Floor coverings specialist Headlam (HEAD) is now operating out of 60 trade counters across the UK and continental Europe. That’s up from 48 at the end of the 2016 half-year, but the proportion of revenue derived from its European network is broadly the same, at 14 per cent. One benefit of geographic expansion is that it allows companies to flatten out cyclical trends by diluting the impact of country-specific economic downturns. It’s telling that the rate of like-for-like revenue growth improved in the group’s European markets, but contracted at home from 3.4 per cent to 2.1 per cent. The majority view is that UK household credit is effectively maxed out, which could undermine domestic demand levels going forward, although Headlam chief executive Steve Wilson points out that the average outlay for floor coverings (excluding kitchen and bathrooms) in the UK is a lowly £250.
Even so, you would imagine that demand for floor coverings is rather elastic. Management can’t do much about macro effects, but practical improvements to the way in which the group manages inventory and warehousing, together with the merging of financial and IT platforms, fed through to a 103 basis point increase in the gross margin to 31.1 per cent.
Investec forecasts adjusted pre-tax profit of £42.5m for the year to December 2017, leading to EPS of 40.7p, against £40.1m and 38.5p in 2016.
| HEADLAM (HEAD) | ||||
| ORD PRICE: | 574p | MARKET VALUE: | £486m | |
| TOUCH: | 567-574p | 12-MONTH HIGH: | 655p | LOW: 436p |
| DIVIDEND YIELD: | 2.9% | PE RATIO: | 15 | |
| NET ASSET VALUE: | 228p | NET CASH: | £49.8m | |
| Half-year to | Turnover | Pre-tax | Earnings per | Dividend |
| 30 Jun | (£m) | profit (£m) | share (p) | per share (p) |
| 2016 * | 329 | 15.1 | 14.4 | 6.70 |
| 2017 | 342 | 16.8 | 16.2 | 7.55 |
| % change | +4 | +11 | +13 | +13 |
| Ex-div: | 30 Nov | |||
| Payment: | 2 Jan | |||
| *Does not include 2016 special dividend worth 8p a share | ||||
