TIDMHEAD
RNS Number : 7975F
Headlam Group PLC
19 November 2020
19 November 2020
Headlam Group plc
('Headlam' or the 'Company')
Trading Update
Strong and sustained recovery in the second half to date
Underlying profit before tax materially ahead of market
expectations
Headlam Group plc (LSE: HEAD), Europe's leading floorcoverings
distributor, is pleased to provide a trading update following its
interim results announcement on 3 September 2020.
Following the Q2 2020 performance which was significantly
impacted by COVID-19, trading to-date in the second half has seen a
strong and sustained recovery to 2019 levels. Revenue for the four
months to 31 October 2020 was down only 1.2% on the same period in
the prior year, with November 2020 currently ahead of last year
despite the lockdown in England and other restrictions in the rest
of the UK. An exceptional UK residential sector performance has
compensated for a significantly weaker commercial sector across
both the UK and Continental Europe, albeit there has been an
improving trend across the commercial sector. On a like-for-like(1)
basis, UK residential sector revenue was up 10.5% in the four
months to 31 October 2020.
Given this sustained recovery in performance and management's
continued focus on costs, the Company now expects to report
underlying(2) profit before tax for the year materially ahead of
current market expectations of a breakeven performance(3).
Unaudited underlying(2) profit before tax for the four months to
31 October 2020 was GBP13.3 million, a strong reversal from the
GBP1.2 million underlying(2) loss before tax reported in the first
half. Subject to trading for the remainder of the year, where there
is a possibility that fitting capacity may constrain sales during
December 2020, it is the Company's current expectation that
underlying(2) profit before tax for the year will be in the range
of GBP14 million to GBP16 million. The Company confirmed earlier
this month that its operations are remaining fully open for the
duration of the current lockdown period in England, with the safety
and protection of its people, customers and necessary visitors to
site remaining the Company's priority.
With cash collections continuing to exceed expectations and
reflecting the strong cash flow from operations, average net debt
for the year-to-date, excluding IFRS 16 'Leases', is approximately
GBP13.6 million, a material reduction on the first half (H1 2020:
average net debt GBP35.3 million). As at 31 October 2020, banking
facilities available to the Company were GBP110.6 million with
headroom of GBP102.1 million.
The Company has increased its product purchasing in the last few
months to support customer demand, and, to further support
customers through the initial weeks of Brexit and minimise any
potential delays in receipt of product, the Company is currently
elevating its inventory position across its fastest-moving
products.
The Company has continued with the projects under its
Operational Improvement Programme which will give rise to both
revenue and margin enhancement. Several projects continue in the
planning phase which will be detailed in Q1 2021 along with the
anticipated financial and operational benefits. The two most
significant currently underway are the network consolidation in the
South East and transport integration, both outlined in the interim
results announcement.
Following the previously announced consolidation of businesses
into the new Ipswich regional distribution centre to be undertaken
in the first half of 2021 and closure of sites no longer required,
it is now also proposed that the main warehousing and distribution
operations of Domus will move to the Company's Rochester site where
capacity will be created following the consolidation. This will
allow for the termination of existing leases in West Molesey upon
their expiry in July 2021 and further network simplification.
Against the backdrop of COVID-19, the Company took the
opportunity to accelerate the roll-out of the transport integration
project focused around more effective delivery fleet utilisation .
The roll-out to the 'North' was completed last month, with the
project having now been implemented over approximately 25% of the
Company's UK deliveries. The roll-out will continue in Q2 2021,
with full national roll-out scheduled to be complete by early Q4
2021.
The current expectation is that the network consolidation and t
ransport integration will generate cost savings in excess of GBP4
million per annum from 2022 , following a modest net benefit in
2021 after all restructuring and delivery costs and applying
prudent revenue expectations given the COVID-19 backdrop . Further
detail will be provided in Q1 2021 along with detail on other
projects that will provide additional financial benefits in 2021
and beyond.
The Company's next Trading Update will be on the 21 January
2021, at which point the Company expects to provide an update on
the reinstatement of an ordinary dividend as well as its wider
capital allocation priorities.
The Board would again like to thank and recognise the resilience
its people have shown throughout the period, and is highly
appreciative of the support and understanding all its stakeholders
have shown through the impact of COVID-19.
Enquiries:
Headlam Group plc Tel: 01675 433 000
Steve Wilson, Chief Executive Email: headlamgroup@headlam.com
Chris Payne, Chief Financial
Officer
Catherine Miles, Director of
Communications
Investec Bank plc (Corporate Tel: 020 7597 5970
Broker)
David Flin / Alex Wright
Panmure Gordon (UK) Limited Tel: 020 7886 2500
(Corporate Broker)
Erik Anderson / Dominic Morley
/ Ailsa Macmaster
Alma PR (Financial PR) Tel: 020 3405 0205
Rebecca Sanders-Hewett / Susie Headlam@almapr.co.uk
Hudson / Harriet Jackson
(1) Like-for-like revenue is calculated based on constant
currency from activities and businesses that made a full
contribution in both the 2020 and 2019 periods and is adjusted for
any variances in working days.
(2)Underlying is before non-underlying items, which includes
amortisation of acquired intangible assets, non-cash impairment of
goodwill, acquisitions related fees, restructuring costs, movements
in deferred and contingent consideration, finance costs on deferred
and contingent consideration, non-recurring pension costs in
relation to guaranteed minimum pension ('GMP') equalisation, and
non-recurring costs relating to senior personnel changes.
(3)Company-compiled consensus market expectations for 2020
revenue and underlying profit before tax (prior to any updates
following this announcement) are GBP561.2 million and GBP0.0
million respectively (on a mean and post IFRS 16 adoption
basis).
Notes for Editors:
Operating for 28 years, Headlam is Europe's leading
floorcoverings distributor.
Headlam provides the distribution channel between suppliers and
trade customers of floorcoverings. Working in partnership with
suppliers across the globe manufacturing a diverse range of
floorcovering products and ancillary accessories, Headlam provides
an unparalleled route to market for their products across the UK
and certain Continental European territories.
The utilisation of an outsourced distribution channel enables
manufacturers to focus on their core activities, incur reduced
costs associated with distribution, and benefit from localised
sales, marketing and distribution expertise that provides a more
effective and greater route to market for their products.
To maximize customer and market penetration, and reflecting the
regionalised nature of the marketplace, Headlam comprises 67
individual businesses in the UK and Continental Europe (France, the
Netherlands and Switzerland) each operating under their own unique
trade brand and utilising individual sales teams.
Headlam's extensive customer base, operating within both the
residential and commercial sectors and comprising principally
independent retailers and flooring contractors, receives the
broadest product offering supported by next day delivery as well as
additional marketing and other support.
Headlam's offering is enabled through its unrivalled operating
expertise, long-established supplier and customer relationships,
and comprehensive distribution network. Following years of
considerable investment, Headlam's distribution network currently
comprises four national distribution hubs, 19 regional distribution
centres and a supporting network of smaller warehouse premises,
trade counters, showrooms and specification centres.
In 2019, Headlam worked with 190 suppliers from 19 countries and
fulfilled 5.3 million customer orders.
www.headlam.com
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