Job losses on the cards as flooring giant rolls out major restructure

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Headlam Group, Europe’s largest distributor of floorcoverings, is set to axe jobs as part of a major restructure of a business it acquired less than three years ago.

It agreed a £35m deal for tilemaker Domus, but is now writing off £21m of goodwill that remained on the balance sheet.

Headlam has started a restructuring at Domus, which it says will result in a “cost base more aligned to the predicted revenue profile going forward” with an unspecified number of jobs to go. Domus specialises in premium construction projects, such as the new US Embassy in London.

The Coleshill-based group is made up of 62 wholly-owned businesses in the UK and Europe that each operate under their own trade brand.

The writedown will result in Headlam reporting a £25m pre-tax loss £25m. Its operating losses for the six months to June have been around £2m.

Its latest update to the market does point to a recovery, with it reporting stronger performances in June and July.

The group said trading had been resilient and broadly in-line with that of the prior year until March when the vast majority of the company’s UK operations were closed in response to the COVID-19 pandemic.

Headlam said that while its UK and French businesses were significantly affected, the company’s other smaller operations in Switzerland and the Netherlands continued to trade comparatively well due to less restrictive governmental measures.

The company reported total revenue for the period of £242.1m, 30.6% below the comparative period in 2019 (H1 2019: £348.7 million), being 34.4% and 9.6% below in the UK and Continental Europe respectively.

However, it said the UK revenue profile recovered strongly during June 2020 following the reopening of all of the company’s principal distribution centres by late May 2020 and the reopening of retail businesses in mid-June 2020.

The company said: “Following on from the significantly weakened revenue profiles of April and May, and strong revenue recovery in June, trading to-date in July has seen a continuation in revenue growth back towards 2019 revenue levels. Currently, July 2020 UK revenue is running ahead of July 2019’s UK revenue.

“Given the company’s limited visibility on order book, it is not possible to predict whether the current revenue recovery will be sustained through the second half of the year. Historically, the company’s trading activity is second-half weighted with the important trading periods being the refurbishment of educational institutions during summer holidays and redecoration in residential accommodation in the run-up to the Christmas period.

“Notwithstanding that overall demand is typically influenced by economic conditions, should there be a re-emergence of COVID-19 and associated lock-down measures this would suppress the company’s revenues.”

Headlam also announced that, following a delay due to the impact of Covid-19, its new 190,000 sq ft regional distribution centre, located in Ipswich, became operational earlier this month.

The centre was completed on budget at a total cost of approximately £26m.

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