Shares dip 10% as carpets group floored by poor early trading

Floorcoverings group Headlam saw its share value dip more than 10% following a gloomy forecast on current trading levels.

Investors got cold feet after the Coleshill-based company said it had seen a near 6% decline in like-for-like revenues in January, albeit against tough comparables.

However, it was the news that business in the UK had dipped by even more – 6.7% – that really gave the market the jitters, especially because of the current gloom surrounding the retail sector.

The announcement overshadowed relatively good full year results for the business, with a 2% overall increase in revenue to £707.8m (2016: £693.6m) despite markets being only half as strong for the majority of the second half.

Underlying pre-tax profit rose 7.5% to £43.1m (2016: £40.1m).

However, the gloss was taken off this with the company’s statement on current trading.

It said: “Against a very strong January 2017 comparator, the company’s overall like-for-like revenue declined 5.9% in January 2018, with the UK showing a more pronounced reduction, 6.7%, predominantly due to the performance of the residential sector and the adverse impact of a reduction of orders from one of our larger customers.”

“The negative UK performance in the month was largely attributable to a very soft first working week following the New Year holiday, with the rest of the month showing some recovery but remaining moderately below our expectations.”

The like-for-like revenue performance in February was broadly similar to January, with a continued reduction in orders from the larger customer and generally softer markets.

The situation was bolstered somewhat by a stronger showing in Continental Europe, where the January performance was up 6.5% on a like-for-like revenue basis.

It also said that given the performance had come at the start of the year, it remained optimistic for the year as a whole.

Chief executive Steve Wilson said: “Given the very early stage in the year and our greater focus on profit rather than top-line growth, with organic revenue growth being a lesser contributor to the company achieving its overall plans and expectations, our expectations for 2018 remain unchanged at this stage despite the weaker markets.”