August 22, 2018 / 6:32 AM / 4 months ago

UK retailer Headlam sees 2018 results at lower end of expectations

(Reuters) - British floor coverings distributor Headlam Group (HEAD.L) warned on Wednesday its full-year results would likely be at the lower end of analysts’ expectations following a drop in first-half underlying sales, sending its shares down 6.6 percent.

The warning from the company, which connects flooring producers with retailers and contractors, comes as one of the sector’s major retailers, Carpetright (CPRC.L), closes stores as part of a creditor-approved restructuring.

In half-yearly results, Headlam said its like-for-like UK sales fell 5.2 percent in the first half of 2018 and that it expected weakness to continue in the second half.

Sales at its smaller European business, however, rose 1.7 percent and overall gross margins improved by about 1 percentage point on better pricing and the impact of a handful of acquisitions. That nudged underlying profit slightly higher to 17.7 million pounds ($22.6 million).

The company also said order intake for August, usually a period where a lot of refurbishments take place, was in line with its expectations.

It said it would increase prices in the UK market by an average of 3 percent from September to cover the costs of raw material price inflation.

“(The) market is likely to remain tough given the slow property market,” brokerage Peel Hunt said in a note, adding that price increases should deliver “material” stock profits.

Investec analysts cut their target for the company’s stock price to 560 pence from 660 pence, compared with a market price on Wednesday of 429 pence.

Headlam did not give a range for analysts’ current full-year profit forecasts, but said the outcome was likely to be ahead of last year. Peel Hunt analysts were forecasting an adjusted profit of 44 million pounds versus 40.7 million in 2017.

($1 = 0.7841 pounds)

Reporting by Sangameswaran S in Bengaluru; Editing by Amrutha Gayathri and Mark Potter

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