Headlam flags weaker first half, as expected

23rd Jul 2024 08:43

(Sharecast News) - Floor coverings distributor Headlam Group said in an update on Tuesday that trading in its first half was consistent with its previous update on 14 May, reflecting ongoing market challenges.

The London-listed firm said revenue for the period declined 11.8% year-on-year, with the UK segment down 11.3% and continental Europe down 15.9%.

It put the drop down to persistent weakness in the floor coverings market, driven by reduced consumer spending on home improvements.

As a result, the group said it anticipated an underlying loss before tax of about £16m for the period, aligning with earlier forecasts.

Despite the revenue decline, strategic growth initiatives performed well.

Revenue from larger customers and trade counters continued to grow, with the latter surpassing £100m on a rolling 12-month basis.

Financial management remained strong, with net debt standing at £28m at the end of June.

The group said it successfully sold a surplus property in Stockport for £7.5m, about 10% above its most recent market valuation.

Headlam had over £70m in cash and undrawn facilities available and owned property valued at £142.1m.

The firm said it was accelerating its strategy to become a more effective organisation and simplify its customer offering.

That included investing in propositions across all customer groups to maintain and grow market presence.

The planning phase was said to be on track, with a more detailed update to be provided with the half-year results in September.

Headlam said the initiatives were being designed to enhance customer service, operational efficiencies, profit improvements, and significant cash benefits from property disposals and working capital reduction, expected to be realised mainly in 2025.

Looking ahead, Headlam said it expected trading to improve in the second half of the financial year, assuming market conditions gradually recovered.

However, it did not foresee a return to market growth until 2025, and as a result, full-year trading was anticipated to be in line with current market expectations.

"While current market conditions remain challenging, we are pleased with the early progress we have made on accelerating our simplification and integration of the business together with the development of exciting improvements to our customer offer and service," said chief executive officer Chris Payne.

"We remain confident that our strategy, and the changes we are making, will strengthen Headlam over the medium term, ensuring that we are well placed to take the opportunity when the market recovers."

Headlam said it would publish its half-year results on 17 September.

At 0841 BST, shares in Headlam Group were down 1.4% at 140.5p.

Reporting by Josh White for Sharecast.com.