Headlam Group PLC Pre-Close Trading Update (3205H)

TIDMHEAD

RNS Number : 3205H

Headlam Group PLC

27 July 2023

27 July 2023

Headlam Group plc

('Headlam' or the 'Company')

Pre-Close Trading Update

Headlam Group plc (LSE: HEAD), the UK's leading floorcoverings distributor, is providing a Pre-Close Trading Update in respect of the first six months of the year to 30 June 2023 (the 'Period') ahead of announcing interim results on 5 September 2023.

Revenue in H1 2023 was 2.5% above that of H1 2022 at GBP332 million (H1 2022: GBP323 million). This was despite residential trading volumes being down nearly 7% H1 2023 versus H1 2022 due to the documented weakness in consumer RMI spend, and reflects good progress made under the Company's revenue growth strategy. Revenue contributions from larger customers and the trade counter roll-out were up 26% and 9% respectively against the same period last year, and the Company continues to broaden its offering and demonstrate market share gains*.

However, recent residential trading volumes are weaker than expectations, with recovery now expected to take place over a more prolonged period. Rolling 12-month volumes are around 20% lower than 2019, with recent independent data showing that DIY / Home Improvement spend particularly for larger items is the most affected non-essential category in terms of reduced spend. This backdrop will more than offset the Company's positive strategic performance and mitigating actions in the near term. Accordingly, and taking a prudent view, it is now anticipated that the Company's underlying profit before tax for the year will be significantly below current market expectations**.

As previously announced, as well as lower residential volumes, gross margin and profit in H1 2023 were also impacted by a reduction in manufacturer led price increases and increased operating costs versus H1 2022. Combined people and energy costs were up almost GBP5 million in H1 2023 against H1 2022 due to inflationary pressures, despite headcount being reduced in line with volume reduction during the Period. Underlying profit before tax in H1 2023 was therefore lower at GBP6 million (H1 2022: GBP17 million), which also reflects strategic related investment to support future growth. Strategic investment is expected to total GBP6 million for the year, of which over half is in relation to the trade counter roll-out to support its growth to a GBP200 million business unit.

While current trading is challenging, the Company's strategy and investment in the business gives the Board confidence for the future, with increasing contributions from both strategic and efficiency actions. As a result, and supported by its strong balance sheet, the Company intends to temporarily lower its dividend cover in respect of the ordinary dividend payment for FY23 to that of pre COVID levels.

The Company is well positioned despite the market backdrop, with ongoing expansion of its market leading position, broadening of its market presence, increased revenue streams, and ongoing efficiencies. All of which will support future financial performance, particularly as volumes return.

*Source: commissioned specialist research from MTW Research, dated June 2023

**Company-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 

This announcement contains inside information for the purposes of Article 7 of Regulation (EU) No 596/2014, as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018. The person responsible for this announcement is Caroline Farbridge, Company Secretary.

Enquiries:

 
 Headlam Group plc                        Tel: [phone] 
 Chris Payne, Chief Executive             Email: [e-mail] 
 Adam Phillips, Chief Financial 
  Officer 
 Catherine Miles, Director of 
  IR and ESG 
 Panmure Gordon (UK) Limited (Corporate   Tel: [phone] 
  Broker) 
 Tom Scrivens / Atholl Tweedie 
 Peel Hunt LLP (Corporate Broker)         Tel: [phone] 
 George Sellar / John Welch 
 

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July 27, 2023 02:00 ET (06:00 GMT)