REG - Headlam Group PLC - Full Year Results
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RNS Number : 9755X Headlam Group PLC 25 March 2026
25 March 2026
Headlam Group plc
('Headlam', the 'Company', the 'Group')
Full Year Results
Progress on the transformation plan despite challenging market conditions
Headlam Group plc (LSE: HEAD), the UK's leading floorcoverings distributor,
today announces its full year results in respect of the year ended 31 December
2025 (the 'Period').
FINANCIAL HIGHLIGHTS
2025 2024
Revenue £498.7m £525.7m
EBITDA £(12.5)m £(5.0)m
Underlying(1) Operating Loss £(33.4)m £(24.9)m
Underlying(1) Loss Before Tax £(39.5)m £(31.7)m
Underlying(1) Basic Loss Per Share (44.1)p (31.0)p
Ordinary dividend per share - -
Underlying(1) Operating Cash Flow £(18.6)m £27.0m
Net (Debt)/Cash £(31.4)m £10.9m
Statutory results
Operating Loss £(63.5)m £(31.3)m
Loss before tax £(69.6)m £(38.1)m
Basic Loss Per Share (102.0)p (31.2)p
All numbers above represent continuing operations, except for Net (Debt)/Cash
and Basic Loss Per Share
Challenging market conditions
· Revenue reduced 4.6%(2) year-on-year
· Gross margin 29.5% (FY 2024: 29.7%). Mix impact from growth in
lower-margin larger customers mitigated by proactive sourcing actions and
centralised buying function
· Reflecting market decline, investment in new trade counter
collection points and cost inflation, Underlying Loss Before Tax was £(39.5)m
Proactive action to strengthen Balance Sheet, enhancing long term resilience
· Net Debt £(31.4)m (FY 2024: £10.9m). Three-year £85m ABL
facility agreed post year end, securing financing to 2029
· Stock levels £10.6m lower year-on-year benefiting from
centralised buying initiative as anticipated
· The Group owns property in the UK valued at £75m(3). Six
properties disposed over prior two years at an average premium of 84% to book
value
· Active engagement on three property disposals. Completion
expected in the coming months
· Continental European sale progressing
STRATEGIC AND OPERATIONAL HIGHLIGHTS
Strategic overhaul - multi-year core customer strategy being implemented
· Multi-year core customer strategy introduced in November 2025 to
transform the business and enhance the quality of earnings through disciplined
focus on core independent retailer and contractor customers. The strategy
embeds five key strategic levers:
- Reduce low-margin revenue from the non-core customer base
- Reduce the fixed and variable cost base associated with non-core
customer revenue
- Enhance customer service to our independent retailer and contractor
customers
- Simplify ranges and consolidate suppliers, strengthening relationships
with key partners
- Optimise cash through strict working capital management and disposal
of surplus assets
· Good early progress as demonstrated by:
- Service improvements made in late 2025 now bearing fruit in 2026
- Range rationalisation complete with "live" range reduced from 27k to
16k SKUs
- Clear line of sight of a return to profitability in 2027
Board Changes
· Chris Payne, Group CEO, stepped down from the Board on 3(rd)
October 2025 with Stephen Bird, Non-Executive Chair, assuming the role of
interim Executive Chair
· Rob Barclay joined the Group on 9(th) March 2026 as CEO designate
and will be appointed to the Board on 27(th) April, after which Stephen Bird
will return to the non-executive Chair role
· Richard Jones joined the Group as Interim CFO on 12(th) March
2026 and will replace Adam Phillips, CFO, on the Board on 26(th) March 2026
OUTLOOK
· The new core customer strategy will see a material planned
reduction in revenue over 2026 and 2027.
· Once fully implemented, and, assuming a stable market, this is
expected to result in a smaller base revenue on continuing operations but with
a significant enhancement to quality of earnings through enhanced gross margin
and lower operating costs.
· With cost saving initiatives also on track, overall future net
operating margins expected to return to mid-single digit once the
transformation plan fully executed.
· Property disposal programme and a reduction in working capital
expected to reduce Net Debt by the end of 2026 with further improvement
anticipated in 2027.
· In the near term, trading conditions remain challenging: consumer
spending on home improvements continues to decline and the conflict in the
Middle East, whilst hard to predict, has already created cost pressures for
the wider UK flooring industry with significant price increases in
polypropylene and fuel.
· Over the medium term, with a clear and granular transformation
strategy now in place and beginning to have a positive impact despite
continuing challenging trading conditions, the Board believes that the outlook
for Headlam is positive reflecting the benefits of its market leading
position, inherent strengths and renewed focus on core independent retailers
and contractors.
· The Board therefore continues to have confidence in a return to
profitability in 2027 as previously guided.
Commenting, Stephen Bird, Interim Executive Chair, said:
"Our new core customer strategy, combined with the ongoing benefits of our
transformation programme, provides a clear road map to profitability in 2027
and beyond. Current cost saving initiatives are progressing as anticipated
with milestones being met. Whilst our current trading environment remains
challenging, this should provide reassurance to all stakeholders that Headlam
is delivering and will be able to capitalise on its position as the preeminent
distributor of flooring products in the UK. The independent retailers and
contractors we serve are resilient. The market will recover and when it does,
we will be well placed to support them - initially smaller, but stronger, more
focused, and more profitable.
I would like to thank all employees for their commitment and in ensuring this
is a business model that can weather market cycles and deliver consistent
returns."
Presentations
The Group will be hosting an online presentation and Q&A for analysts at
9.00am UK time today. To register interest in attending, please
email: headlamgroup@headlam.com (mailto:headlamgroup@headlam.com)
A recording of the presentation, as well as the presentation slides, will be
made available on the Group's website (www.headlam.com
(http://www.headlam.com) ) following the conclusion of the investor
presentation.
Rob Barclay (CEO designate) and Richard Jones (Interim CFO) will host an
Investor Meet presentation in the coming weeks - details to be released in due
course. The presentation will be open to all existing and potential
shareholders.
Footnotes
1. To supplement IFRS reporting, we also present our results on an
underlying basis to show the performance of the business before Non-Underlying
Items. These items are detailed in the notes to the financial statements and
principally comprise: amortisation of acquired intangibles, impairment of
assets, business restructuring and change-related costs, profit on sale of
property, ERP system development, and provision relating to legal claim. These
underlying measures, along with other alternative financial measures including
debt and cash flow metrics, form the Group's Alternative Performance Measures
(APMs) that are used internally by management as key measures to assess
performance. Further explanation in relation to these measures can be found in
the glossary of APMs at the end of this announcement.
2. Excluding revenue in Continental Europe presented as a discontinued
operation. Year-on-year revenue decline is calculated on a same number of
working days basis
3. Market valuations, not book value
Enquiries
Headlam Group plc Tel: 01675 433 000
Stephen Bird, Interim Executive Chair Email: headlamgroup@headlam.com (mailto:headlamgroup@headlam.com)
Rob Barclay, CEO designate
Richard Jones, Interim CFO
Adam Phillips, CFO (outgoing)
Panmure Liberum Limited (Corporate Broker) Tel: 020 3100 2000
Tom Scrivens / Atholl Tweedie
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, providing them with a market leading
service through the largest product range, in-depth knowledge, ecommerce and
marketing support, and nationwide delivery service.
Interim Executive Chairman's Review
Introduction and market update
Headlam is the largest flooring distributor in the UK, with unrivalled scale
and well-established national reach. Our network of distribution centres
provide an excellent service to independent retailers and contractors, with
customers enjoying access to the broadest product range, including our own
exclusive brands.
Over the course of the year performance was impacted by a trading environment
that has remained challenging. To compensate, we launched a revised
transformation plan designed to considerably reduce losses in 2026 and return
the Group to profitability in 2027, even if market conditions remain subdued.
To complement the transformation programme, we have initiated a new core
customer focused strategy which enables significant additional network and
infrastructure cost savings as the Group consolidates its operations on
serving independent retailers and contractors.
These measures, combined with the Group's market position, provides a platform
for a return to sustainable profitable growth. Despite the timing of a market
recovery remaining uncertain, we enter 2026 with a clear plan to create
meaningful value over the medium term.
Financial performance 2025
Revenue declined 4.6% in 2025 on a same working day basis, reflecting both
persistently challenging market conditions and the deliberate decision, taken
in November 2025, to exit low-margin revenue that was diluting profitability.
Revenue from larger customers grew in the year overall but declined in the
last few weeks, largely reflecting the revised strategy, published in
November, to reduce low-margin revenue.
Gross margin of 29.5% was broadly flat year-on-year. Operating costs of
£180.7 million were also flat year-on-year with cost inflation and trade
counter investments offset by benefits from the transformation plan. The
underlying loss before tax increased from £31.7 million to £39.5 million.
The Group had Net Debt of £31.4 million at the end of the year and owned
property in the UK valued at £75.3 million. In January 2026 the Group agreed
a new borrowing facility for three years (with the option to extend).
The financial performance is set out in more detail in the Financial Review.
Transformation plan progress in 2025
Despite the market environment, the application of the transformation plan
launched in 2024 has ensured good operational progress over the year.
Key highlights include:
- Network optimisation in the South East, including the opening of a new
distribution centre in Rayleigh and the closure of the Ipswich site. The
review of our South East network continues as we optimise our footprint to
match our revised customer base
- Rollout of innovative new display stands, supporting our independent
retailer customers. Strong feedback from independent retailer customers
- Consolidation of operations in the Midlands, with Nottingham
transferred into other sites
- Launch of fully centralised buying and supply chain, already yielding
significant benefits in stock levels and stock turn. From early October 2025
to February 2026, stock levels in the UK reduced by c.£30m with further
opportunity
- Preparation for sale of the Group's businesses in France and
Netherlands
Headlam's 2026-2028 core customer strategy
The medium-term objective for Headlam is to be a profitable, cash generative
business positioned for sustainable growth.
From a profit perspective, this translates to our expectations that our
transformation plan will create a return to profitability in 2027 and then a
return to historic midsingle-digit operating profit margin levels thereafter
from the annualised positive benefit of these initiatives.
To fund the strategy and build balance sheet resilience, cash is expected to
be generated from property disposals and working capital optimisation. We
therefore expect to have significantly reduced Net Debt by the end of 2027
with further improvement thereafter.
The new strategy, specifically focused on profit generation, alters the
preceding narrative which was focused on revenue growth. In seeking to fill
excess capacity with increased volumes from larger customers and through trade
counter expansion, we moved away from our core independent retailers and
contractors, the customers on which the strength of this business depends.
Those customers were increasingly of the view that the Group was competing
against them rather than supporting them. As a result, we lost share.
The larger customer business that we won, whilst providing positive
contribution to the fixed cost base, required us to maintain a higher level of
infrastructure than would have otherwise been the case and therefore hindered
the ability to implement significant reductions in the fixed cost base.
Furthermore, although the Group secured additional low-margin revenue, we lost
more profitable residential revenue from our core customer base.
Our core customer strategy refocuses the business on independent retailers and
contractors whilst adjusting the cost base of the business accordingly. We
firmly believe that this will be to the benefit of all stakeholders and create
shareholder value.
The strategy has the following core components:
1. Reduce low-margin revenue - refocus on independent retailers and
contractors, whilst eliminating low-margin revenue that ties up fixed costs
2. Reduce costs - as low-margin business is exited, we will take out the
variable costs associated with it, as well as reducing structural, fixed costs
that previously had to be maintained in order to service that low-margin
business
3. Enhance customer service -we are already rapidly improving customer
service to our independent retailer and contractor customer base. Our measure
of delivery success is substantially improved year-on-year for the first two
months of this year. This is starting to be recognised in feedback from
customers.
4. Simplify ranges and consolidate supply base - put simply, we have had
too many ranges and too many suppliers, with volumes spread too thinly across
the supply base. There is opportunity to reduce range duplication, whilst
maintaining a broad product offering, and also to consolidate our supply base
to strengthen relationships with key strategic sourcing partners
5. Optimise cash - a smaller business means less cash needs to be tied
up in working capital and there are also opportunities to dispose of surplus
assets
Taking each in turn:
1. Reduce low-margin revenue
We will refocus and grow with independent retailers and contractors, while
eliminating low-margin revenue elsewhere.
The focus on fixing or exiting insufficiently profitable business falls into
four categories.
A. Reduction in low-margin large customer business
The Group will ensure that all resources are fully utilised to serve
profitable revenue. As a result, large low margin customers that serve to
increase utilisation of existing capacity, but contribute little to profits
and require us to maintain a higher fixed cost base, are no longer desirable.
B. Exit Continental European business
The sale of our businesses in France and the Netherlands continues to
progress. By focusing solely on the UK, losses are reduced and focus increased
on our core customers. Collectively, those businesses made an underlying loss
before tax of £3.7m in 2025, and are presented as a discontinued operation.
C. Category mix
Within our product categories, there is a wide range of gross margin. Certain
products, particularly in the contract element of the market, can be at
relatively low gross margin and, when central costs are fully allocated, the
profit contribution is marginal.
By focusing on the more profitable categories and actively deprioritising low
gross margin categories, our fixed costs and infrastructure requirements, such
as distribution centres and vehicles, naturally reduce, benefiting overall
Group profitability albeit at the expense of revenue.
In addition, we are proactively re-energising our higher-margin consumer
brands which are highly valued by independents enabling them to generate
strong margins and compete against national chains.
D. Trade counters
As at the end of 2025 we had 80 trade counters. However, a collection of our
trade counters, notably those in the South East, are exposed to relatively
high rent costs which reduces the viability of a collection point rather than
servicing those areas with delivery only. Given higher costs, and a product
range typically focused on lower gross margin categories, the plan is to
reduce our trade counter network whilst migrating some profitable category
sales to adjacent trade counters or switching this revenue from "collection
sales" to "delivered sales". This initiative significantly reduces fixed costs
and whilst revenue also reduces, this is skewed to the lower margin
categories.
Furthermore, we have already repositioned the role and organisational
structure of the trade counters. Specifically:
Previously they were a separate business unit with their own management team.
We have now moved the management of the trade counters into our Mercado
independent retailer and contractor sales team. Our trade counter sites have
now been turned into collection points.
We have reclarified our approach to which customers we will trade with;
specifically, that we will only service customers in the flooring trade.
Previously, the trade counter business, whilst only ever servicing trade
customers, did sell a small amount to adjacent non-flooring trades. These
non-flooring accounts were closed in February 2026.
· Furthermore, we are repositioning the ranges available in the
trade counter sites, in order to provide our independent retailer and contract
customers with access to certain ranges that are not available to smaller
trade customers of our trade counter collection points.
In total, the above initiatives are anticipated to cumulatively reduce revenue
whilst significantly increasing the gross and operating margins of the
business when associated costs are removed.
2. Reduce costs
In line with a substantial reduction in unprofitable revenue there is the
opportunity to reduce both direct and indirect costs significantly. Direct
overheads include warehouse, transport, energy, rent and rates.
As part of the core customer strategy our network footprint will be
significantly reduced. In June 2024, prior to embarking on the transformation
programme, we had 1.5 million square foot of warehousing space in our
distribution centres (excluding cross-dock facilities). This has been reduced
to 1.3 million to date and will reduce further.
3. Substantially enhance customer service to our independent and
contractor customer base
Headlam has taken immense pride in its service levels over the years, but in
the last year these have not met our high standards. Deliveries have not been
consistent enough and availability of some ranges has not been strong enough.
The root cause of much of these issues is from a fragmented, decentralised
business model that has taken time to centralise. This has meant that we have
not had stock in the right places and have had to internally move too much
product around our network, putting pressure on costs and on on-time delivery,
as well as stock availability.
In recent weeks we have made strong progress in addressing delivery
consistency. Our measure of delivery success is substantially improved
year-on-year for the first two months of this year. This is starting to be
recognised in feedback from customers.
We are addressing stock availability through better inventory management and
our newly centralised buying function.
4. Simplify our range and consolidate our supply base
In late 2024, we launched a single go-to-market proposition, under our Mercado
brand, consolidating 32 trading businesses. Earlier this year we also
consolidated six different own product brand businesses into the Mercado sales
team. We are also reducing SKUs to focus on the products that matter most to
our core customers. We have already reduced our "live" product range from 27k
to 16k SKUs with further reduction potential as we focus on profitable
category mix.
As the UK's largest purchaser of flooring, we have the chance to create
long-term, mutually beneficial supplier partnerships as we consolidate our
purchases. Supplier benefits secured in 2025 will take effect and fully
annualise in 2026 with good visibility on further opportunities for increased
collaboration benefitting 2026 and 2027.
In addition, there are opportunities to optimise our approach to pricing and
discounting. Having consolidated 32 trading businesses, with 32 price lists
and different approaches to discounting, there is now an opportunity to
implement consistency and optimisation, which we expect to yield gross margin
benefits.
5. Optimise cash
The core customer strategy and transformation plan requires cash to cover the
trading losses until the Group becomes sustainably cash-generative and to fund
the cost of transformation. The Group has a clear and well progressed plan in
place to generate cash inflows through the disposal of assets, albeit these
are not solely in our control, and a reduction in working capital
requirements. The cash inflows from these are intended to more than cover the
cash requirements, leaving the Group with significantly reduced Net Debt at
the end of 2027.
The Group has several options for realising cash from property assets,
including: outright sale, sale and leaseback, or through utilising the assets
for further borrowings. There are currently three properties on the market for
disposal and more will become available for sale over the next 18 months. Any
further transactions, if realised, would accelerate our reduction in Net Debt
and further increase the Group's liquidity.
Since implementing fully centralised buying we have already significantly
reduced stock levels and improved stock turn. In 2023 the stock turn was 3.2x,
improving to 3.5x in 2024 and 3.8x in 2025, with recent run rate above 4x.
Over the medium term we expect to sustain a stock turn of at least 5.0x, which
will generate further significant cash benefits whilst still providing the
Group with substantially higher levels of stock than its competitors in the
UK.
Progress to date
Since the initiation of the core customer strategy in November 2025, and
reflecting our determination to proceed at pace, we have achieved the
following:
- Over £10m of annualised payroll savings achieved by end of December
2025
- Increased pricing with a low margin large customer, which is expected
to cease to be a customer in the coming months which reduces pressure on the
network, improving service levels to independent retailers and enabling us to
reduce fixed costs
- Service delivery substantially improved year-on-year for the first two
months of 2026
- Agreement of a new borrowing facility
Reflecting the amount, and pace, of change in the business, we have decided to
pause the implementation of the new ERP. The development work performed to
date has been "mothballed" in readiness for the project recommencing at the
appropriate time.
Highly valued colleagues
Across the UK, France and the Netherlands Headlam Group Plc employed an
average c.2,200 people in 2025. To maximise the success of the core customer
strategy, it is essential that our colleagues recognise their importance and
the weight placed on continually striving to make Headlam a great place to
work.
We recognise that implementing significant change can be unsettling for
colleagues and a number of colleagues did leave the Group prior to the end of
2025 as part of collective consultation processes. I would like to thank those
colleagues for their hard work over the years and throughout the consultation
processes, and I wish them all the best for the future. I also wish to
recognise the colleagues who remain with the Group and who continue to work
hard to implement the changes to the business.
Outlook
· The new core customer strategy will see a material planned
reduction in revenue over 2026 and 2027.
· Once fully implemented, and, assuming a stable market, this is
expected to result in a smaller base revenue on continuing operations but with
a significant enhancement to quality of earnings through enhanced gross
margin.
· With cost saving initiatives also on track, overall future net
operating margins expected to return to mid-single digit once the
transformation plan fully executed
· Property disposal programme and a reduction in working capital
expected to materially reduce Net Debt by the end of 2026 with further
improvement anticipated in 2027.
· In the near term, trading conditions remain challenging: consumer
spending on home improvements continues to decline and the conflict in the
Middle East, whilst hard to predict, has already created cost pressures for
the wider UK flooring industry with significant price increases in
polypropylene and fuel.
· Over the medium term, with a clear and granular transformation
strategy now in place and beginning to have a positive impact despite
continuing challenging trading conditions, the Board believes that the outlook
for Headlam is positive reflecting the benefits of its market leading
position, inherent strengths and renewed focus on core independent retailers
and contractors.
· The Board therefore continues to have confidence in a return to
profitability in 2027 as previously guided.
Stephen Bird
Interim Executive Chair
25 March 2026
Financial Review
Summary income statement
Re-presented 1
Underlying(( 2 )) result Non-Underlying Items Total Underlying(2) result Non-Underlying Items Total
2025
2025
2025
2024
2024
2024
£m
£m
£m
£m
£m
£m
Revenue 498.7 - 498.7 525.7 - 525.7
Cost of sales (351.4) (3.6) (355.0) (369.7) (10.6) (380.3)
Gross profit 147.3 (3.6) 143.7 156.0 (10.6) 145.4
Operating costs (180.7) (26.5) (207.2) (180.9) 4.2 (176.7)
Operating loss (33.4) (30.1) (63.5) (24.9) (6.4) (31.3)
Net finance costs (6.1) - (6.1) (6.8) - (6.8)
Loss before tax (39.5) (30.1) (69.6) (31.7) (6.4) (38.1)
Tax 4.1 0.7 4.8 6.8 10.2 17.0
Loss from continuing operations (35.4) (29.4) (64.8) (24.9) 3.8 (21.1)
Loss from discontinued operations (4.4) (12.7) (17.1) (3.2) (0.7) (3.9)
Loss for the period (39.8) (42.1) (81.9) (28.1) 3.1 (25.0)
Revenue
Total revenue in the Period decreased by 4.6% on a same working day basis to
£498.7 million (2024: £525.7 million). This excludes revenue in Continental
Europe which has been presented as a discontinued operation(1).
UK
In the UK, we previously reported revenues through three main sales channels:
Regional Distribution, Trade Counters and Larger Customers. Over the last 18
months, the simplification of the Group, integration of sales teams, and the
launch of customer initiatives such as "order anywhere, collect anywhere",
increased the crossover of revenues between these sales channels, particularly
Regional Distribution and Trade Counters. This has been further accelerated
through the consolidation of the previously separate Trade Counters business
into the main sales organisation. These trade counter sites now operate as
collection points under the control of our Regional Sales Managers for
independent retailers and contractors. Accordingly, we show UK revenue in
total rather than split into channels.
Overall revenue in the second half of the year was similar, on a year-on-year
basis, to the first half, but this actually reflected a lower rate of decline
in revenue from independent retailers and contractors offset by lower growth
in revenue from larger customers.
Continental Europe
Revenue declined 0.8% in Continental Europe; the net of growth in the
Netherlands, reflecting new distribution agreements for exclusive supply of
certain branded ranges, and decline in France due to ongoing market weakness.
The revenue performance in France improved in the second half compared to the
first six months, albeit remained in decline.
Gross Margin
Gross margin in the year was 29.5%, broadly unchanged from the 29.7% achieved
in the previous year. This reflected the adverse impact of customer mix (with
growth in lower-margin larger customer sales) offset by early benefits from
the integrated supplier sourcing strategy and centralised buying function.
Costs
Underlying operating costs of £180.7 million (2024: £180.9 million) were
flat year on year. Cost inflation has remained elevated, albeit to a lower
extent than previous years, driven by the 6.7% increase in the national
minimum wage and the increase in employer's National Insurance contributions.
In addition, the final stage of the rollout of new trade counter collection
points added circa £4.8 million of additional operating costs. The cost
inflation and trade counter investment costs were all offset by benefits from
the transformation plan. These benefits are expected to accelerate in 2026
and, at the same time, we also expect cost inflation to be lower and will also
no longer have additional trade counter investment costs, following the
cessation of that rollout programme.
Underlying Profit/Loss
Underlying Loss Before Tax of £39.5 million compared to a loss of £31.7
million in 2024. The table below breaks down the year-on-year movement:
Underlying Loss Before Tax
£m
2024 (31.7)
Revenue (7.7)
Trade Counter investment (2.3)
Cost inflation (4.7)
Mitigating actions 6.2
Interest costs 0.7
2025 (39.5)
The decline in revenue contributed to a £7.7m reduction in profit
year-on-year.
The rollout of new trade counter collection points contributed to a £2.3
million reduction in profit, reflecting the net of additional operating costs
partially offset by the incremental revenue from new sites.
Cost inflation was a £4.7 million headwind reflecting the factors explained
above. This cost inflation impact was lower than the previous two years (2024:
£7.6 million, 2023: £10.2 million) reflecting an easing in inflationary
pressure. Mitigating actions, through the implementation of the transformation
plan, provided £6.2 million of benefit in the year through cost saving
initiatives.
Net interest costs of £6.1 million (2024: £6.8 million) were slightly lower
year-on-year, partly reflecting lower average borrowings, offset by the
interest component of the incremental lease cost of trade counter collection
points and distribution centres.
Non-Underlying Items
Non-underlying items before tax in the year, relating to continuing
operations, totalled a £30.1 million expense (2024: £6.4m expense) as set
out in the table below. The net cash impact of these non-underlying items in
2025 was a £4.2 million cash outflow.
2025 2025 2025 2024
Cash Non-cash Total Total
£m £m £m £m
Amortisation of intangibles - (1.1) (1.1) (1.2)
Impairment of assets - (4.8) (4.8) (4.0)
Business restructuring and change-related costs (19.8) (3.4) (23.2) (19.7)
Profit on sale of property 21.2 (15.0) 6.2 21.1
ERP system development (5.6) - (5.6) (2.6)
Provision relating to legal claim - (1.6) (1.6) -
Non-underlying income/(expense) before tax (4.2) (25.9) (30.1) (6.4)
Consistent with previous periods, the amortisation of acquired intangibles
arising upon consolidation were categorised as non-underlying and amounted to
£1.1 million (2024: £1.2 million).
Impairment of assets was a £4.8 million (2024: £4.0 million) non-cash
expense and relates to the impairment of goodwill and other intangible assets
associated with Melrose cash generating unit.
Business restructuring and change-related costs are in respect of the
transformation plan. The cash items principally comprised severance,
recruitment, retention and other people-related costs; the one-off cost of
investment in new point-of-sale materials to accompany the Mercado
consolidation; and advisory costs. The non-cash expense of £3.4 million
principally relates to stock provisions, reflecting the write-down of legacy
stock holdings in preparation for network optimisation initiatives and the
range rationalisation activities undertaken following the centralisation of
the buying function.
The cost of developing the new ERP system is expensed rather than capitalised
due to it being a cloud-based solution and, as previously guided, the
development cost is being treated as a non-underlying expense, of which £5.6
million was incurred in the year (2024: £2.6 million). At the end of the
year, the decision was taken to temporarily pause the ERP replacement
programme whilst the business focuses on the transformation plan.
A £1.6 million provision has been recorded in respect of a health and safety
offence relating to an accident at one of the Group's sites in 2022.
EPS and Dividend
Total basic loss per share on an underlying basis was a loss of 44.1 pence per
share (2024: a loss of 31.0 pence per share), reflecting the factors set out
above.
No interim or final ordinary dividend has been declared in respect of the
current or prior year. While we have opted not to declare a dividend, our
long-term commitment remains focused on delivering shareholder value. The
Board will continue to review how the business is performing, taking into
account the market conditions and the implementation of the transformation
plan, in assessing when it may be appropriate to reinstate dividend payments.
Tax
The Group's consolidated underlying effective tax rate for continuing
operations for the Period was 10.4% (2024: 21.5%). This is lower than the
standard rate of corporation tax in the UK primarily due to the partial
recognition of a deferred tax assets relating to losses.
Cash Flow and Net Debt
2025 2024
£m £m
Underlying operating loss (33.4) (24.9)
Depreciation and amortisation 20.9 19.9
EBITDA (12.5) (5.0)
Change in inventories 10.6 16.8
Change in receivables 16.9 2.0
Change in payables (34.3) 12.2
Other 0.7 1.0
Underlying Operating Cash Flow (18.6) 27.0
Interest and Tax 1.4 (4.7)
Lease payments (15.8) (13.7)
Capital expenditure (4.4) (10.5)
Non-underlying items (4.2) 48.5
Dividends - (4.8)
Discontinued operations (0.8) (1.2)
Net cash flow before movement in borrowings (42.4) 40.6
Movement in borrowings 59.0 (50.0)
Net cash flows 16.6 (9.4)
Underlying Operating Cash Flow in the year was an outflow of £18.6 million
compared to an inflow of £27.0 million in 2024. The outflow in 2025 included
a £10.8 million payment of VAT in January, that had been collected on the
property sales in December 2024. Excluding this timing item, the Underlying
Operating Cash Flow in the year was an outflow of £7.8 million (and the prior
year would have been an inflow of £16.2 million), which comprised of an
EBITDA loss of £12.5 million, partially offset by working capital and other
inflows (after adjusting for the £10.8 million VAT timing) of £4.7 million.
Inventories continue to be well-controlled and, in the latter few months of
the year and the first two months of 2026, reduced significantly following the
implementation of the centralised buying and supply chain processes. The
reduction in inventory towards the end of the year was initially principally
offset within working capital by a reduction in payables; the efficiencies in
inventory levels turn into cash benefit as the working capital cycles through
and hence is more of a 2026 cash benefit. Inventories have continued to
decline following the year-end. Inventory turn improved from a year-round
average of 3.2x in 2023 to 3.5x in 2024 and again to 3.8x in 2025. In the last
few months it has averaged over 4x. There remains further opportunity here; we
target at least 5.0x (and this would remain below other flooring
distributors).
Payables was a £34.3 million outflow, of which £10.8 million was in respect
of VAT collected on property sales in December 2024 and paid in January 2025.
The remainder reflected a reduction in purchases. Average payment terms with
suppliers are unchanged.
Over the last two years the Group has averaged a net positive working capital
balance of over £70 million; this means that the Group has had £70 million
of cash tied up in funding its working capital. As the Group streamlines its
focus and actively reduces low margin revenue, it will require (all else
equal) less working capital to be invested in the business. This, combined
with the further opportunity for inventory efficiency, means that we
anticipate a substantial working capital inflow over 2026 and 2027.
A net £1.4 million cash was received in the year (2024: £4.7 million
outflow) in respect of interest and tax, reflecting a refund of corporation
tax payments on account made in 2024.
Lease payments were a £15.8 million cash outflow (2024: £13.7 million); the
increase reflects the additional trade counter and distribution centre leases.
Capital expenditure was £4.4 million (2024: £10.5 million) and included
£1.8 million for fitting out new or refurbished trade counters.
There was a £4.2 million outflow (2024: £48.5 million inflow) in respect of
non-underlying items, comprising £19.8 million business restructuring and
change-related costs, and £5.6 million ERP system development costs,
partially offset by £21.2 million proceeds from property disposal.
Net Debt excluding lease liabilities was £31.4 million at the end of the
year. This compares to Net Cash of £10.9 million at 31 December 2024. The
prior year Net Cash position included a temporary timing difference on
property VAT; £10.8 million of VAT was collected on property sales in
December 2024 and paid over to HM Revenue & Customs in January 2025.
Excluding this, the prior year position was Net Cash of £0.1 million. The
movement since this normalised Net Cash position of £0.1 million to the Net
Debt of £31.4 million at the end of 2025 principally reflects the EBITDA loss
of £12.5 million, lease payments of £15.8 million, capital expenditure of
£4.4 million and non-underlying items of £4.2 million.
At the end of the year, the Group had total banking facilities available of
£72.5 million (31 December 2024: £100.4 million), of which £61.0 million
(31 December 2024: £81.5 million) was committed. The committed facility
comprised a revolving credit facility ("RCF") with three lenders that was due
to expire in October 2027. In January 2026 this facility was replaced with an
asset-based lending facility ("ABL") of up to £85.0 million. This also
replaced a £7.5 million uncommitted overdraft. The available amount of the
ABL depends on the amount of relevant assets (property, receivables and
inventory) against which the Group can borrow and is also subject to a
requirement to hold a minimum amount of headroom on the facility, by way of a
liquidity headroom covenant.
The RCF was subject to covenants on liquidity headroom and quarterly EBITDA.
All such covenants were met during the year. The ABL also has covenants on
liquidity headroom and quarterly EBITDA, as well as operational covenants such
as inventory days and debtor days.
The Group continues to have strong asset backing; as at 31 December 2025, the
Group owned UK property with a market valuation of £75 million. Three of
those properties are currently under offer, with sale processes expected to
complete in the coming months. We anticipate further properties will become
surplus to requirements over the next 18 months.
Principal risks and uncertainties
The Group is exposed to a number of principal risks which may affect its
business model, future performance, solvency or liquidity. The group has a
well-established framework for reviewing and assessing these risks on a
regular basis; and has put in place appropriate processes, procedures and
actions to mitigate them. However, no system of control or series of
mitigations can completely eliminate all risks. The principal risks and
uncertainties that may affect the group were last reported on within the 2024
Annual Report and Accounts and have been considered and updated for the 2025
Annual Report and Accounts.
No new principal risks have been identified. The risk ratings of a number of
the principal risks have been amended slightly; however, the scope of the
principal risks remain broadly unchanged since last reported.
Adam Phillips
Chief Financial Officer
25 March 2026
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2025
Re-presented(1)
Note Underlying 2025 Non-underlying (note 3) 2025 £M Total 2025 Underlying 2024 Non-underlying (note 3) 2024 £M Total 2024
£M £M £M £M
Revenue 2 498.7 - 498.7 525.7 - 525.7
Cost of sales (351.4) (3.6) (355.0) (369.7) (10.6) (380.3)
Gross profit 147.3 (3.6) 143.7 156.0 (10.6) 145.4
Distribution costs (121.2) (10.0) (131.2) (119.8) (4.4) (124.2)
Administrative expenses (58.9) (22.7) (81.6) (59.8) (11.2) (71.0)
Net impairment losses on trade receivables (0.6) - (0.6) (1.3) (1.3) (2.6)
Other operating income - 6.2 6.2 - 21.1 21.1
Operating loss 2 (33.4) (30.1) (63.5) (24.9) (6.4) (31.3)
Finance income 0.6 - 0.6 0.1 - 0.1
Finance expenses (6.7) - (6.7) (6.9) - (6.9)
Net finance costs (6.1) - (6.1) (6.8) - (6.8)
Loss before tax (39.5) (30.1) (69.6) (31.7) (6.4) (38.1)
Taxation 4 4.1 0.7 4.8 6.8 10.2 17.0
Loss from continuing operations (35.4) (29.4) (64.8) (24.9) 3.8 (21.1)
Loss from discontinued operations 6 (4.4) (12.7) (17.1) (3.2) (0.7) (3.9)
Loss for the year attributable to the equity shareholders (39.8) (42.1) (81.9) (28.1) 3.1 (25.0)
Loss per share from continuing operations
Basic 5 (44.1)p (80.7)p (31.0)p (26.3)p
Diluted 5 (44.1)p (80.7)p (31.0)p (26.3)p
Total loss per share
Basic 5 (49.6)p (102.0)p (35.0)p (31.2)p
Diluted 5 (49.6)p (102.0)p (35.0)p (31.2)p
(1) The results for the year ended 31 December 2024 have been re-presented to
reflect the presentation of the Continental European businesses as
discontinued (see note 6 for further information).
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2025
2025 2024
£M £M
Loss for the year attributable to the equity shareholders (81.9) (25.0)
Other comprehensive income/(expense)
Items that will never be reclassified to profit or loss
Remeasurement of defined benefit plans 0.1 (0.5)
Related tax - 0.1
0.1 (0.4)
Items that are or may be reclassified to profit or loss
Exchange differences arising on translation of overseas operations 0.1 (0.2)
0.1 (0.2)
Other comprehensive income/(expense) for the year 0.2 (0.6)
Total comprehensive expense attributable to the equity shareholders for the (81.7) (25.6)
year
Total comprehensive expense attributable to the equity shareholders for the
year arises from:
Continuing operations (64.7) (21.5)
Discontinued operations (17.0) (4.1)
(81.7) (25.6)
STATEMENT OF FINANCIAL POSITION
AT 31 DECEMBER 2025
Note 2025 2024
£M £M
Assets
Non-current assets
Property, plant and equipment 68.8 86.9
Right of use assets 53.6 55.1
Intangible assets 11.3 17.6
Deferred tax assets 8.2 3.9
141.9 163.5
Current assets
Inventories 77.4 102.8
Trade and other receivables 86.6 111.0
Income tax receivable - 3.6
Cash and cash equivalents 26.1 12.0
Assets classified as held for sale 22.7 4.8
212.8 234.2
Total assets 2 354.7 397.7
Liabilities
Current liabilities
Bank overdrafts - (1.1)
Other interest-bearing loans and borrowings (59.0) -
Lease liabilities (12.6) (13.8)
Trade and other payables (97.2) (139.2)
Income tax payable (0.4) -
Provisions (1.6) -
Liabilities relating to assets held for sale (14.7) -
(185.5) (154.1)
Non-current liabilities
Lease liabilities (54.1) (47.4)
Provisions (3.3) (3.1)
Employee benefits (1.8) (2.1)
(59.2) (52.6)
Total liabilities 2 (244.7) (206.7)
Net assets 110.0 191.0
Equity attributable to equity holders of the parent
Share capital 4.3 4.3
Share premium 53.5 53.5
Other reserves (15.3) (15.5)
Retained earnings 67.5 148.7
Total equity 110.0 191.0
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2025
Share capital £M Share premium £M Capital redemption reserve Special reserve £M Translation reserve Treasury reserve £M Retained earnings £M Total equity
£M £M £M
Balance at 1 January 2024 4.3 53.5 0.1 1.5 1.9 (19.0) 178.1 220.4
Loss for the year attributable to the equity shareholders - - - - - - (25.0) (25.0)
Other comprehensive expense - - - - (0.2) - (0.4) (0.6)
Total comprehensive expense for the year - - - - (0.2) - (25.4) (25.6)
Transactions with equity shareholders, recorded directly in equity
Share-based payments - - - - - - 1.0 1.0
Share options exercised by employees - - - - - 0.2 (0.2) -
Dividends to equity holders - - - - - - (4.8) (4.8)
Total contributions by and distributions to equity shareholders - - - - - 0.2 (4.0) (3.8)
Balance at 31 December 2024 4.3 53.5 0.1 1.5 1.7 (18.8) 148.7 191.0
Balance at 1 January 2025 4.3 53.5 0.1 1.5 1.7 (18.8) 148.7 191.0
Loss for the year attributable to the equity shareholders - - - - - - (81.9) (81.9)
Other comprehensive income - - - - 0.1 - 0.1 0.2
Total comprehensive income/(expense) for the year - - - - 0.1 - (81.8) (81.7)
Transactions with equity shareholders, recorded directly in equity
Share-based payments - - - - - - 0.7 0.7
Share options exercised by employees - - - - - 0.1 (0.1) -
Total contributions by and distributions to equity shareholders - - - - - 0.1 0.6 0.7
Balance at 31 December 2025 4.3 53.5 0.1 1.5 1.8 (18.7) 67.5 110.0
CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2025
2025 2024
£M £M
Cash flows from operating activities
Continuing operations (69.6) (38.1)
Discontinued operations (16.5) (3.4)
(Loss)/profit before tax for the year (86.1) (41.5)
Adjustments for:
Depreciation and impairment of property, plant and equipment, amortisation and 13.9 11.0
impairment of intangible assets
Depreciation, impairment and termination of right of use assets 14.9 14.1
Finance income (0.6) (0.1)
Finance expense 6.9 7.1
Profit on sale of property, plant and equipment (6.2) (21.1)
Impairment of disposal group classified as held for sale 12.6 -
Share-based payments 0.7 1.0
Operating cash flows before changes in working capital and other payables (43.9) (29.5)
Change in inventories 16.2 28.2
Change in trade and other receivables 15.0 5.4
Change in trade and other payables (30.1) 10.7
Cash (used in)/generated from the operations (42.8) 14.8
Interest paid (7.0) (7.2)
Interest received 0.6 0.1
Tax received/(paid) 4.0 (0.1)
Net cash flow from operating activities (45.2) 7.6
Cash flows from investing activities
Proceeds from sale of property, plant and equipment 21.2 61.3
Acquisition of property, plant and equipment (4.4) (10.5)
Acquisition of intangible assets (0.2) (0.1)
Net cash flow from investing activities 16.6 50.7
Cash flows from financing activities
Proceeds from borrowings 93.0 40.0
Repayment of borrowings (34.0) (90.0)
Principal elements of lease payments (13.8) (12.9)
Dividends paid - (4.8)
Net cash flow from financing activities 45.2 (67.7)
Net increase/(decrease) in cash and cash equivalents 16.6 (9.4)
Cash and cash equivalents at 1 January 10.9 20.4
Effect of exchange rate fluctuations on cash held 0.1 (0.1)
Cash and cash equivalents at 31 December 27.6 10.9
2025 2024
£M £M
Cash and cash equivalents per Statement of Financial Position 26.1 12.0
Bank overdraft per Statement of Financial Position - (1.1)
Cash and cash equivalents classified as held for sale 1.6 -
Bank overdraft classified as held for sale (0.1) -
Cash and cash equivalents per Cash Flow Statement 27.6 10.9
NOTES TO THE FINANCIAL STATEMENTS
1 Basis of preparation
The financial statements have been prepared on a going concern basis.
In determining the appropriate basis of preparation of the financial
statements the Directors are required to consider whether the Group and
Company can continue in operational existence for a period of at least 12
months from the date of approval of the financial statements. The Directors
have assessed the period to the end of March 2027.
The Group's business activities, together with the factors likely to affect
its future development, performance and position are set out in the Interim
Executive Chair's Review. The financial position of the Group, its cash flows,
liquidity position and borrowing facilities are described in the Financial
Review.
The Group meets its day-to-day working capital requirements through its
banking facilities. At the end of the year, the Group had total banking
facilities available of £72.3 million (31 December 2024: £99.3 million), of
which £61.0 million (31 December 2024: £81.5 million) was committed. The
committed facility comprised a revolving credit facility ("RCF") with three
lenders that was due to expire in October 2027. The Group also had a £7.5m
uncommitted overdraft. In January 2026, the RCF and the uncommitted overdraft
were replaced by an asset-based lending facility ("ABL") of up to £85.0
million with two lenders. The available amount of the ABL depends on the
amount of relevant assets (property, receivables and inventory) against which
the Group can borrow. It is also subject to a requirement to hold a minimum
amount of headroom on the facility, by way of liquidity headroom covenants
together with a quarterly EBITDA covenant and operational covenants including
inventory stock turn and debtor days. The quarterly EBITDA covenant applies
until 31 December 2027 after which it is superseded by a fixed charge cover
covenant.
The previous RCF in place at the year-end included liquidity headroom and
quarterly EBITDA covenants. All such covenants were met during the year.
As previously announced, the Group is implementing a transformation plan to
return the Group to profit. This transformation plan is expected to be net
cash generative, resulting in lower Net Debt at the end of 2026 and 2027 than
at the end of 2025. The cash inflow from the transformation plan represents
the net impact of a) cash inflows from property disposals, b) cash inflows
from a reduction in working capital, offset somewhat by; c) the cash outflow
impact of the losses in the business until it returns to profit, and d) the
cash costs of executing the transformation plan.
As at 31 December 2025, the Group owned freehold and long leasehold property
in the UK valued at c.£75m. Of this, property valued at c.£54m is included
in the ABL at an initial 60% loan-to-value, amortising over 15 years. The
remaining properties (valued at c.£21m) are outside the ABL and unencumbered;
three of these properties, representing the significant majority of the value,
are currently on the market for sale, are under offer, and are expected to
complete in the next few months. Furthermore, the Group anticipates further
properties will become surplus to requirements over the next 18 months as part
of the Group's transformation plan. To the extent that any of these properties
are assets included in the ABL facility, they can be sold subject to lender
consent. The Group would retain the cash proceeds of any such sale(s), but the
corresponding element of the ABL facility would be reduced. For example, if a
property were sold for £10m and the amortised element of the facility in
relation to that property is £6m, then the available ABL facility would
reduce by £6m and the Group would improve its liquidity headroom by £4m from
such property sale.
Over the last two years the Group has averaged a net positive working capital
balance of over £70 million; this means that the Group has had over £70
million of cash tied up in funding its working capital. As the Group
implements its transformation plan it expects to be able to release working
capital and manage the re-shaped business with a lower overall working capital
requirement. This, combined with further opportunity for inventory efficiency,
means that the Group anticipates a significant double-digit £million working
capital inflow over 2026 and 2027.
The Group has prepared a base case and a severe but plausible downside
scenario for the period through to the end of March 2027.
The base case scenario represents the Group's estimate of the expected revenue
and margin profile, as well as the cost and margin improvement initiatives
identified. These are set out in more detail in the Interim Executive Chair's
Review and include:
· Reducing low-margin revenue.
· Focusing on the more profitable categories and actively
deprioritising low gross margin categories.
· Reducing our trade counter network whilst migrating some
profitable category sales to adjacent trade counters or switching this revenue
from "collection sales" to "delivered sales".
· The combination of the above enables us to reduce our fixed costs
and infrastructure requirements, such as distribution centres and vehicles.
· Repositioning the role and organisational structure of the trade
counters.
· Benefits through supplier sourcing strategy and consolidation of
volume.
· Optimising our approach to pricing and discounting.
Some of these initiatives are already complete (including a reduction in
annual payroll costs of over £10 million), some are in-flight and some are
due for implementation later in 2026 or in 2027.
The downside scenario assumes the following key changes compared to the base
case over the same period:
· Revenue: in the base case, revenue is projected to decline
year-on-year at a double-digit percentage over the assessment period, as a
consequence of the transformation plan actions. In the downside scenario a
further mid-to-high single digit percentage revenue decline is applied on top,
reflecting market headwinds and/or greater disruption to the Group's revenue
performance from the implementation of the transformation plan.
· Gross margin: a lower margin % is assumed in the downside
scenario, reflecting a lower achievement of margin improvements from the
transformation plan.
· Cost mitigations: lower cost savings achieved than in the base
case.
In both the base case and downside scenarios, the Group is compliant with the
covenants in the ABL over the going concern assessment period, on the basis
that it delivers the cash inflows from property disposals and working capital
reduction included in the projections. We have also considered whether there
are any significant factors in the period shortly beyond March 2027 which
might impact our going concern assessment and are satisfied there are no such
matters. This is on the basis of the assumptions underpinning the Group's
longer term projections, as set out in the viability assessment within the
annual report.
There are also additional mitigations available to the Group that have not
been included in either the base case or in the downside scenario projections.
The additional mitigations that are within the Group's control are:
· further working capital optimisation (recognising that the Group
has assumed a lower stock turn than is generally achieved by other market
participants);
· increasing the amount of borrowing capacity in the ABL through
meeting certain operational KPIs; and,
· additional cost mitigations.
The additional mitigations that are not wholly in the Group's control include:
· additional property sales;
· the sale and leaseback of properties (recognising that the Group
has a successful track record of implementing both short and long term
leasebacks);
· utilising unencumbered properties for additional borrowing
capacity; and
· faster conversion of rebates into cash (e.g. shorter collection
cycles or converting rebates into net pricing).
After due consideration of the factors above, the Directors believe that it
remains appropriate to prepare the financial statements on a going concern
basis. In doing so, it is recognised that, whilst the transformation plan,
which is underway, is expected to be net cash positive, there are elements of
the cash inflows that are not wholly within the Group's or the Directors'
control. The Group would have other mitigating options as set out above; some
of which are and some of which are not wholly within the Group's control.
Whilst the Directors are confident that the plan, or sufficient mitigating
actions, can be executed, in the event that both a) the property sales are
delayed and b) sufficient mitigating options are unable to be implemented, the
Group would need to seek amendments to its liquidity covenants in the ABL
which, given previous strong support from its prior lender group, the
Directors believe would be achievable as required. Given that neither such
completion of property transactions nor further mitigations are wholly within
the Group's control this, in the Directors' view, is considered to constitute
the existence of a material uncertainty that casts significant doubt over the
Group and Company's ability to continue as a going concern and realise its
assets and discharge its liabilities in the normal course of business. The
financial statements do not include any adjustments that would arise from the
basis of preparation being inappropriate.
2 Segment reporting
As at 31 December 2025, the Group had four operating segments in the UK which
are continuing operations. Each segment represents an individual operation,
and each operation is wholly aligned to the sales, marketing, supply and
distribution of floorcovering products. The operating results of each
operation are regularly reviewed by the Chief Operating Decision Maker, which
is deemed to be the Executive Chair. Discrete financial information is
available for each segment and used by the Executive Chair to assess
performance and decide on resource allocation
The operating segments have been aggregated to the extent that they have
similar economic characteristics. The key economic indicators considered by
management in assessing whether operating segments have similar economic
characteristics are the products supplied, the type and class of customer,
method of sale and distribution and the regulatory environment in which they
operate.
As each operating segment within continuing operations in the UK is a trading
operation wholly aligned to the sales, marketing, supply and distribution of
floorcovering products, management considers all segments have similar
economic characteristics. Accordingly the Group presents one reportable
segment, being UK.
In the prior year, the Continental Europe segment was presented as a separate
reportable segment, as it operated in a different regulatory environment. At
31 December 2025, the Continental Europe segment has been identified as a
disposal group held for sale. Information about this discontinued segment is
provided in note 6.
UK Total
2025 Restated
£M 2024
£M
External revenues 498.7 525.7
Underlying cost of sales (351.4) (369.7)
Underlying gross profit 147.3 156.0
Reportable segment underlying operating loss (26.8) (17.2)
Reportable segment assets 306.4 353.1
Reportable segment liabilities (229.6) (190.5)
During the year there were no inter-segment revenues for the reportable
segments (2024: £nil).
Reconciliations of reportable segment profit, assets and liabilities and other
material items:
2025 Re-presented
£M 2024
£M
Loss for the year
Total underlying operating loss for reportable segments (26.8) (17.2)
Non-underlying items (30.1) (6.4)
Unallocated expense (6.6) (7.7)
Operating loss (63.5) (31.3)
Finance income 0.6 0.1
Finance expense (6.7) (6.9)
Loss before taxation (69.6) (38.1)
Taxation 4.8 17.0
Loss for the year from continuing operations (64.8) (21.1)
Loss from discontinued operations (17.1) (3.9)
Total loss for the year (81.9) (25.0)
2025 Restated
£M 2024
£M
Assets
Total assets for reportable segments 306.4 353.1
Unallocated assets:
Intangible assets 0.1 0.1
Income tax receivable - 3.6
Deferred tax assets 8.2 3.9
Cash and cash equivalents 25.5 7.5
Assets allocated to discontinued operations 14.5 29.5
Total assets 354.7 397.7
Liabilities
Total liabilities for reportable segments (229.6) (190.5)
Unallocated liabilities:
Income tax payable (0.4) -
Liabilities allocated to discontinued operations (14.7) (16.2)
Total liabilities (244.7) (206.7)
Continuing operations Reportable segment total £M Unallocated Consolidated total
£M £M
Other material items 2025
Acquisition of property, plant and equipment 4.2 - 4.2
Depreciation of property, plant and equipment 7.4 - 7.4
Depreciation of right of use assets 13.4 - 13.4
Impairment of intangible assets 4.8 - 4.8
Non-underlying items (excluding impairment) 18.7 5.4 24.1
Other material items 2024
Acquisition of property, plant and equipment 10.4 - 10.4
Depreciation of property, plant and equipment 8.0 - 8.0
Depreciation of right of use assets 12.0 - 12.0
Impairment of property, plant and equipment 0.7 - 0.7
Impairment of right of use assets 0.3 - 0.3
Non-underlying items (excluding impairment) 4.6 0.8 5.4
3 Non-underlying items
In order to illustrate the underlying trading performance of the Group,
presentation has been made of performance measures excluding those items which
it is considered would distort the comparability of the Group's results, which
requires application of judgement. These non-underlying items are defined as
those items that are associated with the acquisition of businesses or other
items which by virtue of their nature, size and expected frequency, require
adjustment to show the performance of the Group in a consistent manner which
is comparable year-on-year.
The following are the principal items classed as non-underlying:
• Amortisation of acquired intangibles as they relate to the
acquisition of businesses;
• Impairment of intangibles, property, plant and equipment and right
of use assets as, in totality, they are significant, non-recurring items
relating to the decision to close certain sites;
• Impairment of inventories and receivables relating to a specific
Larger Customer which entered administration in 2024, as they are specific,
significant, non-recurring items;
• Cloud-based ERP system development costs;
• Business restructuring and change-related costs which is a
significant item in 2025. Such costs are expected to continue into 2026 and
2027 as the transformation plan is executed; and
• Profit on sale of property, plant and equipment as these are
non-recurring items.
Impairment of inventories and business restructuring costs relating to
inventory provisions are recognised in cost of sales. Impairment of
receivables are recognised in net impairment (losses)/gains on trade
receivables. Profit on sale of property, plant and equipment is recognised in
other operating income in the Consolidated Income Statement. All other
non-underlying items are recognised in distribution costs or administrative
expenses in the Consolidated Income Statement.
Non-underlying items relate to the following:
Continuing operations 2025 Re-presented
£M 2024
£M
Amortisation of acquired intangibles (1.1) (1.2)
Impairment of property, plant and equipment, intangible assets and right of (4.8) (1.1)
use assets
Impairment of inventories and receivables - (2.9)
Cloud-based ERP system development costs (5.6) (2.6)
Profit on sale of property, plant and equipment 6.2 21.1
Provision relating to legal claim (1.6) -
Business restructuring and change-related costs (23.2) (19.7)
(30.1) (6.4)
Taxation on non-underlying items 0.7 10.2
(29.4) 3.8
Discontinued operations
Amortisation of acquired intangibles (0.1) (0.1)
Impairment of property, plant and equipment, intangible assets and right of - (0.7)
use assets
Impairment on classification of disposal group as held for sale (12.6) -
Business restructuring and change-related costs (0.1) -
(12.8) (0.8)
Taxation on non-underlying items 0.1 0.1
(12.7) (0.7)
Amortisation of acquired intangibles is a non-cash item relating to the
amortisation of intangibles acquired as part of business combinations.
Included within impairment is £3.2 million relating to the impairment of
goodwill and £1.6 million impairment of intangible assets allocated to the
Melrose cash generating unit following an impairment review. In the prior
year, impairment included £0.4 million impairment of goodwill, £0.1 million
impairment of intangible assets, £0.7 million impairment of property, plant
and equipment and £0.6 million impairment of right of use assets. The
impairment charges relate to a combination of the write down of assets related
to the transformation plan and the annual review of impairment. All impairment
charges are non-cash items.
Impairment of inventories and receivables relating to a specific Larger
Customer which entered administration in 2024, as they are specific,
significant, non-recurring items. These are non-cash in nature.
Cloud-based ERP system development costs relates to the development costs to
replace the current ERP system with a cloud-based software-as-a-service
arrangement and are all cash costs.
Profit on sale of property, plant and equipment relates to the sale of one
site which has resulted in £21.2 million of cash proceeds in the year. In the
prior year this related to the sale of five properties in the year as part of
the Group's continued progress against its transformation plan. This resulted
in £61.3 million of cash proceeds in the prior year.
Business restructuring and change-related costs relate to the transformation
plan, including severance costs and advisory fees. The costs comprise £19.8
million (2024: £10.2 million) cash costs and £3.4 million (2024: £9.5
million) non-cash costs. The non-cash costs principally relate to inventory
provisions.
Impairment costs on classification of disposal group as held for sale are all
non-cash in nature.
4 Taxation
Recognised in the income statement
2025 2024
£M £M
Current tax charge/(credit):
Current year - 0.1
Adjustments in respect of prior years 0.1 (0.5)
0.1 (0.4)
Deferred tax credit:
Origination and reversal of temporary differences (4.3) (16.7)
Adjustments in respect of prior years - 0.6
(4.3) (16.1)
Total tax (4.2) (16.5)
Income tax credit attributable to continuing operations (4.8) (17.0)
Income tax charge attributable to discontinued operations 0.6 0.5
Tax relating to items credited to equity 2025 2024
£M £M
Deferred tax on other comprehensive income/(expense):
Defined benefit plans - (0.1)
Total tax reported directly in reserves - (0.1)
Factors that may affect future current and total tax charges
The UK headline corporation tax rate for the year was 25.0% (2024: 25.0%). UK
deferred tax assets and liabilities have been calculated at a rate of 25.0%
(2024: 25.0%).
The Group is within the scope of the OECD Pillar Two model rules. The Pillar
Two legislation was enacted on 11 July 2023. The Group will take advantage of
temporary 'safe harbour' provisions available in the initial years. The Group
does not expect the Pillar Two legislation to have any material impact.
Reconciliation of tax credit
2025 2024
£M £M
Loss from continuing operations before tax (69.6) (38.1)
Loss from discontinued operations before tax (16.5) (3.4)
Loss before tax (86.1) (41.5)
Tax using the UK corporation tax rate of 25.0% (2024: 25.0%) (21.5) (10.4)
Non-deductible expense/(non-taxable income) 3.4 (7.6)
Impact of losses not recognised 13.8 1.4
Adjustments in respect of prior years 0.1 0.1
Total tax in income statement (4.2) (16.5)
Add back tax on non-underlying items 0.8 10.3
Total tax credit excluding non-underlying items (3.4) (6.2)
Loss before tax before non-underlying items (43.2) (34.3)
Adjusted effective tax rate excluding non-underlying items 7.9% 18.1%
Total effective tax rate 4.9% 39.7%
5 Loss per share
2025 Re-presented
£M 2024
£M
Loss from continuing operations for basic and diluted loss per share (64.8) (21.1)
Loss from discontinued operations for basic and diluted loss per share (17.1) (3.9)
Total Loss for basic and diluted loss per share (81.9) (25.0)
Loss from continuing operations for underlying basic and underlying diluted (35.4) (24.9)
loss per share
Loss from discontinued operations for underlying basic and underlying diluted (4.4) (3.2)
loss per share
Loss for underlying basic and underlying diluted loss per share (39.8) (28.1)
2025 2024
Number of shares
Weighted average number of ordinary shares for the purposes of basic loss per 80,268,993 80,204,515
share
Effect of diluted potential ordinary shares:
Weighted average number of ordinary shares at 31 December 80,268,993 80,204,515
Dilutive effect of share options - -
Weighted average number of ordinary shares for the purposes of diluted loss 80,268,993 80,204,515
per share
Continuing operations loss per share
Basic (80.7)p (26.3)p
Diluted (80.7)p (26.3)p
Underlying basic (44.1)p (31.0)p
Underlying diluted (44.1)p (31.0)p
Discontinued operations loss per share
Basic (21.3)p (4.9)p
Diluted (21.3)p (4.9)p
Underlying basic (5.5)p (4.0)p
Underlying diluted (5.5)p (4.0)p
Total loss per share
Basic (102.0)p (31.2)p
Diluted (102.0)p (31.2)p
Underlying basic (49.6)p (35.0)p
Underlying diluted (49.6)p (35.0)p
At 31 December 2025, the Company held 5,356,544 shares (2024: 5,393,392) in
relation to treasury stock and shares held in trust for satisfying options and
awards under employee share schemes. These shares have been disclosed in the
treasury reserve and are excluded from the calculation of earnings per share.
6 Discontinued operations
As at 31 December 2025 the subsidiaries in Continental Europe have been
classified as a disposal group held for sale. The European subsidiaries had
been actively marketed for sale as a package and offers were received from
several interested parties. The Group is proceeding with the disposal with the
preferred bidder. The sale of these subsidiaries are expected to take place H1
2026.
Financial performance of discontinued operation
Period ended 31 December 2025 Period ended 31 December 2024
Underlying 2025 Non-underlying (note 3) 2025 £M Total 2025 Underlying 2024 Non-underlying (note 3) 2024 £M Total 2024
£M £M £M £M
Revenue 66.9 - 66.9 67.4 - 67.4
Expenses (70.6) (0.2) (70.8) (70.0) (0.8) (70.8)
Loss on measurement to fair value less costs to sell - (12.6) (12.6) - - -
Loss before taxation (3.7) (12.8) (16.5) (2.6) (0.8) (3.4)
Taxation (0.7) 0.1 (0.6) (0.6) 0.1 (0.5)
Loss after taxation from discontinued operations (4.4) (12.7) (17.1) (3.2) (0.7) (3.9)
Exchange differences on translation of discontinued operations 0.1 (0.2)
Other comprehensive loss from discontinued operations (17.0) (4.1)
Impairment - discontinued operations
As a result of the classification of the European subsidiaries to a disposal
group held for sale, an impairment charge of £12.6 million has been
recognised within non-underlying expenses for discontinued operations. The
recoverable amount has been determined based on fair value less costs of
disposal. The impairment charge has been recognised as follows: £2.7 million
against property, plant and equipment; £2.6 million against right of use
assets; £0.4 million against other intangibles; £6.4 million against
inventories and £0.5 million against prepayments and accrued income.
The Company has recognised an impairment of £6.4 million against its
investments in European subsidiary undertakings. The recoverable amount has
been determined based on fair value less costs of disposal for the disposal
group.
For the European subsidiaries classified as a disposal group held for sale,
the fair value less costs of disposal considers the offer price received for
the sale less known and estimated costs associated with the sale.
Cash flows from discontinued operations:
Period ended 31 December 2025 Period ended 31 December 2024
Total Total
£M £M
Net cash inflow from operating activities 1.0 0.3
Net cash outflow from investing activities (0.2) (0.1)
Net cash outflow from financing activities (1.5) (1.5)
Net decrease in cash generated by discontinued operations (0.7) (1.3)
Assets and liabilities of disposal group classified as held for sale:
The following assets and liabilities were reclassified as held for sale in
relation to discontinued operations as at 31 December 2025:
Assets classified as held for sale Period ended 31 December 2025
Total
£M
Inventories 3.4
Trade and other receivables 9.5
Cash and cash equivalents 1.6
Total assets of disposal group held for sale 14.5
Period ended 31 December 2025
Total
£M
Liabilities directly associated with assets classified as held for sale
Bank overdrafts (0.1)
Lease liabilities (3.0)
Trade and other payables (11.0)
Employee benefits (0.6)
Total liabilities of disposal group held for sale (14.7)
The cumulative foreign exchange income recognised in other comprehensive
income in relation to discontinued operations as at 31 December 2025 is £1.8
million (31 December 2024: £1.7 million).
7 Additional information
The financial information set out above does not constitute the Group's
statutory accounts for the years ended 31 December 2025 or 2024 but is derived
from those accounts. Statutory accounts for 2024 have been delivered to the
registrar of companies, and those for 2025 will be delivered in due course.
The auditors have reported on those accounts; their report, whilst unmodified,
contains reference to the material uncertainty disclosed in note 1 above. The
auditors' report does not contain a statement under section 498 (2) or (3) of
the Companies Act 2006.
The Group anticipates that the Group's statutory accounts will be posted to
shareholders during April 2026 and will be displayed on the Group's website at
www.headlam.com during April 2026. Copies of the statutory accounts will also
be available from the Company's registered office at Headlam Group plc, Gorsey
Lane, Coleshill, Birmingham, B46 1JU.
This final results announcement for the year ended 31 December 2025 was
approved by the Board on 25 March 2026.
ALTERNATIVE PERFORMANCE MEASURES ('APMs')
Glossary of Alternative Performance Measures Closest equivalent statutory measure Definition and purpose
Underlying Gross Profit Gross Profit Calculated as gross profit before Non-Underlying Items
Underlying Operating Costs Administrative expenses Calculated as administrative expenses, distribution costs, net impairment
losses on trade receivables, net of any other operating income and before
Non-Underlying Items.
Underlying Operating Profit Operating profit Calculated as operating profit before Non-Underlying Items
Underlying Operating Profit Margin None Calculated as Underlying Operating Profit divided by revenue. This measure is
used to assess how effective the Group is at converting revenue into
underlying operating profit
Underlying Profit Before Tax Profit before tax Calculated as profit before tax before Non-Underlying Items. Underlying profit
before tax is used in the determination of Executive Directors' annual bonuses
Underlying Profit After Tax Profit after tax Calculated as profit after tax before Non-Underlying Items
Underlying Basic Earnings Per Share Basic earnings per share Calculated as basic earnings per share before Non-Underlying Items
Underlying Diluted Earnings Per Share Diluted earnings per share Calculated as diluted earnings per share before Non-Underlying Items
Non-Underlying Items None Items which by virtue of their nature, size and expected frequency require
adjustment to show the performance of the Group in a consistent manner which
is comparable year-on-year. These comprise: amortisation of acquired
intangibles; impairment of assets; business restructuring and change-related
costs; profit on sale of property, plant and equipment; ERP system
development; and provision for legal claim
EBIT None Calculated as underlying operating profit or loss adjusted to exclude the
impact of IFRS 16 and share-based payments
EBITDA None Calculated as underlying operating profit or loss excluding the impact of
depreciation and amortisation
Covenant EBITDA None Calculated as underlying operating profit or loss adjusted to exclude the
impact of IFRS 16 and share-based payments and excluding the impact of
depreciation and amortisation
Underlying Operating Cash Flow None Calculated as shown in the table in the Financial Review. This metric is used
to assess underlying cash generation
Net Debt including lease liabilities None Calculated as cash and cash equivalents less other interest-bearing loans and
borrowings and less lease liabilities
Net Debt / Cash None Calculated as cash and cash equivalents less other interest-bearing loans and
borrowings. This is presented for the Group, including continuing and
discontinued operations
This is provided for use by investors, who used this metric before the
adoption of IFRS16 and continue to do so
Like for Like None Calculated as year-on-year revenue growth, expressed as a percentage and
Revenue Growth adjusted to normalise currency and for consistent working days, for businesses
making a full year's contribution. This allows a consistent measure of
year-on-year performance
Underlying Operating Costs Ratio None Calculated as Underlying Operating Costs divided by revenue. This measure
shows how effective the Group is at converting gross profit into Underlying
Operating Profit
Return on Capital Employed None Calculated as underlying operating profit measured as a percentage of average
capital employed, being total equity less non-current other interest-bearing
loans and borrowings less cash and cash equivalents
This demonstrates the relative level of profit generated by the capital
employed
Cash Conversion None Calculated as Underlying Operating Cash Flow divided by Underlying Operating
Profit or Loss and expressed as a percentage
This cash conversion measure demonstrates the success of the Group in
converting profit to cash, which underpins the quality of earnings and
reflects the effectiveness of working capital management
1 The results for the year ended 31 December 2025 have been re-presented to
refer the presentation of the Continental European businesses as discontinued
(see note 6 for further information).
2 To supplement IFRS reporting, we also present our results on an underlying
basis to show the performance of the business before Non-Underlying Items.
These items are detailed in note 3 and principally comprise: amortisation of
acquired intangibles, impairment of assets, business restructuring and
change-related costs, profit on sale of property, ERP system development, and
provision relating to legal claim.
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