Flooring company Headlam (HEAD) purchases its wares in Europe, but 87 per cent of its sales are in its home market. Considering recent currency movements, this business model has been a cause for concern for shareholders, however a strong first half and a confident outlook provided significant reassurance. Headlam has passed the extra currency-related costs of purchasing its products on to customers, but this hasn't deterred them from buying. Although June sales were softer, turnover in July has bounced back, with the start of the important refurbishment season for UK schools and universties.
Sales in the UK were up 4.3 per cent in the first half, comfortably ahead of the estimated 3.2 per cent market growth set out by sector specialists AMA Research at the start of the year. A large amount of this revenue growth came from Lifestyle Floors, Headlam's own contemporary flooring brand. Demand from the residential sector has been particularly strong, although the commercial business also held up well.
In fact, the increased domination of the higher-margin residential sector helped push UK operating margins up by 40 basis points. As a result, group operating profit was boosted by 19 per cent to £15.4m.
Broker Investec expects 2016 full year pre-tax profits of £36m giving an adjusted EPS of 34p, up from £35.6m and 33.7p in the prior year.
HEADLAM (HEAD) | ||||
|---|---|---|---|---|
| ORD PRICE: | 470p | MARKET VALUE: | £398m | |
| TOUCH: | 465-470p | 12-MONTH HIGH: | 543p | LOW: 408p |
| DIVIDEND YIELD: | 3.9% | PE RATIO: | 13 | |
| NET ASSET VALUE: | 225p | NET CASH: | £33.9m | |
| Half-year to 30 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2015 | 314 | 12.3 | 11.7 | 6.0 |
| 2016 | 329 | 15.1 | 14.4 | 6.7 |
| % change | +5 | +22 | +23 | +12 |
Ex-div: 1 Dec Payment: 3 Jan | ||||
