Headlam Regulatory News (HEAD)

24 May 2018

Headlam Group plc

('Headlam' or the 'Company')

AGM Trading Update

Headlam Group plc (LSE: HEAD), Europe's largest distributor of floorcoverings, today provides a trading update in respect of the first four months of the financial year (the 'Period'), and ahead of its Annual General Meeting ('AGM') being held at 10.00 am today.

Trading throughout the Period was characterised by a soft UK market backdrop affecting revenue in both the residential and commercial sectors as well as a decline in revenue attributable to the Company's largest customer, as referenced in the Company's final results announcement dated 6 March 2018. These factors resulted in a performance that was moderately below the Company's internal expectations for the Period. The soft backdrop and decline with the largest customer was fairly consistent throughout the Period though, showing no further deterioration compared with that detailed in the final results announcement.

The Company's total revenue grew by 0.6% in the Period against the same period in the prior year. Like-for-like revenue* declined by 5.4% for the Period, with the UK showing a reduction of 6.3% versus Continental Europe which was marginally positive, increasing by 0.2%.

Continental Europe performed fairly consistently to plan, with an increase in residential sector revenue being offset by a similar decline in commercial sector revenue.

The UK performance was particularly impacted by the reduction in orders throughout the Period from the largest customer, which accounted for approximately 37% of the UK like-for-like revenue* decline. Positively though, the profitability associated with this customer in the Period was broadly unchanged against the same period in the prior year as a result of a higher margin product mix and alignment of the Company's cost base undertaken in late 2017 and early 2018 in anticipation of lower revenue volumes.

Performance was further affected by the adverse weather conditions experienced during February and March 2018 which reduced footfall to the Company's customer base within the residential sector.

Trading to date in May 2018 has shown an improvement in contrast to the performance in the Period, and is broadly in-line with the Company's expectations. The Company's meeting of expectations for 2018 will largely be reliant on trading in the traditionally stronger second half of the year and the level of weakness experienced in the Period not continuing.

The Company believes it continues to build upon its market share and, additionally, has initiatives underway and currently being trialled or considered to help mitigate the consequence of continuing weakness in the market and to support profitability.

*Like-for-like revenue is calculated based on constant currency from activities and businesses that made a full contribution in both the 2018 and 2017 periods and is adjusted for any variances in working days

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Notes for Editors:

Headlam is Europe's largest distributor of floorcoverings having grown significantly via organic growth and acquisition since 1992.

Headlam's core business provides the distribution link between suppliers and customers of floorcoverings, providing suppliers with the greatest coverage and customer penetration for their products across the UK and Continental Europe, and customers with the broadest range of products supported by next day delivery.

The Company is engaged with suppliers across 16 primary countries whose products cover a significant proportion of the floorcoverings market including carpet, residential vinyl, engineered wood, laminate, luxury vinyl tiles, ceramic tiles, underlay and commercial flooring. The Company's customers are within both the residential and commercial sectors and comprise principally independent retailers and flooring contractors.

The Company comprises 64 wholly-owned businesses in the UK and Continental Europe (UK 60, Continental Europe 4) each operating under their own trade brand and utilising their individual sales team which achieves greater market penetration.

Each of the businesses is supported by the Company's centralised and financial resources and extensive distribution network across the UK and Continental Europe.

www.headlam.com