Flooring distributor Headlam says it will accelerate its consolidation strategy in the face of a major drop in UK sales which saw a £10.6m loss in the past four months.
Sales for the period to the end of April were 12.3% lower: UK sales were down 11.6% despite increased sales in the large customer and trade counters sectors. ‘Revenue in April did not show the expected seasonal uplift usually seen in the Spring period’ and sales at its European operations and core UK regional distribution business fell.
‘Over recent years the group has been implementing its strategy of broadening its customer base and implementing a transformation programme of simplifying and consolidating sales teams and operations. The group is accelerating its strategy which will see further integration and simplification across the business. We expect these initiatives to deliver a material reduction in operating costs along with significant one-off cash benefits from disposal of surplus property and working capital reduction over the next 18 months,’ says the group.
Headlam will own property valued at £142.1m, once a sale in Stockport goes through.
‘Our independent retailer customers in regional distribution remain our biggest customer group and we will continue to invest in that part of our business, building on the significant investments made in 2023, to maintain and grow our market presence. The changes we’ll be making, along with the ongoing ERP replacement project, will make Headlam a more effective organisation and simplify our offer to customers,’ says the group.
‘We expect to report a significant pre-tax loss in the first half based on a double-digit decline in revenue. In the second half we expect an improvement based on our mitigating actions, as well as gradually improving market conditions, albeit we do not anticipate the market returning to growth until 2025. For the full year we expect profit to be significantly below current market expectations.’
‘Whilst the medium-term outlook for the business remains strong, the current trading conditions across the sector have been challenging and we have seen a further deterioration in consumer spending in our markets, which has weighed on profitability. Despite these headwinds, the balance sheet remains strong, it is pleasing to see the strategic growth areas continuing to perform well and, with the acceleration of our strategy, we have a great opportunity to simplify our customer offer to significantly improve the group’s profitability and further improve our cash position,’ says Chris Payne, Headlam ceo.
Headlam’s shares fell by 10% in early trading.
