Headlam Group PLC Pre-Close Trading Update (1953N)
January 16 2019 - 2:00AM
UK Regulatory
TIDMHEAD
RNS Number : 1953N
Headlam Group PLC
16 January 2019
16 January 2019
Headlam Group plc
('Headlam' or the 'Company')
Pre-Close Trading Update
Headlam Group plc (LSE: HEAD), Europe's leading distributor of
floorcoverings, today announces a trading update in respect of the
12 months ended 31 December 2018 ahead of announcing its final
results for the year ended 31 December 2018 on Wednesday, 6 March
2019.
Despite the UK market weakness that was evident throughout 2018,
the Company expects to report final results for the year ended 31
December 2018 marginally ahead of 2017 and in-line with market
expectations*. The Company also expects to propose a final dividend
in-line with market expectations*, resulting in a very slight
increase in the total dividend payable in respect of 2018 against
that of 2017.
It is currently anticipated that the UK market will show further
general weakness during 2019, particularly in the residential
sector where the Company's distribution business is more heavily
weighted. As a result, the Company considers it prudent to expect
revenue for the current financial year to be in-line with 2018.
Whilst the Company has been effective at improving gross margin
over the last couple of years, it is anticipated that underlying
profit before tax in 2019 will be lower than 2018 and in the range
of GBP39 million to GBP41 million. This is primarily due to an
anticipated movement in revenue mix and associated margin,
year-on-year inflationary pressure on distribution costs and
administrative expenses, and a number of efficiency initiatives
aimed at lowering the breakeven point and improving operating
margin being at the early roll-out phase or trialling.
The efficiency initiatives, which include more effective
inventory management, delivery fleet utilisation, and examination
of all goods not for resale and other expenditure, will yield
increasing benefits as 2019 progresses and have a more meaningful
impact in 2020 and beyond.
The Company currently intends to maintain the 2019 dividend
in-line with that of 2018 despite the profit guidance for the year.
This reflects the Board's continued confidence in the Company's
ability to improve profitability, and its commitment to a
progressive dividend policy and maintenance of a strong balance
sheet and operational cash generation. Net cash as at 31 December
2018 is expected to be higher than the GBP35.3 million reported for
2017, and which follows acquisition spend of GBP9 million during
the year.
Since the beginning of the year, and in anticipation of the UK
leaving the EU at the end of March 2019, the Company has invested
in additional inventory across its fastest-moving products. This
coupled with the Company's significant warehousing network and
associated inventory positions should assist in partially
mitigating any potential disruption and help preserve customer
service in the event of a hard Brexit.
Steve Wilson, Headlam's Chief Executive, commented:
"In the face of a year which presents general uncertainty, a
high degree of difficulty predicting any outcome, and an
anticipation of further weakening in markets due to the wider
economic environment, I believe we are taking a prudent view. Our
intention to maintain the dividend for 2019 despite this backdrop
is testament to our belief in the strength of the business. We are
focused on expediting the efficiency initiatives to improve our
performance going forward, irrespective of any weaker trading
conditions and remain committed to providing improving returns to
shareholders."
*Company-compiled consensus market expectations for 2018
revenue, underlying profit before tax and total ordinary dividend
is GBP708.7 million, GBP43.6 million and 24.88 pence per share
respectively (mean). Underlying is before non-underlying items
which includes intangibles amortisation relating to businesses
acquired, acquisition fees, and non-recurring costs relating to
personnel changes.
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 Broker) Tel: 020 7597 5970
David Flin / Alex Wright
Panmure Gordon (UK) Limited (Corporate Tel: 020 7886 2500
Broker)
Erik Anderson / Andrew Potts /
Ailsa MacMaster
Buchanan (Financial PR and IR) Tel: 020 7466 5000
Mark Court / Sophie Wills / Catriona
Flint
Notes for Editors:
Headlam is Europe's largest distributor of floorcoverings having
grown significantly via organic growth and acquisition since
1992.
Headlam's core business provides the distribution channel
between suppliers and trade customers of floorcoverings, providing
suppliers with the greatest coverage and customer penetration for
their products across the UK and Continental Europe, and customers
with the broadest range of products supported by next day
delivery.
The Company is engaged with suppliers across 16 primary
countries whose products cover a significant proportion of the
floorcoverings market including carpet, residential vinyl,
engineered wood, laminate, luxury vinyl tiles, ceramic tiles,
underlay and commercial flooring. The Company's customers are
within both the residential and commercial sectors and comprise
principally independent retailers and flooring contractors.
The Company comprises 67 wholly-owned businesses in the UK and
Continental Europe (UK 63, Continental Europe 4) each operating
under their own trade brand and utilising their individual sales
team which achieves greater market penetration.
Each of the businesses is supported by the Company's centralised
and financial resources and extensive distribution network across
the UK and Continental Europe.
www.headlam.com
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END
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