Increased costs impact margin at flooring distributor

Flooring distributor Headlam Group has reported a growth in half year sales although profit declined.

According to its latest trading update for the first six months of the year to 30 June 2023, total sales rose 2.5% to £332m from £323m in 2022.

Headlam said gross margin and profit in H1 2023 were impacted by a reduction in manufacturer led price increases and increased operating costs versus H1 2022.

Combined people and energy costs were up almost £5m 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 £6m, down from £17m, which also reflects strategic related investment to support future growth.

Strategic investment is expected to total £6m for the year, of which over half is in relation to the trade counter roll-out to support its growth to a £200m business unit.

Commenting on the results, Headlam said: “While current trading is challenging, the Company’s strategy and investment in the business gives the Board confidence for the future, with increasing contributions from both strategic and efficiency actions. As a result, and supported by its strong balance sheet, the Company intends to temporarily lower its dividend cover in respect of the ordinary dividend payment for FY23 to that of pre COVID levels.

“The Company is well positioned despite the market backdrop, with ongoing expansion of its market leading position, broadening of its market presence, increased revenue streams, and ongoing efficiencies. All of which will support future financial performance, particularly as volumes return.”

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