The mountain doesn't indicate a floor covering, it's your choice to climb Mt Baron |
Was it really totally unexpected though? |
OOh, that's a bad 'un. |
Not my quote
I bought a few when they dripped down to 177p |
I was looking at other chat sites after the webinar today
I saw this
Quote of the day
Platinum heights - as an ex Headlam employee and now a customer, I’ve had plenty of dealings with them over the years, since 1992 actually..
I can say with 100% conviction, they are indeed clueless! |
To be fair to current management
2022 profit before tax ( excluding all that underlying adjustment rubbish) was £ 41.7 m profit before tax which was better than Brewers last year |
But back in the day before the 2007-8 crisis Headlam made a fortune. When carpet ruled the world
Now domestic flooring is wood ceramic resin leather glass etc etc and many manufacturers dodge the disribitor and go direct ( Amtico Karndean forbo Gerflor etc etc). As stockists drive toward “own label lookalikes “ manufacturers tend to go past them. Tesco caught a cold trying to confuse customers with their “fake” brands
Customers ain’t stupid |
But back in the day before the 2007-8 crisis Headlam made a fortune. When carpet ruled the world
Now domestic flooring is wood ceramic resin leather glass etc etc and many manufacturers dodge the disribitor and go direct ( Amtico Karndean forbo Gerflor etc etc). As stockists drive toward “own label lookalikes “ manufacturers tend to go past them. Tesco caught a cold trying to confuse customers with their “fake” brands
Customers ain’t stupid |
HEAD is running up the down escalator for sure. The independent carpet guys loved Headlam back in the day because they used to get two or three competing rep visits from the company per week, sometimes per day, and the delivery network was speedy but riddled with duplication. All as a result of acquisitions not being integrated. I wonder if Brewer has learned his lesson given the cast of thousands he name checks in the LIKE report. Only time will tell. |
 It’s incredible that eighthwonder condiders Headlam “was left in a mess by Brewer”.
Tony Brewer was fired by Headlam on or around 14th September 2016. The share price was £4.47. The profit reported in 2016 was £40.1 million and the dividend was 22.55 pence per share.
The mess began the day Tony Brewer was fired because there was no one left on the Board who had any knowledge or experience of the complexities of distributing floorcoverings. What is more, in the intervening period, no one with any knowledge or experience of floorcoverings has been added to the Headlam Board.
In the past, 100’s of independent retailers and flooring contractors purchased shares in Headlam. They considered the annual dividend as a form of loyalty rebate. Smaller shareholders did not really follow the share price as the generous dividend was of paramount importance. Several independent retailers and contractors used to attend the Headlam AGM just to get a chance to meet up and shake hands with Graham Waldron and Tony Brewer. Investing in Headlam for them was also invseting in their own future. Before Graham Waldron and Tony Brewer revolutionised the wholesale floorcovering market, an independent retailer might have to wait 7 to 10 days for a cut length of carpet to be delivered to them. Graham & Tony introduced “everywhere, everday” deliveries. The independent retailers loved this because in effect Headlam’s £100 million of inventory was available to them on a next day basis. Carpetright could no longer compete on service with the indepependent retailers.
Headlam have gone all in with their decision to abdicate their core business of independent retailers and flooring contractors in favcour of large customers (Tapi, SCS, et al) and so far 2,000 carpet fitters & floor layers. It is a policy that they will be unable to reverse if they find out in the future that this business plan is flawed. Headlam may be right, but it going to take 2 to 3 years to find out because their business plan for Trade Counters is basically ‘build it and they will come’.
With Headlam currently hemorrhaging so much market share in their core business to Likewise and the many independents, each trade counter needs to get to a break even turnover of £1.2 million in double quick time. Then there is the difficulty of getting to an earning enhancing turnover of £2 million. And that has to happen at every site. If one trade counter gets stuck at £600,000K, another needs to contribute over £3 million to make uo the shortfall.
It is hard to get people from within the industry to go on the record, but privately very few believe that Headlam will achieve its objectives. Trade magazines are reticent to publish Headlam’s bad news stories for fear of losing advertising revenue. Not that Headlam does much marketing nowadays. Manufacturer’s and Suppliers are keeping their heads down in public and waiting to see what develops.
And then what happens if one of their so-called larger customers fails or decides to procure from a different source. It has happended before and lead to Headlam issuing a profit warning to shareholders.
The next 2 years should determine the outcome. |
as noted i won't defend today's HEAD, but my sources would point to a flat lining of the business before Brewer left leaving behind a very bloated and complex asset and management structure which made it totally unprepared for a changing market. the other thing which went wrong was the stupidly overpriced acquisition made by his successor trying to put his stamp on the business - the successor who was also the FD in Brewer's time and who should never have got the top job. it's been a wounded animal for years. |
To be fair to Mr Brewer he left with share price over £ 5 . No debt and earnings per share over 40p
Not a mess ! |
I'll spend little time defending HEAD - they're suffering in that way which is unique to a the leading player in a moribund market - but we do have to be careful with LIKE's numbers as they do include acquisitions and so a LFL might be somewhat less impressive.
HEAD was left in a mess by Brewer so I am wary of the chances of long term success at LIKE. |
So it looks like Headlam are circa 6% down for the first 2 months of this year and Likewise are 11% up in sales revenue. That seems like a big difference to me! They both are trying to serve the same market with 2 different ways of attracting the end sale. Will be interesting to see if Headlam's new philosophy will work in the coming months. Many independent retailers feel Headlam are no longer supporting them so they are taking their orders elsewhere...... |
Likewise update is a contrast with much optimism |
ALM, having know Headlam since 1992/93, you are being too kind re current performance. |
Headlam Group (HEAD) Full Year results presentation - March 24
Headlam Group Chief Executive Chris Payne, and Chief Financial Officer, Adam Phillips present full year results for the year ended 31 December 2023, followed by Q&A.
Watch the video here:
Or listen to the podcast here: |
I think we may disagree on this one, but that's fine.
The most concerning thing for now at least is that things seem to not be improving at all. -6% on revenues for February (compared to -1% in 2023 as a whole), which sounds like it was actually better than January. And that is with Larger customers and Trade counters growing, so regional distribution is running sharply down y/y.
Consensus is not impossible, as the second half growth comparables are much much easier than the first half. Consensus is now at flat growth for 2024.
It's deep value. But at least for now for a good reason
Eric |
 I guess though that the financial crisis was a bit more of a black swan event, virtually the whole of the banking system in the UK nearly collapsed before being propped up by the taxpayer. To me the current period looks more like a normal cyclical downturn caused by rising interest rates and a stretched consumer. I have read that inflation is falling fast towards target and interest rates are forecast to start coming down soon.
The management can only do their best based on publicly available information and their own value judgements.
As regards competition and discounting, is it any wonder that carpet distributors are trying to stay afloat, We're in an inflationary environment, from a quick look at the results it appears to me that Headlam have decided to try to strike a balance between maintaining market share, protecting margins and absorbing increased costs in the expectation that they'll still be around in a couple of years time when they expect the outlook to be a whole lot more rosy.
It's easy to be wise after the event. |
I think if you benchmark back to the financial crisis, you can see it's possible to reign in the cost base much better than they have, through weaker revenue periods.
More importantly, I wouldn't have been running to aggressively on cash consumption over the last 24 months. I'd have run the business more conservatively around cash, frankly. I suspect there is an increasingly real question to be asked about competition now; I was more sanguine on this, but they've called it out today: "Competition has also been heightened in this part of the market, with aggressive pricing at times; despite this, our gross margins have been stable and well-controlled."
I speak as a former shareholder here, so I don't have a dislike of the business, just of how the current management team is running it. Mostly on the financial communication side.
There is a total disrespect for retail investors/shareholders; filtering profit warnings through broker backchannels (I would argue treading a very fine line towards giving brokers price-sensitive information to disseminate), leaving retail investors in the lurch who rarely have access to Panmure Gordon or Peel Hunt research.
All of that to me screams poor corporate governance, which unfortunately would argue for a big valuation discount / or that some private equity player should just come and acquire Headlam given the discount to TNAV. In my eyes, the above reflects poorly on Keith Edelman, Chris Payne, and Adam Phillips.
Eric |
pireric
What would you have the management do? It seems like a fairly conservatively run business, stuffed full of assets, their own forecasts are for significant growth, not in 2024 but in future years. Do you want them to start shutting facilities already?
When I can walk on water I'll worry about the future of the carpet market. |
Spread too wide |
Looks like a short to me |
Actually the new consensus for 2024 is just 7.2p, down from 11.8p yesterday
Management here continue to have complete disregard to shareholders and financial communication.
2024 EPS of 7.2p compared to 45p for 2024 that was forecast in March 2022. Yes, market conditions are tough, but it's almost as if there has been zero effort by the management team to try and properly mitigate the downturn on profitability
Eric |
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