Floorcoverings group Headlam has reported a growth in half year sales although industry headwinds impact profits.
According to its latest trading update for the first six months of the year to 30 June 2023, total sales rose 2.5% to £331.8m from £323.8m against the same period last year.
UK sales rose 3.3% to £288.9m from £279.6m, despite volumes being 5% lower,, while EU revenues declined 2.9% to £42.9m from £44.2m. The UK and Continental Europe accounted for 87.1% and 12.9% of total revenue respectively in the Period (H1 2022: UK 86.3%; Continental Europe 13.7%).
Within the UK, commercial sector revenue increased by 8.4%, as it continued its more buoyant performance following very subdued activity during and in the aftermath of Covid-19. Residential sector revenue increased by 0.9%, comprising a volume decline of 7% offset by price increases – principally the annualisation of significant manufacturer-led price increases during 2022. Continental Europe saw a similar trend by the two sectors with commercial sector revenue down just 0.6% but residential revenue declining by 4.4%.
Underlying Profit Before Tax resulted at £6m, down from £17.3m, which was due to the macro and industry headwinds of lower residential trading volumes and high operating cost inflation.
“Profitability was significantly impacted by the macro and industry headwinds of lower residential trading volumes, limited manufacturer-led price increases, and high operating cost inflation,” the group said. “Underlying Profit Before Tax included some positive contributions from mitigating actions implemented in the Period including reducing operational headcount and other cost savings, and targeted price increases on certain products. These actions will build in the second half and into 2024.”
Looking ahead, UK volumes in July and August 2023 were in line with expectations, with full year forecasts remaining unchanged.
Commenting, Chris Payne, Chief Executive, added: “I am pleased to say the Group delivered revenue growth and good cash generation in the first half, particularly in the strategic growth areas with strong growth in larger customers and trade counters. However, the macroeconomic and industry headwinds that drove residential volumes, and our first half profit, lower are likely to persist into 2024. Despite this, the continued investment in broadening Headlam’s business base will provide the foundation for significant profit uplift in the coming years as the market improves.”