In my previous piece earlier this month on Headlam, I referred to the existing broker forecasts as looking on the conservative side, given the tone of its then update and the progress made by the company.
As it transpires today, the numbers have indeed been upped, following a very positive pre-close update from the flooring distribution company.
This cited pre-tax profits as now being expected to come in materially ahead of expectations, which was most welcome news for holders of the shares.
Indeed, it is quite a beat too, (barring something drastic emerging) and the company continues to look very well set for the foreseeable future.
Importantly, there is also good news on the dividend front, alongside a very robust expected net cash position.
As I write, the shares are up 6% or 30p to £5.20p which, with revised numbers now issued from broker Panmure Gordon shines a further light on the recovery and growth prospects for the business.
Within the update revenues are confirmed to be more or less back in-line with pre Covid levels as seen in 2019, with self -help initiatives as previously mentioned here playing a part.
The broker has now upped its full year pre-tax profit forecast from £29.1m to £35m with EPS raised to 30.9p against the previously expected 25.1p.
Net cash is also now anticipated being higher at £50.5m against the £31.8m that had been earmarked.
The same broker currently has a £5.80p target price on the stock as it has also upped its guidance for next year with a pre-tax profit of £41.9m now in place.
Historically, HEAD sees a second half weighting to its sales, so it should be interesting to see how the coming months play out, given the background of disruption and ongoing recovery, so the level of confidence at this stage is perhaps worthy of note.
Rebound activity remains strong according to the company with solid demand being maintained across the residential sector whilst recovery across the commercial space is also seemingly gathering pace.
Aside the improving picture for growth and profits, dividends are also firmly back on the agenda with full year 2021 expected to deliver 11.5p, rising to 14.8p next year.
I don’t like to look too far ahead with business prospects though, particularly in light of what we have all had to contend with, alongside current inflationary pressures.
That said, HEAD does look to be well placed as I referred to earlier and looking beyond next year, Panmure Gordon has pencilled in guidance for 2023. This sees revenue at circa £710m with pre-tax profits of £49m giving EPS of 42.2p, implying a longer term forward PER of 12.
There is also the possibility of further strategic moves across the business which could provide for a future increase in revenue numbers and profits, thus adding to the attraction of holding HEAD for the longer term.