Profits rise at Headlam despite revenue slip

Headlam Group reported a dip in half-year revenues on Tuesday, after demand weakened in the UK.

The floor coverings distributor reported total revenues of £323.8m for the six months to 30 June, compared to £329.9m a year previously. Sales in mainland Europe rose 5.2% but fell 2.9% in the UK because of weakness in the residential sector, Headlam said.

Operating profits were £22.2m, compared to £14.7m a year previously, however, after higher manufacturer prices were passed onto customers.

The gross margin temporarily rose to 33.7% from 32.7%, due to the "unprecedented" inflationary environment.

Looking ahead, Headlam said it expected the gross margin to fall back in the second half, as the number and scale of price increases eased. Energy costs are also expected to rise from October, when a fixed price energy contract expires.

Chris Payne, chief executive, said: "The financial performance in the period was pleasing given the economic environment and inflationary impact on consumer spending. Commissioned specialist research indicated that the company improved its market share in the period, and new customers have also been secured within the multiple retailers/larger customers space.

"All this provides a high degrees of confidence that the company’s strength of driving additional revenue opportunities from a more efficient and modernised operating base is the right one. Headlam said be set fair when the current headwinds ease."

Shares in the AIM-listed firm were ahead 5% at 275p as at noon BST.