months to 31 March 2021.”

“This six month period has been very turbulent with significant increases in the market prices for our products and well documented problems in the global supply chain leading to difficulties in obtaining regular supplies of inventory,” he said.

“We anticipated this issue and made sure that sufficient contracts were placed to ensure that our customers were not left short of stock. These significant increases in market prices did lead to a short-term improvement in margins as we worked through inventory purchased at competitive prices.”

Inventories have increased significantly, up to £69.1m from £41.3m. Apart from the increases due to the higher cost of products, the supply chain has become extended leading to increased stocks on water from £7m to nearly £20m, as vessels are delayed both at the port of origin and the destination port. 

Trade and other receivables have increased by £23.65m to £68.4m due directly to the increases in revenues, but continue to show good debtor day figures, with bad debts remaining at a low figure. 

“This six months has tested the strength of our business model and our impressive results reflect the hard work of all parts of the Company, but also are a reflection of the unprecedented market conditions of the first six months which are unlikely to be repeated.”

The second half of 2021/22 has started with slightly weaker volumes compared with the exceptional six months to September 230, 2021, and margins are returning to more normal levels. 

“We have seen a reduction in prices of some commodity products but most products are seeing prices remaining firm,” added Mr Latham. 

“The challenges persist in our supply chain, with shipment delays, congestion at the ports and container prices at all time high levels. Inventory levels have remained high to ensure we can meet our customers’ expectations.”

He said supply chain issues could persist throughout 2022. 

“Some of our customers are a bit quieter, which is in part due to projects being delayed due to supply issues with non-timber products but overall we remain confident that we will have a good end to our financial year despite the challenges ahead of us.”

The company has invested in a large racking project at its Thurrock facility and has invested in machinery at its Dresser Mouldings business to improve the efficiency of the production process.