UPDATE 1-Headlam sees H1 profit in line with hopes

* First-half revenue down 8.2 pct

* UK underlying sales down 10.7 pct

* Continental Europe underlying sales down 9.7 pct

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LONDON, July 14 (Reuters) - European floorcoverings distributor Headlam Group Plc (HEAD.L) on Tuesday forecast first-half earnings in line with management expectations despite falling sales and profit margins as recession hit demand.

The firm, which supplies independent retailers and contractors as well as the residential market, said revenue fell 8.2 percent in the six months to June 30.

Like-for-like revenue in the group's UK businesses fell 10.7 percent, whilst in Continental Europe it fell 9.7 percent.

Headlam said gross margin eased compared with 2008, principally because of a less profitable mix of products sold.

"Based on this performance, earnings for the six months ended June 30 are likely to be in line with management's expectations," it said.