Headlam sales unaffected by price hikes post Brexit

The Headlam Group, a floor-covering distributor, have reported a rise in earnings despite being forced to hike prices following the aftermath of Brexit.

With most of their carpets being imported from Belgium, currency fluctuations post-Brexit had a significant impact on the firm’s costs. In response to this, the company raised its prices by 6% on all floor coverings hailing from Europe.

The group's facilities are located throughout the UK, France, Switzerland and the Netherlands.

“The referendum result gave rise to a weakening in sterling, and the group has sought to mitigate this adverse inflationary effect by implementing price increases earlier this month for residential floor-coverings imported from Continental Europe. It is pleasing that these price increases appear to have had no adverse impact on the level of residential revenues to date,” said chief executive Tony Brewer.

For the half year period ending 30 June 2016, the group’s revenue was up 4.8% at £328.7m while operating profit rose 18.5% to £15.4m. Profit before tax increased 22.4% to £15.11m and like-for-like sales improved by 3.4%.

The board attributed their success to its peak trading season. "August is traditionally one of the group's peak trading months in the UK with the annual summer refurbishment of educational institutions. To date, this seasonal business seems to have been unaffected by the result of June's referendum on EU membership” said Brewer.

Net funds were £33.9m at the end of the period compared to £26m the previous year.

The firm is also on course to achieve further expansion with the opening of service centres in Croydon, Hull and Bristol during the period, bringing the total number of centres to 32, with three more currently in development.

The board remain confident it will achieve its full-year expectations with Christmas being a key trading period coming up.

Shares are trading on a trailing price to earnings multiple of 13.6 and 12.8 times on a forward basis according to N+1 Singer analyst Jamie Constable. According to Constable, the stock is “well managed and solid” and this spills over into a positive read-across for sector peers like Carpetright, DFS and ScS.

Basic earnings per share were up 23.1% at 14.4p and the interim dividend by 11.7% to 6.7p. The share price gained 6.15% to 475p on Wednesday.