REG - Headlam Group PLC - Property Transaction

HeadlamAnnouncement

Mon 07:00

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RNS Number : 7525R  Headlam Group PLC  21 July 2025

21 July 2025

Headlam Group plc

('Headlam', the 'Company', the 'Group')

 

Continued implementation of the transformation plan with the sale and
leaseback of the Tamworth distribution centre

Headlam (LSE: HEAD), the UK's leading floorcoverings distributor, provides an
update on its previously announced transformation plan, with the sale and
leaseback of the Group's Tamworth distribution centre.

The sale proceeds of £21.75 million (excluding VAT(1)) represent a premium of
153% to the book value of £8.6 million and 43% to the last market
valuation(2) of £15.2 million. The profit(3) generated from the sale of this
property will be recognised as non-underlying income.

The Tamworth distribution centre remains a core part of the Group's
distribution network and is integral to the Group's growth plans over the
coming years. Accordingly, the Group has entered into a 10-year leaseback,
with the opportunity to extend further. This sale and leaseback transaction
further optimises the Group's mix of owned and leased distribution centres.
The cost of the leaseback is equivalent to the Group's cost of debt, meaning
that this transaction is broadly neutral to the Group's Underlying Profit
Before Tax.

£21.1 million of the sales proceeds (excluding VAT) have been received in
cash following simultaneous exchange and completion, with the remaining £0.7
million retained by the buyer pending the Group's completion of pre-agreed
repairs and maintenance on the property. The sales proceeds will initially be
used to reduce the Group's drawdown on its revolving credit facility,
providing further liquidity headroom whilst the Group implements its
transformation plan.

This sale constitutes a significant transaction under the Listing Rules;
accordingly, further details are contained in the appendix to this
announcement.

 

The Group intends to provide a scheduled pre-close trading update tomorrow.

 

Footnotes

1.   VAT of £4.35m has been collected on this sale and will be paid over to
HM Revenue & Customs

2.   As at the market valuation undertaken in January 2023

3.   The calculation of the profit on sale is subject to IFRS 16 accounting
requirements regarding sale and leasebacks and will be finalised ahead of the
Group reporting its results for the year ended 31 December 2025

Enquiries

 Headlam Group plc                            Tel: 01675 433 000
 Chris Payne, Chief Executive                 Email: headlamgroup@headlam.com (mailto:headlamgroup@headlam.com)
 Adam Phillips, Chief Financial Officer

 Panmure Liberum Limited (Corporate Broker)   Tel: 020 3100 2000
 Tom Scrivens / Atholl Tweedie

 Peel Hunt LLP (Corporate Broker)             Tel: 020 7418 8900
 George Sellar / Finn Nugent

 

 

 

Notes to Editors

Operating for over 30 years, Headlam is the UK's leading floorcoverings
distributor. The Group works with suppliers across the globe manufacturing the
broadest range of products, and gives them a highly effective route to market,
selling their products into the large and diverse trade customer base. The
Group has an extensive customer base spanning independent and multiple
retailers, small and large contractors, and housebuilders. It provides its
customers with a market leading service through the largest product range,
in-depth knowledge, ecommerce and marketing support, and nationwide next day
delivery service. To maximise customer reach and sales opportunity, Headlam
operates businesses, trade brands and product brands across the UK and
Continental Europe (France and the Netherlands), which are supported by the
group's network, central resources and processes.

 

IMPORTANT NOTICE

The information contained within this announcement is deemed by the company to
constitute inside information as stipulated under the Market Abuse Regulation
(EU) no. 596/2014 as it forms part of UK domestic law pursuant to the European
Union (withdrawal) act 2018, as amended. Upon the publication of this
announcement via a regulatory information service, this information is
considered to be in the public domain.

This announcement has been issued by and is the sole responsibility of the
Company. The information contained in this announcement is for background
purposes and does not purport to be full or complete.

The information contained in this announcement is for background purposes only
and no reliance may or should be placed by any person for any purpose
whatsoever on the information contained in this announcement or on its
completeness, accuracy or fairness. Recipients of this announcement should
conduct their own investigation, evaluation and analysis of the business, data
and property described in this announcement.

The information in this announcement is subject to change. This announcement
is not intended to, and does not constitute or form part of, any offer to sell
or issue or any solicitation of an offer to purchase, subscribe for, or
otherwise acquire, any securities or a solicitation of any vote or approval in
any jurisdiction.

Panmure Liberum Limited is authorised and regulated by the Financial Conduct
Authority. Panmure Liberum Limited is acting for the Company only in
connection with the Transaction and no one else, and will not be responsible
to anyone other than the Company for providing the protections offered to
clients nor for providing advice in relation to the Transaction, the contents
of this announcement or any arrangement or other matter referred to in this
announcement.

Peel Hunt LLP is authorised and regulated by the Financial Conduct Authority.
Peel Hunt LLP is acting for the Company only in connection with the
Transaction and no one else, and will not be responsible to anyone other than
the Company for providing the protections offered to clients nor for providing
advice in relation to the Transaction, the contents of this announcement or
any arrangement or other matter referred to in this announcement.

Appendix

The sale of the Tamworth property to HEPP Mid Box Limited for £21.75 million
constitutes a significant transaction under the Listing Rules. This Appendix,
together with the main body of the announcement, sets out the further
information that is required to be disclosed.

1.   Material Contracts

Sale Agreement

·      On 18(th) July 2025, the Group entered into a sale and purchase
agreement with HEPP Mid Box Limited to sell the Tamworth distribution centre
in consideration for £21.75 million plus VAT.

 

·      The sale and purchase agreement was subject to standard
commercial property terms. Completion occurred on 18(th) July 2025
("Completion").

 

·      The exchange and completion of the properties pursuant to the
terms of the sale and purchase agreement took place simultaneously and as
such, there are no conditions outstanding.

 

·      £0.7 million of the sales proceeds have been retained by the
buyer and will be released to the Group upon the Group undertaking pre-agreed
repairs and maintenance on the property within 36 months of Completion.

 

·      The Company has received the consideration of £21.75 million
plus £4.35million VAT less £0.7 million retention in cash. Other than the
£0.7 million retention there are no amounts outstanding. The VAT will be paid
to HMRC as part of the next quarterly VAT payment.

 

·      The retention will be paid to the Company in cash upon completion
of a pre-agreed schedule of repair and maintenance works. The Company has 36
months from Completion to undertake these works.

 

Leaseback Overview

 

·      The Group has entered into a lease agreement with the new
landlord of the property, on the following terms:

o  Term: from Completion for 10 years.

o  No break clause.

o  Customary provisions dealing with removing the Group's fixtures and
fittings and making good any applicable dilapidations on expiry of the lease.

o  The lease is within the Landlord and Tenant Act 1954, providing the Group
with certain protections, including the ability to enter into a new lease upon
expiry of the current lease.

o  The lease rental is at market rates. The annual leaseback cost is £1.5
million.

 

2.   Risks

 

Headlam shareholders should carefully consider, together with all other
information contained in this announcement, the specific factors and risks
described below. The Company considers these to be the known material risk
factors relating to the transaction. There may be other risks of which the
Board is not aware or which it believes to be immaterial which may be
connected to the transaction and have a material and adverse effect on the
business, financial condition, results of operations or future prospects of
the Group.

 

The risks disclosed below are those which the Company considers: (i) are
material risks related to the transaction; (ii) will be material new risks to
the Group as a result of the transaction; or (iii) are existing material risks
for the Group which will be impacted by the transaction. The risks described
below are not set out in any order of priority, assumed or otherwise.

 

·      The Group may incur liability under the sale contract and
leaseback.

o  The sale contract is based on standard commercial property contract terms
and also includes customary provisions. Both the Group and HEPP Mid Box
Limited carried out a customary due diligence and disclosure process to
minimise the liability under these provisions.

o  The leases are based on customary provisions and dealing with removing the
Group's fixtures and fittings and making good any applicable dilapidations on
expiry of the lease.

·      The market price of shares in the Group may fluctuate on the
basis of market sentiment surrounding the transaction:

o  The shares in the Group are quoted and the price which investors may
realise their shares are influenced by a number of factors, some specific to
the Group and its operations and some which may affect flooring distributors
or publicly traded companies as a whole, or other comparable companies.

o  The sentiments of the stock market regarding the transaction will be one
such factor and this, together with other factors including actual or
anticipated fluctuations in the financial performance of the Group and its
competitors, market fluctuations, and legislative or regulatory changes for
the flooring sector, could lead to the market price of the Group's shares
going up or down.

 

3.   Impact of the transaction on the Company's earnings, assets and
liabilities

 

·      Upon completion, the Group has de-recognised the £8.6 million
book value of the property from its balance sheet and recognised the receipt
of £21.75 million (excluding VAT) less £0.7 million retention in cash, plus
a further £4.35 million of cash collected in respect of VAT to be paid over
to HM Revenue & Customs in the next quarterly VAT payment. Upon Completion
the Group has used the cash proceeds to reduce the drawdown on its revolving
credit facility.

 

·      A profit on disposal of the properties will be recognised. The
amount of profit on disposal is subject to the accounting requirements of
IFRS16 with regard to sale and leaseback transactions and will be calculated
prior to finalising, and subsequently disclosed within, the Group's results
for the year ended 31(st) December 2025.

 

·      The profit on disposal will be classified as a non-underlying
item in the Group's income statement due to its material size and one-off
nature.

 

·      A right-of-use asset and lease liability will be recognised on
the Group's balance sheet in respect of the properties being leased back.
These amounts will be calculated prior to finalising, and subsequently
disclosed within, the Group's results for the year ended 31(st) December 2025.

 

4.3 Use of proceeds

 

·      The proceeds will initially be used to reduce the Group's
drawdown on its revolving credit facility. Over the next 12 months or so the
Group will invest a proportion of the proceeds in the implementation of the
Group's transformation plan, including in initiatives for growth such as the
rollout of display stands and other point-of-sale materials. This
transformation plan was announced on 17(th) September 2024, including details
of the cost of implementation.

 

4.   Additional disclosures

 

·      The Board of the Company unanimously voted in favour of the
transaction and in its opinion the transaction is in the best interests of the
Company's shareholders as a whole, as well as its colleagues, suppliers and
customers. This assessment is on the basis of the transaction further
strengthening the Group's financial position.

 

·      There are no related party transactions or material litigation to
disclose.

 

·    The information required by UKLR Annex 2.2(2) and 2.2(3) is not
available, and as referenced in the main body of this announcement the value
of the consideration for the transaction represents a premium of 153% to the
book value of £8.6 million and 43% to the Company's last market valuation of
£15.2 million. A profit on sale will be generated, which will be recognised
as non-underlying income.  As such, the Board considers the consideration for
the property is fair as far as the shareholders of the Group are concerned.

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