Decent start for Headlam pegged back by pressure on margins

FLOORCOVERINGS firm Headlam says it has enjoyed a good start to 2014.

Burt margins have fallen in both its UK and Contintal European operations. 

In an interim management statement for the period from 1 January 2014 to 30 April 2014, the Coleshill company said trading during the first four months of 2014 maintained the improving trend that was evident during the final quarter of 2013. 

During the period, group revenue increased by 8.9% compared with the previous year.
 
UK revenues increased by 11.1% with like for like performance improving by 8.9%. 

Comparatives are calculated by reference to a weak period in 2013 which was influenced by particularly unfavourable weather during the first two months and lacklustre markets during months three and four.
 
Anecdotal evidence relating to the UK floorcovering market points to a slightly more buoyant environment.  Whilst the weaker comparatives are a flattering factor and the increased activity in the UK market during the first four months has been contributory, there is no doubt that the UK business has continued to grow market share during this period, Headlam says.
 
But it warns that despite the more positive trading environment, the market in the UK still remains very competitive and, as a consequence, gross margin improvement continues to be hindered. 

Compared with the period in 2013, gross margin has fallen by 50 basis points, it said.
 
On the Continent, where markets remain difficult, revenue from itsDutch and French businesses increased by 3.2% and 2.3% respectively. 

However, these improvements were offset by a weaker performance from its Swiss business whose revenue contracted by 3.6%.
 
As with the UK, the continental businesses have also seen a collective fall in gross margin during the period equating to 30 basis points.

Tony Brewer, Headlam’s group chief executive, said:  “The group’s improved trading experience during the first four months has been very encouraging particularly since in the UK momentum has continued into May.
 
“Given the performance to date, the board are cautiously optimistic that the group’s internal financial objectives for 2014 could be exceeded. 

“The cautious sentiment is due to a demanding second half objective and a need for floorcovering markets to show continued improvement.”