Headlam Regulatory News (HEAD)

25 November 2021

Headlam Group plc

('Headlam' or the 'Company')

Trading and ESG Update

On track to deliver profit marginally ahead of expectations

Headlam Group plc (LSE: HEAD), Europe's leading floorcoverings distributor, is pleased to provide an update on trading, and Environmental, Social and Governance ('ESG') actions.

Trading Update

Revenue for the year to date is tracking broadly in line with current market expectations* which were significantly upgraded in July 2021. A robust performance in the residential sector has helped to offset a persisting subdued commercial sector, with other features of the market being the ongoing industry wide supply issues, and associated inflationary pressures, all of which the Company has been largely able to mitigate.

Profit performance has been pleasing and reflects the previous and ongoing actions to improve operating efficiency and margin. As a consequence, the Company expects to deliver underlying profit before tax for the year ending 31 December 2021 marginally ahead of current market expectations*.

The Company will announce its Pre-Close Trading Update on 27 January 2022 ahead of announcing final results for the year ending 31 December 2021 in early March 2022.

ESG Update

Introduction

Following the publication of the Company's first ESG Strategy Report in May 2021, which set out initial focuses and broader ambitions in sustainability and ESG, the Company is pleased to provide an update on its recent actions.

Through collaborating and working with its employees and external stakeholders, the Company is focused on:

i) reducing its contribution to Greenhouse Gas ('GHG') emissions and climate change;

ii) becoming a more sustainable business, including through cultural development and increasing oversight of ESG related risks and opportunities; and

iii) increasing the sustainability of the overall floorcoverings industry through engagement and example, and supporting the future transition to a circular economy.

Environmental

GHG emissions from its transportation activities (both commercial and non-commercial fleet) are the Company's most material direct impact on the environment and therefore an area of immediate focus. The Company's Transport Integration project centred around more efficient delivery fleet utilisation has thus far resulted in a 35 reduction in fleet number to 353.

In relation to its non-commercial fleet, the Company has this month introduced a plug-in hybrid vehicle for drivers so that during 2022 over 50% of the non-commercial fleet will be plug-in hybrids. Currently there are no viable options to move the commercial fleet to electric powered vehicles, but the Company will continue to actively monitor the situation.

In support of promoting sustainable products into the industry and increasing awareness by the end consumer, the Company recently launched a sustainable 'Wool Britannia' product range, with other launches planned as part of an ongoing campaign.

Social

The Company's current focus in this area is on improving the support to its workforce, including through cultural development, engagement, and review of rewards and benefits. During the last few months, 'Values and Behaviours' and 'Leading through Change' workshops have been rolled-out across the group, as well as conferences and training being held on strategic projects. In addition, enhancements to rewards and benefits are being implemented from the beginning of 2022 along with a locally focused community programme, which will be detailed within the 2021 Annual Report being published in March 2022.

Governance

One of the material issues identified through consultation with stakeholders was 'Supply Chain Risk', and it forms an area of key near-term focus. Actions to mitigate risk in this area include the commencement of an engagement programme with key suppliers on industry sustainability issues, including on any changes to regulation and potential sustainability partnerships. Additionally, the Company has recently signed a contract with an independent party to conduct a full Supply Chain Risk Assessment.

Disclosure, Targets and Measurement of Progress

The Board of Headlam is committed to developing the Company's ESG Strategy, and has oversight and overall responsibility for the ESG Strategy and performance. To provide a tool to measure progress, KPIs and targets will be introduced for certain environmental related and other actions within the 2021 Annual Report which will incorporate a full form ESG Report aligned with both the Task Force on Climate-related Financial Disclosures ('TCFD') and the Sustainability Accounting Standards Board ('SASB'). The 2021 Annual Report will also articulate the Company's initial strategy in relation to Diversity and Inclusion.

*Company compiled consensus market expectations for 2021 revenue and underlying profit before tax are £684.8 million and £35.0 million respectively (on a mean and post IFRS 16 adoption basis).

Enquiries:

Notes for Editors:

Headlam is Europe's leading floorcoverings distributor, providing the channel between suppliers and trade customers of floorcoverings.

Headlam works with suppliers across the globe manufacturing a diverse range of floorcovering products, and provides them with a cost efficient and effective route to market for their products into the highly fragmented customer base. Alongside long established processing and distribution expertise, suppliers benefit from Headlam's marketing and customer servicing into the most extensive customer base.

To maximise customer reach, Headlam operates 66 businesses across the UK and Continental Europe (France and the Netherlands). Each business operates under its own trade brand and utilises individual sales teams while being supported by the Company's network and centralised resources.

The Company's customer base covers both the residential and commercial sectors, with the principal customer groups being independent retailers and smaller flooring contractors alongside other groups such as larger retailers, housebuilders, specifiers, and local authorities.

Headlam is focused on providing customers with a market leading service through:

· the broadest product offering;

· unrivalled product knowledge and tailored solutions;

· sales team and marketing support;

· ecommerce support; and

· nationwide delivery and collection service.

www.headlam.com