Headlam Group (HEAD) H2 2023 earnings summary

Executive summary

• Revenue declined 1.1% to £656.5m; underlying PBT fell to £11.0m from £37.1m amid weak residential volumes, reduced prior-year price benefits and cost inflation.

• Strategic channels grew strongly: Larger Customers revenue +25.6% and Trade Counters +8.5%; operating cash flow rose to £26.0m.

• Market weakness continued into early 2024, while medium-term growth opportunities are supported by market recovery and strategic initiatives.

Financial highlights

• Revenue £656.5m, down 1.1% YoY; gross margin 31.7%, down 140 bps; underlying operating profit £16.1m versus £39.2m.

• Underlying PBT £11.0m versus £37.1m; statutory PBT £7.1m versus £41.8m; underlying basic EPS 11.0p versus 35.5p.

• Underlying operating cash flow increased to £26.0m from £12.8m; net debt excluding leases was £29.6m versus net funds of £1.8m.

• Full-year dividend 10.0p versus 17.4p, with cover of 1.1x.

Outlook and guidance

• Residential market weakness continued into 2024; Group revenue in February was 6% below February 2023 but ahead of January 2024.

• FY24 underlying PBT expected to be significantly H2-weighted; capex ~£12m and underlying effective tax rate ~26%.

• FY24 ERP software development costs expected at ~£3m, treated as a non-underlying expense; medium-term revenue and profit uplift expected from recovery and strategic initiatives.

• Illustrative long-term revenue ambition: Larger Customers £200m, Trade Counters £200m, Regional Distribution £500m–£600m and total revenue £900m–£1bn.