European floorcoverings distributor Headlam (HEAD) has trading tailwinds at its heels and says internal 2014 profit targets could be beaten. The carpets-to-laminate flooring specialist's news arrives in an upbeat trading statement that sends the shares 3.6% higher to 489.63p.
Birmingham-based Headlam's update for the opening four months of 2014 – three month comparatives would be distorted by year-on-year changes in the timing of the important Easter selling season – flags group sales 8.9% ahead. This shows the improving trend seen towards the end of a difficult 2013 for the company is being sustained.
Significantly, UK sales grew 11.1%, up 8.9% on a like-for-like basis, reflecting a combination of market share gains and more buoyant conditions in what remains a highly-competitive floorcoverings industry, one characterised by downwards margin pressure.
Tony Brewer, chief executive officer and seasoned floorcoverings industry operator, raises spirits with news that positive UK trading trends have continued into May. He's 'cautiously optimistic' that the board's full-year financial targets could be exceeded. Before today, consensus estimates pointed to a return to profitable growth to the tune of £28.5 million this year and £31.2 million for 2015.
As Shares recently outlined, cash-generative Headlam represents a geared play on an improving UK housing market as well as the rising levels of commercial refurbishment and building projects engendered by the UK's economic recovery. Its company-specific strengths include an extensive range of competitively-priced floorcoverings supplied to independent retailers and contractors.
Headlam's autonomously-run batch of 52 businesses represents a competitive advantage. Local management can react quickly to the needs of regional customers, a structure that has enabled the company to consistently outperform the floor coverings market even in tough times, as demonstrated by last year's record £603.1 million turnover haul.
The latest trading update also contains positive signals from Continental Europe, where market stability will provide a boon. Sales from Headlam's Dutch and French businesses, whose poor performance was a key factor behind 2013's 5.1% taxable profits decline to £26.4 million, rose 3.2% and 2.3% respectively in the first four months. However, weakness witnessed within the Swiss business constrained aggregate growth across these European territories to 0.5%.