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Headlam on track to deliver profit expectations

Headlam Group plc, reportedly Europe’s leading floorcoverings distributor, has provided a trading update in respect of the first four months of the year ahead of its AGM.

The overall revenue performance in the period was in-line with 2021 with a profit performance above 2021 due to strong margins, supported by the company’s ongoing focus on operational efficiency through cost control. The company continues to be comfortable with profit expectations for the year.

Financial performance

Q1 2022 revenue was broadly in line with plan, followed by a slightly weaker performance in April 2022 due to overall ‘softening’ in the residential sector and some delayed orders. In the four months, residential sector revenue for the group was down 0.5% against the prior year period on a like-for-like basis. However, the company’s branded, higher-end, and higher-margin products performed above plan, and delayed orders are now coming through.

The commercial sector continued to show recovery from its severely impacted position in both 2020 and 2021 due in large part to Covid-19 related restrictions. In the four months, commercial sector revenue for the group was up 5.8% against the prior year period on a like-for-like basis.

The overall revenue performance in the period was in-line with 2021. Profit performance was above 2021 due to strong margins continuing into 2022, supported by the company’s ongoing focus on operational efficiency through cost control.

Strategic progress

The company’s strategy is focused on driving additional revenue opportunities from a more efficient operating base, including capturing market share in underweight customer segments. Encouraging progress was made in the period, including: further new customer gains and increase in SKUs in the multiple retailer segment; 25% of sales now coming from the new and improved digital channels (2019: 11%); and the revenue performance of the trade counter network which is subject to improvement and significant roll-out being up 13% for invested sites on the same period last year (on a like for like basis). Additionally, activity was focused on preparations for new product launches over the coming months to support market share gain.

Outlook

As expressed at the time of the March 2022 final results announcement, the continuing inflationary environment is likely to impact consumer spending during the year, thereby suppressing underlying volumes and revenues in the industry. However, the company’s strategy, set out above, should provide a countermeasure and some protection against the weaker underlying market. Additionally, the continuing manufacturer-led price increases due to cost inflation will continue to provide a support to revenue performance and help offset operational cost inflation.

Summer months are an important period for commercial, owing to refurbishment, repair, and maintenance – particularly in educational establishments’

The summer months are an important period for the commercial sector activity owing to refurbishment, repair, and maintenance particularly in educational and other establishments. With a severely impacted industry-wide commercial sector performance in the previous two years, there is an expectation that some of the work previously not undertaken will take place this year.

Given the above, and the performance to date, Headlam continues to be comfortable with profit expectations for the year.

Chris Payne, chief executive, said:

‘With our comprehensive growth focused strategy which is demonstrating progress, we believe we are well positioned despite the expected weakening in the residential sector of the marketplace. We look forward to the busier trading months ahead and the ongoing delivery of our strategy.’

www.headlam.com

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