TIDMHEAD
RNS Number : 4621K
Headlam Group PLC
02 September 2021
2 September 2021
Headlam Group plc
('Headlam' or the 'Company')
Interim Results
Strong recovery to 2019 levels
Headlam Group plc (LSE: HEAD), Europe's leading floorcoverings
distributor, today announces its interim results for the six months
ended 30 June 2021 (the ' Period ' ) and an update on current
trading.
Period Overview
Financials(1)
-- Strong recovery to 2019 levels, with total revenue of
GBP329.9 million being in-line with H1 2019 (GBP335.0 million), and
45.2% ahead of H1 2020 (GBP227.2 million)
-- Gross margin increased to 32.7% (H1 2020: 32.3%; H1 2019:
32.4%) owing to increased proportion of total revenue from
higher-margin residential sector and an inflationary environment
through Q2 2021
-- Underlying (2) operating margin in-line with H1 2019 at 5.3%,
in part reflecting ability to keep underlying (2) distribution
costs and administrative expenses flat through cost benefits from
Operational Improvement Programme ('OIP') and restructuring
activities offsetting wage inflation and additional costs
-- Underlying (2) operating profit and underlying (2) profit
before tax of GBP17.4 million and GBP16.7 million respectively,
representing a strong reversal from the losses in H1 2020 (GBP1.1
million and GBP1.8 million losses respectively) (H1 2019: GBP17.9
million underlying (2) operating profit; GBP16.8 million underlying
(2) profit before tax)
-- Statutory operating profit and statutory profit before tax of
GBP14.7 million and GBP14.0 million respectively, after
non-underlying items of GBP2.7 million (H1 2020: GBP23.8 million
and GBP24.5 million losses respectively, after GBP22.7 million of
non-underlying items; H1 2019: GBP16.9 million and GBP15.8 million
profit respectively, after GBP1.0 million of non-underlying
items)
-- Average net funds (3) of GBP30.5 million, representing a
strong reversal of the GBP35.3 million and GBP8.6 million average
net debt (3) position for H1 2020 and full-year 2020
respectively
-- Net funds at Period-end, excluding impact of IFRS 16
'Leases', of GBP53.9 million (as at 30 June 2020: GBP22.4 million
net debt; 31 December 2020: GBP51.6 million net funds)
Operational
-- Operated effectively throughout the Period despite lockdowns
-- Able to maintain inventory position despite industry-wide supply issues
-- Significant progress made under the OIP during the Period
-- On-track to achieve stated ambition of a 7.5% UK operating
margin run-rate during 2023 through successful delivery of the
OIP
Post Period-End and Current Trading
-- Subdued commercial sector activity, although with regional
variations, and residential sector performance pleasing
-- Continuing to trade in-line with market expectations (4)
which were significantly upgraded in July 2021
-- Resumption of normalised level of dividend payments with 2021
interim ordinary dividend of 5.8 pence per share
Commenting, Steve Wilson, Chief Executive, said:
" The pleasing performance in the Period demonstrates a strong
and sustained recovery following the initial impact of COVID-19 ,
with the Company operating effectively throughout despite further
lockdowns at the start of the year. As a consequence of this
performance, along with balance sheet strength and confidence in
the prospects for the business, we have returned to a normal
dividend profile more rapidly than initially anticipated.
Notwithstanding the presence of some industry-wide and other
COVID-19 related headwinds, we remain positive on prospects and
look forward to our busiest trading months in the
fourth-quarter."
The Company's interim results presentation accompanying this
announcement is available on its website at Reports &
presentations | Headlam . A video of the presentation will also be
available shortly to view on the website.
(1)The financial results represent continuing operations only,
and exclude the contribution from the Swiss business Belcolor AG
('Belcolor') in the Period, and the comparator years, following its
disposal in May 2021 (as detailed below and in Note 6 to the
Financial Statements).
(2) Underlying is before non-underlying items, which includes
amongst other items i) amortisation of acquired intangible assets,
ii) impairment of goodwill, iii) property disposal profit, and iv)
business restructuring costs (as detailed below and in Note 3 to
the Financial Statements).
(3)Average net funds / debt is calculated by aggregating the net
funds / debt position, excluding the impact of IFRS 16 'Leases',
for each business day and dividing by the total number of business
days.
(4) Company-compiled consensus market expectations for 2021
revenue and underlying profit before tax are GBP684.8 million and
GBP35.0 million respectively (on a mean and post IFRS 16 adoption
basis).
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 / Edward Walsh
/ Ailsa MacMaster
Alma PR (Financial PR) Tel: 020 3405 0205
Susie Hudson / Harriet Jackson headlam@almapr.co.uk
/ Faye Calow
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 66 businesses
across the UK and Continental Europe (France and the Netherlands).
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 customer base covers both the residential and
commercial sectors, with the principal customer groups being
independent retailers and smaller flooring contractors alongside
other groups such as larger retailers, housebuilders, 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;
-- sales team and marketing support;
-- e-commerce support; and
-- nationwide delivery and collection service.
www.headlam.com
Chief Executive's Statement and Financial Review
Introduction
The Company's overall performance was remarkably unaffected by
COVID-19 and related issues during the Period, particularly given
the further lockdowns and UK non-essential retail businesses being
closed from January through to April 2021. This is testament to the
Company's effective operating procedures, including established
COVID-19 related measures, the resilience of the customer base who
managed to trade successfully throughout, long-held supplier
relationships, and the hard work and commitment of its people.
Operations continued throughout the Period with an overarching
focus on the safety and protection of the Company's people, and
total revenue for the Period was in-line with H1 2019 and 45.2%
ahead of H1 2020 which was significantly impacted by extensive
COVID-19 related temporary closures.
This pleasing performance demonstrates a strong and sustained
recovery following the initial impact of COVID-19. It confirms the
resilience of the Company's business model, with the ongoing
Operational Improvement Programme ('OIP') detailed below providing
significant scope for operational and financial improvement and the
capturing of a greater share of the overall GBP3 billion UK market
(Source: LEK Consulting, 2020, calculated at distributors' selling
price and inclusive of sales direct from manufacturers).
Whilst the Company was able to operate effectively in the Period
and the financial performance rebounded strongly from 2020, there
continued to be many COVID-19 related considerations and issues,
and the Company wishes to express its thanks for the commitment and
support shown by all its stakeholders, especially its people.
Financial Performance for the Period
The following financial results represent continuing operations
only, and exclude the contribution from the Swiss business Belcolor
AG ('Belcolor') in the Period, and the comparator years, following
its disposal in May 2021 (as detailed below and in Note 6 to the
Financial Statements).
In the commentary below the Company has chosen to give the
financial comparators for both H1 2019 and H1 2020, with H1 2019
being a more appropriate comparator than H1 2020 which was impacted
by extensive COVID-19 related temporary closures of operations.
Total revenue for the Period was GBP329.9 million, being in-line
with H1 2019 (GBP335.0 million) and 45.2% ahead of H1 2020
(GBP227.2 million). Performance improved through the Period, with
initial soft trading in the first two months being recovered by the
following stronger monthly performances.
The residential sector showed strength throughout, with the weak
commercial sector curtailing overall performance to H1 2019 levels.
For the Period, residential sector revenue was up 4.7% and
commercial sector revenue down 12.8% against H1 2019, with the
residential and commercial sectors accounting for 68.5% and 31.5%
respectively of total revenue in the Period (H1 2019: 64.4%
residential; 35.6% commercial). However, the commercial sector
weakness continued to be recouped as the Period progressed, and in
June 2021 commercial sector revenue was only 3.2% below June 2019.
The residential sector was notably strong in June 2021 being up
22.5% against June 2019.
The UK and Continental Europe accounted for 87.3% and 12.7%
respectively of total revenue in the Period. The total and
Continental European revenue is presented on a continuing
operations basis and, therefore, excludes any contribution from the
Swiss business Belcolor which was disposed of in the Period for a
total of GBP12.0 million cash (see Note 6 to the Financial
Statements). While Belcolor is highly established and a
market-leading distributor in Switzerland, from the Company's
perspective there were limited avenues for meaningful organic or
acquisitive growth. Additionally, the Swiss market varies
significantly from the Company's other geographic territories in
terms of supplier base and product mix, and therefore there was
limited ability to leverage group synergies.
The Continental European businesses, comprising LMS SA in France
and Headlam BV and Dersimo BV in the Netherlands, fared well in the
Period. Their collective revenue in the Period was up 3.8% on H1
2019 at GBP42.0 million (H1 2020: GBP34.1 million), with the
residential sector being strong and the commercial sector not as
weak as the UK, and accounting for 62.1% and 37.9% of revenue
respectively.
The Company's gross margin rose to 32.7% for the Period (H1
2020: 32.3%; H1 2019: 32.4%), owing to the increased proportion of
total revenue from the higher-margin residential sector and an
inflationary environment through Q2 2021.
Underlying distribution costs and administrative expenses were
in-line with H1 2019 at GBP90.5 million (H1 2020: GBP74.5 million;
H1 2019: GBP90.5 million), with H1 2020 being below due to COVID-19
impacts for three months of the period. Cost benefits from the OIP
projects and restructuring activities undertaken in the Period were
able to offset wage inflation, additional network costs incurred
prior to realising the benefit of the Network Consolidation
project, and the accrual of full performance-related employee bonus
payments due to the current outperformance in 2021.
Profit and Non-underlying items
Underlying operating profit and underlying profit before tax was
GBP17.4 million and GBP16.7 million respectively in the Period, a
strong reversal from the losses in H1 2020 (GBP1.1 million and
GBP1.8 million losses respectively) (H1 2019: GBP17.9 million
underlying operating profit; GBP16.8 million underlying profit
before tax). Statutory operating profit and statutory profit before
tax was GBP14.7 million and GBP14.0 million respectively (H1 2020:
GBP23.8 million and GBP24.5 million losses respectively, after
GBP22.7 million of non-underlying items. H1 2019: GBP16.9 million
and GBP15.8 million profit respectively, after GBP1.0 million of
non-underlying items).
The underlying operating margin for the Period was 5.3% and
in-line with H1 2019 (5.3%), in part reflecting the ability to keep
underlying distribution costs and administrative expenses flat as
described above (H1 2020: (0.5)%; FY 2020: 3.0%). Restructuring
activities undertaken in the Period will have a full six months
contribution in the second-half.
The non-underlying items from continuing operations in the
Period reflect a net charge of GBP2.7 million to the Income
Statement (H1 2020: GBP22.7 million; H1 2019: GBP1.0 million). This
comprised non-underlying costs of GBP3.6 million, offset by GBP0.9
million profit on disposal of a freehold property under the OIP's
Network Consolidation project. Of the GBP3.6 million non-underlying
costs, GBP2.1 million is non-cash in nature (amortisation of
acquired intangibles plus impairment of goodwill arising in
relation to a business in Northern Ireland affected by COVID-19),
with the remaining GBP1.5 million cash item relating to
restructuring activities, and associated reductions in headcount,
some of which occurred as a further mitigation against COVID-19 and
associated consequences.
Total non-underlying items reflect a net profit of GBP1.9
million in the Period, and are detailed in Note 3 to the Financial
Statements.
Tax
The Company's consolidated effective tax rate for the Period was
26.3%, which reflects the expected effective tax rate for the full
year. This is higher than the standard rate of corporation tax in
the UK of 19% primarily due to the effect of restating the opening
UK deferred tax liability to reflect the change in the UK tax rate
from 19% to 25%, which was substantively enacted in the Period.
Without the impact of the deferred tax rate change the effective
tax rate would have been 20.4%.
Dividends and Capital Allocation
In May 2021, following a recovery in trading in the preceding
months after the initial impact of COVID-19, the Company resumed
the payment of dividends in a nominal way having suspended payments
as a consequence of the significant financial impact of COVID-19 in
2020.
As indicated at the time of the July 2021 Pre-Close Trading
announcement, the Board is now expediting the resumption of a
normalised level of dividend payments with a 2021 interim ordinary
dividend of 5.8 pence per share being declared. This dividend,
payable on 29 November 2021 to shareholders on the register as at
29 October 2021, has been calculated in-line with the targeted
parameters with the Company's published Capital Allocation
Priorities, namely a total annual pay-out equivalent to a 2x
earnings cover ratio for the anticipated full-year statutory
performance with a higher weighting to the final ordinary dividend.
This quicker than initially anticipated return to a normal dividend
profile reflects the trading performance in the Period, the strong
balance sheet described below, and confidence in the prospects for
the business.
Operational Performance in the Period and Strategy
The Company was able to adjust working practices to operate
effectively throughout the Period despite lockdowns. COVID-19 did,
however, present or exacerbate some industry-wide issues, including
the shortage of HGV drivers and product supply issues, both of
which are persisting into the second-half. Despite the supply
issues, the Company was able to maintain its inventory position,
which stood at GBP120.6 million as at 30 June 2021 (31 December
2020: GBP118.5 million) by working closely with its suppliers on
product availability during the Period. Outside of COVID-19, the
Company experienced some minor and regional Brexit-related
disruption to product flow during the Period.
As a consequence of the industry supply issues, including
upstream raw material shortages, supplier price increases were a
particular feature in the second-quarter of the Period, with price
increases across product categories ranging from 3% to 14% in the
Period. However, as is typical of the industry, these price
increases are passed directly into the marketplace, with them being
easily absorbed as demand for floorcoverings tends to be inelastic
to price increases due to the relative infrequency of purchase by
the end-consumer and proliferation of product at all price
points.
A key strategic objective of the Company is to continue
improving its operational performance, and the comprehensive
programme of projects under the OIP are designed to:
-- Improve the service propositions for each customer segment
-- Capture a larger share of the overall GBP3 billion UK market
-- Increase operational efficiencies and remove complexity within the group
-- Modernise process and systems, additionally improving the working environment
-- Deliver significant cost savings
Significant progress was made under a number of the projects *
during the Period, with the key accomplishments listed below:
-- Network Consolidation - the consolidation of six businesses
into the Ipswich distribution centre completed on-time in the
Period, simplifying the network going forward and allowing for the
sale of two freehold properties (one post Period-end)
-- Sales Force Effectiveness - reorganisation of the sales team
completed in the Period allowing for more effective sales
generation, an increased focus on generating new revenue, as well
as a reduction in costs
-- Multiple Retailer / Key Account Management - dedicated team
recruited to actively target multiple retailers, a customer segment
where the Company is significantly underweight, with customer wins
in the Period through a limited number of SKUs and, therefore,
substantial scope to develop the revenue opportunity
-- Ecommerce - web-sales from the relaunched B2B websites rising
to 17 %** by Period-end (2019: 11 %**), with the associated
benefits of an improved offer to all customer segments and lower
cost to serve. Development of 'first-to-market' feature-rich fully
transactional app in the Period, with full launch later this
month
-- Trade Counters - business plan developed to grow the current
approximate GBP80 million trade counter business to GBP200 million
through the roll-out from 54 to 90 new and improved sites by 2025,
expanding the national footprint and engaging with a broader range
of customers
-- Transport Integration - project implemented over 70% of
national coverage by the Period-end, with completed regions hitting
key performance indicators. On-track for completion in Q1 2022 and
GBP3 million savings (net benefit) per annum from 2022
-- ESG - accelerated focus and expansion of initiatives in the
Period, with first Materiality Assessment and ESG Strategy Report
(including Scope 3 emissions) both published. Updating report to be
published in November 2021
*Full detail on each of the projects can be found within the
July 2021 Capital Markets Day presentation , and accompanying
webinar , available on the Company's website www.headlam.com
**As a percentage of total sales
The Board believes the Company continues to be on-track to
achieve its stated ambition of a 7.5% UK operating margin run-rate
during 2023 through successful delivery of the OIP (unless
exceptional or unforeseen circumstances prevail).
Board Appointments and Governance
The Board has been expanded and enhanced during 2021, with
further highly relevant skills and experience being brought on to
the Board through the Non-Executive Director appointments of Simon
King in May 2021 and the previously announced forthcoming
appointment of Stephen Bird with effect from 13 September 2021.
Both have extensive executive experience leading growth and
customer-led strategies, Simon as the former CEO of Wickes, one of
the UK's leading home improvement retailers, and Stephen as the
current Group Chief Executive of The Vitec Group plc (LSE: VTC),
the international provider of premium branded hardware products and
software solutions to the growing content creation market. Their
addition to the Board increases oversight of the Company's
strategic and corporate objectives, including the effective
implementation of the OIP and continued development and
effectiveness of internal controls including risk management.
Investments
Investment, both opex and capex, in the core distribution
business to optimise performance and support organic revenue growth
is listed as the second priority within the Company's Capital
Allocation Priorities, after maintenance of a strong balance sheet.
There were no acquisitions in the Period (H1 2020: one acquisition,
cash consideration of GBP1.1 million), with the current focus being
on internal performance improvement.
Areas of current and near-term investment include i) replacing
and upgrading material-handling equipment and cutting tables; ii)
IT and customer-support systems; and iii) Trade Counters as
referred to above and below.
Capex of GBP3.4 million in the Period was primarily focused on
improvements to the Trade Counter network, warehouse equipment, and
the refurbishment of a sales office. H1 2020 capex was higher at
GBP10.1 million due to completion of spend on the Ipswich
distribution centre which opened in July 2020.
The Company anticipates its annual maintenance capex to increase
in 2021 and beyond from that in previous years as it focuses on
investing in modernising and improving its estate and systems.
Additional capex will also be incurred in relation to the Trade
Counter roll-out, with approximately GBP2 million in 2021, and an
anticipated total capital investment of GBP18 million between 2022
and 2024 as the roll-out accelerates to reach the targeted 90
sites.
Cash and Cash Flows
The Company is characterised as being highly cash generative,
which was demonstrated during 2020 despite the initial impact of
COVID-19.
Cash inflow from operating activities was GBP4.1 million in the
Period (H1 2020: GBP23.4 million cash outflow; H1 2019: GBP17.4
million cash inflow). There was a modest investment in working
capital in the Period following the recovery in trading against
2020, which was increased by the payment of GBP12.1 million of VAT
deferred from 2020.
Net funds at Period-end, excluding the impact of IFRS 16
'Leases', was GBP53.9 million (as at 30 June 2020: GBP22.4 million
net debt; 31 December 2020: GBP51.6 million net funds) and reflects
the operating cash generated above combined with GBP14.1 million
received from the disposal of Belcolor and sale of a freehold
property, offset by the nominal dividend payment of GBP1.7 million
and other payments for corporation tax, capital expenditure and
lease payments.
Average net funds in the Period, excluding the impact of IFRS 16
'Leases', were GBP30.5 million, representing a strong reversal of
the GBP35.3 million and GBP8.6 million average net debt position
for H1 2020 and full-year 2020 respectively.
Post the Period-end, an additional freehold property was sold as
part of the Network Consolidation project with cash proceeds of
GBP5.8 million received in July 2021. The 2021 interim ordinary
dividend declared above will result in a cash outflow of GBP4.9
million in November 2021.
Pensions
The accounting valuation for the UK pension scheme shows a
surplus of GBP5.1 million. However, as the Company does not have an
unconditional right for a surplus refund, the pension scheme is
recorded as a deficit of GBP4.7 million as at June 2021 reflecting
the level of UK deficit recovery plan payments that the Company
committed to following the last actuarial valuation as at March
2020. The Company no longer has a liability for the Swiss pension
scheme following the disposal of Belcolor in the Period.
Post Period-End and Current Trading
Trading post the Period-end in July and August 2021 has been
below the same months in 2019, although not materially. These two
months typically have a higher level of commercial sector activity
due to summer refurbishment of educational and other
establishments, and the commercial sector has continued to be
subdued albeit with regional variations. A proportion of this
activity will likely be recouped at a future stage owing to it
being repair and maintenance, and therefore relatively essential in
nature. The residential sector performance has continued to be
pleasing. The Company now looks forward to its busiest trading
months in the fourth-quarter, and remains positive on prospects
albeit it with headwinds from the industry-wide issues and
continuing backdrop and consequences of COVID-19. The Company is
trading in-line with market expectations which were significantly
upgraded in July 2021.
Banking Facilities and Liquidity
As above, net funds at the Period-end, excluding the impact of
IFRS 16 'Leases', were GBP53.9 million. Total banking facilities
available to the Company as at 30 June 2021 were GBP106.6 million,
with headroom of GBP97.8 million (see Note 1 to the Financial
Statements). The maturities of the committed credit facilities
remain unchanged at 30 April 2023, with the only change being the
removal of the facility related to Belcolor following its
disposal.
Going Concern and Viability
Given the demonstrated strong recovery from the initial impact
of COVID-19, sustained trading and financial performance for the
Period despite ongoing measures against COVID-19 including
lockdowns, and previously enacted and effective mitigating actions,
the Directors consider that the adverse trading scenarios and
conclusions contained within the 2020 Annual Report's Viability
Statement remain valid for the going concern assessment for this
interim report, as summarised in Note 1 to the Financial
Statements. The viability modelling exercise based on similar
scenarios, including a reverse stress test, has been refreshed to
confirm this.
As such, and given the Company's current balance sheet strength
detailed above, the Board has a reasonable expectation that the
Company has adequate resources to continue in operation during the
next 12 months, and that it is appropriate for the going concern
basis to be adopted in preparing this interim report and financial
statements.
Principal Risk s and Uncertainties
It is the Directors opinion that the Principal Risks and
Uncertainities as set out on pages 32 to 35 within the 2020 A nnual
R eport remain valid , inc l uding in their level of risk , and
remain applicable for the remaining six months of 2021 . The
Principal Risks are listed below (not in order of significance),
with additional mitigating actions put in place during the
Period.
Area of risk Additional mitigating actions put in place
during the Period
Market demand Ongoing roll-out of the OIP, and key accomplishments
in the Period as detailed above, along with
r estructuring activities undertaken during
the Period to more effectively align headcount.
-----------------------------------------------------
Competitor risk Ongoing roll-out of the OIP, and key accomplishments
in the Period as detailed above.
-----------------------------------------------------
IT resilience and cyber All critical recommendations arising from
security an independent security assessment following
a cyber security incident in 2020 now complete.
Correspendance received from Information
Commissioner's Office to-date states they
have decided not to take any formal regulatory
action following the incident (notwithstanding
their right to revisit the matter if anything
further comes to light).
On-line employee training using a third-party
platform being introduced during the Period,
with further roll-out including increasing
employees' ability to identify and reduce
cyber security risks through monthly training.
Board briefings on IT resilience and cyber
security increased, with three briefings
by senior management in the Period. The
two Non-Executive Director appointments
detailed above enlarging the Audit Committee
which has direct oversight of IT resilience
and cyber security, and adding additional
knowledge and experience. The Audit Committee
is comprised of only independent non-executive
directors.
-----------------------------------------------------
People 'Leading through Change' workshops for senior
managers commenced in the Period.
-----------------------------------------------------
Health and safety Recommendations arising from a commissioned
independent audit largely complete in the
Period.
-----------------------------------------------------
Supply chain (incorporating Working closely with its suppliers on product
Brexit) availability during the Period, and able
to maintain inventory position.
-----------------------------------------------------
Legislation and regulation Implementation of an on-line compliance
training portal, with certain modules including
Anti-Bribery and Social Media Awareness
rolled-out in the Period.
-----------------------------------------------------
Environmental First ESG Strategy Report (including Scope
3 emissions) published in May 2021, setting
out the Company's initial focuses and broader
ambitions in sustainability and ESG.
ESG becoming a standalone project within
the OIP during the Period, with a senior
steering group.
Steps being taken towards ISO environmental
accreditation.
-----------------------------------------------------
Change and decision Increased project management and Board oversight
making of projects under the OIP, and its overall
implementation.
New Board appointments increasing oversight
and adding additional expertise.
-----------------------------------------------------
Directors' Responsibility Statement
We confirm that, to the best of our knowledge:
(a) the condensed set of financial statements has been prepared
in accordance with IAS 34 'Interim Financial Reporting';
(b) the interim report includes a fair review of the information
required by DTR 4.2.7R (indication of important events during the
Period and description of principal risks and uncertainties for the
remaining six months of the year); and
(c) the interim report includes a fair review of the information
required by DTR 4.2.8R (disclosure of related parties' transactions
and changes therein).
For and on behalf of the Board
Steve Wilson Chris Payne
Director Director
2 September 2021
Condensed Consolidated Interim Income Statement
Re-presented*
-----------------------------------------------------------------------------
Six
Six months
months ended
ended 30 Year ended
Underlying Non-underlying 30 June Underlying Non-underlying June Underlying Non-underlying 31 December
(Note 3) (Note 3) (Note 3)
Note 2021 2021 2021 2020 2020 2020 2020 2020 2020
GBPM GBPM GBPM GBPM GBPM GBPM GBPM GBPM GBPM
Continuing
operations Unaudited Unaudited Audited
---------------- ---- ----------------------------------- ----------------------------------- ----------------------------------------
Revenue 2 329.9 - 329.9 227.2 - 227.2 578.1 - 578.1
Cost of sales (222.0) - (222.0) (153.8) - (153.8) (400.0) - (400.0)
---------------- ---- ---------- -------------- ------- ---------- -------------- ------- ---------- -------------- ------------
Gross profit 107.9 - 107.9 73.4 - 73.4 178.1 - 178.1
Distribution
costs (61.8) - (61.8) (52.7) - (52.7) (113.9) - (113.9)
Administrative
expenses (28.7) (2.7) (31.4) (21.8) (22.7) (44.5) (46.8) (29.6) (76.4)
---------------- ---- ---------- -------------- ------- ---------- -------------- ------- ---------- -------------- ------------
Operating
profit/(loss) 2 17.4 (2.7) 14.7 (1.1) (22.7) (23.8) 17.4 (29.6) (12.2)
Finance income 4 0.2 - 0.2 0.6 - 0.6 0.8 - 0.8
Finance expenses 4 (0.9) - (0.9) (1.3) - (1.3) (2.8) (0.1) (2.9)
---------------- ---- ---------- -------------- ------- ---------- -------------- ------- ---------- -------------- ------------
Net finance
costs (0.7) - (0.7) (0.7) - (0.7) (2.0) (0.1) (2.1)
---------------- ---- ---------- -------------- ------- ---------- -------------- ------- ---------- -------------- ------------
Profit/(loss)
before tax 16.7 (2.7) 14.0 (1.8) (22.7) (24.5) 15.4 (29.7) (14.3)
Taxation 5 (4.4) 0.2 (4.2) (0.5) (0.1) (0.6) (3.8) 0.7 (3.1)
---------------- ---- ---------- -------------- ------- ---------- -------------- ------- ---------- -------------- ------------
Profit/(loss)
from continuing
operations 2 12.3 (2.5) 9.8 (2.3) (22.8) (25.1) 11.6 (29.0) (17.4)
---------------- ---- ---------- -------------- ------- ---------- -------------- ------- ---------- -------------- ------------
Profit/(loss)
from
discontinued
operation 6 0.1 4.4 4.5 0.5 - 0.5 0.4 (3.3) (2.9)
---------------- ---- ---------- -------------- ------- ---------- -------------- ------- ---------- -------------- ------------
Profit/loss) for
the period
attributable to
the equity
shareholders 12.4 1.9 14.3 (1.8) (22.8) (24.6) 12.0 (32.3) (20.3)
---------------- ---- ---------- -------------- ------- ---------- -------------- ------- ---------- -------------- ------------
Earnings/(loss)
per share for
profit from
continuing
operations
Basic 7 14.7p 11.6p (2.7)p (29.8)p 13.7p (20.7)p
---------------- ---- ---------- -------------- ------- ---------- -------------- ------- ---------- -------------- ------------
Diluted** 7 14.4p 11.4p (2.7)p (29.8)p 13.7p (20.7)p
---------------- ---- ---------- -------------- ------- ---------- -------------- ------- ---------- -------------- ------------
Earnings/(loss)
per share for
profit from
discontinued
operations
Basic 7 0.1p 5.3p 0.5p 0.5p 0.5p (3.4)p
---------------- ---- ---------- -------------- ------- ---------- -------------- ------- ---------- -------------- ------------
Diluted** 7 0.1p 5.2p 0.5p 0.5p 0.5p (3.4)p
---------------- ---- ---------- -------------- ------- ---------- -------------- ------- ---------- -------------- ------------
Ordinary
dividend per
share
Interim dividend
proposed for
the financial
period 8 5.8p - -
---------------- ---- ---------- -------------- ------- ---------- -------------- ------- ---------- -------------- ------------
Dividend
proposed for
the financial
period 8 - - 2.0p
---------------- ---- ---------- -------------- ------- ---------- -------------- ------- ---------- -------------- ------------
* The results for the year ended 31 December 2020 and interim
results ended 30 June 2020, have been re-presented to reflect the
presentation of the Belcolor business as discontinued.
** For the six months ended 30 June 2020 and year ended 31
December 2020, diluted earnings/(loss) per share are reported the
same as basic earnings/(loss) per share, as a result of the
earnings being negative so the impact of them is anti-dilutive.
Condensed Consolidated Interim Statement of Comprehensive
Income
Six months Six months
ended ended Year ended
30 June 30 June 31 December
202 1 20 20 20 20
GBPM GBPM GBPM
Unaudited Unaudited Audited
Profit for the period attributable to
the equity
shareholders 14.3 (24.6) (20.3)
Other comprehensive income:
Items that will never be reclassified
to profit or loss
Re-measurement of defined benefit plans (2.6) (1.8) ( 0. 3)
Related tax 0.6 0.4 0.1
(2.0) (1.4) (0.2)
Items that are or may be reclassified
to profit or loss
E xchange differences on translation
of overseas operations (0.8) 2.4 0.9
Exchange differences on translation of (4.8)
discontinued operation - -
(5.6) 2.4 0.9
-------------------------------------------- ----------- ----------- --------------
Other comprehensive (expense) /income
for the period (7.6) 1.0 0.7
Total comprehensive income attributable
to the equity shareholders for the period 6.7 (23.6) (19.6)
-------------------------------------------- ----------- ----------- --------------
Total comprehensive income attributable
to the equity shareholders for the period
arising from:
Continuing operations 7.0 (24.1) (17.5)
-------------------------------------------- ------ ------- -------
Discontinued operations (0.3) 0.5 (2.1)
-------------------------------------------- ------ ------- -------
6.7 (23.6) (19.6)
-------------------------------------------- ------ ------- -------
Condensed Consolidated Interim Statement of Financial
Position
At At At
30 June 30 June 31 December
202 1 20 20 20 20
GBPM GBPM GBPM
Unaudited Unaudited Audited
Assets
Non-current assets
Property, plant and equipment 115.9 120.5 122.9
Right-of-use assets 37.4 41.0 42.1
Intangible assets 19.0 27.5 21.1
Deferred tax assets - 1.4 -
-------------------------------- ---------- ---------- -------------
172.3 190.4 186.1
-------------------------------- ---------- ---------- -------------
Current assets
Inventories 120.6 119.7 118.5
Trade and other receivables 109.6 89.1 101.6
Cash and cash equivalents 62.7 30.7 60.8
292.9 239.5 280.9
-------------------------------- ---------- ---------- -------------
Non-current assets classified
as held for sale 1.5 - 0.4
--------------------------------- ---------- ---------- -------------
294.4 239.5 281.3
-------------------------------- ---------- ---------- -------------
Total assets 466.7 429.9 467.4
--------------------------------- ---------- ---------- -------------
Liabilities
Current liabilities
Bank overdrafts (0.1) (0.5) -
Other interest-bearing loans
and borrowings (1.9) (0.2) ( 2.0 )
Lease liabilities (10.7) (13.0) ( 12.5 )
( 178.4
Trade and other payables (176.9) (102.5) )
Income tax payable (1. 1 ) - ( 0.2 )
Employee benefits (1.0) - -
( 193.1
(191.7) (116.2) )
-------------------------------- ---------- ---------- -------------
Non-current liabilities
Other interest-bearing loans
and borrowings (6.8) (52.4) ( 7 .2)
Lease liabilities (27.7) (29.1) (30. 8 )
Provisions (2.1) (2.3) (2. 1 )
Deferred tax liabilities (8.3) (8.3) ( 8.7 )
Employee benefits (4.0) (6.0) ( 5.5 )
(48.9) (98.1) ( 54.3 )
-------------------------------- ---------- ---------- -------------
( 247.4
Total liabilities (240.6) (214.3) )
--------------------------------- ---------- ---------- -------------
Net assets 226.1 215.6 220.0
--------------------------------- ---------- ---------- -------------
Equity attributable to equity
holders of the parent
Share capital 4.3 4.3 4.3
Share premium 53.5 53.5 53.5
Other reserves (2.0) 3.7 3.4
Retained earnings 170.3 154.1 158.8
Total equity 226.1 215.6 220.0
--------------------------------- ---------- ---------- -------------
Condensed Consolidated Interim Statement of Changes in
Equity
Unaudited
Capital
Share Share redemption Special Translation Treasury Retained Total
capital premium reserve reserve reserve reserve earnings equity
GBPM GBPM GBPM GBPM GBPM GBPM GBPM GBPM
Balance at 1
January ( 5.9
202 1 4.3 53.5 0. 1 1 .5 7.7 ) 158.8 220.0
Profit for the
period
attributable
to the
equity
shareholders - - - - - - 14.3 14.3
Other
comprehensive
income - - - - (5.6) - (2.0) (7.6)
--------------- ---------- ---------- ------------ ---------- -------------- ----------- ----------- ---------
Total
comprehensive
income for
the period - - - - (5.6) - 12.3 6.7
--------------- ---------- ---------- ------------ ---------- -------------- ----------- ----------- ---------
Transactions
with equity
shareholders,
recorded
directly in
equity
Share based
payments - - - - - - 0.4 0.4
Share options
exercised
by employees - - - - - 0. 2 (0.1) 0.1
Deferred tax
on share
options - - - - - - 0.6 0.6
Dividends to
equity
holders - - - - - - (1.7) (1.7)
--------------- ---------- ---------- ------------ ---------- -------------- ----------- ----------- ---------
Total
contributions
by and
distributions
to equity
shareholders - - - - - 0.2 (0.8) (0.6)
--------------- ---------- ---------- ------------ ---------- -------------- ----------- ----------- ---------
Balance at 30
June
202 1 4.3 53.5 0. 1 1 .5 2.1 (5.7) 170.3 226.1
--------------- ---------- ---------- ------------ ---------- -------------- ----------- ----------- ---------
Condensed Consolidated Interim Statement of Changes in Equity
continued
Unaudited
Capital
Share Share redemption Special Translation Treasury Retained Total
capital premium reserve reserve reserve reserve earnings equity
GBPM GBPM GBPM GBPM GBPM GBPM GBPM GBPM
Balance at
1 January
2020 4.3 53.5 0.0 0.5 6.8 (6.0) 186.0 245.1
Profit for the
period
attributable
to the
equity
shareholders - - - - - - (24.6) (24.6)
Other
comprehensive
income - - - - 2.4 - (1.4) 1.0
--------------- ---------- ---------- ------------ ---------- -------------- ----------- ----------- ---------
Total
comprehensive
income for
the period - - - - 2.4 - (26.0) (23.6)
--------------- ---------- ---------- ------------ ---------- -------------- ----------- ----------- ---------
Transactions
with equity
shareholders,
recorded
directly in
equity
Share based
payments - - - - - - 0.1 0.1
Deferred tax
on share
options - - - - - - 0.3 0.3
Dividends to
equity
holders - - - - - - (6.3) (6.3)
--------------- ---------- ---------- ------------ ---------- -------------- ----------- ----------- ---------
Total
contributions
by and
distributions
to equity
shareholders - - - - - - (5.9) (5.9)
--------------- ---------- ---------- ------------ ---------- -------------- ----------- ----------- ---------
Balance at
30 June 2020 4.3 53.5 0.0 0.5 9.2 (6.0) 154.1 215.6
--------------- ---------- ---------- ------------ ---------- -------------- ----------- ----------- ---------
Condensed Consolidated Interim Statement of Changes in Equity
continued
Audited
Capital
Share Share redemption Special Translation Treasury Retained Total
capital premium reserve Reserve reserve reserve earnings equity
GBPM GBPM GBPM GBPM GBPM GBPM GBPM GBPM
Balance at
1 January 20 (6. 1
20 4.3 53.5 0. 1 0.5 6.8 ) 186.0 245.1
(Loss)/profit
for the
period
attributable
to the equity
shareholders - - - - - - (20.3) (20.3)
Other
comprehensive
income
/(expense) - - - - 0.9 - (0.2) 0.7
--------------- ---------- ---------- ------------ ---------- -------------- ----------- ----------- ---------
Total
comprehensive
income
/(expense)
for
the period - - - - 0.9 - (20.5) (19.6)
--------------- ---------- ---------- ------------ ---------- -------------- ----------- ----------- ---------
Transactions
with equity
shareholders,
recorded
directly in
equity
Share-based ( 0.
payments - - - - - - 1) (0.1)
Share options
exercised (0. 1
by employees - - - - - 0.2 ) 0.1
Ordinary
shares issued - - - 1.0 - - - 1.0
Deferred tax
on share ( 0.2
options - - - - - - ) 0.2
Dividends to
equity ( 6.3 ( 6.3
holders - - - - - - ) )
Total
contributions
by and
distributions
to equity ( 6.7 ( 5.5
shareholders - - - 1.0 - 0.2 ) )
--------------- ---------- ---------- ------------ ---------- -------------- ----------- ----------- ---------
Balance at
31 December ( 5.9
20 20 4.3 53.5 0. 1 1 .5 7.7 ) 158.8 220.0
--------------- ---------- ---------- ------------ ---------- -------------- ----------- ----------- ---------
Condensed Consolidated Interim Cash Flow Statements
Six months Six months
ended ended Year ended
30 June 30 June 31 December
202 1 20 20 20 20
GBPM GBPM GBPM
Unaudited Unaudited Audited
Cash flows from operating activities
P rofit /(loss) before tax for the
period :
Continuing operations 14.0 (24.5) (14.3)
Discontinued operations 4.5 0.6 (2.8)
----------------------------------------------- ----------- ----------- --------------
18.5 (23.9) (17.1)
Adjustments for:
Depreciation of property, plant and
equipment, amortisation and impairment 5.0 24.7 35.8
Depreciation of right of use assets 6.8 8.0 16.2
Finance income (0.2) (0.6) (0.8)
Finance expense 0.9 1.3 2 .9
Profit on sale of property, plant
and equipment (9.6) - 0.1
Share-based payments 0.4 0.1 (0.1)
Operating cash flows before changes
in working capital and other payables 21.8 9.6 37.0
Change in inventories (11.5) 14.5 15.3
Change in trade and other receivables (12.0) 36.2 23.2
Change in trade and other payables 9.5 (76.7) ( 4.8 )
----------------------------------------------- ----------- ----------- --------------
Cash generated from the operations
* 7.8 (16.4) 70.7
Interest received 0.3 0.6 0.8
Interest paid (1.5) (1.3) ( 2.7 )
Tax paid (2.2) (6.3) ( 6 .3)
Additional contributions to defined
benefit plan (0.3) - -
Net cash flow from operating activities 4.1 ( 23.4 ) 62.5
----------------------------------------------- ----------- ----------- --------------
Cash flows from investing activities
Proceeds from sale of property, plant
and equipment 14.1 - 0.1
Acquisition of subsidiaries, net of
cash acquired - (1.0) ( 1.0 )
Repayment of acquired borrowings on
acquisition - (0.2) (0.2)
Disposal of discontinued operation,
net of cash disposed of** (3.4) - -
Acquisition of property, plant and
equipment (3.4) (10.1) (15. 0)
----------------------------------------------- ----------- ----------- --------------
( 16.1
Net cash flow from investing activities 7.3 ( 11.3 ) )
----------------------------------------------- ----------- ----------- --------------
Cash flows from financing activities
Proceeds from the issue of treasury
shares 0.1 - 0. 2
Proceeds from borrowings - 50.9 50.9
( 48.5
Repayment of borrowings (0.1) (5.1) )
( 15.7
Principal elements of lease payments (7.5) (8.5) )
Dividends paid (1.7) (6.3) ( 6.3 )
----------------------------------------------- ----------- ----------- --------------
( 19.4
Net cash flow from financing activities (9.2) 31.0 )
----------------------------------------------- ----------- ----------- --------------
Net increase in cash and cash equivalents 2.2 (3.7) 27.0
Cash and cash equivalents at 1 January 60.8 33.4 33.4
Effect of exchange rate fluctuations
on cash held (0.4) 0.5 0.4
Cash and cash equivalents at end of
period 62.6 30.2 60.8
----------------------------------------------- ----------- ----------- --------------
*Cash generated from the operations for the six months ended 30
June 202 1 , includes an amount of GBP nil, ( six months ended 30
June 2020 : GBP8.9 million ; 12 months ended 31 December 2020 :
GBP11.0 million) cash received under governmental job retention
schemes in the UK and France.
**For cash flows of discontinued operations see Note 6.
Notes to the Condensed Consolidated Interim Financial
Statements
Unaudited
1 BASIS OF REPORTING
Reporting entity
Headlam Group plc, the 'company', is a company incorporated in
the UK. The Condensed Consolidated Interim Financial Statements
consolidate those of the company and its subsidiaries which
together are referred to as the 'Group' as at and for the six
months ended 30 June 202 1 .
The Consolidated Financial Statements of the Group as at and for
the year ended 31 December 20 20 are available upon request from
the company's registered office or the website.
The comparative figures for the financial year ended 31 December
20 20 are not the Group's statutory accounts for that financial
year. Those accounts have been reported on by the Group's auditor
and delivered to the registrar of companies. The report of the
auditor was (i) unqualified, (ii) did not include a reference to
any matters to which the auditors drew attention by way of emphasis
without qualifying their report, and (iii) did not contain a
statement under section 498(2) or (3) of the Companies Act
2006.
These Condensed Consolidated Interim Financial Statements have
not been audited or reviewed by the auditor pursuant to the
Auditing Practices Board's Guidance on Financial Information.
Statement of compliance
These Condensed Consolidated Interim Financial Statements have
been prepared and approved by the directors in accordance with the
Disclosure Guidance and Transparency Rules sourcebook of the UK's
Financial Conduct Authority and UK adopted International Accounting
Standard IAS 34 , Interim Financial Reporting.
They do not include all of the information required for full
annual financial statements and should be read in conjunction with
the Consolidated Financial Statements of the Group as at and for
the year ended 31 December 20 20, which were prepared in accordance
with IFRS in conformity with the requirements of the Companies Act
2006 and IFRS adopted pursuant to Regulation (EC) No 1606/2002 as
it applies in the European Union .
I n the year to 31 December 2021 the annual financial statements
will be prepared in accordance with IFRS as adopted by the UK
Endorsement Board . T his change in basis of preparation is
required by UK company law for the purposes of financial reporting
as a result of the UK's exit from the E uropean Union on 31 January
2020 and the cessation of the transition period on 31 December 2020
. T his change does not constitute a change in accounting policy
but rather a change in framework which is required to ground the
use of IFRS in company law . T here is no impact on recognition,
measurement or disclosure between the two frameworks in the period
reported .
These Condensed Consolidated Interim Financial Statements were
approved by the Board of Directors on 2 September 202 1 .
Significant accounting policies
As required by the Disclosure Guidance and Transparency Rules of
the Financial Conduct Authority, the condensed set of financial
statements has been prepared applying the accounting policies and
presentation that were applied in the preparation of the Group's
published Consolidated Financial Statements for the year ended 31
December 20 20 .
In addition, the Group has modified its taxation accounting
policy so that the effect of the taxation rate change from 19% to
25% on deferred taxation is spread over the full year.
Impacts of standards and interpretations in issue but not yet
effective
There are no other new standards, amendments to existing
standards, or interpretations that are not yet effective that would
be expected to have a material impact on the Group.
Going concern
The Group's performance, position and business activities,
together with the factors likely to affect its future development,
are described in the Chief Executive's Statement and Financial
Review.
The Directors have reviewed current performance and forecasts,
combined with borrowing facilities and
expenditure commitments, and three downside trading scenarios , as summarised below .
i) A sustained recession, characterised by a long period of
underperformance throughout the assessment period;
ii) An economic crash with a sharp decline in the first year,
15% down on 2019 levels, before a recovery; and
iii) A less likely, more severe scenario (and a reverse stress
test) where the Company experiences a significant reduction in
revenue in the first year, 21% down on 2019 levels.
In each scenario, even in the absence of any significant
mitigating actions, the Group continues to operate within its
current banking facilities and the covenant restrictions set out
therein.
After making enquiries, the Directors have a reasonable
expectation that the Group has adequate financial resources to
continue in operation, including contractual and commercial
commitments, for the next 12 months. For these reasons, the going
concern basis has been adopted in preparing the financial
statements.
Bank facilities at 30 June 202 1
Committed credit Uncommitted credit
facilities facilities Total facilities
GBP million GBP million GBP million
Drawn funds 8.7 0.1 8.8
Undrawn funds 68.3 29.5 97.8
----------------- ------------------- -------------------
77.0 29.6 106.6
================= =================== ===================
Judgements and estimates
The preparation of interim financial statements requires
management to make judgements, estimates and assumptions that
affect the application of accounting policies and the reported
amounts of assets and liabilities, income and expense. Actual
results may differ from these estimates.
In preparing these Condensed Consolidated Interim Financial
Statements, the significant judgements made by management in
applying the Group's accounting policies and key sources of
estimation uncertainty were the same as those that applied to the
Consolidated Financial Statements as at and for the year ended 31
December 20 20 .
Risks and uncertainties
The risk factors which could cause the Group's results to differ
materially from expected results, and the result of the Board's
review of those risks, are listed above and set out in detail in
the Annual Report and Accounts for the year ended 31 December 20 20
.
2 SEGMENT REPORTING
At 30 June 202 1 , the Group had 6 3 operating segments in the
UK and three operating segments in Continental Europe , following
the disposal of the Belcolor Swiss operating segment in May 2021 .
Each segment represents an individual trading operation and each
operation is wholly aligned to the sales, marketing, supply and
distribution of floorcovering products. The operating results of
each operation are regularly reviewed by the Chief Operating
Decision Maker, which is deemed to be the Chief Executive. Discrete
financial information is available for each segment and used by the
Chief Executive to assess performance and decide on resource
allocation.
The operating segments have been aggregated to the extent that
they have similar economic characteristics, with relevance to
products and services, type and class of customer, methods of sale
and distribution and the regulatory environment in which they
operate. The Group's internal management structure and financial
reporting systems differentiate the operating segments on the basis
of the differing economic characteristics in the UK and Continental
Europe and accordingly present these as two separate reportable
segments. This distinction is embedded in the construction of
operating reports reviewed by the Chief Executive, the Board and
the executive team and forms the basis for the presentation of
operating segment information given below.
Continuing operations
UK Continental Europe Total
31 31 December 31
30 June 30 June December 30 June 30 June 20 20 30 June 30 June December
202 20 20 20 20 202 20 20 GBPM 202 20 20 20 20
1 GBPM GBPM 1 GBPM 1 GBPM GBPM
GBPM GBPM GBPM
Revenue
External
revenues 287.9 193.1 504.7 42.0 34.1 73.4 329.9 227.2 578.1
------------- ---------- ---------- ---------- --------- --------- ------------ ---------- ---------- ----------
Reportable
segment
underlying
operating
profit 17.1 (0.6) 15.5 1.8 0. 2 1.6 18.9 (0.4) 17.1
------------- ---------- ---------- ---------- --------- --------- ------------ ---------- ---------- ----------
Reportable
segment
assets 292.8 211.3 296.5 38.9 60.1 47.8 331.7 271.4 344.3
Reportable
segment ( 200.9 ( 31.3 ( 232.2
liabilities (197.9) (123.9) ) (27.6) (30.4) ) (225.5) (154.3) )
------------- ---------- ---------- ---------- --------- --------- ------------ ---------- ---------- ----------
During the periods shown above there have been no inter-segment
revenues for the reportable segments (20 20 : GBPnil).
Reconciliations of reportable segment profit, assets and
liabilities and other material items:
31 December
30 June 30 June 20 20
202 20 20 GBPM
1 GBPM
GBPM
Profit for the period
Total profit for reportable
segments 18.9 ( 0. 4) 17.1
( 29.6
Non-underlying items (2.7) (22.7) )
Unallocated ( expense
)/income (1.5) (0.7) 0.3
-------------------------------- ---------- ---------- ------------
(23. 8
Operating p rofit /(loss) 14.7 ) (12.2)
Finance income 0.2 0.6 0.8
Finance expense (0.9) (1.3) ( 2 .9)
-------------------------------- ---------- ---------- ------------
P rofit /(loss) before ( 24.5
taxation 14.0 ) (14.3)
Taxation (4.2) (0. 6 ) ( 3.1 )
-------------------------------- ---------- ---------- ------------
P rofit /(loss) for ( 25.1
the period 9.8 ) (17.4)
-------------------------------- ---------- ---------- ------------
31 December
30 June 30 June 20 20
202 1 20 20 GBPM
GBPM GBPM
Assets
Total assets for reportable segments 331.7 271.4 344.3
Unallocated assets:
Properties, plant and equipment 98.1 105.9 105.4
Right of use assets 0.7 0. 7 0.7
Deferred tax assets - 1.4 -
Non-current assets classified
as held for sale 1.5 - 0.4
Income tax receivable - 0.3 -
Cash and cash equivalents 34.7 50.2 16.6
Total assets 466.7 429. 9 467.4
--------------------------------------------- ---------- ---------- ------------
Liabilities
( 232.2
Total liabilities for reportable segments (225.5) (154.3) )
Unallocated liabilities:
Lease liabilities (0.7) (0.7) (0. 8)
( 5.5
Employee benefits (5.0) (6.0) )
Other interest-bearing loans - (45.0) -
and borrowings
( 0.2
Income tax payable (1.1) - )
( 8.7
Deferred tax liabilities (8.3) (8.3) )
( 247.4
Total liabilities (240.6) (214.3) )
============================================= ========== ========== ============
Reportable
Continental segment Consolidated
UK Europe total Unallocated total
GBPM GBPM GBPM GBPM GBPM
Other material items
30 June 202 1
Capital expenditure 2.9 0.1 3.0 0.4 3.4
Depreciation 1.5 0.4 1.9 1.0 2.9
Depreciation of right
of use assets 5.8 1.0 6.8 - 6.8
Non-underlying items :
Impairment of goodwill 1.2 - 1.2 - 1.2
Disposal of subsidiary
(including Swiss property
disposal) - (4.4) (4.4) - (4.4)
Other excluding finance
expenses and impairments
(note 3) 2.3 0.1 2.4 (0.9) 1.5
Other material items 30
June 20 20
Capital expenditure 1.0 0.3 1.3 6.5 7.8
Depreciation 1.1 0.6 1.7 0.9 2.6
Depreciation of right
of use assets 7.0 1.0 8.0 - 8.0
Non-underlying items :
Impairment of goodwill 21.3 - 21.3 - 21.3
Other excluding finance
expenses and impairments
(note 3) 1.3 0.1 1.4 - 1.4
Other material items 31
December 20 20
Capital expenditure 9.1 0.7 9 .8 5.6 15.4
Depreciation 2.8 0.7 3.5 2.7 6.2
Depreciation of right
of use assets 14.0 2. 1 16.1 0.1 16.2
Non-underlying items :
Impairment of goodwill 23.4 1.3 24.7 - 24.7
Other excluding finance
expenses and impairments
(note 3) 4.8 0.1 4.9 - 4.9
----------------------------- ------ -------------- ----------- -------------- ---------------
In the UK the Group's freehold properties are held within
Headlam Group plc and a rent is charged to the operating segments
for the period of use. Therefore, the operating reports reviewed by
the Chief Executive show all the UK properties as unallocated and
the operating segments report a segment result that includes a
property rent. This is reflected in the above disclosure.
Each segment is a continuing operation.
The Chief Executive, the Board and the executive team have
access to information that provides details on revenue by principal
product group for the two reportable segments, as set out in the
following table:
UK Continental Europe Total
31 31 December 31
30 June 30 June December 30 June 30 June 20 20 30 June 30 June December
202 20 20 20 20 202 20 20 GBPM 202 20 20 20 20
1 GBPM GBPM 1 GBPM 1 GBPM GBPM
GBPM GBPM GBPM
Revenue
Residential 200.0 130.4 354.3 26.1 21.3 44.9 226.1 151.7 399.2
Commercial 87.9 62.7 150.4 15.9 12.8 28.5 103.8 75.5 178.9
------------- --------- --------- --------- --------- --------- ------------ --------- ---------- -----------
287.9 193.1 504.7 42.0 34.1 73.4 329.9 227.2 578.1
------------- --------- --------- --------- --------- --------- ------------ --------- ---------- -----------
3 NON-UNDERLYING ITEMS
Non-underlying items relate to the following:
Six months Six months
ended ended Year ended
30 June 30 June 31 December
202 1 20 20 20 20
GBPM GBPM GBPM
Continuing operations:
Impairment of goodwill 1.2 21.3 24.7
Amortisation of acquired intangibles 0.9 0.8 1.6
Property disposal (0.9) - -
Acquisitions related fees - 0.6 0.7
Movements in deferred and contingent
consideration - - (0. 1 )
Finance costs on deferred and contingent
consideration - - 0. 1
Business restructuring 1.5 - 2.4
GMP Equalisation - - 0.3
2.7 22.7 29.7
Taxation on non-underlying items (0.2) 0.1 (0.7)
------------------------------------------ ----------- ----------- --------------
2.5 22.8 29.0
------------------------------------------ ----------- ----------- --------------
Discontinued operation:
Impairment of goodwill - - 3.3
Disposal of subsidiary (including Swiss (4.4) - -
property disposal)
------------------------------------------ ----------- ----------- --------------
(4.4) - 3.3
------------------------------------------ ----------- ----------- --------------
(1.9) 22.8 32.3
------------------------------------------ ----------- ----------- --------------
During the six months ended 30 June 2021 , following a review of
indicators of impairment, the goodwill attributable to the Northern
Irish CECO business was tested for impairment , resulting in the
full write down of the remaining GBP1.2 million of goodwill.
4 FINANCE INCOME AND EXPENSE
Six months Six months
ended ended Year ended
30 June 30 June 31 December
202 1 20 20 20 20
GBPM GBPM GBPM
Interest income:
Bank interest 0.1 0.1 0.6
Other 0.1 0.5 0.2
Finance income 0.2 0.6 0.8
--------------------------------------------- ----------- ----------- --------------
Interest expense:
Bank loans, overdrafts and other financial
expenses (0.2) (0.5) ( 0.7 )
Interest on lease liability (0.7) (0.8) (1. 6 )
Net interest on defined benefit plan
obligation - - (0.1)
Finance costs on deferred and contingent
consideration - - (0. 1 )
Other - - (0. 4 )
Finance expenses (0.9) (1.3) ( 2 .9)
--------------------------------------------- ----------- ----------- --------------
5 TAXATION
The Group's consolidated effective tax rate ('ETR') for the
interim period is 26.3%. This is higher than the standard rate of
corporation tax in the UK primarily due to the effect of restating
the opening UK deferred tax liability to reflect the change in the
UK tax rate from 19% to 25%, which was substantively enacted in the
period. Without the impact of the deferred tax rate change the ETR
is 20.4%
The UK headline corporation tax rate for the six months ended 30
June 2021 was 19% (six months ended 30 June 2020: 19% (12 months
ended 2020: 19%)). The deferred tax balance in respect of UK
entities has been calculated at 25% (2020: 19%).
6 DISCONTINUED OPERATIONS
On 28 April 202 1 , the Group entered into a sale agreement to
dispose of Belcolor AG ('Belcolor'). Belcolor is a floorcoverings
distribution business based in St. Gallen, Switzerland, and
represents the entirety of Headlam's Swiss operations. Headlam's
Continental European operations accounted for 17.2% of total
revenue in 2020, with Switzerland being the smallest reflecting the
small landmass and population of the country. For the year ended 31
December 2020, Belcolor reported revenue of GBP31.1 million and
profit before tax of GBP1.1 million (GBP0.4 million after pension
costs incurred under IAS19) , with fairly uninterrupted operations
during 2020 in contrast to the Company's UK and French operations
which were subject to stringent COVID-19 related lockdown
measures.
While Belcolor is highly established and industry-leading in its
country, from the Company's perspective there were limited avenues
for meaningful organic or acquisitive growth. Additionally, the
Swiss market varies significantly from the Company's other
geographic territories in terms of supplier base and product mix,
and therefore there was limited ability to leverage group
synergies. The disposal allows the Company to more effectively
focus its activities and investments on its operations which offer
greater opportunity.
On 29 April 2021, as a condition of the sale agreement, Belcolor
undertook a sale and leaseback of its property for GBP10.1 million
and paid a dividend of GBP11.1 million to its parent company,
Headlam Group plc. Gross assets disposed of were GBP24.0 million.
Cash consideration of GBP0.9 million was received, resulting in a
total of GBP12.0 million cash being received by Headlam as a result
of the disposal of Belcolor.
The subsidiary was sold on 28 April 20 21 with effect from 1 7
May 20 21 and was reported in the se financial statements for the
half-year ending 30 June 20 21 as a discontinued operation.
Financial information relating to the discontinued operation for
the period to the date of disposal is set out below.
Financial performance of discontinued operation
Six months ended 30 June 2021
Underlying Non-underlying Total
GBPM GBPM GBPM
Revenue 9.1 - 9.1
Expenses (9.0) - (9.0)
Other gains (profit on sale of building) - 8.6 8.6
---------------------------------------------------------------- ------------ -------------- -----
Profit before tax 0.1 8.6 8.7
Attributable tax expense - - -
-------------------------------------------------------------- ------------ -------------- -----
Profit after tax of discontinued operation 0.1 8.6 8.7
Loss on sale of subsidiary after tax - (4.2) (4.2)
---------------------------------------------------------------- ------------ -------------- -----
Profit from discontinued operation 0.1 4.4 4.5
---------------------------------------------------------------- ------------ -------------- -----
Exchange differences on translation of discontinued operation 4.8
---------------------------------------------------------------- ------------ -------------- -----
Other comprehensive income from discontinued operation 4.8
---------------------------------------------------------------- ------------ -------------- -----
Six months ended
30 June
2021
GBPM
Consideration received:
Cash 0.9
Costs of disposal (0.1)
Net disposal consideration 0.8
Carrying amount of net assets sold (9.8)
-------------------------------------------------------------------------------------- ----------------
Loss on sale before tax and reclassification of foreign currency translation reserve (9.0)
Reclassification of foreign currency translation reserve 4.8
Tax expense on gain -
------------------------------------------------------------------------------------- ----------------
Loss on sale after tax (4.2)
-------------------------------------------------------------------------------------- ----------------
Cash flows from discontinued operation
Net cash outflow from ordinary activities (5.0)
----------------------------------------------------- ------
Net cash inflow from investing activities 11.3
----------------------------------------------------- ------
Net cash outflow from financing activities (11.1)
----------------------------------------------------- ------
Net decrease in cash generated by the subsidiary (4.8)
----------------------------------------------------- ------
Effect of disposal on the financial position of the Group
GBPM
-------------------------------------- -----
Property, plant and equipment (1.4)
Right-of-use-assets (5.5)
Deferred tax asset (0.9)
Inventories (8.7)
Trade and other receivables (3.2)
Cash and cash equivalents (4.3)
Employee benefits 2.8
Current tax liability 1.5
Trade and other payables 4.4
Lease liabilities 5.5
Net assets and liabilities (9.8)
---------------------------------------- -----
Consideration received in cash 0.9
Cash and cash equivalents disposed of (4.3)
---------------------------------------- -----
Net cash outflow (3.4)
======================================== =====
The cash of GBP0.9 million represents the residual consideration
following the GBP11.1 million dividend previously paid up to the
parent company. Cash balances of GBP4.3 million were held by
Belcolor on disposal.
7 EARNINGS PER SHARE
The calculation of the basic and diluted earnings per share is
based on the following data:
Six months Six months
ended ended Year ended
30 June 30 June 31 December
202 1 20 20 20 20
GBPM GBPM GBPM
Continuing operations e arnings
Earnings for basic and diluted earnings ( 25.1
per share 9.8 ) (17.4)
Earnings for underlying basic and underlying
diluted earnings per share 12. 3 ( 2.3 ) 11.6
---------------------------------------------- ------------- ------------- --------------
Discontinued operations e arnings
Earnings for basic and diluted earnings
per share 4.5 0.5 (2.9)
Earnings for underlying basic and underlying
diluted earnings per share 0.1 0.5 0.4
---------------------------------------------- ------------- ------------- --------------
Six months Six months
ended ended Year ended
30 June 30 June 31 December
202 1 20 20 20 20
Number of shares
Weighted average number of ordinary
shares for the purposes of basic earnings
per share 84,409,416 84,197,830 84,228,880
Effect of diluted potential ordinary
shares:
Weighted average number of ordinary
shares at period end 84,409,416 84,197,830 84,228,880
Dilutive effect of share options 1,242,836 663,254 543,732
---------------------------------------------- ------------- ------------- --------------
Weighted average number of ordinary
shares for the purposes of diluted earnings
per share 85,652,252 84,861,084 84,772,612
---------------------------------------------- ------------- ------------- --------------
Continuing operations e arnings per
share
(29. 8
Basic 11.6p )p (20.7) p
(29. 8
Diluted* 11.4p )p (20.7) p
Underlying basic 14.7p (2. 7 )p 13.7 p
Underlying diluted 14.4p (2. 7 )p 13.7 p
---------------------------------------------- ------------- ------------- --------------
Discontinued operations e arnings per
share
Basic 5.3p 0.5p (3.4)p
Diluted* 5.2p 0.5p (3.4)p
Underlying basic 0.1p 0.5p 0.5p
Underlying diluted 0.1p 0.5p 0.5p
--------------------------------------- ----- ----- -------
* For the six months ended 30 June 2020 and the year ended 31
December 2020, diluted earnings per share are reported the same as
basic earnings per share, as a result of the earnings being
negative so the impact of them is anti-dilutive.
8 DIVIDS
Six months Six months
ended ended Year ended
30 June 30 June 31 December
202 1 20 20 20 20
GBPM GBPM GBPM
Dividend of a nominal amount of 2.00 1.7 - -
p paid 2 8 May 202 1
Interim dividend for 2019 of 7.55p paid
2 January 2020 - 6.3 6.3
1.7 6.3 6.3
----------------------------------------- ----------- ----------- --------------
The Board of Directors have declared for 2021, an interim
ordinary dividend of 5.8 pence per share. This dividend is payable
on 29 November 2021 to shareholders on the register as at 29
October 2021, and is discussed further in the Chief Executive's
Statement and Financial Review above.
9 FINANCIAL INSTRUMENTS
The fair value of the Group's financial assets and liabilities
as detailed below at 30 June 202 1 were not materially different to
the carrying value.
The table below sets out the Group's accounting classification
of each class of financial assets and liabilities at 30 June 202 1
.
Fair value
through Amortised Total
profit cost carrying
o r loss GBPM value
(FVPL) GBPM
GBPM
Cash and cash equivalents - 62.7 62.7
Bank overdraft - (0.1) (0.1)
Borrowings due within one
year - (1.9) (1.9)
Borrowings due after one year - (6.8) (6.8)
Trade payables - (136.0) (136.0)
Non-trade payables - (32.3) (32.3)
Leasing liability - (38.4) (38.4)
Trade receivables - 78.4 78.4
Other receivables - 13.0 13.0
Provisions - (2.1) (2.1)
Derivative liability (0.1) - (0.1)
(0.1) (63.5) (63.6)
------------------------------- ----------- ------------ -----------
Financial instruments carried at fair value are categorised
according to their valuation method. The different levels have been
defined below:
-- Level 1: quoted prices (unadjusted) in active markets for
identical assets or liabilities.
-- Level 2: inputs other than quoted prices included within
level 1 that are observable for the asset or liability, either
directly, as prices or indirectly, derived from prices.
-- Level 3: inputs for the asset or liability that are not based
on observable market data (unobservable inputs).
The Group has forward currency contracts which were fair valued
in accordance with level 2 (30 June and 31 December 20 20 : level
2).
Fair values
The carrying amounts shown in the Statement of Financial
Position for financial instruments are a reasonable approximation
of fair value.
Trade receivables, trade payables and cash and cash
equivalents
Fair values are assumed to approximate to cost due to the
short-term maturity of the instrument.
Borrowings, other financial assets and other financial
liabilities
Where available, market values have been used to determine fair
values. Where market values are not available, fair values have
been estimated by discounting expected future cash flows using
prevailing interest rate curves. Amounts denominated in foreign
currencies are valued at the exchange rate prevailing at the
Statement of Financial Position date.
11 CAPITAL COMMITMENTS
As at 30 June 202 1 , the Group had contractual commitments
relating to the purchase of property, plant and equipment of GBP3
.1 million ( 30 June 20 20 : GBP 1.6 million ; 31 December 20 20 :
GBP 3.7 million ).
12 RELATED PARTIES
The Group has a related party relationship with its subsidiaries
and with its key management. There have been no changes to the
nature of related party transactions entered into since the last
annual report.
13 SUBSEQUENT EVENTS
Management have given due consideration to any events occurring
in the period from the reporting date to the date these Interim
Financial Statements were authorised for issue and have concluded
that there are no material adjusting or non-adjusting events to be
disclosed in these Interim Financial Statements other than the sale
of a freehold property post the Period-end for cash proceeds of
GBP5.8 million, detailed in the Chief Executive's Statement and
Financial Review.
-Ends-
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END
IR SSDFWFEFSEFU
(END) Dow Jones Newswires
September 02, 2021 02:00 ET (06:00 GMT)
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