Flooring specialist Headlam (HEAD) has continued with an expansion-based approach to tackling difficult UK market conditions. This seemed to pay off as a combination of expansion and lower costs contributed to a 4.5 per cent increase in full-year operating profit to £29.3m. But trading pressures remain apparent after bad weather meant a slow start to 2013.
Finding cost savings remains important for Headlam as a combination of tough competition and a less profitable sale mix is putting the gross profit margin under pressure. However, management reckons that this could start to reverse if there's an underlying improvement in volumes - the company thinks the cost of maintaining its structure and investment programme is ultimately worth the gain in extra market share. Cash usage, however, has needed to become more efficient after a £12.9m increase in working capital in 2011 - this fell £2.2m during 2012. The main UK business does seen to have benefited from all this extra investment, though - sales there increased 5 per cent, with the operating profit having jumped 10 per cent to £28.2m. That stood in contrast to operations in continental Europe, where revenue fell 9 per cent to £93.7m and profits dropped 28 per cent to £2m.
Broker Shore Capital upgraded its adjusted EPS estimate by 3 per cent for 2013 to 27.4p (25.1p in 2012).
HEADLAM (HEAD) | ||||
|---|---|---|---|---|
| ORD PRICE: | 340p | MARKET VALUE: | £284m | |
| TOUCH: | 337-345p | 12-MONTH HIGH: | 355p | LOW: 263p |
| DIVIDEND YIELD: | 4.4% | PE RATIO: | 13 | |
| NET ASSET VALUE: | 208p* | NET CASH: | £16.2m | |
| Year to 31 Dec | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2008 | 557 | 40.1 | 34.5 | 19.70 |
| 2009 | 534 | 22.1 | 19.1 | 11.00 |
| 2010 | 536 | 25.0 | 21.5 | 12.40 |
| 2011 | 570 | 27.6 | 24.6 | 14.15 |
| 2012 | 586 | 28.5 | 25.8 | 14.85 |
| % change | +3 | +3 | +5 | +5 |
Ex-div: 5 Jun Payment: 1 Jul *Includes intangible assets of £13.2m, or 16p a share | ||||
