Headlam warns on weak residential market
The recovery is the residential flooring market is going to take longer than expected says top distributor Headlam as they issued a profits warning to investors today.
In a trading statement covering the six months to June 2023, Headlam said residential trading volumes were down nearly 7% on 2022.
"Recent residential trading volumes are weaker than expectations, with recovery now expected to take place over a more prolonged period. Rolling 12-month volumes are around 20% lower than 2019," said the company's statement.
Nevertheless, the value of Headlam's sales in the first half of this year were 2.5% up on 2022, helped by a strong performance by larger customers and its trade counter roll-out which were up 26% and 9% respectively.
"Gross margin and profit in H1 2023 were also impacted by a reduction in manufacturer led price increases and increased operating costs versus H1 2022," says Headlam. "Combined people and energy costs were up almost £5 million in H1 2023 against H1 2022 due to inflationary pressures, despite headcount being reduced in line with volume reduction during the period.
"Underlying profit before tax in H1 2023 was therefore lower at £6 million (H1 2022: £17 million), which also reflects strategic related investment to support future growth" said the statement.
Headlam announced that "the Company's underlying profit before tax for the year will be significantly below current market expectations" but said it was well-positioned to increase revenues and broaden its market presence.
Strategic investment is expected to total £6 million for the year, of which over half is in relation to the trade counter roll-out to support its growth to a £200 million business unit.
