TIDMHEAD
RNS Number : 3816M
Headlam Group PLC
21 January 2021
21 January 2021
Headlam Group plc
('Headlam' or the 'Company')
Pre-close Trading Update
Strong and sustained recovery maintained through the
second-half
Intention to reinstate dividend
Headlam Group plc (LSE: HEAD), Europe's leading floorcoverings
distributor, is pleased to provide a trading update in respect of
the year ended 31 December 2020, and ahead of announcing its final
results on 9 March 2021.
2020 Financial Performance
Whilst trading in Q2 2020 was significantly impacted by
COVID-19, trading in the second-half was characterised by a strong
and sustained recovery to 2019 levels. Accordingly, total revenue
for the full year was only 15.3% below the prior year at GBP609.1
million, compared to 30.6% below for the first-half.
The recovery was driven by the UK residential sector which
performed exceptionally well despite the continuation of
restrictions and further lockdown periods, and compensated for a
significantly weaker commercial sector particularly in the UK. In
the second-half, residential sector revenue was up 8.8% against the
prior year compared to a decline of 17.8% for the commercial
sector, albeit this still represented a strong recovery from the
34.4% decline seen in the first-half.
Revenue for the collective Continental European businesses was
down only 4.1% on the year compared with 2019 due to robust
performances in Switzerland and the Netherlands helping to offset
weakness in France, which was subject to severe lockdown
measures.
In-line with the Trading Update on 19 November 2020, the Company
expects to report underlying(1) profit before tax towards the top
of the range of GBP14 million to GBP16 million. Reflecting the
strong cash flow from operations upon the return to more normalised
operations in the second-half, average net debt for the year was
GBP8.6 million, a material reduction on the first-half average net
debt of GBP35.3 million (both figures exclude the impact of IFRS 16
'Leases').
As at 31 December 2020, the Company had a net cash position of
GBP50.5 million (inclusive of GBP12.0 million deferred VAT payable
in Q1 2021), and total banking facilities available of GBP110.3
million of which GBP102.8 million was undrawn.
Ordinary Dividend
Given the recovered performance in the second-half, and
commitment to providing dividend income for shareholders, the Board
is pleased to announce its intention to reinstate the ordinary
dividend which was suspended following the emergence of COVID-19.
It is the Board's current intention to propose an initial nominal
ordinary dividend at the time of the Company's final results
announcement in March 2021, which will be paid to shareholders in
May 2021 following approval at the AGM. A further ordinary dividend
will be declared at the time of the Company's interim results
announcement in September 2021 unless exceptional or unforeseen
circumstances prevail. From 2022, the Board expects to announce
dividends in-line with the parameters set out in the Company's
Capital Allocation Priorities published below. The Company has also
taken the opportunity to accelerate its dividend payment timetable
so that dividends are paid to shareholders in a shorter timescale,
namely:
Ordinary Dividend Declared / Proposed Payable
Final (in respect of March May
12 months ended 31
December)
-------------------- ---------
Interim (in respect September November
of six months ended
30 June)
-------------------- ---------
Capital Allocation Priorities
As signposted in the November 2020 Trading Update, listed below,
in order of priority, are the Board's Capital Allocation Priorities
including targeted parameters:
1. Maintain a strong balance sheet, with targeted average net
debt (2) during a financial year of not more than 0.75x EBITDA,
unless exceptional or unforeseen circumstances prevail.
2. Investment, both opex and capex, in the core distribution
business to optimise performance and growth.
3. Provide income to shareholders through a bi-annual ordinary
dividend distribution paid out of cash with a target cover ratio of
2x earnings for the combined pay-out, and an interim and final
dividend payment split of approximately 1/3 : 2/3.
4. Consideration of investment in acquisition opportunities
aimed at growing the Company's core market position, including
extending the product portfolio and weighting in certain customer
segments.
5. After applying the priorities and parameters above, return
any surplus cash to shareholders. The Board will keep under review
and determine at the appropriate time the most effective method of
returning surplus cash, including consideration of special
dividends and share buybacks for cancellation.
The Board will review these priorities on a regular basis.
2021 Trading and Brexit
To-date in January 2021, typically the Company's quietest
trading month, with non-essential retail businesses closed in the
UK, France and the Netherlands, total revenue is down 5.1% against
the prior year. The Company confirmed earlier this month that its
operations in the UK and Continental Europe affected by current
lockdowns are remaining fully open for the duration of the lockdown
periods, with the safety and protection of its people, customers
and necessary visitors to site remaining the Company's priority.
The Company will closely monitor all government guidance and
provide any updates as and when appropriate.
The network consolidation and transport integration projects
under the Operational Improvement Programme are both progressing to
plan. The Company will now take the opportunity to accelerate the
new projects being introduced during 2021, following extensive
planning, to more quickly realise cost base improvements and
revenue benefits, which will help mitigate against potential
reductions in demand going forward due to the ongoing impact and
consequences of COVID-19. Further detail on the outcomes of the
2020 projects, new 2021 projects, and anticipated benefits arising
from the overall Programme along with the Company's operating
margin aspiration will be provided in the final results
announcement.
Pleasingly, and as a result of its preparatory work, the Company
has experienced very limited disruption to product flow to-date
from the EU following Brexit, and has continued to purchase product
in-line with customer demand.
The Board would again like to thank and recognise the commitment
and resilience its people have shown throughout 2020 and into the
early days of 2021 as they deal with the ongoing consequences of
the COVID-19 pandemic, and is highly appreciative of the support
and understanding all its stakeholders have shown throughout the
period.
Enquiries:
Headlam Group plc Tel: 01675 433 000
Steve Wilson, Chief Executive Email: headlamgroup@headlam.com
Chris Payne, Chief Financial
Officer
Catherine Miles, Director of
Communications
Investec Bank plc (Corporate Tel: 020 7597 5970
Broker)
David Flin / Alex Wright
Panmure Gordon (UK) Limited Tel: 020 7886 2500
(Corporate Broker)
Erik Anderson / Dominic Morley
/ Ailsa Macmaster
Alma PR (Financial PR) Tel: 020 3405 0205
Rebecca Sanders-Hewett / Susie Headlam@almapr.co.uk
Hudson / Harriet Jackson
(1)Underlying is before non-underlying items, which includes
amortisation of acquired intangible assets, non-cash impairment of
goodwill, acquisitions related fees, restructuring costs, movements
in deferred and contingent consideration, finance costs on deferred
and contingent consideration, non-recurring pension costs in
relation to guaranteed minimum pension ('GMP') equalisation, and
non-recurring costs relating to senior personnel changes.
(2)Net debt calculation excludes leasing liabilities as defined
by IFRS 16 and pension liabilities based on IAS 19.
Notes for Editors:
Headlam is Europe's leading floorcoverings distributor,
providing the channel between suppliers and trade customers of
floorcoverings.
Headlam works with suppliers across the globe manufacturing a
diverse range of floorcovering products, and provides them with a
cost efficient and effective route to market for their products
into the highly fragmented customer base. Alongside
long-established processing and distribution expertise, suppliers
benefit from Headlam's marketing and customer servicing into the
most extensive customer base.
To maximise customer reach, Headlam operates 67 businesses
across the UK and Continental Europe (France, the Netherlands and
Switzerland). Each business operates under its own trade brand and
utilises individual sales teams while being supported by the
Company's network and centralised resources. The Company's diverse
customer base covers both the residential and commercial sectors,
and encompasses the two principal customer groups of independent
retailers and smaller flooring contractors alongside other groups
such as larger retailers, specifiers, and local authorities.
Headlam is focused on providing customers with a market-leading
service through:
-- the broadest product offering;
-- unrivalled product knowledge and tailored solutions;
-- marketing and sales team support;
-- e-commerce support;
-- 'just-in-time' nationwide delivery and collection service;
and
-- other support including the provision of credit
Headlam's business is characterised by a high volume of smaller
value orders delivered to customers next day, with this capability
enabled by its extensive distribution network, material handling
and processing capabilities, and customer servicing expertise.
www.headlam.com
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