Headlam Group (HEAD) Trading Update summary

Transformation plan progress

• Consolidation of 32 trading businesses into a single national entity, Mercado, is well advanced, with over 90% of customers by revenue transitioning and 50% of applicable revenue now through Mercado.

• New Rayleigh distribution centre fit-out is nearly complete, with operations expected to start in early 2025; Ipswich and Uddingston sites are now surplus and being prepared for sale.

• Centralised buying and stock control team implemented, reducing product duplication and simplifying supplier interactions.

• Transformation plan is on track, with expectations to release at least £70m cash from property disposals and working capital optimisation sooner than initially planned.

• Ongoing profit improvements now targeted at a minimum of £20m, to be realised during 2025 and fully achieved by end of 2026.

Trading and market conditions

• Flooring and home improvement markets remain weak, with UK consumer confidence declining and home improvement spending down 7.7% in October 2024.

• Flooring market estimated to have declined 10-15% year-on-year in H2 2024, matching H1 trends.

• Group revenue decline slowed to 7.3% for the five months to November, compared to 11.8% in H1, aided by larger customer revenue.

• Underlying loss before tax for H2 expected to be broadly in line with H1.

• Cash and working capital remain well-controlled, with a property portfolio valued at £142 million.

Cost and operational impacts

• Recent UK budget changes, including higher national minimum wage and national insurance adjustments, will add approximately £2 million to annual operating costs from April 2025.

• Board remains focused on transformation to offset market headwinds and position for long-term success.

• No discernible disruption to revenue during transformation, with positive customer and colleague feedback.