Headlam raising the floor
19/08/2011 Ben Jaglom
http://www.growthcompany.co.uk/news/1649008/headlam-raising-the-floor.thtml


Carpets and floorings distributor Headlam Group (HEAD) has reported a 17.3 per cent increase in profits amidst a surprisingly resilient UK market.

The fully-listed group declared pre-tax profits of £9.9 million on turnover up 5.5 per cent to £269 million. EPS increased from 7.3p to 8.7p while the dividend per share rose from 3.83p to 4.3p. Sales to the UK rose by 7.4 per cent while in Continental Europe they slipped by 4.5 per cent. Net debt stood at £16.1 million

Headlam noted that sales over the period took place across its carpet, vinyl, wood, laminate, commercial flooring and flooring accessories products with the company enthusing that its customers- floorings and carpet retailers had 'continued to trade positively' over the period. At the higher end of the market it argued that its 'lifestyle floors' brand of products such as top quality vinyl, wood, laminate and other types of floorings had led to those retailers that bought from the range range increasing 'their purchases at a faster rate than our other independent retail customers.'

In its European operations France and Netherlands were described as 'stable' while trading in Switzerland was described as 'challenging'. Its Dutch business increased sales while its French division reported a slight reduction in revenue. Headlam noted that its Swiss business benefited from the weakening of the Euro against the Swiss Franc. Despite the 'unhelpful markets' profits in its European division increased from £1 million to £1.4 million.

In an interview with Growth Company Investor finance director Steve Wilson remarked that while the market as a whole is 'difficult' the company has an 'incredibly wide reach in the UK with over 7,000 customers' noting that the company has strong links in particular with commercial customers that represent circa a third of revenue. Wilson argues that while public sector cuts have resulted in many infrastructure projects being pulled altogether 'this benefits us as companies tend to spend on refurbishment projects instead.'

Analysts at Peel Hunt are forecasting pre-tax profits of £27.5 million (EPS: 24.1p) on sales of £556.3 million for the year to December 2011. In 2012 it expects profits of £29 million (EPS: 25.6p) on revenue of £575 million.

Shares in Headlam are a long way from their 2007 value of 600p, and are currently trading at 256p. The company has reported impressive results amidst what is a tough time for the floorings industry, traditionally driven by housebuilding activity. Debt stands at a reasonable level while its continental perfomance was respectable given the wider market. However over the coming year growth in the sector looks unlikely given the present circumstances. Hold.

Tags: Business in Switzerland, Carpets market, Floorcoverings

Sector: Household Goods

Companies: Headlam Group

Investment Column: Johnson Matthey has formula for growth

http://www.independent.co.uk/news/a2317150.html

Edited by Nikhil Kumar
Wednesday, 20 July 2011

Headlam

Our view: Buy

Share price: 285p (+9.75p)

Headlam, the European floor-covering distributor, has, like the retailer United Carpets, bucked the downturn in the carpet market by rolling out stellar figures for the first half of the year.

While some, including the UK market leader, Carpetright, have struggled recently, Birmingham-based Headlam has powered ahead and delivered group revenues up by 5.5 per cent for the six months to 30 June.

Analysts at Peel Hunt said the result was "excellent" in what the distributor's management called a "flat" market, particularly in the UK, where its like-for-like sales surged by 7.4 per cent.

While Headlam is benefiting from not having shops on the high street, the company deserves praise for maximising its relationships with retailers and contractors through the 47 brands it sells to them.

That said, like-for-like sales on the Continent rose by a less stellar 4.5 per cent over the half-year. However, we note that analysts raised their profit forecasts after yesterday's update and that the shares were as high as 354p as recently as January. It's also worth noting that Headlam trades on what is a relatively modest forward-earnings multiple of 11.6 times.

I work for the headlam group as a hgv driver . At our depot we are still fairly busy and maybe only down a bit on last year.It,s not a easy job delivering carpets and heavy flooring. I think the shares will recover over next 2 years . AT present not a shareholder but will buy £2000 worth soon

I see some analysts are predicting a fall in the divi - no surprise there then. Looking to the future, if others fall by the wayside, and Head picks up market share, this co is going to come out of the recession even stronger. That of course applies to a number of companies: the strong will end up even stronger. Just a question of spotting the winners in the sectors being hammered, and deciding when it's a good time to buy. Each to his own. Easy!?