Headlam Regulatory News (HEAD)

20 May 2026

Headlam Group plc

('Headlam', the 'Company', the 'Group')

Trading Update

Headlam (LSE: HEAD), the UK's leading floor coverings distributor, provides the following trading update for the four months ended 30 April 2026 (the "Period").

Trading and transformation plan progress

As previously anticipated, the Group has continued to experience challenging trading throughout the Period and revenue for the Group's continuing operations was 21% lower Year on Year. This decline in overall market share is in part a reflection of the planned reduction in certain sales activity as the business implements its new core customer strategy to refocus on independent retailers and flooring contractors, coupled with the continuation of difficult end market conditions. As a result, the Group continues to incur significant underlying operating losses.

Under the leadership of the new management team who have now been in place for eight weeks, certain operational improvements have already been implemented. In addition, the Group has put through a price increase in May and targeted surcharges reflecting recent higher raw material input prices, which are being passed onto customers. The company will continue to monitor any further impact from macroeconomic and geopolitical issues and act accordingly. The team remains focused on delivering further significant operational and commercial improvements and will report on progress in more detail with our interim report.

Balance sheet

As referenced in the Company's full year results announcement in March, we are pleased to report the very recent disposal¹ of one of the three surplus properties highlighted, with further disposals of the remaining two properties due to complete imminently. Together these will result in c. £15.3m of net disposal proceeds which will be used to invest in working capital and improve liquidity. Following these disposals, the Group is also evaluating the potential sale and leaseback of our Coleshill property, which would provide significant additional liquidity. These property transactions form part of a wider range of options being considered to strengthen the balance sheet during 2026.

The Group's net debt at the end of the Period was £(40.3)m compared to £(31.4)m at the 2025 year-end, reflecting the impact of ongoing operating losses and one-off transformation costs, offset in part by lower working capital in the Period.

Board composition

At the AGM today, two new Non-Executive Directors join the Board, Nick Kelsall and Wilf Walsh. Both have considerable experience, building upon that of the new Chief Executive and interim Chief Financial Officer who joined in March 2026.

As such, the Board, having engaged widely with shareholders, continues to believe it has the right skills and experience to provide leadership and stability for the Group. The Board recommendation remains to reject the resolutions contained with the Requisition Notice to be voted on 2 June.

Rob Barclay, CEO, commented:

"It has been a busy couple of months since joining. The Board remains of the view that, while there is lots to do on multiple fronts, there is a pathway to return to profitability during 2027. To deliver this we need to act with speed and decisiveness, and this is the focus of my team."

Enquiries

This announcement contains inside information for the purposes of Article 7 of EU Regulation 596/2014 as it forms part of domestic law of the United Kingdom by virtue of the European Union (Withdrawal) Act 2018, as amended. Upon the publication of this announcement, this inside information is now considered to be in the public domain. The person responsible for arranging the release of this announcement on behalf of the Company is Richard Jones, Interim Chief Financial Officer.

Notes to Editors

Operating for over 30 years, Headlam is the UK's leading floorcoverings distributor. The Group works with suppliers across the globe manufacturing the broadest range of products, and gives them a highly effective route to market, selling their products into the large and diverse trade customer base. The Group has an extensive customer base, providing them with a market leading service through the largest product range, in-depth knowledge, ecommerce and marketing support, and nationwide delivery service. To maximise customer reach and sales opportunity, Headlam operates businesses, trade brands and product brands across the UK and in the Netherlands, which are supported by the group's network, central resources and processes.

¹On 19 May 2026, the Group completed the sale of its Rochdale distribution centre to EELVF V UK B1 Limited for £8.0million plus VAT, which constitutes a significant transaction under the Listing Rules. This footnote, together with the main body of the announcement, sets out the further information that is required to be disclosed. (A) Material Contracts - The sale agreement between the Group and EELVF V UK B1 Limited is subject to standard commercial property terms and there are no conditions outstanding. At the same time, the Group also entered into a short leaseback agreement with the new buyer until 1 January 2028 at a market rate rent, (the lease is contracted outside the Landlord and Tenant Act 1954 and has customary provisions dealing with removing the Group's fixtures and fittings and making good any applicable dilapidations on expiry of the lease). (B) Risks - Headlam shareholders should carefully consider, together with all other information contained in this announcement, the specific factors and risks described below. The Company considers these to be the known material risk factors relating to the significant transaction. There may be other risks of which the Board is not aware or which it believes to be immaterial which may be connected to the transaction and have a material and adverse effect on the business, financial condition, results of operations or future prospects of the Group. The risks disclosed below are those which the Company considers: (i) are material risks related to the transaction; (ii) will be material new risks to the Group as a result of the transaction; or (iii) are existing material risks for the Group which will be impacted by the transaction. The risks described below are not set out in any order of priority, assumed or otherwise: (i) The Group may incur liability under the sale contract and leaseback; (ii) The sale contract is based on standard commercial property contract terms and also includes customary provisions. Both the Group and EELVF V UK B1 Limited carried out a customary due diligence and disclosure process to minimise the liability under these provisions. (iii) The short lease back is based on customary provisions and dealing with removing the Group's fixtures and fittings and making good any applicable dilapidations on expiry of the lease; (iv) The market price of shares in the Group may fluctuate on the basis of market sentiment surrounding the transaction; (v) The shares in the Group are quoted and the price which investors may realise their shares are influenced by a number of factors, some specific to the Group and its operations and some which may affect flooring distributors or publicly traded companies as a whole, or other comparable companies; (vi) The sentiments of the stock market regarding the transaction will be one such factor and this, together with other factors including actual or anticipated fluctuations in the financial performance of the Group and its competitors, market fluctuations, and legislative or regulatory changes for the flooring sector, could lead to the market price of the Group's shares going up or down. (C) Impact of the transaction on the Company's earnings, assets and liabilities - On completion the Group has de-recognised the £4.81million book value of the Rochdale property from its balance sheet and recognised the receipt of £8.0million (excluding VAT) less costs associated with the transaction, plus a further £1.6 million of cash collected in respect of VAT to be paid over to HM Revenue & Customs in the next quarterly VAT payment. Upon Completion, the Group will use the cash proceeds for general working capital purposes, and a profit on disposal of the property will be recognised. The amount of profit on disposal is subject to the accounting requirements of IFRS16 with regard to sale and leaseback transaction and will be calculated prior to finalising, and subsequently disclosed within, the Group's results for the year ended 31st December 2026. The profit on disposal will be classified as a non-underlying item in the Group's income statement due to its size and one-off nature. A right-of-use asset and lease liability will be recognised on the Group's balance sheet in respect of the Rochdale property being leased back. These amounts will be calculated prior to finalising, and subsequently disclosed within, the Group's results for the year ended 31st December 2026. (D) Use of proceeds - The proceeds will be used for general working capital purposes. (E) Additional Disclosures - The Board of the Company unanimously voted in favour of the transaction and in its opinion the transaction is in the best interests of the Company's shareholders as a whole, as well as its colleagues, suppliers and customers. This assessment is on the basis of the transaction further strengthening the Group's financial position. There are no related party transactions or material litigation to disclose. The information required by UKLR Annex 2.2(2) and 2.2(3) is not available. As referenced above the value of the consideration for the Company's last market property valuation of £4.81million. A profit on sale will be generated, which will be recognised as non-underlying income. As such, the Board considers the consideration for the property is fair as far as the shareholders of the Group are concerned.