Shares in Headlam Group experienced a significant drop on Thursday as the company acknowledged that recent residential trading volumes were weaker than anticipated and would take longer to recover. In response to the challenging market conditions, the company plans to temporarily decrease its dividend cover.
At 0803 GMT, shares were down 12% or 29 pence, reaching 210 pence.
The UK-based floor-coverings distributor expressed concerns that underlying pretax profit for 2023 will fall significantly below the current market expectations of £30.5 million ($39.5 million).
During the first half of the year, underlying profit before tax amounted to £6 million, compared to £17 million for the same period in 2022. This decline was primarily due to investments made to support future growth.
Despite the challenges, Headlam Group reported an increase in revenue for the period, rising from £323 million in the previous year to £332 million.
The company noted that rolling 12-month volumes were approximately 20% lower than those in 2019. Additionally, recent independent data revealed a reduction in DIY and home improvement spending, especially for larger items, which significantly impacted non-essential categories.
While currently facing trading difficulties, Headlam Group remains confident about its future prospects due to its strategic initiatives and continued investments. The company expects increasing contributions from both strategic actions and efficiency measures. Consequently, it plans to temporarily reduce its dividend cover for the ordinary dividend payment in 2023 to pre-Covid-19 levels.
