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Headlam gathers momentum

Trading improved at floor coverings specialist Headlam in the first half - but not enough to change our view on the shares.
September 2, 2014

Trading is gathering pace at floor coverings distributor Headlam (HEAD), thanks to a number of self-help initiatives and the booming UK housing sector. Chief executive Tony Brewer said staff training, improved selling techniques and other initiatives had all contributed to the 16 per cent increase in group operating profit to £11.3m.

413p

The UK in particular enjoyed a good first half. Headlam increased its market share, as like-for-like sales jumped 8 per cent, lifting operating profit by 14 per cent to £11.4m. The regional and national multi-product divisions, which sell both residential and commercial products and are seen as a bellweather of overall trading, made encouraging recoveries. In Europe, however, underlying sales were flat, as improved trading in France and the Netherlands was offset by weakness in Switzerland.

Mr Brewer said the good first-half performance had spilled into July and August, so that Headlam was "well-placed" for the rest of the year - sealing his confidence with a 12 per cent hike in the interim dividend. However, Charles Hall, an analyst at Peel Hunt, said the cooling of the housing market and the group's exit from the FTSE All-Share index - because the shares weren't frequently enough traded - could continue to affect sentiment towards the stock. Prior to these results, he was expecting pre-tax profit of £30m for the full year, giving EPS of 28p (from 24p in 2013).

HEADLAM (HEAD)
ORD PRICE:413pMARKET VALUE:£347m
TOUCH:412-414p12-MONTH HIGH:496pLOW: 370p
DIVIDEND YIELD:3.8%PE RATIO:21
NET ASSET VALUE: 205pNET CASH:£11.7m

Half-year to 30 JunTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20132809.18.44.65
201430210.810.25.2
% change+8+19+21+12

Ex-div: 04 Dec

Payment: 02 Jan