Last checked at 28 Jul 2022 07:00
28 July 2022
Headlam Group plc
('Headlam' or the 'Company')
Pre-Close Trading Update
Improved profitability despite economic backdrop
Headlam Group plc (LSE: HEAD), the leading floorcoverings distributor, is providing a Pre-Close Trading Update in respect of the first six months of the year to 30 June 2022 (the 'Period') ahead of announcing interim results on 6 September 2022.
Financial performance and outlook
The financial performance in the Period was pleasing given the economic environment and inflationary impact on consumer spending, with underlying profitability improved year on year. Revenue was only marginally below the prior year period, and commissioned specialist research indicates the Company improved its market share in the Period¹.
Total revenue was £323.8 million (H1 2021: £329.9 million), with a 5.1% uplift in Continental Europe (France and The Netherlands) helping to offset a 2.9% decline in the UK related to weakness in the residential sector. Manufacturer-led price increases helped offset operational cost inflation during the Period. This, and the Company's continued focus on operational efficiency and cost control, led to an improved underlying profit before tax performance of £17.3 million (H1 2021: £16.7 million).
While residential sector revenue declined 5.0% in the Period, the commercial sector increased 4.9% as it showed recovery from mainly COVID-19 related issues in the prior two years, with the ongoing summer months being an important trading period.
In-line with its Capital Allocation Priorities, the Company retains a strong balance sheet. The Company had undrawn banking facilities totalling £74.0 million and net funds of £6.0 million as at 30 June 2022, with the reduction from year end following normal cyclical patterns (1 January 2022: £53.7 million net funds). Alongside this, the Company has £148.1 million of inventory and a £109.5 million nationwide freehold property portfolio2. Outflows in the Period included: £25.8 million of shareholder returns3; investment in inventory ahead of the busier trading months and new product launches; and investments relating to the growth strategy (including network, trade counters and equipment).
Currently, the Company remains on track to meet market expectations4 for the year, although the marketplace will undeniably continue to present weakness on the residential side and operational cost inflation headwinds remain.
Chief Financial Officer appointment
The appointment of a permanent Chief Financial Officer is progressing well.
Commenting, Chris Payne, Chief Executive, said:
"We are pleased with our performance thus far in 2022, particularly given the economic backdrop. Profitability has been improved, market share gains made, and our strategy is proving to provide a countermeasure and protection against a weaker underlying market. We believe we are set fair especially for when headwinds ease."
¹Commissioned research produced by specialist MTW Research - Monthly UK Floorcovering Market Analysis (January to June 2022).
2Value of the Company's current freehold property portfolio at the last independent valuation date of January 2020, plus the book value of the freehold Ipswich distribution centre which was built and became operational in July 2020.
3£25.8 million of shareholder returns: £7.2 million final ordinary dividend payment plus £14.9 million special dividend payment plus £3.7 million expenditure in the Period as part of the ongoing total £15 million share buyback programme.
4Company-compiled consensus market expectations for revenue and underlying profit before tax, on a mean basis, are available on the Company's website at www.headlam.com.
Net funds numbers are given excluding lease liabilities.
Enquiries:
Headlam Group plc | Tel: 01675 433 000 |
Chris Payne, Chief Executive | Email: headlamgroup@headlam.com |
Catherine Miles, Director of IR and ESG | |
Panmure Gordon (UK) Limited (Corporate Broker) | Tel: 020 7886 2500 |
Erik Anderson / Edward Walsh / Ailsa MacMaster | |
Peel Hunt LLP (Corporate Broker) | Tel: 020 7418 8900 |
George Sellar / John Welch / Andrew Clark | |
Alma PR (Financial PR) | Tel: 020 3405 0205 |
Susie Hudson / David Ison / Lily Soares Smith | Email: headlam@almapr.co.uk |
Notes for Editors:
Operating for 30 years, Headlam is the 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 trade 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 group's distribution network, central teams and resources.
The Company's extensive customer base covers both the residential and commercial sectors, with principal customer groups being independent retailers and smaller flooring contractors alongside other customer segments such as larger (multiple) retailers, housebuilders, specifiers, and larger contractors (including local government / authorities).
Headlam provides customers with a market leading service through:
· the broadest product offering;
· unrivalled product knowledge;
· tailored service propositions and solutions;
· sales team and marketing support;
· ecommerce support and digital applications;
· nationwide delivery; and
· trade counter and collection service.
www.headlam.com