Write-downs at its European arm were responsible for a slump in profits at floor coverings specialist Headlam (HEAD) last year. Underlying earnings, however, were better than feared, and momentum built up towards the end of last year has spilled over into 2014. Yet, despite teasing a 10 per cent upgrade out of broker Peel Hunt, the shares are not cheap.
Even after stripping out a £5.4m charge against earnings at the French and Dutch operations, pre-tax profit fell 5 per cent to £26.4m. But Peel Hunt, which had been looking for just £24m, clearly likes chief executive Tony Brewer's prediction of a return to profit growth this year. The broker has beefed up its profit forecast for 2014 by £2.5m to £28.5m, giving adjusted EPS of 26.7p. Expect a bigger dividend, too - about 16.5p, which puts the shares on a forward yield of 3.5 per cent.
Early signs are certainly encouraging. Like-for-like sales at the core UK business reversed a first-half decline to grow 1.5 per cent to £499m in 2013. The rate of profit decline eased considerably in the second half, too, to just 2 per cent; market conditions have improved slightly, says Mr Brewer. Even in mainland Europe, where profit fell 18 per cent to under £1.7m, markets are "more stable".
HEADLAM (HEAD) | ||||
|---|---|---|---|---|
| ORD PRICE: | 475p | MARKET VALUE: | £397m | |
| TOUCH: | 471-480p | 12-MONTH HIGH: | 487p | LOW: 315p |
| DIVIDEND YIELD: | 3.2% | PE RATIO: | 26 | |
| NET ASSET VALUE | 212p* | NET CASH: | £14m | |
| Year to 31 Dec | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2009 | 534 | 22.1 | 19.1 | 11 |
| 2010 | 536 | 25.0 | 21.5 | 12.4 |
| 2011 | 570 | 27.6 | 24.6 | 14.15 |
| 2012 | 586 | 27.9 | 25.3 | 14.85 |
| 2013 | 603 | 21.1 | 18.0 | 15.3 |
| % change | +3 | -24 | -29 | +3 |
Ex-div: 4 Jun Payment: 1 Jul | ||||
