UK flooring firm Headlam warns on profit amid subdued housing market
Shares hit 23-year low of 151.5p in early trade
Company sees FY profit below current market view
Revenue down 12.3% in four months to end April
Adds share move in paragraph 2, analysts' comment in paragraph 8, details throughout
By Aby Jose Koilparambil
May 14 (Reuters) -Britain's Headlam Group HEAD.L said on Tuesday it expected the market to return to growth only next year, as the floor coverings distributor forecast annual profit significantly below current market estimates, sending its shares sharply lower.
Shares in the firm, which specialises in carpet, residential vinyl, wood and commercial flooring, fell as much as 14.2% to a 23-year low of 151.5 pence, before paring losses to trade 10.5% lower at 0827 GMT.
Fortunes of companies such as Headlam are firmly tied to the health of the housing repair, maintenance and improvement (RMI) segment, which has been under some pressure as customers continue to curb spending in the wake of broader economic woes.
The delay in the central bank's monetary policy easing has tempered hopes of a better-paced recovery in the British housing market.
"The current trading conditions across the sector have been challenging and we have seen a further deterioration in consumer spending in our markets, which has weighed on profitability," CEO Chris Payne said in a trading statement.
Headlam said it expects an improvement in the second half "based on our mitigating actions, as well as gradually improving market conditions, albeit we do not anticipate the market returning to growth until 2025".
Headlam said revenue in April did not show the expected
seasonal uplift during spring, traditionally seen as a strong period for house sales in Britain.
Peel Hunt analysts wrote in a note that Headlam is responding to the continuing weak market by a reassessment of its costs and sites, and the brokerage estimated a full-year loss of 25 million pounds ($31.4 million).
Pre-tax loss for the four months to end April was 10.6 million pounds.
Headlam said it expects significant one-off cash benefits from disposal of surplus property and working capital reduction over the next 18 months.
The Birmingham-headquartered company said revenue in the four months to end-April fell 12.3% year on year, with the turnover in the UK and Continental Europe falling 11.6% and 16.9%, respectively.
Travis Perkins TPK.L, Britain's largest supplier of building materials, and top tile retailer Topps Tiles TPT.L had flagged subdued demand in the RMI sector.
($1 = 0.7989 pounds)
Reporting by Aby Jose Koilparambil in Bengaluru; Editing by Rashmi Aich and Jacqueline Wong
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