Headlam is fortunate that its niche segment of the furnishings market has not been taken over by big retail chains. Independent retailers and flooring contractors still account for around 60 per cent of the UK floor coverings market (excluding ceramics) and Headlam claims a 26 per cent share. So, while many companies have put expansion plans on hold, Headlam intends to invest £26m over the next two years. It will extend two distribution centres and build a new one in Ipswich.
Not surprisingly, perhaps given the economic backdrop, both sales and profits growth slowed in the first six months of the year, but the UK operation still managed to lift revenues 7 per cent to £233m and boost profits by £1m to £10.7m. In contrast, sales in Europe fell 8 per cent to £46.6m, which resulted in profits halving to £0.7m as residential demand declined, particularly in France and Holland. Earnings, however, were boosted by a lower rate of corporation tax. That cut made it possible to increase the dividend – since 2008, the dividend cover has been fixed at 1.7 times net earnings.
Headlam reports "maintained" sales in July and August, so broker Arden Partners forecasts 12 months' sales up 3 per cent to £586m and adjusted pre-tax profits of £28.4m (£27.6m). On this basis, EPS rises by 1p to 25.6p and the dividend goes up from 14.15p to 14.8p.
HEADLAM (HEAD) | ||||
|---|---|---|---|---|
| ORD PRICE: | 310p | MARKET VALUE: | £259m | |
| TOUCH: | 308-312p | 12-MONTH HIGH: | 320p | LOW: 230p |
| DIVIDEND YIELD: | 4.7% | PE RATIO: | 12 | |
| NET ASSET VALUE: | 192p | NET CASH: | £14.8m | |
| Half-year to 30 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2011 | 269 | 9.9 | 8.7 | 4.30 |
| 2012 | 279 | 10.4 | 9.4 | 4.65 |
| % change | +4 | +5 | +8 | +8 |
Ex-div: 5 Dec Payment: 2 Jan | ||||
