Final Results

Date : 03/09/2012 @ 2:00AM
Source : UK Regulatory (RNS & others)
Stock : Headlam Group (HEAD)
Quote : 440.0  1.0 (0.23%) @ 11:35AM
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Final Results

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RNS Number : 0048Z

Headlam Group PLC

09 March 2012

9 March 2012

Preliminary Results for the Year Ended 31 December 2011

Headlam Group plc ("Headlam"), Europe's leading floorcoverings distributor, announces its final results for the year ended 31 December 2011.

Financial highlights

                                2011      2010   Change 
                              GBP000    GBP000 
 Revenue                     569,795   535,690    +6.4% 
 Operating profit             28,052    26,066    +7.6% 
 Profit before tax            27,588    25,006   +10.3% 
 Basic earnings per share      24.6p     21.5p   +14.4% 
 Dividend per share           14.15p    12.40p   +14.1% 

Key points

   --      UK like for like revenues increase by 7.7% indicating further increase in market share 
   --      Continental European revenues decrease by 5.0% on a like for like basis 
   --      Profit before tax increased by 10.3% 
   --      Group net funds GBP7.6 million 
   --      Dividend per share increased by 14.1% 

Tony Brewer, Headlam's Group Chief Executive, said:

"The first ten weeks of 2012 have continued a positive trend with all five business sectors and each product category in the UK continuing to produce increases in revenue against the corresponding period last year.

Markets remain challenging and somewhat unpredictable due to the general economic outlook combined with uncertainty over both raw material prices and currency exchange. However through the group's strategy and structure combined with extensive product and marketing initiatives, we are confident that our individual businesses can collectively outperform the market."


Headlam Group plc

   Tony Brewer, Group Chief Executive                             Tel: 01675 433000 

Steve Wilson, Group Finance Director

Chairman's Statement

I am pleased to report that the group's revenue increased by 6.4% in 2011 from GBP535.7 million to GBP569.8 million. Like for like revenue increased in the UK by 7.7% and, declined in Continental Europe by 5.0%. The increase in the UK, achieved in challenging conditions, represents a continued outperformance compared with the floorcovering market.

Earnings and dividend

Profit before tax increased by 10.3% from GBP25.0 million to GBP27.6 million and earnings per share improved by 14.4% from 21.5p to 24.6p. The board is therefore proposing to increase the final dividend by 14.9% from 8.57p to 9.85p resulting in a total dividend for the year of 14.15p, up 14.1% on 2010.

The final dividend, if approved by shareholders at the Annual General Meeting, will be paid on 2 July 2012 to shareholders on the register at close of business on 1 June 2012.


Our strategy remains focused on the development of our floorcovering distribution businesses in the UK and Continental Europe and the continued improvement of the service we provide to independent floorcovering retailers and contractors.

The strategy is based upon a well defined operating structure that delivers sustained product development, marketing and distribution services aimed at supporting and enhancing our customers' position in their markets. This structure, built upon over many years, has allowed us to continually outperform the floorcovering market through various economic cycles. This has been particularly evident in recent years when conditions have proved to be particularly challenging and during which time the group has maintained the ability to increase its market share.

One of the key components of the group's structure is the deliberate proliferation of autonomous businesses controlled by dedicated management teams empowered to independently develop and enlarge their individual business. This decentralised approach, set within a well developed and consistently applied framework of operational and financial controls, provides the group with a wide and penetrating access to the floorcovering market enabling our businesses to minimise risk in challenging trading environments and respond swiftly to opportunities.

In the UK, it was particularly encouraging to see this strategy deliver success in 2011 when each of the five business sectors and all our product categories showed increases in revenue against the previous year.

We have a number of investment plans at various stages of development, aimed at enlarging and improving the infrastructure of the group. The plans relate to replacing one and extending two existing distribution centres and establishing additional service centres, which will enhance our logistics capability and contribute to the group's long-term future growth objectives.


2011 represents another year of progress for the group and has been achieved through the collective endeavour of all our employees. The board would like to thank our management and employees for their efforts and contribution in producing another positive result over the course of the year.


With the benefit of the clearly defined strategy and autonomous structure, the group has made a solid start to 2012. Each of the management teams in the UK and Continental Europe are clearly focused on their specific objectives with regard to revenue and profit contribution.

Whilst we are operating in challenging markets and a particularly competitive environment persists, the autonomous structure combined with the experience and tenacity of our individual management teams, sales representatives and employees should enable the group to achieve its internal objectives assuming normal seasonal trends prevail.

Graham Waldron, Chairman

Chief Executive's Review

The 7.7% like for like increase in UK revenue reflects a particularly positive performance, in a floorcovering market, where various indicators would suggest that challenging trading conditions remain.

Market sectors

The 50 businesses in the UK, operating from 18 distribution centres and 16 service centres, are structured within five market sectors based on their geographical position or product offering.

Regional multi-product: These 20 businesses, operating in both the residential and commercial markets, collectively provide a comprehensive national coverage. During the year the revenue from these businesses increased by 5.3% and given that they represent 51% of UK revenue, their positive performance is important since it provides the group with a solid base from which to expand its market presence.

National multi-product: The Mercado businesses have been able to increase revenue by 6.8% across their residential and commercial activities throughout England, Wales and Northern Ireland. We have implemented further initiatives to enhance Mercado's geographical presence and these are covered more fully below.

Regional commercial: This sector, which increased revenue by 10.2%, currently includes 18 operations based in 5 distribution and 13 service centres. During the year, we opened a new service centre in Carlisle and with modest investment, intend to increase the number of service centres to expand our UK locations.

Residential specialist: The 14 businesses, operating principally in the middle to premium quality carpet market, achieved a successful year increasing their revenue by 16.1%. Further targeted investment in sales and marketing activities should result in these businesses gaining additional market share within their sector.

Commercial specialist: These businesses, which increased revenue by 1.7% during the year operate throughout the commercial markets but have a primary focus in the healthcare and education sectors. With additional product development, these businesses can secure opportunities in other commercial segments.


Our suppliers are integral to the business development of the group and liaise closely with our senior and operating management teams. This relationship with the leading floorcovering manufacturers, principally in the UK and Continental Europe, ensures that our 50 businesses in the UK and five businesses in Continental Europe are continuously able to provide independent floorcovering retailers and contractors with new products. This is supported by appropriate point of sale displays to present new floorcovering products and innovations to the ultimate end user.

One particular innovation, developed during 2011, is the revolutionary carpet fibre WOLLTEC--. This fibre, which is exclusive to the group, combines the appearance and luxury characteristics of wool with the durability and stain resistant properties of polypropylene. The products manufactured with this fibre, which have received a particularly positive reaction from independent floorcovering retailers, are an example of how the group maintains its position at the forefront of new floorcovering technology and passes the benefits to its customers.

Market presence

Our external sales representatives are positioning new product into customers on a daily basis, using various types of display stands and sample books. In conjunction with the ongoing product launches, we further improve our supplier and customer relationships with an extensive programme of promotional events and customer initiatives.

During 2011, our businesses launched 3,501 (2010: 3,109) new products and we supplied our customers with 658,188 (2010: 626,637) sample books and display stands. This level of activity has contributed to the particularly encouraging trend for 2011 where our businesses increased revenue in each of the product categories of carpet, residential vinyl, wood, laminate, commercial flooring and accessories. Whilst revenue attributable to commercial flooring increased at a slightly faster rate than residential, the overall mix remains unchanged compared with last year at 69% residential and 31% commercial.

Lifestyle Floors is now firmly established as a trade brand in the UK floorcovering market. The steps taken to significantly enlarge our market presence, principally through the installation of display modules and lecterns, have been extremely well received by independent floorcovering retailers.

We have invested in a management team who are responsible for enhancing the performance of Lifestyle Floors, by identifying opportunities to maximise the brand and supervise product development. They also manage a team of ten merchandisers who are being utilised to ensure that the modules and lecterns used to display the product are up to date, complete and in pristine condition allowing the independent floorcovering retailer to maximise the potential of the brand.


We continue to maximise our presence with independent floorcovering retailers and contractors, through our 383 external sales people, collectively visiting our customers 488,660 (2010: 475,901) times during the year.

In the UK, the group is focused on encouraging the individual sales and marketing autonomy of the 50 businesses. We are able to provide an efficient logistics service to our customers because of our comprehensive stockholding and availability of next day delivery. During 2011, our fleet of 371 vehicles completed 1,143,860 (2010: 1,126,676) deliveries to our customers' premises.

Active accounts in the UK increased from 41,994 to 43,347 during the year. As reflected in our revenue increase, the independent sector is in good health and continues to take market share. It is inevitable that there are business failures and the occurrence of bad debts has increased compared with the previous year, however, the average period of credit taken by our independent customer base, decreased from 42.0 to 40.9 days.


The introduction of iPads, in conjunction with the development of bespoke software, to all of our sales people has undoubtedly been beneficial in further improving their working practices and time management and ultimately, provides an enhanced service to our customers.

The iPads provide our sales people with improved visibility of real time customer data, the ability to access stock files to place orders and give an immediate flow of information on customer visits to our sales managers. An additional benefit is that our businesses' extensive marketing literature and display information can be contained within the iPad for efficient demonstration to our customers.

We have launched the iPad initiative in the Netherlands and intend to extend it to France and Switzerland during 2012.

Continental Europe

In Continental Europe, each of our five businesses has contributed to an increased level of profitability in mixed market conditions.

Belcolor, our business based in Switzerland, purchases 44.0% of its total product requirements in Euros. The appreciation of the Swiss Franc against the Euro has therefore had a beneficial impact on the business, improving gross margins during the year, compensating for reductions in revenue and enabling Belcolor to produce a satisfactory result compared with last year.

Market conditions were relatively stable in France, allowing LMS to increase its profitability. Similarly in the Netherlands, Lethem Vergeer, Interplan and Sylvester were able to produce a solid result.

Management and employees

In addition to the group's strategy and operating structure, the other key element underpinning our ongoing success is the strength and experience of our management teams and employees.

The group has a clear policy of promoting employees from within wherever possible affording all employees the opportunity to develop and fulfil their career aspirations. This has enabled employees to progress from relatively junior positions into middle and senior management roles and has allowed us to develop an entrepreneurial culture throughout the business.

The benefit of this approach is that the group has operating management teams, with in-depth knowledge of their business objectives and processes, leading the development of our businesses.

The strength of our management at the individual business level is supported by the small team of senior executive managers who through guidance and direction, ensure that our teams are pursuing the group's strategy and contributing to the achievement of our operating objectives.


We currently have a number of plans to further improve and enlarge the infrastructure of the group.

We have obtained planning permission to extend our distribution centre in Tamworth, increasing its footprint from 147,400 square feet to 160,200 square feet. This will allow our Residential and Commercial specialist businesses to further develop their activities in the middle to higher market sectors that they serve.

In Coleshill, we have agreed to acquire, subject to planning permission, land adjacent to the existing distribution centre in order to increase the size of the centre from 159,500 square feet to 283,800 square feet. This will provide the capacity to increase our central stock holding in certain product sectors to satisfy the demand from our regional distribution centres and manage our future working capital investment on a more efficient basis.

We have been involved in a very protracted process to relocate Faithfulls, our Regional multi-product business in Hadleigh, near Ipswich. Unfortunately, the planning permission issues proved to be insurmountable and therefore, we are currently in dialogue with other parties to acquire an alternative site, to accommodate a 127,000 square feet distribution centre, in close proximity to our existing operation.

Mercado, our National multi-product business, is currently in the process of opening a 6,800 square feet service centre in Liverpool. The service centre will enable Mercado to expand its position in the area and provides an opportunity to develop its market share in the commercial sector.

Furthermore, we plan to relocate the trans-shipping depot based in Chelmsford, which Mercado utilises to service the southeast of England. The new facility, which is located in the near vicinity, will also operate as a service centre for Mercado to enlarge its commercial activities in this region.

We are evaluating other modest investments to increase the number of service centres in specific geographical locations, which will expand our regional commercial activities.


The first ten weeks of 2012 have continued a positive trend with all five business sectors and each product category in the UK continuing to produce increases in revenue against the corresponding period last year.

Markets remain challenging and somewhat unpredictable due to the general economic outlook combined with uncertainty over both raw material prices and currency exchange. However through the group's strategy and structure combined with extensive product and marketing initiatives, we are confident that our individual businesses can collectively outperform the market.

2011 financial review

Results for 2011


The revenue result for 2011 is the highest ever recorded by the group and represents a very satisfactory achievement given the current trading environment. At GBP569.8 million, it exceeds the results achieved in 2007 and 2008 respectively amounting to GBP544.7 million and GBP557.3 million, which were previously the two best years and were, attained prior to markets being affected by the current economic issues.

However, whilst we continue to make steady progress in the UK, in markets that anecdotal evidence suggests remain flat, the significant impact of currency translation on the evolution of group revenue should not be overlooked.

By way of illustration, the table below documents the principal factors giving rise to the changes in group revenue between 2007 and 2011.

                                      GBP000    GBP000 
 Revenue 2007                                  544,718 
 UK growth                                       3,297 
 Continental European decline        (6,808) 
 Benefits of currency translation     28,588 
 Revenue 2011                                  569,795 

The analysis highlights the benefits of currency gains, which arise from the depreciation of Sterling against the Euro and Swiss Franc. Based on the average currency rates used to translate the results of the Continental businesses in 2007 and 2011, Sterling has depreciated by 21.1% against the Euro and 40.9% against the Swiss Franc.

Growth in the UK during the four years since 2007 is the net result of expansion in the Residential and Commercial specialist businesses amounting to GBP33.2 million and a net decline of GBP29.9 million in the traditional distribution businesses.

The Residential specialist businesses represent a sector the group has invested in during the last ten years, firstly by acquisition and secondly, through ongoing investment in sales and marketing, the combination of which has seen this sector continue to grow notwithstanding market contraction.

The decline in the multi-product businesses has occurred as a direct consequence of the decrease in UK floorcovering markets. These businesses collectively represent 63% of UK revenue and as highlighted in the Chief Executive's Review, the resumption of growth in these two sectors during 2011 was an important step forward, since they provide the UK operation with the base of its market presence.

The impact of the reduction in the floorcovering markets in Continental Europe has been at its most acute in Switzerland, where revenues, at constant currency compared with those achieved in 2007, have reduced by 14.7%. Revenue is down in the Netherlands over the four year period by 9.1% and in France by 4.5%.

Gross margin and expenses

Group gross margin as a percentage of revenue remained unchanged compared with 2010. In the UK, the ongoing improvement in gross margin performance was unable to progress because of changes in product mix and increased price competition, particularly during the second half of the year. Further price competition is expected to be a feature of UK trading during 2012.

Total distribution and administration expenses as a percentage of revenue remained unchanged compared with the last two years at 25.9%. The increase in expenditure during the year, amounting to GBP8.8 million, was principally due to

   --     employment costs, in constant currency terms, up 5.9% to GBP4.4 million, 
   --     fuel costs, up 14.0% to GBP1.4 million, 
   --     cost of the delivery fleet up 12.5%, GBP1.0 million and 
   --     sampling and bad debts up 7.2% to GBP1.1 million 

Net finance costs

Net finance costs reduced during the year by GBP0.6 million compared with 2010. The change during the year was almost entirely attributable to the net reduction in finance cost associated with the group's pension plans.

Following renewal of the group's term facility, net finance costs are likely to increase during 2012 due to pricing changes on the new facilities.


The effective rate of taxation reduced to 26% during the year, reflecting the decrease in the UK headline corporation tax rate and also the further future reduction already enacted, which impacts upon deferred taxation. The anticipated effective rate for 2012 is expected to reduce to 25% due to announced UK rate reductions.


Total dividends paid and proposed for 2011 have increased by 14.1% from 12.40 pence to 14.15 pence. Dividend cover of 1.74 times is in line with last year and represents a cover ratio the board anticipate maintaining for the foreseeable future.


The group has entered into two separate agreements with Barclays Bank and The Royal Bank of Scotland and completed the re-financing of its existing term facility.

The new facilities, provided equally by the two banks and totalling GBP40.0 million, are for a term of four years, which can be extended to five on the exercise of a separate option by each bank.

The former facility, amounting to GBP30.0 million has been repaid in full and cancelled.

In addition to the above, the group has extended its uncommitted UK facilities, amounting to GBP35.0 million, for another 12 months.

Cash flows

Operating cash flows before changes in working capital

Operating cash flows before changes in working capital increased during the year by GBP2.3 million from GBP31.5 million to GBP33.8 million.

Net working capital investment during the year amounted to GBP12.9 million compared with GBP0.2 million during the previous year. The group continues to provide its customers with a wide range of product. This commitment, coupled with price increases introduced by suppliers during the first quarter of 2011, which averaged 3.6%, has resulted in an additional GBP8.7 million investment in inventory.

The additional funding required in connection with trade receivables has arisen due to the increase in revenue during the year. However, as already noted in the Chief Executive's Review, the average period of credit taken by our independent customer base, as measured at the end of the year, has reduced compared with the previous year.

The additional net working capital investment is the reason for cash generated from operations reducing by GBP10.5 million during the year. However, the decrease in cash payments relating to tax, GBP4.1 million, and the enhanced transfer value exercise, GBP4.2, was the principal reason for the reduction in net cash from operating activities to GBP2.2 million.

Cash flows from investing and financing activities

Additions to property, plant and equipment during the year were modest compared with previous years. However, as highlighted in the Chief Executive's Review, the group intends to embark on further investment over the next few years with approximately GBP24.0 million being committed to the development of the Coleshill extension and the new distribution centre for Faithfulls. It is too early in the process to comment on the detailed timing of the cash flows.

Cash out flows relating to financing activities amounted to GBP12.1 million compared with GBP10.0 million in the previous year. The main component of the cash flow relates to dividends but during the year, GBP1.6 million was utilised to acquire shares in the company to crystallise the cost of satisfying potential awards under the employee share plan arrangements.

Net debt

Group net funds at the end of the year decreased compared with the previous year by GBP2.9 million from GBP10.5 million to GBP7.6 million. The details are shown in the table below.

                                At                                       At 
                         1 January       Cash    Translation    31 December 
                              2011      flows    differences           2011 
                            GBP000     GBP000         GBP000         GBP000 
 Cash at bank and 
  in hand                   44,758    (3,211)           (53)         41,494 
 Debt due within one 
  year                       (225)   (30,000)              6       (30,219) 
 Debt due after one 
  year                    (34,011)     30,228             92        (3,691) 
                            10,522    (2,983)             45          7,584 
                       -----------  ---------  -------------  ------------- 

Employee benefits

As disclosed in the Cash Flow Statement, the group made further payments totalling GBP3.3 million in connection with the enhanced transfer value exercise during the first quarter of 2011, enabling deferred members of the UK defined benefit pension plan the opportunity to transfer out.

The group does not anticipate repeating this exercise in the foreseeable future.

The results of the triennial review of the UK defined benefit pension plan revealed a net deficit reduction from GBP22.4 million to GBP11.5 million. The reduction has been appreciably facilitated by both the additional contributions to the plan and the transfer of deferred members.

The company has agreed with the plan trustee to maintain additional contributions in line with the arrangement agreed in 2008, which means that each year's contribution will continue to increase on the previous year at a rate of 3.2%. This commitment gave rise to a cash payment of GBP2.8 million during the year and should result, all else being equal, in the plan deficit being completely eliminated by December 2015.

Going concern

Having reviewed the group's resources and a range of likely out-turns, the directors believe they have reasonable grounds for stating that the group has adequate resources to continue in operational existence for the foreseeable future and that it is appropriate to adopt the going concern basis in preparing the group's financial accounts.

Consolidated Income Statement

for the year ended 31 December 2011

                                            Note        2011        2010 
                                                      GBP000      GBP000 
 Revenue                                       1     569,795     535,690 
 Cost of sales                                     (394,056)   (370,731) 
-----------------------------------------  -----  ----------  ---------- 
 Gross profit                                        175,739     164,959 
 Distribution expenses                             (110,623)   (102,016) 
 Administrative expenses                            (37,064)    (36,877) 
-----------------------------------------  -----  ----------  ---------- 
 Operating profit                              1      28,052      26,066 
 Finance income                                        4,520       4,637 
 Finance expenses                                    (4,984)     (5,697) 
-----------------------------------------  -----  ----------  ---------- 
 Net finance costs                                     (464)     (1,060) 
-----------------------------------------  -----  ----------  ---------- 
 Profit before tax                                    27,588      25,006 
 Taxation                                            (7,184)     (7,127) 
-----------------------------------------  -----  ----------  ---------- 
 Profit for the year attributable to the 
  equity shareholders                                 20,404      17,879 
-----------------------------------------  -----  ----------  ---------- 
 Dividend paid per share                       3      12.40p      11.00p 
 Earnings per share 
 Basic                                         2       24.6p       21.5p 
-----------------------------------------  -----  ----------  ---------- 
 Diluted                                       2       24.4p       21.5p 
-----------------------------------------  -----  ----------  ---------- 

All group operations during the financial years were continuing operations.

Consolidated Statement of Comprehensive Income

for the year ended 31 December 2011

                                                       Note      2011      2010 
                                                               GBP000    GBP000 
 Profit for the year attributable to the equity 
  shareholders                                                 20,404    17,879 
 Other comprehensive income: 
  Foreign exchange translation differences arising 
   on translation of overseas operations                        (234)     1,094 
  Actuarial losses and gains on defined benefit 
   plans                                                      (7,839)       356 
  Effective portion of changes in fair value 
   of cash flow hedges                                              -       (1) 
  Transfers to profit or loss on cash flow hedges                   -       225 
  Income tax on other comprehensive income                      1,855         9 
-----------------------------------------------------------  --------  -------- 
 Other comprehensive (expense)/income for the 
  year                                                        (6,218)     1,683 
 Total comprehensive income attributable to 
  the equity shareholders for the year                         14,186    19,562 

Statements of Financial Position

at 31 December 2011

                                                              2011        2010 
                                                  Note      GBP000      GBP000 
  Non-current assets 
  Property, plant and equipment                             94,201      97,215 
  Intangible assets                                         13,210      13,210 
  Investments in subsidiary undertakings                         -           - 
  Deferred tax assets                                          962         896 
                                                           108,373     111,321 
  Current assets 
  Inventories                                              114,196     105,694 
  Trade and other receivables                              111,656     102,240 
  Cash and cash equivalents                                 41,494      44,758 
  Assets held for sale                                         362         362 
                                                           267,708     253,054 
  Total assets                                       1     376,081     364,375 
 ---------------------------------------------  ------  ----------  ---------- 
  Current liabilities 
  Other interest-bearing loans and borrowings             (30,219)       (225) 
  Trade and other payables                               (154,490)   (149,476) 
  Employee benefits                                        (2,669)     (2,586) 
  Income tax payable                                       (6,678)     (4,201) 
                                                         (194,056)   (156,488) 
  Non-current liabilities 
  Other interest-bearing loans and borrowings              (3,691)    (34,011) 
  Employee benefits                                       (11,789)    (10,138) 
                                                          (15,480)    (44,149) 
 ---------------------------------------------  ------  ----------  ---------- 
  Total liabilities                                  1   (209,536)   (200,637) 
  Net assets                                               166,545     163,738 
 ---------------------------------------------  ------  ----------  ---------- 
 Equity attributable to equity holders 
 of the parent 
 Share capital                                               4,268       4,268 
 Share premium                                              53,512      53,512 
 Other reserves                                            (7,013)     (6,571) 
 Retained earnings                                         115,778     112,529 
----------------------------------------------  ------  ----------  ---------- 
 Total equity                                              166,545     163,738 
----------------------------------------------  ------  ----------  ---------- 

Statement of Changes in Equity

for the year ended 31 December 2011

                                                 Capital                      Cash 
                          Share      Share    redemption    Translation       flow    Treasury    Retained       Total 
                        capital    premium       reserve        reserve    hedging     reserve    earnings      equity 
                         GBP000     GBP000        GBP000         GBP000    reserve      GBP000      GBP000      GBP000 
 Balance at 
  1 January 2010          4,268     53,512            88          5,297      (224)    (13,057)     102,745     152,629 
 Profit for the 
  year attributable 
  to the equity 
  shareholders                -          -             -              -          -           -      17,879      17,879 
 Other comprehensive 
  income                      -          -             -          1,094        224           -         365       1,683 
--------------------  ---------  ---------  ------------  -------------  ---------  ----------  ----------  ---------- 
 Total comprehensive 
  income for the 
  year                        -          -             -          1,094        224           -      18,244      19,562 
--------------------  ---------  ---------  ------------  -------------  ---------  ----------  ----------  ---------- 
 with equity 
 recorded directly 
 in equity 
  payments                    -          -             -              -          -           -         448         448 
 Share options 
  exercised by 
  employees                   -          -             -              -          -           7           -           7 
 Deferred tax 
  on share options            -          -             -              -          -           -         224         224 
 Dividends to 
  equity holders              -          -             -              -          -           -     (9,132)     (9,132) 
--------------------  ---------  ---------  ------------  -------------  ---------  ----------  ----------  ---------- 
 Total contributions 
  by and 
  to equity 
  shareholders                -          -             -              -          -           7     (8,460)     (8,453) 
--------------------  ---------  ---------  ------------  -------------  ---------  ----------  ----------  ---------- 
 Balance at 
  31 December 2010        4,268     53,512            88          6,391          -    (13,050)     112,529     163,738 
--------------------  ---------  ---------  ------------  -------------  ---------  ----------  ----------  ---------- 
 Balance at 
  1 January 2011          4,268     53,512            88          6,391          -    (13,050)     112,529     163,738 
 Profit for the 
  year attributable 
  to the equity 
  shareholders                -          -             -              -          -           -      20,404      20,404 
 Other comprehensive 
  income                      -          -             -          (234)          -           -     (5,984)     (6,218) 
--------------------  ---------  ---------  ------------  -------------  ---------  ----------  ----------  ---------- 
 Total comprehensive 
  income for the 
  year                        -          -             -          (234)          -           -      14,420      14,186 
--------------------  ---------  ---------  ------------  -------------  ---------  ----------  ----------  ---------- 
 with equity 
 recorded directly 
 in equity 
  payments                    -          -             -              -          -           -         871         871 
  for purchase 
  of own shares               -          -             -              -          -     (1,575)           -     (1,575) 
 Share options 
  exercised by 
  employees                   -          -             -              -          -       1,367     (1,357)          10 
 Deferred tax 
  on share options            -          -             -              -          -           -       (390)       (390) 
 Dividends to 
  equity holders              -          -             -              -          -           -    (10,295)    (10,295) 
--------------------  ---------  ---------  ------------  -------------  ---------  ----------  ----------  ---------- 
 Total contributions 
  by and 
  to equity 
  shareholders                -          -             -              -          -       (208)    (11,171)    (11,379) 
--------------------  ---------  ---------  ------------  -------------  ---------  ----------  ----------  ---------- 
 Balance at 
  31 December 2011        4,268     53,512            88          6,157          -    (13,258)     115,778     166,545 
--------------------  ---------  ---------  ------------  -------------  ---------  ----------  ----------  ---------- 

Cash Flow Statements

for the year ended 31 December 2011

                                                     Note       2011      2010 
                                                              GBP000    GBP000 
 Cash flows from operating activities 
 Profit before tax for the year                               27,588    25,006 
 Adjustments for: 
 Depreciation, amortisation and impairment                     4,883     5,519 
 Net settlement loss/(gain) on enhanced transfer 
  value exercise                                                  56     (176) 
 Finance income                                              (4,520)   (4,637) 
 Finance expense                                               4,984     5,697 
 Profit on sale of property, plant and equipment                (86)     (314) 
 Share-based payments                                            871       448 
 Operating cash flows before changes in working 
 capital and other payables                                   33,776    31,543 
 Change in inventories                                       (8,700)   (5,770) 
 Change in trade and other receivables                       (9,764)   (1,405) 
 Change in trade and other payables                            5,544     6,947 
 Cash generated from the operations                           20,856    31,315 
 Interest paid                                               (1,342)   (1,344) 
 Tax paid                                                    (3,380)   (7,506) 
 Additional contributions to defined benefit 
  plan                                                       (2,781)   (2,706) 
 Enhanced transfer value exercise payments                   (3,302)   (7,488) 
 Net cash flow from operating activities                      10,051    12,271 
---------------------------------------------------------  ---------  -------- 
 Cash flows from investing activities 
 Proceeds from sale of property, plant and 
  equipment                                                      110     3,167 
 Interest received                                               751       834 
 Dividends received                                                -         - 
 Acquisition of property, plant and equipment                (2,035)   (6,995) 
 Net cash flow from investing activities                     (1,174)   (2,994) 
---------------------------------------------------------  ---------  -------- 
 Cash flows from financing activities 
 Proceeds from the issue of treasury shares                       10         7 
 Payment to acquire own shares                               (1,575)         - 
 Repayment of borrowings                                       (228)     (866) 
 Dividends paid                                             (10,295)   (9,132) 
 Net cash flow from financing activities                    (12,088)   (9,991) 
---------------------------------------------------------  ---------  -------- 
 Net decrease in cash and cash equivalents                   (3,211)     (714) 
 Cash and cash equivalents at 1 January                       44,758    44,979 
 Effect of exchange rate fluctuations on cash 
  held                                                          (53)       493 
 Cash and cash equivalents at 31 December                     41,494    44,758 
---------------------------------------------------------  ---------  -------- 


1. Segment reporting

The group has 50 operating segments in the UK and 5 operating segments in Continental Europe. Each segment represents an individual trading operation, and each operation is wholly aligned to the sales, marketing, supply and distribution of floorcovering products. The operating results of each operation are regularly reviewed by the Chief Operating Decision Maker, which is deemed to be the Group Chief Executive. Discrete financial information is available for each segment and used by the Group Chief Executive to assess performance and decide on resource allocation.

The operating segments have been aggregated to the extent that they have similar economic characteristics, with relevance to products and services, type and class of customer, methods of sale and distribution and the regulatory environment in which they operate. The group's internal management structure and financial reporting systems differentiate the operating segments on the basis of the differing economic characteristics in the UK and Continental Europe and accordingly present these as two separate reportable segments. This distinction is embedded in the construction of operating reports reviewed by the Group Chief Executive, the board and the executive management team and forms the basis for the presentation of operating segment information given below.

                                UK             Continental                   Total 
                            2011        2010       2011       2010        2011        2010 
                          GBP000      GBP000     GBP000     GBP000      GBP000      GBP000 
 External revenues       466,968     432,815    102,827    102,875     569,795     535,690 
--------------------  ----------  ----------  ---------  ---------  ----------  ---------- 
 Reportable segment 
  operating profit        25,696      24,662      2,830      2,553      28,526      27,215 
--------------------  ----------  ----------  ---------  ---------  ----------  ---------- 
 Reportable segment 
  assets *               220,878     205,655     45,427     47,589     266,305     253,244 
 Reportable segment 
  liabilities          (136,358)   (129,365)   (18,132)   (20,111)   (154,490)   (149,476) 
--------------------  ----------  ----------  ---------  ---------  ----------  ---------- 

During the year there are no inter-segment revenues for the reportable segments (2010: GBPnil).

* Reportable segment assets have been restated for the year ended 31 December 2010 to allocate relevant cash and cash equivalents between the reportable segments.

Reconciliations of reportable segment profit, assets and liabilities and other material items:

                                   2011      2010 
                                 GBP000    GBP000 
 Profit for the year 
 Total profit for reportable 
  segments                       28,526    27,215 
 Impairment of assets                 -     (466) 
 Unallocated expense              (474)     (683) 
-----------------------------  --------  -------- 
 Operating profit                28,052    26,066 
 Finance income                   4,520     4,637 
 Finance expense                (4,984)   (5,697) 
-----------------------------  --------  -------- 
 Profit before taxation          27,588    25,006 
 Taxation                       (7,184)   (7,127) 
-----------------------------  --------  -------- 
 Profit for the year             20,404    17,879 
-----------------------------  --------  -------- 

Notes (continued)

1. Segment reporting - continued

                                                                                     2011            2010 
                                                                                   GBP000          GBP000 
 Total assets for reportable 
  segments                                                                        266,305         253,244 
 Unallocated assets: 
  Properties, plant and 
   equipment                                                                       84,531          86,504 
  Deferred tax assets                                                                 962             896 
  Assets held for sale                                                                362             362 
  Cash and cash equivalents                                                        23,921          23,369 
 Total assets                                                                     376,081         364,375 
--------------------------------  --------  -------------  ---  ------------  -----------  -------------- 
 Total liabilities for reportable 
  segments                                                                      (154,490)       (149,476) 
 Unallocated liabilities: 
  Employee benefits                                                              (14,458)        (12,724) 
  Other interest-bearing loans and borrowings                                    (33,910)        (34,236) 
  Income tax payable                                                              (6,678)         (4,201) 
 Total liabilities                                                              (209,536)       (200,637) 
--------------------------------  --------  -------------  ---  ------------  -----------  -------------- 
                                              Continental        segment                     Consolidated 
                                        UK         Europe          total      Unallocated           total 
                                    GBP000         GBP000         GBP000           GBP000          GBP000 
 Other material items 
 Capital expenditure                 1,358            593          1,951               84           2,035 
 Depreciation                        2,240            798          3,038            1,845           4,883 
 Other material items 
 Capital expenditure                   784            553          1,337            5,658           6,995 
 Depreciation                        2,503            747          3,250            1,803           5,053 
 Impairment of assets                    -              -              -              466             466 
--------------------------------  --------  -------------  -------------  ---------------  -------------- 

In the UK the group's freehold properties are held within Headlam Group plc and a rent is charged to the operating segments for the period of use. Therefore the operating reports reviewed by the Group Chief Executive show all the UK properties as unallocated and the operating segments report a segment result that includes a property rent. This is reflected in the above disclosure.

Each segment is a continuing operation.

The Group Chief Executive, the board and the senior executive management team have access to information that provides details on revenue by principal product group for the two reportable segments, as set out in the following table:

Revenue by principal product group and geographic origin is summarised below:

                       UK              Continental            Total 
                   2011      2010      2011      2010      2011      2010 
                 GBP000    GBP000    GBP000    GBP000    GBP000    GBP000 
 Residential    320,290   297,606    50,047    51,992   370,337   349,598 
 Commercial     146,678   135,209    52,780    50,883   199,458   186,092 
-------------  --------  --------  --------  --------  --------  -------- 
                466,968   432,815   102,827   102,875   569,795   535,690 
-------------  --------  --------  --------  --------  --------  -------- 

Notes (continued)

2. Earnings per share

The calculation of the basic and diluted earnings per share is based on the following data:

                                                              2011          2010 
                                                            GBP000        GBP000 
 Earnings for the purposes of basic earnings per 
  share being profit attributable to equity holders 
  of the parent                                             20,404        17,879 
----------------------------------------------------  ------------  ------------ 
                                                              2011          2010 
 Number of shares 
 Issued ordinary shares at 1 January                    85,363,743    85,363,743 
 Effect of shares held in treasury                     (2,423,159)   (2,246,489) 
 Weighted average number of ordinary shares for 
  the purposes of basic earnings per share              82,940,584    83,117,254 
----------------------------------------------------  ------------  ------------ 
 Effect of diluted potential ordinary shares: 
  Weighted average number of ordinary shares at 
   31 December                                          82,940,584    83,117,254 
  Dilutive effect of share options                         596,479       113,570 
 Weighted average number of ordinary shares for 
  the purposes of diluted earnings per share            83,537,063    83,230,824 
----------------------------------------------------  ------------  ------------ 

At 31 December 2011, the company held 2,841,197 shares in treasury and these are excluded from the calculation of earnings per share.

3. Dividends

                                                         2011      2010 
                                                       GBP000    GBP000 
 Interim dividend for 2010 of 3.83p paid 4 January      3,180         - 
 Final dividend for 2010 of 8.57p paid 1 July 2011      7,115         - 
 Interim dividend for 2009 of 3.70p paid 2 January 
  2010                                                      -     3,072 
 Final dividend for 2009 of 7.30p paid 1 July 2010          -     6,060 
                                                       10,295     9,132 
---------------------------------------------------  --------  -------- 

The final proposed dividend of 9.85p per share (2010:8.57p per share) will not be provided for until authorised by shareholders at the forthcoming AGM.

Interim dividends of 4.30p per share (2010: 3.83p per share) are provided for when the dividend is paid.

The total value of dividends proposed but not recognised at 31 December 2011 is GBP11,663,000 (2010: GBP10,294,000).

Notes (continued)

4. Additional information

The financial information set out above does not constitute the company's statutory accounts for the years ended

31 December 2011 or 2010 but is derived from those accounts. Statutory accounts for 2010 have been delivered to the registrar of companies, and those for 2011 will be delivered in due course. The auditors have reported on those accounts; their reports were (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

We anticipate that the company's statutory accounts will be posted to shareholders during April 2012 and will be displayed on the company's website at during March 2012. Copies of the statutory accounts will also be available from the company's registered office at Headlam Group plc, PO Box 1, Gorsey Lane, Coleshill, Birmingham, B46 1LW.

This preliminary announcement of results for the year ended 31 December 2011 was approved by the board on 9 March 2012.

This information is provided by RNS

The company news service from the London Stock Exchange



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