Headlam shares leap after rolling out market-beating results

Oliver Gill
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Headlam is Europe's largest floorcovering distributor (Source: Getty)

Floormaker Headlam's share price rocketed up seven per cent this morning after revealing its full-year results beat market expectations.

The figures

In its 12-month trading statement, Europe's largest floor covering firm said total revenue would be six per cent higher than 2015.

The firm added it would also beat market consensus expectations of profit before tax of £37.6m.

Read more: Carpetright bosses up their stakes in the company after sales drop

UK operations, which account for 85 per cent of total revenue, grew by 4.7 per cent, beating the average market growth of 3.8 per cent.

Currency tailwinds boosted continental Europe operations, with revenues up 12 per cent.

Why it's interesting

While the rest of Britain was focusing on Marmite and Toblerone, Headlam hiked its prices in the wake of the Brexit vote and the economic impacts.

Nevertheless, such price increases had actually boosted revenues. In its announcement, the firm said:

The company benefited from the price increases it implemented from August 2016 to mitigate cost inflation due to a weakening of sterling, and the increased revenue led to an improved operating performance as a result of operational gearing.

What analysts said

Charles Hall of Peel Hunt said shareholders were likely to benefit from the positive numbers:

The improved profitability and confidence in trading prospects gives greater visibility on cashflow. As a result, the company is likely to materially increase dividend payments.

Unsurprisingly the shares have been dull over the last year given concerns over Brexit/consumer confidence. Now looks a good time to step-up interest.

Read more: Carpetright says the pound's plunge is hurting margins

But it wasn't all good news for Headlam. Profit margins were well behind all-time highs realised in 2007 according to Panmure Gordon's Adrian Kearsey.

Whilst investors will be pleased to see the pre-close update, the chief exec has indicated he wants to drive an improved margin performance. Crucially he intends to push ahead in a slow and measured manner.

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