COVID-19 Trading Update

RNS Number : 5230H

Headlam Group PLC

25 March 2020

 

25 March 2020

Headlam Group plc

('Headlam' or the 'Company')

COVID-19 Trading Update

Headlam Group plc (LSE: HEAD), Europe's leading floorcoverings distributor, today announces a COVID-19 trading update.

The Board is committed to following all of the UK Government's guidance and to ensuring the long-term sustainability and success of the Company. An overview of the short and longer-term measures the Company is taking in this regard is detailed below as well as an overview of the Company's financial position and liquidity.

2020 Trading and Full Year Expectations

Trading to date in 2020, incorporating the majority of the first quarter, has been reasonably resilient, and broadly in-line with that of 2019. However, following the recent changes in UK Government guidance in response to COVID-19, the Company now expects an imminent and meaningful downturn in orders. As the overall impact on demand and over what time period is not yet known, it is not currently possible to provide guidance on the expected outturn for the financial year ending 31 December 2020. As soon as the Board has improved clarity, a further announcement will be made in respect of the anticipated 2020 performance.

Operations and Cash Management

The Company is focused on cash management and limiting operating costs to the lowest possible level in preparation for the expected meaningful reduction in orders, which will hopefully be deferrals and temporary in nature, until Government restrictions on movement are lifted.  All non-critical operational and capital spend has been halted and all purchasing of stock ceased earlier this month.

The Company closed all of its UK sites as of close of business yesterday until further notice, with the exception of its largest national distribution centre in Coleshill. This will enable the Company to fulfil demand which may arise, specifically within the commercial sector where there is essential work driven by health and safety requirements and medical or emergency infrastructure related orders. The Company has a significant inventory position, £132.5 million as at 31 December 2019, which will enable it to continue to fulfil demand for the foreseeable future.

The opening of the Company's new regional distribution centre in Ipswich has been delayed from the originally planned Easter 2020 opening as a result of European contractors being recalled due to travel restrictions. It will be possible for the centre to be operational in a matter of weeks once restrictions are lifted.

The Company is currently assessing the UK Government's range of COVID-19 related financial support available to businesses and is assessing if any of them would provide any benefit to the Company in the long-term.

People

It is the Board's intention to protect the wellbeing of its people and preserve employment, with this firmly in-line with the UK Government's aim. All of the Company's people who are affected by the temporary closure of sites and businesses will be paid an enhanced form of the UK Government's Coronavirus Job Retention Scheme.

Operational Improvement Programme

It is the Company's intention to remain focused on the long-term, and will, where practical, continue with the planning and / or acceleration of some of the projects forming part of the overall operational improvement programme designed to make the business more efficient and effective.

Balance Sheet and Liquidity

The Company has a strong Balance Sheet and significant liquidity headroom as detailed below. Additionally, the Company has a largely freehold property portfolio with minimal lease commitments which limits property cash outflows.

As stated in the Company's final results announcement on 5 March 2020, average net debt in 2019 was £3.3 million (2018: £16.9 million net debt), with cash and cash equivalents of £33.4 million as at 31 December 2019.

On 5 August 2019, the Company completed a refinancing of its existing banking facilities to extend their term from 14 December 2021 to 30 April 2023. The Company maintained its two agreements with Barclays Bank PLC and HSBC Bank Plc, and decreased the level of Sterling committed facilities from £72.5 million to £68.5 million and increased its Euro committed facilities from €8.6 million to €9.6 million. The Company also has short-term uncommitted facilities which continue at £25.0 million, and are renewable on an annual basis. The total banking facilities available to the Company at 31 December 2019 were £109.7 million, and as at that date 94.1% of the total facilities were undrawn, equivalent to £103.2 million.

2019 Final Ordinary Dividend

Notwithstanding the current Balance Sheet strength and liquidity headroom, in light of the uncertain environment which is likely to prevail for a considerable period, the Board has taken the prudent decision to suspend the proposed 2019 final ordinary dividend of 17.45 pence per share that was detailed within the final results announcement, and that was to be put to a shareholder vote at the forthcoming AGM in May 2020. This is reflective of the Board's overriding focus on preserving the financial stability of the Company, with the suspension of the dividend reducing cash outflow by £14.6 million. The Board is committed to providing dividend income to its shareholders, and dependent on prevailing conditions at the time, the Board will consider an appropriate augmentation to the 2020 interim dividend that is normally declared at the time of the Company's interim results announcement and payable in January of the following year. Alternatively, and subject to trading in the final quarter of 2020 and other prevailing conditions at the time, the Company may consider the declaration of a special dividend.

The Company will continue to engage with all its stakeholders during this difficult time, and wishes to express its utmost appreciation to all its people.

It is currently anticipated that the 2019 Annual Report and Accounts and accompanying Notice of AGM will be posted to shareholders in April 2020.

Enquiries:

Headlam Group plc	Tel: [phone]
Steve Wilson, Chief Executive Chris Payne, Chief Financial Officer Catherine Miles, Director of Communications	Email: [e-mail]
Investec Bank plc (Corporate Broker)	Tel: [phone]
David Flin / Alex Wright
Panmure Gordon (UK) Limited (Corporate Broker)	Tel: [phone]
Erik Anderson / Dominic Morley / Ailsa Macmaster
Buchanan (Financial PR and IR)	Tel: [phone]
Mark Court / Toto Berger

Notes for Editors:

Operating for 28 years and employing 2,575 people as at 31 December 2019, Headlam is Europe's leading floorcoverings distributor.

Headlam provides the distribution channel between suppliers and trade customers of floorcoverings. Working in partnership with suppliers across the globe manufacturing a diverse range of floorcovering products and ancillary accessories, Headlam provides an unparalleled route to market for their products across the UK and certain Continental European territories.

The utilisation of an outsourced distribution channel enables manufacturers to focus on their core activities, incur reduced costs associated with distribution, and benefit from localised sales, marketing and distribution expertise that provides a more effective and greater route to market for their products.

To maximize customer and market penetration, and reflecting the regionalised nature of the marketplace, Headlam comprises 67 individual businesses in the UK and Continental Europe (France, the Netherlands and Switzerland) each operating under their own unique trade brand and utilising individual sales teams.

Headlam's extensive customer base, operating within both the residential and commercial sectors and comprising principally independent retailers and flooring contractors, receives the broadest product offering supported by next day delivery as well as additional marketing and other support.

Headlam's offering is enabled through its unrivalled operating expertise, long-established supplier and customer relationships, and comprehensive distribution network. Following years of considerable investment, Headlam's distribution network currently comprises four national distribution hubs, 19 regional distribution centres and a supporting network of smaller warehouse premises, trade counters, showrooms and specification centres.

In 2019, Headlam worked with 190 suppliers from 19 countries and fulfilled 5.3 million customer orders.

www.headlam.com

 

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