Home in on carpet and flooring giant – for the chance to make piles of cash
THE past year has been one of the toughest in living memory for businesses and many have suffered. But Britain’s entrepreneurial spirit has also come into its own, as companies have adapted to coronavirus- induced restrictions and made the best of it.
Many are now starting to surprise investors, with better than expected figures for the end of last year and beginning of this. Birmingham- based Headlam is one such business and the shares, at £3.90, should rise.
The company is the UK’s largest distributor of carpets and other floor coverings, from luxury vinyl to engineered wood to basic lino. With more than 70,000 customers in the UK and parts of Europe, the firm sells to big chains, such as B& Q and ScS, as well as independent floor and furniture shops, building contractors, interior designers and architects.
Founded in the teeth of the 1990s recession, Headlam has grown steadily over the years, focusing on offering reliable service, an extensive range and reasonable prices. Chief executive Steve Wilson has been there from the start, joining as finance director in 1991 and stepping up to the top job in 2016, nearly 25 years later.
Wilson clearly knows the business inside- out but his first job, while still a student, was in a bakery. The work taught him many useful lessons about how to distribute goods – be they loaves or laminate – from warehouses where they are stored to shops where they are sold.
Those lessons are increasingly in evidence at Headlam, particularly since Wilson took the helm. The business focuses not just on having the products that customers want but also on making sure the transport network operates efficiently so lorries are sufficiently loaded to make journeys worthwhile.
A hub and spoke strategy has been developed, with four national distribution centres and 13 regional sites dotted round the country.
The model has been refined in recent years and efforts have been accelerated through the pandemic, which should drive down costs and improve c ustomer service. The group is also working hard to enhance its online service, which should drive sales materially in future.
Last month, Wilson said that, even though trading during the first lockdown had been incredibly tough, demand had bounced back as restrictions eased, so 2020 sales were down less than expected and profits would be at the top end of brokers’ forecasts. Having suspended paying dividends last summer, the group also said payouts will be restored when the final results are announced next month.
Figures for 2020 will still not be pretty. Sales are likely to be 15 per cent lower at £ 609 million while profits are expected to more than halve to £15.5 million and a nominal dividend of 2p has been pencilled in for the year.
However, a swift recovery is expected this year, with sales of £685 million, profits of £29 million and a dividend of around 13.9p, rising to 18.9p for 2022.
About two-thirds of Headlam’s flooring ends up in people’s homes and demand has been strong, rising almost 9 per cent in the second half of last year.
Further growth is expected in the months ahead as consumers, stuck at home, choose to cheer themselves up with new carpets or modern wooden flooring.
Commercial customers account for the rest of Headlam’s sales, including hospitals, schools and local authorities. Many of these cut back on all but the essentials last year. However, business is likely to pick up as the UK gradually returns to normality. Health centres in particular, may be looking to replace flooring as the pandemic eases.