Out-of-favour floorcoverings distributor Headlam (HEAD) rallied 6.4% to 273.5p on Monday on the news UK revenue ‘recovered strongly’ during June, and July trading to date has seen ‘a continuation in revenue growth back towards 2019 revenue levels.’
This encouraging sales uptick followed the reopening of all the Birmingham-headquartered firm’s principal distribution centres by late May and the reopening of retail businesses in mid-June.
LOCKDOWN HIT
For the six months to June 2020, Headlam’s revenue slumped 30.6% to £242.1 million, reflecting March’s closure of the vast majority of its UK operations due to the emerging COVID-19 pandemic.
Headlam expects to report a £25 million statutory loss before tax for the half, which will include a write-down of its investment in its Domus acquisition, and will sensibly skip its interim dividend payout.
The UK and French businesses were particularly hard hit, although Headlam’s smaller operations in Switzerland and the Netherlands continued to trade comparatively well due to less restrictive government measures in those countries.
SUMMER SALES BOUNCEBACK
Following weakened sales in April and May, Headlam enjoyed a ‘strong revenue recovery in June’ and said ‘trading to-date in July has seen a continuation in revenue growth back towards 2019 revenue levels’.
Surprisingly, given the circumstances, July 2020 UK revenue is actually running ahead of July 2019’s UK revenue.
While encouraging, Headlam cautioned that order book visibility is limited and there are no guarantees the current revenue recovery will be sustained through the second half of the year, especially if we see a second coronavirus wave and another lockdown.
This is traditionally the stronger half when Headlam benefits from educational institution refurbishments over the summer holidays as well as residential accommodation decorations in the run-up to Christmas.
IPSWICH OPENS
Following a COVID-19-induced delay, Headlam’s new regional distribution centre in Ipswich became operational earlier this month and is expected to contribute to profits in 2022.
Headlam insisted it is now ‘operating at largely normalised operations in the UK, with COVID-19 Secure fully implemented throughout the network, and a resumption of nationwide next-day delivery operations and elevated levels of product buying to satisfy customer demand’.
Management added that cash management has ‘exceeded the company’s expectations’, although Headlam is still unable to provide guidance for the full year given both COVID-19 and the economic backdrop.
