Accelerating
the strategy
Annual Report and Accounts
for the year ended 2024
Our Year in Review
Chris Payne,
CEO
“ The challenges impacting the UK
flooring market have weighed on
our trading performance in the
short term. However, the Board has
been encouraged by the significant
progress we are making against
our strategy and transformation
plan to simplify our operations and
improve our customer offering.
This progress remains critical to
ensuring the business is positioned
for long-term success.”
The UK’s leading floor covering distributor
Q
What are you doing to mitigate the
impact of the market conditions on
Headlam?
A
Over recent years the Group has been
implementing its strategy of broadening its
customer base and implementing a programme of
simplifying and consolidating the business. In light
of the continued market weakness, in May 2024
we announced that the Group is accelerating its
strategy, through a transformation programme
aimed at delivering further integration and
simplification across the business. We expect these
initiatives to deliver a material improvement in
profitability along with significant one-off cash
benefits from disposal of surplus property and
working capital reduction. We’ve already made
good progress on this transformation plan and
have increased the size of P&L and cash benefits
that we are targeting, compared to what we
originally set out in May.
Q
What are your key focuses for 2025?
A
To continue to deliver great service, and grow with
new and existing customers, whilst controlling costs
and driving through efficiencies. We will continue
to invest in the business, including point-of-sale
materials for our independent retail customers,
re-platforming our Mercado online ordering portal
and developing our new ERP system.
Q
The flooring market has had another
tough year. What are your views on the
timing of recovery?
A
The flooring market has seen three consecutive
years of significant decline in volume and is now
materially lower than it was in 2019. This has been
driven by the residential component of the market,
reflecting heavy declines in consumer spending on
home improvements in recent years as a result of
reduced housing transactions, the cost-of-living
crisis and poor consumer confidence, particularly
for major purchases.
There are no significant structural reasons why
the flooring market should not recover. We saw
a significant recovery in the market following the
Global Financial Crisis. Housing transactions have
been back in growth in recent months, consumer
confidence is improving (albeit still fragile) and
disposable incomes are projected to grow. All of
this points to the market returning to growth, but
the timing and pace of recovery remains uncertain
and difficult to predict.
Visit us online at:
www.headlam.com
WELCOME TO
OUR 2024 ANNUAL REPORT
Overview
Our Business at a Glance
02
Chair's Statement
04
Chief Executive’s Review
06
Strategic Report
Market Overview
14
Our Business Model
16
Accelerating Our Strategy
18
Key Performance Indicators (KPIs)
22
Stakeholder Engagement
26
Financial Review
30
Sustainability Report
38
Environmental
40
Social
44
Governance
50
Task Force on Climate-Related
Financial Disclosures (TCFD)
54
Streamlined Energy and Carbon
Reporting (SECR)
59
Risk Management
63
Principal Risks
66
Viability Statement
68
Non-Financial and Sustainability
Information Statement
70
Governance
Compliance Statement
74
Chairman’s Introduction
76
Board of Directors
78
Executive Team
80
How the Board Embeds Culture
82
Board Leadership and Company
Purpose
84
Division of Responsibilities
90
Composition, Succession and
Evaluation
98
Audit Committee Report
100
Nomination Committee Report
108
Directors’ Remuneration Report
114
Directors’ Report
138
Statement of Directors’
Responsibilities
143
Financial Statements
Independent Auditors’ Report
146
Consolidated Income Statement
152
Consolidated Statement of
Comprehensive Income
153
Statements of Financial Position
154
Statement of Changes in Equity
– Group
155
Statement of Changes in Equity
– Company
156
Cash Flow Statements
157
Notes to the Financial Statements
158
Alternative Performance Measures
204
Financial Record
208
Additional Information
210
Revenue
Statutory basic
(loss)/earnings per share
(9.7)%
£593.1m
(2023: £656.5m)
(425.0)%
(31.2)p
(2023: 9.6p)
663.6
656.5
593.1
22
23
24
40.1
9.6
(31.2)
22
23
24
Underlying1 operating (loss)/profit
Total ordinary dividend
(269.6)%
£(27.3)m
(2023: £16.1m)
(100.0)%
£nil
(2023: 10.0p)
39.2
16.1
(27.3)
22
23
24
17.4
10.0
0.0
22
23
24
Underlying1 (loss)/profit
before tax
Net cash/(debt)
(411.8)%
£(34.3)m
(2023: £11.0m)
136.8%
£10.9m
(2023: £(29.6)m)
37.1
11.0
(34.3)
22
23
24
1.8
(29.6)
10.9
22
23
24
Statutory (loss)/profit
before tax
Net debt including
lease liabilities
(684.5)%
£(41.5)m
(2023: £7.1m)
31.1%
£(50.3)m
(2023: £(73.0)m)
41.8
7.1
(41.5)
22
23
24
(35.9)
(73.0)
(50.3)
22
23
24
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 note 3 and principally 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 insurance proceeds. 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.
Financial Highlights
Contents
Overview
Headlam Group PLC Annual Report & Accounts 2024
01
Headlam is the UK’s leading floor covering distributor,
operating for over 30 years.
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.
Headlam has an extensive customer base spanning independent and multiple retailers, small and large
contractors, and house builders. 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.
Revenue
89%
11%
UK
Continental Europe
32
Years operating
20
Distribution hubs
and centres
Over 2,000
People
76
Trade counters
02
OUR BUSINESS AT A GLANCE
Serving multiple customer segments...
...and transforming our business
Online Retailers
Online business only (with no physical
retail premises)
Key needs:
•
Delivery to fulfilment centre or drop
ship vendor (DSV)
•
Well recognised product brands
with social media appeal
•
Direct to customer sample
fulfilment
•
Digital systems, real-time data
sharing and automated ordering
Independent Retailers
A mix of large and small stores,
independently owned
Key needs:
•
Product availability and next day
delivery
•
Customer service and strong
relationships with fast response to
queries
•
Reliable quality
•
New product launches and
promotions; point-of-sale
materials to showcase options to
end-consumer
•
Digital ordering and stock checking
Tradespeople, Fitters
and Small House Builders
Often self-employed with or without a
delivery address
Key needs:
•
Nearby trade counter for collection
•
Quick, one-stop shop
•
Product advice and sampling
showcase for end-consumer
•
Ability to check stock and order out
of hours and on the move
Contractors
Large scale, with premises and
contracts that span sectors
Key needs:
•
Quick ordering and delivery
lifecycle
•
Able to supply nationwide and
to site
•
Account management and
contracts all in one place
•
Sustainability credentials
Major Multiple
Retailers
Flooring specialists and generalists
with nationwide premises
Key needs:
•
Fast and accurate delivery
nationwide
•
Digital systems, real-time data
sharing and automated ordering
•
Supply chain management and
stockholding
•
Sustainability credentials, exclusive
products and insight
Large House Builders
and Housing Associations
Nationwide with multiple
developments
Key needs:
•
Single account management with
contracts in place
•
Able to supply nationwide at scale
and to site
•
Product insight, with tailored
ranges, point-of-sale materials
and showcase options for end-
consumer
Through the acceleration of our strategy with a transformation plan that will:
Simplify our
customer offer
Simplify
our network
and simplify
how we operate
For more information
see pages 18 to 21
Overview
Headlam Group PLC Annual Report & Accounts 2024
03
2024 saw a continuation of the challenging
conditions for the industry as a whole, and
for many businesses exposed to consumer
spending on home improvements.
The flooring market has now declined
significantly for three consecutive years
and this has impacted the Group’s financial
performance. In response to this we
launched a transformation plan during the
year to accelerate the Group’s strategy to
simplify the business; unlocking profit and
cash benefits.
We continued to make good progress implementing our
existing strategy during the year, evidenced by revenue
growth in Larger Customers and Trade Counters, and an
increase in the proportion of our revenue that is from our
own product brands. However, this was more than offset
by the impact of the weak market on the core distribution
business and the Group made an underlying loss before tax
of £34.3 million. The Board is resolutely focused on improving
the profitability of the Group and, in response to the market
conditions, launched a transformation plan during the year.
This transformation plan is rapidly accelerating the journey
we have been on in recent years to integrate, consolidate
and simplify the business. Good early progress has been
Stephen Bird,
Non-Executive Chair
“ In response to
market conditions
the Board launched
a transformation
plan during the year
to rapidly accelerate
the journey we have
been on to integrate,
consolidate and
simplify the business.”
04
CHAIR’S STATEMENT
made, including the consolidation of 32 trading businesses
into one, and the successful implementation of a number
of optimisation initiatives in our logistics network. The latter,
combined with tight working capital management during
the year, has resulted in a significant cash inflow in the year;
and the Group ended the year in a net cash postiive position
whilst also retaining an extensive property portfolio valued
at £94 million.
As announced recently, I took over as Chair from
27 February 2025 following a successful handover with our
previous Chair, Keith Edelman (who decided to step down
from the Board as part of the Company’s Chair succession
plan). I know the Group well, having been a Non-Executive
Director since 2021 and the Senior Independent Director
since 2022, and my experience will serve the Group well as
we continue to implement the transformation plan and
navigate the market conditions. I am very much looking
forward to making progress through the acceleration
of the Group’s strategy and implementation of its
transformation plan.
As I look back over the last few years, we have achieved a
lot as a business; growing revenue in areas of the market
that the Group has been underweight in, modernising
and simplifying the operations and processes, investing in
making Headlam a great place to work, and developing the
Group’s sustainability credentials. The exceptionally weak
market conditions have masked the benefit of these, but the
progress made to date, combined with the implementation
of the transformation plan, will position the Group well over
the long term.
On behalf of the Board, I would like to thank all of our
colleagues for their hard work and commitment in
implementing the changes we have made, and continue
to make, to the Group. I would also like to thank all our
stakeholders for their support during what has been a
difficult year.
Stephen Bird,
Non-Executive Chair
11 March 2025
Overview
05
1
Headlam Group PLC Annual Report & Accounts 2024
Introduction and market update
The Group’s financial performance reflects the ongoing
challenging trading environment across the flooring market.
Flooring, a discretionary ‘big ticket’ purchase, has been
one of the weakest performing categories for consumer
spending. The market has been adversely affected by the
recent cost of living crisis hitting disposable income, the
weakness of housing transactions (until more recently)
and persistent weak consumer confidence. The Board
recognised this ongoing weakness during 2024 and launched
its transformation plan to structurally improve profitability
as well as reduce the capital intensity of the Group. A
huge amount of work has been put into the strategic
transformation, which at its heart will simplify our customer
offer, simplify our network and simplify our operations. While
this plan was only launched during the final quarter of
the year, we have made strong early progress and remain
focussed on driving further momentum in 2025.
Financial performance in 2024
Group revenue was down 9.7% year-on-year at £593.1 million
(2023: £656.5 million). In the UK, revenue declined by 8.9%
and the Group maintained market share overall. Revenue
continued to grow in our key strategic growth initiatives
of Trade Counters and Larger Customers, but this was
more than offset by the decline in Regional Distribution.
Continental Europe revenue declined by 14.9%. The impact
of volume decline, combined with a lack of price inflation
and elevated cost inflation (albeit lower than in the
previous year) resulted in an Underlying Loss Before Tax of
£34.3 million (2023: £11.0 million profit).
Chris Payne,
CEO
“ We are confident that
our strategy, accelerated
by the transformation
plan, will deliver
sustainable improvement
in our financial
performance, whilst
maintaining our position
as the UK’s number one
flooring distributor.”
06
CHIEF EXECUTIVE’S REVIEW
Despite the impact of the market conditions on profitability,
cash generation was strong with a significant reduction
in borrowings as a result of working capital optimisation
and property disposal proceeds, resulting from the
transformation plan. The Group ended the year with Net
Cash of £10.9 million compared to Net Debt of £29.6 million
at the end of the previous year. The Group had £111.3 million
of cash and undrawn facilities available at the end of the
year and a property portfolio valued at £93.9 million, which
demonstrates the strength of the balance sheet.
Full detail of the Group’s financial performance is given in the
Financial Review, including a breakdown of the movement in
year-on-year profit.
Operational and strategic progress in 2024
Although the outputs have been masked by the impact of
the external headwinds on overall financial performance, we
have made good progress in the year. We have continued
to invest selectively and carefully in people, in the network
and infrastructure, and in customer-facing improvements; all
supporting growth, efficiency, and customer service.
The key strategic growth initiatives delivered good results:
revenue from Larger Customers and Trade Counters in
the UK was up compared with 2023. This was offset by the
decline in Regional Distribution revenue, taking the overall
UK revenue decline to 8.9%. This decline was in line with the
market; the Group held share in the UK market in the year.
The market characteristics in France and the Netherlands
were even more challenging than in the UK, resulting in our
Continental Europe revenues declining 14.9% in the year.
More detail on the performance and operational progress
in our sales channels is set out in the Chief Financial Officer’s
Review.
Digital & IT transformation
During the year we consolidated our transactional B2B
websites and app, to align with the customer simplification,
and providing the widest range of products in one place,
as well as adding new features to improve our capability in
clearance.
We have also developed a new product information portal
for our colleagues; providing easily accessible information on
our ranges, to help our customers make informed purchasing
decisions.
We made good progress in the year in the ERP replacement
project, including the selection of software and systems
integrator. The project has now progressed to the “design
and build” phase. As previously explained, this is a modular
rollout and we expect to switch on certain elements of the
new system in 2025, with more to follow in 2026. We expect
the project to be fully complete in 2027. The transformation
plan provides significant benefits for the ERP change, by
simplifying our business processes prior to transitioning
across to the new platform.
Sustainability and our “People”
Our focus on engaging our colleagues at Headlam to
attract and retain the best people has made good progress
this year and we were proud to see a 5ppt improvement in
our colleague engagement survey score in September. This
significant increase results from our enhanced colleague
development offer, improved colleague recognition,
investments in market-leading reward for our sales force and
continued support for our colleagues’ wellbeing. In a year
of structural change at Headlam we have enhanced the
support we have given to managers delivering change and
to colleagues impacted by change through both training
and engaging with third parties to provide practical support
and advice.
Overview
Headlam Group PLC Annual Report & Accounts 2024
07
We continue to see our efforts to reduce carbon emissions
result in good progress against our Scope 1 and 2 reduction
pathway and we have now set our targets for Scope 3 using
SBTi methodology. In 2024 we worked with suppliers across
the industry and with waste management providers to take
a step closer to a circular economy through our successful
take back trial in our Northampton trade counter. This trial
will expand throughout 2025 as we test its scalability.
During the year we launched a successful trial of our first
fitter training programme and we will be expanding this
programme in 2025. This has only been possible with the
support we have received from our suppliers, and also from
our customers, who will employ our trainees at the end of
their programme.
Headlam’s strategy
To maintain our vision to be the leading, most trusted experts
in flooring, we have a five-pillar strategy, launched in 2022:
1.
Maximising sales through great service, solutions, pricing
and range
2. Developing new opportunities for future growth
3. Improving our operational capabilities and effectiveness
4. Leading on sustainability and environmental
responsibility
5. Making Headlam a great place to work
We have made good progress across all five pillars in
the last two years, notwithstanding the impact of the
unprecedented market conditions. We continue to
implement this strategy as previously outlined, but at an
accelerated pace through our transformation plan.
Acceleration of strategy through
our transformation plan
In September 2024 we announced a transformation plan.
There are three parts:
1.
Simplify our customer offer
2. Simplify our network
3. Simplify our operations
The objectives are to improve profitability, increase market
share and release capital from more efficient working
capital management and the disposal of property.
1
Simplify our customer offer
In September we launched a single go-to-market
proposition, called Mercado, consolidating our 32 trading
businesses. This simplifies our offer to our customers and
provides them with the broadest range of flooring through a
unified product list. This major change project has now been
successfully implemented with all customers now having
transitioned their accounts from the 32 trading businesses
into a Mercado account.
Customers benefit from dedicated customer sales support
from a local Area Sales Manager (ASM), providing local
support but drawing on a national network with substantial
expertise; collectively our Mercado sales team has over
3,000 years of experience in flooring. Customers also benefit
from more time with our sales teams, as we have reduced
the average size of the geographical territories covered by
our ASMs. We also launched our “order anywhere, collect
anywhere” customer proposition during the year; enabling
independent retailers, fitters, contractors and housebuilders
to place an order anywhere and to collect from any of our
trade counters; providing unrivalled convenience in the UK
distribution market.
For the first time, we now have a unified, national product
file. This provides our ASMs and customers with simplified
access to a broader range of products through one
customer account, making it significantly easier to do
business with us.
We have also set up dedicated sales managers and
leadership teams covering each of the residential and
contract elements of the market, recognising that
Headlam has an underweight share of the contract market
and therefore a growth opportunity. Within this, we are
developing a new team and proposition specifically focused
on housebuilders and large contractors.
Alongside this we have invested in market-leading
remuneration and incentive packages for our sales teams.
These changes will be supported by investment in innovative
new display stands and other point-of-sale (POS) materials;
this rollout commences later this month and will continue
through 2025, helping our independent retailer customers to
grow together with us.
Finally, our online presence has been simplified and
strengthened; we have now consolidated 32 ordering portals
into one. This is all supported by enhanced digital marketing
(enabling us to concentrate resources on one website, rather
than 32) and social media (combining 64 social media
accounts into one).
08
CHIEF EXECUTIVE’S REVIEW
CONTINUED
2
Simplify our network
Headlam operates from a network of distribution centres
and transport cross-docks1 out of which around 300 delivery
vans (in the UK) provide next-day service to customers across
the country. This is supported by a network of trade counters
offering collection points for independent retailers, fitters,
contractors, etc. This combined delivery and collection
infrastructure provides unrivalled convenience and scale in
the UK market, which we will maintain and enhance.
The configuration of the network of distribution centres
is largely a legacy of Headlam’s acquisitions of regional
flooring distribution businesses in the 1990s and 2000s. In
recent years we have made good progress in optimising and
integrating elements of this network by creating regional
hubs and by consolidating transport operations. We are
accelerating this element of our strategy, to more rapidly
simplify our network.
We have made significant progress in the last twelve
months, including:
•
Optimising our operations in North West England by
transferring stock out of our Stockport distribution centre
and opening up a cross-dock facility nearby.
•
Consolidating our distribution centres in Scotland,
combining two sites near Glasgow.
•
Opening a new distribution centre in Rayleigh (Essex)
and a new cross-dock facility in Ipswich to enable us to
better serve our customers in the South East of England.
As a consequence of this, our Ipswich distribution centre
and Enfield cross-dock facility have become surplus to
requirements and closed.
The above changes result in an improved network for
customer service at slightly lower operating cost, whilst also
generating significant cash proceeds.
We will continue to review and provide updates on our
network as we continually look to enhance customer service
and improve operational efficiency, whilst maintaining a
market-leading presence throughout the UK.
3
Simplify our operations
The simplification of our sales structure and our network
significantly reduces complexity in supporting processes and
functions. This reduces the cost of those operations as well
as improving quality and control.
One of the implications of these changes has been a
centralisation of our Finance function, which is now complete.
By consolidating 32 trading businesses into a single, national
Mercado business, we have also developed a unified product
file. This is supported by a centralised buying and stock
control team.Looking ahead, we will be harnessing these
changes to reduce product duplication, simplify supplier
interaction, and optimise stock ordering and stock holding
1
Transport cross-docks are non-stock-holding locations that
are used to transfer product from overnight trunker deliveries
onto local delivery vans, ready for delivery the following day to
customers in the surrounding area
Objectives and targets for the transformation plan
We have upgraded the targeted benefits since we first announced the plan in September. The objectives and targets are set
out below, along with an update on progress:
Objectives
Target
Progress
Market share gains in our core
distribution business
Market share increase on completion
of the transformation plan
The initiatives underpinning this
objective are on track: POS refresh
launching in March 2025
Unlock capital to deleverage and to
fund the transformation
At least £90m one-off cash inflow
(upgraded from original guidance of
£70m)
£57m achieved in H2 2024
Structurally improve profitability
£25m of ongoing annual profit
improvement (upgraded from original
guidance of £15m)
Initiatives identified and in progress.
£10m of the £25m is targeted to be
delivered in 2025
The targeted £90 million of one-off cash benefit comprises proceeds from the disposal of surplus property and optimisation of
net working capital and is before c.£30 million of one-off cash costs of implementing the transformation programme.
The indicative phasing of the benefits and one-off costs is set out below. The guidance provided below is in respect of the
transformation plan in isolation and does not include other factors impacting on profit and cash, such as: the impact of the
existing strategic initiatives (including the growth plans for Larger Customers and Trade Counters), cost inflation, or market
decline/recovery.
Overview
Headlam Group PLC Annual Report & Accounts 2024
09
2024
£m
2025
£m
2026
£m
2027
£m
Cumulative annual profit benefit
–
10
15+
25
Cumulative one-off cash flow
57
80+
90+
90+
Cumulative one-off cash costs
9
19
25
30
The one-off cash inflow in 2024 relates to H2 only (reflecting that the transformation plan was initiated halfway through the
year) and comprises: £54 million from property disposals and £4 million from reduction in net working capital (adjusted for
movements in stock provisions and for the VAT collected on the property disposals, i.e. the £4 million represents the actual cash
improvement from working capital optimisation actions).
The one-off cash costs include: restructuring costs, fit-out of new sites, dual-running costs (for example, the costs
associated with the Rayleigh distribution centre prior to operations switching over from Ipswich), investment in point-of-
sale equipment, and advisory fees. The one-off cash costs in 2024 relates to costs incurred in H2, following the launch of the
transformation plan.
Current trading and outlook
The Group’s revenue for January and February 2025 declined 6% compared to the previous year, with a slightly improving tend
in more recent weeks. We are pleased to say our new distribution centre in Rayleigh is now delivering a consistent next day
service following its opening in late January and subsequent closure of our operations in Ipswich and Enfield in February.
It has undoubtedly been an exceptionally difficult few years for the flooring market, but the lead indicators are more positive.
Housing transactions have been increasing year-on-year since the early summer of 2024, inflation has declined materially
from its peak, interest rates are expected to reduce and disposable incomes are rising1. Consumer confidence is the missing
ingredient to date; if this improves, we expect to see improved consumer spending on home improvements.
The various external forecasts for flooring and related markets point to the flooring market returning to small growth in 2025,
albeit the timing and pace of recovery remains highly uncertain and could be influenced by macroeconomic and geopolitical
developments. In 2025 we will also start to see the in-year contribution from the transformation plan.
The Board believes that the long-term outlook for Headlam remains positive, reflecting the combination of:
•
Continued implementation of the existing strategy to broaden the base of the business
•
The maturity of the Trade Counter business, recognising that the investment phase will be complete in mid 2025
•
The benefits from the transformation plan, once fully implemented
•
Market recovery, recognising that the market is now materially lower than in 2019 in volume terms.
We are confident that our strategy, accelerated by the transformation plan, will deliver sustainable improvement in our
financial performance and maintain our position as the UK’s number one flooring distributor, whilst also positioning the
business to be at the forefront of market recovery and future growth opportunities as we remain focussed on delivering value
to our shareholders and wider stakeholders.
The Board thanks all the Group’s colleagues for their continued hard work during the challenging period for the flooring market.
Chris Payne,
Chief Executive
11 March 2025
1
Asda income tracker
10
CHIEF EXECUTIVE’S REVIEW
CONTINUED
Overview
Headlam Group PLC Annual Report & Accounts 2024
11
12
STRATEGIC
REPORT
Market Overview
14
Our Business Model
16
Accelerating Our Strategy
18
KPIs
22
Stakeholder Engagement
26
Financial Review
30
Sustainability Report
38
Environmental
40
Social
44
Governance
50
Task Force on Climate-Related Financial
Disclosures (TCFD)
54
Streamlined Energy and Carbon Reporting (SECR)
59
Risk Management
63
Principal Risks
66
Viability Statement
68
Non-Financial and Sustainability
Information Statement
70
Strategic Report
13
Headlam Group PLC Annual Report & Accounts 2024
Market Indicators
Consumer confidence in major purchase has
lagged the recovery in overall confidence
Housing transactions declined 20% in 2023
and a further 8% in Q1 2024, growing thereafter
0
Apr-23
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Overall index
Major purchase index
-5
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-25
-20
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-35
25%
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Mar-24
Apr-24
May-24
Jun-24
Jul-24
Aug-24
Sep-24
Oct-24
Nov-24
20%
15%
10%
5%
0%
-5%
-10%
-15%
-20%
-25%
-30%
Market Context
It has been an exceptionally difficult few years for the
flooring market. Two-thirds of this market in the UK is
residential and therefore reliant on consumers choosing
to spend on home improvements. As a “big ticket”,
discretionary purchase, flooring has been one of the weakest
performing categories of consumer spending, suffering
from heavy decline. This reflects the impact of the cost-of-
living crisis on disposable incomes, the decline in housing
transactions (20% in 2023 and a further 8% in Q1 2024,
improving thereafter) and weak consumer confidence. This
has resulted in a sustained decline in market volume over the
last three years. Headlam has maintained market share over
this period.
The macroeconomic factors described above, along with
the after effects of COVID-19, has caused the traditional
seasonality to trading to be less pronounced in the last
three years. COVID-19 has been thought to have pulled
forward some home improvements works, whilst the cost-
of-living crisis is thought to be causing consumers to be
deferring work.
An unusual dynamic of the flooring market in the last two
years has been the lack of manufacturer-led price increases.
Looking back over the last 20 years or so, manufacturers
would typically apply an inflationary price rise each year.
This would flow through the supply chain, resulting in an
increase in distributor prices and ultimately into the retailers
who would typically pass that on in higher prices to the
end consumer. This is important for distributors because
the price inflation, whilst neutral for margin percentage,
would grow absolute gross profit in order to offset their
overhead inflation. Due to the exceptionally weak volumes in
the market, there have been very limited price rises in 2023
and 2024, and indeed some instances of price deflation, as
manufacturers compete for volume to utilise their factories.
There are a number of lead indicators for the market,
including: housing transactions and consumer confidence.
These are looking more positive, and external forecasts
for construction output, housing output, RMI (residential,
maintenance and improvement) spend and the flooring
market point to growth returning in 2025 as result of
improved consumer spending on home improvements.
However the timing and pace of that recovery remains
uncertain.
As the clear UK market leader, drawing on a heritage of
over 30 years industry knowledge and expertise, a large
and diverse customer base, and long-established supplier
relationships, Headlam has a unique long-term opportunity.
With the broadest and largest product range and the
most comprehensive and scaled delivery and collection
network across the UK, recent years have seen the Group
strategically refocus to broaden the customer base of
the business to provide incremental growth opportunities.
This enables us to service an increasingly diverse range
of customer types, spanning independent retailers,
tradespeople, major multiple retailers, housebuilders, online
retailers and contractors.
Headlam’s Market Opportunity
The flooring market is worth around £2.5 to £3 billion.
Headlam has previously operated primarily in the traditional
retailers and tradespeople/fitters elements of the market.
The Group’s strategy is to broaden the base of the business
to access the areas of the market where Headlam is
underweight, such as contractors, multiple retailers or
housebuilders. Good progress was made in 2024, with 4%
and 7% growth in revenue from Larger Customers and Trade
Counters, respectively; however, there remains a significant
opportunity for further growth as the Group continues to
execute its strategy.
14
MARKET OVERVIEW
Chris Payne,
CEO
“ There is a significant
long-term market
opportunity for growth
as the Group executes its
strategy to broaden the
base of the business.”
Two-thirds residential, one-third commercial
The value we create
Existing Headlam Weighting
High
Low
Consumer spending on home improvements
continued to decline, compounding a weak 2023
5%
Sep-23
Oct-23
Nov-23
Dec-23
Jan-24
Feb-24
Mar-24
Apr-24
May-24
Jun-24
Jul-24
Aug-24
Sep-24
Oct-24
Nov-24
Dec-24
2.5%
0%
-2.5%
-5%
-7.5%
-10%
Traditional
Retailers
Tradespeople
and Fitters
Contractors
(including government)
Multiple Retailers and
other Larger Customers
Larger
Housebuilders
Online
(pure online)
Sources:
• UK market size: estimates by LEK
• Consumer confidence: NIQ GfK
• Housing transactions:
www.gov.uk/government/statistics/monthly-property-
transactions-completed-in-the-uk-with-value-40000-or-above
• Consumer spending on home improvements:
www.barclayscorporate.com/insights/industry-expertise/uk-
consumer-spending-report
Headlam Group PLC Annual Report & Accounts 2024
15
Strategic Report
We create value by
leveraging our key
relationships, supply
chain expertise, and
innovative approach
to deliver products
that are both
sustainable and fit
for purpose.
Our people
Attracting and retaining the best
people to provide the highest
levels of customer service, and
working together to deliver
success.
Our culture
A shared group of values, including
to ensure a business of integrity
with robust controls and ethical
conduct.
Our expertise
Ensuring we retain and build upon
our market leading expertise
through ongoing investment in
people and the business.
Our sustainable mindset
Ensuring the long-term success
of the business through a focus
on a sustainable business model
and working closely with all
stakeholders.
Our relationships
Actively engaging with all stakeholders, including people,
customers and suppliers, to support each other and deliver
success together.
Working closely with our suppliers across the globe to launch innovative
and successful products into the marketplace, sharing data and ensuring
an efficient and ethical supply chain.
What differentiates us
What we rely on
Supporting our suppliers
Our customer-led
approach
Broadest product
offering; next day
delivery and collection;
industry-leading App;
improved B2B website.
Our differentiated
offering/routes to
market
The broadest offering
across the different
customer groups, with
significant opportunity
for future growth by
leveraging our scale
and reach.
Our material handling
and processing
capabilities
Largest inventory
holding amongst peers.
Able to process a high
volume of orders for next
day delivery.
16
OUR BUSINESS MODEL
Purchasing
Sourcing and purchasing leading,
innovative and exclusive products
from a wide range of suppliers/
manufacturers from across
the globe.
Customer service
Providing our customer base with
the widest range of products
and comprehensive service
propositions tailored to their
specific needs.
Solutions
Offering an array of solutions
across the value chain, including
stockholding and storage
solutions, product insight and
knowledge, curated exclusive
ranges, and sales support.
Delivery
Providing a truly nationwide
delivery service, with next
day delivery or trade counter
network collection service for all
customers.
We work alongside our suppliers to launch innovative and successful
products into the marketplace, sharing data and ensuring an efficient
and ethical supply chain.
Working closely with our suppliers across the globe to launch innovative
and successful products into the marketplace, sharing data and ensuring
an efficient and ethical supply chain.
What we do
Supporting our customers
Our Colleagues
Providing an inclusive and
collaborative working environment
where people are supported, and
can develop and succeed.
Our Customers
Helping our customers grow their
businesses through an outstanding
service, and giving them
competitive advantages.
Our Suppliers
Providing a highly effective and
efficient route to market for their
products and access to a large and
fragmented customer base.
Our Shareholders
A focus on ensuring the long-term
success of the businesses, and
improving financial performance
to ensure increasing shareholder
returns.
Our Communities
and the Environment
Supporting local communities
through employment and
engagement activities, and
reducing our impact on the
environment through our
sustainability strategy.
The value we create
Our extensive
distribution network
The largest delivery
and collection network
in the UK.
Our product
knowledge and
ranging
Unrivalled product
knowledge and
expertise. Able to
provide valuable
insight to both
customers and
suppliers.
Our disciplined
capital allocation
strategy
Balancing investment,
for growth with
shareholder returns..
Headlam Group PLC Annual Report & Accounts 2024
17
Strategic Report
Our Fundamentals
Existing strategy
Transformation Plan
Maximising sales through
great service, solutions,
pricing and range
Improving our operational
capabilities and
effectiveness
Developing new
opportunities for
future growth
Leading on sustainability
and environmental
responsibility
Making Headlam a
great place to work
for everyone
1
Simplify our
customer offer
2
Simplify our
network
3
Simplify our
operations
Purpose
Creating great places for
our communities to live,
work and play
Vision
The leading, most trusted
experts in flooring
Values
•
Keep each other safe and
well, always
•
Work together, with everyone
•
Keep improving, everywhere
•
Lead by example, we are all
leaders
•
Act sustainabily, use less,
waste less, give back
•
Get it done, brilliantly
Culture
Colleagues are at the heart
of our business, and are our
greatest asset. There are
over 2,000 colleagues at
Headlam within a variety
of departments, including
warehousing, transport, sales,
and administration.
We continue to focus on making
Headlam a great place to work,
and ensure colleagues share in
the Group’s long-term success.
18
ACCELERATING OUR STRATEGY
Existing strategy
Strategic Priority
Progress made in
last two years
Links to KPIs &
Principal Risks
Maximising sales
through great
service, solutions,
pricing and range
•
Launched the award-winning
Everyroom brand
•
Increased presence in the rugs
market with Melrose acquisition
•
Increase in Own Product Brand mix
to 38.8% in 2024
•
Positive progress on strategic
initiatives overshadowed by impact
of market weakness
Link to Risks
1
2
7
Link to KPIs
1
2
3
4
5
Developing new
opportunities for
future growth
•
Increased Trade Counter footprint
from 53 to 76
•
Trade Counter business now
annualising over £100m revenue
•
Strong growth in revenue from
Larger Customers
•
New account wins in Larger
Customers
Link to Risks
1
2
3
7 10
Link to KPIs
1
2
3
4
5
6
Improving our
operational
capabilities and
effectiveness
•
Transport integration (deliveries
made from closest site)
•
Dynamic route planning
•
Added Drop Ship Vendor capability
•
Live customer delivery tracking
Link to Risks
1
3
4 10
Link to KPIs
2
3
4
5
7
8 10 11
Leading on
sustainability and
environmental
responsibility
•
Scope 3 targets set
•
Achieved ISO 14001 environmental
certification at key sites
•
Over 85% of non-commercial
vehicle fleet now hybrid or full
electric
•
Successful trial of flooring
take-back scheme
Link to Risks
2
7
8
9
Link to KPIs
10 11
Making Headlam a
great place to work
for everyone
•
Investment in training and
development
•
Launch of Wellbeing & Inclusion
strategy
•
Rollout of safety enhancements,
including telematics in vehicles
•
Launch of fitter training
programme
•
5ppt improvement in colleague
engagement in 2024
Link to Risks
5
6
Link to KPIs
8
9
Headlam Group PLC Annual Report & Accounts 2024
19
Strategic Report
Targeted benefits of transformation plan
We are simplifying our customer offer...
Progress made
✓
Launched and embedded
the national Mercado
business, consolidating 32
trading businesses
✓
Developed and launched
unified product list
✓
Implemented dedicated
residential and
commercial teams
✓
Launched “order
anywhere, collect
anywhere”
✓
Launched Mercado app
and consolidate 32 online
ordering portals
Outlook for 2025
•
Roll out of innovative,
new display stands to
independent retailers,
starting in March 2025
•
Re-platforming the online
ordering website
•
Further review and
investment in our
proposition for all
customer types
1
Transformation Plan
Targeting £20m+ of proft improvement and £90m+ of one-off
cash benefits
£90m+ one-off cash inflow
•
Targeted to be achieved by the
end of 2026
•
To be achieved from property
disposals and working capital
optimisation.
•
£57m delivered in H2 2024
£25m+ annual profit
improvement
•
Achieved through a combination
of margin benefits, operating cost
savings and interest cost savings
•
The annual profit improvement
of over £20m is expected to be
realised from 2027 onwards,
(reflecting the phasing of
initiatives over the next two years
£30m one-off cash costs
•
Includes restructuring costs,
investment in new sites,
relocation costs and advisory/
consultancy fees
•
We have also ringfenced
significant investment in a major
refresh of display stands as part
of the launch of the consolidated
Mercado business
20
ACCELERATING OUR STRATEGY
CONTINUED
Transformation Plan
...simplifying our network...
Progress made
✓
Opened a brand new
cross-dock facility in
Irlam (Manchester)
and consolidated our
Stockport distribution
centre into other
nearby sites
✓
Opened a new
distribution centre
in Rayleigh (Essex),
facilitating the
closure of our Ipswich
distribution centre
and Enfield transport
cross-dock facility
✓
Consolidation of two
distribution centres
near Glasgow into one
Outlook for 2025
•
We will continue to
review our network as
we continually look
to enhance customer
service and improve
operational efficiency
2
Scotland
Eurocentral
Newcastle
Rochdale
Gildersome
Leeds
Nottingham
Rayleigh
Ipswich
Stockport
Thatcham
Transport X dock
Aberdeen
Transport X dock
Enfield
Transport X dock
Rochester
UK map key
Distribution centre
Cross-dock facility
Closed/closing
New distribution centres
New cross-dock facility
Scotland
Uddingston
Tamworth
Coleshill
Bridgend
Plymouth
Transport X dock
Belfast
Transport X dock
Irlam
Transport X dock
Ipswich
Transport X dock
Bristol
...and simplifying our operations
Progress made
✓
Unified product
file supported
by a centralised
buying and stock
control team
✓
Centralisation of
Finance function
Outlook for 2025
•
Optimisation of stock ordering and holding, by
centrally coordinating how much to buy and
where to locate it
3
Headlam Group PLC Annual Report & Accounts 2024
21
Strategic Report
Financial KPIs
1 Like-for-like1
revenue growth (%)
APM
Measurement
Year-on-year revenue growth, expressed
as a % and adjusted to normalise
currency and for consistent working
days, for businesses making a full year’s
contribution.
Why it’s important and relevant
Allows a consistent measure of
year-on-year performance.
Initiatives and actions
for improvement
Organic revenue growth is a key
strategic objective with specific projects
to support its delivery.
Link to Strategy
0.5
(2.8)
(10.5)
22
23
24
2 Underlying gross
profit margin (%)
Measurement
Measured as a % of revenue.
Why it’s important and relevant
Shows the effectiveness of gross profit
generation from revenue.
Initiatives and actions
for improvement
Ongoing pricing discipline, and product
ranging.
Link to Strategy
33.1
31.7
29.9
22
23
24
3 Underlying2 operating cost
ratio (%)
APM
Measurement
Measured as a % of revenue.
Why it’s important and relevant
Shows how effective the Company is at
converting gross profit into operating
profit. Underlying2 is used to show the
underlying performance of the business
without non-underlyingitems.
Initiatives and actions
for improvement
Focus on operating efficiencies
including simplifying our network
and our operations under the
Transformation Plan.
Link to Strategy
27.2
29.2
34.5
22
23
24
The Board believes these Key Performance Indicators (‘KPIs’) provide a comprehensive
and relevant list of measurements with which to assess the Group’s financial, operational,
and social performance towards the achievement of its strategy. Commentary on
the Group’s use of Alternative Performance Measures (‘APMs’) alongside International
Financial Reporting Standards (‘IFRS’) Measures is given within the Financial Review on
pages 30 to 37, and below.
1
Like-for-like revenue is calculated based on constant currency from activities and businesses that made a full contribution in both the 2024
and the comparator year(s), and is adjusted for any variances in working days.
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 and other
acquisition-related costs; impairment of assets; business restructuring and change-related costs; profit on sale of property, plant and
equipment; ERP system development; and insurance proceeds. 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.
22
KEY PERFORMANCE INDICATORS (‘KPIs’)
4 Underlying2 operating
profit /(loss) margin (%)
APM
Measurement
Measured as a % of revenue.
Why it’s important and relevant
Shows the effectiveness of sustainable
operating profit generation from
revenue. Underlying2 is used to show the
underlying performance of the business
prior to non-underlying items.
Initiatives and actions
for improvement
Existing strategy of maximising sales,
complemented by the Transformation
Plan to simplify our customer offer,
together with the operating efficiencies
described in KPI 3.
Link to Strategy
5.9
2.5
(4.6)
22
23
24
5 Statutory basic earnings/
(loss) per share (‘EPS’) (p)
Measurement
Profit after tax divided by average basic
weighted number of shares.
Why it’s important and relevant
Shows the level of profit per share
attributable to shareholders.
Initiatives and actions
for improvement
In line with statutory profit performance.
Link to Strategy
40.1
9.6
(31.2)
22
23
24
6 Underlying return on capital
employed (‘ROCE’) (%)
APM
Measurement
Measured as underlying2 operating profit
as a % of capital employed.
Why it’s important and relevant
Demonstrates the relative level of
underlying profit generated by the
capital employed. Underlying2 is used to
show the underlying performance of the
business without non-underlying items.
Initiatives and actions
for improvement
Focus on efficient use of capital. May
be offset in the short term by a period
of upfront investment and maturity, e.g.
trade counter roll-out.
Link to Strategy
19.6
7.6
(14.4)
22
23
24
Headlam Group PLC Annual Report & Accounts 2024
23
Strategic Report
Non-Financial KPIs
7 Inventory turn
Measurement
Annual ratio measured by comparing
underlying cost of goods sold during
the financial period with the average
annual inventory level (using averaged
data points at 1 January, 30 June and
31 December).
Why it’s important and relevant
A higher inventory turn is an indicator
of efficient revenue generation,
and more effective utilisation of
distribution centre capacity.
Initiatives and actions
for improvement
Centralised buying and stock control
team, maintaining a unified national
product file.
Link to Strategy
3.2
3.2
3.5
22
23
24
8 Employee retention (%)
Measurement
Retention measures the ability to
retain employees in the current
year compared with previous years.
It is measured as a percentage of
employees retained in the Company
between 1 January and 31 December.
*The figures have been restated to
exclude the impact of redundancies.
Why it’s important and relevant
Retention demonstrates the
Company’s ability to retain employees.
The Company is continuing to develop
a cultural ethos, which attracts and
retains the best talent to ensure
valuable workforce knowledge is
retained to support delivery of the
strategy, and reduce the costs involved
in hiring and training employees.
Initiatives and actions
for improvement
Focus on people and culture, including
investing in people through training
and review of reward/benefits.
Link to Strategy
86
85
81
22*
23*
24
24
KEY PERFORMANCE INDICATORS (‘KPIs’)
CONTINUED
9 Reportable incidents
(‘RIDDOR Reports’)
Measurement
Reporting of Injuries, Diseases and
Dangerous Occurrences Regulations
2013 ('RIDDORs'). These regulations
require employers, the self-employed
and those in control of premises to
report specified workplace incidents.
Why it’s important and relevant
By measuring reportable injuries, it is
possible to identify any deficiencies
in the Company’s processes, allowing
continuous improvement in health and
safety standards.
Initiatives and actions
for improvement
Change in the National Safety Team
structure to deliver effective support
to the Group.
Link to Strategy
19
25
17
22
23
24
10 Deliveries per
commercial vehicle
Measurement
Average deliveries per commercial
vehicle per day in area following
Transport Integration (delivery
consolidation) project. Prior to the
project, in 2019 it was 12.
Why it’s important and relevant
The Transport Integration project
results in more deliveries per
commercial vehicle, which reduces
the Company’s impact on the
environment through a reduced
number of vehicles needed to serve
local areas.
Initiatives and actions
for improvement
Transformation Plan simplifying our
network.
Link to Strategy
14
14
14
22
23
24
11 UK Scope 1 and 2 emission
reduction
Measurement
Percentage reduction in UK Scope
1 and 2 emissions (tCO2e) against
a baseline year set at 2019 on a
location basis.
Why it’s important and relevant
Need to meet the reduction pathway
required to achieve the interim target
of a 46% reduction by 2030, and
reduce the Company’s contribution to
climate change.
Initiatives and actions
for improvement
Actively engaged in transition
planning, with the main
decarbonisation actions currently
being pursued detailed in the
Sustainability Report page 38.
Link to Strategy
44
47
43
22
23
24
Please see more details in our Sustainability Report on page 38
Strategic Report
25
Headlam Group PLC Annual Report & Accounts 2024
Acting in the interests of stakeholders is vital in delivering our purpose
The Board has responsibility for managing the business to promote its success, and having regard to how its decisions
and events impact its stakeholders, engaging with and supporting them appropriately
Our Colleagues
Our Customers
Relationship to Headlam
Colleagues are at the heart of our business, and are
our greatest asset. There are over 2,000 colleagues at
Headlam within a variety of departments, including
warehousing, transport, sales, and administration.
How we support
We continue to focus on making Headlam a great place
to work, and ensure colleagues share in the Group’s
long-term success.
How we engage
The CEO, CFO, Executive Team, and Non-executive
members of the Board all have frequent interaction
with colleagues, including site visits and both formal
and informal meetings and forums (inclusive of the
Employee Forum).
Effect on decision making, outcome,
and benefits to stakeholders
Despite the weak market conditions, we continued
to invest in the stratefic priorities. This is aligned with
our fundamental belief that the long-term success of
the business and the expansion of its market-leading
position is of most benefit to all stakeholders.
Further investments in a strong health and safety
culture.
Conducted our second colleague engagement survey,
providing valuable insight into what is working well and
what can be done to better engage our colleagues.
Took the decision to again tier our cost-of-living
increases to ensure lowest-paid colleagues got the
greatest increase.
We launched a transformation plan in September 2024,
which has significant impact on some of our colleagues;
we have carefully communicated and engaged with our
colleagues throughout.
Relationship to Headlam
Imperative to our success and the growth of the
Company.
We have an extensive customer base spanning
independent and multiple retailers, small and large
contractors, and house builders.
How we support
We provide our customers with a market-leading service
through the largest product range, in-depth knowledge
ecommerce and marketing support, and nationwide
next day delivery service.
We help our customers grow their businesses through
providing them with competitive advantages.
How we engage
Frequent interaction through sales representatives,
dedicated service teams, and communications
channels.
Six monthly customer surveys, and feedback
mechanisms Focus groups, including on new product
launches.
Effect on decision making, outcome,
and benefits to stakeholders
We decided to continue investing in the strategy, and
for the future, despite the difficult economic backdrop.
This is aligned with our fundamental belief that the
long-term success of the business and the expansion
of its market-leading position is of most benefit to all
stakeholders.
Considerable investment and progress in upgrading the
network to increase the level of service to all customers.
Continue to improve the service propositions for all
customer segments, including: i) rolling out the trade
counter network to create a nationwide footprint that
services both the fitter and general contractor market;
and ii) rolling out a DSV proposition to larger retailers.
26
STAKEHOLDER ENGAGEMENT
Our Suppliers
Our Shareholders
Relationship to Headlam
Key to ensuring we can supply the best product at a
competitive price in a timely manner to customers /
end-consumers.
We work with suppliers across the globe manufacturing
the broadest range of products, and give them a
highly effective route to market into the fragmented
customer base.
How we support
Helping and supporting manufacturers with selling
their products into our large and diverse trade
customer base.
How we engage
Frequent visits to suppliers’ sites and premises. Annual
Supplier Conference held to share our insights and
strategy with them, and how we can more effectively
work together.
Sharing of sales data, and insight into customer and
end-consumer buying.
Effect on decision making, outcome,
and benefits to stakeholders
During the year we launched a transformation plan
to simplify the business and its processes. This makes
Headlam easier to do business with, which is beneficial
for our suppliers.
We have continued to invest in growing the trade
counter estate, which provides our suppliers with access
to more of the fitter and contractor market.
Continued to work closely on sharing data, and ensuring
an efficient and ethical supply chain.
Relationship to Headlam
The owners of the Company. It is important that the
Board is aware of and solicits their views, and then
evaluates these views in relation to the strategic and
corporate objectives of the Company.
Key joint focus on the long-term success and
sustainability of the Company.
How we support
Focus on delivering a long-term sustainable business
that operates with the highest level of governance.
How we engage
Frequent regulatory announcements with appropriate
levels of disclosure.
In-person presentations and meetings, including
offering meetings at the Company’s sites. Use of
webinars and recordings to allow all shareholders to
hear and view materials.
Solicitation and consideration of feedback, including on
strategy and its oversight.
Effect on decision making, outcome,
and benefits to stakeholders
The views of stakeholders, including shareholders were
considered as we shaped and implemented both our
existing strategic priorities and the transformation plan.
Efficiency and mitigating actions to help support
margins and better align costs with the weak
market backdrop. Ongoing scrutiny of operational
performance, efficiencies, and the cost base.
The Board carefully considered the impact on
shareholders of a cessation in the dividend whilst the
transformation plan is executed.
Headlam Group PLC Annual Report & Accounts 2024
27
Strategic Report
Acting in the interests of
stakeholders is vital in delivering
our purpose
The Board has responsibility for managing the business to
promote its success, and having regard to how its deceions
ane events impact its stakeholders.
Our Communities and the Environment
Relationship to Headlam
Key to supporting the success of the Company’s
regional and national businesses.
We actively recruit people from local communities, so
very important to the ongoing success of the Company
by attracting great people.
Minimising environmental impact is cridtical to
managing climate change, and the knock-on impact
on communities.
How we support
Supporting communities through employment and
engagement activities, and also by reducing our impact
on the environment through out sustainability strategy.
How we engage
Engagement with colleagues to ensure aware of local
causes and events.
Actively advertise job vacancies through word of mouth
and locally.
Locally focused Communities Programme, which
gives colleagues the opportunity to both volunteer
and donate to projects and charities in their local
community.
Effect on decision making, outcome and benefits to
stakeholders
Through engaging with our communities and other
stakeholders we identified a need for developing new
trained fitters; we subsequently implemented fitter
training programme, supported by our suppliers and
also by our customers, who will employ our trainees at
the end of their training programme.
28
STAKEHOLDER ENGAGEMENT
CONTINUED
Our s.172 statement
The Directors of the Company are required by
Section 172 of the Companies Act 2006 to act in a
way that promotes the success of the Company
for the benefit of stakeholders as a whole and
in doing so, they must also have regard to wider
expectations of responsible business behaviour,
specifically:
•
the likely consequences of any decision in the
long term;
•
the interests of the Company’s people;
•
the need to foster the Company’s business
relationships with suppliers, customers and
others;
•
the impact of the Company’s operations on the
community and the environment;
•
the desirability of the Company maintaining
a reputation for high standards of business
conduct; and
•
the need to act fairly between members of the
Company.
The Board understands the importance of
engagement with its key stakeholders as only in
this way can it truly understand their needs and
concerns to support its decision making, and the
likely impact of those decisions on each stakeholder
group. The Company uses a variety of methods to
engage, both formally and informally, believing that
much can be gained from personal interaction.
The Board acknowledges that situations may arise
where stakeholder groups have conflicting priorities
of achieving its strategic objectives and the long-
term sustainable success of the business.
Following consideration of the information
contained within Stakeholders and Engagement,
and all other activities and undertakings detailed
in this Annual Report, the Board considers it has
fulfilled its duty in respect of Section 172, both
individually and collectively, and that it has acted
in the way it considers would be most likely to
promote the success of the Company for the
benefit of its members as a whole (having regard to
the stakeholders and matters set out in s172(1) (a) to
(f) of the Act) in the decisions taken during the year
ended 31 December 2024.
Chris Payne,
Chief Executive
Signed on behalf of the Board 11 March 2025
Strategic Report
29
Headlam Group PLC Annual Report & Accounts 2024
Adam Phillips,
Chief Financial Officer
“Whilst the challenging
market conditions
have significantly
impacted profitability,
the progress on
the transformation
plan resulted in a
significant cash
inflow for the year.”
30
FINANCIAL REVIEW
Summary income statement
Underlying¹
result
2024
£m
Non-
Underlying
items
2024
£m
Total
2024
£m
Underlying¹
result
2023
£m
Non-
Underlying
items
2023
£m
Total
2023
£m
Revenue
593.1
–
593.1
656.5
–
656.5
Cost of sales
(415.5)
(10.6)
(426.1)
(448.7)
–
(448.7)
Gross profit
177.6
(10.6)
167.0
207.8
–
207.8
Operating costs
(204.9)
3.4
(201.5)
(191.7)
(3.9)
(195.6)
Operating profit/(loss)
(27.3)
(7.2)
(34.5)
16.1
(3.9)
12.2
Net finance costs
(7.0)
—
(7.0)
(5.1)
–
(5.1)
Profit/(loss) before tax
(34.3)
(7.2)
(41.5)
11.0
(3.9)
7.1
Tax
6.2
10.3
16.5
(2.2)
2.8
0.6
Profit/(loss) after tax
(28.1)
3.1
(25.0)
8.8
(1.1)
7.7
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 note 3 and principally 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 insurance
proceeds.
Revenue
Total revenue decreased by 9.7% to £593.1 million (2023: £656.5 million), with the UK down 8.9% and Continental Europe (France
and The Netherlands) down 14.9% as shown in the table below. The UK and Continental Europe accounted for 88.6% and 11.4%
of total revenue respectively in the year (2023: UK 87.9%; Continental Europe 12.1%).
2024
£m
2023
£m
Year-on-year
%
Regional Distribution
315.5
375.4
(16.0)
Larger Customers
81.8
78.7
3.9
Trade Counters
104.3
97.1
7.4
Other
24.1
26.1
(7.7)
UK
525.7
577.3
(8.9)
Continental Europe
67.4
79.2
(14.9)
Group
593.1
656.5
(9.7)
Regional Distribution
Our Regional Distribution business in the UK represents our sales channels into the core distribution market, principally
comprising independent retailers and contractors, excluding any orders collected in one of our trade counters. The largest
component of Regional Distribution is our newly consolidated Mercado business (previously 32 local trading businesses). Our
Regional Distribution business also supports operations across the Group through its national network and processing and
delivery capabilities.
This part of our business, which accounted for 60.0% of total UK revenue in the year (2023: 65.0%), was particularly impacted
by the market decline, as consumers cut back their spending on home improvements. Revenue declined by 16.0%. Competition
in this part of the market also remained particularly concentrated, with distributors reducing prices to maximise share in a
declining market and we responded with some price and promotional activity, and new value ranges, during the year. There is
also some crossover of revenue between Regional Distribution and Trade Counters; for example, where a Regional Distribution
customer collects an order in a trade counter site, this is recorded as a Trade Counter sale in the above revenue breakdown.
Despite the industry headwinds, we have continued to invest in service and during the year, in response to listening to
customer demand, we launched live delivery tracking and updates, enabling customers to see exactly where their delivery is
and have a real-time view of when they can expect their delivery to arrive. Maintaining and improving our customer service
has been a key priority of ours and will remain so, including as we implement the transformation plan.
Revenue from Own Product Brands, an important point of differentiation in the marketplace, outperformed non-own-
branded products and represented 38.8% (2023: 35.2%) of the revenue through the Regional Distribution channel.
Headlam Group PLC Annual Report & Accounts 2024
31
Strategic Report
Larger Customers
Revenue grew by 3.9% in the year to £81.8 million, reflecting
the combination of strong share growth in certain existing
customer relationships, offset by weakened demand in some
of our other larger customers, reflecting the deterioration in
consumer spending on home improvements.
It has been a year of significant change for the larger
retailers in the home improvements market. Carpetright and
Homebase went into administration in July and November
respectively, and SCS made a strategic decision to exit
flooring following their change of ownership. Carpetright
was only a very small customer of Headlam and the Group
has subsequently benefited from the transfer of Carpetright
revenues into Tapi, one of the Group’s largest customers.
Homebase was a more significant customer of the Group,
with £6.8 million of revenue in 2024 prior to it ceasing to
trade. During the year we reduced our credit risk with
Homebase from c.£3 million to c.£1 million through a lowering
of credit limit and an accelerated weekly payment plan.
The residual amount owed by Homebase to the Group is
£1.3 million, which has been fully provided for.
We have a strong pipeline of growth, across both existing
and new customers. During the year we won a new multiple
retailer customer and a contract to provide delivery services
for a flooring manufacturer.
Trade Counters
Revenue grew by 7.4% in the year and is now annualising at
over £100 million.
Our aim is to create a nationwide footprint of counters
offering expertise and collection points for all customer
types, enabling us to offer unrivalled flexibility to our existing
independent retailer customers and the ability to service
the fitter and general contractor market. We started this
investment programme in 2021 with 53 sites and, at the time,
set out an expectation to invest c.£25 million in refurbishing
the existing sites and increasing the estate to around 90
sites. Up to the end of 2024 we had cumulatively invested
£15.7 million and had an estate of 76, an increase of nine on
the previous year. We now expect the rollout programme to
be complete in mid 2025 with a total estate of 83 sites. From
2026 onwards, growth in revenue in Trade Counters will drop
through to profit at a greater rate, reflecting that the fixed
cost will already be in place.
At maturity, which is circa 5 years after opening, each trade
counter is expected to generate revenue of £2 million on
average. Collectively the trade counters have continued to
perform in line with expectations, despite the weak market.
Continental Europe
Revenue declined 14.9% in Continental Europe with our
French and Dutch businesses both experiencing significant
market decline. During the year we entered into new
distribution agreements in the Netherlands, for exclusive
supply of certain branded ranges, which helped revenue in
the second half.
Underlying Gross Margin
Underlying gross margin was 29.9% (2023: 31.7%). The year-
on-year reduction reflected four factors:
1.
Heightened stock clearance activity in the UK. This was
on both a national level, with a review of the overall stock
portfolio undertaken in readiness for the centralisation
of buying and ranging decisions, and on a local level,
whereby the network optimisation developments in
South East England and in Scotland have necessitated
the accelerated clearance of discontinued ranges.
2. Rebates. The volume decline in the market, combined
with the Group’s drive to improve stock turn, reduced
purchases from suppliers, which impacts on rebate tiers
and thresholds.
3. Mix. The revenue from Larger Customers, whilst
contributing positively at operating margin, is at a lower
gross margin than revenue from Regional Distribution.
Partially offsetting this was the increased proportion
of revenue from Own Product Brands, which attract a
higher gross margin than third party brands.
4. Price and promotional activity. In response to market
activity on price, the Group responded with price
and promotional activity to remain competitive. This
was, however, a relatively modest driver of the overall
movement in gross margin.
Costs
Underlying operating costs increased by 6.9% (13.2 million)
to £204.9 million (2023: £191.7 million). Cost inflation was the
biggest factor and contributed £7.4 million of additional
cost; this is lower than the £10.2 million of cost inflation in
2023 but higher than the long-term average cost inflation
impact, reflecting elevated pay inflation across the UK
and Continental Europe. In the UK, the 10% increase in the
national minimum wage contributed to an overall average
pay inflation of circa 6%.
The Group also made strategic investments for long-term
growth, principally relating to the roll-out of trade counters;
collectively these added £2.7 million to operating costs.
Mitigating actions provided £2.3 million of cost efficiencies;
these included the benefit of the introduction of dynamic
route planning in the second half of 2023, along with flexing
of variable costs to adjust for market conditions. The
transformation plan had limited impact on 2024 operating
costs; these benefits have started to be recognised in 2025.
The Group has assessed the implications of the October
2024 budget announcement by the UK Government. The
reduction in the national insurance threshold, combined with
the rise in the employers’ national insurance rate to 15%, will
add c.£2 million to the Group’s operating costs in 2025.
32
FINANCIAL REVIEW
CONTINUED
Underlying Profit/Loss
Underlying Loss Before Tax of £34.3 million compared to a profit of £11.0 million in 2023. The table below breaks down the
year-on-year movement:
Underlying
Operating
Profit
£m
2023
11.0
Volume
(19.4)
Gross margin
(7.1)
Strategic investments
(2.7)
Cost inflation
(7.4)
Continental Europe and other
(8.9)
Mitigating actions
2.3
Interest
(2.1)
2024
(34.3)
Volume was, by far, the single biggest factor, contributing to a £19.4 million reduction in profit, reflecting our estimate of 10+%
market decline in 2024 in the UK.
Gross margin declined by 180 basis points, as explained above.
Strategic investments contributed to a £2.7 million reduction in profit, principally reflecting the roll out of Trade Counters. As
expected, and as previously guided, in the early years of the Trade Counter investment programme the profit contribution
to the Group from this business, whilst remaining positive, is reduced due to the operating losses on newly invested trade
counters. Strategic investments in the year also included the annualisation of incremental investments in 2023 in people and
capability to deliver on other elements of the strategy (including digital, brand and customer enhancements).
Cost inflation was a £7.4 million headwind as explained above. There was no observable price inflation in the market, with very
limited manufacturer price rises (which would normally drive distributor price inflation) for the second year in a row, due to the
manufacturers competing for volume. Ordinarily this price inflation would offset cost inflation, but this price inflation has been
absent in the market for two consecutive years.
Mitigating actions provided £2.3 million of offsetting benefit. This does not include the impact of the transformation plan; this
takes effect in 2025.
In Continental Europe the market conditions were even weaker than in the UK, driving a £2.6 million year-on-year reduction
in profit. Other movements included the non-repeat of certain items of income in the previous year including insurance
proceeds from business interruption (relating to the Kidderminster fire in 2021) and a reduction in bad debt provisions.
Interest costs of £7.0 million (2023: £5.1 million) were £2.1 million higher year-on-year reflecting higher average borrowings plus
the interest component of the lease cost of incremental trade counter units.
Non-Underlying Items
Non-underlying items before tax totalled a £7.2 million expense (2023: £3.9 million expense) as set out in the table below. The
net cash impact of these non-underlying items in 2024 was a £48.5 million cash inflow.
2024
Cash
£m
2024
Non-cash
£m
2024
Total
£m
2023
Total
£m
Amortisation of intangibles
–
(1.3)
(1.3)
(2.3)
Impairment of assets
–
(4.7)
(4.7)
(5.9)
Business restructuring and change-related costs
(10.2)
(9.5)
(19.7)
(5.4)
Profit on sale of property
61.3
(40.2)
21.1
1.1
ERP system development
(2.6)
–
(2.6)
–
Insurance proceeds
–
–
–
8.6
Non-underlying income/(expense) before tax
48.5
(55.7)
(7.2)
(3.9)
Consistent with previous periods, the amortisation of acquired intangibles arising upon consolidation were categorised as
non-underlying and amounted to £1.3 million (2023: £2.3 million).
Headlam Group PLC Annual Report & Accounts 2024
33
Strategic Report
Impairment of assets was a £4.7 million non-cash expense in
2024 and predominantly related to the write-down of assets
associated with the network optimisation initiatives, along
with the write-down of inventory and receivables related to
Homebase entering administration.
Business restructuring and change-related costs are
in respect of the transformation plan. The cash items
principally comprised severance costs and advisory
costs. The non-cash expense of £9.5 million principally
relates to stock provisions, reflecting the write-down
of legacy stock holdings in preparation for the network
optimisation initiatives in the South East of England and in
Scotland, along with the write-down of stock following the
centralisation of buying activities.
A £21.1 million (2023: £1.1 million) profit on sale of property was
recognised in the year, generating £61.3 million cash (2023:
£1.8 million), net of agent fees and associated costs.
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
£2.6 million was incurred in the year.
In the prior year, £8.6 million of income, all of which was
received in cash in the year, was recognised in respect of
the final settlement of the buildings and contents insurance
claim on the Kidderminster building, which was destroyed by
fire in 2021.
Tax
The Group’s consolidated underlying effective tax rate
(ETR) for the year was 18.1% (2023: 20.0%). This is lower than
the standard rate of corporation tax in the UK, primarily
due to the derecognition of a deferred tax asset in respect
of tax losses in France. The Group’s statutory effective
tax rate for the year was 39.7% (2023: 8.5% credit). The
Group’s underlying effective tax rate in 2025 is expected
to be around 25%, broadly in line with the standard rate of
corporation tax in the UK.
The Company is committed to being fully compliant with
the relevant tax laws and compliance obligations regarding
the filing of tax returns, payment and collection of tax.
The Company maintains an open relationship with HM
Revenue & Customs and currently operates within a level
of tax compliance risk that is rated as ‘low’ (2023: ‘low’); this
rating was reaffirmed during the year following a scheduled
inspection by HM Revenue & Customs.
The Pillar Two rules became effective from 1 January 2024
and it is expected that the Group will meet the Simplified
ETR safe harbour test, which provides short-term relief in
respect of Pillar Two compliance obligations.
EPS and Dividend
Basic earnings per share on an underlying basis decreased
from earnings of 11.0 pence per share in the prior year to
a loss of (35.0) pence per share, reflecting the factors set
out above.
No interim or final ordinary dividend has been declared or
proposed in respect of 2024 (2023: total dividend of 10.0
pence comprising interim and final combined). 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.
Cash flow and net debt
2024
£m
2023
£m
Underlying operating (loss)/profit
(27.3)
16.1
Depreciation and other non-cash items
21.9
20.6
EBITDA
(5.4)
36.7
Change in inventories
17.6
10.0
Change in receivables
3.7
2.7
Change in payables
10.7
(24.0)
Other
1.0
0.6
Underlying Operating Cash Flow
27.6
26.0
Interest and Tax
(7.2)
(9.1)
Lease payments
(12.9)
(13.0)
Capital expenditure
(10.6)
(18.2)
Property disposal and insurance settlement
61.3
10.4
Other non-underlying items
(12.8)
(3.9)
Acquisitions
–
(6.1)
Dividends
(4.8)
(12.2)
Payments to acquire own shares (share buyback programme)
–
(5.2)
Net cash flow before movement in borrowings
40.6
(31.3)
Movement in borrowings
(50.0)
49.7
Net cash flows
(9.4)
18.4
34
FINANCIAL REVIEW
CONTINUED
Underlying Operating Cash Flow in the year was an inflow
of £27.6 million (2023: £26.0 million). The impact of the
underlying operating loss was more than offset by a working
capital inflow of £32.0 million, comprising:
•
£17.6 million reduction in inventories. The Group’s average
stock turn increased from 3.2x at the end of 2023 to 3.5x
at the end of 2024, reflecting the initial benefits of stock
optimisation initiatives.
•
£3.7 million inflow from receivables, reflecting the
reduction in revenue.
•
£10.7 million inflow from payables. This includes
£10.8 million of VAT chargeable on the sale of properties
in December, which was paid over to HM Revenue &
Customs in January 2025. Excluding this, payables were
broadly flat year-on-year. There have been no significant
changes to payment terms with suppliers.
Capital expenditure was £10.6 million (2023: £18.2 million)
and included £4.0 million in fitting out new or refurbished
trade counters, £1.4 million in the fit-out of the new Rayleigh
distribution centre, £0.7 million in solar panels (with that
rollout programme now complete) and the remainder in
warehouse equipment.
£61.3 million cash (net of agent fees) was received in the year
in respect of the sale of properties, as follows:
•
£7.4 million from the disposal of the Stockport distribution
centre in June 2024;
•
£3.1 million from the disposal of the Uddingston
distribution centre in December 2024; and,
•
£50.8 million from the sale of the Gildersome, Ipswich and
Leeds properties in December 2024.
Other non-underlying items contributed a £12.8 million
cash outflow and comprised £10.2 million of business
restructuring and change-related costs and £2.6 million of
ERP development costs.
£4.8 million was paid in June 2024 in respect of the
final ordinary dividend for 2023. In 2023, £17.4 million of
shareholder returns were made, comprising £5.2 million of
payments to acquire own shares under the share buyback
programme that completed in March 2023 and £12.2 million
of ordinary dividend payments.
Net Cash excluding lease liabilities was £10.9 million at the
end of the year, representing a favourable movement of
£40.5 million compared to the Net Debt of £29.6 million at
31 December 2023. Net Debt including lease liabilities was
£50.3 million at the end of the year (31 December 2023:
£73.0 million).
At the end of the year, the Group had total banking facilities
available of £99.3 million (31 December 2023: £100.6 million),
of which £81.5 million (31 December 2023: £81.5 million)
comprised a committed revolving credit facility with three
banks, expiring in October 2027. The Group had £111.3 million
of cash and undrawn facilities at 31 December 2024
(31 December 2023: £71.0 million).
The Group has agreed a new covenant package with
its banks. The pre-existing covenants of leverage and
interest cover did not apply for the 30 June 2024 and
31 December 2024 tests and will also not apply for the
30 June 2025 or 31 December 2025 tests. Instead, a monthly
minimum liquidity test and a quarterly minimum EBITDA
test applied during H2 2024 and will apply throughout
2025. The banks have a legal charge over four of the
Group’s properties, with a combined market valuation of
£59.2 million. The cash generation during 2024 from disposal
of properties and working capital optimisation, combined
with the opportunities for further cash generation from
the transformation plan, has enabled the Group to reduce
the overall size of its facilities to £72.4 million, effective from
January 2025, principally through a reduction in the revolving
credit facility from £81.5 million to £61.0 million.
The Group continues to have strong asset backing; as at
31 December 2024, the Group owned property with a market
valuation of £93.9 million, and also had inventory and
receivables of £102.8 million and £111.0 million respectively.
Headlam Group PLC Annual Report & Accounts 2024
35
Strategic Report
Pension buy-in
During the year the Group completed a buy-in arrangement with Aviva in respect of the Headlam Group PLC Staff Retirement
Benefits Scheme (the ‘Scheme’), which further strengthens the Group’s balance sheet. The buy-in secures an insurance asset
from Aviva that matches the remaining pension liabilities of the Scheme, with the result that the Group no longer bears any
material investment, longevity, interest rate or inflation risk in respect of the Scheme. Furthermore, the Group will no longer be
required to contribute funding into the Scheme; the Group’s contributions have been £1 million per annum.
This transaction is positive for the Scheme’s members and has the full support of the trustee. The purchase of the insurance policy
was funded by the Scheme’s assets plus a top-up payment from the Group of £1.1 million, excluding advisor fees. The transaction
results in a modest cash outflow for the Group in 2024, compared to if it did not proceed with it, but becomes cashflow accretive
by the end of 2025. At the end of the year the Group recognised a pension liability of £1.5 million for the Scheme.
Capital allocation priorities
The Board regularly reviews and follows a clear capital allocation framework. The priorities are unchanged and are as follows:
Priority
Rationale
1
Maintain a strong
balance sheet
This ensures the financial stability and long-term sustainability of the Group. The
Group has previously stated a long-term average Leverage target range of 0.5
to 1.0x, which will be reconfirmed or revised once the Group is further progressed
through its transformation plan.
2
Investment in the
business
To optimise performance and support growth, in turn leading to improved
financial performance.
3
Ordinary dividend
income for shareholders
Recognising shareholders’ expectation of dividend income due to the cash
generative nature of the Group in normal market conditions, the Group’s
market-leading position, and relatively modest investment required to deliver on
the strategy.
4
Acquisitions and/or
return of surplus capital
After all of the above priorities have been fulfilled, the Board would consider M&A
or a return of surplus capital to shareholders.
36
FINANCIAL REVIEW
CONTINUED
Going concern
The Board reviewed the Group’s resilience to principal risks and uncertainties by considering stress testing forecasts through
a downside scenario, which involved modelling consumer confidence for major purchases being depressed throughout 2025,
leading to market volumes continuing to decline. The testing indicated that the Group would be able to operate within its
current facilities and meet its financial covenants within the 12 month period considered for going concern.
The Board believes there are reasonable grounds for stating that the Group has adequate resources to continue in
operational existence for a period of 12 months from the date of this Financial Review, and it is appropriate to adopt the going
concern basis in preparing the Group’s Financial Statements.
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 2023 Annual Report and Accounts and have been considered and updated for the 2024 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
11 March 2025
Strategic Report
37
Headlam Group PLC Annual Report & Accounts 2024
Sustainable by design
As we accelerate the delivery of our strategy, we are ensuring
that ESG is a key consideration in the design of our business.
Our first example of this has been the take-back trial we
have successfully completed at our Northampton site. The
trial has taught us about the types of materials we are likely
to receive, how best to work with our waste management
provider and how valuable this service is to our customers.
We’ll be extending this trial in 2025 and I am confident that
if this extended trial is a success we will be able to scale up a
take-back scheme with national geographic reach through
our Trade Counter network, thus enabling our customers to
recycle with ease.
We have also collaborated with several of our suppliers to
create our Trainee Flooring Fitter programme in which we
have funded four trainee fitters through a six-month training
programme provided by our suppliers. We have created
this programme to help increase this valuable skill set in the
market for the long term sustainability of the industry and
we envisage this programme growing over time. At the end
of the programme we will work with our customers to place
trainees in roles in their businesses.
As you will see from this report there have been many
other achievements this year including setting our
Scope 3 near term and long term targets, improving our
waste management processes, improving our colleague
engagement result by 5ppts, supporting our colleagues’
development and improving our governance and controls.
I truly believe that this has been achieved because our ESG
plans are integral to our business strategy.
Chris Payne,
CEO
“ As a distributor, to be
truly sustainable takes a
coordinated effort across
the flooring industry and
I am proud to say we
have had successes in
demonstrating our ability
to do this to improve
the sustainability of
our environment and
communities this year.”
38
SUSTAINABILITY AT HEADLAM
E
Environmental
S
Social
G
Governance
Priorities
a. Product design
b. Service design
c. Building design
Why we have chosen them
a. To meet the long-term
ambition of creating a
circular product cycle we
must act now to engineer
products to use more
recycled material and be
recyclable at end of life
b. Creating a scalable take-
back scheme enhances our
customer offer and supports
sustainability
c. As we open new sites
(Rayleigh and Trade
Counters) we should
continuously improve their
energy efficiency and
minimise carbon emissions
Progress made
a. Engaged with several key
suppliers to create joint
product development plans.
Working as part of Carpets
Recycling UK to develop
Sustainability Pledge across
the industry
b. Take-back scheme
successfully trialled in
Northampton Trade Counter
c. Facilities planners fully
engaged in environmental
planning as part of site
development which
incorporates waste, energy
efficiency, biodiversity etc
Outlook
a. Educate the central buying
team, under the leadership
of the new Chief Buying
Officer, to develop more
sustainable products
b. Extend the take-back trial to
a further four sites
c. Work with operations and
property teams to create
building blueprint for
optimum sustainability
Priorities
a. Engagement plans to create
the right environment to
attract and retain the best
colleagues
b. Community plans to support
the sustainability of local
communities and the
industry
Why we have chosen them
a. We need to attract and
retain colleagues with
the right skills, knowledge
and expertise. We truly
believe that engaged and
motivated colleagues
provide the best service and
apply their knowledge and
expertise to their fullest
b. A lack of trained flooring
fitters is an industry wide
challenge, and by working
across our supply chain
we can help to grow this
valuable resource whilst
also providing employment
and training for our local
communities who need it
Progress made
a. Colleague engagement
increased by 5% year on
year, especially in areas of
investment e.g. leadership
training
b. Trial of fitter training
programme successfully
conducted
Outlook
a. Maintain progress on
engagement throughout
the implementation of
further business changes
focusing on improving
processes, colleagues feeling
heard and improved local
communication
b. Extend fitter training
programme to two cohorts
Priorities
a. Buying process review
(supplier and product
selection)
b. Systems and reporting
requirements
Why we have chosen them
a. Fully centralised UK
Distribution buying and
supply chain teams enable
consistent group processes.
Scope 3 targets now set
enabling focused planning
b. The new ERP implementation
programme means we will
be reviewing several systems
across the business and
have the opportunity to
influence the data that will
be collected
Progress made
a. ESG standards and
assurances form part of the
new product introduction
process for own brand
products. Scope 3 targets
have been set and agreed
b. ESG Director has contributed
to the appropriate ERP
requirements workshops
Outlook
a. Scope 3 actions plans
defined in 2025, continue
to inform and educate
buying and supply teams on
responsible sourcing best
practices
b. Review and develop
ESG data and reporting
capability to create
harmonised ESG dashboard
and confirm requirements for
new ERP Programme
Headlam Group PLC Annual Report & Accounts 2024
39
Strategic Report
Key achievements
in 2024:
•
Scope 1,2 & 3 targets aligned
and set to be net zero
by 2040
•
46% reduction of Scope 1 and
2 against a 2019 baseline
•
Waste monitoring and
reporting now implemented
in all major distribution
centres
•
Introduced our first recycling
centre service for our trade
counter customers
•
Partnership with waste
management & recyclers to
ensure end of life material is
regenerated
•
EV Salary sacrifice scheme
available to all colleagues
•
ISO 14001 certification
achieved in our national
distribution centres
We continue to be committed to protecting the planet
and aim for our emissions to be net zero by 2040.
Our focus is on developing products that can be
renewed, repurposed and easily recycled for reuse in the
products we supply. We are creating a supply chain that
is circular and includes taking responsibility for recovering
as much material as we place onto the market.
Reducing our Carbon Emissions
We continued throughout 2024 to deliver against our carbon reduction
target timeline and have now set our target and timescale for Scope 3. The
Company will follow a ‘true’ Net Zero strategy whereby it will focus on actual
decarbonisation in achieving these targets and only consider offsetting
actions for the residual 10%. We will continue to use a science-based
approach and have aligned our Scope 1 & 2 target to our Scope 3 timescales.
We will continue to measure Scope 1 & 2 against a 2019 baseline and Scope 3
against a 2023 baseline.
We have now set an interim target for Scope 3 whilst Scope 1 & 2 will remain
in line with our previously published commitment to achieve a 46% reduction
by 2030.
Our focus for 2025 will be on product development following our sustainable
by design principles see ESG Priorities for 2025, non-commercial fleet,
promoting and educating colleagues on good energy behaviours.
Transport Efficiencies
In 2023 we invested in Webfleet, a vehicle telematics system which enables
us to focus on several key metrics around driver behaviours, safety and
efficiencies. We have since seen a 23% reduction in driving events, (for
example heavy braking). We have also seen significant fuel savings gained
through reduced idling.
Our fuel efficiency in miles per gallon (mpg) has increased by 5% since
introducing Webfleet and we have reduced the number of routes we operate
through smarter planning by 5% and increased the utilisation of our fleet.
Energy Intensity
In the last 2 years we have invested in solar panels across 12 of our distribution
centres with the final installation taking place in Coleshill in 2024. They are now
generating an average of 49%1 of their consumption requirements. In addition,
the facilities which operate under solar have seen on average 32.5% reduction
in energy costs against the comparative periods in 2023.
Gas usage has also dropped by 15% across the Headlam Group operation
as we change our behaviours and reduce our reliance on fossil fuels. We will
continue to review ways to further reduce our consumption and invest in
renewable energy solutions whenever possible.
E
Environmental
1
Data used May 24 to Dec 24 compared to same period in 2023, as Solar operational from
May 2024.
40
ENVIRONMENTAL
UK and Continental Europe
Scope 1 and 2 emissions
2024 Full Year Data
91%
9%
Scope 1: 91% (14.0ktCO2e)
Scope 2: 9% (1.6ktCO2e)
Net Zero Emissions Timeline
Key Achievements and Targets
2023
Solar panels installed across 11 of our 13 largest sites
Achieved ISO 14001 environmental certification at key sites
Over 85% of UK non-commercial fleet electric/low emission
Good Energy and Recycling Behaviours workshops held at
11 of our largest sites
Continued trailing of electric/low emission commercial vehicles
Transport integration completed
2024
Use telematics to improve driver behaviours resulting in
emissions reductions
Review waste management across UK distribution sites in order
to implement best practice, reduce waste and set targets
Scope 3 strategy and targets to be developed
Continued trial of low emission commercial fleet vehicles
Trial of Trade Counter take-back and recycling scheme in
Northampton
Launched EV salary sacrifice scheme
2025
Scope 3 targets introduced
Carbon workshops commenced with buying team. Further
planned through 2025
2030
Interim target of 46% reduction against 2019 (Scope 1 and 2)
Roll-out of low carbon commercial vehicles
Potential heating electrification to reduce gas consumption
2032
Interim target of 42% reduction of Scope 3 emissions against
2023 baseline
2040
Net Zero emissions target (Scope 1, 2 and 3)
Ongoing trialling and introduction of electric/low carbon commercial vehicles
Headlam Group PLC Annual Report & Accounts 2024
41
Strategic Report
Sustainable Product Development
Sustainable
by design
Sales
Takeback/
Recovery
Distribution
Material
Processing
Manufacturing
Recycled
material
In 2024 we focused our attention on understanding how sustainable the full
product lifecycle is and how this contributes to our Sustainable by Design
programme.
We have invested in trials to manage products at the end of their life, providing
a facility that takes them back. Through partnerships with recyclers and
manufacturers, we ensure that as much material as we recover through our
recycling centres is processed back into raw materials that can be used again and
again in as many of our products as possible.
Our Florprotec brand offers a collection service at end of life, and we are working
with a recycler and the manufacturer to ensure this material is re-used in new
Florprotec product.
We are also working with major carpet and vinyl flooring manufacturers in the
UK and Europe designing new broadloom and vinyl ranges that can be easily
recycled, removing the reliance on specialist recyclers and improving the quality of
recycled material.
Take-back Scheme
We stated in our 2023 report that we would introduce a full take-back and
recycling scheme and in May 2024 we launched this facility to our Mercado
Northampton trade counter customers.
During the trial this service has been provided free to our customers to encourage
them to bring back uplifted flooring (post-consumer waste), off cuts (post
industrial waste), underlay, vinyl, LVT, laminate, packaging (plastics & cardboard)
and general waste.
Customers using the facility have welcomed the recycling centre and are regularly
using it. Having the ability to drop any off cuts or uplifted material from the previous
job, without having to use additional waste disposal facilities or services, saves them
both time and money and knowing that the waste material is being recycled.
Scope 3 Emissions
2024 Full Year Data
Purchased goods and
services
80.2% (653,926 ktCO2e)
Capital goods
0.5% (3,848 ktCO2e)
Fuel-related Emissions
0.5% (4,133 ktCO2e)
Upstream Transportation
and Distribution 0.4%
(3,215 ktCO2e)
Waste Generated in
Operations 0.1% (949 ktCO2e)
Business Travel
0.4% (351 ktCO2e)
Employee Commuting
0.3% (2,204 ktCO2e)
End-of-life treatment of
sold product 15.9% (129,949
ktCO2e)
Total Scope 1, 2 and 3
Emissions: 815,119 tCO2e
2024 Full Year Data
Scope 1
1.9% (15,339 ktCO2e)
Scope 2 (location-based)
0.1% (1,205 ktCO2e)
Scope 3
98.0% (798,876 ktCO2e)
E
Environmental
42
ENVIRONMENTAL
CONTINUED
Partnerships
Biffa provide the bulkers and skips and routinely collect
and sort the materials into raw material component types;
for example, on broadloom carpet, by using chemical
analysers they sort into polypropylene, polyester, nylon,
wool and mixed materials.
Once sorted, the polypropylene broadloom carpet will
be sent to a specialist recycler, who process and recycle
back to polypropylene pellets and make it available to the
industry to produce new products.
We also promote and work with Recofloor who facilitate
the collection of Vinyl and LVT on behalf of Polyfloor
and Altro.
This is the first flooring recycling centre in the UK and in the
first six months we collected, processed and recycled over
135 tonnes of material.
Water
The Company is not a large consumer of water, which is
primarily used for cleaning its commercial vehicles, and
continues to engage in limiting usage whenever possible.
Waste
In 2024, we diverted 86.5% of our operational waste
from landfill of which we have recycled 15% from our UK
Distribution Centres.
We have introduced recycling bins into our largest
distribution centres and encourage all colleagues to
reduce waste and recycle wherever possible. We continue
to look for alternative solutions for repurposing stock that
is discontinued or end of roll, many of which are sent to our
Melrose Interiors business who transform them into rugs.
Where product cannot be repurposed it will be recycled
either through our manufacturers or through recycling
facilities specialising in textile or resilient flooring.
The Group continues to use the most sustainable sources
for packaging ensuring the products’ integrity remains
during transit to avoid damage and unnecessary waste.
We continue encourage all our businesses to recover and
reuse poles and pallets wherever possible. All packaging
that cannot be reused is recycled through our waste
management partners.
Through our Mercado recycling centre in Northampton,
we encourage customers to recycle all packaging through
our facility and c.8% of material disposed of is derived
from packaging.
Raw Materials
The Headlam Group recognises we rely on natural raw
materials to produce our products and always look to use
the most sustainable solutions available in a responsible
way. Through our Sustainable by Design programme, we
look at renewable materials first and incorporate these
wherever possible, many of which can be found in our
flagship brand, Crucial Trading.
We ensure all timber used is from verified and legal sources
and have due diligence systems in place and by working
with recognised specialist third party organisations such
as Track Record Global who ensure all our imported timber
supply chains are traced to source.
Where non-renewable raw materials are used, we
encourage the inclusion of recycled materials and are
developing our products to be easier and more recyclable
at end of life.
Headlam Group PLC Annual Report & Accounts 2024
43
Strategic Report
Key achievements
in 2024:
•
Colleague Engagement
score in September
2024 was 72%, an
improvement of 5ppts
year on year and 1ppt
behind the industry
benchmark
•
Reduction in RIDDORs by
30% year on year
•
Safety culture training
has been attended by all
leaders
•
1,300 colleagues have
accessed online learning
through our new
learning portal and over
780 colleagues have
attended face-to-face
training on leadership,
safety or sales
•
Sales through Service
Apprenticeship launched
in Trade Counters
•
New HR and payroll
system implemented
improving colleague
visibility of their
employee file and
rewards
•
Gender pay gap
reduced year on year
•
Strategic approach to
community support
taken in Leeds
through Trainee Fitter
programme delivered
to help bridge the skills
gap in the industry and
improve employability in
the area
Making Headlam a great place to work with a positive
impact on communities
Our Colleagues
Across the UK, France and the Netherlands Headlam Group Plc employs c.2,330
people, with 2,075 of those based in the UK. Colleagues are at the heart of our
business, and are our greatest asset. We continually focus on making Headlam a
great place to work, and ensure colleagues share in the Group’s long-term success.
Whether our colleagues work in our warehouses, are part of the transport team,
represent us in sales and trade counters, support our customers in our sales offices
or help the business behind the scenes in our support functions, we have a range of
working arrangements available to attract and retain colleagues who live our values:
Keep each other
safe and well,
always
Lead by example,
we are all leaders
Work together,
with everyone
Act sustainably,
use less, waste
less, give back
Keep improving,
everywhere
Get it done,
brilliantly
And always, do the right thing
The ways of working which underpin these values and demonstrate our
commitment to fostering a culture of integrity can be found in our Colleague
Code of Ethics Policy and other workplace policies, many of which are published
on our corporate website. Our Colleague Code of Ethics, which we refer to as The
Headlam Way covers a range of topics including safety, behaviours towards each
other, conflicts of interest, sustainability, bribery and corruption, fair competition,
confidentiality and other topics all intended to ensure that we work together,
serve our customers, do business with our suppliers, support our local communities
and maintain a sustainable business for our shareholders. It also refers to and
complements our Speak Up policy which ensures that our colleagues know how
to confidentially raise whistleblowing concerns which are seen directly by our
Audit Committee Chair. All new colleagues at Headlam have the opportunity
to familiarise themselves with these policies as part of their online induction
and important changes and updates are communicated through our monthly
leadership call and our manager briefings.
In the UK Headlam employs salaried colleagues exclusively and we do not
employ anyone on a zero-hour contract. Our colleagues are entitled to several
employment benefits and rights from day one of employment including company
sick pay and the right to request flexible working, with just over 5% of colleagues
having flexible working patterns in place. In 2024 most of our colleagues were
permanent workers with temporary workers making up approx. 0.64% of the
workforce on average across the year. Temporary workers are primarily engaged
to manage peaks in work, cover long term absences or support through period of
transition during business change projects.
S
Social
44
SOCIAL
We have a number of careers available to our colleagues
and we have brought these to life in 2024 with a series
of articles about our colleagues who have progressed
through the business. We strongly believe that this,
coupled with our colleagues’ commitment to support our
customers and each other is why we have tenured service
at Headlam.
Length of service
0-3 mths
10%
5+ yrs
44%
2-5 yrs
21%
3 mths-2 yrs
25%
Our long serving colleagues, with their in-depth
knowledge of our customers, services, products, processes
and systems are a foundation of our success and so
we continually focus on ways to retain them and you
can read more about this in the Reward, Learning and
Development, Colleague Engagement and Community
sections of this report. Uncontrolled labour turnover is
one of our 3 key People KPIs, along with attendance and
engagement, and throughout 2024 we have implemented
actions to improve all three.
We also believe that to achieve our strategic ambitions
we also need to diversify the skills and experience of our
workforce through the targeted recruitment of talent.
We have brought in expertise from other industries to
strengthen our knowledge base, have improved our ability
to talent bank core skills, which are in high demand across
our industry, and have worked with recruitment sites and
agencies to ensure that candidates have a much better
overview of our business and the exciting opportunities
available to them. Improving our attraction and selection
methods will be a key priority for us in 2025 as we invest
in a new careers website and applicant tracking system
to give us greater insight into who we are attracting and
improve our processes to provide an excellent candidate
experience whether the candidate is internal or external.
Keeping each other safe and well, every day
2024 has seen a change in the National Safety Team
structure to ensure we deliver an effective support to the
group. We have seen a reduction of over 30% from 2023
in RIDDOR’s reported as set out in the table on the right
hand side.
There has been a real focus this year on training
throughout the group including ‘accident Investigation’
‘IOSH Leading Safely’ Say it See it’ and ‘Felt’ Training.
We maintained our ISO 45001 standards throughout 2024
with successful audits of four of our key sites.
We have seen a 3% increase in engagement survey results
in relation to colleague’s thoughts on how safe they feel in
the workplace.
The RIDDOR incident frequency rate for every 1,000,000
was 4.12 in 2024 against the recommendation from HSE
of 3.77.
Type of RIDDOR Incident
2024
2023
Slip, trips and fall
2
9
Struck by moving vehicle
3
6
Contact with machinery
2
0
Hit by moving/falling, flying object
1
0
Handling, lifting, Carrying
4
2
Fall from height
3
3
Other
2
5
Total
17
25
2025 will see us introduce a Safety Culture platform
throughout the group that standardise how we
manage our safety processes. This will act as a fantastic
engagement tool for all colleagues to contribute to a
safer working environment for all.
Supporting our colleagues through change
There were several changes across the business in 2024
as part of the acceleration of our plans to transform
Headlam.
Whilst there have been many positive opportunities arising
from these changes, including a move to industry leading
reward for our sales teams, new roles in many of our
departments, simplified processes and improved ways of
working, there have sadly been colleagues who have been
at risk of redundancy.
Headlam Group PLC Annual Report & Accounts 2024
45
Strategic Report
In 2024 we consulted with c.230 colleagues across six
business change projects. As a result of these changes
c.180 colleagues left the business through redundancy,
c.20 colleagues resigned before the consultation process
concluded and we are pleased to say that just over 30
colleagues were redeployed within the business. Through
the year we improved the support we give to colleagues
who are at risk of redundancy and now ensure all at-
risk colleagues have access to outplacement support
through a third party, can access pensions advice and
are made fully aware of the comprehensive support we
have in place for all forms of wellbeing including mental
and financial. You can find more information about the
support we provide in the Wellbeing section of this report.
Details of the training and support that we provided to
leaders to help execute these changes can be found in the
Learning and Development section of this report.
Colleague Engagement
We are immensely proud of the improvement in our
colleague engagement score in 2024 which improved by
5ppts to 72% against a challenging backdrop of business
change and tough market conditions. This improvement is
testament to the focus and importance that our leaders
put on making sure that Headlam is a great place to
work for everyone. We saw a year-on-year improvement
against every question asked in the survey.
CEO Open Forums have continued across our sites
through 2024, offering colleagues from different
departments and at all levels to hear directly from
Chris and ask him anything that is on their minds. Chris
communicates themes arising from these forums to the
appropriate senior leadership team colleagues and takes
responsibility for resolving issues.
We held four face-to-face Employee Forums in 2024 and
four virtual forums. More information about the discussions
at these forums can be found in the Stakeholder
Engagement section of this report. Our in-person
Employee Forums are attended by our CEO and Karen
Hubbard (Non Executive Director) who reports back to the
Board on ideas, suggestions and obstacles raised by our
colleagues.
As part of our ongoing commitment to listening to our
colleagues and learning from their experience, several
Area Sales Manager (ASM) forums took place across the
year providing us with the opportunity to hear our sales
colleagues’ ideas regarding supporting our customers,
products, sampling and point of sale materials, training,
and marketing. A cross functional approach was taken
to improve our product and service quality with regular
colleague forums taking place to discuss quality issues and
suggested improvements including colleagues from our
warehouses, our drivers, sales office colleagues and ASMs.
Learning and Development
In 2024 we launched our new learning management
system, Eloomi, which provides colleagues with access
to over 600 elearning modules, the ability to book on to
face-to-face training, the creation of playlists, reporting
capability and a user-friendly way to develop bespoke
elearning content. Since launching the platform over 1,300
colleagues have used it to access learning, online content
has had over 15,000 views and nearly 9,000 online courses
have been completed. Over 780 people have attended
the 118 training sessions delivered in 2024.
We also started to deliver our new leadership programme,
Lead the Way consisting of 2 levels of leadership
development delivered face to face. Feedback from
managers was positive across all modules and in our
engagement survey 89% of our managers said that they
know what is expected of them to manage their direct
reports well, which was an improvement of 5ppts year
on year. More importantly we saw a 7ppt improvement
on questions relating to how colleagues viewed their
line manager which put us 7ppts above the industry
benchmark for leadership.
Managers and leaders continued to benefit from Health
& Safety training throughout the year with DSS+ delivering
Felt Leadership training for our senior leaders which covers
the importance of creating a Safety culture, and See it,
Say it training for our management teams.
We invested in training for our sales teams by providing
our Area Sales Managers (ASMs) with Driving Sales Growth
training, a programme designed to help them to hone
their selling skills. Our Regional Sales Managers attended
Delivering Sales Performance to help their ASMs embed
their training, provide guidance on field observation and
feedback and to support their coaching skills for 121s,
appraisals and team meetings.
As part of the acceleration of our strategy through the
implementation of our Sales Transformation and Network
rationalisation we provided impacted leaders with training
to help them to lead through the change process. This
not only explored their potential reactions to change but
also how their teams may react and the support they can
provide to help colleagues to adapt.
To complement our existing Driver, Warehouse and
Supervisor and Manager apprenticeships we successfully
launched our first bespoke Headlam apprenticeship for
our Trade Counter teams, Sales through Service, a level
2 Customer Service Apprenticeship. This provides our
Trade Counter Assistants with an opportunity to further
develop their skills to support their career development
ambitions. To help bring careers at Headlam to life for all
our colleagues we have commenced a series of articles on
our internal communication channel, myHub, highlighting
career stories of a selection of colleagues as well as “Day
In The Life Of” articles.
S
Social
46
SOCIAL
CONTINUED
Our colleagues continue
to give both their time and
Headlam donations to our local
communities through myHeadlam
Community.
This year we have supported charities such
as Breast Cancer Now and MacMillan with
coffee mornings, raised money by abseiling
for Acorns Children’s Hospice and the Aston
Villa Foundation, run pot noodle drives for the
Newbury Soup Kitchen and spinathons for the
local cycling club, donated to excellent causes
such as Smiling Families, Dementia Connect
and even sponsoring an elephant sculpture for
St Giles Hospice March of the Elephant event.
Our colleagues have also supported several
local sports teams to enable them to keep their
local communities connected, fit and healthy
including Stopsley United FC, Victoria Bowls
Club, and Boldemere FC.
Case study
Reward
We have continued to invest in colleague reward following
the great work we had already completed on improving
sick pay, increasing holidays and introducing a range of new
benefits over the preceding years. This year we have focused
on improving colleague benefits and incentives and visibility
of their own records. We started the year by benchmarking
our car allowances, and retendered for our company car
fleet provider which resulted in a new partnership providing a
broader range of better-quality cars for our colleagues. The
provider also delivered online driver training and a voluntary
Electric Vehicle scheme for non-company car drivers.
We have kept a focus on encouraging colleague
recognition this year and have seen an increase of 32% in
colleague recognition cards or awards through our central
My Headlam Heroes scheme. As a result, our colleague
engagement survey score for the question ‘In the last 12
months, I have received recognition for doing a great job or
to celebrate an achievement at work’ increased by 6ppts.
To support our ambition to be a market leading flooring
sales employer we conducted a full review of our Area Sales
Managers (ASMs) pay and benefits in advance of the sales
transformation announcement. This resulted in uplifting ASM
pay and incentives to create market-leading packages.
All sales colleagues were also awarded market value share
options to better align their performance with the interests
of our shareholders.
Improved visibility of pay and benefits was achieved in
2024 by launching a new people and payroll system. The
new system provides colleague and manager self-service
providing efficiencies to our finance team and better
reporting capability for the HR team. The new system, which
is integrated with our new payroll system, has allowed us
to introduce holiday purchase for the first time as a direct
result of feedback from our Employee Forum. This went live in
January 2025.
To read more about our Reward and pay principles please
refer to our corporate website.
Headlam Group PLC Annual Report & Accounts 2024
47
Strategic Report
Wellbeing
Headlam offers a range of wellbeing resources for
colleagues to access on our colleague communication and
benefits platform. These include an Employee Assistance
Programme service which offers a broad range of advice
and support and unlimited counselling for colleagues.
Finance wellbeing support has been provided by Salary
Finance which supports our colleagues with personal
finance products including savings and loans, resources
and information; and our support of the Furniture Makers’
Company provides our colleagues with access to crisis
support through their helpline ‘Shout’.
Finally, we continue to train a team of colleagues across
the UK to provide mental health first aid, which includes a
partnership with Everymind.
Our engagement survey results demonstrated that our
efforts to improve wellbeing support to our colleagues
has continued to be valued with an increase of 3ppts in
our wellbeing score year on year, taking us to a score of
76% and 6ppts over the benchmark score for our industry
comparators (as confirmed by our outsourced colleague
engagement consultants who administer our survey,
Workbuzz).
Diversity, Equity and Inclusion
We know that diversity brings fresh ideas, different
ways of thinking and better represents the huge array
of customers we support and so we remain committed
to attracting and retaining a diverse workforce by
creating an inclusive place to work. In 2024 we focused
on attracting and retaining two of the many groups we
represent in our workforce; females and colleagues from
ethnic minorities, however, through all our decision making
we ensure that we strive to be inclusive to all colleagues.
Diversity in gender
Females make up 24% of the overall workforce at
Headlam with changes at the most senior levels of
the business starting to have a positive impact on the
proportion of women in leadership roles. During 2024, 50%
of the Executive Committee were female, we had our first
all-female trade counter team, and we saw an increase
of 10 ppts of female at middle management levels in an
industry which is overwhelmingly male dominated. By
working closely with our recruitment agencies to insist on
balanced long lists, providing females with the confidence
to apply for internal opportunities and supporting
them by ensuring they can access development and by
showcasing the successful careers that females can have
in our business we hope to see the number of females in
Headlam grow. For more information about work we have
completed and continue to do to encourage gender
diversity please see our gender pay gap report in which
we report a Headlam UK mean pay gap of -4.1% and a
median pay gap of 1.6% on our corporate website.
Diversity in ethnicity
We have a target to get to 10% of colleagues who have
disclosed themselves to be from an ethnic minority
group across the business by 2028. We will focus on our
UK businesses where we know that our local communities
have an ethnic minority population of approximately 18%
(based on ONS data).
We started the year by focusing on five key sites: Leeds,
Ipswich, Coleshill, Scotland and Gildersome where they
had the headcount, turnover and local demographic
to be able to make a change over a four year period.
Focusing on these sites enabled us to provide strong
support to the management teams, experiment with
attraction methods on a local level and build the requisite
community relationships.
We have met with the hiring managers from Leeds,
Ipswich and Coleshill who have all been briefed and
are now underway with unconscious bias eLearning,
recruitment and selection eLearning, utilising and
reviewing our current onboarding guide, recruitment
guide, interview questions & feedback guidelines. In
2025 we will focus on developing relationships with local
community partners who support disadvantaged groups
into employment.
We also have introduced a suite of Diversity and Inclusion
resources for any colleague to access via our learning
platform Eloomi.
This year the proportion of ethnic minority colleagues has
moved from 7% to 7.7%.
Preventing harassment
From October 2024 the Worker Protection (Amendment of
Equality Act 2010) Bill strengthened existing protection for
workers against sexual harassment.
As part of our efforts to meet this obligation we have
invested in training for every colleague at Headlam in
the UK to ensure that they understand what constitutes
harassment (against any of the protected characteristics),
what they should do if they experience or witness it, and
Headlam’s likely response. We have selected a team of
investigators from across the business who have received
training to ensure that they can competently and
confidently carry out harassment investigations which
are inherently more complex than standard disciplinary
cases. Posters are visible across our offices, distribution
centres and trade counters to remind everyone that we
will not tolerate the harassment of/by our colleagues and
instructions on how to report an incident. Our Inclusion
and Respect at Work policy has been updated to
specifically include a section on sexual harassment. Finally,
we have completed sexual harassment risk assessments
for the different roles across the organisation to identify
where we need to focus preventative action.
S
Social
48
SOCIAL
CONTINUED
Public commitments
We have now signed the opening doors campaign led
by Business in the Community (BITC) to make jobs more
inclusive. Our commitments are as follows:
•
Removing bias from interview process (training or
guidance doc)
•
Review where we are advertising jobs to attract a more
diverse candidate pool
•
Partner with organisations that support
disadvantaged groups
•
Ensure our imagery is diverse
We are signatories of BITC’s Race at Work charter which
publicly demonstrates our commitment to improving
equality of opportunity across Headlam. This Charter has
seven calls to action for businesses, many of which we are
working towards.
Finally, Headlam are represented on two of the BITC
Regional Boards, East Midlands and Yorkshire & Humber.
Community
Through making use of the BITC community needs analysis,
we have identified which groups in the local community
most need support. This provided us with insight into Bulwell,
which is local to our Nottingham site and last year we
reported on the partnerships we developed with Bulwell
Academy and Bulwell Forest Gardens. These relationships
have continued and in 2024 our Nottingham team, suppliers
and customers donated over 100 Easter eggs to the children
that visit the centre. Through donations we have made in
2024 we have also been able to fund a weekly forest school
session throughout 2025.
This year we have extended the Community Needs analysis
to Leeds which identified that we can have the biggest
impact in Leeds through providing training and employment
opportunities. As a result, we will have piloted our Trainee
Fitter programme in Leeds. This programme looks to address
the lack of training within the area, whilst also supporting the
sustainability of the flooring industry, which has a reducing
population of trained flooring fitters. We have created a
6-month training programme in partnership with 7 of our
suppliers. The training programme gives the trainees a fully
rounded experience of all aspects of floor laying. During the
programme the fitters will support various local community
projects to hone their skills and demonstrate competency
to their assessors. At the end of this programme, we will
help trainees to find jobs with our customers. This is a great
example of the flooring industry pulling together to support
local communities and improve the sustainability of the
industry.
Headlam Group PLC Annual Report & Accounts 2024
49
Strategic Report
Our commitment
Leading on sustainability and environmental responsibility
and Making Headlam a Great Place to Work for everyone
are two of the five pillars of our strategy see pages 18 to 21
and as such we set targets annually to ensure continuous
improvement to achieve these ambitions. The governance
we have in place to track progress against these
actions are hard wired into many of our ways of working,
standard reporting and meetings to provide leadership
and management with an opportunity to share latest
performance, further actions they are taking, risks and
issues which may have arisen, and any support required.
Ensuring that colleagues know what is expected of them
will always be a key focus for the leadership team at
Headlam, and we have a variety of ways in which we
assure this. Our Colleague Code of Ethics, workplace
policies and standard operating procedures are reviewed
regularly and are made available to all our colleagues
through our intranet and communications portal.
We hold regular briefings with colleagues at all levels
including monthly leadership briefings, management
communications, team meetings and toolbox talks.
These communications not only provide an opportunity
to remind colleagues of our policies and ways of working
but also ensure that they are aware of their key priorities,
how these priorities help us to achieve the business
strategy and provide them with an insight into how they
are progressing.
Karen Hubbard,
Non-Executive Director
“ In today’s business
landscape, ESG
governance is not just
a responsibility – it’s
an opportunity. By
embedding environmental,
social, and governance
principles into our core
strategies, we ensure
long-term resilience,
drive meaningful impact,
and build trust with all
our stakeholders.”
G
Governance
50
GOVERNANCE
This is further supported by the opportunity to set
objectives and review them through the check in process.
Formal meetings such as Board meetings, Executive
Performance Reviews, Commercial Performance Reviews,
Audit and ESG Committee meetings provide high level
oversight of what has been achieved, how it has been
achieved and proposed actions.
ESG Committee
We have an established ESG Committee at Headlam
to assist the Board of Directors in providing oversight
with respect to the ongoing development and delivery
of the ESG strategy. The Committee is chaired by the
Chief Executive and has one of the Non-Executive
Directors in attendance along with the Chief People and
Sustainability Officer, the Chief Customer Officer and
several senior leaders, including our ESG Director. A copy
of the ESG Committee terms of reference can be found
on the corporate website. In 2024, the Committee met
on four occasions and discussed every aspect of the ESG
strategy including Health & Safety, decarbonisation, waste
management, the take-back scheme, sustainable product
development, ongoing ethical sourcing audits and raw
material traceability checks by recognised independent
third party bodies, quality and service, fleet innovation,
inclusion and wellbeing, policy changes, regulatory horizon
scanning, packaging, colleague development, colleague
engagement and community.
Executive Accountability
To ensure appropriate Executive focus on ESG, the Board
ensures that ESG targets are included in both the Annual
Bonus Scheme and the Performance Share Plan for
Executive Directors and members of the Executive Team.
Details of the Annual Bonus Scheme objectives for 2024
and the Performance Share Plan targets for all in-flight
schemes can be found the in the Remuneration Report of
the 2024 Annual Report and Accounts.
Progress against all ESG targets are presented through
the ESG Committee. Key environmental, community
and people initiatives are reviewed at monthly Executive
Performance Review meetings and service, quality
and compliance updates are provided through the
Commercial Review Progress meetings on a monthly basis,
or when required, at the weekly Executive meetings.
Sourcing
Our responsible sourcing programme continues to
strengthen with our supplier onboarding process as the
foundation, before a supplier can trade with the Group
they must complete our due diligence assessment, which
includes completing a comprehensive questionnaire,
reading and signing up to our supply chain values through
our supplier code of conduct and sustainability charter.
If required any risks associated with human rights, health &
safety, environment or business ethics must be addressed
before we award any business or commence mass
production.
Headlam Group PLC Annual Report & Accounts 2024
51
Strategic Report
We remain members of SEDEX and require all suppliers
manufacturing products under a Headlam brand to
undergo an independent audit, every two years, using the
SMETA format, covering human rights, health & safety,
environment & business ethics.
We are looking to further strengthen our processes in
2025 by working collaboratively with our suppliers to build
a more circular supply chain, taking more accountability
for material recovery, raw material selection and use;
and looking at innovative solutions to further reduce our
impact on the environment.
Timber remains an important commodity to the Group
and we will continue to ensure all our supply chains are not
causing any form of deforestation or degradation by working
with manufacturers and verifying through independent
specialist organisations. Our Domus business continue to
maintain their FSC Certification and we only work with
suppliers that can provide certified timber material.
Quality
Supplier Management
Quality is an essential part of our values and we demand
that all our suppliers deliver to our agreed standards. All
products sold under a Headlam brand must be compliant
with all applicable UK and EU regulations, fit for purpose
and perform as described. Our quality management
team are continually reviewing customer feedback to
ensure our brands are meeting their expectations. Any
supplier or product that falls below our acceptable quality
limits (AQL) undergoes an immediate quality review to
understand the root cause of why our standards have not
been achieved supported by a corrective action plan.
Operations
During 2024 we focused on our operations to ensure our
customers are receiving their orders on time, in full and
free from damage. Working alongside our customer
support team and using our customer feedback our
central operations team have implemented a number of
key improvements to ensure our customers continue to
receive the best and most reliable service available.
Speak Up (Whistleblowing)
In the event that colleagues are not complying with our
Code of Ethics, and the formal mechanisms have failed
to alert us to this, we have a Speak Up policy which is
well publicised in sites and through our policies. There are
two ways in which colleagues can raise a whistleblowing
concern; through a Speak Up email account or through a
third party confidential reporting service.
Either way, the Chief People & Sustainability Officer,
Head of Business Partnering and Employee Relations,
Company Secretary, Director of Group Finance, Head of
Internal Audit and one of our Non-Executive Directors
(our Audit Chair) are made immediately aware of any
concerns raised and will follow the concern through the
investigation stage to its conclusion. Concerns raised
in this way, and the outcome of the investigations, are
reported to the Board.
Improved support for colleagues
We have implemented a number of improvements, as
reported elsewhere in this report, including:
•
New learning management system (Eloomi)
•
Safety Culture system
•
New HR and payroll system
Policies and Process
The following ESG and People policies have been revised
and updated in 2024: Environmental Policy, Inclusion and
Respect in the Workplace and the Human Rights Policy.
These policies are available on the Headlam corporate
website.
Project and Programme Governance
In 2024 we had two major programmes running at
Headlam in the UK; Project Fusion, the acceleration of
our strategy and Project Nexus, the implementation
of our new ERP system. To ensure ESG remained a key
consideration through both projects the Chief People and
Sustainability Officer sat on the steering committee for
both programmes and the ESG Director was consulted
and engaged through workshops or weekly updates. Both
programmes provide us with an opportunity to fast track
many of the plans across the ESG strategy by through new
buildings, new processes, improved reporting, and new
ways of working internally or with suppliers and customers.
Stakeholder engagement
In 2024, we continued to maintain engagement on ESG
with the broader industry through Carpets Recycling UK,
our suppliers, and industry bodies. During our supplier
conference in September, we presented progress on our
Take-back trial and how we could work together with
our suppliers to ensure that we are sourcing recyclable
and recycled products. We have also held meetings with
a number of suppliers across the year to discuss product
innovation and how they can support future Take-back
efforts.
We also put an emphasis on engaging our colleagues
through our Employee Forums, where we discussed sharing
best practice on Health & Safety, colleague engagement,
quality improvements, and discussed changes to
our reward offer resulting in the implementation of a
holiday purchase scheme. Our Quality improvement
group, facilitated by our operations team, has brought
colleagues from right across the business and at all levels
to find ways to improve the quality of the products being
delivered to our customers. This has led to several process
improvements and changes in packaging design.
Our greatest insight into the views of our customers
regarding ESG is our colleagues. We have worked hard this
year to ensure that, as well as the views of our customers
being fed up through colleagues reporting lines, we
create forums for colleagues to share insights directly with
decision makers. Examples of these opportunities include
ASM forums, Quality Improvement Forums, Open Forums
and Employee Forums.
G
Governance
52
GOVERNANCE
We also survey our customers at least once a year and
use this insight to create actions to improve performance.
Interestingly, whilst our customers’ perception of how
environmentally friendly we are increased in 2024, the
importance they give to this attribution is still very low.
25% of customer survey respondents say that their own
customers are enquiring about sustainable products with
the top three enquiries regarding: Products made from
recycled materials, products made from sustainable
materials and products that are/could be recycled at end
of life. This feedback is passed on to our central buying
team to inform range selection.
Our shareholders have the benefit of reviewing our
progress on sustainability across the business each year
through this report which is included in our annual report
and accounts available online and in hard copy (for
those who have requested hard copies). The Company’s
position and progress across various sustainability areas is
reviewed and rated by various ESG rating agencies which
is available online for shareholders to review.
Headlam Group PLC Annual Report & Accounts 2024
53
Strategic Report
The table below, and continuing on pages 55 to 58 details the Group’s responses consistent with the TCFD recommendations
and pillars.
The Group has considered and taken into account the TCFD all-sector guidance and supplemental guidance for financial and
non-financial companies and believes it to be consistent with them.
This TCFD disclosure forms part of the Group’s overall Sustainability Report on pages 38 to 62. It should be read as part of the
full report which includes the Group’s key decarbonisation actions to reach Net Zero and reduce its contribution to climate
change, together with KPIs and targets to measure progress.
Governance
Disclosure
The Board’s oversight of
climate-related risks and
opportunities
The Board has primary oversight and ultimate responsibility for ESG strategy and
performance, which includes the approach and actions in relation to climate-related
issues. ESG is considered regularly as part of the Board programme of business, with
ESG policy and strategy considered in depth on an annual basis. An Executive ESG
Committee assists the Board with the more detailed aspects of its ESG agenda and
holds management to account on the implementation of the ESG strategy approved
by the Board. The Committee’s terms of reference are publicly available on the Group’s
website, with the Chief Executive the Chair of the Committee.
Whilst ultimate responsibility for risk governance sits with the Board, the Audit
Committee assists in risk oversight (as described within Risk Management on page 63.
The Group’s most material ESG issues are included in the Group’s Risk Register. During
2024, these material issues were reported to the Audit Committee by the Executive Risk
Committee (detailed below) and discussed at each of their quarterly meetings, with
management’s approach to mitigating risk and capturing opportunity challenged
appropriately.
Management’s role in
assessing and managing
climate-related risks and
opportunities
As above, the Group has an Executive ESG Committee, which, as part of its remit,
focuses on decarbonisation actions and reducing the Group’s contribution to climate
change. The Group also has an established Executive Risk Committee, which meets
quarterly and comprises the Chief Financial Officer, members of the Executive Team,
senior managers and heads of department (including from operations and finance).
Its role is to review identified risks, including the likelihood and potential impact of each
risk, establishing and monitoring the effectiveness of mitigating and opportunistic
actions, and considering emerging risk. The Group’s most material ESG issues per the
Materiality Assessment Map published on the Group’s website are included in the
Group’s Risk Register, which forms the basis for Committee discussions. Materiality for
climate-related risks and opportunities is assessed with reference to that used for
mainstream reporting but also considers the key risks being assessed by management
to inform current and future strategy along with internal feedback.
The Group employs an ESG Team, reporting into the Chief People Officer and led by
the ESG Director. Its principal activity is the day-to-day management and delivery of
projects in relation to the Group’s ESG strategy, with projects to both mitigate climate
risk and capture opportunity. The projects related to decarbonisation and reducing
contribution to climate change are given on page 40 of the Sustainability Report.
Outputs are tracked through the ESG Committee and major projects are reviewed by
the Chief Executive.
54
TASK FORCE ON CLIMATE-RELATED
FINANCIAL DISCLOSURES (‘TCFD’)
Governance
Disclosure
The organisation’s processes
for identifying and assessing
climate-related risks
The Group’s risk governance and management processes are detailed within Risk
Management on page 63 of the Annual Report and Accounts. Its preparation includes
a quantitative assessment of ESG risks, inclusive of climate-related, on the composite
bases of likelihood and potential impact of ‘raw’ risk. Risks considered include Transition
Risks, such as market, policy and legal (both existing and emerging), technology, and
reputation, and Physical Risks (both acute and chronic). This process has allowed the
Group to both identify climate-related risks and opportunities and determine their
relative significance to the business.
How processes for identifying,
assessing and managing
climate-related risks
are integrated into the
organisation’s overall risk
management
Climate-related risks are considered as part of the ESG Strategy and ‘Environmental’
Principal Risk and, therefore, integrated into the Group’s overall risk management
process. Additionally, through preparation of the Group’s annually reviewed and publicly
disclosed Environmental Policy and TCFD disclosure, the Group gives full consideration
and commentary on climate-related factors.
The climate-related risks and
opportunities the organisation
has identified over the short,
medium and long term
The impact of climate-related
risks and opportunities on the
organisation’s business(es),
strategy and financial planning
The organisation’s processes
for managing climate-related
risks
The Group has identified its climate-related risks and opportunities, and assessed
strategy resilience, through quantitative scenario analysis. The range of possible
risks and opportunities were analysed under two future climate forecasts. Both
Physical and Transition Risks were considered, modelled around the widely recognised
Representative Concentration Pathways (RCPs) and Shared Socio-economic Pathways
(SSPs). The scenarios chosen were: global warming of 2ºC (RCP 3.4), considered the
most likely scenario; and global warming of 4ºC (RCP 8.5), considered a resilience
scenario. Time horizons have been chosen that best reflect the Group’s business plan,
strategy, and various financial accounting policies. The total time horizon considered
is up to 2050, split into short term (three years, 2025–2027), medium term (2028–2035)
and long term (2036–2050). The assumptions used in the scenario analysis, with
reference to Extended Producer Responsibility impact and the transition to a more
sustainable fleet, are also discussed in note 11 to the Financial Statements.
Factors
Middle of the road
Fossil-fuelled growth
RCP
3.4
8.5
SSP
2
5
Temperature rise
2ºC
4ºC
Likelihood
High
Moderate
Societal response
Proactive, Disorderly
Reactive
Headlam Group PLC Annual Report & Accounts 2024
55
Strategic Report
The quantitative assessment below considered the likelihood and estimated financial impact of each climate-related risk,
before the impact of mitigating actions.
Category
Risk
Key assumptions
Scenario 1 (Transition): Average global temperatures rising by 2ºC above pre-industrial levels by 2100
Policy and
Legal:
Financial
impact of
potential new
legislation/
regulation
(including
product
legislation)
Risk: Increased operating
costs through Extended
Producer Responsibility (EPR)
for bulky waste
The EPR (bulky waste) legislation is assumed to come into effect in 2027, which
essentially introduces an extra tax on the sale of residential floorcoverings for
companies considered to be manufacturer or first point of contact in the UK
for imported items. The rates used in the scenario modelling are consistent with
current industry best estimates, which are uncertain whilst the legislation is
under consultation. The scenario modelling assumes that the take-back scheme,
currently being trialled, is rolled out across the network. In the long term, all of the
EPR costs are forecast to be mitigated by offsetting collected waste against the
tax. The modelling does not currently assume that any residual EPR costs in the
short or medium term are passed on to customers, which is considered prudent
given industry practice of passing through cost inflation to customers.
Market:
Transitioning
to more
sustainable
business and
operating
practices
Risk: Increased costs of
operating a sustainable
fleet with low-carbon
technologies
The technology for zero-emission long-haul, heavy goods vehicles (HGVs) is less
developed than for non-commercial (including company cars) and short-haul
commercial vehicles. The Group operates around 300 HGVs and is monitoring the
development of both electric and hydrogen powered HGVs.
There is a high degree of uncertainty in the cost estimates for a zero emission
HGV fleet. Current forecasts show that the total cost of ownership of electric
HGVs are likely to be higher than diesel HGVs due to the high initial purchase
price. However, the Group will monitor how the initial cost of electric HGVs
changes as improvements in powertrains and energy storage are developed.
It has been assumed, for this scenario modelling, that the cost of operating a
zero emission HGV fleet is broadly comparable to that of operating a diesel fleet.
This assumption is on the basis that there is a very large global market for HGVs,
which provides commercial incentive for companies to develop a viable, cost-
effective zero emission solution for HGVs. There could also be subsidies provided
by governments to incentivise the transition to zero emission HGVs.
Market:
Changing
consumer
preferences
Risk: Reduced demand for
current product offering
The scenario modelling assumes a shift away from non-sustainable to more
sustainable flooring at a rate of 0.5% of mix per year, settling in the medium term,
with an associated gross profit reduction.
Scenario 2 (Physical): Average global temperatures rising by 4ºC above pre-industrial levels by 2100
Acute: Asset
damage
Risk: Business interruption
and loss of revenue following
damage to distribution
network as a result of
extreme weather event;
consequential impairment
of assets and increased
insurance premiums
A weather event, likely to be a flooding event, is assumed to occur in the long
term. Only a small number of the geographically dispersed sites are considered
to have a high risk of flooding. Following the acceleration of the network
optimisation strategy, including the disposal of the Ipswich and Uddingston
distribution centres, there are no sites, which if affected, would give rise to a
material profit impact.
Chronic
and Acute:
Supply chain
disruption
Risk: Potential raw material
shortages and knock-
on impact on product
availability from supply
chain disruption leading to
loss of revenue
The scenario modelling assumes there is no loss of revenue from this risk due
to the comprehensive inventory and homogeneous products held and sold
by the Group.
56
TASK FORCE ON CLIMATE-RELATED
FINANCIAL DISCLOSURES (‘TCFD’)
CONTINUED
Average potential financial impact on
annual profit £M
Short Term
(2025–2027)
Medium Term
(2028–2035)
Long Term
(2036–2050)
Strategic response and resilience
(2.2)
(3.2)
–
Collaborate with suppliers on new sustainable product launches.
Roll-out the take-back scheme to maximise recycling opportunities
and avoid materials entering into the waste stream with a view to
offsetting EPR costs.
It is likely that all, or significantly all, of any residual EPR costs (after
offsetting Take-back scheme waste) could be indirectly passed on to
customers, reducing the potential financial impact to an immaterial
amount.
–
–
–
Network optimisation will increase transport efficiency.
Ongoing trials of electric commercial vehicles.
(0.5)
(2.5)
(2.5)
Due to leading position, the Group is well placed to develop its range
of flooring solutions to quickly adapt its offering to reflect consumer
preferences and, therefore, mitigate all or significantly all of this risk,
reducing the potential financial impact to an immaterial amount.
–
–
–
The Group’s assets are not expected to be exposed to high physical
climate-related risk due to the geographies in which it operates.
Operations are disaggregated with business continuity plans in place if
specific sites are affected by isolated events.
–
–
–
Market-leading position and strategic partnerships with suppliers
should enable the Group to preserve levels of availability.
Comprehensive inventory levels, typically, maintained at any one time
providing strong availability.
Headlam Group PLC Annual Report & Accounts 2024
57
Strategic Report
Strategy and
Risk Management
Disclosure
Resilience of the
organisation’s
strategy, taking
into consideration
different climate-
related scenarios
The analysis suggests that EPR and reduced demand for current product offering could have the
most significant impact on the Group’s profits in the transition scenario. EPR would only have a
significant impact if any residual costs, not mitigated by the Take-back scheme, were not passed
on to customers, which is considered unlikely. There is a high degree of uncertainty around the
cost of transitioning to a zero emission HGV fleet.
There could be further market opportunities for the Group to increase revenue with its peer-
leading sustainable practices helping to attract new larger customers and by capturing market
share by responding to a shift towards sustainable products more quickly than competitors.
These opportunities are not included in the quantitative scenario modelling.
In the physical scenario, the analysis suggests that there would not be a significant impact on
the business.
There are a number of strategic responses that the Group could and is already taking against
these risks, as noted above. When taking into account the judged severity of the potential risks,
time horizons and mitigating actions, the Group is currently considered to remain a resilient
business in both scenarios modelled above. Overall, the business model is deemed fit for purpose,
with strategic aims in place to leverage the opportunities from its ESG strategy.
Metrics and Targets
Disclosure
Metrics used by the
organisation to assess
climate-related risks
and opportunities
The Group uses the below KPIs and targets to both assess the risks and opportunities as well as
its progress in relation to its overall ESG Strategy.
KPI
•
Energy usage (per SECR disclosure)
•
Scope 1, 2 and 3 emissions (year on year)
•
Achieving reduction pathway required for Scope 1, 2 and 3 emissions to achieve interim target
•
Number of sustainable own brand product launches
•
ESG-related capital investment
•
ESG rating agency scores
•
Physical asset damaged related insurance claims/premiums
Target
•
100% of non-commercial fleet electric/low emission by 2025
•
Interim emissions target (Scope 1, 2 and 3)
•
Net Zero emissions target (Scope 1, 2 and 3)
An intensity metric is additionally given within the Group’s SECR Disclosure on page 59.
An ESG metric has been introduced into Executive Director and Executive Team performance-
related variable remuneration.
Link to Risks
9
Link to KPIs
10 11
Scope 1, Scope 2 and
Scope 3 greenhouse
(‘GHG’) emissions,
and the related risks
The Group’s Scope 1, 2 and 3 emissions are summarised on pages 60 to 61 of the Sustainability
Report.
Targets used by
the organisation to
manage climate-
related risks and
opportunities and
performance against
targets
The Group’s Scope 1, 2 and 3 targets are aligned and set to be net zero by 2040.
The Group has an interim Scope 1 and 2 target for a 46% reduction against the 2019
baseline by 2030.
The Group also has an interim Scope 3 target for a 42% reduction against the 2023
baseline by 2032.
58
TASK FORCE ON CLIMATE-RELATED
FINANCIAL DISCLOSURES (‘TCFD’)
CONTINUED
Overall UK Carbon Intensity
This SECR disclosure forms part of the Company’s overall
Sustainability Report on pages 38 to 62, and should be
read as part of the full report.
This disclosure along with the full report summarises
the Company’s energy usage, associated emissions,
energy efficiency actions being undertaken and energy
performance under the government policy Streamlined
Energy and Carbon Reporting (‘SECR’), as implemented
by the Companies (Directors’ Report) and Limited Liability
Partnerships (Energy and Carbon Report) Regulations 2018.
This disclosure also summarises the methodologies utilised
for all calculations related to the elements reported under
Energy and Carbon, and includes intensity metrics. With
the energy efficiency actions detailed in the full report, this
disclosure fully complies with the reporting regulations under
the new SECR legislation.
This disclosure, and full supporting documentation, has been
prepared by Net Zero Compliance (a division of Inspired
Energy PLC) in conjunction with members of Headlam’s
Executive Team for Headlam Group PLC by means of
interpreting the Companies (Directors’ Report) and
Limited Liability Partnerships (Energy and Carbon Report)
Regulations 2018 as they apply to information supplied by
Headlam Group PLC and its energy suppliers.
The following figures demonstrate year-on-year changes
in consumption and resulting emissions for Headlam Group
PLC for 2024 and 2023. Headlam Group PLC has chosen to
disclose its consumption and emissions data for its global
operations, in addition to mandatory UK consumption and
emissions data.
Definitions of the Scopes used in this disclosure:
•
Scope 1 consumption and emissions include direct
combustion of natural gas, and fuels utilised for
transportation, for example, company vehicle fleets.
•
Scope 2 consumption and emissions cover indirect
emissions related to the consumption of purchased
electricity in day-to-day business operations, and
electricity consumed in vehicles such as EVs and PHEVs.
•
Scope 3 consumption and emissions cover emissions
resulting from sources not directly owned by Headlam
Group PLC, which relates to grey fleet business travel
undertaken in employee-owned vehicles only.
UK Overview
UK Carbon and Consumption £m = £m Revenue
UK Carbon Intensity Metric £m = £m Revenue
29.41 tCO2e per £m turnover
YOY +16.45%
14,602.02 tCO2e
tCO2e YOY +8.01%
Natural Gas
4,270,355 kWh
781.05 tCO2e
tCO2e YOY: -15.52%
1.56 tCO2e per £m
YOY: -5.71%
Electricity
5,330,844 kWh
1,103.75 tCO2e
tCO2e YOY: -18.01%
1.99 tCO2e per £m
YOY: -8.98%
Transport
57,389,580 kWh
13,573.45 tCO2e
tCO2e YOY: +10.27%
24.48 tCO2e per £m
YOY: +22.30%
Headlam Group PLC Annual Report & Accounts 2024
59
Strategic Report
STREAMLINED ENERGY AND
CARBON REPORTING (‘SECR’)
Consumption (kWh) and Greenhouse Gas emissions (tCO2e) Totals
The following tables show the consumption and associated emissions for financial years ending December 2024 and
December 2023 for all operations.
Headlam have chosen to disclose its consumption and emissions data for the group’s global operations, in addition to
mandatory UK consumption and emissions data.
UK Totals
The total Energy Consumption (kWh) figures for reportable UK-based energy supplies are outlined below:
Utility and Scope
2024
Consumption
kWh
2023
Consumption
kWh
Grid-Supplied Electricity (Scope 2)
5,330,844
6,501,459
Gaseous and other fuels (Scope 1)
4,270,355
5,054,342
Transportation (Scope 1)
56,919,467
50,755,600
Transportation (Scope 2)
126,675
886,117
Transportation (Scope 3)
343,438
153,078
Total
66,990,779
63,350,597
The total emission (tCO2e) figures for reportable UK-based energy supplies are outlined below.
Utility and Scope
2024
Consumption
tCO2e
2023
Consumption
tCO2e
Grid-Supplied Electricity (Scope 2)
1,103.75
1,346.28
Gaseous and other fuels (Scope 1)
781.05
924.59
Transportation (Scope 1)
13,470.67
12,066.80
Transportation (Scope 2)
26.23
207.98
Transportation (Scope 3)
76.55
34.43
Total
15,458.25
14,580.07
UK Intensity Metric
An intensity metric of tCO2e per £m has been applied for our annual total emissions. The methodology of the intensity metric
calculations is detailed in the appendix, and the results of this analysis are as follows:
Intensity Metric
2024
Intensity
Metric
2023
Intensity
Metric
tCO2e/£m UK Revenue
29.41
25.25
60
STREAMLINED ENERGY AND
CARBON REPORTING (‘SECR’)
CONTINUED
Continental European Totals
Headlam Group PLC have sites that they are responsible for in France and in the Netherlands. The consumption and emission
figures for these are shown below:
France Totals
Utility and Scope
2024
Consumption
kWh
2024
Consumption
tCO2e
Grid-Supplied Electricity (Scope 2)
437,618
13.48
Gaseous and other fuels (Scope 1)
508,697
93.04
Transportation (Scope 1)
1,932,301
436.91
Total
2,878,616
543.43
Netherlands Totals
Utility and Scope
2024
Consumption
kWh
2024
Consumption
tCO2e
Grid-Supplied Electricity (Scope 2)
255,345
61.68
Gaseous and other fuels (Scope 1)
271,218
49.61
Transportation (Scope 1)
2,185,113
507.46
Total
2,711,676
618.75
UK and European Totals
Utility and Scope
2024
Consumption
kWh
2024
Consumption
tCO2e
Grid-Supplied Electricity (Scope 2)
6,023,807
1,178.92
Gaseous and other fuels (Scope 1)
5,050,270
923.69
Transportation (Scope 1)
61,036,882
14,415.04
Transportation (Scope 2)
126,675
26.23
Transportation (Scope 3)
343,438
76.55
Total
72,581,072
16,620.43
UK and European Intensity Metric
An intensity metric of tCO2e per £m has been applied for our annual total emissions. The methodology of the intensity metric
calculations is detailed in the appendix, and the results of this analysis are as follows:
Intensity Metric
2024
Intensity
Metric
tCO2e / £m Group Revenue
28.02
Headlam Group PLC Annual Report & Accounts 2024
61
Strategic Report
Headlam is committed to year-on-year improvements in its
operational energy efficiency. A register of energy efficiency
measures has been compiled, with a view to implementing
these measures in the next five years.
Energy efficiency actions
All leased sites for new trade counters have been retrofitted
with best-rated energy efficiency measures. This has
been done in an attempt to remove outdated inefficient
hardware at these sites to reduce consumption.
Solar panel installation
Introduced solar panels and power management efficiency
in Coleshill Distribution centre. This site is a significant
distribution centre for the company and has a very high
surface area for solar panels, reducing the site’s reliance
upon the national grid for electricity. Efforts will be made in
2025 to record generation data from these solar panels.
Company car fleet electrification
All new company car purchases are now either plug-in
hybrid or battery-electric vehicles. Fossil fuel-consuming
vehicles will gradually be phased out and retired during the
transition process towards a fully electric fleet.
Measures to be addressed in 2025
Closure and rationalisation of distribution network
Headlam plans to consolidate its operations into single sites
from multiple sites. This will streamline the overall operational
footprint and result in a reduction in unnecessary energy
wastage from a wider network of sites.
Energy behaviours workshops
Company-wide training on best practices to reduce energy
consumption and use of energy efficiency measures are
set to take place during 2025. These workshops aim to
guide employees in their day-to-day activities to be more
conscious of energy being consumed and mitigate some of
this excess consumption.
Year-on-year changes
Gas and electricity emissions have reduced as there has
been less estimation year-on-year. Since 2023, there has
been a 95% reduction in estimated consumption, which
has resulted in higher data accuracy and, as a result, lower
consumption.
The key reason for the large increases in transport emissions
has been driven by a 6% increase in litres consumed by
diesel-fuelled company cars and fleet vehicles.
The total intensity metric has increased due to a 10%
reduction in total revenue (£m) and increased transport
emissions.
Total Group Revenue (£m)
£593.1m
Total UK Revenue (£m)
£525.7m
Total Continental Europe Revenue (£m)
£67.4m
62
STREAMLINED ENERGY AND
CARBON REPORTING (‘SECR’)
CONTINUED
Overview
The table on pages 66 to 67 summarises the Principal
Risks (in no particular order), which the Board considers
could have a material impact on the Group’s reputation,
operations or financial performance. No new Principal Risks
have been identified.
The risk heat map on page 65 shows the Board’s assessment
of the level of risk for each of these Principal Risks as of the
date of this Annual Report and Accounts. The assessment
of the level of risk is first conducted by the Executive Risk
Committee and then reviewed and approved, following any
changes, by the Board.
Risk governance
Risk is encountered as part of the ordinary course of business
as well as through the implementation of the Group’s
strategy and transformation plan.
The Board has overall responsibility for the stewardship of
risk management and for ensuring that the Group exercises
an appropriate level of risk management to support the
achievement of its strategy. The Principal Risks faced by the
Group could have a material adverse effect on its business,
financial performance, or reputation, either alone or in
combination, so the management of such risks through
appropriate review, monitoring and control is important
to the Group’s long-term sustainable success. Changes to
the trading environment can also affect the likelihood and
impact of risks and may give rise to new risks.
The Board is supported in its risk management
responsibilities and in reviewing the effectiveness of the risk
management framework by the Audit Committee and the
Executive Risk Committee.
The Executive Risk Committee is advised by an external
risk management specialist and meets quarterly to assess
the Group’s internal risk register, the adequacy of and
any changes in controls, and to undertake continuous
identification of emerging risks. The work of the Executive
Risk Committee is considered by the Audit Committee at
each of its four scheduled meetings during a year, and
informs the Audit Committee’s risk management discussions.
The Board carries out an assessment of the Group’s Principal
Risks and Uncertainties and identifies any emerging risks, at
least annually.
The Audit Committee, on behalf of the Board, also monitors
the Group’s system of risk management and internal control,
and conducts a review of its effectiveness at least once
a year, as well as overseeing the internal and third-party
assurance relating to the Principal Risks.
Risk appetite
The Board has considered the amount and type of
risk that the Group is willing to pursue or retain.
The Executive Risk Committee conducted an
exercise to determine risk appetite for each
principal risk across a five-point scale : Averse,
Cautious, Neutral, Open, High. The outcome of
this was then presented to, and discussed with,
and challenged by, the Audit Committee, and
subsequently ratified by the Board.
Headlam Group PLC Annual Report & Accounts 2024
63
Strategic Report
RISK MANAGEMENT
Risk monitoring structure
Board
The Board has overall responsibility for the Group's system of risk management and internal control.
Committees
Risk Identification
Risk Management
Independent assurance1
Audit
Committee
Nomination
Committee
Remuneration
Committee
Assesses strategic risks
identified by management
capable of threatening
the business model, future
performance, solvency or
liquidity in the context of
the Company’s strategy
and the interests of
stakeholders and market
context.
Overall responsibility for corporate
governance, internal control and
risk management and for setting
risk appetite taking into account the
expectations of stakeholders and
feedback received from engagement
activities.
Audit Committee receives updates
from Executive Risk Committee on
key risks and assesses adequacy of
controls and risk classification and
identification processes.
Other Committees consider risk
management as it relates to their role
and priorities.
Executive Risk Committee
Assesses risks and
mitigating controls using a
specified scoring system,
based on likelihood and
impact, and reports into
the Audit Committee.
Reviews operation and design of
internal controls to ensure risks remain
within appetite.
Senior Leadership Team
Group functions
Business management
Use knowledge of best
practice, business and
the market in which we
operate to assess changes
in key risks.
Applies local knowledge
to identify and assess
operational risk.
Responsible for ensuring that risk
management is embedded within the
business and appropriate actions are
taken to manage risk.
Applies local knowledge to identify
and assess operational risk.
1
A Head of Internal Audit was appointed in 2022 and commenced independent assurance on the Group’s risk management processes in 2023.
64
RISK MANAGEMENT
CONTINUED
Our principal risks
The Group has identified ten principal risks. There have been
no additions or deletions to these principal risks during the
year. However, a number of changes have been made to the
risk ratings, taking into account the events of the year (both
macro and micro) and any specific relevant circumstances
for the Group, along with the mitigating actions and
controls. These changes are summarised below:
Risk 3 – IT (systems and infrastructure):
Whilst we are now closer to the eventual replacement of
the legacy ERP, with strong progress made in the year,
the risk profile increases slightly in the interim, due to the
increasing age of the legacy system and the complexity of
maintaining ongoing developments on this sytem, whilst also
developing the new system.
Risk 10 – change and decision making:
This risk has increased, reflecting the scale of change that
the business is undergoing through the transformation plan.
Whilst we have ensured numerous mitigating controls are in
place, the scale and pace of change, at the same time as an
ERP change project, increases the risk.
Key
1
Market (economy and competition)
2
Market (strategy)
3
IT (systems and infrastructure)
4
IT (cyber security)
5
People
6
Health and Safety
7
Supply chain
8
Legislation, regulation and reporting
9
Environmental and decarbonisation
10
Change and decision making
High
Impact
Low
High
Likelihood
6
7
3
2
9
5
1
10
8
4
Risk heat map
Emerging risks
Identification and review of emerging risks are
integrated into our risk review process. Emerging
risks are risks that are rapidly evolving, or arriving
at pace, for which the impact and likelihood have
not yet been fully understood and for which the
appropriate mitigations have not yet been fully
identified.
We continue to monitor the uncertain
macroeconomic and geopolitical environment
to assess impacts on customers, suppliers and
colleagues. Currently we monitor this through the
lens of our existing principal risks, but with a view to
separating out any elements if it were considered
to be a principal risk of its own. During the year the
Executive Risk Committee also undertook a “horizon
scanning” workshop, with external facilitation, to
challenge our thinking on emerging risks and to
identify if there could be other risks that we have
not considered. Whilst this did not result in any
new emerging or principal risks for the Group, it did
identify some additional potential causes of existing
risks, which we have added to our risk registers and
allocated appropriate mitigating controls.
There are no other emerging risks assessed as being
of significance to disclose currently.
Headlam Group PLC Annual Report & Accounts 2024
65
Strategic Report
Risk and description
Mitigating actions
Link to
Strategy
Risk
change
1 Market (economy and competition)
Failure to sustain
revenue and profit
performance as a result
of economic backdrop,
market demand, service
levels or competitive
dynamics
The Group closely monitors market activity on a daily basis at both an
individual business and Group level. This visibility allows the Group to take
prompt action in response, including enhanced sales activity, operational
efficiency, managing inventory levels, and cash management.
The Group maintains customer engagement and feedback activities to
gain insight into customer preferences to ensure its service proposition and
offering remains competitive.
In response to prolonged market weakness the Group has launched a
transformation plan designed to grow market share, improve profitability
and reduce borrowings.
2 Market (strategy)
Failure to develop and
deliver on new revenue
growth opportunities
Investments were made in multiple areas to support delivery of the revenue
growth strategy during 2024, including £4.0 million capital expenditure
on new and refurbished trade counters, (increasing the number of sites
to 76) and improving the existing network and equipment to support
revenue growth and efficiencies, including £1.2 million invested in upgrading
equipment and premises.
The Board has direct oversight of the Group’s strategy, and its effective
implementation, with the performance of each project team monitored
against clear targets and objectives.
3 IT (systems and infrastructure)
Failure to develop and
maintain IT systems and
infrastructure that is
resilient, scalable, and
able to support the
strategy
The Group is well progressed in its ERP replacement project. This is a modular
programme, with components being developed and activated on a phased
basis, with the overall project expected to be fully completed in 2027. The
software solution and systems integrator have been selected, and the focus
is now on designing and building modules.
4 IT (cyber security)
Failure to develop and
maintain adequate or
effective security and
cyber controls
Targeted use of specialist external advice and support, including a vCISO
(virtual Chief Information Security Officer).
Regular employee cyber engagement programme through a refresher email
requiring all colleagues to watch a short video and answer questions.
5 People
Failure to recruit and
retain the right people
with relevant skills,
values and behaviours
The Board continues to focus on making the Group a great place to work,
and ensure colleagues share in the Group’s long-term success.
For details on the developments in 2024, see pages 44 to 49. Amongst other
developments, during 2024, the Group conducted its second colleague
engagement survey in the UK, which resulted in a 5 ppts improvement.
Key
Increased
Unchanged
Decreased
66
PRINCIPAL RISKS
Risk and description
Mitigating actions
Link to
Strategy
Risk
change
6 Health and safety
Failure to provide a safe
place to work for our
people
Health and safety is a standing agenda item at all Board Meetings. The
Group has a dedicated in-house health and safety team, with a dedicated
Group Health & Safety Director, reporting into the CEO.
The Group also commissions independent audit, and engages external
support, and is focused on having a strong and embedded health and
safety culture across the group. As part of the Group’s ongoing certification,
ISO 45001 audits have been undertaken across all the UK’s main sites.
7 Supply chain
Failure to maintain
a supply chain that
provides innovative,
competitively priced,
environmentally sound
and legally compliant
products on a reliable
and ethical basis
Increased engagement with suppliers to help mitigate against any supply
chain risk. Including on: Sustainability Charter; Ethical Code of Conduct; and
Self-Assessment Questionnaire (delivered by a third-party leading social
audit business).
Working closely with certain suppliers to launch new competitive and
sustainable ranges.
We engage with suppliers regularly and hold an annual supplier conference.
8 Legislation, regulation and reporting
Failure to operate
with high standards of
governance supported
by a sound system of
internal control that
ensures compliance
with laws and
regulations, including
disclosure and reporting
requirements
The Group manages its obligations through a framework of policies and
procedures and, where appropriate, engages the services of specialist
third-party advisers.
The Group has an online compliance training portal with courses related
to Anti-Bribery, Modern Slavery and Human Trafficking, Cyber Security and
Social Media Awareness being rolled out to appropriate staff members.
The Group has implemented a Code of Conduct, setting out clear
standards and expectations for all employees (also see Supplier Ethical
Code of Conduct above). All senior leaders are required to complete a
twice-yearly standards and controls attestation certificate.
9 Environmental and decarbonisation
Failure to reduce
environmental impact,
including failure to
deliver GHG reductions
in line with Net Zero
commitments and
contribution to climate
change
The Group continues to develop and progress its overall ESG Strategy.
For full details on environmental-related actions, see the Sustainability
Report on pages 38 to 62, which includes the Group’s TCFD disclosure. This
disclosure details the climate-related risks the Group has identified, and
how it is specifically assessing and addressing them.
10 Change and decision making
Failure to successfully
drive the cultural and
operating model
changes necessary to
deliver the strategy
The Group’s strategy and strategic objectives continue to be embedded
through regular group-wide communications and engagement. Senior
Leadership meetings are held regularly to discuss overall progress and focus
on specific elements of the strategy.
The Board has direct oversight of strategy and its progress, and investment
has been made in multiple areas in support of the strategy. The Board is
mindful of the impact of the market conditions on the financial performance
and invests carefully and selectively in the key strategic initiatives.
Headlam Group PLC Annual Report & Accounts 2024
67
Strategic Report
Background
Provision 1, in line with Principle C of the UK Corporate
Governance Code 2018, requires the Board to assess the
risks to the sustainability of the business model and delivery
of strategy, and whether these have been considered
and addressed. This statement sets out, in overview, that
assessment.
Consistent with previous years, a period of three years, to
31 December 2027, was chosen for the purpose of the viability
assessment. This period best aligns with the Group’s strategy.
The assumptions used in this longer-term viability
assessment are consistent with the assumptions used in the
directors’ assessment of going concern.
Sensitivity analysis
Reporting on the Group’s and Company’s viability and
assessing going concern requires the Board to consider
those principal risks that could impair the solvency and
liquidity of the Group and Company. In order to determine
those risks, the Board considered the Group-wide principal
risks as set out in the Risk Management and Principal Risks
sections on pages 63 to 67.
In light of the Group’s competitive position, corporate
governance controls, mitigating actions and factors within
its control, it is the Board’s opinion that it is unlikely that
any of the individual risks other than market (economy and
competition) could compromise the Group’s viability in the
assessment period.
The identified principal risks include environmental
and decarbonisation risk. It is the Board’s opinion that
environmental risks are unlikely to compromise the Group’s
viability over the assessment period, including transition risks,
which are considered the most likely to occur. In particular,
any new potential legislation, regarding extended producer
responsibility for bulky household waste items, is unlikely to
significantly impact the Group’s viability after factoring in
the planned mitigating actions concerning the take-back
scheme.
In respect of ultimately transitioning to a sustainable
fleet, it has been assumed that such costs are broadly
comparable to those of operating a diesel fleet. There is
a high degree of uncertainty in the cost estimates for a
zero emission HGV fleet. However, the assumption is on
the basis that there is a very large global market for HGVs,
which provides commercial incentive for companies to
develop a viable, cost-effective zero emission solution for
HGVs. The Board considers that any potential changes in
consumer preferences towards more sustainable products
can be supported by the Group reflecting these changes
in its product offering. Climate-change risks are discussed
further in the TCFD quantitative analysis on pages 54 to 58,
including consideration of the impact of the risks over time
horizons longer than this assessment period.
The Board considered the impact of a new ‘black swan’
event, whereby, for example, a new pandemic surfaces
with little-to-no notice and for which there is no vaccine.
However, it was concluded not to specifically model this
for viability purposes on the basis of probability and also in
acknowledgement that the Covid-19 pandemic proved that
the Group was able to withstand such a shock.
In respect of market (economy and competition) risk, the
key risk relates to sustained periods of macroeconomic
downturn that create reduced consumer and business
confidence, which could result in a significant reduction in
demand for the Group’s products.
The Board considers that the severe but plausible scenario
that has the potential to threaten the viability of the Group
is a prolonged continuation of the volume decline, primarily
in the independent retail market, that has been experienced
over the last three years.
68
VIABILITY STATEMENT
Market backdrop
2024 has seen continued decline in the flooring market,
which is now estimated to be around 30% smaller than it was
in 2019. While the lead indicators for the flooring and home
improvements markets continue to point to improvement
in the medium term, these indicators remain volatile. As has
been widely reported, UK consumer confidence declined in
the run-up to the UK government’s budget announcement,
and this resulted in a further deterioration in the rate of
decline in consumer spending on home improvements.
In setting the downside scenario to be modelled, the Board
recognises that, as the Group exited 2024, the market
in which the Group operates had already declined by a
cumulative circa 30% over recent years. The downside
scenario includes an estimate of the further additional
severe-but-plausible decline in revenue that could occur.
Banking facilities
As at 31 December 2024, the Group had a net cash position
excluding lease liabilities of £10.9 million, and had total
banking facilities available of £100.4 million, including
£81.5 million of committed facilities. At 31 December 2024, the
Group had cash and undrawn facilities of £111.3 million.
The Group is subject to financial covenants in relation to its
revolving credit facility agreement, comprising minimum
EBITDA and minimum liquidity covenants through to May
2026 and interest cover and leverage thereafter. Liquidity is
the total amount of cash and available committed facilities
held by the Group at a month end. Interest Cover is the
ratio of EBITDA, adjusted to exclude the impact of IFRS 16
and share-based payments (‘Covenant EBITDA’) to Finance
Charges. Leverage is the ratio of borrowings and cash
and cash equivalents, excluding IFRS 16 lease liabilities to
Covenant EBITDA.
In January 2025, the size of the facilities was reduced,
recognising that the Group was in a net cash position
at 31 December 2024 and in order to reduce the cost of
maintaining unutilised facilities. The committed revolving
credit facility, which is with a syndicate of three banks, was
reduced to £61.0 million and the uncommitted overdraft
facilities reduced to £9.7 million.
The revolving credit facility matures in October 2027, and
the scenario is modelled on the basis that the facility,
or a comparable facility, could be extended on broadly
similar terms.
Viability statement
Based on the results of the analysis, the Board has a
reasonable expectation that the Group will continue in
operation and be able to meet its liabilities as they fall due
over the three-year period of assessment.
Downside Scenario – continued market
decline
The scenario is modelled on the basis that
consumer confidence for major purchases is
depressed throughout 2025, leading to market
volumes continuing to decline. The market is then
assumed to partially recover over 2026 and 2027,
albeit remaining heavily depressed compared to
2019 levels.
This compares to the base case which assumes a
small degree of market growth in 2025.
In the base case and downside scenario, the Group
and Company would continue to operate within
their banking facilities and covenants until June
2026, when the current covenant amendment
arrangements on the revolving credit facility would
need to be rolled forward, as has successfully been
achieved to date. Alternatively, mitigating actions
would need to be taken in order that the Group
did not require access to its revolving credit facility.
Mitigating actions that could be deployed include:
a freeze on capital spend; sale and leaseback of
freehold properties, recognising that the Group
had a property portfolio worth £94 million (as at
January 2023 valuation) at 31 December 2024;
factoring of receivables, a practice that occurs
elsewhere in the flooring distribution sector; and,
alternative forms of financing such as loans secured
on assets.
Headlam Group PLC Annual Report & Accounts 2024
69
Strategic Report
The table below sets out where stakeholders can find information in the Strategic Report that relates to non financial matters
detailed under Section 414CA and 414CB of the UK Companies Act 2006, and this, taken together, comprises the Company’s
Non-Financial Information Statement.
Reporting Requirement
Relevant policies
Additional Information
Matters
Environmental matters
ESG Policy
Supplier Code of Conduct
Sustainability Report – pages 38 to 62
SECR Disclosure – pages 59 to 62
Corporate Governance Report – pages 73 to 143
People
Code of Ethics
Stakeholder Engagement and Section 172
Statement – pages 26 to 29
Sustainability Report – pages 38 to 62
Corporate Governance Report – pages 73 to 143
Social matters
Equal Opportunities and diversity
policy
Flexible working policy
Stakeholder Engagement and Section 172
Statement – pages 26 to 29
Sustainability Report – pages 38 to 62
Corporate Governance Report – pages 73 to 143
Respect for Human Rights
Health and Safety Policy
Modern Slavery Statement
Health and Safety – pages 44 to 45
Modern Slavery – page 141
Other Statutory Disclosures – pages 138 to 142
Anti-Corruption and
Anti-Bribery matters
Anti-Corruption and Bribery Policy
Speak Up Policy
Expenses Policy
Corporate Governance Report – pages 73 to 143
Audit Committee Report – pages 100 to 106
Other Statutory Disclosures – pages 138 to 142
Information disclosed in support of the matters
Business model
Business Model – pages 16 to 17
Principal risks, impact
and mitigation
Risk Management, and Principal Risks and
Uncertainties – pages 63 to 67
Non-financial key performance
indicators
Key Performance Indicators – pages 22 to 25
Sustainability Report – pages 38 to 62
This Strategic Report was approved by the Board on 11 March 2025 and signed on its behalf by
Chris Payne,
Chief Executive
70
NON-FINANCIAL AND SUSTAINABILITY
INFORMATION STATEMENT
Headlam Group PLC Annual Report & Accounts 2024
71
Strategic Report
72
GOVERNANCE
Compliance Statement
74
Chairman’s Introduction
76
Board of Directors
78
Executive Team
80
How the Board Embeds Culture
82
Board Leadership and Company Purpose
84
Division of Responsibilities
90
Composition, Succession and Evaluation
98
Audit Committee Report
100
Nomination Committee Report
108
Directors’ Remuneration Report
114
Directors’ Report
138
Statement of Directors’ Responsibilities
143
Governance
Headlam Group PLC Annual Report & Accounts 2024
73
It is the Board’s view that, throughout the financial year ended 31 December 2024, and
as at the date of this report, the Company complied with the relevant principles and
provisions set out in the UK Corporate Governance Code 2018 (the ‘Code’).
This report complies with Rule 7 of the Disclosure Rules and Transparency Rules of the Financial Conduct Authority, with the
information required to be disclosed by sub-section 2.6 of Rule 7 being shown on pages 158 to 210. The Company has also
complied with the relevant requirements of the Disclosure Guidance and Transparency Rules, the Listing Rules, Directors’
Remuneration Reporting regulations and narrative reporting requirements.
The Corporate Governance section of this Annual Report and Accounts explains how the Code principles have been applied.
The 2018 UK Corporate Governance Code is available at www.frc.org.uk
Implementation of the Principles of the Code
Board leadership and Company purpose
The Board is responsible for:
Promoting the long-term sustainable success of the
Company and establishing the Company’s purpose, values
and strategy (ensuring that its culture is aligned).
Ensuring the necessary resources are in place to meet
objectives and measure performance against them within
a framework of effective controls.
Engaging with stakeholders to inform decisions and
ensuring that workforce policies and practices are
consistent with the Company’s values and support
long-term success.
Board of Directors – pages 78 to 79
Leadership and purpose – pages 84 to 99
Board activities during the year – pages 84, and 95 to 96
Considering stakeholders in decision making – pages 26 to 29
Division of responsibilities
The Chair leads the Board and is responsible for its overall
effectiveness in driving the Company.
There is clear division of responsibilities between the
leadership of the Board and the executive leadership of
the business.
The Non-Executive Directors dedicate sufficient time
to meet their responsibilities and provide constructive
challenge, strategic guidance, specialist advice and hold
management to account.
Board policies and processes are in place to ensure that the
Board functions effectively.
Board roles – page 91
Division of responsibilities – pages 90 to 97
Nomination Committee report – pages 108 to 112
Dealing with Directors’ conflicts of interest – page 93
74
COMPLIANCE STATEMENT
Composition, succession and evaluation
Formal, rigorous and transparent procedures are in place
to support Board appointments, led by the Nomination
Committee, which considers the importance of diversity
in decision-making.
The Nomination Committee regularly reviews composition
of the Board and Committees to ensure appropriate
combination of skills, experience and knowledge and to
plan for the progressive refreshing of the Board.
Annual evaluation of the Board’s composition, diversity
and effectiveness.
Nomination Committee report – pages 108 to 112
Appointments to the Board – pages 110 and 111
Board diversity policy – page 109
Board composition – pages 111 and 112
Board evaluation – page 98
Audit, risk and internal control
The Board has established formal and transparent policies
and procedures to ensure the integrity of the independence
of the Group’s external audit, and to satisfy itself of the
integrity of the Group’s financial statements and to confirm
that they represent a fair, balanced and understandable
assessment of the Company’s position and prospects.
Procedures have been established to manage risk, oversee
the internal control framework and determine the nature
and extent of the principal risks the Company is willing to
take in order to achieve its long-term strategic objectives.
Audit Committee report – pages 100 to 106
Fair, balanced and understandable statement – page 143
Risk management and principal risks – pages 63 to 67
Remuneration
The Board, through its Remuneration Committee,
determines Director and senior management remuneration
policies and practices and ensures they align to the
Company’s purpose, values, and promote the successful
delivery of the Company’s long-term strategy.
Each element of performance-related pay allows for the
independent exercise of judgement and discretion when
authorising remuneration outcomes.
Controls have been implemented to ensure that no Director
is involved in deciding their own remuneration.
Remuneration Overview – page 115
Directors’ Remuneration Policy – pages 117 to 125
Directors’ Annual Report on Remuneration – pages 114 to 137
Governance
Headlam Group PLC Annual Report & Accounts 2024
75
On behalf of the Board, I am pleased to
present the Governance report for the
financial year ended 31 December 2024.
This report sets out our approach to
effective governance, outlines the areas of
focus for the Board and the key activities
undertaken.
My role and that of the Board has been to guide the
business and the executive management whilst ensuring the
right strategy is in place, supported by the right people, to
deliver the strategy and drive the business forward. The last
financial year has been an important period and we have
accelerated the implementation of our strategy and are
continuing to successfully strengthen the foundations we
have in place to support our strategic ambition.
Board changes and succession planning
Following Keith’s decision to step down from the Board, the
Nomination Committee and the Board implemented the
Chair succession plan, and after a successful handover I
became Chair on 27 February 2025. Jemima, Chair of the
Remuneration Committee, was also appointed our Senior
Independent Director at the same time. The composition of
the Board and its Committees was also reviewed, to ensure
that these remain appropriate with the right mix of expertise
and experience to support the Company in its strategic goals.
Stephen Bird,
Non-Executive Chair
“Governance
and oversight of
the Company’s
transformation
programme and
securing a net cash
positive position
have been key
priorities this year.”
76
CHAIRMAN’S INTRODUCTION
Strategy and culture
The Board has made progress in many key areas throughout
the year, including the review of the acceleration of the
Group’s strategy, and governance and oversight of the
transformation programme.
Karen Hubbard continues in her role of Non-Executive
Director responsible for employee engagement and she
continues to provide regular reports to the Board. This role
and reporting, together with other activity on how the Board
monitors the culture of the Group (see pages 82, 83 and 86),
creates an appropriate cultural dashboard and continues to
enhance the quality of the information the Board receives
from our employees.
We held a further supplier conference in the year, which
was attended by our key suppliers and we held a sales
conference in September attended by our sales force
colleagues. Our supplier code of conduct and colleague
code of conduct continue to be in place.
Our on-going engagement work with all our stakeholders
helps shape how the Board takes their views into
consideration to support our decision-making and ensure
the culture of the business is developing in line with our
stated purpose and values. Information of our engagement
with stakeholders can be found on pages 26 to 29 and
throughout this Governance report.
This commitment to guiding and promoting a healthy
culture is underpinned by a significant ongoing work
programme to develop a strong safety culture. We have
appointed a new Health & Safety director who reports
directly to the Chief Executive to continue to drive a strong
safety culture, please see pages 44 to 45 for further details.
Please see pages 82, 83 and 86 on how the Board monitors
culture so that the Board continues to understand the
changes and trends within the business, which deepens our
ongoing relationships with all our stakeholders.
Environmental, social and governance (ESG)
responsibilities
Our ESG strategy and work to deliver this has continued
throughout 2024 as a key work stream and embedded into
the business through the established ESG Committee which
is attended by Non-Executive Director Karen Hubbard.
ESG updates have regularly been given to our stakeholders
and Karen Hubbard formally reports back to the Board
on the ESG Committee progress; and the Board reviewed
the Group’s ESG strategy as part of its strategy day held in
September. The highlights from the year and our progress
in key areas are outlined in our Sustainability Report on
pages 38 to 62.
The commitments to embedding ESG across the
organisation and leading on sustainability and
environmental responsibility, as well as making Headlam a
great place to work for everyone, are now an integral part
of our strategic pillars. We have made great strides forward
during the course of the year and as a Board we are focused
on delivering tangible progress in the year ahead.
Diversity
The Board recognises that diversity both on the Board and in
the wider organisation leads to healthy debate, which in turn
leads to better decisions and helps support the Company.
The Board reviews its diversity policy annually and it was
a key consideration when the Board considered who was
going to appointed as the Senior Independent Director in
my place. In making our appointments we have aimed to
cultivate a broad spectrum of attributes and characteristics
in the Boardroom and we continue to keep the position
under review as we move forward in all our succession
planning activity. Diversity across the organisation is
summarised on page 48 and further information on Board
diversity can be found in the report of the Nomination
Committee on pages 108 to 112.
Board evaluation
An internally facilitated evaluation was carried out towards
the end of the year, and the results were pleasing and
confirmed that the Board and Committees are working
well. Notwithstanding this, the Board took the opportunity
to have a session on key areas it would focus upon to
improve, please see page 98 for further details. However, it
was recognised that there was a high level of constructive,
positive challenge and support from the Board, both inside
and outside the Boardroom during the year, and this will
continue as the Board works together to oversee and
support the continued implementation of its transformation
programme. More information on the Board evaluation can
be found on page 98.
Our colleagues
It has been a busy year overseeing the acceleration of
of our strategy, the transformation programme and the
recruitment of a number of highly skilled colleagues at
all levels of the business to drive us forward, including the
appointments of David Rose (Chief Operating Officer)
and James Heese (Chief Buying Officer) to the Executive
Committee.
The Board recognises the significant contributions from all
our colleagues throughout the year and thanks them for
their hard work and dedication.
Stephen Bird,
Non-Executive Chair
11 March 2025
Headlam Group PLC Annual Report & Accounts 2024
77
Governance
Stephen Bird
Non-Executive Chairman
Stephen was appointed our Non-
Executive Chair on 27 February 2025,
(previously he was Senior Independent
Director from 2022). Stephen’s
last executive role was Group
Chief Executive of Videndum plc
(formerly The Vitec Group plc), the
international provider of premium
branded hardware products and
software solutions to the growing
content creation market, having
held the position since 2009. He was
previously Senior Independent Director
of Dialight plc, the global leader in
sustainable LED lighting for industrial
applications, stepping down in 2021
after nearly nine years on the Board.
Stephen has extensive executive
experience developing successful,
customer-led growth strategies to
help businesses grow and adapt to
changing markets. Prior to joining
Videndum plc, Stephen was Divisional
Managing Director of Weir Oil & Gas,
and held senior roles at Danaher
Corporation, Black & Decker, and
Technicolor Group. He is a member of
the English National Ballet’s Finance
and General Purposes Committee.
Chris Payne
Chief Executive
Chris joined the Company as Chief
Financial Officer in 2017, and was
appointed Chief Executive in 2022
having been a key architect of the
Company’s strategy centred around
growth, efficiency, and modernisation.
Chris was previously at Biffa plc, the
UK integrated waste management
company, where he was Group
Commercial Finance Director, a
member of the Group Executive Team
with responsibilities for the operational
finance teams and Divisional Finance
Directors, commercial pricing and
leading the M&A function. Prior to that,
Chris held Finance and Commercial
Director positions at several listed
businesses.
He is a qualified Chartered Accountant
having trained with KPMG and is a
Fellow of the Institute of Chartered
Accountants in England and Wales.
Jemima Bird
Senior Independent Director
Jemima was appointed our
Senior Independent Director on
27 February 2025 and is also our Chair
of the Remuneration Committee.
Jemima has over 20 years’ retail
experience working with many of
the UK’s leading high-street brands,
and has held numerous executive
commercial, marketing and operations
positions. She is currently a
Non-Executive Director and the
Chair of the Remuneration Committee
at Pinewood Technologies Group
plc and was previously a Non-
Executive Director at Carpetright plc,
(a leading floorcoverings and beds
provider, until it was taken private
in 2020) and previously the Senior
Independent Director and Chair of the
Remuneration Committee at the Revel
Collective plc.
Previously, Jemima was the Senior
Trustee for the Football Foundation,
the UK’s largest sports charity.
N
R
D
A
Committee Membership key
A Audit Committee
N Nomination Committee
E ESG Committee
R Remuneration Committee
D Disclosure Committee
A Committee Chair
Ri Risk Committee
F Employee Forum
The whole Board has oversight of the Company’s sustainability agenda and ESG Strategy, which incorporates areas of focus
including workforce engagement, health and safety, IT resilience, and DEI. Additional oversight and individual accountability
for specific focus areas is given through Board and Executive Team membership of the ESG Committee, the Risk Committee,
and the formal Employee Forum.
E
F
N
R
A
78
BOARD OF DIRECTORS
Robin Williams
Independent Non-Executive Director
Robin was appointed a Non-
Executive Director and Chair of the
Audit Committee in 2022. Robin has
over 30 years’ experience with listed
companies, including as founder CEO
and Executive Director with FTSE250
companies within the packaging and
the building materials industries. He
is currently Non-Executive Chairman
of Keystone Law Group plc and of
Churchill China plc and was previously
a Non-Executive Director of The
Manufacturing Technology Centre Ltd.
Robin is a qualified Chartered
Accountant and brings experience of
chairing audit committees as well as
insights from a wide range of sectors
as an Executive and Non-Executive
Board member of public and private
companies.
Keith Edelman
Non-Executive Director
(until 27 February 2025)
Keith was previously appointed a
Non-Executive Director in 2018, and
Non-Executive Chairman in 2022
and stood down from the Chairman
role on 27 February 2025. Keith is
currently a Non-Executive Director
of Grupo Murano and a previous
Non-Executive Director of the London
Legacy Development Corporation
and Non-Executive Chair of the
Revel Collective plc. His last executive
appointment was Managing Director
of Arsenal Holdings Plc where he was
responsible for the move from Highbury
to Emirates Stadium. Keith has held
a number of public company Non-
Executive roles, including Superdry Plc,
Safestore Plc, Goals Soccer Centres plc,
JE Beale Plc, Thorntons Plc, Pennpetro
Energy Plc and Altitude Group plc.
Keith brings extensive commercial
experience to the Board coupled with
a background in consumer facing
businesses. In his executive career he
was a director of consumer, retail and
leisure companies including Ladbroke
Group Plc, Carlton Communications Plc
and Storehouse Plc.
A
N
Adam Phillips
Chief Financial Officer
Adam joined the Company as Chief
Financial Officer in March 2023.
He was previously Group Financial
Controller at Mobico Group plc, the
FTSE 250 multinational transport
provider. Prior to this Adam was at
Halfords Group plc, in a number of
roles, including Corporate Finance
Director and Group Strategy Director.
Adam is a qualified Chartered
Accountant having trained with
KPMG and is a Fellow of the Institute
of Chartered Accountants in England
and Wales. Adam is Chair of the Risk
Committee.
Karen Hubbard
Independent Non-Executive Director
Karen was appointed a Non-Executive
Director in 2022. Karen has over 25
years’ experience in retail, at both
executive and Director levels across
various industries and markets. She
was previously Chief Executive Officer
of Card Factory plc, the UK’s leading
specialist retailer of greeting cards,
gifts, wrap and bags, where she
diversified their income from a UK
high-street business to a multi-channel,
international, wholesale and franchised
operation. Karen has also served as
Chief Operating Officer at B&M, on
the ASDA Stores Executive Board as
Director for Property, Multi-Channel
and Format Development, in addition
to working for BP Oil’s retail divisions.
Karen currently serves as Non-Executive
Chair in privately backed businesses
Custom Materials Limited and Fun
Brands Group. In addition, she is a Non-
Executive Director and Chair of ESG of
St Austell Brewery.
Karen is a member of the ESG
Committee and the Employee Forum,
and the Independent Director who has
oversight of workforce engagement.
A
Ri
N
D
E
F
R
R
Headlam Group PLC Annual Report & Accounts 2024
79
Governance
Clare Moore
Chief People and Sustainability Officer
Clare was appointed in 2022 having
previously worked as the Chief HR
Officer at Midcounties Cooperative
Ltd, the UK’s largest independent
consumer cooperative made up of
Food Retail, Travel, Childcare, Utilities,
and Healthcare. Prior to that she held
a number of roles at Halfords Group
plc spanning ten years where she was
eventually promoted to the role of
Group People Director.
Clare has also worked in HR in
businesses such as Barclaycard,
Aston Martin Lagonda Ltd and Rolls
Royce plc. Clare brings experience of
colleague attraction, engagement,
development and reward across a
broad range of colleagues.
Clare is responsible for the day-to-day
oversight of the ESG strategy, activity
and reporting and is a member of the
ESG Committee, the Risk Committee,
and the Employee Forum.
Toni Wood
Chief Customer Officer
Toni joined in January 2023, into
the new role of Chief Customer
Officer with the remit of leading
sales, marketing and e-commerce.
Toni has previously held senior roles
across FMCG (Procter and Gamble),
Retail (Sainsbury’s plc and DFS plc),
Hospitality (Costa Coffee) and Digital
and Technology (ufurnish.com) She has
experience in building businesses and
teams both globally and in the UK.
She is also the Senior Independent
Director and Renumeration
Committee Chair at H&T plc. She is
a Fellow of the McKinsey Marketing
Academy and was recognised in
2019 and 2022 as one of the UK’s Top
Marketers. She is a member of the ESG
and Risk Committee.
David Rose
Chief Operating Officer
David was appointed Chief Operating
Officer in November 2024, following
his initial role as Operations Director,
which he began in April 2024. He
has day-to-day responsibility for
the Company’s operations and
supply chain.
Before joining the Company, he was
Chief Operating Officer at UK Flooring
Direct, where he led transformative
operational improvements at one
of the UKs largest ecommerce Hard
Flooring companies. Previously, he
served as Group Supply Chain &
Logistics Director at Studio Moderna, a
leading Central and Eastern European
multi-brand omni-channel retailer and
held several senior roles over a decade
at Home Retail Group, focusing on
large-scale, multi-location operations
and customer-centric supply chains.
David is a Fellow of the Chartered
Institute of Logistics and Transport,
a membership he has held for over
20 years, reflecting his dedication to
professional excellence in logistics
and supply chain management. He
brings extensive experience in driving
efficiency and operational excellence
across diverse sectors.
Ri
Ri
E
E
Committee Membership key
A Audit Committee
N Nomination Committee
E ESG Committee
R Remuneration Committee
D Disclosure Committee
A Committee Chair
Ri Risk Committee
F Employee Forum
80
EXECUTIVE TEAM
James Heese
Chief Buying Officer
James was appointed in 2025 into
the new role of Chief Buying Officer
with the remit of leading product and
supplier strategy. James was previously
the Commercial Director at SCS Plc,
the UK’s 2nd largest upholstery retailer
and a leading flooring retailer. Prior to
that he was Managing Director of Tile
Giant – a division of Travis Perkins Plc
and led the successful transformation
of the business resulting in the
divestment and sale to private
investors. James has also held senior
buying and trading roles across The
Very Group, Wickes, and Home Retail
Group Plc ,including General Manager
of the Asia Sourcing office. He began
his career at Asda. James brings 30
years’ buying experience to Headlam,
and has a track record of developing
winning customer-focused product
propositions and building long-term
supplier partnerships.
Alison Hughes
General Counsel & Company Secretary
Alison was appointed in December
2023 and has over 19 years’ experience
across several business sectors,
including retail and hospitality and
extensive experience in corporate and
commercial legal matters, corporate
governance and compliance matters.
Previously she was the Director of
Group Legal & Company Secretariat
at Mitchells & Butlers plc, a FTSE
250 company within the hospitality
industry. Prior to that she worked at
Boots plc, and trained and qualified as
a solicitor with Wragge & Co LLP (now
Gowling WLG).
Alison is a qualified solicitor with over
19 years’ post qualification experience.
She is a member of the Disclosure
Committee, ESG Committee and the
Risk Committee.
Ri
D
E
Headlam Group PLC Annual Report & Accounts 2024
81
Governance
The Board regularly reviews a number of measures throughout the year to monitor the culture of the Company and how it
is embedded through the values of the Company summarised below, please also see pages 44 to 49, and 86 on culture and
colleague engagement:
Safety: Keep each other safe and well, always.
•
Review of health and safety (‘H&S’) metrics and information included in the regular Board H&S reports.
•
Review and approval of the Company’s H&S policy.
•
Presentations by the Company’s Group H&S Director alongside visits to the site to see H&S measures and
processes in practice.
•
Review of the feedback and scoring from the Company’s annual ‘Have your Say’ employee survey which
includes specific feedback from employees on their perspective and rating of safety of physical work
environments, employee behaviours in respect of health and safety and wellbeing all scores for these this year
were improved from the prior year and where there was an applicable industry benchmark scores were higher
than the industry benchmark.
•
Review and approval of the Company’s whistleblowing policy, the ‘Speak Up Policy’ and its processes.
•
Oversight and visibility of whistleblowing cases during the year and the whistleblowing procedures in place mean
any cases, (including those that may relate to H&S) are immediately visible to the Audit Chair (who is the designated
Board Director with oversight of the Company’s review and investigation process for all whistleblowing cases).
•
Board Directors regularly take the opportunity to seek colleagues’ feedback on a number of issues when they
are out in the businesses during the year.
Teamwork: work together with everyone
•
Review of regular updates on colleague turnover through the regular Chief People & Sustainability Officer
reports across all areas and departments of the Company, and which also includes commentary relating to
any particular trends for the Board to consider and if required investigate further.
•
Review of the annual colleague engagement survey, (which includes colleagues’ feedback, for example on the
Company’s work environment and if everyone feels included, regardless of gender, background, ethnicity, sexual
orientation, age etc, feedback on line managers ability to manage changes which affect their teams, ability to
be themselves at work), all of which this year showed an improvement in scores.
•
Review of the annual gender pay gap report.
•
Review of the updates from the Company on its diversity and inclusion plans, including changes to recruitment
processes and other inclusion initiatives.
•
Review of reports from each of the Employee Forums by Karen Hubbard (who is the designated Non-Executive
Director for workplace engagement).
•
Board Directors have, and regularly take, the opportunity to seek colleagues feedback on a number of issues
when they are out in the businesses during the year.
•
Review of the People Strategy as part of the Company Strategy.
Improvement: Keep improving everywhere
•
Review of updates on customer satisfaction through the Company’s customer survey results.
•
Review of quality reporting included in various reports to the Board and including those that go to the ESG
Committee.
•
Review of the annual colleague engagement survey, (which includes colleagues’ feedback on training, having
the right tools and equipment for colleagues to fulfil their role, the right processes being in place along with
other measures), which for this year scoring improved compared to the prior year.
•
Review of training initiatives reported through the Chief People & Sustainability Officer reports, the
Sustainability report and any specific updates provided.
•
Through the Employee Forum, colleagues are regularly updated and have the opportunity to feedback on
areas for improvement across the Company, and suggestions and thoughts on improvements, recent topics
have included product launches and procurement processes.
•
Review of reports from each of the Employee Forums by Karen Hubbard who is the designated Non-Executive
Director for workplace engagement.
•
Board Directors regularly take the opportunity to seek colleagues’ and customers’ feedback on a number of
issues when they are out in the businesses during the year.
•
Review of the Company’s Strategy and Transformation Programme across various pillars to drive business
improvement.
82
HOW THE BOARD EMBEDS CULTURE
Leading: Lead by example, we are all leaders
•
The strength of leadership is measured as part of the colleague engagement survey which includes feedback
on colleague motivation, line management, colleague recognition, line manager communication and ability to
raise issues, all of which this year showed an improvement compared to the prior year.
•
The Chief People & Sustainability Officer regular reports include reporting on metrics such absence which give
an indication of the strength of leadership amongst other metrics.
•
The visibility that the Board has of whistleblowing cases also means that any cases related to leadership or
colleague behaviour would be immediately visible to the Audit Chair.
•
Review of reports from each of the Employee Forums through Karen Hubbard, who is the designated Non-
Executive Director for workplace engagement.
•
Board Directors regularly take the opportunity to seek colleagues’ feedback on a number of issues when they
are out in the businesses during the year.
•
Oversight of succession planning for the Board, Executive Committee and senior leaders.
Sustainability: Act sustainably, use less, waste less, give back
•
Through the Sustainability report we report on a range of sustainability measures including:
–
Waste produced
–
Waste recycled
–
Carbon emissions
–
Actions taken to reduce waste and CO2 emissions
–
Community support
–
Sustainability of product development
•
Review of reports from each of the ESG Committees by Karen Hubbard, (who is the designated Non-Executive
Director who is a member of the ESG Committee alongside the Chief Executive).
•
Review of the ESG Strategy as part of the Company’s Strategy.
Achieving: Get it done, brilliantly
•
Board reviews business performance measures and metrics regularly through the various regular reports from
the Executive Committee members, (including in the context of the market and the Company’s competitors).
•
Review of the annual colleague engagement survey, which includes on colleagues’ feedback on whether they
are satisfied with the communications they receive about local sites and departments in order to do their jobs
effectively, which this year showed an improvement in scoring compared with the prior year.
•
Board reviews our customers’ feedback through the customer survey and reports on the same to the Board.
•
Board reviews and receives specific reporting and presentations on major business change programmes such
as the Company’s transformation programme and ERP replacement programme, along with external advisers,
to have the opportunity to directly ask questions of specialist advisers and subject matter experts.
Headlam Group PLC Annual Report & Accounts 2024
83
Governance
Board activity in 2024
The Board maintains a comprehensive schedule of
meetings and a forward agenda to ensure its time is
used most effectively and efficiently. However, there is
flexibility in this programme, which is important to permit
key items to be added to any agenda, so that the Board
can focus on evolving and important matters at the most
appropriate time. This was specifically illustrated this year
by the Board having a dedicated Board meeting in June
on the Company’s transformation programme and the
acceleration of its strategy, with subsequent updates on
the transformation programme for the Board at all of its
meetings thereafter.
Board agendas are structured carefully to facilitate
discussions and allocate appropriate time to all relevant
matters, and the agendas are agreed in advance by
the Chair, (along with the Chief Executive and General
Counsel & Company Secretary).
A typical Board meeting will comprise the
following elements:
•
Reports from the Chairs of each of the Board
Committees on the proceedings of those meetings,
including the key discussion points and particular
matters to bring to the Board’s attention.
•
Following every Employee Forum and ESG
Committee, a report on the topics discussed is
presented by Karen Hubbard to add further context
at the Board meeting.
•
Performance reports from the Executive Committee,
including: reports from the Chief Executive, Chief
Finance Officer, Chief People & Sustainability Officer,
Chief Customer Officer and Chief Operating Officer.
•
Deep dive reports into areas of particular strategic
importance, opportunities and risks, to evaluate
progress, provide insight and, where necessary,
decide on appropriate action. Read more about
some of the topics covered during the year opposite
and page on 95.
•
Legal and governance updates, including: Quarterly
Reports from the General Counsel & Company
Secretary, approval of delegated financial authorities
across the Group; approvals of various policies (such
as Speak Up Policy, Health & Safety Policy, Approval of
the Anti-Slavery and Human Trafficking Statement).
•
Time is set aside at various meetings for the Chair
to hold an Independent Non-Executive Director
only meeting, (where it is considered appropriate, to
provide the opportunity for discussion on key matters
without the Executive Directors and management
present).
•
All of the Board also meet over dinner on a number of
occasions before certain Board meetings, also joined
by members of the Executive Committee, to enable
Board members and Executive Committee members
to build a rapport with each other and a relationship
on a personal level, share external views and consider
issues impacting the Group, resulting in better Board
dynamics and decision making.
Health & safety
policy
Board reviews
and approves the
Company’s Health &
safety policy
ERP Programme
update
Board receives update of
the Company’s Project
Nexus ERP replacement
programme
Trade Counters
Board receives update
from Trade Counters
leadership team and
reviews the Trade
Counter strategy
Property disposal
transactions
Board approves various
property disposal transactions
to simplify operations and
generate £54m cash proceeds
March
July
August
December
84
BOARD LEADERSHIP AND COMPANY PURPOSE
Domus site visit
Board visits its Domus business
in London for a site visit and
receives updates on its strategy
and hears from its independent
retail leadership team
Strategy Day
Board receives
updates from our key
areas of the business
and its strategy for
each area
Key Accounts
Board receives
update from the
Key Accounts
leadership team
Melrose site visit
Board visits Melrose site
and receives update
on its rug and sampling
strategy from the
Melrose leadership team
Transformation
Programme
Board receives the
acceleration of its strategy
and transformation
programme proposals
Customer insight
Board reviews the
latest results from its
customer survey and
insights
April
May
June
September
October
November
Headlam Group PLC Annual Report & Accounts 2024
85
Governance
Our Board is ultimately responsible for the strategy, management, performance and
long-term sustainable success of the Group.
It is the principal decision-making forum for the Group,
providing entrepreneurial leadership, both directly and
through its Committees and by delegating authority to the
Executive Team.
This responsibility includes: setting the Company’s purpose,
values and strategy; reviewing and promoting the desired
organisational culture; ensuring the necessary resources are
available to meet agreed objectives; and ensuring that all of
these elements are aligned. The Company’s business model
and strategy is detailed on pages 16 to 21.
Through the strong governance framework that it has in
place, the Board is able to deliver on its strategy of providing
strong sustainable financial and operational performance.
The Board is also accountable for ensuring that in carrying
out its duties the Group’s legal and regulatory obligations
are being met; and for ensuring that it operates within
appropriately established risk parameters.
Culture and colleagues
The Board is responsible for monitoring and assessing
culture. The Board does not have a single way to assess
culture, instead it draws on multiple sources to understand
the way colleagues feel about the Company. This is done
through formal and informal methods, through the outputs
from the Employee Forums and the reports of the Executive
Team to the Board. Please also see pages 44 to 49.
Colleagues are encouraged to incorporate the values into
work every day, to work the Headlam Way and deliver our
long-term objectives, together.
Karen Hubbard is the Independent Non-Executive Director
accountable for representing the voice of our colleagues
in Board meetings. Karen attended four Employee Forum
meetings during 2024, please see page 89 for feedback from
Karen on 2024 Employee Forums.
Work continues to enhance communication to ensure that
staff across the business, especially those more remotely
situated and any new colleagues are briefed on relevant
Company news, so they do not feel isolated. The Group-wide
intranet continues to be developed as a place for colleagues
to access all communication and information about
benefits and personal and financial wellbeing. In addition
to this, the following improvements have been during the
year; the sales conference was held off-site in September,
the ongoing leadership development programme, ongoing
regular manager and leadership weekly calls, as well as the
employee engagement survey (the results of which were
presented to the Board in December 2024).
The Speak Up Policy (which continues to include an
externally managed helpline) which was launched in 2022
continued to be in place during the year and this, together
with a well-established grievance policy, provides a
mechanism for colleagues to raise matters of concern more
formally. In addition, the Headlam Code of Ethics continues
to be issued to all new employees and is part of the new
induction programme. As well as reviewing People KPIs at
the Board and the outputs from the listening channels, the
Board has continued to influence and monitor Group culture
in a number of additional ways summarised below but
please also see pages 82 to 83 on how the Board assesses
how its culture is embedded in the Group:
•
Increasing the focus on the health, safety and working
practices of our colleagues and reviewing key health
and safety performance indicators, please see page 45.
•
Reviewing and revising remuneration structures for
senior management.
•
Reviewing the progress of the implementation of the
People Strategy.
•
Regular meetings with management and inviting
presentations at the Board and Committee meetings
from relevant managers and colleagues.
•
Assessing other cultural indicators such as the attitude
to risk, the implementation and compliance with
Group-wide policies such as Anti-Corruption and
Bribery, Fraud and Money Laundering.
86
BOARD LEADERSHIP AND COMPANY PURPOSE
CONTINUED
Board Engagement with Stakeholders
Information on our stakeholder engagement and Section 172 Statement of the Strategic report on pages 26 to 29.
By understanding the interests and needs of all our stakeholders, the Board can take these views into account in Boardroom
discussions and decisions. The relevance of each stakeholder group may change depending on the issue under discussion.
The Board continued to develop its methods of engagement during the year and this work will be continued during 2025.
Our Colleagues
Board members engage with a wide variety of colleagues. Karen Hubbard is our dedicated
Employee Non-Executive Director and attends the Employee Forum.
See pages 44 to 49 for employee engagement
Our Customers
The Board receives customer insights from the Chief Executive, Chief Customer Officer and
Chief Operating Officer, through Board reports and strategy presentations.
See page 03 for customer segments
Our Suppliers
Supplier relationships provide valuable insights through engagement with operations
teams and through the Chief Executive and Chief Operating Officer.
See page 27 for supplier engagement
Our Shareholders
There is regular dialogue with our shareholders.
See page 27 for shareholder engagement
Our Communities
and the Environment
It is important that we operate safely and sustainably and that we review the impact of
our operations on local communities and on the environment. The Board receives regular
updates on these activities.
Karen Hubbard is our dedicated ESG Non-Executive Director and attends the ESG Committee.
Further information can be found in our Sustainability Report on pages 38 to 62
87
Governance
Headlam Group PLC Annual Report & Accounts 2024
Examples of how the Board considered the interests of its key stakeholders when making decisions.
Project Nexus – ERP
Replacement Programme
The Board considered multiple
stakeholders in its consideration of the
proposed ERP replacement programme.
This programme will enhance the
ability for the Group and its employees
to operate business critical processes
across various areas of the business.
It will also utilise the Group’s data
more efficiently to further enhance
the end-to-end service it offers its
customers. Overall, this will enhance
the value of the Group for the benefit
of all of its stakeholders, (including its
shareholders).
Property disposals
The Board considered multiple
stakeholders in its decision-making to
dispose of a number of properties in
the second half of 2024 for £53.9 million
(excluding VAT) representing a premium
of 64% to book value and generating a
substantial profit from the sales.
This was part of the Board consideration
of accelerating the Group’s strategy
and its transformation plan to optimise
its network operations for the benefit of
colleagues, suppliers and customers and
reinforce its market-leading customer
service, as well as driving improved
operational efficiency for the benefit
of the Group and all of its stakeholders,
including its shareholders. Also a result
of completing the property disposals,
the aggregate proceeds were received
in cash, putting the Group in a net
cash position for the benefit of all of its
stakeholders.
Transformation programme
Over recent years the Group has been implementing its strategy of broadening
its customer base and implementing a transformation programme of
simplifying and consolidating sales teams and operations.
Following volume declines and macro data indicating continued weakness in consumer spending
on home improvements, as well as housing transactions which indicated a further delay for a
recovery in the floor coverings market, in the first part of the year the Board considered that
it was in the best interests of all stakeholders to accelerate the Group’s strategy for further
integration and simplification across the Group. This would make Headlam a more effective
organisation and simplify the Group’s offer to its customers, whilst also investing in the proposition
across all of our customer groups, in order to maintain and grow market presence for the benefit
of the Group, its shareholders, colleagues and suppliers. The Board also considered the initiatives
which will deliver a material reduction in operating costs, enhanced customer service, significant
one-off cash benefits from the disposal of surplus property (as above) and reduction in working
capital and profit improvement.
88
BOARD LEADERSHIP AND COMPANY PURPOSE
CONTINUED
Karen Hubbard,
Non-Executive Director nominated to
represent the employee voice at the Board
“ Pleased to hear directly
from our colleagues
about the continued
improvement in
communications and
engagement this year.”
Q
Describe the Employee Forum and
your role as designated Non-Executive
Director, workforce engagement and
how it adds value to the Group
A
The Employee Forum is one of the ways we engage
with our colleagues. It provides the opportunity
for colleagues to meet with myself and senior
members of management on a regular basis,
helping them to stay connected to the strategy
and direction of the Company. It also provides
the opportunity for us to listen directly to what
colleagues have to say and hear about matters
the Board is reviewing and considering.
I also actively spend time with colleagues, without
management present, to give colleagues the
opportunity to provide feedback directly to
the Board.
As the nominated Non-Executive Director for
workplace engagement, I then provide this
feedback directly to the Board which helps us
all gain a better understanding of day-to-day
operations and insight into the implementation
of the transformation plans, and how that
impacts our colleagues. It also helps ensure the
Board understands how the Company’s culture is
embedded.
I continue to liaise with the Chief People and
Sustainability Officer and support the Group in
how it can better communicate and engage
with colleagues. In addition, as a member of the
Remuneration Committee my insight is also very
helpful in the context of Executive pay.
Q
What have been your highlights this
year?
A
I have once again been especially impressed by
the willingness of the forum members to raise issues
and confidently challenge business processes and
provide constructive insights.
Good progress has also been made this year in
getting communication to all levels, functions
and sites. I’ve been pleased to hear about
the improvements in the level and cascade of
communications across the Company, especially
as the Company implements its transformation
plans. I’ve also been pleased to see a good
representation at the Employee Forums of a
workforce that is diverse in terms of functions and
also geographically spread. I’m looking forward
to seeing continued improvements in 2025 as
the format of the Employee Forum is reviewed by
senior management and it continues to evolve as a
successful way to engage with our colleagues.
Headlam Group PLC Annual Report & Accounts 2024
89
Governance
Q&A WITH KAREN HUBBARD
Board balance
As at 31 December 2024 the Board consisted of the
Non-Executive Chair, the Chief Executive, the Chief Financial
Officer and four Non-Executive Directors (one of whom was
the Senior Independent Director).
As such, at least half the Board, excluding the Chair, were
Non-Executive Directors in accordance with the Code
during the year.
The Board undertook a review of the size and balance of
the Board and confirmed that it was appropriate to meet
the business and operational objectives. Further information
on the changes to the Board in 2025 can be found in the
Nomination Committee report on page 108.
Decisions are made by the Board following detailed
consideration of the items under review and no one
individual or small group of individuals dominate the Board’s
decision-making.
The Board operates within a corporate governance
framework designed to support the achievement of
long-term sustainable success. The Board has overall
responsibility for setting the Group’s strategy and setting
objectives for the business, taking into account the risk
appetite of the business. The Board has a formal schedule
of matters reserved for its approval and then delegates
responsibilities to its committees and management. The list
of the key matters considered by the Board in 2024 can be
found on page 95.
The schedule of matters reserved for the Board has
been reviewed and is available from the Governance
section of the Company’s website, www.headlam.com.
It includes matters relating to strategy and management,
structure and capital, financial reporting and controls,
risk management and internal controls, contracts, Board
membership and delegation of authority, acquisitions and
risk management. An overview of the main duties, roles
and responsibilities of the Board are also available on the
Company’s website.
The Statement of the Responsibilities of the Chair, Chief
Executive and Senior Independent Director has been
reviewed and is also available on the Company’s website.
Board at a Glance
Gender representation
as at 31 December 2024
Board Independence
as at 31 December 2024
Board Director tenure
as at 31 December 2024
5
2
Chair
1
Executive Directors
2
Independent Non-Executive
Directors (including the Senior
Independent Director)
4
Adam Phillips
Jemima Bird
Robin Williams
Karen Hubbard
Stephen Bird
Keith Edelman
Chris Payne
7.4
6.4
3.4
2.5
2.3
2.3
1.9
Male
Female
90
DIVISION OF RESPONSIBILITIES
Non-Executive Chair
The Chair leads the Board and sets the cultural tone from the top. He
ensures high standards of corporate governance are maintained. He
is responsible, with the Board, for understanding the views of all key
stakeholders and ensuring they are considered in all decision-making.
He ensures that all Directors are able to participate in discussions and
constructive challenge and to promote effective communication between
the Executive and Non-Executive Directors. The Chair leads the annual
Board effectiveness review and ensures all new Directors have a tailored
induction.
General Counsel & Company Secretary
The General Counsel & Company Secretary is secretary to the Board and
its Committees. The role is to support the Chair and Chief Executive in
fulfilling their duties particularly in relation to induction, training and Board
effectiveness evaluations. In addition, she supports the Non-Executive
Directors and provides updates to the Board and advice on corporate
governance and compliance matters.
Chief Executive
The Chief Executive leads the Group and ensures the
delivery of its commercial objectives, whilst ensuring
that operational policies and practices are driving
the appropriate behaviour in line with the desired
culture. He proposes and develops the Group’s
strategy in consultation with the Executive Team, the
Chair and the Board and leads the communication
programme with all key stakeholders including
employees. He is responsible for overseeing Group
health and safety and diversity initiatives and
ensuring the Board has all the information it requires.
Senior Independent Director
In addition to their role as a Non-Executive Director,
They act as a sounding board for the Chair and
acts as an intermediary for other Directors when
necessary. They are available to shareholders where
communication through the Chair or Executive
Directors may not seem appropriate and to provide
additional support in resolving significant issues. They
are also responsible for leading the effectiveness
evaluation of the Chair and discussions regarding
the term of appointment and fees of the Chair.
Chief Financial Officer
The Chief Financial Officer is responsible for
bringing the commercial and financial perspective
to the Boardroom. He is responsible for managing
the Group’s finance function and ensuring that
the appropriate financial support and processes
are in place to support the implementation of
the Group’s strategy. He oversees and supports
the relationship with the investment community
and shareholders. He chairs the Executive Risk
Committee which oversees the Group’s risk profile
and risk management process.
Independent Non-Executive Directors
The role of the Independent Non-Executive Director
is to provide strategic and specialist guidance with
effective and constructive challenge. They critically
assess the strategy and scrutinise the performance
of management in meeting agreed goals and
objectives within the risk and control framework
set by the Board. They ensure all stakeholders are
considered in the decision-making process. They
have a prime role in succession planning and setting
appropriate levels of remuneration for the Executive
Directors and senior management team.
Board and Committee Structure as at 31 December 2024
Headlam Group PLC Annual Report & Accounts 2024
91
Governance
Committee attendance
Membership of the Board and its Committees and attendance at meetings held during the year ended 31 December 2024.
Board
Nomination
Committee
Audit
Committee
Remuneration
Committee
Keith Edelman (Chair)
11/12
6/7
–
4/4
Chris Payne
12/12
–
–
4/4
Stephen Bird
11/12
6/7
4/4
4/4
Jemima Bird
11/12
7/7
4/4
4/4
Karen Hubbard
11/12
7/7
4/4
4/4
Robin Williams
12/12
7/7
4/4
4/4
Adam Philips
12/12
–
–
4/4
The numbers in the table above confirm how many meetings each Director attended and the total each was eligible to attend during the year
There were no Disclosure Committee meetings during the year.
Nomination
Committee
To monitor the size,
diversity and composition
of the Board and its
Committees and ensure
a formal, rigorous and
transparent procedure
for the appointment of
new Directors and to plan
for succession. To take an
active role in monitoring
the Company’s diversity
strategy and approach
and monitoring its
effectiveness.
See page 108 to
read more
Audit
Committee
To assist the Board in
fulfilling its obligations
relating to the Group’s
financial reporting
practices, internal control
and risk management
framework, and its
external audit and other
assurance processes.
See page 100 to
read more
Executive Risk
Committee
Meets quarterly to
evaluate and propose
policies and processes
to current and
emerging risks.
Remuneration
Committee
To determine and agree
the remuneration policy
for Executive Directors
and Executive Team, and
to monitor and report
on it. To review wider
workforce remuneration
and related policies
in accordance with
the Code.
See page 114 to
read more
Disclosure
Committee
Meets as required
to assist the Board
in discharging its
responsibilities in
relation to the control of
inside information and
obligations under the
Market Abuse Regulation.
92
DIVISION OF RESPONSIBILITIES
CONTINUED
Group Board
ESG
Committee
The Committee
meets quarterly to
further develop the
Sustainability Strategy
and to monitor progress
towards achieving the
agreed commitments.
It seeks to embed good
sustainability practices
across the Group and is
attended by a group of
leaders from across
the business.
For more
information on
the Sustainability
strategy see
page 38
Employee
Forum
The Employee Forum
seeks to allow colleagues
to express and discuss
their views on any
issue, and provides an
opportunity for them to
influence and develop a
more inclusive working
environment. The
Employee Forum meets
quarterly, and is chaired
by the Chief Executive.
There are additional
check in meetings
between the formal
meetings attended
by Employee Forum
representatives only.
For more
information on
Employee Forum
see page 46
Group
Executive Team
The Executive Team
meets every month to
develop and monitor
strategy, operational
plans and procedures
and to ensure financial
performance against the
budget is monitored. The
Executive Committee
assesses and controls
risk and prioritises and
allocated resources
to deliver the strategy.
Group health and safety
is now monitored during
each Executive Team
monthly meeting.
See page 16
onwards and 45
Board roles and responsibilities
All Directors share collective responsibility for the activities
of the Board; the long-term success of the business and its
impact on stakeholders and the wider society. The Board
roles are constructed to ensure a clear distinction between
leadership of the Board and the executive leadership of the
business. Specific Board roles are outlined in the table on
page 91.
Board Committees and delegation
Various operational matters and decisions have been
delegated to Board or management committees.
The Company has long-established Audit, Disclosure,
Nomination and Remuneration Committees which, oversee
and debate important issues of policy and assist the Board
in attending to its responsibilities.
Terms of reference for the Audit, Nomination and
Remuneration Committees have been reviewed during the
year and are available on the Governance section of the
Company’s website.
The Executive Directors are responsible for the detailed
implementation of the strategic decisions of the Board. The
Non-Executive Directors are responsible for evaluating and
challenging management’s proposals and their mix of skills
and experience bring a broader perspective to the Board’s
dialogue and decision-making process.
Independence
The Company recognises the importance of its
Non-Executive Directors remaining independent of
executive management in character and judgement,
in order for them to effectively support and challenge
management’s proposals. The Board has considered the
independence of the four Non-Executive Directors and,
taking into account the Board’s review of the Conflicts of
Interests register, consider that all remain independent in
character and judgement and free from any business or
other relationship that could materially interfere with the
exercise of independent and objective judgement. None of
the circumstances outlined in the Code that may impair, or
could appear to impair, independence apply in the case of
any Non-Executive Director.
Keith Edelman was considered independent upon
appointment to the Board in 2018 and continued to be
so upon taking up his role as Non-Executive Chair. Both
Stephen Bird and Jemima Bird were considered independent
upon their appointment to the Board in September 2021 and
October 2022 and they both continued to be so upon taking
up their respective roles as Non-Executive Chair and Senior
Independent Director on 27 February 2025.
The Senior Independent Director is available to shareholders
if they have concerns which are not resolved through the
normal channels of the Chair, Chief Executive or Chief
Financial Officer, or for which such contact is inappropriate.
Headlam Group PLC Annual Report & Accounts 2024
93
Governance
Group Chief Executive
The Non-Executive Chair and Non-Executive Directors
do not participate in any bonus, share option or pension
scheme of the Company, nor are they subject to minimum
shareholding requirements. They are initially appointed for
a three-year term and, subject to review and re-election
by shareholders, can serve up to a maximum of three such
terms.
In line with the Code, all Board members stand for
re-election by shareholders annually and will do so at
the 2025 AGM (with the exception of Keith Edelman who
stepped down from the Board on 27 February 2025 and
therefore not seeking re-election at the AGM).
Board activity in 2024
Board meetings provide the forum for the debate, review
and challenge of strategic, operational and governance
matters, please also see pages 84 and 95 .
The Board had 12 meetings during the year to discuss the
latest operating and financial information, key strategic
items, additional deep dives into specific items and other
topics requiring discussion or decision. The agenda has
strong links to the strategic objectives of the Group and is
set via a collaborative process between the Chair, Chief
Executive and the General Counsel & Company Secretary.
Sufficient time is allocated to each item to ensure effective
discussion.
Standing agenda items include the Chief Executive, Chief
Financial Officer, Chief People and Sustainability Officer,
Chief Customer Officer and Chief Operating Officer on
trading matters, health and safety, people and financial
reports. The annual Board work programme ensures that
the view of all stakeholders, including employees, suppliers,
customers and shareholders are taken into consideration.
This ensures that the Directors discharge their duties
including those under section 172(1) of the Companies Act
2006. Further detail on stakeholders can be found on pages
26 to 29.
Board papers are issued where possible, five working days
prior to each meeting to allow adequate consideration of
the matters to be discussed. The Board’s meeting agenda
is structured to ensure sufficient time is given to each item
under consideration.
A separate strategy day is held during the year, which in
2024 was in September, and is attended by the Executive
team and other key management. This allows detailed
consideration of the strategic plan and key focus areas,
which then forms the basis of the budget, which is approved
at the end of the year. This provided the Board with another
opportunity to meet senior leaders in a more formal way and
constructively challenge the detailed direction of strategy
implementation.
For further information on strategy see page 18
The Board receives an update from the General Counsel &
Company Secretary on a quarterly basis including updates
on matters of corporate governance. Matters requiring
attention between these quarterly updates are shared at
the next meeting, or between meetings as required. The
Board performs deep dives into areas of importance such
as sales, buying, ecommerce and digital, and conducts post
implementation reviews of key capital projects.
94
DIVISION OF RESPONSIBILITIES
CONTINUED
Strategy and management
•
Review of Group strategy
and priorities
•
Review of organisation
structure to deliver the
strategy and the resources
required
•
Consideration of the
operational strategy to
deliver the strategic goals
•
Deep dives into strategic
areas, including ERP
replacement programme
•
Approval of various property
disposals for £54m cash
proceeds and simplify
operations
•
Oversight of the acceleration
of Company Strategy
through a two-year
transformation plan
•
Considered the impact
of Company culture on
initiatives and projects
See page 18 to read more
on Strategy
Internal controls and
risk management
•
Consideration of the
effectiveness of the internal
audit function
•
Completed an assessment
of the Company’s emerging
and principal risks and risk
appetite
•
Monitored health and
safety performance and
implementation of continual
improvements to procedures
•
Monitored the ongoing
implementation of
recommendations arising
out of the external review of
IT security
•
Received a presentation
from the newly appointed
Health & Safety Director
See page 63 on risk
management
Financial and
performance reporting
•
Review of the trading
performance and the
approval of the Company’s
annual and half-year results
•
Approval of the Company’s
dividend policy
•
Reviewed the Company’s
capital allocation priorities
•
Reviewed and approved
the Company’s 2025
budget, forecasts and key
performance targets
•
Long term viability
statement, and time frame
over which it should be
considered
•
Approved the UK Tax strategy
See page 68 for long term
viability statement
ESG and stakeholder
engagement
•
Interacted with shareholders
and the wider investment
community
•
Reviewed investor relations
programme and feedback
provided by the Company’s
investors, stockbrokers
and financial PR agency
plus reports on investor
roadshows
•
Received progress updates
on ESG Committee activity
and ESG strategy
•
Received feedback from the
Supplier Conference
See page 38 for
Sustainability report
People
•
Review of purpose and
culture
•
Approval of the appointment
of Stephen Bird (as
replacement Chair with
effect from 2025 AGM)
•
Senior management and
Executive Committee
succession planning
•
Consideration of health and
safety leadership
•
Consideration of the external
review of Group diversity
•
Gender pay gap reporting
•
Modern slavery reporting
•
Employee share grants and
long service awards
•
Agreed a tiered pay award
See pages 44, 48, 82-83,
and 89 on culture,
colleague engagement
and diversity
Governance and culture
•
Participated in and reviewed
the results of an externally
facilitated Board and
Committee self-evaluation
exercise and agreed areas of
focus for 2025
•
Approved the terms of
reference of each Board
Committee
•
Reviewed and approved the
Board’s principal policies
•
Reviewed the Company’s
Register of Conflicts
•
Approved the Company’s
Anti-Corruption and Bribery
policy, procedures on gifts
and hospitality, Fraud and
Anti-Money Laundering
policy and Speak Up policy
•
Received and considered
reports on compliance
with financial, regulatory,
corporate responsibility and
environmental commitments
•
Reviewed the feedback from
the Colleague ‘Have your
say’ engagement survey
Key highlights of the Board discussions during the year under review are outlined.
Headlam Group PLC Annual Report & Accounts 2024
95
Governance
Outside the Boardroom
Throughout the year the Board undertook
site visits across the business.
In April they visited the Domus business in London and in
October the Board visited the Melrose business site near
Bradford. Each visit included a tour of the site as well as
presentations from site management on the performance
and opportunities for the business (including health and
safety performance). The Board also meets and speaks with
a variety of employees during these visits.
In addition the Directors undertook further site and
customer visits, which allowed an additional opportunity to
discuss areas relevant to the customers and the Board and
meet a variety of customer managers and employees.
The Non-Executive Directors have access at any time to the
Executive Directors, senior management and employees.
All this activity allows the development of a deeper
understanding of the Company and to ask questions about
any specific areas of interest. This improves the constructive
challenge at Board meetings.
The Chair is kept up to date about emerging issues through
regular interaction with the Chief Executive, Chief Financial
Officer and other members of the Executive Committee.
The Chair and Non-Executive Directors schedule meetings
without the Executive Management present to allow
an opportunity to discuss the operation of the Board
and any areas for consideration are fed back to the
Executive Directors.
The Senior Independent Director also held a meeting of
the Non-Executive Directors without management or the
Chair present.
96
DIVISION OF RESPONSIBILITIES
CONTINUED
Risk management
The Board has overall responsibility for Group’s system of
risk management and internal control and for reviewing its
effectiveness and is supported in this regard by the Audit
Committee and the Executive Risk Committee.
Emerging risks are considered by the Board at least annually.
Further information on the Company’s approach to risk
management is available in the Strategic report on page 63
and in the Audit Committee report on page 100.
A description of the risks identified, together with details of
how they are managed or mitigated, is set out on pages 66
to 67.
The Audit Committee, on behalf of the Board, monitors the
Company’s system of risk management and internal control
with papers from the Executive Risk Committee at each of
its meetings, and conducts a review of its effectiveness at
least once a year.
Board induction and training
The process for identifying and evaluating new candidates
for Board positions has been delegated to the Nomination
Committee under its terms of reference. Once a preferred
candidate has been identified they are recommended to
the Board for appointment. Further information on this
process is outlined below.
Induction
Upon joining, each new Director receives a tailored induction
programme relevant to their experience, expertise and
committee membership. Particular emphasis is placed on
the new Director visiting several operating locations and
businesses and meeting the associated senior managers
and colleagues to aid with deep understanding of the
Group’s business operations and the day-to-day challenges
facing the business. The Director is also able to accompany
a salesperson and a driver for a day to help develop an all-
round understanding of the roles and the challenges faced
at all levels of the organisation.
An induction programme will typically include briefings
on strategy and other matters, site visits, and one-to-one
meetings with senior colleagues, including other Directors
and each member of the Executive Team, in addition to
advisers such as the Company’s stockbrokers and auditor.
Briefings are included on health and safety, investor and
workforce engagement, culture, governance and risk.
Meetings will also be scheduled with each Committee Chair
and relevant advisers.
A comprehensive information pack is provided which
includes (but is not limited to):
•
Background information about the Group and current
strategy documents;
•
Board and Committee minutes and meeting procedures;
•
Group policies;
•
Matters reserved for the Board and Committee terms
of reference;
•
Financial budgets;
•
Shareholder and other stakeholder feedback;
•
Customer insights; and
•
Relevant industry and financial reports.
Training and development
All Directors are considered to be suitably qualified, trained
and experienced so as to be able to participate fully in the
work of the Board. To assist with the independent conduct of
their function and, if required, in connection with their duties,
a process is in place for the Non-Executive Directors to
obtain professional advice at the Company’s expense.
The Directors keep their knowledge and skills up to date
and have the opportunity to discuss areas for development
with the Chair. Virtual seminars and on-line courses run by
professional bodies on various commercial, operational and
regulatory matters were attended by the Directors as part
of their ongoing development . As required, professional
advisers are invited to the Board meetings to provide
in-depth updates and the Board also receives updates
on environmental, employee and governance issues as
appropriate. The General Counsel & Company Secretary
provides regular updates on regulatory matters.
Presentations at the Board during 2024 have covered ESG
updates, branding, culture, cybersecurity, investor views
and market remuneration and policy trends. In addition,
the General Counsel & Company Secretary provides regular
updates on developments in Corporate Governance.
The Non-Executive Directors further enhance their
understanding and knowledge of the business and culture
by spending time with the Executive Directors, the Executive
Team, other senior management and colleagues.
Headlam Group PLC Annual Report & Accounts 2024
97
Governance
Board evaluation
Progress during 2024 versus actions identified as part of the prior year’s Board evaluation (2023)
ESG
Risk
Employee Forum
Actions
identified in
2023
To ensure that feedback from
the ESG Committee is formally
fed back to the Board following
each ESG Committee, and to
ensure that ESG Committee
feedback becomes a standing
agenda item at the relevant
Board meetings immediately
following the quarterly ESG
Committee meetings.
Risk is discussed in detail at the
Board and within Committees.
The evaluation results were good
in this area but it was agreed
that the Board would carry out
an annual review of risk appetite
as well as an annual review of
the Principal Risks.
It was agreed that a paper
would be submitted to provide
formal written feedback to the
Board following each Employee
Forum to further enhance
the oversight of points raised
by employees through the
Employee Forums.
Progress
made in 2024
The Board receive (as a standing
agenda item) a written report
from Karen Hubbard with
feedback from the Executive
ESG Committee.
The Board carried out an annual
review of risk appetite and an
annual review of the Principal
Risks.
The Board receive (as a standing
agenda item) a written report
from Karen Hubbard with
feedback from the Employee
Forum.
2024 Board evaluation
The Code recommends that there should be a formal and rigorous annual evaluation of the performance of the Board and
its Committees and that this process is externally facilitated at least every three years. The Board undertook an externally
facilitated self-evaluation in 2023, and for 2024 it was considered that an internally facilitated Board evaluation was
appropriate. This was conducted through the General Counsel & Company Secretary seeking feedback through an evaluation
questionnaire towards the end of the year, and the responses were anonymous. The resulting scoring and commentary was
received and analysed in draft by the Chair, prior to being submitted to the Nomination Committee for review on behalf of the
Board at its meeting in December 2024.
The evaluation noted the positive performance of the Board in several areas and highlighted areas, which would benefit from
further improvement.
Following careful consideration of the findings of the review, the Board and its Committees noted a number of strengths,
including:
•
The Directors have a good understanding of management’s agenda and key issues and investor perspectives are well
understood by the Board.
•
The Committee meetings (an area also examined in the prior year) are well led and operating effectively.
•
The contributions from the Non-Executive Directors are balanced and reflect each individual’s area of expertise. However,
a few points were signposted through this evaluation and these are outlined below.
2024 outcomes and actions
Customer
Continued Board
engagement with
Executive team
Meetings
2024
Outcomes
and actions
To ensure that the Board
continued to understand the
Company’s different customer
segments it was agreed that
each of the Board members
would contact and/or visit
different customer types to gain
further insight.
To ensure the continued
dialogue and engagement
between Executive team
members and individual
Board members outside of the
Boardroom to get the benefit of
the Board Directors’ experiences
and input into the Company’s
strategy and its implementation.
It was agreed that the Board
would continue with a recent
practice of each Non-Executive
Director providing direct
feedback at the end of each
meeting for the benefit of the
Executive Directors to share with
the Executive team members.
The Board discussed the report and agreed actions to take forward based on the suggestions in the report. The General
Counsel & Company Secretary is responsible for tracking these actions and reporting back to the Board periodically on the
progress made.
98
COMPOSITION, SUCCESSION AND EVALUATION
Performance review of the Chair during the
financial year
The previous Senior Independent Director (Stephen Bird),
following results of the Board evaluation and consultation
with other Directors, provided feedback to Keith Edelman
as the then Chair on his own performance. The review noted
that Keith was very engaged and it was noted that Keith’s
regular contact with the Non-Executive Directors before each
Board meeting gave an additional opportunity to ensure their
interests and concerns were brought into the Boardroom.
During the year, Keith had been instrumental in overseeing
the acceleration of the Company’s strategy through its
transformation programme and the recent sale of various
properties, to simplify operations and generate £54 million
of cash for the Company. At this point, Keith confirmed
his desire to step down from the Board and implement
the Chair succession plan. Please see the Nomination
Committee report on pages 108 to 112 on how it ensured that
the Company continues to have the most effective Board
composition and combination of skills to support the delivery
of the acceleration of the Company’s strategy.
Individual Director performance reviews during
the financial year
As part of the annual effectiveness review of the Directors,
the then Chair, Keith Edelman provided feedback to each
Director on their own performance and discussed training
and development opportunities.
Following the results of the evaluation and the relevant
performance reviews described in this section, the Board
confirms that all Directors, including the current Chair
of the Board, continue to be effective and demonstrate
commitment to the role, including dedicating sufficient time
to attend all necessary meetings and to carry out all other
duties required of them.
Headlam Group PLC Annual Report & Accounts 2024
99
Governance
Robin Williams,
Chair of the Audit Committee
“ The Audit Committee has continued to
closely monitor the impact of market
conditions, and the transformation plan,
on the Group’s significant accounting
matters and key judgements.”
Statement from the Chair of the Audit Committee
On behalf of the Board, I am pleased to present the Audit
Committee’s report for the year ended 31 December 2024.
This report summarises the role that the Audit Committee has continued to play
in providing challenge and oversight over the Group’s financial reporting, internal
controls and risk management. Throughout the year, macroeconomic and industry
headwinds have continued to present externally driven challenges, and the Audit
Committee has continued to carefully monitor for their impact on the Group.
Membership and meetings
The Audit Committee had four scheduled meetings during the year, each of
which are structured around the annual programme of business and the financial
reporting cycle. A verbal update is provided from the Chair of the Audit Committee
to the Board following each meeting. The Audit Committee is scheduled close
to, and shortly preceding, the Board meetings to ensure effective and timely
reporting.
The Audit Committee members are Stephen Bird, Jemima Bird, Karen Hubbard
and myself. All members of the Audit Committee are independent Non-Executive
Directors and the remuneration of the members of the Audit Committee is set
out in the Report on Directors’ Remuneration on page 114. See pages 78 and 79
for further information on the Audit Committee members experience, as set out
in the Directors’ biographies. This wide range of relevant expertise allows robust
challenge and the ability to analyse the issues that are discussed.
The Chief Executive, Chief Financial Officer, Chair and representatives of the
external auditor attend the Audit Committee’s meetings at the invitation of the
Audit Committee Chair. The Director of Group Finance, other members of senior
management and the Head of Internal Audit are invited to attend the meetings
where appropriate. Meetings of the Audit Committee with the external auditor
without the presence of management were held during the year and. separately,
with the Head of Internal Audit. I hold meetings with the Lead Audit Partner
outside of the formal meeting schedule and keep in regular contact with the
Chief Financial Officer and the Head of Internal Audit. The role of Secretary to the
Committee is performed by the Company Secretary.
In addition to attending the Audit Committee meetings, the Audit Committee
members met with operational and finance team members, and other members
of senior management during the year.
Main role and key responsibilities
The Audit Committee is appointed by the Board and operates under written terms
of reference (available in the investors section at www.headlam.com). At the start
of the year the Audit Committee agreed its priority areas of focus for 2024. These
are set out in the table below along with a summary of the progress the Audit
Committee has made on these priorities.
Key responsibilities:
•
Monitoring the integrity
of the Group’s financial
statements and results
announcements and any
other published financial
information and significant
financial reporting issues and
judgements, as well as other
required disclosures.
•
Reviewing the adequacy and
effectiveness of the Group’s
internal controls and risk
management systems.
•
Approving the activities,
reviewing the findings and
assessing the effectiveness
of the Group’s internal audit
function.
•
Recommending the external
auditor appointment;
assessing audit quality and
effectiveness; assessing
independence, objectivity
and approving fees; and
monitoring non-audit
services.
100
AUDIT COMMITTEE REPORT
Key priorities
Progress made
Progress on the
implementation of
the plan to meet the
requirements from the
BEIS review
The workstreams that will underpin the
requirements are underway. A key development
during the year was a materiality assessment
using guidance from the Financial Reporting
Council and ICAEW, and publications from audit
firms.
The continued
improvement of the
system of internal
controls, including
consideration of the
ERP replacement
programme
Internal controls continue to be improved through
the work being performed for the updated
Corporate Governance Code requirements, as
well as through other internal control initiatives,
such as improvements to IT general controls.
During the year the Group selected the software
and systems integrator for the ERP replacement.
Internal control requirements are integral to the
design and build of the replacement system and
the Audit Committee will review progress in due
course.
Consideration has also been given to the impact
of the transformation plan, which is expected
to enhance the internal control environment as
it results in simplification and centralisation of
processes.
Review of the internal
assurance plan
Reviewed on an ongoing basis at the Audit
Committee meetings.
Playing a further
enhanced role in
the monitoring of
the Group’s risk
management processes
and in reviewing
principal risks and
setting risk appetite
Risk management matters are now referred
and addressed firstly at the Audit Committee
meetings, before being taken to the main Board
meeting for any further discussion or ratification.
The Audit Committee set risk appetite formally
for the first time in February 2024. This is now an
annual exercise that was repeated in February
2025.
Assessing impact of
macroeconomic and
trading environment on
the Group’s accounting
judgements, estimates
and disclosures
The Audit Committee assessed this on numerous
occasions, both through the lens of the review
and scrutinisation of the half year and full year
results, and also through review of management’s
accounting updates during the year, including
management’s assessments of the impact of
the transformation plan on key accounting
judgements, estimates and disclosures.
Assessing compliance
with Global Internal
Audit Standards
Management performed an assessment against
the updated standards, which concluded that
there is compliance, acknowledging the context
of the size and maturity of the Internal Audit
function. The Audit Committee reviewed this
assessment during the year.
How the Committee
spent its time
Financial Reporting 30%
External Audit 30%
Internal Controls and Risk 25%
Governance 15%
Headlam Group PLC Annual Report & Accounts 2024
101
Governance
Activities of the Audit Committee during the year
The key activities of the Audit Committee in discharging its principal areas of responsibility are outlined below.
External Audit
•
Considered and approved the external audit plan,
the materiality level, the risk assessment and the
key members of the external audit team.
•
Discussed the audit fee and the increase proposed
due to increased regulatory requirements and
increased costs within the audit profession.
Information on the audit fees can be found on
page 171.
•
Discussed the reports on audit findings and met
with the Auditor without management present.
There were no significant issues to report.
•
Considered the independence and objectivity
of PwC LLP. The Audit Committee confirmed the
independence of PwC. See page 105.
•
Reviewed the effectiveness of the external audit
process. The Audit Committee concluded that the
audit was effective and a recommendation was
made to the Board on the reappointment of PwC
at the AGM.
Governance
•
Reviewed and approved the Audit Committee’s
terms of reference and annual programme of
business.
•
Approved the Speak Up, Fraud and Anti-Money
Laundering and the Anti-Corruption and Bribery
Policies. Further information can be found on
pages 52 and 141.
•
Considered the Company’s approach to the
avoidance of modern slavery and human
trafficking.
•
Received updates on corporate governance
requirements and the BEIS review relevant to its
responsibilities.
Going concern and viability reporting
•
Reviewed the financial modelling conducted for
the going concern assessment.
•
Reviewed and challenged the viability assessment
process in support of the long-term viability
statement based on scenarios arising from
identified key risks and their impacts.
Transformation plan
•
Consideration of accounting implications of the
consolidation and centralisation of functions and
processes.
•
Review the basis of Cash Generating Units for the
assessment of impairment.
Financial reporting
•
Reviewed the half year and annual financial
statements and reports, and the significant
financial reporting judgements and estimates.
•
Reviewed the risk disclosures in the half year and
annual financial statements and reports.
•
Reviewed the process established for ensuring that
the report and accounts are fair, balanced and
understandable, and provided the information
necessary for shareholders to assess the Group’s
performance, business model and strategy.
•
Considered the impact of the macroeconomic
and trading environment, and management’s
responses to those (including the implementation
of the transformation plan), on the Group’s
accounting judgements, estimates and disclosures.
•
Considered liquidity risk and the basis for preparing
the half year and full year accounts on a going
concern basis and reviewed the related disclosures.
•
Reviewed and challenged the pension buy-in
transaction and the accounting treatment thereof.
•
Reviewed the Auditor’s findings and
recommendations, and management’s response.
•
Reviewed and approved the Audit Committee
Report to be published in the Annual Report and
Accounts.
Internal controls and Risk
•
Approved the internal audit charter and the work
plan for 2024.
•
Considered reports from management and
the Auditor on their assessment of the control
environment.
•
Reviewed the effectiveness of the risk
management framework and considered the
systems and processes for identifying, managing
and mitigating risks.
•
Assisted the Board in its assessment of the
emerging and principal risks, reviewed minutes
from the Executive Risk Committee and
challenged management on its activities, ensured
that the Board reviewed and discussed the Risk
Register.
•
Reviewed reporting disclosures in relation to internal
controls, risk management, principal risks and
uncertainties and the work of the Committee.
102
AUDIT COMMITTEE REPORT
CONTINUED
Significant financial reporting issues and areas of estimate and judgement
The Audit Committee received and discussed reports and recommendations from management and the Auditor setting out
the significant areas of judgement and estimation.
Significant issues and areas of
estimate and judgement
How they were addressed
Supplier arrangements
The Group has a significant number
of rebate agreements with suppliers.
These agreements can contain multiple
terms or tiered arrangements based on
the volume of goods purchased. The
majority of these rebates are paid to the
Group after the year-end, meaning that
there is typically a significant rebate
receivable at the year-end balance
sheet date.
Management explained to the Audit Committee the process of calculating
the amounts expected to be received and confirming these balances with
suppliers and discussed the assumptions made in the calculations. The Audit
Committee challenged the assumptions used by management and reviewed
the level of cash receipts and credit notes received after the year-end.
The work of the external auditor in relation to supplier rebates was discussed by
the Audit Committee.
Based on this, the Audit Committee was satisfied that the amounts recognised
have been appropriately scrutinised and that the assumptions upon which the
calculation was based are sufficiently robust.
Non-underlying items
The Group accounting policy for
non-underlying items states that
performance measures will be
presented which exclude items which
are associated with the acquisition of
businesses and other items which by
virtue of their nature, size and expected
frequency, warrant separate additional
disclosure in the financial statements
in order to fully understand the
underlying performance of the Group.
Management must exercise judgement
in deciding whether items should be
treated as non-underlying by reference
to this policy.
The Audit Committee considered the presentation of non-underlying items in
accordance with the Group accounting policy. This year the non-underlying
items included income of £21.1 million in respect of the profit on disposal of
properties, and expenses of £28.3 million comprising: £1.3 million of amortisation
of intangibles and other acquisition-related expenses, £4.7 million impairment
of assets, £19.7 million business restructuring and change-related costs, and
£2.6 million ERP system development.
The Audit Committee received reports from management and the Auditor,
outlining the judgements applied including consideration of materiality. The
Audit Committee also considered whether the Annual Report and Accounts
was fair, balanced and understandable and challenged management’s
designation of items as non-underlying. The Audit Committee concluded that
the disclosure of non-underlying items was sufficient and appropriate for the
user of the accounts to understand the nature of the items and reason for their
treatment as non-underlying.
Carrying value of
non-current assets
The Group had £10.8 million of goodwill
allocated on its balance sheet at 31
December 2024, resulting from past
acquisitions, along with intangible
assets, property, plant and equipment
and right-of-use assets. The assessment
of the recoverable amount of these
assets are estimated based on future
cashflows and any impairment has the
potential to be material.
Management performed the annual impairment review of goodwill, along
with impairment reviews for other groups of assets at both June 2024 and
December 2024 where indicators of impairment were identified. Management
performed the annual impairment review of goodwill, along with impairment
reviews for other groups of assets at both June 2024 and December 2024 where
indicators of impairment were identified. Management concluded that an
impairment of £1.8 million was necessary during 2024, as described in note 11.
The key assumptions used in an impairment review are the level of revenue
growth, gross margin and the discount rate. Climate change risks were also
considered by management and included in the sensitivity analysis.
Judgements are made by the Directors in identifying the cash generating
units (‘CGU’). The restructuring activities undertaken during the year have
necessitated a change to CGUs due to the consolidation and integration of
regional trading businesses into a single, national business. This has reduced the
number of CGUs from 16 to 7.
The Audit Committee considered the change in CGUs and the impairment
reviews carried out by management and discussed the basis of the key
assumptions and the sensitivities performed. The Audit Committee also
considered the external auditor’s findings and discussed this matter with the
external auditors. Based on this the Audit Committee was satisfied that the
approach taken by management was robust and that the assumptions made
were reasonable.
Headlam Group PLC Annual Report & Accounts 2024
103
Governance
Internal audit
The Group has an internal Audit function with a Head of
Internal Audit, who reports into the Audit Committee at
each meeting. During the year the Internal Audit function
executed the approved annual internal audit plan. The plan
was developed by assessing the Group’s principal risks and
during this first year of operation the plan continued to be
refined during the year. The internal audit programme for
2024 has concluded that there has been an improvement in
the control environment over the course of the year.
Assurance is also provided to the Audit Committee in
the form of internal control audits undertaken by the
Group finance team; various additional reports provided
by management including a summary of all sources of
assurance in place throughout the Group and internal
self-certification reports relating to the compliance with
regulation and Group policies.
The Internal Audit function will continue to evolve to support
the Group’s strategy and objectives by evaluating and
assessing the effectiveness of risk management systems,
business policies and procedures, systems and key internal
controls. Once any recommendations to address issues
are made, they will be reviewed by management and the
Internal Audit function will then monitor implementation and
report back to the Audit Committee at each meeting.
The Audit Committee is satisfied that the internal Audit
function is independent and effective. The Head of Internal
Audit reports directly to the Chair of the Audit Committee
with an administrative reporting line to the Chief Executive
and has no other responsibilities as required under the
Institute of Internal Auditors Code of Practice.
The Audit Committee has a formal private session with the
Head of Internal Audit twice a year and the Head of Internal
Audit meets with the Chair of the Committee at least
quarterly.
External auditor
Non-audit services
During the year, no non-audit services were provided by the
Auditor and therefore no fees were paid to the Auditor for
non-audit services. The general policy is that the external
auditor must not carry out any non-audit services. The
Group’s statutory auditor will only be engaged to carry out
non-audit services in exceptional circumstances or where
there is a regulatory request and any such engagement
would be approved by the Audit Committee. This is to ensure
the independence of the external auditor is safeguarded.
The Audit Committee has reviewed its policy for the provision
of non-audit services (‘Non-Audit Policy’) within the last 12
months. Under the Non-Audit Policy and in line with the EU
Audit Directive and Regulations, non-audit fees paid to the
external auditor should not exceed 70% of the average audit
fee for the preceding three periods.
104
AUDIT COMMITTEE REPORT
CONTINUED
Independence and objectivity
The Audit Committee annually reviews the appointment of
the external auditor and considers their independence and
objectivity.
PwC was appointed as Auditor in 2016 following a full
tender exercise. Gill Hinks took over as lead audit partner
for Headlam Group plc following the conclusion of the 2019
audit and as she has now served as lead audit partner
for nearly five years the Audit Committee will consider, in
conjunction with the external auditors, appropriate lead
audit partner arrangements in accordance with current
professional standards.
In 2026, PwC will have been the Group’s Auditor for ten years;
accordingly the Group has commenced planning for a
tender process.
The Audit Committee considered the conduct of the
external auditor and the level of challenge displayed during
the course of the year-end audit, in particular the depth of
discussions and the challenge to the Group’s approach to its
significant judgements.
The external auditor has processes in place to ensure that
independence is maintained and has written to the Audit
Committee confirming that, in their opinion, they remain
independent within the meaning of the relevant regulations
on this matter and their own professional standards and
that no conflict of interest exists that would affect their
professional judgement.
Taking into account the external auditor’s confirmation, its
own deliberations and feedback from management, the
Audit Committee agreed that the external auditor remained
independent from management and able to display an
independent view on the position of the business.
Effectiveness of external audit
An effectiveness review is performed after the conclusion of
each year’s audit. Feedback was obtained from members
of the Audit Committee, regular attendees and members
of the finance team. The review covers several themes
including the calibre of the external auditor, the team and
relationship with the business and the independence and
objectivity displayed. The progress achieved against the
agreed audit plan and the competence with which the
auditor handled the key accounting and audit judgements
were also considered.
Following the review, the Audit Committee concluded that
the external auditor, PwC LLP, remained independent and
that the external audit process remained effective.
Consideration of external auditor appointment
In determining whether to recommend the external
auditor for reappointment this year, the Audit Committee
considered the length of tenure and ability to perform an
independent audit as well as the quality of planning and the
ability to meet deadlines. They also considered the expertise
of the Lead Audit Partner and the wider audit team and
concluded that a comprehensive and timely audit had been
undertaken.
The Audit Committee therefore concluded that it was in the
best interest of Company shareholders to reappoint PwC
as the Company’s external auditor. The Audit Committee’s
recommendation, that a resolution to reappoint PwC LLP
be proposed at the AGM, was accepted and endorsed by
the Board.
Misstatements
Management reported to the Audit Committee that they
were not aware of any material misstatements or immaterial
misstatements made intentionally to achieve a particular
presentation. The external auditor reported to the Audit
Committee the misstatements that had been found in the
course of the audit work and no material amounts remained
unadjusted.
Information security and cyber risk
The Company has a clear approach to identifying and
mitigating information security risk which is outlined further
on page 66. The Audit Committee, with its membership
consisting of only Non-Executive Directors, oversees the
Group’s approach to information security and cyber risk
management as part of its review of the risk management
and internal control framework and its oversight of the work
of the Executive Risk Committee. Information security and
cyber risks are mitigated through processes and procedures
employed by the Group; training provided to all colleagues
with email access and annual cyber awareness training;
and independent assurance and annual penetration
testing. Further improvements to information security were
implemented in the year, building on the progress made in
the previous year. These improvements were evidenced in a
reduction in the premium payable for cyber insurance.
Risk management and internal control
effectiveness review
The Board has ultimate responsibility for the effective
management of risk throughout the Group, including
determining its risk appetite and identifying key strategic
and emerging risks. The role of the Audit Committee is to
monitor, on behalf of the Board, the Group’s financial and
non-financial risk and internal control management systems
and assess their effectiveness.
In supporting the Board in its assessment of the
effectiveness of risk management and internal control
process, the Audit Committee relies on a number of different
sources of assurance: at each meeting, the Audit Committee
reviews the minutes of and considers assurance provided
by the Executive Risk Committee as part of its assessment
of the effectiveness of the risk management framework;
reports provided by management and the Executive Risk
Committee; and the assurance provided by third parties in
specific risk areas.
The Audit Committee also receives reports from the
external auditor on matters identified during the course of
its statutory audit work. The Audit Committee takes into
account the resources within the finance team including the
structure of the team, and the qualifications, experience and
competence of the people within it, in forming its view.
The Group’s control framework is intended to manage
rather than eliminate the risk of failure to achieve business
objectives. Such a framework can only provide reasonable
and not absolute assurance against material misstatement or
loss. The control framework is evolving in line with the strategic
Headlam Group PLC Annual Report & Accounts 2024
105
Governance
objectives and has been enhanced by the implementation
of a set of minimum controls standards, with a rolling
programme of testing to ensure that all of the minimum
control standards are designed and operating effectively.
Health and safety risks are managed by the Executive Risk
Committee but performance is monitored directly by the
Board at each of its scheduled meetings.
An overview of the risk management framework and the
principal risks and uncertainties it identifies, is set out on
pages 63 to 67.
The Audit Committee was satisfied that the reporting
disclosures in respect of internal controls and risk
management are a fair representation of the Group’s position.
Fair, balanced and understandable
At the request of the Board, the Audit Committee reviewed
the Group’s Annual Report and Accounts and considered
if when taken as a whole, it was fair, balanced and
understandable, and provides the information necessary
for shareholders to assess the Company’s position and
performance, business model and strategy, as required by
the Code Provision 25.
The key themes are considered early in the process and this
process involved a wide range of individuals including the
Chief Executive, Chief Financial Officer, Company Secretary,
Finance Team, Chief People & Sustainability Officer and
senior managers of the businesses.
The Audit Committee followed robust procedures to make
this assessment. These included reviewing the early stages of
drafting and any feedback was then incorporated into the
subsequent drafts. Each Director also had the opportunity
to review and feedback on a full copy of the report which
provides additional oversight. The Audit Committee also
had oversight of the overall process and also the results of
the evaluations of the remuneration committee report and
the governance section as well as private sessions with the
external auditor.
In addition, the Audit Committee considered and challenged
the going concern assumptions and the management’s
areas of significant judgements as part of the year end
process as did the external auditor.
The Audit Committee considered the content and if it was
balanced with both negative and positive factors being
presented and that it represented the events throughout the
year. The balance and consistency between narrative and
financial reporting was reviewed.
It was recommended to the Board that the 2024 Report and
Accounts did reflect a fair, balanced and understandable
assessment of the Company’s position and prospects and
contained sufficient information for shareholders to assess
the Company’s position, performance, business model and
strategy.
Speak up policy
The Group has a Speak Up Policy that sets out the formal
process by which an employee of the business may, in
confidence, raise concerns about possible improprieties in
financial reporting or other matters. All employees receive
a copy of the Speak Up policy as part of the induction
process and training is provided. Regular training and
communication about the Policy is sent to all employees
throughout the year. The channels through which an
employee can raise concerns are clearly defined and there is
a Speak Up Committee (speakup@headlam.com) consisting
of the Chief People & Sustainability Officer, General Counsel
& Company Secretary, Director of Group Finance and Head
of Internal Audit.
An independent external organisation provides a further
channel for concerns to be raised confidentially and
anonymously through a website or via the telephone.
When an incident is logged the policy clearly defines the
procedures in place to investigate and when to inform the
Board of the result of any investigations. All incidents are
reported to the Chair of the Audit Committee.
The Group is committed to a zero-tolerance position
with regard to bribery. The Anti-Corruption and Bribery,
and Fraud and Anti-Money Laundering policies were
each considered by the Audit Committee during the year
and recommended to the Board for approval. Further
information on Anti-Corruption and Bribery is available on
page 141.
Committee effectiveness review
The effectiveness of the Audit Committee was evaluated
as part of the Board evaluation. This was an externally
facilitated self-evaluation process using questionnaires.
Further details of this can be found on page 141. The review
found that the Audit Committee is operating effectively and
that its role and remit remain appropriate for the current
needs of the business. This year, it was also acknowledged
that the meetings of the plc Board’s sub-committees,
(including the Audit Committee) were well-led and
operating effectively.
Summary
The Audit Committee has concluded, as a result of its work
during the year, that it has acted in accordance with its
terms of reference and fulfilled its responsibilities.
The Audit Committee remains committed to maintaining an
open and constructive dialogue on relevant audit matters
with shareholders. If you should have any questions on any
aspect of this report, please do email headlamgroup@
headlam.com and I will also be available at the AGM
to answer any questions about the work of the Audit
Committee.
This Audit Committee report forms part of the Corporate
Governance Report and is signed on behalf of the Audit
Committee by:
Robin Williams
Chair of the Audit Committee
11 March 2025
106
AUDIT COMMITTEE REPORT
CONTINUED
Headlam Group PLC Annual Report & Accounts 2024
107
Governance
Stephen Bird,
Chair of the Nomination Committee
“ Succession planning is a key process
for the committee, as demonstrated
by the implementation of our
Chair succession plan.”
Statement from the Chair of the Nomination Committee
On behalf of the Board, I am pleased to present the
Nomination Committee report for the year ended
31 December 2024.
The focus in 2024 was to consider the composition of the Board, considering
executive and senior management succession planning, and strategic hires to
support the Company through its transformation programme. We also considered
Board diversity and reviewed the results of the Board effectiveness evaluation.
However, a key area of focus was the implementation of the Chair succession plan.
Board composition and succession planning
Following a succession Chair transition between Keith and myself, I took over as
Chair of the Board and Chair of the Nomination Committee with effect from
27 February 2025. The Nomination Committee then also considered the balance of
skills and experience on the Board to support the delivery of the key strategic aims
of the Company. As a result, I’m pleased to confirm that Jemima Bird, our Chair of
the Remuneration Committee was appointed as the Senior Independent Director
with effect from 27 February 2025. Full details of all the Board can be found in
their biographies on pages 78 and 79. However, the Nomination Committee will
continue to monitor the composition of the Board, its Committees and senior
management on an ongoing basis to ensure they remain appropriate and
effective and have the right balance of skills, knowledge, experience and diversity
to deliver the Company’s strategy now and in the future.
As part of the Nomination Committee’s monitoring during the year, it carried out a
skills mapping self-assessment exercise for all of the Board members, the results of
which were debated and the Nomination Committee concluded that the Board
and its Committees have appropriate skills and experience to support the delivery
of the key strategic aims of the Company.
The Nomination Committee also annually considers the tenure of the Board and
when considering succession planning for the Board, consideration is given to skills,
experience and diversity to ensure that there is the appropriate mix to continue
to lead the Company and deliver long-term success of the Company for all of our
stakeholders. The Board evaluation confirmed that the Non-Executive Directors
have a good understanding of management’s agenda and key issues, and also
that investor perspectives are well understood by the Board. It also concluded
that the Committee meetings are well led and operating effectively, and that the
contributions from the Directors are balanced and reflect each individual’s area of
expertise.
Key responsibilities:
•
Monitoring the structure,
size and composition of the
Board, its Committees and
the senior management on
an ongoing basis to ensure
they remain appropriate and
effective and have the right
balance of skills, knowledge,
experience and diversity
to deliver the Company’s
strategy now and in the
future.
•
Making recommendations
to the Board of any
changes required and
leads the process regarding
appointments to the Board,
including the role as Chair
and Senior Independent
Director.
•
Succession planning for the
Board (including Chair and
Committee Chairs) and
senior management and
making recommendations to
the Board.
•
Considering the diversity of
the Board and the talent
pipeline.
Full details of responsibilities
delegated to the Nomination
Committee by the Board in the
written terms of reference which
are available on the Company’s
website.
108
NOMINATION COMMITTEE REPORT
Strengthening the senior management team
The Nomination Committee continued to focus on the Company’s talent
management strategy with the Chief Executive to ensure the right people with
the right skills were in place to deliver the strategy and ensure performance
management was strengthened throughout the business.
As a result, a comprehensive review was undertaken of the senior management
team, to ensure the continuing delivery of the strategy in the current challenging
market conditions. A number of senior appointments were made during the year,
including the addition of David Rose (Chief Operating Officer) and James Heese
(Chief Buying Officer) to the Executive Team, their biographies are included on
pages 80 to 81.
Board diversity
Board diversity and the advantages it can make to decision making are
acknowledged by the Board. Diversity is considered for every appointment, which
are made on merit against objective criteria. Recruitment agencies are instructed
to present a diverse list of candidates for all roles.
Any appointments are made to ensure the correct and complementary skills are
on the Board, and provide the level of experience required to deliver the strategy
for our stakeholders. The Board diversity policy is considered every year by the
Board, which was last reviewed in July 2024 and can be found on the Company’s
website.
The key statement of the Board diversity policy is that the Company is committed
to developing a diverse workforce and equal opportunities for all and that the
Board recognises the valuable contribution that diversity including gender,
ethnicity and personal strengths can bring to the Board.
The Board diversity policy also commits to maintaining the current gender balance
of the Board, and the Nomination Committee continues to be committed to
increasing gender and ethnic diversity at Board level and will seek to achieve
this when the opportunity arises and appropriate candidates are identified.
Notwithstanding this, all Board appointments will be made on merit and against
objective criteria and the Nomination Committee will monitor progress against the
Board diversity policy.
In terms of Board gender diversity, as at 31 December 2024, there were seven
Board members, two of which were female (28.6%). As at 11 March 2025, there are
six Board members, two of which are female (33%) and five are male (77%).
On 27 February 2025, one of our female Board Directors, Jemima Bird was
appointed as our Senior Independent Director. However, the Board recognises that
it currently has less than 40% female Board Directors and that it does not have a
Director from an ethnic minority background which means it does not comply with
all of the diversity and inclusion targets set out in the Listing Rules. Although, the
Board has reviewed its size, structure and composition during the year, (and more
recently on 27 February 2025), and concluded that its remains suitable to meet
the Company’s needs and to promote the desired culture, (please also see the
results of the 2024 Board Evaluation on pages 98 to 99). The Board believes that it
currently has the right balance of Board Directors, especially in light of the Board
appointments made in the past couple of years. However, the Board is committed
to increasing diversity when the opportunity arises and appropriate candidates
are identified.
It remains the policy that all appointments to the Board and Executive team
should be made on merit and against objective criteria, whilst addressing diversity
considerations of the Board. The Board’s diversity objective is to have a broad
range of age, gender, ethnicity, approach, skills, experience and educational/
professional backgrounds represented at Board level and in senior management
positions, and the Nomination Committee will continue to review what steps and
recruitment processes are appropriate for achieving diversity.
The information required by the listing rule for companies to report information
and disclose the gender and ethnic background representation on their boards
and executive management on a comply or explain basis is included below.
Headlam Group PLC Annual Report & Accounts 2024
109
Governance
Data concerning gender and ethnicity representation is collected directly from all the individual Board and Executive team
members as part of their onboarding process, or in the case of the Non-Executive Directors, through a Diversity and Inclusion
Monitoring Form (the ‘Form’) which was issued for completion asking individuals to disclose their gender and ethnicity using
the options included on the Form, which align with the detail in the left-hand columns of the tables below and therefore
includes the option to not specify an answer.
Gender representation as at 31 December 2024
Board
Executive Committee
Number of
Board members
Percentage of
the Board
Number of
senior positions
on the Board
(CEO, CFO, SID
and Chair)
Number in
Executive
management
Percentage
of Executive
management
Men
5
71%
4
3
60%
Women
2
29%
–
2
40%
Not specified/prefer not to say
–
–
–
–
–
Ethnicity representation as at 31 December 2024
Board
Executive Committee
Number of
Board members
Percentage of
the Board
Number of
senior positions
on the Board
(CEO, CFO, SID
and Chair)
Number in
Executive
management
Percentage
of Executive
management
White British or other White
(including minority-white groups)
7
100%
4
4
80%
Mixed/Multiple Ethnic Groups
–
–
–
1
20%
Asian/Asian British
–
–
–
–
–
Black/African/Caribbean/
Black British
–
–
–
–
–
Other ethnic group, including Arab
–
–
–
–
–
Not specified/prefer not to say
–
–
–
–
–
Group-wide diversity
The Company has continued to implement its inclusion and wellbeing strategy, which includes actions to improve the diversity,
equity and inclusion of our workforce, please see further details on page 48.
Colleague engagement
Karen Hubbard is appointed as the designated Non-Executive Director for workforce engagement. Further information on the
establishment of the Employee Forum and how the employee voice is heard in the Boardroom can be found on page 46.
Effectiveness of the Nomination Committee
The effectiveness of the Nomination Committee was evaluated as part of the 2024 Board and Committees evaluation, which
was undertaken internally this year (having been undertaken by an external third-party consultant, Gould Consulting in 2023),
utilising a questionnaire with metrics and scoring to produce a report. This highlighted that the Board and its Committees
continue to function well. The findings were discussed and it was agreed that the Nomination Committee remained effective.
This year, it was also acknowledged that evaluation scores for the Nomination Committee all increased since the prior year.
Retirement and re-election of Directors
As previously mentioned, the Chair succession plan was implemented following Keith’s decision to step down from the Board,
and I was appointed Chair of the Company and its Nomination Committee with effect from 27 February 2025. I, together with
the rest of the Board will be standing for re-election at the 2025 AGM.
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NOMINATION COMMITTEE REPORT
CONTINUED
Each Director has been subject to a performance evaluation
and the Nomination Committee has conducted its own
annual review of the appropriateness of the Directors’ skills
and experience; their time commitment to the Company;
and their contribution to the Board during the year. As
part of this review, each Director has confirmed that they
continue to allocate sufficient time to discharge their
responsibilities effectively, and the Nomination Committee
evaluates their ability to do so, taking into consideration
other external commitments, in addition to their individual
performance throughout the year and their skills and
experience set against the agreed strategy.
Following this review the Nomination Committee, and
subsequently the Board has concluded that each Director
continues to make an effective and valuable contribution
and demonstrates commitment to their role. It is
recommended that shareholders approve the resolutions
to be proposed to the forthcoming AGM relating to the re-
election of each Director.
A year of progress
Despite the challenges throughout the year, we have
continued to invest in the business and the people to ensure
the future growth of the business can be supported and
we will continue to do so throughout 2025. The Nomination
Committee always has the long-term success of the
business for all stakeholders in mind.
Membership and attendance at 2024 meetings
During the year, Keith Edelman was Chair of the Nomination
Committee, and it comprises a majority of Independent
Non-Executive Directors as required by the Code, their
biographies are set out on pages 78 to 79. Appointments
to the Nomination Committee are made by the Board. The
Nomination Committee considers the composition of the
Board and its committees on an annual basis.
The Nomination Committee met on seven occasions in
order to fulfil its responsibilities delegated to it by the Board.
Attendance is shown in the table below.
Only members of the Nomination Committee are entitled to
be present at meetings. However, other Directors (including
the Chief Executive), members of the Executive team and
advisers may be invited to attend Nomination Committee
meetings at the discretion of the Chair. The General Counsel
& Company Secretary performs the role of Secretary to the
Nomination Committee.
No Director is involved in any decisions regarding their
own continuation in office, re-appointment or re-election,
including the Chair.
Name
No. of meetings attended
Keith Edelman (Chair)
6/7
Stephen Bird
6/7
Jemima Bird
7/7
Karen Hubbard
7/7
Robin Williams
7/7
There was one Nomination Committee meeting held to discuss
specifics relating to Chair succession and the replacement Chair
appointment and given this, it was appropriate that neither
Stephen Bird nor Keith Edelman attended this meeting and so their
attendance record in the table above reflects this.
Appointment and re-appointment of Directors
The Nomination Committee has procedures in place for a
formal, rigorous and transparent process leading to Board
appointments, ensuring that appointments to the Board
are made on merit, against objective criteria and promote
diversity of gender, social and ethnic backgrounds. This has
been shown by the recent decision to appoint Jemima Bird
as our Senior Independent Director.
Headlam Group PLC Annual Report & Accounts 2024
111
Governance
The Chair and the other Non-Executive Directors are
appointed for an initial period of three-years, which, with
the approval of the Nomination Committee and the Board,
would normally be extended for a further three years term.
All appointments are subject to annual election by the
shareholders.
The letters of appointment of all Non-Executive Directors
(alongside the service contracts for the Executive Directors)
are available for inspection at the Company’s registered
office during normal office hours. Copies are also made
available at each of the Company’s Annual General
Meetings for 15 minutes prior to the meeting and throughout.
Time commitments
The letters of appointment clearly set out the time
commitment expected from each Non-Executive Director
and this is reviewed annually by the Committee to ensure it
remains appropriate. Each Non-Executive Director confirms
at the time of their appointment, and each year thereafter,
with careful consideration to their external appointments,
that they can continue to dedicate sufficient time to the
Group’s business.
All Directors have demonstrated strong time commitment to
their roles during the year.
The Nomination Committee confirms that it is fully satisfied
that each Director dedicates the appropriate amount
of time to their roles on the Board and the Nomination
Committee.
Board size, structure and composition
The composition and performance of the Board and its
Committees was considered by the Nomination Committee
as part of its annual assessment and it was concluded
that the Board and each Committee continue to function
effectively. The Nomination Committee concluded that the
composition of the Board is compliant with the provisions
of the Code, is appropriate to meet the business and
operational objectives, and is sufficient to bring a balanced
and experienced view to the decision-making process.
Activities of the Nomination Committee
The Nomination Committee agrees an annual workplan
and, in addition to matters relating specifically to its terms of
reference, agendas incorporate matters arising and topical
items upon which the Nomination Committee has chosen to
focus.
The key activities of the Nomination Committee during the
year in discharging its principal areas of responsibility are
shown below:
Skills assessment and succession
•
Reviewed the skills and experience required by the Board
in the context of wider business needs and culture, long-
term strategic objectives and stakeholder feedback
•
Reviewed the skills and experience of Non-Executive
Directors to fully support the achievement of the Group’s
strategic objectives and carried out a skills mapping
exercise to support this review
•
Reviewed succession plans for the Chair, Board, Executive
team and senior management
•
Supported the recruitment of key management positions
•
Implemented the Chair succession plan
Governance
•
Reviewed the structure, size and composition of the
Board and its Committees
•
Reviewed and updated the terms of reference of the
Committee and its annual plan
•
Reviewed the time commitment required of Non-
Executive Directors and evaluated whether enough time
had been committed to fulfil their duties
•
Agreed that all Non-Executive Directors (excluding the
Chair) remain independent
•
Recommended the re-election of all Directors due to
retire at the AGM
•
Reviewed the role descriptions of the Chair, Chief
Executive and Senior Independent Director positions
•
Considered and re-approved the policy on approving
external appointments
•
Reviewed and approved the Board diversity policy
Evaluation
•
Reviewed the results of the Board effectiveness in
relation to the Board, its Committees and their own
performance
•
Considered the composition, size and diversity of
the Board
Reporting
•
Considered and recommended to the Board the
Nomination Committee report for inclusion in the Annual
Report and Accounts
This report and the information on pages 74 to 143 forms
part of the Corporate Governance report and is signed on
behalf of the Nomination Committee by:
Stephen Bird
Chair of the Nomination Committee
11 March 2025
112
NOMINATION COMMITTEE REPORT
CONTINUED
Headlam Group PLC Annual Report & Accounts 2024
113
Governance
Annual Statement
On behalf of the Board, I am pleased to present the
Directors’ Remuneration Report for 2024.
The report includes this Annual Statement, an abridged version of the Directors’
Remuneration Policy (‘Policy’) which was approved by shareholders at the 2023
AGM and the Annual Report on Remuneration for the financial year ended
31 December 2024. The Directors’ Remuneration Report (excluding the Policy) will
be subject to an advisory shareholder vote at the AGM on 22 May 2025.
Business performance and incentive out-turn for 2024
As set out in the Chair’s statement on page 4, 2024 proved to be a difficult
year for the industry as a whole, and for many businesses exposed to consumer
discretionary spend. Financial performance was hampered by a declining market
and high operational cost inflation. Despite this backdrop, the Company made
good progress with the acceleration of its strategy to optimise and simplify the
business through a transformation plan, reinforcing its market-leading customer
service and driving improved operational efficiency. Following completion of
the sales of various properties in December, the Company achieved a net cash
positive position and continues to have a property portfolio valued at £94 million.
For 2024, annual bonus opportunity was capped at 125% of base salary. 70%
of the bonus was assessed against the Company’s underlying profit before tax
performance and 30% against key strategic and ESG-related objectives. While
the threshold Underlying PBT target was not met, most of the strategic targets
were met and the ESG related target was met in full, resulting in 20% of the
maximum bonus payable. However, notwithstanding the significant progress
that has been achieved by the management team in respect of delivering the
Company’s strategy and implementation of its transformation programme, the
Committee decided to apply negative discretion and therefore reduced the bonus
to zero in light of the Company’s financial performance and broader stakeholder
experience.
In respect of PSP awards granted in April 2022 and due to vest in April 2025, which
were based on EPS and relative Total Shareholder Return measured against the
constituents of the FTSE SmallCap Index (excluding investment trusts), EPS was
below threshold and Headlam’s TSR was below median based on performance to
31 December 2024. As such, none of the 2022 PSP awards will vest. Further details of
the 2022 PSP award are set out on page 128.
Key responsibilities:
•
Designing the framework
and policy for Executive
Directors’ remuneration and
determining remuneration
packages for the Executive
Directors, Chair and senior
managers.
•
Establishing remuneration
schemes that promote
long-term shareholdings
by Executive Directors and
that support alignment with
shareholders’ interests, both
in employment, and post
cessation.
•
Reviewing workforce
remuneration and related
policies.
Jemima Bird,
Chair of the Remuneration Committee
“ Careful consideration in exercising
our discretion has been vital this year,
allowing us to strike the right balance for
our stakeholders during what has been
a challenging period for the Company.”
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DIRECTORS’ REMUNERATION REPORT
Discretion
The Remuneration Committee is conscious of its role in
ensuring that remuneration is appropriate when considering
the performance of the business and the individual
Directors. As detailed above, whilst the Remuneration
Committee recognises the significant progress that has
been achieved by the management team in respect of
delivering the Company’s strategy and implementation of its
transformation programme, the Remuneration Committee
considered the formulaic outcomes of the annual bonus
plan and applied negative discretion to reduce the bonus
award for 2024 to zero. No discretion was applied in respect
of the 2022 PSP awards which will lapse in full in April 2025.
Remuneration for 2025
Base salary
Executive Director base salaries were increased in line with
the workforce from 1 January 2025. As such, Chris Payne’s
salary increased by 2% from £484,500 to £494,190 and Adam
Phillips’ salary increased by 2% from £325,000 to £331,500
with effect from 1 January 2025.
Pension
Pension contributions will continue to be capped at 8%
of salary for both the Chief Executive and Chief Financial
Officer which is comparable to the majority of employees.
Annual bonus and PSP
Maximum bonus potential will remain at 125% of salary for
the Chief Executive and Chief Financial Officer. 70% of the
annual bonus opportunity will be based key financial metrics
and 30% will be based on a number of key strategic and
ESG-related objectives. The targets, which are considered to
be commercially sensitive at this time, together with the level
of achievement, will be detailed in the 2025 Annual Report
and Accounts.
It is the Committee’s intention to make PSP awards in 2025
up to 150% of salary for the Chief Executive and Chief
Financial Officer. As per last year’s award, vesting will be
subject to EPS targets for the majority of the award and
relative TSR targets and ESG targets for a minority of the
award. The combination of a post-vesting holding period
requirement under the PSP, the deferral into shares under
the annual bonus scheme and the shareholding guidelines
will continue to provide alignment between the interests of
Executive Directors, the shareholders and delivery of
the strategy.
Shareholder views and voting outcomes
The Remuneration Committee conducted a consultation
exercise with our larger shareholders and the major proxy
voting agencies in advance of the 2023 AGM when our
current Policy was approved and was grateful for the level
of support received. No changes are proposed to the
Remuneration Policy this year and at last year’s AGM over
91% of votes cast in favour of the Directors’ Remuneration
Report (excluding the Policy). We hope we will again receive
your support at the forthcoming 2025 AGM.
2025 AGM Resolution
On the basis that the Directors’ Remuneration Policy was
approved by shareholders at the 2023 AGM and no changes
are proposed, the Directors’ Remuneration Report (excluding
the Policy) will be subject to an advisory shareholder vote at
the AGM on Thursday 22 May 2025.
Conclusion
We remain committed to a responsible approach to
executive pay, as I trust this Directors’ Remuneration Report
demonstrates. That said, I would be happy to meet or speak
with shareholders if there are any questions or feedback on
our approach to executive remuneration.
Jemima Bird
Chair of the Remuneration Committee
11 March 2025
Headlam Group PLC Annual Report & Accounts 2024
115
Governance
At a glance remuneration overview
Executive Remuneration for the year ending 31 December 2024
Fixed
Remuneration
Salary
Workforce Aligned Pension
Benefits
(c.30% of total reward assuming maximum performance)
Variable
Remuneration
Annual Bonus
Performance Share Plan
Link to Strategy
Performance measures support Group
strategy to:
–
increase profitability for shareholders
–
deliver key strategic and ESG-related
priorities
Performance measures support Group strategy to
deliver:
–
higher returns to shareholders
–
increased earnings
–
the ESG strategy
Potential
(Maximum 125% of Salary)
1/3rd deferred into shares under the Deferred
Bonus Plan
(Maximum 150% Salary)
Two year post vesting holding period
Dividend equivalents accrue to extent awards vest
FY2024 Performance Metrics
Underlying Profit Before Tax - 70% (to support
profitability of the business)
Key strategic and ESG-related objectives - 30%
(to support business growth and ESG objectives)
Underlying Basic Earnings Per Share (EPS) - 70% (to
support the growth of earnings)
Relative Total Shareholder Return (TSR) - 20% (to align
the interests of Directors with those of shareholders)
ESG-related objectives - 10% (to support key strategic
and ESG objectives)
Shareholder
alignment
In Employment
Post Employment
200% of salary
Lower of shareholding at cessation of employment and
200% of salary to be held for two years post cessation
116
DIRECTORS’ REMUNERATION REPORT
CONTINUED
Directors’ Remuneration Policy
This part of the Directors’ Remuneration Report sets out an abridged version of the Directors’ Remuneration Policy which was
approved by shareholders at the AGM on 25 May 2023. The Policy took formal effect from the date of approval and is intended
to apply until the 2026 AGM. The full shareholder approved Policy can be found in the 2022 Annual Report which can be viewed
via the Company’s website at www.headlam.com.
Considerations when determining the remuneration policy
The overarching objective of the remuneration policy is to promote the long-term success of the Group. In seeking to achieve
this objective the policy has been designed based on the following key principles:
•
to operate remuneration arrangements which are simple and transparent, and which help to build and maintain a
sustainable performance culture;
•
to appropriately align executive reward with the Group’s strategic objectives and with the best interests of shareholders
and other key stakeholders;
•
to promote appropriately the long-term success of the Group, and to not pay more than is necessary in doing so; and
•
to have a competitive mix of base salary and short- and long-term incentives, with an appropriate proportion of the
package determined by the rigorous application of stretching targets linked to the Group’s performance.
Consideration of employment conditions elsewhere in the Group
In setting remuneration for the Executive Directors, the Remuneration Committee takes note of the overall approach to
reward for employees in the Group. Salary increases will ordinarily be (in percentage of salary terms) no higher than those
of the wider workforce. The Company operates an Employee Forum at which aspects of remuneration across the Group
(including Executive Director remuneration) is discussed. In addition, the Chair of the Remuneration Committee receives
feedback on remuneration matters directly from the designated workforce engagement Non-Executive Director and the
Group People Director updates the Remuneration Committee periodically on remuneration arrangements and employment
conditions across the Group.
Shareholder views
The Remuneration Committee is committed to an ongoing dialogue with shareholders and welcomes feedback on
Executive and Non-Executive Directors’ remuneration. The Remuneration Committee will seek to engage directly with
larger shareholders and their representative bodies should any material changes be made to the Policy. The Remuneration
Committee also considers shareholder feedback received in relation to the remuneration-related resolutions each
year following the AGM. This, plus any additional feedback received from time to time, is then considered as part of the
Committee’s annual review of remuneration policy and its implementation.
Headlam Group PLC Annual Report & Accounts 2024
117
Governance
Summary Policy table for Executive Directors
Component
Purpose and link
to strategy
Operation
Base salary
To provide a
competitive base
salary for the
market in which the
Group operates to
attract and retain
Executives of a
suitable calibre.
Salaries are usually reviewed annually, with any increases typically effective
1 January.
Salaries are typically set after considering:
• pay and conditions elsewhere in the Group;
• overall Group performance;
• individual performance and experience;
• progression within the role; and
• competitive salary levels in companies of a broadly similar size and complexity
and market forces.
Benefits
To provide broadly
market competitive
benefits as part
of the total
remuneration
package.
Executive Directors receive benefits in line with market practice, and these
include life assurance, private medical insurance, company car or car allowance
and, where relevant, relocation expenses. Executive Directors are also provided
with the opportunity to join any HMRC approved all-employee share plan
arrangements on the same basis as other employees.
Executive Directors will be eligible for any other benefits which are introduced
for the wider workforce on broadly similar terms and other benefits might
be provided from time to time based on individual circumstances and if the
Committee decides payment of such benefits is appropriate.
Any reasonable business-related expenses can be reimbursed (and any tax
thereon met if determined to be a taxable benefit).
Retirement
benefits
To provide
employees with
long-term savings
to allow for
retirement planning.
The Group may offer participation in a defined contribution pension plan or may
permit Executive Directors to take a cash supplement in lieu of pension up to the
same value.
Annual bonus
Rewards
performance
against targets
which support the
strategic direction
of the Group. Bonus
deferral provides a
retention element
through share
ownership and
direct alignment
with shareholders’
interests.
Awards are based on performance typically measured over one year.
Pay-out levels are determined by the Remuneration Committee after the year
end based on performance against pre-set targets.
Executive Directors will defer at least one-third of any bonus award into shares,
typically for a two-year period. The Committee may decide to pay the whole of
the bonus earned in cash where the amount to be deferred would, in the opinion
of the Remuneration Committee, be so small as to make deferral administratively
burdensome. Deferred shares will typically take the form of nil-cost share options
but may be structured as an alternative form of share award.
Deferred bonus awards may be granted on the basis that the participant shall be
entitled to an additional benefit (in cash or shares) in respect of dividends paid over
the deferral period, calculated on such basis as the Committee shall determine.
The vesting of the deferred shares is not subject to the satisfaction of any
additional performance conditions.
The annual bonus plan includes provisions which enable the Remuneration
Committee (in respect of both the cash and the deferred elements of bonuses) to
recover or withhold value in the event of certain defined circumstances.
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DIRECTORS’ REMUNERATION REPORT
CONTINUED
Maximum opportunity
Performance measures
While there is no maximum salary, increases will normally be in line with
the typical range of salary increases awarded (in percentage of salary
terms) to the wider workforce.
Larger salary increases may be awarded to take account of individual
circumstances, such as:
• where an Executive Director has been promoted or has had a
change in scope or responsibility;
• where the Remuneration Committee has set the salary of a new hire
at a discount to the market level initially, a series of planned increases
can be implemented over the following few years to bring the salary
to the appropriate market position, subject to individual performance;
• where there has been a change in market practice; or
• where there has been a significant change in the scale of the role or
the size and/or complexity of the business.
Increases may be implemented over such time period as the
Remuneration Committee deems appropriate.
Although there are no formal performance
conditions, any increase in base salary is only
implemented after careful consideration of
individual contribution and performance and
having due regard to the factors set out in the
Operation column of this table.
Whilst the Remuneration Committee has not set an absolute maximum
on the level of benefits Executive Directors may receive, the value of
benefits is set at a level that the Remuneration Committee considers
appropriate against the market and provides a sufficient level of
benefits based on individual circumstances.
Not applicable.
Workforce aligned (currently 8% of base salary).
Not applicable.
125% of base salary.
Targets are set annually with measures linked
to the Group’s strategy and aligned with key
financial, strategic and/or individual targets.
The majority, if not all, of the annual bonus will
be assessed against key financial performance
metrics of the business and any balance will be
based on non-financial strategic, ESG-related
and/or personal objectives.
A graduated scale of targets is set for each
measure, with up to 10% of each element
payable for achieving the relevant threshold
performance level and 100% of maximum
potential for achieving stretch performance.
The Remuneration Committee has discretion to
amend the pay-out should any formulaic output
not reflect the Remuneration Committee’s
assessment of overall business performance.
Headlam Group PLC Annual Report & Accounts 2024
119
Governance
Component
Purpose and link
to strategy
Operation
Performance
Share Plan
(‘PSP’)
To incentivise
Executive Directors,
and to deliver
genuine long-term
performance-
related pay, with a
clear line of sight
for Executives and
direct alignment
with shareholders’
interests.
Awards will be in the form of nil-cost share options, conditional shares or other
such form as has the same economic effect.
Awards will be granted with vesting dependent on the achievement of
performance conditions set by the Remuneration Committee, with performance
normally measured over at least a three-year performance period.
The Remuneration Committee retains discretion to adjust vesting levels in
exceptional circumstances, including but not limited to regard of the overall
performance of the Company or the grantee’s personal performance.
Awards will usually be subject to a two-year holding period following the end of
the performance period, and shares will typically not be released to participants
until the end of any such holding period.
Awards under the PSP may be granted on the basis that the participant shall be
entitled to an additional benefit (normally in shares) in respect of dividends paid
over the holding period. This amount shall be calculated on such basis as the
Remuneration Committee determines.
The PSP includes provisions which enable the Remuneration Committee to recover
or withhold value in the event of certain defined circumstances.
Shareholding
guidelines
To further align the
Executive Directors’
long-term interests
with those of
shareholders.
In employment:
Until the guideline has been reached Executive Directors are required to retain all
of the net number of vested shares from the PSP and DBP. Vested shares which are
subject to a holding period under the PSP and shares which are subject to DBP
awards will count towards the limit (on a net of assumed tax basis).
Post employment:
Executive Directors will normally be required to hold shares at a level equal to the
lower of their shareholding at cessation of employment and 200% of salary for
two years post cessation in respect of any share awards granted after the 2021
AGM and excluding own shares purchased.
Non-Executive Directors (including the Chair)
Annual Fee
To attract
individuals with
appropriate
knowledge and
experience.
Fees are normally reviewed annually taking into account factors such as the time
commitment and contribution of the role and market levels in companies of
comparable size and complexity.
The Chairman is paid an all-inclusive fee for all Board responsibilities.
Fees for the other Non-Executive Directors may include a basic fee and additional
fees for further responsibilities (for example, chairmanship of Board committees or
holding the office of Senior Independent Director).
In exceptional circumstances, if there is a temporary yet material increase in the
time commitments for Non-Executive Directors, the Board may pay extra fees on
a pro rata basis to recognise the additional workload.
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DIRECTORS’ REMUNERATION REPORT
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Maximum opportunity
Performance measures
150% of salary.
PSP performance measures may include, and
are not limited to, relative TSR, EPS, strategic
measures and ESG-related objectives.
A maximum of 25% of any element vests for
achieving the threshold performance target and
100% for maximum performance.
Performance metrics and weightings are
reviewed annually and may be varied for future
award cycles as appropriate to reflect the
prevailing strategic priorities of the Group at
that time.
200% of salary.
Not applicable.
Neither the Chairman nor the Non-Executive Directors participate in
any of the Group’s performance related schemes (i.e. annual bonus or
incentive arrangements). Nor do they receive any pension or private
medical insurance or taxable benefits, other than the potential to
receive gifts at the end of a long-standing term of appointment.
Non-Executive Directors may be eligible to receive benefits such as the
use of secretarial support, travel costs or other benefits that may be
appropriate and the Company repays any reasonable expenses that a
Non-Executive Director incurs in carrying out their duties as a director,
including any tax liabilities thereon, if appropriate.
Not applicable.
Headlam Group PLC Annual Report & Accounts 2024
121
Governance
Explanation of performance measures chosen
Performance measures for the annual bonus are selected
annually to align with the KPIs and prevailing strategic
imperatives of the Group, and the interests of shareholders
and other stakeholders. Financial measures (e.g. underlying
profit before tax) will be used for a majority of the bonus with
any remainder based on key strategic, ESG-related and/
or personal objectives designed to ensure that Executive
Directors are incentivised to deliver across a range of
objectives. ‘Target’ performance is typically set in line with
the business plan for the year, with threshold to stretch
targets set around this based on a sliding scale which takes
account of relevant commercial factors. Only modest
rewards are available for delivering threshold performance
levels, with rewards at stretch requiring material
outperformance of the business plan. Details of the specific
measures used for the annual bonus are set out in the annual
report on remuneration.
Performance measures for the PSP are selected in order to
provide a robust and transparent basis on which to measure
the Group’s performance, to demonstrably link remuneration
outcomes to delivery of the business strategy over the longer
term, and to provide strong alignment between senior
management and shareholders. In achievement of these
aims, PSP awards granted in 2025 will be based on underlying
basic Earnings Per Share (‘EPS’), relative Total Shareholder
Return (‘TSR’) and ESG-related metrics. EPS is currently a
critical KPI for the Group, supporting a focus on profitability
and growth; TSR is aligned with the Group’s focus on creating
value for our shareholders; and ESG-related objectives are
being built in to reflect the increasing importance of this
aspect of the Group’s overall strategy. However, the policy
provides for Remuneration Committee discretion to alter the
PSP measures and weightings to ensure they can continue to
facilitate an appropriate measurement of performance over
the life of the policy, taking account of any evolution in the
Group’s strategic ambitions.
When setting performance targets for the bonus and PSP,
the Remuneration Committee will take into account a
number of different reference points, which may include the
Group’s business plans and strategy, external forecasts and
the wider economic environment.
The Remuneration Committee retains discretion to amend
the bonus pay-out and to reduce the PSP vesting level if any
formulaic outcome is not reflective of the Remuneration
Committee’s assessment of overall business performance
over the relevant performance period.
Malus and clawback
The following provisions apply:
•
Prior to the payment of an annual bonus or vesting of a
DBP or PSP award, the Remuneration Committee may
operate ‘malus’ (or ‘withholding’) to cancel the award.
•
For up to two years following the payment of an
annual bonus award, the Remuneration Committee
may operate ‘clawback’ (or ‘recovery’) to require the
repayment of any cash amount paid or may cancel any
deferred bonus award.
•
For up to two years after the vesting of a PSP award, the
Remuneration Committee may operate clawback to
cancel the award during the holding period (or require
repayment of the award if it has been released prior to
the end of the holding period); reduce future vesting
under the Company’s share plans; or reduce the number
of shares already vested but unexercised.
The circumstances in which malus and clawback may be
operated are as follows:
•
the Company materially misstated its financial results
(excluding any changes resulting from a change in
accounting standards);
•
the Executive’s conduct being such that it would entitle
(or, where the Employment has terminated prior to the
date on which the Board becomes aware of such act or
omission, would have entitled) the Group to terminate
the Employment summarily;
•
a material error having occurred in determining whether
any corporate or personal performance conditions
relating to the bonus or PSP award have been met (or
any other material error having occurred in calculating
the sum that was awarded as a bonus or the size of the
PSP award);
•
circumstances which in the opinion of the Board would
have (or would have if made public) a sufficiently
significant impact on the reputation of the Company
or Group;
•
the Company becomes insolvent or otherwise suffers a
corporate failure and the Board determines that such
circumstances arose from events occurring (in whole or
substantial part) during any period in which the relevant
individual was a participant; or
•
such other exceptional circumstances which, in the
Remuneration Committee’s absolute discretion, justify
such reimbursement being imposed.
Discretion retained by the Committee in
operation of the incentive plans
The Remuneration Committee will operate the Company’s
incentive plans according to their respective rules and
consistent with normal market practice, the Listing Rules
and HMRC rules where relevant, including flexibility in a
number of regards. These include making awards and setting
performance criteria each year, dealing with leavers, and
adjustments to awards and performance criteria following
acquisitions, disposals, special dividends, changes in share
capital and to take account of the impact of other merger
and acquisition activity, and to settle awards in cash. The
Remuneration Committee also retains discretion within the
policy to adjust the targets, set different measures and/
or alter weightings for the annual bonus plan and PSP, pay
dividend equivalents on vested shares up to the date those
shares can first reasonably be exercised and, in exceptional
circumstances, under the rules of the long-term incentive
plans to adjust performance conditions to ensure that
the awards fulfil their original purposes (for example, if an
external benchmark or measure is no longer available).
All assessments of performance are ultimately subject to
the Remuneration Committee’s judgement. Any discretion
exercised, and the rationale, will be disclosed in the Annual
Remuneration Report.
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DIRECTORS’ REMUNERATION REPORT
CONTINUED
Differences in pay policy for Executive Directors
compared to employees more generally
The Remuneration Policy applied to the Executive Directors
is similar to the policy for the wider senior management
team in that a significant element of remuneration is
dependent on Group performance and the key principles of
the remuneration philosophy are applied consistently across
the Group below this level, taking into account seniority and
market practice. Key features include:
•
we aim to provide market competitive levels of
remuneration across the workforce in order to recruit and
retain high calibre employees at all levels;
•
we have aligned pension contributions for Executive
Directors with the workforce;
•
all UK employees have the opportunity to participate
in an HMRC-approved employee share scheme
arrangement; and
•
employees at selected levels participate in an annual
bonus arrangement.
At senior levels, remuneration is increasingly long term, and
‘at risk’ with an increased emphasis on performance-related
pay and share-based remuneration.
Recruitment remuneration
The policy aims to facilitate the appointment of individuals
of sufficient calibre to lead the business, to execute the
Group’s strategy effectively and to promote the long-term
success of the Group for the benefit of shareholders and
other stakeholders. When appointing a new Executive
Director, the Remuneration Committee seeks to ensure that
arrangements are in the best interests of the Group and not
to pay more than is appropriate.
The Remuneration Committee will take into consideration
a number of relevant factors, which may include the calibre
and experience of the individual, the candidate’s existing
remuneration package, and the specific circumstances
of the individual, including the jurisdiction from which the
candidate was recruited.
When hiring a new Executive Director, the Remuneration
Committee will typically align the remuneration package
with the above Policy. The Remuneration Committee
may include other elements of pay which it considers are
appropriate; however, this discretion is capped and is
subject to the principles and the limits referred to below.
•
Base salary will be set at a level appropriate to the role
and the experience of the Executive Director being
appointed and the circumstances of the appointment.
This may include agreement on setting the salary at
below the market rate with a series of future staged
increases planned in order to bring the salary up to
a market level, in line with progression in the role,
increased experience and/or responsibilities, and subject
to satisfactory performance, where it is considered
appropriate.
•
Retirement benefits will be workforce aligned and other
benefits will be provided in line with the above policy.
•
If the Executive Director will be required to relocate in
order to take up the position, it is the Group’s policy to
allow reasonable relocation, travel and subsistence
payments. Any such payments will be at the discretion
of the Remuneration Committee.
•
The Remuneration Committee will not offer non-
performance related incentive payments (for example
a ‘guaranteed sign-on bonus’).
•
If an Executive Director is recruited at a time in the year
when it would be inappropriate to provide a bonus or
long-term incentive award for that year as there would
not be sufficient time to assess performance, subject
to the limit on variable remuneration set out below, the
quantum in respect of the months employed during the
year may be transferred to the subsequent year so that
reward is provided on a fair and appropriate basis.
•
The Remuneration Committee may also alter the
performance measures, performance period, vesting
period, deferral period and holding period of the annual
bonus or PSP, if the Remuneration Committee determines
that the circumstances of the recruitment merit such
alteration. The rationale will be clearly explained in the
following Directors’ Remuneration Report.
•
The maximum level of variable remuneration which may
be granted (excluding ‘buyout’ awards as referred to
below) is 275% of salary.
•
The Remuneration Committee may make additional
payments or awards in respect of hiring an employee to
‘buyout’ remuneration arrangements forfeited on leaving
a previous employer. In doing so, the Committee will take
account of relevant factors including any performance
conditions attached to the forfeited arrangements
and the time over which they would have vested. The
Remuneration Committee will generally seek to structure
buyout awards or payments on a like-for-like basis to
the remuneration arrangements forfeited. Any such
payments or awards are limited to the expected value
of the forfeited awards. Where considered appropriate,
such buyout awards will be liable to forfeiture or ‘malus’
and/or ‘clawback’ on early departure.
•
Any share awards referred to in this section, including
any buyout awards, will be granted as far as possible
under the Group’s existing share plans. If necessary, and
subject to the limits referred to above, awards in relation
to a recruitment may be granted outside of these plans
as permitted under the Listing Rules which allow for the
grant of awards to facilitate, in unusual circumstances,
the recruitment of an Executive Director.
•
Where a position is filled internally, any ongoing
remuneration obligations or outstanding variable pay
elements shall be allowed to continue according to the
original terms.
•
Fees payable to a newly appointed Chairman or
Non-Executive Director will be in line with the fee policy
in place at the time of appointment.
Headlam Group PLC Annual Report & Accounts 2024
123
Governance
Service contracts and letters of appointment
Executive Directors’ service contracts are on a rolling basis
and may be terminated on up to 12 months’ notice by the
Group or by the Executive.
All Non-Executive Directors have letters of appointment
providing for fixed-term agreements with the Group which
may be terminated by the giving of three months’ notice by
either party (Chairman six months’ notice). The agreements
last for an initial period of three years and may then be
extended for two additional periods of three years, subject
to re-election by shareholders at the relevant AGM.
Copies of Executive Directors’ service contracts and
Non-Executive Directors’ letters of appointment are
available for inspection at the Company’s registered office
during normal hours of business.
Payments for loss of office
The principles on which the determination of payments for loss of office will be approached are set out below:
Component
Policy
Payment in lieu
of notice
If notice is served by either party, the Executive Director can continue to receive base salary, benefits
and pension for the duration of their notice period, during which time the business may require the
individual to continue to fulfil their current duties or may assign a period of garden leave.
The Group has discretion to make a payment in lieu of notice. Such a payment would include base
salary and, at the election of the Remuneration Committee, compensation for benefits and pension
contributions (if applicable) for the unexpired period of notice.
Annual bonus
This will be at the discretion of the Remuneration Committee on an individual basis and the decision as
to whether or not to award an annual bonus award in full or in part will be dependent on a number of
factors, including the circumstances of the individual’s departure (i.e. normal good leaver provisions) and
their contribution to the business during the annual bonus period in question. Any annual bonus award
amounts paid in respect of a good leaver will normally be prorated for time in service during the annual
bonus period and will, subject to performance, be paid at the usual time (although the Remuneration
Committee retains discretion to pay the annual bonus award earlier in appropriate circumstances) and
normally subject to deferral policy. Any bonus earned for the year of departure and, if relevant, for the prior
year may be paid wholly in cash at the discretion of the Remuneration Committee.
Deferred
bonus awards
The extent to which any unvested deferred bonus award will vest will be determined in accordance with
the rules of the Deferred Bonus Plan (‘DBP’).
If a participant ceases employment for any reason (other than summary dismissal, in which case his
award will lapse), his award will ordinarily continue until the normal vesting date. The Remuneration
Committee retains discretion to release awards when the participant leaves.
Awards (in the form of nil cost options) which have vested and been released but remain unexercised at
the date of cessation may be exercised, for such period as the Remuneration Committee determines, if
a participant leaves for any reason (other than summary dismissal).
PSP
The extent to which any unvested award will vest will be determined in accordance with the rules of
the PSP.
Unvested awards will normally lapse on cessation of employment. However, if a participant leaves due
to death, ill health, injury, disability, the sale of his employer or any other reason at the discretion of the
Remuneration Committee, the Remuneration Committee shall determine whether the award will be
released at cessation or on the normal release date or at some other time (such as following the end
of the performance period). In any case, the extent of vesting will be determined by the Remuneration
Committee taking into account the extent to which the performance condition is satisfied and, unless
the Remuneration Committee determines otherwise, the period of time elapsed from the date of grant
to the date of cessation relative to the performance period. Awards may then be exercised during such
period as the Remuneration Committee determines.
If a participant leaves for any reason (other than summary dismissal) after an award has vested but
before it has been released (i.e. during a ‘holding period’), his award will ordinarily continue until the
normal release date when it will be released to the extent it vested. The Remuneration Committee
retains discretion to release awards when the participant leaves.
Awards (in the form of nil cost options) which have vested and been released but remain unexercised
at the date of cessation may be exercised, for such period as the Remuneration Committee determines,
if a participant leaves for any reason (other than summary dismissal).
124
DIRECTORS’ REMUNERATION REPORT
CONTINUED
Component
Policy
Change of
control
The extent to which unvested awards under the DBP and PSP will vest will be determined in accordance
with the rules of the relevant plan.
Awards under the DBP will vest in full in the event of a takeover, merger or other relevant corporate event.
Unvested awards under the PSP will vest early on a takeover, merger or other relevant corporate
event. The Committee will determine the level of vesting taking into account the extent to which
the performance condition is satisfied and, unless the Committee determines otherwise, the period
of time elapsed from the date of grant to the date of the relevant corporate event relative to the
performance period.
Awards under the PSP which have vested but not been released (i.e. awards which are subject to a
holding period) will be released, to the extent vested.
Mitigation
If an Executive Director’s employment is terminated, any compensation payment will be calculated
in accordance with normal legal principles including the application of mitigation to the extent
appropriate to the circumstances of the termination. Payments will be made in instalments and
reduced to the extent employment is taken up elsewhere.
Other
payments
Payments may be made either in the event of a loss of office or a change of control under any of the
Group’s HMRC-favoured all-employee share plans in line with the associated plan rules. There is no
discretionary treatment for leavers or on a change of control under these schemes.
In appropriate circumstances, payments may also be made in respect of accrued holiday,
outplacement and legal fees and other benefits that may be considered appropriate taking into
account the circumstances of the termination.
The Remuneration Committee reserves the right to make additional exit payments where such
payments are made in good faith in discharge of an existing legal obligation (or by way of damages for
breach of such an obligation) or by way of settlement or compromise of any claim arising in connection
with the termination of a Director’s office or employment.
Where a buy-out award is made under the Listing Rules then
the leaver provisions would be determined at the time of
the award.
Where the Remuneration Committee retains discretion, it
will be used to provide flexibility in certain situations, taking
into account the particular circumstances of the Director’s
departure and performance.
There is no entitlement to any compensation in the event of
Non-Executive Directors’ fixed-term agreements not being
renewed or the agreement terminating earlier.
Existing contractual arrangements and
historical awards
The Remuneration Committee retains discretion to make
any remuneration payment or payment for loss of office
outside the policy in this report (including exercising any
discretions available to it in connection with any such
payment):
•
where the terms of the payment were agreed before
the policy came into effect (including the satisfaction
of options granted under the CIP), provided in the case
of any payment whose terms were agreed after the
previous Directors’ Remuneration Policy was approved
and before the policy in this report became effective, the
remuneration payment or payment for loss of office was
permitted under that former policy;
•
where the terms of the payment were agreed at a
time when the relevant individual was not a Director
of the Group and, in the opinion of the Remuneration
Committee, the payment was not in consideration of the
individual becoming a Director of the Group.
External appointments
The Board believes that experiences of other companies’
practices and challenges is valuable both for the personal
development of its Executive Directors and for the Group.
Any external appointments are subject to Board approval
(which would not be given if the proposed appointment
would lead to a material conflict of interest). Fees received
by Executive Directors in respect of external non-executive
appointments are retained by the individual Director. Details
of such appointments are included in the Annual Report on
Remuneration.
Headlam Group PLC Annual Report & Accounts 2024
125
Governance
Annual report on remuneration
Certain information provided in this part of the Directors’ Remuneration Report is subject to audit. This is annotated as
audited. Any information not annotated as audited is unaudited.
Single total figure of remuneration for each Director
The table below reports the total remuneration receivable in respect of qualifying services by each of the Executive Directors
for the years 2024 and 2023.
Directors’ remuneration as a single figure (audited)
Executive
Directors
Base
salary/
fees
£000
Non-
salary
benefits2
£000
Pension
related
benefits3
£000
Total
fixed
£000
Annual
performance
bonus⁴
£000
Share-
based
incentive
schemes5
£000
Total
variable
£000
Total
£000
Chris Payne
2024
484.5
9.2
38.7
532.4
–
–
–
532.4
2023
475
12
38
525
119
–
119
644
Adam Phillips1
2024
325
1.6
16.2
342.8
–
–
–
342.8
2023
229
1
10
240
54
–
54
294
Non-Executive Directors
Keith Edelman
2024
150
2.5
–
152.5
–
–
–
152.5
2023
150
4.5
–
154.5
–
–
–
154.5
Stephen Bird
2024
60
0.9
–
60.9
–
–
–
60.9
2023
60
0.9
–
61.9
–
–
–
61.9
Karen Hubbard
2024
57
3
–
60
–
–
–
60
2023
57
5.8
–
62.8
–
–
–
62.8
Robin Williams
2024
57
0.4
–
57.4
–
–
–
57.4
2023
57
1
–
58
–
–
–
58
Jemima Bird
2024
57
0.9
–
57.9
–
–
–
57.9
2023
57
1.2
–
58.2
–
–
–
58.2
Total
2024
1,190.5
18.5
54.9
1,263.9
–
–
–
1,263.9
2023
1,085
26.4
48
1,159.4
173
–
173
1,332.4
1
Adam Phillips was appointed Chief Financial Officer on 20 March 2023.
2
Non-salary benefits for Executive Directors include the provision of a company car or car allowance, private medical insurance and other
benefits deemed to be an employment benefit such as some fuel costs. Non-salary benefits for Non-Executive Directors relates to taxable
expenses.
3
The amount of employer contribution to a scheme or paid as cash in lieu of retirement benefits based on a fixed percentage of base
salary. Chris Payne received pension contributions from the Company equivalent to 8% of his base salary (£9,980 as pension, £28,760 as
a salary supplement, totalling £38,700) which aligns with the contribution level (i) received by a significant proportion of our employees
and (ii) available to all new joiners under the Headlam Master Trust Pension Scheme. Adam Philips received pension contributions from the
Company equivalent to 5% of his base salary.
4
Details of the annual bonus award are set out on the following page.
5
2022 PSP awards granted on 8 April 2022 will lapse in full in April 2025 as a result of below threshold performance against EPS (80%) and
relative TSR (20%) targets.
126
DIRECTORS’ REMUNERATION REPORT
CONTINUED
Annual performance bonus in respect of financial year 2024 (audited)
For 2024, the Chief Executive and Chief Financial Officer had a maximum annual bonus opportunity equal to 125% of base
salary, with 50% of maximum payable for a target level of performance. The bonus was assessed against the Company’s
underlying profit before tax (PBT) (70% of bonus opportunity) and against the achievement of a number of key strategic and
ESG-related objectives (30% of bonus opportunity) as shown in the tables below:
Performance
metric
Weighting
Threshold
Target
Maximum
Actual
Bonus
earned (%
max)
Bonus
Receivable
– C Payne1
(£)
Bonus
Receivable
– A Phillips1
(£)
Underlying PBT
70%
£7m
£7.7m
£11m
£(34.3)m
0%
0
0
Strategic/ESG
objectives
30%
See table
below
20%
121,124
81,252
100%
20%1
121,124
81,252
1
Before the application of negative discretion (see overleaf) to reduce the 2024 bonus to zero.
Strategic and ESG-related objectives (audited)
The following non-financial strategic objectives were designed to focus on the achievement of certain key elements of
Company strategy.
Objective
Target
Maximum
Committee
Assessment/
Result
Potential
Bonus (%
of bonus
opportunity)
Bonus
Achieved
(% of bonus
max)
Key Accounts
(Growth)
Develop strategic
customer
relationship with
a new margin
enhancing model
All new accounts will
exceed the current average
operating margin of the
division
At least 2 existing
accounts to move to
new commercial model
to improve existing
operating margin
Achieved at
Target as three
new key accounts
exceeded
the average
operating margin
of the division
10%
5%
Brand (Growth)
Improve long
term resilience
of the business
by enhanced
branded sales
Increase share of regional
distribution sales going
through the Branded
Business Unit (excluding
Key Accounts and Trade
Counters)
Increase share of
regional distribution
sales going through the
Branded Business Unit
by 2% (excluding Key
Accounts and Trade
Counters)
Achieved at
Maximum as the
share of regional
distribution
sales through
the Branded
Business Unit
increased by the
Maximum target
5%
5%
Service
Improve service
related customer
feedback scores
Improve the following
Headlam Customer survey
delivery scores between
1-2 ppts
Products are delivered in
good condition
A delivery service that is
on time
Next day delivery service
Improve the following
Headlam Customer
survey delivery scores
between 3 ppts or more
Products are delivered in
good condition
A delivery service that is
on time
Next day delivery service
Missed Target
5%
0%
Environmental,
Social
& Governance
Improve colleague
engagement
Increase engagement index
by 3 ppts
Increase engagement
index by 5ppts
Achieved at
Maximum as
engagement
increased more
by 5ppts
10%
10%
Total
30%
20%
Headlam Group PLC Annual Report & Accounts 2024
127
Governance
Based on the above performance assessment in the table on the previous page, while the threshold Underlying PBT target was
not met, half of the strategic targets were met and the ESG related target was met in full, resulting in 20% of the maximum
bonus payable, (subject to the discretion of the Remuneration Committee). However, notwithstanding the significant progress
that has been achieved by the management team in respect of delivering the Company’s strategy and implementation of its
transformation programme, the Committee decided to apply negative discretion and therefore reduced the bonus to zero
in light of the Company’s financial performance and broader stakeholder experience. As such, neither Chris Payne nor Adam
Phillips received a bonus for the financial year ended 31 December 2024.
2022 PSP due to vest in 2025 (audited)
Awards granted under the PSP in April 2022 are based on underlying Earnings Per Share (‘EPS’) performance condition (80%
of the award) and a relative Total Shareholder Return (‘TSR’) performance condition (20% of the award). The performance
targets are shown in the table below:
Performance Target
% vesting
Underlying
Basic EPS
growth
(80% of award)
TSR v FTSE
SmallCap
(excluding ITs)
(20% of award)
Below Threshold
–
Less than
6% p.a.
Below median
Threshold
25
6% p.a.
Median
Maximum
100
10% p.a.
Upper quartile
Actual Performance
<6% p.a.
Below median
Vesting
0%
0%
Director
Shares granted
Shares vesting
Value of shares
vesting
Chris Payne
111,548
0
£0
Share awards granted during the financial period (audited)
PSP awards
PSP awards were granted to the Executive Directors on 18 March 2024 as follows (audited)
Number
of nil-cost
options over
which award
granted
Value of
Award
% of salary
% of award
vesting at
threshold
Date of
grant
Performance period
Chris Payne
395,402
£726,748
150%
25% 18 March 2024
3 years ending 31.12.2026
Adam Phillips
265,233
£487,498
150%
25% 18 March 2024
3 years ending 31.12.2026
The share price used to determine the number of shares under the PSP was 183.8 pence, being the average mid-market closing
share price for the five business days prior to the date of award.
128
DIRECTORS’ REMUNERATION REPORT
CONTINUED
The Awards are subject to an underlying Basic Earnings Per Share (‘EPS’) performance condition (70% of the award), a relative
Total Shareholder Return (‘TSR’) performance condition (20% of the award) and an ESG performance condition (10% of
award). The performance targets are shown in the table below:
Performance Target
% vesting
Underlying
Basic EPS
for 2026
(70% of
award)
TSR v FTSE
SmallCap
(excluding ITs)
(20% of
award)
tCO2e%
reduction
(10% of
award)
Below Threshold
–
Less than 16p
Below median
Less than 25%
Threshold
25
16p
Median
25%
Maximum
100
25p
Upper quartile
29%
The vesting of the awards is additionally subject to a financial underpin whereby the extent of vesting may be adjusted
to reflect the overall financial performance of the Company over the three-year performance period. The Remuneration
Committee also has full discretion to ensure that the final outcome is warranted based on the performance of the Company
in the light of all relevant factors and to ensure there have been no windfall gains. Any awards vesting are additionally subject
to a two-year holding period following the date of vesting.
DBP awards (audited)
In addition, following the decision to defer 100% of the annual bonus in respect of the financial year ended 31 December 2023,
the Company granted nil-cost options to Chris Payne and Adam Phillips over 64,608 and 29,583 shares respectively under the
Deferred Bonus Plan (DBP) on 18 March 2024. The award will not vest until the second anniversary of the grant date, and is
subject to dividend equivalents in the form of additional shares to the extent awards vest. The number of ordinary shares over
which the awards were granted was calculated based on a share price of 183.8 pence per ordinary share.
Payment for loss of office and to past Directors (audited)
No payments were made for loss of office and there have been no payments to past directors to be reported for the year
under review.
Headlam Group PLC Annual Report & Accounts 2024
129
Governance
Executive Directors’ share awards outstanding (audited)
Scheme
Number of shares
/options as at 31
December 2023
Shares/options
granted
Shares/options
lapsed
Shares/options
exercised
Number of
shares/options at
31 December 2024
Date of grant
Share price at
grant (pence)
Exercise Price
(pence)
Market price on
exercise date
(pence)
Vesting date
Expiry date
Chris Payne
PSP
–
395,402
–
–
395,402
18 March 2024
183.80
Nil
–
March 20271 March 2034
DBP
–
64,608
–
–
64,608
18 March 2024
183.80
Nil
–
March 2026 March 2034
PSP
277,669
–
–
–
277,669
29 June 2023
257
Nil
–
June 20261
June 2033
DBP
22,563
–
–
–
22,563
13 April 2023
301
Nil
–
April 2025
April 2033
PSP
111,548
–
–
–
111,548
8 April 2022
381
Nil
–
April 20251
April 2032
PSP
64,137
–
64,137
–
–
9 April 2021
454
Nil
–
April 20241
April 2031
DBP
39,822
–
– 46,2872
–
8 April 2022
381
Nil
127.29
April 2024
April 2032
SAYE
–
12,513
–
–
12,513
16 Oct 2024
143.42
114.74
–
Nov 2027
April 2028
SAYE
10,214
–
10,214
–
–
6 Oct 2023
220
181.6
–
Nov 2026
May 2027
SAYE
7,929
–
7,929
–
–
5 Oct 2020
271
227
–
Nov 2023
May 2024
Adam Phillips
PSP
–
265,233
–
–
265,233
18 March 2024
183.80
Nil
–
March 20271 March 2034
DBP
–
29,583
–
–
29,583
18 March 2024
183.80
Nil
–
March 2026 March 2034
PSP
127,143
–
–
–
127,143
29 June 2023
257
Nil
–
June 20261
June 2033
SAYE
–
6,272
–
–
6,272
16 Oct 2024
143.42
114.74
–
Nov 2027
May 2028
SAYE
5,107
–
5,107
–
–
6 Oct 2023
220
181.6
–
Nov 2026
May 2027
1
Award vests on date shown but is subject to a further two-year holding period during which time the option may not be exercised.
2
On 17 October 2024, Chris Payne exercised his 2022 nil-cost option to purchase 46,287 ordinary shares of 5 pence each in the capital of the
Company (‘Shares’) under the Company’s Deferred Bonus Plan. The number of Shares under option reflect the addition dividend equivalents in
Shares, calculated on a reinvestment basis. Chris Payne subsequently sold 22,064 Shares to cover exercise costs (including tax and NI) arising
on exercise and has 24,763 retained Shares.
130
DIRECTORS’ REMUNERATION REPORT
CONTINUED
Statement of Directors’ shareholding and share interests (audited)
The interests of Directors and their connected persons in the Company’s ordinary shares as at 31 December 2024 were as
set out below. There have been no changes to those interests between 31 December 2024 and the date of signing of these
financial statements and reports.
Owned
Shares at 31
December
2024
PSP
Deferred
Bonus
Vested
but not
exercised
SAYE
Shares under
Shareholding
Guidelines1
Guidelines
achieved1
(%)
Chris Payne
78,618
784,619
87,171
0
12,513
124,818
18%
Adam Philips
12,168
392,376
29,583
0
6,272
17,847
4%
Keith Edelman
37,415
N/A
N/A
N/A
N/A
N/A
N/A
Jemima Bird
7,677
N/A
N/A
N/A
N/A
N/A
N/A
Stephen Bird
5,000
N/A
N/A
N/A
N/A
N/A
N/A
Karen Hubbard
3,708
N/A
N/A
N/A
N/A
N/A
N/A
Robin Williams
17,720
N/A
N/A
N/A
N/A
N/A
N/A
1
This includes all owned shares plus, on a net of tax basis: (i) vested scheme interests; and (ii) deferred bonus awards which vest based on
continued service only, as permitted under the Company’s share ownership policy.
TSR graph
The graph below shows the value at 31 December 2024 of £100 invested in the Company on 1 January 2015 compared to
the value of £100 invested in the FTSE SmallCap Index, making the assumption that dividends are reinvested to purchase
additional equity. The SmallCap has been chosen given that the Company is a constituent of this index and has been over
the period presented.
31 Dec 15
31 Dec 14
31 Dec 16
31 Dec 17
31 Dec 18
31 Dec 19
31 Dec 20
31 Dec 21
31 Dec 22
31 Dec 23
31 Dec 24
Headlam Group plc
FTSE SmallCap Index
250
200
150
100
50
0
Total Shareholder Return (restated to 100)
Headlam Group PLC Annual Report & Accounts 2024
131
Governance
Chief Executive remuneration table
The table below sets out the remuneration of the Chief Executive for the last ten financial year periods.
Period
Chief
Executive
single figure
of total
remuneration
(£000)
Annual
bonus (% of
maximum
opportunity)
Long-term
incentive
vesting rates
against
maximum
opportunity
(%)
2024
Chris Payne
532
–
–
2023
Chris Payne
644
20
–
2022
Chris Payne
674
38
–
2021
Chris Payne
2051
100
–
2021
Steve Wilson
8642
100
–
2020
Steve Wilson
514
–
–
2019
Steve Wilson
798
45.5
5.7
2018
Steve Wilson
588
–
53.5
2017
Steve Wilson
1,069
65.8
97.5
2016
Steve Wilson
1,0673
76.8
98.6
2016
Tony Brewer
7374
N/A
88.9
2015
Tony Brewer
1,175
87.1
N/A
1
The remuneration shown is on a pro-rated basis for the period Chris Payne was Interim Chief Executive from 7 October 2021 to
31 December 2021 only.
2
Steve Wilson stepped down as Chief Executive and a Director on 6 October 2021. The 2021 figures reflect his remuneration earned from the
start of 2021 until the date of his resignation as a Director. This remuneration is for a part year and does not include a termination payment.
3
The remuneration shown is for the full year and incorporates his remuneration as Group Finance Director from 1 January 2016 until
14 September 2016 when he became Chief Executive.
4
Tony Brewer stepped down as Chief Executive and a Director on 14 September 2016. The 2016 figures reflect his remuneration earned from
the start of 2016 until the date of his resignation as a Director. This remuneration is for a part year and does not include a termination
payment.
132
DIRECTORS’ REMUNERATION REPORT
CONTINUED
Percentage change in remuneration of Directors compared with other employees
The table below shows the percentage increase/(decrease) in each Executive and Non-Executive Directors’ remuneration
compared with the Company’s employees as a whole between the financial periods 2020, 2021, 2022, 2023 and 2024.
2024
2023
2022
2021
2020
Director
Salary and fees
(% change)
All taxable benefits
(% change)
Annual Bonuses2
(% change)
Salary and fees
(% change)
All taxable benefits
(% change)
Annual Bonuses2
(% change)
Salary and fees
(% change)
All taxable benefits
(% change)
Annual Bonuses2
(% change)
Salary and fees
(% change)
All taxable benefits
(% change)
Annual Bonuses2
(% change)
Salary and fees
(% change)
All taxable benefits
(% change)
Annual Bonuses2
(% change)
Executive Directors
Chris Payne
2
-23.3
-100
14
-37
-42
25
27
(55)
–
(10)
100
2
–
(100)
Adam Phillips8
41.9
60
-100
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Non-Executive Directors
Keith Edelman5
0
0
N/A
27
-72
N/A
95
N/A
N/A
–
N/A
N/A
–
N/A
N/A
Stephen Bird
3
0
0
N/A
15
-73
N/A
282
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Jemima Bird6
0
0
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Karen Hubbard6
0
0
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Robin Williams6
0
0
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Former Directors
Philip
Lawrence7
N/A
N/A
N/A
N/A
N/A
N/A
(60)
N/A
N/A
–
N/A
N/A
–
N/A
N/A
Amanda
Aldridge7
N/A
N/A
N/A
N/A
N/A
N/A
12
N/A
N/A
–
N/A
N/A
–
N/A
N/A
Simon King3
N/A
N/A
N/A
N/A
N/A
N/A
120
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Steve Wilson4
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
(23)
(24)
100
2
2
(100)
Alison Littley4
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
(75)
N/A
N/A
8
N/A
N/A
All employees1
12
8
0
7
-3
-100
3
(6)
(74)
–
5
100
2
(14)
(100)
1
Reflects the average percentage change in salary, benefits and bonus for employees of the parent company (excluding the Board).
2
This reflects annual bonus paid in respect of the financial year as per the single figure table.
3
Stephen Bird and Simon King joined the Board on 13 September 2021 and 14 May 2021 respectively. Simon King stepped down from the Board
on 11 October 2022.
4
Alison Littley and Steve Wilson left the Board on 31 March 2021 and 6 October 2021 respectively and their pro-rated salary is reflected in the
percentage change shown.
5
Keith Edelman was promoted from Senior Independent Director to Non-Executive Chairman on 19 May 2022.
6
Jemima Bird and Robin Williams joined the Board on 11 October 2022 and Karen Hubbard joined the Board on 1 September 2022.
7
Philip Lawrence stepped down from the Board on 19 May 2022 and Amanda Aldridge stepped down from the Board on 11 October 2022.
8
Adam Phillips joined the Board on 20 March 2023.
Headlam Group PLC Annual Report & Accounts 2024
133
Governance
Relative importance of spend on pay
The table below shows the overall expenditure on dividends and on pay as a whole across the Company along with the
percentage change between each.
2024
£000
2023
£000
% change
Dividends1
Nil
12,169
(100)%
Pay
105,530
99,270
6.3%
1
Includes dividends paid during the financial year.
CEO pay ratio
The data shows how the Chief Executive’s single figure remuneration for 2024 (as taken from the single figure remuneration
table) compares to equivalent single figure remuneration for the year ended 31 December 2024 for full-time equivalent UK
employees as at 31 December 2024, on a Group basis, ranked at the 25th, 50th and 75th percentile.
Period
Method
25th
percentile
ratio
Median (50th
percentile)
ratio
75th
percentile
ratio
2024
Option A
21.5:1
18.3:1
13.5:1
2023
Option A
27.3:1
22.7:1
16.6:1
2022
Option A
29.2:1
24.0:1
16.9:1
20211
Option A
51.1:1
38.9:1
26.5:1
2020
Option A
25.8:1
20.7:1
14.4:1
2019
Option A
39.3:1
31.8:1
22.7:1
1
The remuneration for comparison for 2021 reflects the total remuneration included in the single total figure of remuneration table paid to Steve
Wilson and Chris Payne in relation to the period that each were undertaking the role of Chief Executive. Pension payments have been omitted
from the CEO pay ratio calculation for the period that Steve Wilson was Chief Executive to maintain consistency as he did not receive a
pension payment. Pension payments have been included for the period in which Chris Payne was Chief Executive to align with his pay package.
Option A was selected given that this method of calculation was considered to be the most efficient and robust approach in
respect of gathering the required data and was consistent with reporting for previous years.
The salary and total pay and benefits for the UK employees at the relevant percentiles, and upon which the pay ratios have
been calculated, are as follows:
Year
Percentile
Salary (£)
Total pay and
benefits (£)
2024
25th percentile
24,782
24,782
Median
29,109
29,109
75th percentile
39,496
39,496
The CEO pay ratios for 2024 are lower than those for 2023. This is primarily due to the CEO single figure reducing year on year
which reflects the no annual bonus award for 2024 compared to 2023 (20% of maximum). As such, given that the change in
the ratios is due to the CEO’s performance related pay (which will by its nature fluctuate year on year) rather than a material
change to employee pay, the Remuneration Committee considers the median CEO pay ratio to be representative of the
UK employee base and not inconsistent with the Company’s pay, reward and progression policies. The median pay ratio has
shown a steady upward trend over the past three years, increasing by 2% from 2021 to 2022, 1% from 2022 to 2023, and 3%
from 2023 to 2024. While the fluctuation in growth rates suggests some variability, the overall trajectory indicates a continued
rise. This reflects adjustments in compensation structures, changes in workforce composition, and broader economic factors
influencing pay distribution.
134
DIRECTORS’ REMUNERATION REPORT
CONTINUED
Executive Directors’ service contracts
Chris Payne was appointed on 13 September 2017 and the date of his current service contract is 8 March 2022.
Adam Phillips was appointed on 20 March 2023 and the date of his current service contract is 14 November 2022.
Executive Director service contracts may be terminated on 12 months’ notice from either party
Non-Executive Directors’ letters of appointment
Details of the current Non-Executive Directors’ appointment dates are set out below:
Non-Executive Director
Date of appointment
Expiry of current term
Keith Edelman
1 October 2018
27 February 2025
Jemima Bird
11 October 2022
10 October 2025
Stephen Bird
13 September 2021
12 September 2027
Karen Hubbard
1 September 2022
31 August 2025
Robin Williams
11 October 2022
10 October 2025
Statement of implementation of remuneration policy in 2025
Details of how the Company will operate the Remuneration Policy in 2025 are provided below.
Base salaries for 2025
Executive Director base salaries were increased in line with the workforce from 1 January 2025. As such, Chris Payne’s salary
increased by 2% from £484,500 to £494,190 and Adam Phillips’ salary increased by 2% from £325,000 to £331,500 with effect
from 1 January 2025.
Pension
Pension contributions will continue to be capped at 8% of salary for both the Chief Executive and Chief Financial Officer.
Annual bonus
The maximum annual bonus opportunity for 2025 will remain at 125% of base salary and on-target bonus will continue to 50%
of maximum potential. The payment of the annual bonus will be based on 70% on financial performance of the Company
based on EBITDA (on a pre-IFRS16 basis) and 30% linked to the achievement of a number of key strategic and ESG-related
objectives. The strategic targets relate to various measurable objectives that underpin Company growth and ESG strategy.
Full disclosure of the targets, which are considered to be commercially sensitive, will be provided in the 2025 Annual Report and
Accounts. In line with our Remuneration Policy, a minimum of one-third of any amount earned will be deferred into shares for
two years.
PSP
In considering the performance targets for the 2025 PSP Awards the Committee has considered the need to set stretching and
challenging targets which are aligned to the short- and long-term performance of the Group. The Committee will set targets
based on the underlying Basic EPS growth and relative TSR and ESG. PSP awards in respect of 2025 will be granted in the form
of nil cost options over ordinary shares in the Company at the level up to 150% of salary for the Chief Executive and Chief
Financial Officer.
The proposed performance targets are set out in the table below:
Vesting (% of maximum)
Underlying Basic EPS for
2027 (70% of award)
TSR v FTSE SmallCap (ex
ITs) (20% of award)
tCO2e% reduction (10% of
award)
0%
Less than 0p
Below median
Less than 25%
25%
More than than 0p
Median
More than 25%
100%
13.1p or more
Upper quartile
More than 29%
Note: 50% of awards based on EPS vest for a Basic EPS for 2027 of 6.6p.
Straight-line vesting between points. In addition to the above performance targets, the Committee will consider whether
there has been any windfall gains at the point of vesting.
To balance the overall long-term nature of the package, and in line with best practice, awards will be subject to a two-year
holding period following the date of vesting.
Headlam Group PLC Annual Report & Accounts 2024
135
Governance
Non-Executive Directors’ fees for 2025
Current fees for the financial year ending 31 December 2025 are as follows:
Role
Fees
effective
1 Jan 2025
£000
Fees
effective
1 Jan 2024
£000
Chairman fee
150.0
150.0
Non-Executive Director base fee
50.0
50.0
Senior Independent Director fee
10.0
10.0
Audit Committee chair fee
7.5
7.5
Remuneration Committee chair fee
7.5
7.5
Employee Forum and ESG committee fee
7.5
7.5
Remuneration Committee activity
The Board approved the terms of reference, delegating certain responsibilities to the Remuneration Committee, most recently
on 24 September 2024. The terms of reference are reviewed periodically and are available on the Company’s website within
the Governance section at www.headlam.com. The Remuneration Committee comprises the Chairman and each of the other
Non-Executive Directors. Attendance at scheduled meetings of the Committee during the year was as follows:
Members
Meetings
attended
Eligible to
attend
Keith Edelman
4
4
Jemima Bird
4
4
Stephen Bird
4
4
Karen Hubbard
4
4
Robin Williams
4
4
Members additionally correspond on urgent matters between formal Remuneration Committee meetings. Other Directors
may attend Remuneration Committee meetings by invitation, including the Chief Executive and Chief Financial Officer
where appropriate. The Remuneration Committee also receives assistance from the Chief People and Sustainability Officer,
the General Counsel & Company Secretary and from independent external advisers, FIT Remuneration Consultants LLP. The
General Counsel & Company Secretary acts as Secretary to the Remuneration Committee.
No one attending a Remuneration Committee meeting may participate in discussions relating to their own terms and
conditions of service or remuneration.
Main role and key responsibilities
The Remuneration Committee’s main responsibilities include:
•
designing the framework and policy for Executive Directors’ remuneration and determining remuneration packages for the
Executive Directors, Chairman and Senior Management, including the Company Secretary, to promote the achievement
of the Group’s strategy and long-term sustainable success. When setting executive remuneration, take into account the
link between Executive Director and senior manager remuneration and that provided to the wider workforce;
•
establishing remuneration schemes that promote long-term shareholding by Executive Directors and that support
alignment with Shareholders’ interests, both in post and post cessation;
•
approving the design and operation of the Company’s short-term and long-term incentive arrangements. This includes
agreeing the targets that are applied to awards made to Executive Directors and the Senior Management Team;
•
oversight of the administration of share plans as required;
•
review workforce remuneration and related policies; and
•
determine the policy for and scope of pension arrangements for Executive Directors and Senior Management.
136
DIRECTORS’ REMUNERATION REPORT
CONTINUED
Remuneration Committee activities
The key matters discussed at the meetings of the Remuneration Committee in 2024 were as follows:
Remuneration
•
reviewed wider workforce remuneration arrangements, and annual bonus scheme and considered in conjunction with pay
strategy for Executive Directors and Senior Management;
•
considered pay awards for Executive Directors and Senior Management;
•
considered Annual Bonus payments;
•
reviewed and confirmed that no vesting would occur for the 2021 PSP;
•
approved the Annual Bonus payments for 2023;
•
approved the PSP Award and targets; and
•
considered remuneration for Executive Directors, Senior Management and the Chairman; using updated benchmarking
data where appropriate.
Governance
•
reviewed guidance from investor bodies and institutional shareholders;
•
received feedback from the Employee Forum on matters relating to remuneration;
•
received an AGM debrief and governance update and considered recommendations made by the voting agencies in their
AGM reports;
•
reviewed its own terms of reference; and
•
approved its annual workplan.
Reporting
•
approved the Remuneration Report (including CEO pay ratio and Gender pay gap disclosure).
Effectiveness
•
reviewed the Committee’s effectiveness; and
•
reviewed the performance of its independent advisor FIT Remuneration and determined that they should remain in office.
Remuneration Committee effectiveness
The effectiveness of the Remuneration Committee was evaluated as part of the Board performance evaluation process. The
review found that the Committee is operating effectively.
Advisers
FIT Remuneration Consultants LLP (FIT) has served as independent adviser to the Remuneration Committee throughout the
year under review. FIT was appointed by the Committee in 2019 following a competitive tender process. FIT also provided
additional related advice to the Company in relation to drafting this report, share plan operation and Non-Executive Director
fee benchmarking. FIT’s fees in respect of advice provided during the year ended 31 December 2024 were £39,006 (excluding
VAT) and were charged on a time and disbursements basis. FIT is a member of the Remuneration Consultants Group and as such
voluntarily operates under its Code of Conduct in relation to executive remuneration in the UK. The Remuneration Committee
reviewed the performance of the FIT and was satisfied that all advice received was of good quality, objective and independent.
Statement of shareholders’ votes
The following table sets out the results of the binding vote on the Directors’ Remuneration Policy at the 2023 AGM and the vote
on the 2023 Directors’ Remuneration Report at the 2024 AGM.
% of votes
cast
For
% of votes
cast
Against
Number of
Shares
Withheld
2023 Remuneration Policy
90.72
9.28
1,903,961
2023 Annual Report on Remuneration
91.60
8.40
1,256
This report has been approved by the Board of Directors and signed on its behalf by Jemima Bird, Chair of the
Remuneration Committee.
Jemima Bird
Chair of the Remuneration Committee
11 March 2025
Headlam Group PLC Annual Report & Accounts 2024
137
Governance
The Directors present their report, together with the
audited financial statements for the Group, for the year
ended 31 December 2024. This report contains additional
information which the Directors are required by law
and regulation to include within the Annual Report and
Accounts. In conjunction with the information from the
Chair’s Statement on page 4 to the Statement of Directors’
Responsibilities on page 143, this section constitutes the
Directors’ Report in accordance with the Companies Act
2006 and the Management Report as required by DTR
4.1.5 R(2).
Principal activities
The principal activities of the Group are the sales, marketing,
supply and distribution of floorcoverings and certain other
ancillary products in the UK and certain Continental Europe
territories. The principal activity of the Company is that of a
holding company and its subsidiaries are listed on page 203.
Further details of the Group’s activities and future plans are
set out in the Strategic Report on pages 14 to 70.
Headlam Group plc is a company incorporated and domiciled
in the UK, company number 00460129. The address of the
registered office is Gorsey Lane, Coleshill, Birmingham B46 1JU.
Strategic report and future developments
The Group is required by the Companies Act 2006 to include
a Strategic Report in this document. The information that
fulfils the requirements of the Strategic Report, and which
is incorporated in this report by reference, can be found
on pages 14 to 70. The Strategic Report includes certain
disclosures required to be contained in the Directors’ Report
as follows: the viability statement (page 68), approach
to diversity (pages 48 and 109), workforce engagement
(pages 44 to 48 and page 89), an indication of likely future
developments (page 6 onwards, Strategic Report), and the
approach to risk management (pages 63 to 67).
Directors
The following were Directors of the Company during the
period ended 31 December 2024 and at the date of this
report unless otherwise stated:
•
Keith Edelman (until 27 February 2025)
•
Chris Payne
•
Adam Phillips
•
Stephen Bird
•
Jemima Bird
•
Karen Hubbard
•
Robin Williams
Corporate governance statement
The corporate governance statement as required by the
Financial Conduct Authority’s Disclosure and Transparency
Rules (DTR) 7.2.1 is set out on pages 74 and 75 and is
incorporated into this report by reference.
Acquisitions
There have been no acquisitions during the year.
Pension buy-in
During the year the Group completed a buy-in arrangement
with Aviva in respect of the Headlam Group PLC Staff
Retirement Benefits Scheme (the ‘Scheme’) which secures
an insurance asset from Aviva that matches the remaining
pension liabilities of the Scheme, with the result that the
Group no longer bears any material investment, longevity,
interest rate or inflation risk in respect of the Scheme. Please
see page 36 for further details.
Property Disposals
During the year, as part of the Company’s transformation
programme, it sold its Uddingston, Ipswich, Gildersome and
Leeds properties for a total of £53.9 million (excluding VAT)
which was a significant transaction under the Listing Rules.
Please also see pages 18 to 21 for more information of the
Company’s transformation programme.
Financial results and ordinary dividends
The results for the year and financial position at
31 December 2024 are shown in the Consolidated Income
Statement on page 152 and Statements of Financial Position
on page 154.
No interim dividend was paid in 2024 per ordinary share (2023:
4.0p) to shareholders and the Directors propose no final
dividend is paid per ordinary share (2023: 6.0p) in respect of
the financial year ended 31 December 2024 which means the
total dividend for FY24 will be nil p per ordinary share.
Share capital
As at 31 December 2024, the issued share capital of the
Company comprised a single class of ordinary shares of 5p
each (‘Ordinary Shares’).
The Company’s Ordinary Shares are listed on the Main
Market of the London Stock Exchange. No new Ordinary
Shares were issued during the year. The Company’s total
issued share capital therefore remains 85,639,209 Ordinary
Shares as at 31 December 2024.
The balance of shares in treasury stock as at
31 December 2024 was 4,804,315 Ordinary Shares (5.6% of the
Company’s total issued share capital).
Details of the Company’s share capital are set out in note
24 to the financial statements, which should be treated
as forming part of this report. Subject to the provisions of
the Articles of Association and the Companies Act 2006,
shares may be issued with such rights or restrictions as the
Company may by ordinary resolution determine or, if the
Company has not so determined, as the Directors may
decide. There are, however, no restrictions on the transfer of
securities in the Company, except that certain restrictions
may from time to time be imposed by law or regulation, for
example, insider trading laws, and pursuant to the Listing
Rules of the Financial Conduct Authority (the ‘Listing Rules’),
and the UK Market Abuse Regulation, whereby certain
employees require the approval of the Company to deal
in the Company’s shares. On a show of hands at a general
meeting of the Company every holder of ordinary shares
present in person and entitled to vote shall have one vote,
and on a poll every member present in person or by proxy
and entitled to vote shall have one vote for every ordinary
share held. The Notice of AGM specifies deadlines for
exercising voting rights and appointing a proxy or proxies
138
DIRECTORS’ REPORT
Directors
Biographies of Directors currently serving on the Board are set out on pages 78 and 79.
Changes to the Board in 2025 are set out on page 108. Details of the Directors’ service agreements are set out below:
Director
Date of appointment
Date of original letter
of appointment/
service agreement
Effective date of
current letter of
appointment/service
agreement
Next due for
election/re-election
Executive Director
Chris Payne
13 September 2017
N/A
8 March 2022
22 May 2025
Adam Phillips
20 March 2023
14 November 2022
22 May 2025
Non-Executive Director
Keith Edelman (Chair until
27 Feb 2025)
1 October 2018
15 August 2018
1 October 2021
N/A
Stephen Bird (Chair from
27 Feb 2025)
13 September 2021
10 August 2021
13 September 2024
22 May 2025
Jemima Bird
11 October 2022
10 October 2022
10 October 2022
22 May 2025
Karen Hubbard
1 September 2022
1 September 2022
1 September 2022
22 May 2025
Robin Williams
10 October 2022
10 October 2022
10 October 2022
22 May 2025
Remaining service agreement term for Non-Executive Directors as at 31 December 2024 (in whole months)
•
Keith Edelman – 6 months
•
Stephen Bird – 33 months
•
Jemima Bird – 9 months
•
Karen Hubbard – 8 months
•
Robin Williams – 9 months
As Keith Edelman stepped down from the Board on 27 February 2025 there is no remaining service agreement term for him.
The Directors shall be not less than three and not more than eight in number, although the Company may by ordinary
resolution vary these numbers. Directors may be appointed by the ordinary resolution of the shareholders or by the Board.
A Director appointed by the Board holds office only until the next AGM of the Company after their appointment, at which
they are then eligible to stand for election. As set out in the AGM Notice of Meeting, all of the Board Directors are standing for
re-election (with the exception of Keith Edelman who stepped down from the Board on 27 February 2025 and so will not be
standing for re-election) at the 2025 AGM.
As noted elsewhere in this report, all Directors are subject to annual election by shareholders at the AGM in line with the
provisions of the UK Corporate Governance Code.
to vote in relation to resolutions to be passed at the AGM.
All proxy votes are counted and the numbers for, against
or withheld in relation to each resolution are announced
at the AGM and published on the Company’s website by
the next business day after the meeting. The holders of
ordinary shares are entitled to receive the Annual Report
and Accounts, to attend and speak at general meetings
of the Company, to appoint proxies and to exercise voting
rights. The Company is not aware of any agreements
between holders of securities that may result in restrictions
on voting rights. Further shareholder information is available
in the Notice of AGM which contains explanations as to the
resolutions proposed.
Subject to certain limits, at the AGM on 23 May 2024, the
Directors were granted general authority to allot shares
in the Company together with an authority to allot shares
in the Company in connection with a rights issue and
in respect of cash without first offering them to existing
shareholders. The Directors will be seeking to renew these
authorities to allot unissued shares and to disapply statutory
pre-emption rights at the forthcoming AGM. Full details
are set out in the Notice of AGM which is contained in a
separate circular to shareholders.
In line with usual practice, the Directors will also seek to
renew the authority to purchase shares under the at the
forthcoming AGM. The Company intends to exercise this
authority: (i) to purchase and hold shares in treasury to fulfil
the Company’s future obligations under its employee share
schemes; and/or (ii) after following its Capital Allocation
Priorities as detailed on page 36 and considering market
conditions and the share price prevailing at the time, where
the Board believes that the purchase and subsequent
cancellation of shares would be in the best interest of
shareholders generally. A full explanation and details are
set out in the Notice of AGM sent in a separate circular to
shareholders and which is also available on the Company’s
website, www.headlam.com
Headlam Group PLC Annual Report & Accounts 2024
139
Governance
Related party transactions
The Board and certain members of Senior Management
are related parties within the definition of IAS 24 (Revised)
‘Related Party Disclosures’ (‘IAS 24’) and the Board are
related parties within the definition of Chapter 8 of the UK
Listing Rules. There is no difference between transactions
with key personnel of the Company and transactions with
key personnel of the Group. During the year, the Group did
not enter into any transaction which, for the purposes of
IAS 24, is considered to be a ‘related party transaction’. No
related party transactions that require disclosure have been
entered into during the year under review. Please see page
125 for information on the Board’s conflict of interest process.
Directors’ powers
Subject to the Company’s Articles of Association, the
Companies Act 2006 and any directions given by the
Company by special resolution, the business of the Company
will be managed by the Board which may exercise all
the powers of the Company, whether relating to the
management of the business of the Company or otherwise.
The matters reserved for the Board are detailed in a specific
schedule, which is reviewed annually and is available on the
Company’s website, www.headlam.com.
Change of control
The Group has entered into certain agreements that may
take effect, alter or terminate upon a change of control
of the Company following a successful takeover bid. The
significant agreements in this respect are the Group’s
banking facility and certain of its employee share schemes.
The Group’s term loan facilities include a provision such that,
in the event of a change of control, the lender may cancel
all or any part of the facility and/or declare that all amounts
outstanding under the facility are immediately due and
payable by the Group. Outstanding options granted under
the SAYE scheme may be exercised within a period of six
months from a change of control of the Company following
a takeover taking place.
Rights under employees’ share schemes
As at 31 December 2024, Kleinwort Hambros, as trustee of the
Headlam Group Employee Trust Company Limited (‘Trust’)
held 589,077 shares, approximately 0.007% of the issued
share capital of the Company (excluding treasury shares)
for the purpose of satisfying options and awards under the
various employee share schemes operated by the Company.
Kleinwort Hambros waives dividends due on all but 0.01p per
share of their total holding.
Details of employee share schemes are set out in note 23
to the Financial Statements. Details of long-term incentive
schemes for the Directors are shown in the Remuneration
Report starting on page 114.
Securities carrying special rights
There are no requirements for prior approval of any transfers
and no person holds securities in the Company carrying
special rights with regard to control of the Company.
Substantial interests in voting rights
Notifications of the following voting interests in the
Company’s ordinary share capital had been received by the
Company (in accordance with Chapter 5 of the DTR), with
the information received from the discloser stated to be
correct at the time of disclosure.
As at and up to 31 December 2024, the persons set out in the
table below have notified the Company, pursuant to DTR 5.1,
of their interests in the voting rights in the Company’s issued
share capital.
Ordinary shares of 5p each
Number of
shares1
% of total
voting
rights2
Aberforth
11,668,732
14.44%
Perpetual Limited
8,918,052
11.03%
(Lombard Odier Asset
Management (Europe) Limited
5,032,390
6.23%
Orbis Allan Gray Limited
4,023,153
4.98%
LA FINANCIERE DE L’ECHIQUIER
2,413,758
2.99%
FIL Limited
8,044,135
9.96%
1
Represents the number of voting rights last notified to the Company
by the respective shareholder in accordance with DTR 5.1.
2
Based on the Total Voting Rights in the Company as at
31 December 2024.
Since 31 December 2024, there have been the following
notifications since 31 December 2024 to 10 March 2025
Ordinary shares of 5p each
Number of
shares1
% of total
voting
rights2
Perpetual Limited
8,937,856
11.057%
1
Represents the number of voting rights last notified to the Company
by the respective shareholder in accordance with DTR 5.1.
2
Based on the Total Voting Rights in the Company as at
31 December 2024.
Directors’ interests and indemnity
arrangements
During the year, no Director held any material interest in
any contract of significance with the Company or any of
its subsidiary undertakings, other than service agreements
between each Executive Director and the Company. In
addition, the Company has purchased and maintained
throughout the year and up to the date of approval of
the financial statements, Directors’ and Officers’ liability
insurance in respect of itself and its Directors. The Directors
also have the benefit of the indemnity provision contained in
the Company’s Articles of Association. This provision extends
to include the Directors of Headlam Group Pension Trustees
Limited, a corporate trustee of the Scheme, in respect
of liabilities that may attach to them in their capacity as
Directors of that corporate trustee. These provisions were in
force throughout the year and are currently in force. Details
of Directors remuneration, service agreements, and interests
in the shares of the Company are set out in the Directors’
Remuneration Report.
140
DIRECTORS’ REPORT
CONTINUED
Anti-corruption and bribery
It is the Company’s policy to conduct all business in an
honest and ethical manner. The Company takes a zero-
tolerance approach to bribery and corruption and is
committed to acting professionally, fairly and with integrity
in all business dealings and relationships. The policy is
detailed on the Company’s website, www.headlam.com
Modern Slavery Act
The Board fully supports the aims of the Modern Slavery Act
and the Company has a zero-tolerance approach to slavery
and human trafficking. The Company issues a supplier Code
of Conduct which our suppliers are expected to engage
and adhere to. Headlam works with all suppliers to ensure
compliance. However, if any supplier is found to be involved
in any form of Modern Slavery or unethical behaviour, the
Company will look to suspend or cease trading with that
supplier.
Full information can be found in the Company’s Modern
Slavery Statement which is published annually on the
Company’s website and which details the actions
undertaken to prevent slavery and human trafficking in both
the Company’s organisation and its supply chain.
Human rights
We have policies and processes in place to ensure that we
act in accordance with our cultural values which encompass
areas such as equal opportunities, diversity, inclusion and
respect, anti-corruption and bribery, whistleblowing and
fraud. We do not believe this to be a material issue in our
business.
Employment policies
The Group is an equal opportunities employer and we
are committed to the elimination of unlawful and unfair
discrimination and the fair and equal treatment of all
colleagues and applicants during the recruitment and
selection process, training and career development.
We have a zero-tolerance approach to matters of
discrimination, harassment and bullying across the business.
Polices are in place for reporting and dealing with such
matters.
This commitment applies regardless of anyone’s physical
ability, sexual orientation or gender identity, pregnancy and
maternity, race, religious beliefs, age, nationality or ethnic
origin. Our Company policies ensure this is reflected in the
culture of the business and include an Inclusion and Respect
at Work policy. Full consideration is given to employment
applications from people with diverse backgrounds,
including disabilities whenever suitable vacancies exist. If
a colleague becomes disabled efforts are made to ensure
their continued employment within the company with
appropriate training as required.
Further details on diversity are included in the Nomination
Committee Report on page 108.
Colleague engagement
We are committed to keeping our colleagues informed
and communicating with them on matters of importance
relating to our company performance and their
employment. We also recognise that communication should
be two-way and we actively encourage feedback and
involvement from our colleagues, either through formal
channels such as our Employee Forum (pages 46 to 48, and
page 89), our engagement survey, or more informal methods
such as the dedicated internal communications email
address or MyHub portal. Further information can be found
on page 46.
A summary of how Directors have engaged with employees
and had regard to employee interests and the effect of that
regard on the principal decisions taken by the Company
during the financial year is provided on pages 26, 82 to 83
and 88.
Sharesave and long service awards
During the year, the Company invited all eligible employees
to participate in:
a. its HMRC approved Sharesave Scheme, (this Scheme
allows eligible employees to save up to £500 per month
in one or a combination of Sharesave Schemes in order
to further align their interests with the performance of
the Group); and
b. its long service award scheme which awards colleagues
after certain milestones of service with a monetary gift
and, for longer serving employees, an award of ordinary
shares in the Company to be granted bi-annually
under the scheme using service milestones and as at
31 December 2024, a total of 9,200 ordinary shares of 5
pence each were awarded in 2024 to eligible employees
at nil cost under the scheme.
Management long-term incentive plan
During the year, to allow eligible employees to further align
their interests with the performance of the Group, the
Company granted a number of Open Market Value share
options to eligible employees being:
a. senior leadership teams (a total of 1,108,697 Open Market
Value Options over ordinary shares of 5 pence each
were awarded in 2024 to a select group of senior leaders
approved by the Remuneration Committee and typically
granted once per year; and
b. the Company’s sales force, they were awarded
Open Market Value Options as a one-off exercise (a
total of 2,088,067 Open Market Value Options over
ordinary shares of 5 pence each were awarded to
eligible employees within this group approved by the
Remnueration Committee).
Stakeholder engagement
The directors understand the need to develop good
business relationships with its suppliers, customers and other
stakeholders and the success with which this is achieved is
paramount to business success. Further information on the
Company’s approach to engagement with its stakeholders
and how this feeds through into the decision-making
process can be found on pages 26 and 27.
Headlam Group PLC Annual Report & Accounts 2024
141
Governance
Directors’ and auditor’s responsibilities
A statement by the Directors on their responsibilities in
respect of the Annual Report and Accounts is given on page
143 and a statement by the Auditor on their responsibilities is
given on page 146.
Political donations and expenditure
The Company’s policy is not to make any donations for
political purposes in the UK or to donate to political parties
or incur political expenditure outside of the UK. Accordingly,
neither the Company nor its subsidiaries made any political
donations or incurred political expenditure in the financial
period under review (2023: £nil).
Charitable donations
Charitable giving is undertaken through both monetary
and product donations to good local causes. Monetary
donations made during the year in support of charitable
causes nationally, and those of interest to employees
amounted to £63,518 (2023: £114,134).
Amendments to the Articles of Association
The Company’s Articles of Association may only be amended
by a special resolution at a general meeting of shareholders.
The Company’s Articles of Association were last amended at
the general meeting held on 21 May 2021 with the updated
articles being filed with the Registrar of Companies.
Financial instruments
The disclosures required in relation to the use of financial
instruments by the Group together with details of our
treasury policy and management are set out in note 25 to
the financial statements.
External auditor
PricewaterhouseCoopers LLP have indicated their
willingness to continue as Auditor and their reappointment
has been approved by the Audit Committee. Resolutions to
reappoint them and to authorise the Directors to determine
their remuneration will be proposed at the 2025 AGM.
AGM
This year’s AGM will be held at the Company’s head office
in Coleshill on Thursday 22 May 2025 at 10.00am. The notice
convening this meeting is in a separate document to this
Annual Report and Accounts along with the explanatory
notes regarding the resolutions that will be proposed at the
meeting. A copy of the Notice of Meeting is available on the
Company’s website: www.headlam.com
Other disclosures
Certain information that is required to be included in the
Directors’ Report can be found elsewhere in this document
as referred to below, each of which is incorporated by
reference into the Directors’ Report:
•
Information on greenhouse gas emissions can be found
on page 60.
•
Information on energy consumption can be found on
page 60.
•
Information on energy efficiency can be found on
page 40.
•
For the purposes of Listing Rule (LR) 9.8.6R(8) the
information on climate-related financial disclosures
consistent with the TCFD recommendation and the
TCFD recommended disclosure can be found on pages
54 to 58.
•
Further details of the actions which the Group is taking to
reduce emissions can also be found in the Sustainability
Report starting on page 40.
•
An indication of likely future developments in the Group’s
business can be found throughout the Strategic Report,
starting on page 14.
•
The long-term viability statement can be found on
page 68.
•
Information on the appropriateness of adopting the
going concern basis of the accounts can be found on
page 37.
•
Our approach to risk management can be found on
pages 63 to 65.
•
Information for shareholders can be found on the
Company’s website.
•
A list of the Company’s overseas subsidiaries is on
page 203.
This report was approved by the Board and signed on its
behalf by:
Alison Hughes
General Counsel & Company Secretary
11 March 2025
Company registration number: 00460129
142
DIRECTORS’ REPORT
CONTINUED
Listing Rule (LR) 6.6.1R information Section
(1)
Capitalised interest
Not applicable
(2)
Publication of unaudited
financial information
Not applicable
(3)
Details of long-term
incentive schemes
established specifically to
recruit or retain a Director
Pages 114 to 137
(4) (5)
Waiver of emoluments by a
Director
Not applicable
(6) (7)
Allotments of equity
securities for cash
Not applicable
(8)
Participation in a placing of
equity securities
Not applicable
(9)
Contracts of significance
Not applicable
(10) (13)
Controlling shareholder
disclosure
Not applicable
(11) (12)
Dividend waiver
Page 194
The directors are responsible for preparing the Annual Report
and Accounts and the financial statements in accordance
with applicable law and regulation.
Company law requires the directors to prepare financial
statements for each financial year. Under that law the
directors have prepared the Group and the Company
financial statements in accordance with UK-adopted
international accounting standards.
Under company law, directors must not approve the
financial statements unless they are satisfied that they give
a true and fair view of the state of affairs of the Group and
Company and of the profit or loss of the Group for that
period. In preparing the financial statements, the directors
are required to:
•
select suitable accounting policies and then apply
them consistently;
•
state whether applicable UK-adopted international
accounting standards have been followed, subject to
any material departures disclosed and explained in the
financial statements;
•
make judgments and accounting estimates that are
reasonable and prudent; and
•
prepare the financial statements on the going concern
basis unless it is inappropriate to presume that the group
and company will continue in business.
The directors are responsible for safeguarding the assets of
the Group and Company and hence for taking reasonable
steps for the prevention and detection of fraud and other
irregularities.
The directors are also responsible for keeping adequate
accounting records that are sufficient to show and explain
the Group’s and Company’s transactions and disclose with
reasonable accuracy at any time the financial position of
the Group and Company and enable them to ensure that
the financial statements and the Directors’ Remuneration
Report comply with the Companies Act 2006.
The directors are responsible for the maintenance and
integrity of the Company’s website. Legislation in the United
Kingdom governing the preparation and dissemination of
financial statements may differ from legislation in other
jurisdictions.
Directors’ confirmations
The directors consider that the Annual Report and Accounts,
taken as a whole, is fair, balanced and understandable
and provides the information necessary for shareholders
to assess the Group’s and Company’s position and
performance, business model and strategy.
Each of the directors, whose names and functions are listed
in the Annual Report and Accounts confirm that, to the best
of their knowledge:
•
the Group and Company financial statements, which
have been prepared in accordance with UK-adopted
international accounting standards, give a true and fair
view of the assets, liabilities and financial position of the
Group and Company, and of the loss of the Group; and
•
the Strategic Report includes a fair review of the
development and performance of the business and the
position of the Group and Company, together with a
description of the principal risks and uncertainties that
it faces.
In the case of each director in office at the date the
directors’ report is approved:
•
so far as the director is aware, there is no relevant
audit information of which the Group’s and Company’s
auditors are unaware; and
•
they have taken all the steps that they ought to have
taken as a director in order to make themselves aware
of any relevant audit information and to establish that
the Group’s and Company’s auditors are aware of that
information.
Chris Payne
Director
11 March 2025
Headlam Group PLC Annual Report & Accounts 2024
143
Governance
STATEMENT OF DIRECTORS’ RESPONSIBILITIES
144
FINANCIAL
STATEMENTS
Independent Auditors’ Report
146
Consolidated Income Statement
152
Consolidated Statement of
Comprehensive Income
153
Statements of Financial Position
154
Statement of Changes in Equity – Group
155
Statement of Changes in Equity – Company
156
Cash Flow Statements
157
Notes to the Financial Statements
158
Alternative Performance Measures (‘APMs’)
204
Adjusted Results Reconciliation
206
Financial Record
208
Additional Information
210
Financial Statements
Headlam Group PLC Annual Report & Accounts 2024
145
Report on the audit of the
financial statements
Opinion
In our opinion, Headlam Group Plc’s group financial
statements and company financial statements (the
“financial statements”):
•
give a true and fair view of the state of the group’s and of
the company’s affairs as at 31 December 2024 and of the
group’s loss and the group’s and company’s cash flows
for the year then ended;
•
have been properly prepared in accordance with UK-
adopted international accounting standards as applied
in accordance with the provisions of the Companies Act
2006; and
•
have been prepared in accordance with the
requirements of the Companies Act 2006.
We have audited the financial statements, included within
the Annual Report and Accounts (the “Annual Report”),
which comprise: the Group and Company Statements of
Financial Position as at 31 December 2024; the Consolidated
Income Statement and Consolidated Statement of
Comprehensive Income, the Group and Company Cash Flow
Statements, and the Group and Company Statements of
Changes in Equity for the year then ended; and the notes to
the financial statements, comprising material accounting
policy information and other explanatory information.
Our opinion is consistent with our reporting to the Audit
Committee.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (“ISAs (UK)”) and applicable law.
Our responsibilities under ISAs (UK) are further described in
the Auditors’ responsibilities for the audit of the financial
statements section of our report. We believe that the audit
evidence we have obtained is sufficient and appropriate to
provide a basis for our opinion.
Independence
We remained independent of the group in accordance with
the ethical requirements that are relevant to our audit of
the financial statements in the UK, which includes the FRC’s
Ethical Standard, as applicable to listed public interest
entities, and we have fulfilled our other ethical responsibilities
in accordance with these requirements.
To the best of our knowledge and belief, we declare that
non-audit services prohibited by the FRC’s Ethical Standard
were not provided.
We have provided no non-audit services to the company or
its controlled undertakings in the period under audit.
Our audit approach
Overview
Audit scope
•
The Group financial statements are a consolidation of a
number of reporting components, comprising the group’s
operating businesses, centralised functions and non-
trading entities.
•
We performed full scope audits on the financial
information of three UK reporting components: HFD
Limited, Domus Group of Companies and Headlam
Group plc (the company) due to their size and risk
characteristics. These UK reporting components
comprise 83% consolidated revenue and 87% absolute
consolidated underlying loss before tax.
•
In addition, we targeted significant balances in other
components. These were identified as cash balances
within the components of MCD Group and Headlam BV.
•
All work was performed by the group team and no reliance
was placed upon the work of component auditors.
•
Our audit of the Company Financial Statements included
substantive procedures over all material balances and
transactions.
•
Finally, we performed analytical procedures on non-
significant components for group reporting purposes.
Key audit matters
•
Supplier arrangements (group)
•
Recoverability of investments in subsidiary undertakings
(company)
Materiality
•
Overall group materiality: £1,710,000 (2023: £1,398,000)
based on 5% of underlying loss before tax (2023 basis: a
three year average of underlying profit before tax).
•
Overall company materiality: £1,624,000 (2023:
£1,328,000) based on 1% of total assets, capped at
allocated component materiality of £1,624,000 (2023:
£1,328,000).
•
Performance materiality: £1,282,000 (2023: £1,050,000)
(group) and £1,218,000 (2023: £996,000) (company).
The scope of our audit
As part of designing our audit, we determined materiality
and assessed the risks of material misstatement in the
financial statements.
Key audit matters
Key audit matters are those matters that, in the auditors’
professional judgement, were of most significance in the
audit of the financial statements of the current period
and include the most significant assessed risks of material
misstatement (whether or not due to fraud) identified by
the auditors, including those which had the greatest effect
on: the overall audit strategy; the allocation of resources
in the audit; and directing the efforts of the engagement
team. These matters, and any comments we make on the
results of our procedures thereon, were addressed in the
context of our audit of the financial statements as a whole,
and in forming our opinion thereon, and we do not provide a
separate opinion on these matters.
This is not a complete list of all risks identified by our audit.
Impairment of goodwill and intangible assets, and impairment
of tangible assets, which were key audit matters last year, are
no longer included because of the simplification of the business
CGU structure reducing the risk and amount of audit effort
involved in the testing over these impairments. Otherwise, the
key audit matters below are consistent with last year.
146
INDEPENDENT AUDITORS’ REPORT
TO THE MEMBERS OF HEADLAM GROUP PLC
Key audit matter
How our audit addressed the key audit matter
Supplier arrangements (group)
Refer to the Audit Committee Report and the use
of estimates and judgements in note 1(b) to the
financial statements. The group has a significant
number of rebate agreements with suppliers.
These agreements can contain multiple terms
or tiered arrangements based on the volume of
goods purchased. The majority of agreements
are co-terminous with the financial year, meaning
that, although the calculation of the rebate does
not rely on estimates of future purchases, there
are significant amounts of rebates receivable
subject to recovery at the year end.
We tested a sample of rebate balances by requesting confirmations
directly from the counterparty.
For those balances subject to testing, we agreed post year end
settlements back to evidence of cash receipt or credit notes received,
to provide evidence over the recoverability of the balances. In addition
for any amounts not yet settled we assessed the recoverability, for
example, through consideration of any evidence to suggest the
counterparty was not able to pay the amounts due and the timing of
payments received in previous years.
No material inconsistencies or exceptions were noted during our testing
of supplier arrangements.
Recoverability of investments in
subsidiary undertakings (company)
Refer to note 12 to the company financial
statements. As at 31 December 2024 the
company’s balance sheet includes investments
of £102.4m (2023: £101.7m). Annually, the Directors
consider whether any events or circumstances
have occurred that could indicate that the
carrying amount of fixed asset investments may
not be recoverable.
There was an indicator of impairment present for
some of the subsidiaries given the net assets of
subsidiaries were below the carrying value of the
investment. Furthermore, at 31 December 2024,
the market capitalisation of the group implied a
valuation of the underlying subsidiaries below the
carrying value on an aggregated basis.
Management have assessed the recoverable
amount using a value in use model in order to
determine whether an impairment is required.
The value in use model includes a number of
judgemental assumptions including, revenue
growth, gross margin and discount rate. No
impairment was identified by management
based on the assessment performed.
We evaluated management’s assessment of potential impairment
triggers across all investments. Where impairment triggers were
identified, we obtained management’s impairment models and tested
their integrity and accuracy.
We agreed the revenue and cash flows used as the basis of the model
back to board approved forecasts. We reviewed corroborative and
contradictory evidence available for growth rates from 2025 onwards
by performing independent research for market and wider economic
forecasts.
We reviewed gross margins and confirmed they were consistent with
historical margins achieved by the subsidiary and wider business
performance. We engaged valuation experts to benchmark the
discount rate and terminal growth rate calculated by management.
We reviewed management’s sensitivity analysis on key assumptions,
including revenue growth, gross margin and discount rate. We
performed independent sensitivities which included replacing future
revenue growth with external industry forecasts.
We reviewed management’s previous forecasts against actual
results, assessing management’s ability to forecast accurately. We
also considered 2025 actual results to date against management’s
forecasts.
We reviewed the associated disclosures within the financial
statements.
As a result of these procedures, we consider the directors’ assessment
of the carrying value of investment in subsidiaries to be supportable
and appropriately disclosed.
How we tailored the audit scope
We tailored the scope of our audit to ensure that we
performed enough work to be able to give an opinion on
the financial statements as a whole, taking into account the
structure of the group and the company, the accounting
processes and controls, and the industry in which they
operate.
The Group operates as a supplier and distributor of
floorcovering products and has two operating segments; the
UK and Continental Europe. The Group financial statements
are a consolidation of a number of reporting companies,
comprising the group’s operating businesses, centralised
functions and non-trading group companies.
In establishing the overall approach to the group audit, we
identified three UK reporting components which, in our view,
required an audit of their complete financial information
both due to their size and risk characteristics: HFD Limited,
Domus Group of Companies and Headlam Group plc (the
Company). These reporting components were audited by
the group engagement team.
In addition, we targeted significant balances in other
components. These were identified as cash balances within
the components of MCD Group and Headlam BV.
The work on these components, together with additional
procedures performed at the Group level, including
analytical procedures and specific testing of the
consolidation, gave us the evidence we needed for our
opinion on the Group financial statements as a whole.
Headlam Group PLC Annual Report & Accounts 2024
147
Financial Statements
Our audit of the Company Financial Statements was
undertaken by the Group audit team and included
substantive procedures over all material balances and
transactions.
The impact of climate risk on our audit
As part of our audit, we made enquiries of management
to understand their process to assess the extent of the
potential impact of climate change risks on the Group
and its financial statements. Management’s assessment
has considered the climate-related risks disclosed in the
Annual Report including the Group’s transition to its net zero
emissions targets by 2040 (Scope 1, 2 & 3), and potential
exposure to changing consumer preferences and potential
new legislation. In particular, management considered the
extent to which:
•
The group may incur costs in the transition to net zero, for
example, replacements to renewable energy, buildings
and vehicles;
•
The group may be exposed to government imposed
end-of-life disposal taxes on bulky waste (extended
producer responsibility); and
•
The group may be exposed to changing consumer
preferences towards more sustainable flooring products.
As disclosed within notes 1 and 11 of the financial statements,
management considers that the impact of climate change
does not give rise to a material financial statement impact
based on the assumption that the increased cost of
sustainable products is passed onto consumers as consumer
preferences shift towards more sustainable products in the
medium term.
In response, we used our understanding of the Group
to evaluate management’s assessment; in particular,
we considered how climate change risks, both physical
and transitional, would impact the assumptions made
in the forecasts prepared by management used in their
impairment analyses and in their going concern and viability
assessments. We concluded that climate change risks do
not materially impact the Group’s financial statements. We
also read the disclosures made in relation to climate change
in the other information within the Annual Report, and
considered their consistency with the financial statements
and our knowledge from the audit.
Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality.
These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and
extent of our audit procedures on the individual financial statement line items and disclosures and in evaluating the effect of
misstatements, both individually and in aggregate on the financial statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Financial statements - group
Financial statements - company
Overall
materiality
£1,710,000 (2023: £1,398,000).
£1,624,000 (2023: £1,328,000).
How we
determined it
5% of underlying loss before tax (2023 basis: a
three year average of underlying profit before
tax)
1% of total assets, capped at allocated
component materiality of £1,624,000 (2023:
£1,328,000)
Rationale for
benchmark
applied
Based on the benchmarks used in the annual
report, underlying profit/loss before tax is the
primary measure used by the shareholders in
assessing the performance of the group, and is
a generally accepted auditing benchmark. A 3
year average benchmark was used in the prior
year to take into consideration the decreasing
profitability of the group despite similar revenue
and scale of operations. In the current year we
consider underlying loss before tax is a more
appropriate benchmark for materiality.
Total assets is the primary measure used by the
shareholders in assessing the performance of the
Company, and is a generally accepted auditing
benchmark.
For each component in the scope of our group audit, we
allocated a materiality that is less than our overall group
materiality. The range of materiality allocated across
components was between £452,000 and £1,624,000.
Certain components were audited to a local statutory
audit materiality that was also less than our overall group
materiality.
We use performance materiality to reduce to an
appropriately low level the probability that the aggregate of
uncorrected and undetected misstatements exceeds overall
materiality. Specifically, we use performance materiality
in determining the scope of our audit and the nature
and extent of our testing of account balances, classes of
transactions and disclosures, for example in determining
sample sizes. Our performance materiality was 75% (2023:
75%) of overall materiality, amounting to £1,282,000
(2023: £1,050,000) for the group financial statements and
£1,218,000 (2023: £996,000) for the company financial
statements.
148
INDEPENDENT AUDITORS’ REPORT
TO THE MEMBERS OF HEADLAM GROUP PLC
CONTINUED
In determining the performance materiality, we considered
a number of factors - the history of misstatements, risk
assessment and aggregation risk and the effectiveness of
controls - and concluded that an amount at the upper end
of our normal range was appropriate.
We agreed with the Audit Committee that we would
report to them misstatements identified during our audit
above £85,000 (group audit) (2023: £70,000) and £81,000
(company audit) (2023: £66,000) as well as misstatements
below those amounts that, in our view, warranted reporting
for qualitative reasons.
Conclusions relating to going concern
•
Our evaluation of the directors’ assessment of the group’s
and the company’s ability to continue to adopt the
going concern basis of accounting included:
•
●Evaluating management’s detailed cash flow forecasts
and liquidity headroom under both base case and
downside scenarios.
•
●Testing the cashflows were consistent with board
approved forecasts and considering whether they
were reasonable in light of previous performance,
future expectations and management’s track record of
accurate forecasting.
•
●Assessing whether there were any significant doubts over
the ability of the group to meet its debt covenants under
both base case and downside scenarios.
•
●Confirming the amendment to covenants as agreed on
30 January 2025.
•
●Assessing the adequacy of disclosures in the going
concern statement and statements in note 1a of the
notes to the financial statements.
Based on the work we have performed, we have not
identified any material uncertainties relating to events
or conditions that, individually or collectively, may cast
significant doubt on the group’s and the company’s ability to
continue as a going concern for a period of at least twelve
months from when the financial statements are authorised
for issue.
In auditing the financial statements, we have concluded
that the directors’ use of the going concern basis of
accounting in the preparation of the financial statements is
appropriate.
However, because not all future events or conditions can
be predicted, this conclusion is not a guarantee as to the
group’s and the company’s ability to continue as a going
concern.
In relation to the directors’ reporting on how they have
applied the UK Corporate Governance Code, we have
nothing material to add or draw attention to in relation to
the directors’ statement in the financial statements about
whether the directors considered it appropriate to adopt
the going concern basis of accounting.
Our responsibilities and the responsibilities of the directors
with respect to going concern are described in the relevant
sections of this report.
Reporting on other information
The other information comprises all of the information in the
Annual Report other than the financial statements and our
auditors’ report thereon. The directors are responsible for the
other information. Our opinion on the financial statements
does not cover the other information and, accordingly, we
do not express an audit opinion or, except to the extent
otherwise explicitly stated in this report, any form of
assurance thereon.
In connection with our audit of the financial statements,
our responsibility is to read the other information and,
in doing so, consider whether the other information is
materially inconsistent with the financial statements or our
knowledge obtained in the audit, or otherwise appears to
be materially misstated. If we identify an apparent material
inconsistency or material misstatement, we are required to
perform procedures to conclude whether there is a material
misstatement of the financial statements or a material
misstatement of the other information. If, based on the work
we have performed, we conclude that there is a material
misstatement of this other information, we are required to
report that fact. We have nothing to report based on these
responsibilities.
With respect to the Strategic report and Directors’ Report,
we also considered whether the disclosures required by the
UK Companies Act 2006 have been included.
Based on our work undertaken in the course of the audit,
the Companies Act 2006 requires us also to report certain
opinions and matters as described below.
Strategic report and Directors’ Report
In our opinion, based on the work undertaken in the course
of the audit, the information given in the Strategic report
and Directors’ Report for the year ended 31 December 2024
is consistent with the financial statements and has been
prepared in accordance with applicable legal requirements.
In light of the knowledge and understanding of the group
and company and their environment obtained in the course
of the audit, we did not identify any material misstatements
in the Strategic report and Directors’ Report.
Directors’ Remuneration
In our opinion, the part of the Directors’ Remuneration
Report to be audited has been properly prepared in
accordance with the Companies Act 2006.
Corporate governance statement
The Listing Rules require us to review the directors’
statements in relation to going concern, longer-term
viability and that part of the corporate governance
statement relating to the company’s compliance with the
provisions of the UK Corporate Governance Code specified
for our review. Our additional responsibilities with respect to
the corporate governance statement as other information
are described in the Reporting on other information section
of this report.
Headlam Group PLC Annual Report & Accounts 2024
149
Financial Statements
Based on the work undertaken as part of our audit, we
have concluded that each of the following elements of
the corporate governance statement, included within
the Governance section is materially consistent with the
financial statements and our knowledge obtained during
the audit, and we have nothing material to add or draw
attention to in relation to:
•
The directors’ confirmation that they have carried out a
robust assessment of the emerging and principal risks;
•
The disclosures in the Annual Report that describe those
principal risks, what procedures are in place to identify
emerging risks and an explanation of how these are
being managed or mitigated;
•
The directors’ statement in the financial statements
about whether they considered it appropriate to
adopt the going concern basis of accounting in
preparing them, and their identification of any material
uncertainties to the group’s and company’s ability to
continue to do so over a period of at least twelve months
from the date of approval of the financial statements;
•
The directors’ explanation as to their assessment of
the group’s and company’s prospects, the period
this assessment covers and why the period is
appropriate; and
•
The directors’ statement as to whether they have a
reasonable expectation that the company will be able
to continue in operation and meet its liabilities as they
fall due over the period of its assessment, including any
related disclosures drawing attention to any necessary
qualifications or assumptions.
Our review of the directors’ statement regarding the longer-
term viability of the group and company was substantially
less in scope than an audit and only consisted of making
inquiries and considering the directors’ process supporting
their statement; checking that the statement is in alignment
with the relevant provisions of the UK Corporate Governance
Code; and considering whether the statement is consistent
with the financial statements and our knowledge and
understanding of the group and company and their
environment obtained in the course of the audit.
In addition, based on the work undertaken as part of
our audit, we have concluded that each of the following
elements of the corporate governance statement is
materially consistent with the financial statements and our
knowledge obtained during the audit:
•
The directors’ statement that they consider the
Annual Report, taken as a whole, is fair, balanced and
understandable, and provides the information necessary
for the members to assess the group’s and company’s
position, performance, business model and strategy;
•
The section of the Annual Report that describes the
review of effectiveness of risk management and internal
control systems; and
•
The section of the Annual Report describing the work of
the Audit Committee.
We have nothing to report in respect of our responsibility
to report when the directors’ statement relating to the
company’s compliance with the Code does not properly
disclose a departure from a relevant provision of the Code
specified under the Listing Rules for review by the auditors.
Responsibilities for the financial statements
and the audit
Responsibilities of the directors for the financial
statements
As explained more fully in the Statement of Directors’
Responsibilities, the directors are responsible for the
preparation of the financial statements in accordance with
the applicable framework and for being satisfied that they
give a true and fair view. The directors are also responsible
for such internal control as they determine is necessary to
enable the preparation of financial statements that are free
from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are
responsible for assessing the group’s and the company’s
ability to continue as a going concern, disclosing, as
applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either
intend to liquidate the group or the company or to cease
operations, or have no realistic alternative but to do so.
Auditors’ responsibilities for the audit of the financial
statements
Our objectives are to obtain reasonable assurance about
whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error,
and to issue an auditors’ report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not
a guarantee that an audit conducted in accordance with
ISAs (UK) will always detect a material misstatement when
it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they
could reasonably be expected to influence the economic
decisions of users taken on the basis of these financial
statements.
Irregularities, including fraud, are instances of non-
compliance with laws and regulations. We design
procedures in line with our responsibilities, outlined above,
to detect material misstatements in respect of irregularities,
including fraud. The extent to which our procedures are
capable of detecting irregularities, including fraud, is
detailed below.
Based on our understanding of the group and industry, we
identified that the principal risks of non-compliance with
laws and regulations related to employment regulation,
health and safety legislation and the Listing Rules, and we
considered the extent to which non-compliance might
have a material effect on the financial statements. We
also considered those laws and regulations that have a
direct impact on the financial statements such as the
Companies Act 2006 and tax regulations. We evaluated
management’s incentives and opportunities for fraudulent
manipulation of the financial statements (including the risk
of override of controls), and determined that the principal
risks were related to posting of inappropriate journal entries
and management bias in accounting estimates. Audit
procedures performed by the engagement team included:
•
Inquiries of management and reviewing minutes of
meetings of those charged with governance regarding
any known or suspected instances of fraud or non-
compliance with laws and regulations.
150
INDEPENDENT AUDITORS’ REPORT
TO THE MEMBERS OF HEADLAM GROUP PLC
CONTINUED
•
Challenging assumptions and judgements made by
management in their significant accounting estimates
and judgements; and
•
Testing of journals posted to revenue and non-underlying
items that have unusual account combinations,
including immaterial journals below our usual threshold
for testing.
There are inherent limitations in the audit procedures
described above. We are less likely to become aware of
instances of non-compliance with laws and regulations that
are not closely related to events and transactions reflected
in the financial statements. Also, the risk of not detecting
a material misstatement due to fraud is higher than the
risk of not detecting one resulting from error, as fraud may
involve deliberate concealment by, for example, forgery or
intentional misrepresentations, or through collusion.
Our audit testing might include testing complete
populations of certain transactions and balances, possibly
using data auditing techniques. However, it typically involves
selecting a limited number of items for testing, rather
than testing complete populations. We will often seek to
target particular items for testing based on their size or risk
characteristics. In other cases, we will use audit sampling to
enable us to draw a conclusion about the population from
which the sample is selected.
A further description of our responsibilities for the audit of
the financial statements is located on the FRC’s website
at: www.frc.org.uk/auditorsresponsibilities. This description
forms part of our auditors’ report.
Use of this report
This report, including the opinions, has been prepared
for and only for the company’s members as a body in
accordance with Chapter 3 of Part 16 of the Companies
Act 2006 and for no other purpose. We do not, in giving
these opinions, accept or assume responsibility for any other
purpose or to any other person to whom this report is shown
or into whose hands it may come save where expressly
agreed by our prior consent in writing.
Other required reporting
Companies Act 2006 exception reporting
Under the Companies Act 2006 we are required to report to
you if, in our opinion:
•
we have not obtained all the information and
explanations we require for our audit; or
•
adequate accounting records have not been kept by
the company, or returns adequate for our audit have not
been received from branches not visited by us; or
•
certain disclosures of directors’ remuneration specified
by law are not made; or
•
the company financial statements and the part of the
Directors’ Remuneration Report to be audited are not in
agreement with the accounting records and returns.
We have no exceptions to report arising from this
responsibility.
Appointment
Following the recommendation of the Audit Committee, we
were appointed by the members on 20 May 2016 to audit the
financial statements for the year ended 31 December 2016
and subsequent financial periods. The period of total
uninterrupted engagement is 9 years, covering the years
ended 31 December 2016 to 31 December 2024.
Other matter
The company is required by the Financial Conduct Authority
Disclosure Guidance and Transparency Rules to include these
financial statements in an annual financial report prepared
under the structured digital format required by DTR 4.1.15R -
4.1.18R and filed on the National Storage Mechanism of the
Financial Conduct Authority. This auditors’ report provides no
assurance over whether the structured digital format annual
financial report has been prepared in accordance with
those requirements.
Gillian Hinks
(Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
East Midlands
11 March 2025
Headlam Group PLC Annual Report & Accounts 2024
151
Financial Statements
Note
Underlying
2024
£M
Non-
underlying
(note 3)
2024
£M
Total
2024
£M
Underlying
2023
£M
Non-
underlying
(note 3)
2023
£M
Total
2023
£M
Revenue
2
593.1
—
593.1
656.5
—
656.5
Cost of sales
2
(415.5)
(10.6)
(426.1)
(448.7)
—
(448.7)
Gross profit
2
177.6
(10.6)
167.0
207.8
—
207.8
Distribution costs
(136.4)
(4.4)
(140.8)
(132.8)
—
(132.8)
Administrative expenses
(66.9)
(12.0)
(78.9)
(60.8)
(12.5)
(73.3)
Net impairment (losses)/gains
on trade receivables1
(1.6)
(1.3)
(2.9)
1.5
—
1.5
Other operating income
—
21.1
21.1
0.4
8.6
9.0
Operating (loss)/profit
2
(27.3)
(7.2)
(34.5)
16.1
(3.9)
12.2
Finance income
6
0.1
—
0.1
0.3
—
0.3
Finance expenses
6
(7.1)
—
(7.1)
(5.4)
—
(5.4)
Net finance costs
(7.0)
—
(7.0)
(5.1)
—
(5.1)
(Loss)/profit before tax
3
(34.3)
(7.2)
(41.5)
11.0
(3.9)
7.1
Taxation
7
6.2
10.3
16.5
(2.2)
2.8
0.6
(Loss)/profit for the year
attributable to the equity
shareholders
(28.1)
3.1
(25.0)
8.8
(1.1)
7.7
(Loss)/earnings per share
Basic
9
(35.0)p
(31.2)p
11.0p
9.6p
Diluted
9
(35.0)p
(31.2)p
10.9p
9.6p
Ordinary dividend per share
Interim dividend for the
financial year
24
-
4.0p
Final dividend declared
24
-
6.0p
1
Net impairment (losses)/gains on trade receivables were included within distribution costs in the prior year and have been re-presented as a
separate line item in the comparatives.
152
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2024
Note
2024
£M
2023
£M
(Loss)/profit for the year attributable to the equity shareholders
(25.0)
7.7
Other comprehensive (expense)/income
Items that will never be reclassified to profit or loss
Remeasurement of defined benefit plans
22
(0.5)
(0.3)
Related tax
0.1
0.1
(0.4)
(0.2)
Items that are or may be reclassified to profit or loss
Exchange differences arising on translation of overseas operations
(0.2)
(0.2)
(0.2)
(0.2)
Other comprehensive expense for the year
(0.6)
(0.4)
Total comprehensive (expense)/income attributable to the equity
shareholders for the year
(25.6)
7.3
Headlam Group PLC Annual Report & Accounts 2024
153
Financial Statements
CONSOLIDATED STATEMENT
OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2024
Group
Company
Note
2024
£M
2023
£M
2024
£M
2023
£M
Assets
Non-current assets
Property, plant and equipment
10
86.9
127.6
2.2
3.2
Investment properties
10
—
—
46.1
87.7
Right of use assets
19
55.1
41.6
3.2
0.8
Intangible assets
11
17.6
19.4
0.1
0.1
Deferred tax assets
13
3.9
0.9
—
—
Investments in subsidiary undertakings
12
—
—
102.4
101.7
163.5
189.5
154.0
193.5
Current assets
Inventories
14
102.8
131.5
—
—
Trade and other receivables
15
111.0
117.1
14.1
13.6
Non-current trade and other receivables
15
—
—
14.6
11.8
Income tax receivable
8
3.6
3.1
0.6
1.5
Cash and cash equivalents
16
12.0
21.1
82.3
63.2
Assets classified as held for sale
17
4.8
—
4.8
—
234.2
272.8
116.4
90.1
Total assets
397.7
462.3
270.4
283.6
Liabilities
Current liabilities
Bank overdrafts
18
(1.1)
(0.7)
—
—
Other interest-bearing loans and borrowings
18
—
(50.0)
—
(50.0)
Lease liabilities
19
(13.8)
(11.9)
(1.8)
(0.1)
Trade and other payables
20
(139.2)
(129.1)
(49.2)
(41.4)
Employee benefits
22
—
(1.1)
—
(1.1)
(154.1)
(192.8)
(51.0)
(92.6)
Non-current liabilities
Lease liabilities
19
(47.4)
(31.5)
(4.6)
(0.8)
Provisions
21
(3.1)
(2.6)
—
—
Deferred tax liabilities
13
—
(13.2)
(3.9)
(7.7)
Employee benefits
22
(2.1)
(1.8)
(1.5)
(1.2)
(52.6)
(49.1)
(10.0)
(9.7)
Total liabilities
(206.7)
(241.9)
(61.0)
(102.3)
Net assets
191.0
220.4
209.4
181.3
Equity attributable to equity holders of the parent
Share capital
24
4.3
4.3
4.3
4.3
Share premium
53.5
53.5
53.5
53.5
Other reserves
24
(15.5)
(15.5)
3.4
3.2
Retained earnings
148.7
178.1
148.2
120.3
Total equity
191.0
220.4
209.4
181.3
The notes on pages 158 to 203 are an integral part of these consolidated financial statements.
The Company is taking advantage of the exemption in s408 of the Companies Act 2006 not to present its individual income
statement, however the profit for the year attributable to the equity shareholders is £32.3 million (profit in 2023: £3.1 million).
The financial statements on pages 152 to 209 were approved by the Board of Directors on 11 March 2025 and were signed on
its behalf by
Chris Payne
Director
Company Number: 00460129
154
STATEMENTS OF FINANCIAL POSITION
AT 31 DECEMBER 2024
Note
Share
capital
£M
Share
premium
£M
Capital
redemption
reserve
£M
Special
reserve
£M
Translation
reserve
£M
Treasury
reserve
£M
Retained
earnings
£M
Total
equity
£M
Balance at
1 January 2023
4.3
53.5
0.1
1.5
2.1
(19.5)
182.8
224.8
Profit for the year
attributable to the equity
shareholders
—
—
—
—
—
—
7.7
7.7
Other comprehensive
expense
—
—
—
—
(0.2)
—
(0.2)
(0.4)
Total comprehensive
(expense)/income for
the year
—
—
—
—
(0.2)
—
7.5
7.3
Transactions with equity
shareholders, recorded
directly in equity
Share-based payments
23
—
—
—
—
—
—
0.6
0.6
Share options exercised by
employees
—
—
—
—
—
0.5
(0.5)
—
Deferred tax on share
options
—
—
—
—
—
—
(0.1)
(0.1)
Dividends to equity holders
24
—
—
—
—
—
—
(12.2)
(12.2)
Total contributions by
and distributions to equity
shareholders
—
—
—
—
—
0.5
(12.2)
(11.7)
Balance at
31 December 2023
4.3
53.5
0.1
1.5
1.9
(19.0)
178.1
220.4
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
23
—
—
—
—
—
—
1.0
1.0
Share options exercised by
employees
—
—
—
—
—
0.2
(0.2)
—
Dividends to equity holders
24
—
—
—
—
—
—
(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
Headlam Group PLC Annual Report & Accounts 2024
155
Financial Statements
STATEMENT OF CHANGES IN EQUITY – GROUP
FOR THE YEAR ENDED 31 DECEMBER 2024
Note
Share
capital
£M
Share
premium
£M
Capital
redemption
reserve/
£M
Special
reserve
£M
Treasury
reserve
£M
Retained
earnings
£M
Total
equity
£M
Balance at 1 January 2023
4.3
53.5
0.1
22.1
(19.5)
129.5
190.0
Profit for the year attributable to the
equity shareholders
—
—
—
—
—
3.1
3.1
Other comprehensive expense
—
—
—
—
—
(0.2)
(0.2)
Total comprehensive income
for the year
—
—
—
—
—
2.9
2.9
Transactions with equity
shareholders, recorded
directly in equity
Share-based payments
23
—
—
—
—
—
0.6
0.6
Share options exercised by employees
—
—
—
—
0.5
(0.5)
—
Dividends to equity holders
24
—
—
—
—
—
(12.2)
(12.2)
Total contributions by and distributions
to equity shareholders
—
—
—
—
0.5
(12.1)
(11.6)
Balance at 31 December 2023
4.3
53.5
0.1
22.1
(19.0)
120.3
181.3
Balance at 1 January 2024
4.3
53.5
0.1
22.1
(19.0)
120.3
181.3
Profit for the year attributable to the
equity shareholders
—
—
—
—
—
32.3
32.3
Other comprehensive expense
—
—
—
—
—
(0.4)
(0.4)
Total comprehensive income
for the year
—
—
—
—
—
31.9
31.9
Transactions with equity
shareholders, recorded
directly in equity
Share-based payments
23
—
—
—
—
—
1.0
1.0
Share options exercised by employees
—
—
—
—
0.2
(0.2)
—
Dividends to equity holders
24
—
—
—
—
—
(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
22.1
(18.8)
148.2
209.4
156
STATEMENT OF CHANGES IN EQUITY – COMPANY
FOR THE YEAR ENDED 31 DECEMBER 2024
Group
Company
Note
2024
£M
2023
£M
2024
£M
2023
£M
Cash flows from operating activities
(Loss)/profit before tax for the year
(41.5)
7.1
31.6
4.5
Adjustments for:
Depreciation and impairment of property, plant
and equipment, amortisation and impairment of
intangible assets
11.0
14.0
1.8
6.7
Depreciation, impairment and termination of
right of use assets
14.1
13.9
0.1
0.1
Finance income
6
(0.1)
(0.3)
(12.4)
(7.3)
Finance expense
6
7.1
5.4
4.6
11.5
Insurance proceeds for property, plant and equipment
(following fire)
3
—
(8.6)
—
(7.1)
Profit on sale of property, plant and equipment
3
(21.1)
(1.1)
(21.4)
(1.1)
Share-based payments
23
1.0
0.6
0.3
—
Operating cash flows before changes in working
capital and other payables
(29.5)
31.0
4.6
7.3
Change in inventories
28.2
10.0
—
—
Change in trade and other receivables
5.4
2.7
(0.9)
(4.6)
Change in trade and other payables
10.7
(22.1)
4.8
2.9
Cash generated from the operations
14.8
21.6
8.5
5.6
Interest paid
(7.2)
(4.7)
(4.7)
(2.6)
Interest received
0.1
0.3
9.7
5.7
Tax paid
(0.1)
(4.7)
—
(4.4)
Net cash flow from operating activities
7.6
12.5
13.5
4.3
Cash flows from investing activities
Proceeds from sale of property, plant and equipment
61.3
2.3
61.3
2.3
Acquisition of subsidiary, net of cash acquired
—
(6.1)
—
—
Acquisition of property, plant and equipment
(10.5)
(17.4)
(0.8)
(3.0)
Insurance proceeds for property, plant and equipment
following fire
—
8.6
—
7.1
Acquisition of intangible assets
11
(0.1)
(0.8)
—
(0.7)
Net cash flow from investing activities
50.7
(13.4)
60.5
5.7
Cash flows from financing activities
Payment to acquire own shares
—
(5.2)
—
(5.2)
Proceeds from borrowings
40.0
110.0
40.0
110.0
Repayment of borrowings
(90.0)
(60.3)
(90.0)
(60.0)
Principal elements of lease payments
(12.9)
(13.0)
(0.1)
(0.1)
Dividends paid
24
(4.8)
(12.2)
(4.8)
(12.2)
Net cash flow from financing activities
(67.7)
19.3
(54.9)
32.5
Net (decrease)/increase in cash and cash equivalents
(9.4)
18.4
19.1
42.5
Cash and cash equivalents at 1 January
20.4
2.1
63.2
20.7
Effect of exchange rate fluctuations on cash held
(0.1)
(0.1)
—
—
Cash and cash equivalents at 31 December
16
10.9
20.4
82.3
63.2
Headlam Group PLC Annual Report & Accounts 2024
157
Financial Statements
CASH FLOW STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2024
1 Presentation of the Financial Statements and Accounting Policies
Reporting entity
Headlam Group PLC (the ‘Company’) is a public limited company which is listed on the London Stock Exchange and
incorporated and domiciled in the UK. The address of its registered office is Gorsey Lane, Coleshill, Birmingham, B46 1JU.
Statement of compliance
Both the Company’s and the Group’s financial statements have been prepared and approved by the Directors in accordance
with UK adopted International Accounting Standards and with the requirements of the Companies Act 2006 as applicable to
companies reporting under those standards. On publishing the Company’s financial statements here together with the Group
financial statements, the Company is taking advantage of the exemption in s408 of the Companies Act 2006 not to present
its individual income statement and related notes that form a part of these approved financial statements.
The Company and Group financial statements were authorised for issuance on 11 March 2025.
Basis of preparation
The principal accounting policies applied in the preparation of the financial statements of the Company and the financial
statements of the Group are set out below. These policies have been applied consistently to all years presented, unless
otherwise stated.
Judgements made by the Directors, in the application of these accounting policies that have a significant effect on the
financial statements and estimates with a significant risk of material adjustment in the next year, are discussed below.
(a) Measurement convention
These financial statements are presented in pounds sterling, which is the Company’s functional currency. All financial
information presented in pounds sterling has been rounded to the nearest hundred thousand.
The Company and Group financial statements are prepared on the historical cost basis with the exception of derivative
financial instruments and pension scheme assets and liabilities, both of which are stated at fair value.
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 can continue in operational existence for
a period no shorter than 12 months from the date of approval of the financial statements.
The Group’s business activities, together with the factors likely to affect its future development, performance and position are
set out in the Chair’s Statement on pages 04 to 05 and Chief Executive’s Review on pages 06 to 10.
The financial position of the Group, its cash flows, liquidity position and borrowing facilities are described in the Financial
Review on pages 30 to 37. In addition, note 25 to the financial statements includes the Group’s objectives, policies and
processes for managing its capital; its financial risk management objectives; details of its financial instruments and hedging
activities; and its exposures to credit risk and liquidity risk.
The Group meets its day-to-day working capital requirements through its banking facilities. As at 31 December 2024, the
Group has a committed sterling revolving credit facility agreement with Barclays Bank PLC, The Bank of Ireland and Credit
Industriel Et Commercial (London Branch) for £81.5 million, with maturity in October 2027. During January 2025, following the
receipt of proceeds in December 2024 from the property disposals, the Group reduced this revolving credit facility agreement
to £61.0 million.
As at 31 December 2024 the Group also had short term uncommitted facilities of £15.0 million and €4.7 million which are
renewable on an annual basis. During January 2025, the short term uncommitted facility of £15.0 million was reduced to
£7.5 million, and the €4.7 million facility was reduced to €2.7 million following a review of facility requirements after the property
disposal proceeds.
As at 31 December 2024, the Group had Net Cash of £10.9 million and had total banking facilities available of £100.4 million, of
which £99.3 million was undrawn. Lease liabilities are excluded from this metric to be consistent with measurements used in
the facility agreement and to allow comparison to total banking facilities available.
The Group has agreed new covenant arrangements with its lenders whilst the transformation plan is implemented. These
arrangements were first agreed in June 2024 and are rolled forward every circa six months. In January 2025 these were
rolled forward to cover the period up to, and including, May 2026. The pre-existing covenants of leverage and interest cover
no longer apply for the June and December tests within that period. Instead, a monthly minimum liquidity test (based on
committed facilities) and a quarterly minimum EBITDA test apply. The Group has complied with these new tests to date
and, later in 2025, intends to roll forward the covenant arrangements for a further six months to encompass the second half
of 2026.
As detailed on pages 68 and 69, the Directors have reviewed the Group’s and Company’s resilience to the principal risks and
uncertainties by considering forecasts through a downside scenario, which involves modelling market volumes continuing
to decline. The testing indicated that the Group would be able to operate within its current facilities and meet its current
financial covenants, for a period of 12 months from the date of approval of the financial statements.
158
NOTES TO THE FINANCIAL STATEMENTS
The Directors have a reasonable expectation that the Group and Company have adequate resources to continue in
operational existence for a period of 12 months from the date of approval of the financial statements. Thus, they continue to
adopt the going concern basis of accounting in preparing the annual financial statements.
In preparing the Financial Statements the Directors have considered the potential impact of climate change, particularly
in the context of the Taskforce for Climate-related Financial Disclosures (‘TCFD’) included in the Strategic Report. It is the
Directors’ opinion that the potential impact of climate change, after mitigating actions, is unlikely to be material.
(b) Use of accounting estimates and judgements
Estimates
The preparation of financial statements in conformity with UK adopted International Accounting Standards requires the use of
estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the reporting year. Although these estimates are based on
management’s best knowledge of the amounts, events or actions, actual results ultimately may differ from those estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are
recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision
and future periods if the revision affects both current and future periods.
The key sources of estimation uncertainty at the Statement of Financial Position date that have significant risk of material
adjustment to the carrying value of assets and liabilities within the next financial year are as follows:
Supplier arrangements
The Group has a number of rebate agreements with suppliers. The majority of agreements are co-terminus with the financial
year, meaning that, although the calculation of the rebate does not rely on estimates of future purchases, there are significant
amounts of rebates receivable subject to recovery at the year-end. At 31 December 2024, rebates receivable are estimated to
be fully recoverable.
Impairment
The Group determines whether goodwill is impaired on an annual basis unless there is an indication of impairment at an
earlier date. The Group also assesses whether property, plant and equipment, right of use assets and other intangible assets
are impaired if there is an indication of impairment at the end of the reporting period. Estimations are required of the value in
use of the CGUs to which the assets are allocated. Estimating the value in use requires the Group to make an estimate of the
expected future cash flows from the CGU and also to choose a suitable discount rate in order to calculate the present value
of those cash flows. Estimations are also required of the fair value less costs of disposal of the assets in the CGUs, including
the market value of the property. An impairment has been recognised as a result of impairment testing in the current year in
addition to a specific property, plant and equipment impairment following strategic decisions to close certain sites. Further
details of the impairment review can be found in note 11.
The Company determines annually whether there are any indications that its investment in its subsidiaries may be impaired.
The Company then assesses whether there is an impairment in this investment. Estimations are required of the value in use
of the subsidiaries in which the investments are held. Estimating the value in use requires the Company to make an estimate
of the expected future cash flows from the subsidiaries and also to choose a suitable discount rate in order to calculate the
present value of those cash flows.
Inventory provision
Inventory provision calculations involve an estimation of the net realisable value of inventory by considering ageing profiles,
items sold for less than carrying value and discontinued items.
This is a significant estimate in the current year due to the non-underlying inventory provisions recognised as part of the
business restructuring. Further details can be found in note 3.
A 10% decrease in the level of non-underlying inventory provision recognised would result in a £0.9 million credit to the
Consolidated Income Statement.
Judgements
Judgements made by the Directors, in the application of these accounting policies that have a significant effect on the
financial statements are as follows:
Impairment
Judgements are made by the Directors in identifying the cash generating units (‘CGU’), being the smallest groups of assets
that generate independent cash flows, with the development of the business strategy, as well as in assessing whether any
CGUs trigger an impairment review. As a result of the continuing development of the business strategy and transformation
plan, with sites being fulfillment locations for sales orders that go through one central system. CGUs in UK Distribution have
moved from being site-base to being one CGU for UK Distribution as a whole.
Headlam Group PLC Annual Report & Accounts 2024
159
Financial Statements
1 Presentation of the Financial Statements and Accounting Policies continued
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, see note 3.
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 2024. Such costs are expected to continue
into 2025 and 2026 as the transformation plan is executed. See note 3 for further details; and
•
Insurance proceeds (following fire) 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. Insurance proceeds and
profit on sale of property, plant and equipment are 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.
(c) Impact of newly adopted accounting standards
The Group has applied the following standards and amendments for the first time for its annual reporting period commencing
1 January 2024:
Classification of liabilities as current and non-current liabilities with covenants – Amendments to IAS 1; and
Lease liability in sale and leaseback - Amendments to IFRS 16
(d) IFRS not yet applied
There are no new standards, amendments to existing standards, or interpretations that are not yet effective that would be
expected to have a material impact on the Group.
(e) Accounting policies
Basis of consolidation
The Group financial statements consolidate those of the Company and its subsidiaries which together are referred to as the
‘Group’. The Company’s financial statements present information about the Company as a separate entity and not about
its Group.
Subsidiaries are entities controlled by the Group. Control exists when the Group has power over an entity, is exposed or has
rights to variable returns from its involvement with the entity and has the ability to affect those returns through its power over
the entity. In assessing control, potential voting rights that are currently exercisable or convertible are taken into account.
The financial results of subsidiaries are included in the Group’s financial statements from the date that control commences
until the date that control ceases.
The acquisition method of accounting is used to account for the acquisition of subsidiaries by the Group. The consideration
transferred in the acquisition is generally measured at fair value, as are the identifiable net assets acquired. Any goodwill
that arises is tested annually for impairment and any gain on a bargain purchase is recognised in the Consolidated Income
Statement immediately. Transaction costs are expensed as incurred, with the exception of costs that relate to the issue of
debt or equity securities.
Intercompany transactions, balances and unrealised gains and losses on transactions between Group companies are
eliminated in the Group’s financial statements.
Foreign currency
Functional and presentation currency
Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary
economic environment in which the entity operates (‘the functional currency’). The consolidated financial statements are
presented in UK sterling currency units (£), which is Headlam Group PLC’s functional and presentational currency.
160
NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
Foreign currency transactions
Transactions in foreign currencies are translated at the foreign exchange rate ruling at the date of the transaction. There are
no derivatives in the current or prior year. Monetary assets and liabilities denominated in foreign currencies at the Statement
of Financial Position date are translated at the foreign exchange rate ruling at that date. Foreign exchange differences arising
on translation are recognised in the income statement. Non-monetary assets and liabilities that are measured in terms of
historical cost in a foreign currency are translated using the exchange rate at the date of the transaction.
Financial statements of foreign operations
The assets and liabilities of foreign subsidiaries are translated at foreign exchange rates ruling at the Statement of Financial
Position date.
Foreign currency exposure
The revenues, expenses and cash flows of foreign subsidiaries are translated at an average rate for the period where this rate
approximates to the foreign exchange rates ruling at the dates of the transactions.
Exchange differences arising from this translation of foreign subsidiaries are taken directly to the translation reserve and
reflected as a movement in the statement of comprehensive income.
When a foreign subsidiary is disposed of in its entirety or partially such that control, significant influence or joint control is lost,
the cumulative amount in the translation reserve related to that foreign operation is reclassified to profit or loss as part of the
gain or loss of disposal.
Note 25 contains information about the foreign currency exposure of the Group and risks in relation to foreign exchange
movements.
Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses.
Where parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items
of property, plant and equipment.
Depreciation is charged to the income statement on a straight-line basis in order to depreciate assets to their residual value
over their useful economic lives. Assets begin to be depreciated from the date they become available for use. The annual rates
applicable are:
Land and buildings
Freehold and long leasehold properties – 2%
Plant and equipment
Motor and commercial vehicles
– 10% – 25%
Office and computer equipment
– 10% – 33%
Warehouse and production equipment – 10% – 20%
Solar panels
– 4%
Land is not depreciated.
The residual balances are reviewed annually.
Gains and losses on disposal of an item of property, plant and equipment are determined by comparing the proceeds from
disposal with the carrying amount of property, plant and equipment and are recognised in the income statement.
Assets under construction are reported within property, plant and equipment. These assets are stated at cost and are
not depreciated until they are complete and utilised by the Group. The cost of self-constructed assets includes the cost
of materials, direct labour and any other costs directly attributable to bringing the asset to a working condition for its
intended use.
Investment properties
Investment properties are stated at cost less accumulated depreciation and impairment losses.
Depreciation is charged to the income statement on a straight-line basis in order to depreciate assets to their residual value
over their useful economic lives. The annual rate applicable is:
Freehold and long leasehold properties – 2%
The residual balances are reviewed annually.
Headlam Group PLC Annual Report & Accounts 2024
161
Financial Statements
1 Presentation of the Financial Statements and Accounting Policies continued
Goodwill and other intangible assets
Goodwill
All business combinations are accounted for by applying the acquisition method. Goodwill arises on the acquisition of
subsidiaries and represents the excess of the fair value of the consideration of the business combination over the fair value
of the Group’s share of the identifiable assets, liabilities and contingent liabilities acquired. Transaction costs associated with
acquisitions and movements in contingent consideration are recognised in the Consolidated Income Statement.
Goodwill is stated at cost less any accumulated impairment losses. Goodwill is allocated to cash-generating units and is not
amortised but tested annually for impairment, or more frequently when there is an indicator that the unit may be impaired.
In respect of acquisitions prior to 1 January 2004, goodwill is included on the basis of its deemed cost, which represents the
amount recorded under UK GAAP which was broadly comparable save that only separable intangibles were recognised and
goodwill was amortised. This is in accordance with IFRS 1.
Other intangible assets
Other intangible assets that are acquired by the Group are stated at cost less accumulated amortisation and impairment
losses. Intangible assets recognised as a result of a business combination are stated at fair value at the date of acquisition
less cumulative amortisation and impairment losses. Other intangible assets are amortised from the date they are available
for use.
Amortisation
Amortisation is charged to the income statement and is split over the estimated useful lives of each separately identifiable
intangible asset unless such lives are indefinite. Amortisation occurs on brand names, order book, non-compete agreements,
customer relationships, supply agreements and software development and is charged to administrative expenses in the
income statement. The estimated useful lives are assessed to be:
Order book
– 1–36 months
Customer relationships
– 5–10 years
Brand names
– 10–15 years
Non-compete agreements – 1–3 years
Supply agreements
– 1–5 years
Software development
– 5–10 years
Software-as-a-Service (SaaS) arrangements
SaaS arrangements are service contracts providing the Group with the right to access the cloud provider’s application
software over the contract period. Costs incurred to configure or customise are expensed to the Consolidated Income
Statement and are classed as non-underlying when they are judged to be significant, non-recurring items. The ongoing fees
to obtain access to the cloud provider’s application software, are recognised as operating expenses when the services are
received.
Financial assets
At initial recognition, the Group measures a financial asset (unless it is a trade receivable without a significant financing
component) at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs
that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at fair
value through profit or loss are expensed in profit or loss. A trade receivable without a significant financing component is
initially measured at the transaction price. Financial assets with embedded derivatives are considered in their entirety when
determining whether their cash flows are solely payment of principal and interest.
There are three measurement categories under IFRS 9 into which debt instruments may be classified, these are:
•
Amortised cost;
•
Fair value through other comprehensive income;
•
Fair value through profit and loss
All material financial assets of the Group are held at amortised cost. Financial assets that are held for collection of
contractual cash flows where those cash flows represent solely payments of principal and interest are measured at amortised
cost. Interest income from these financial assets is included in finance income using the effective interest rate method. Any
gain or loss arising on derecognition is recognised directly in profit or loss.
Financial assets are no longer recognised when the rights to receive cash flows from the financial assets have expired or have
been transferred and the Group has transferred substantially all the risks and rewards of ownership.
162
NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
Trade and other receivables
Trade receivables are recognised at the transaction price if the trade receivables do not contain a significant financing
component. Other receivables are measured at fair value on initial recognition.
The Group assesses, on a forward-looking basis, the expected credit losses associated with its trade and other receivables.
The impairment methodology applied depends on whether there has been a significant increase in credit risk. For trade
receivables, the Group applies the simplified approach permitted by IFRS 9, which requires expected lifetime losses to be
recognised from initial recognition of the receivables, see note 25.
Inventories
Inventories are stated at the lower of cost and net realisable value. Cost is based on the first-in first-out principle and includes
expenditure incurred in acquiring the inventories and bringing them to their existing location and condition. This includes
management’s best estimate of overheads to be absorbed in the cost of inventory and rebates to be received from suppliers.
Net realisable value represents the estimated selling price less all estimated costs of completion and costs to be incurred in
marketing, selling and distribution.
Provisions to write down inventory to its net realisable value are calculated by reference to each individual product, based on
the ageing profile, consideration of inventory sold for less than its carrying value, and consideration for discontinued items.
Cash and cash equivalents
Cash and cash equivalents are carried in the Statement of Financial Position at amortised cost. Where there is a pooling
arrangement in place and where there is a right to set-off under the overdraft facilities and the intention to settle the balance
is on a net basis, cash and cash equivalents are reported net of overdrawn bank accounts.
Cash and cash equivalents relate to cash balances held. Bank overdrafts that are repayable on demand and form an integral
part of cash management of both the Company and Group are included as a component of cash and cash equivalents for
the purpose only of the Cash Flow Statement.
Assets held for sale
Non-current assets are classified as held for sale if their carrying amount will be recovered principally through a sale
transaction rather than through continuing use and a sale is considered highly probable. They are measured at the lower of
their carrying amount and fair value less costs to sell.
Non-current assets classified as held for sale are not depreciated or amortised and are presented separately from other
assets in the balance sheet.
Impairment
The carrying amounts of the Group’s assets, other than financial assets, inventories and deferred tax assets, are reviewed at
each Statement of Financial Position date to determine whether there is any indication of impairment. If any such indication
exists, the asset’s recoverable amount is estimated. Financial assets are assessed using an expected credit loss model.
Intangible assets with an indefinite useful life and goodwill are systematically tested for impairment annually.
For the purposes of impairment testing, assets are grouped together into cash generating units, being the smallest group of
assets that generates cash flows from continuing use that are largely independent of the cash inflows from other groups of
assets. During the year, there has been a change in the assessment of cash-generating units. With the development of the
business strategy, performance is now assessed at a higher level, with each trading legal entity reviewed, considering these
to be the smallest group of assets generating independent cash flows. In the prior year, each distribution centre (including
satellite trade counters) was classified as a cash generating unit.
An impairment loss is recognised in the income statement whenever the carrying amount of an asset or its cash-generating
unit exceeds its recoverable amount.
Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any
goodwill allocated to cash-generating units and then to reduce the carrying amount of the other assets in the unit on a pro
rata basis.
Calculation of recoverable amount
The recoverable amount of assets, with the exception of the Group’s receivables, is the greater of their fair value less costs of
disposal and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using
a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.
Headlam Group PLC Annual Report & Accounts 2024
163
Financial Statements
1 Presentation of the Financial Statements and Accounting Policies continued
Reversals of impairment
An impairment loss in respect of goodwill is not reversed.
In respect of other assets, an impairment loss is reversed when there is an indication that the impairment loss may no longer
exist and there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed
only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined,
net of depreciation or amortisation, if no impairment loss had been recognised.
Trade payables
Trade payables are initially recognised at fair value and then are stated at amortised cost.
Interest-bearing borrowings
Interest-bearing borrowings are recognised initially at fair value less attributable transaction costs. Subsequent to initial
recognition, interest-bearing borrowings are stated at amortised cost with any difference between cost and redemption
value being recognised in the income statement over the period of the borrowings on an effective interest basis.
Provisions
Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, it is
probable that an outflow of resources will be required to settle the obligation and the amount can be reliably estimated.
Provisions are made for property dilapidations for the estimated costs of the repairs over the period of the tenancy where a
legal obligation exists.
Employee benefits
The Company and the Group operate both defined benefit and defined contribution plans. The assets of the defined benefit
plans are held in independent trustee-administered funds. The pension cost is assessed in accordance with the advice of a
qualified actuary.
Defined contribution plans
Obligations for contributions to defined contribution pension plans are recognised as an expense in the income statement as
incurred.
Defined benefit plans
The Group’s net obligation in respect of defined benefit pension plans is calculated by estimating the amount of future benefit
that employees have earned in return for their service in the current and prior periods. That benefit is discounted to determine
its present value, and the fair value of any plan assets is deducted. The liability discount rate is the yield at the Statement of
Financial Position date using AA rated corporate bonds that have maturity dates approximating to the terms of the Group’s
obligations. The calculation is performed by a qualified actuary using the projected unit credit method.
When the benefits of a plan are improved, the portion of the increased benefit relating to past service by employees is
recognised as an expense in the income statement immediately.
To the extent that any benefits vest immediately, the expense is recognised directly in the income statement.
The net interest cost is calculated by applying the discount rate to the net balance of the defined benefit obligation and the
fair value of plan assets. The cost is included in finance expenses in the income statement.
All actuarial gains and losses that arise in calculating the Group’s obligation in respect of a scheme are recognised
immediately in reserves and reported in the statement of comprehensive income.
Where the calculation results in a benefit to the Group, the asset recognised is limited to the present value of any future
refunds from the plan or reductions in future contributions to the plan. The Company does not have an unconditional
right to a refund, or reduction in future contribution, under IFRIC 14. Consequently, the surplus balance sheet position at
31 December 2023 was reduced to a deficit in recognition of the asset ceiling and the minimum funding requirement (i.e. the
present value of future contributions the Company is contractually obliged to pay via the schedule of contributions).
The Group operates a UK defined benefit pension plan. There is no contractual agreement or stated Group policy for
allocating the net defined benefit liability between the participating subsidiaries and as such the full deficit is recognised by
the Company, which is the sponsoring employer.
The participating subsidiary companies have recognised a cost equal to contributions payable for the period as advised by a
professionally qualified actuary.
During the year the Group completed a buy-in arrangement in respect of the UK defined benefit pension plan. The buy-in
arrangement secures an insurance asset that matches the remaining net obligation.
164
NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
Share-based payment transactions
The Company and Group operate various equity-settled share option schemes under the approved and unapproved
executive schemes and savings-related schemes.
For executive share option schemes, the option price may not be less than the mid-market value of the Group’s shares at the
time when the options were granted or the nominal value.
Further details of the share plans are given in the Directors’ Remuneration Report on pages 114 to 137.
The fair value of options granted is recognised as an employee expense with a corresponding increase in equity over the
period that the employees unconditionally become entitled to the award. The fair value is measured at grant date and spread
over the period during which the employees become unconditionally entitled to the options. The fair value of the options
granted is measured using an option valuation model, taking into account the terms and conditions upon which the options
were granted. The amount recognised as an expense is adjusted to reflect the number of awards for which the related service
and non-market performance conditions are expected to be met, such that the amount ultimately recognised is based on
the number of awards that meet the related service and non-market performance conditions at the vesting date. For share-
based payment awards with non-vesting and market conditions, the grant-date fair value of the share-based payment is
measured to reflect such conditions and there is no true-up for differences between expected and actual outcomes.
When options are granted to employees of subsidiaries of the Company, the fair value of options granted is recognised as an
employee expense in the financial statements of the subsidiary undertaking together with the capital contribution received.
In the financial statements of the Company, the options granted are recognised as an investment in subsidiary undertakings
with a corresponding increase in equity.
The Company and Group also operate an Employee Long Service Award scheme whereby shares are issued to employees
meeting certain milestones of service for no cash consideration and vest immediately on the grant date. The market value of
the shares issued at grant date is recognised as an employee expense with a corresponding increase in equity.
Repurchase of share capital
When share capital recognised as equity is repurchased, the amount of the consideration paid, net of any tax effects,
is recognised as a deduction from equity. Repurchased shares are classified as treasury shares and are presented as a
deduction from total equity. Where the Group has committed to buy back its own shares, but not yet repurchased them, the
amount of the commitment is recognised as a deduction from equity with a corresponding amount recognised as a liability.
When treasury shares are sold or reissued subsequently, the amount received is recognised as an increase in equity and the
resulting surplus or deficit on the transaction is transferred to or from retained earnings.
Own shares held by Employee Benefit Trust
Transactions of the Group sponsored Employee Benefit Trust are included in the Group financial statements. In particular, the
Trust’s purchases of shares in the Company are debited directly to equity.
Revenue
Revenue from the sale of floorcoverings is measured at the fair value of the consideration and excludes intra-group sales and
value added and similar taxes. The primary performance obligation is the transfer of goods to the customer. Revenue from
the sale of floorcoverings is recognised when control of the goods is transferred to the customer (which is typically the point
at which goods are received by the customer), at an amount that reflects the consideration to which an entity expects to be
entitled in exchange for those goods. Provisions for returns, discounts and other allowances are reflected in revenue at the
point of recognition.
Supplier arrangements
Rebates received from suppliers comprise volume related rebates on the purchase of inventories. Volume related rebates
are accrued as units are purchased based on the percentage rebate applicable to the forecast total purchases over the
rebate period, where it is probable the rebates will be received and the amounts can be estimated reliably. Rebates relating
to inventories purchased but still held at the balance sheet date are deducted from the carrying value so that the cost of
inventories is recorded net of applicable rebates. Rebates received for the financial year are deducted from cost of sales.
Rebates recoverable at the end of the financial year are accrued within other debtors.
Insurance proceeds
Insurance proceeds are recognised when recovery is virtually certain and the amounts can be measured reliably. Insurance
proceeds recognised are shown as other operating income, separately from any related costs. Insurance proceeds
recoverable at the period end are recognised within other receivables.
Headlam Group PLC Annual Report & Accounts 2024
165
Financial Statements
1 Presentation of the Financial Statements and Accounting Policies continued
Leases – Group as a lessee
At inception of a contract, the Group assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if
the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
The Group recognises a right-of-use asset and a corresponding lease liability at the lease commencement date, with the
exception of short-term leases (defined as leases with a lease term of 12 months or less) and leases of low-value assets,
comprising mainly of IT equipment.
The Group has elected to use a practical expedient as permitted by IFRS 16, not to separate non-lease components and
instead account for the lease and non-lease component as a single lease component.
Lease liability
Assets and liabilities arising from a lease are initially measured at the present value of the future lease payments,
discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group’s incremental
borrowing rate.
Lease liabilities for the Group include the net present value of the following payments:
•
fixed payments, less any lease incentives receivable;
•
variable lease payment that are based on an index or a rate, initially measured using the index or rate as at the
commencement date;
•
amounts expected to be payable by the Group under residual value guarantees;
•
the exercise price of a purchase option if the Group is reasonably certain to exercise that option, and
•
payments of penalties for terminating the lease, if the lease term reflects the Group exercising that option.
Lease payments to be made under reasonably certain extension options are also included in the measurement of the liability.
The lease liability is measured at amortised cost using the effective interest method, by increasing the carrying amount to
reflect interest in the lease liability and reducing the carrying amount to reflect the lease payments made. The lease liability is
subsequently remeasured when there is a change in future lease payments arising from a change in an index or rate, if there
is a change in the Group’s estimate of the amount expected to be payable under a residual guarantee, if the Group changes
its assessment of whether it will exercise a purchase, extension or termination option or if there is a revised in-substance fixed
lease payment. When the lease liability is remeasured, an equivalent adjustment is made to the right-of-use asset unless its
carrying amount is reduced to zero, in which case any remaining amount is recognised in the income statement.
The lease liability is presented separately in the Statement of Financial Position.
Right-of-use assets
Right-of-use assets are measured at cost less accumulated depreciation and impairment losses, comprising the following:
•
the amount of the initial measurement of lease liability;
•
any lease payments made at or before the commencement date less any lease incentives received;
•
any initial direct costs; and
•
restoration costs.
Right-of-use assets are depreciated over the shorter of the asset’s useful life (in line with property, plant and equipment) and
the lease term on a straight-line basis. In addition, right-of-use assets are periodically reduced by impairment losses, if any,
and adjusted for remeasurements of the corresponding lease liability.
The right-of-use assets are presented separately in the Statement of Financial Position.
Short-term and low-value assets
The Group has elected not to recognise right-of-use assets and lease liabilities for leases of low-value assets and short-term
leases, including IT equipment. The Group recognises the lease payments associated with these leases as an expense on a
straight-line basis over the lease term.
Sale and leaseback of property, plant and equipment
In determining whether a transaction is a sale-and-leaseback, the Group first considers whether the initial transfer of the
underlying asset from the seller to the buyer is a sale in accordance with IFRS 15.
When a transaction meets the definition of a sale-and-leaseback, the Group derecognises the underlying asset and applies
the lessee accounting models as per IFRS 16. The Group records a right-of-use-asset at the retained portion of the previous
carrying amount, such that the amount of any gain or loss on sale recognised is only that related to the rights transferred to
the lessor.
166
NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
Net financing costs
Net financing costs include interest receivable on funds invested, interest payable, interest on lease liabilities and net interest
expense on the net defined benefit liability.
Interest income and interest payable is recognised in the income statement as it accrues, using the effective interest method.
The Group determines the net interest expense on the net defined benefit liability for the period by applying the discount rate
used to measure the defined benefit obligation at the beginning of the annual period to the then net defined benefit liability,
taking into account any changes in the net defined benefit liability during the period as a result of contributions and benefit
payments.
Interest paid and interest received are classified as operating cash flows in the cash flow statement.
Dividends
Paid
Interim and final dividends are recognised when they are paid or when approved by the members in a general meeting. Final
dividends proposed by the Board and unpaid at the end of the year are not recognised in the financial statements.
Received
The Company receives dividends from its UK and Continental European subsidiaries. Dividends are recognised in the financial
statements when they have been received by the Company.
Taxation
Income tax comprises current and deferred tax. Tax is recognised in the income statement except to the extent that it relates
to items recognised directly in equity, in which case the related tax is also recognised in equity.
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted
at the Statement of Financial Position date, and any adjustment to tax payable in respect of previous years.
Deferred tax is provided on temporary differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for the following temporary
differences: the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects
neither accounting nor taxable profit; and differences relating to investments in subsidiaries to the extent that it is probable
that they will not reverse in the foreseeable future. In addition, deferred tax is not recognised for taxable temporary
differences arising on the initial recognition of goodwill.
The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of
assets and liabilities, using tax rates enacted or substantively enacted at the Statement of Financial Position date.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against
which the asset can be utilised.
Deferred tax assets and liabilities are offset where there is a legally enforceable right to offset current tax assets and liabilities
and where the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset
where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and
settle the liability simultaneously.
The Group has applied the temporary exception issued by the IASB in May 2023 from the accounting requirements for deferred
taxes in IAS 12. Accordingly, the Group neither recognises nor discloses information about deferred tax assets and liabilities
related to Pillar Two income taxes.
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. 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, see note 3. The principal items classed as non-underlying are described in the basis of preparation
in this note.
See pages 204 to 205 for details on alternative performance measures.
Headlam Group PLC Annual Report & Accounts 2024
167
Financial Statements
2 Segment reporting
As at 31 December 2024, the Group had four operating segments in the UK and three operating segments in Continental
Europe. 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 Chief Executive. Discrete financial information is available for
each segment and used by the Chief Executive to assess performance and decide on resource allocation. In the prior year,
individual distribution centres within the individual operations were classified as a segment. With the development of the
business strategy, performance is now assessed at a higher level, with each individual operation reviewed.
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 is a trading operation wholly aligned to the sales, marketing, supply and distribution of
floorcovering products, management considers all segments have similar economic characteristics except for the regulatory
environment in which they operate, which is determined by the country in which the operating segment resides.
The Group’s internal management structure and financial reporting systems differentiate the operating segments on the basis
of the differing economic characteristics in the UK and Continental Europe and accordingly present these as two separate
reportable segments. This distinction is embedded in the construction of operating reports reviewed by the Chief Executive,
the Board and the executive management team and forms the basis for the presentation of operating segment information
given below.
UK
Continental Europe
Total
2024
£M
2023
£M
2024
£M
2023
£M
2024
£M
2023
£M
External revenues
525.7
577.3
67.4
79.2
593.1
656.5
Underlying cost of sales
(369.7)
(395.3)
(45.8)
(53.4)
(415.5)
(448.7)
Underlying gross profit
156.0
182.0
21.6
25.8
177.6
207.8
Reportable segment underlying
operating (loss)/profit
(17.2)
22.0
(2.4)
0.2
(19.6)
22.2
Reportable segment assets
278.3
359.4
29.5
35.6
307.8
395.0
Reportable segment liabilities
(190.5)
(209.8)
(16.2)
(18.9)
(206.7)
(228.7)
During the year there were no inter-segment revenues for the reportable segments (2023: £nil).
Reconciliations of reportable segment profit, assets and liabilities and other material items:
2024
£M
2023
£M
(Loss)/profit for the year
Total underlying operating (loss)/profit for reportable segments
(19.6)
22.2
Non-underlying items
(7.2)
(3.9)
Unallocated expense
(7.7)
(6.1)
Operating (loss)/profit
(34.5)
12.2
Finance income
0.1
0.3
Finance expense
(7.1)
(5.4)
(Loss)/profit before taxation
(41.5)
7.1
Taxation
16.5
0.6
(Loss)/profit for the year
(25.0)
7.7
168
NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
2024
£M
2023
£M
Assets
Total assets for reportable segments
307.8
395.0
Unallocated assets:
Intangible assets
0.1
0.1
Income tax receivable
3.6
3.1
Deferred tax assets
3.9
0.9
Cash and cash equivalents
82.3
63.2
Total assets
397.7
462.3
Liabilities
Total liabilities for reportable segments
(206.7)
(228.7)
Unallocated liabilities:
Deferred tax liabilities
—
(13.2)
Total liabilities
(206.7)
(241.9)
UK
£M
Continental
Europe
£M
Reportable
segment
total
£M
Unallocated
£M
Consolidated
total
£M
Other material items 2024
Acquisition of property, plant and equipment
10.4
0.1
10.5
—
10.5
Depreciation of property, plant and equipment
8.0
0.4
8.4
—
8.4
Depreciation and termination of right of use assets
12.0
1.5
13.5
—
13.5
Impairment of property, plant and equipment
0.7
—
0.7
—
0.7
Impairment of intangible assets
—
0.5
0.5
—
0.5
Impairment of right of use assets
0.3
0.3
0.6
—
0.6
Non-underlying items (excluding impairment)
4.6
—
4.6
0.8
5.4
Other material items 2023
Acquisition of property, plant and equipment
17.1
0.3
17.4
—
17.4
Depreciation of property, plant and equipment
6.7
0.4
7.1
—
7.1
Depreciation of right of use assets
12.0
1.5
13.5
—
13.5
Impairment of property, plant and equipment
1.9
—
1.9
—
1.9
Impairment of intangible assets
—
—
—
3.6
3.6
Impairment of right of use assets
0.4
—
0.4
—
0.4
Non-underlying items (excluding impairment)
(2.3)
0.1
(2.2)
0.2
(2.0)
The Chief Executive, the Board and the senior executive management team have access to information that provides details
on revenue by principal product group for the two reportable segments, as set out in the following table:
Revenue by principal product group and geographic origin is summarised below:
UK
Continental Europe
Total
2024
£M
2023
£M
2024
£M
2023
£M
2024
£M
2023
£M
Revenue
Residential
332.7
377.2
39.7
47.5
372.4
424.7
Commercial
193.0
200.1
27.7
31.7
220.7
231.8
525.7
577.3
67.4
79.2
593.1
656.5
Headlam Group PLC Annual Report & Accounts 2024
169
Financial Statements
3 (Loss)/profit before tax
The following material items are included in (loss)/profit before tax:
2024
£M
2023
£M
Underlying items:
Depreciation of property, plant and equipment
8.4
7.1
Depreciation of right of use assets
13.9
13.5
Increase/(reduction) in impairment loss allowance
1.6
(1.5)
Non-underlying items:
Amortisation of acquired intangibles
1.3
2.3
Impairment of property, plant and equipment, intangible assets and right of use assets
1.8
5.9
Impairment of inventories and receivables
2.9
–
Cloud-based ERP system development costs
2.6
–
Profit on sale of property, plant and equipment
(21.1)
(1.1)
Business restructuring and change-related costs
19.7
5.4
Insurance proceeds (following fire)
–
(8.6)
7.2
3.9
Taxation on non-underlying items
(10.3)
(2.8)
(3.1)
1.1
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 £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
as disclosed in note 11. 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 five properties in the year as part of the Group’s
continued progress against its transformation plan. This has resulted in £61.3 million of cash proceeds in the year.
Business restructuring and change-related costs relate to the transformation plan, including severance costs and advisory
fees. The costs comprise £10.2 million cash costs and £9.5 million non-cash costs. The non-cash costs principally relate to
inventory provisions.
In the prior year, included within impairment is £3.6 million impairment of intangible assets, £1.9 million impairment of property,
plant and equipment and £0.4 million impairment of right of use assets. The impairment charges related to the write off of
software development costs following the decision to replace the existing ERP system and the write down of assets following
the decision to close certain sites.
In the prior year, insurance proceeds related to an insurance claim for losses arising from the Kidderminster fire in December
2021. Profit on sale of property, plant and equipment includes £1.2 million loss on disposal of items under construction relating
to previously capitalised costs associated with the rebuild of the Kidderminster site, including site clearance fees and
professional adviser fees incurred before the decision was made to dispose of the site and also a £2.3 million profit on sale
relating to the ultimate disposal of the Kidderminster land.
In the prior year, business restructuring and change-related costs related to network optimisation, including headcount
reduction costs as a result of the restructuring, together with the cost of closing certain sites and the implementation of
dynamic transport planning which led to further headcount reductions and vehicle termination costs. The costs comprise
£3.4 million cash costs and £2.0 million non-cash costs and relate to the period from January 2023 to December 2023.
See pages 204 to 205 for details on alternative performance measures.
170
NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
Auditors’ remuneration:
2024
£M
2023
£M
Audit of these financial statements
0.2
0.2
Amounts received by the Auditors and their associates in respect of:
Audit of financial statements of subsidiaries of the Company
0.4
0.4
0.6
0.6
4 Staff numbers and costs
The monthly average number of people employed, including Executive Directors, during the year, analysed by category, was
as follows:
Number of employees
Group
Company
2024
2023
2024
2023
By sector:
Floorcoverings
2,351
2,311
—
—
Central operations
26
27
26
27
2,377
2,338
26
27
By function:
Sales and distribution
2,136
2,106
—
—
Administration
241
232
26
27
2,377
2,338
26
27
The aggregate payroll costs were as follows:
Group
Company
2024
£M
2023
£M
2024
£M
2023
£M
Wages and salaries
88.7
83.8
3.0
2.7
Equity settled share-based payment expense (note 23)
1.0
0.6
0.3
—
Social security costs
11.2
10.4
0.4
0.2
Other pension costs (note 22)
4.9
4.4
0.6
0.2
105.8
99.2
4.3
3.1
The table above excludes non-underlying staff costs which total £5.6 million (2023: £nil).
5 Emoluments of key management personnel
Executive and Non-Executive Directors are considered to be the key management personnel of the Group.
2024
£M
2023
£M
Short-term employee benefits
1.3
1.3
Equity settled share-based payment expense
0.3
—
1.6
1.3
Short-term employee benefits comprise salary and benefits earned during the year and bonuses awarded for the year.
Further details on Directors’ remuneration, share options and long-term incentive schemes are disclosed in the Remuneration
Report on pages 114 to 137.
Headlam Group PLC Annual Report & Accounts 2024
171
Financial Statements
6 Finance income and expense
2024
£M
2023
£M
Interest income:
Bank interest
0.1
0.3
Finance income
0.1
0.3
Interest expense:
Bank loans, overdrafts and other financial expenses
(4.5)
(3.0)
Interest on lease liability
(2.5)
(2.1)
Net interest on defined benefit plan obligations (note 22)
(0.1)
(0.1)
Other
—
(0.2)
Finance expenses
(7.1)
(5.4)
7 Taxation
Recognised in the income statement
2024
£M
2023
£M
Current tax credit:
Current year
0.1
—
Adjustments in respect of prior years
(0.5)
(0.3)
(0.4)
(0.3)
Deferred tax credit:
Origination and reversal of temporary differences
(16.7)
(0.5)
Adjustments in respect of prior years
0.6
0.2
(16.1)
(0.3)
Total tax
(16.5)
(0.6)
2024
£M
2023
£M
Tax relating to items (credited)/charged to equity
Deferred tax on:
Share options
—
0.1
Deferred tax on other comprehensive expense:
Defined benefit plans
(0.1)
(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% (2023: 23.5%). In the Spring Budget of 2021, the UK Government
announced that from 1 April 2023 the rate of UK corporation tax would increase from 19.0% to 25.0%. This new law was
substantively enacted on 24 May 2021. UK deferred tax assets and liabilities have been calculated at a rate of 25.0% (2023:
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.
172
NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
Reconciliation of tax credit
2024
£M
2023
£M
(Loss)/profit before tax
(41.5)
7.1
Tax using the UK corporation tax rate of 25.0% (2023: 23.5%)
(10.4)
1.7
Non-taxable income
(7.6)
(1.3)
Impact of losses not recognised
1.4
—
Recognition of deferred tax on losses
—
(0.9)
Adjustments in respect of prior years
0.1
(0.1)
Total tax in income statement
(16.5)
(0.6)
Add back tax on non-underlying items
10.3
2.8
Total tax (credit)/charge excluding non-underlying items
(6.2)
2.2
(Loss)/profit before tax before non-underlying items
(34.3)
11.0
Adjusted effective tax rate excluding non-underlying items
18.1%
20.0%
Total effective tax rate credit
39.7%
(8.5)%
8 Income tax receivable
The Group’s current tax asset of £3.6 million (2023: asset of £3.1 million) represents the amount of income tax receivable (2023:
receivable) in respect of current and prior year periods. The Company’s current tax asset of £0.6 million (2023: asset £1.5 million)
represents the amount of income tax receivable (2023: receivable) in respect of current and prior year periods.
9 (Loss)/earnings per share
2024
£M
2023
£M
(Loss)/earnings for basic and diluted (loss)/earnings per share
(25.0)
7.7
(Loss)/earnings for underlying basic and underlying diluted (loss)/earnings per share
(28.1)
8.8
2024
2023
Number of shares
Weighted average number of ordinary shares for the purposes of basic (loss)/earnings per share
80,204,515
80,270,756
Effect of diluted potential ordinary shares:
Weighted average number of ordinary shares at 31 December
80,204,515
80,270,756
Dilutive effect of share options
38,031
107,110
Weighted average number of ordinary shares for the purposes of diluted (loss)/earnings per share
80,242,546
80,377,866
(Loss)/earnings per share
Basic
(31.2)p
9.6p
Diluted
(31.2)p
9.6p
Underlying basic
(35.0)p
11.0p
Underlying diluted
(35.0)p
10.9p
At 31 December 2024, the Company held 5,393,392 shares (2023: 5,449,419) 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.
Headlam Group PLC Annual Report & Accounts 2024
173
Financial Statements
10 Property, plant and equipment
Group property, plant and equipment
Land and
buildings
£M
Plant and
equipment
£M
Under
construction
£M
Total
£M
Cost
Balance at 1 January 2023
131.9
40.4
5.3
177.6
Acquisitions
0.1
0.5
—
0.6
Additions
4.7
10.8
1.9
17.4
Disposals
(0.4)
(3.1)
(2.3)
(5.8)
Transfers
0.9
2.2
(3.1)
—
Effect of movements in foreign exchange
(0.1)
(0.2)
—
(0.3)
Balance at 31 December 2023
137.1
50.6
1.8
189.5
Balance at 1 January 2024
137.1
50.6
1.8
189.5
Additions
4.2
4.6
1.7
10.5
Disposals/transfer to assets held for sale
(52.1)
(6.0)
(0.1)
(58.2)
Transfers
0.4
1.1
(1.5)
—
Effect of movements in foreign exchange
(0.3)
(0.3)
—
(0.6)
Balance at 31 December 2024
89.3
50.0
1.9
141.2
Accumulated depreciation and impairment
Balance at 1 January 2023
32.8
24.9
—
57.7
Depreciation charge for the year
3.4
3.7
—
7.1
Impairment charge
0.7
0.1
1.1
1.9
Disposals
(0.4)
(3.1)
(1.1)
(4.6)
Effect of movements in foreign exchange
(0.1)
(0.1)
—
(0.2)
Balance at 31 December 2023
36.4
25.5
—
61.9
Balance at 1 January 2024
36.4
25.5
—
61.9
Depreciation charge for the year
3.6
4.8
—
8.4
Impairment charge
—
0.7
—
0.7
Disposals/transfer to assets held for sale
(12.2)
(4.0)
—
(16.2)
Effect of movements in foreign exchange
(0.2)
(0.3)
—
(0.5)
Balance at 31 December 2024
27.6
26.7
—
54.3
Net book value
At 1 January 2023
99.1
15.5
5.3
119.9
At 31 December 2023
100.7
25.1
1.8
127.6
At 31 December 2024
61.7
23.3
1.9
86.9
The £0.7 million impairment charge in the year relates to the impairment of specific assets following the decision to close
certain sites. These impairment charges are reported in non-underlying administrative expenses in the Consolidated Income
Statement.
In the prior year, £1.1 million of the impairment charge in the year relates to specific IT assets held in ‘under construction’ that
have been written off. £0.8 million of the impairment charge in the year relates to the impairment of specific assets following
the decision to close certain sites. These impairment charges are reported in non-underlying administrative expenses in the
Consolidated Income Statement.
The club of banks has a legal charge over a number of properties that are included in land and buildings.
174
NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
Company investment properties and plant and equipment
Investment
properties
£M
Plant and
equipment
£M
Plant and
equipment
under
construction
£M
Plant and
equipment
total
£M
Cost
Balance at 1 January 2023
116.8
0.8
1.8
2.6
Additions
—
2.2
0.8
3.0
Disposals
—
—
(2.3)
(2.3)
Balance at 31 December 2023
116.8
3.0
0.3
3.3
Balance at 1 January 2024
116.8
3.0
0.3
3.3
Additions
—
0.8
—
0.8
Transfers
—
0.3
(0.3)
—
Disposals/transfer to assets held for sale
(51.3)
(1.7)
—
(1.7)
Balance at 31 December 2024
65.5
2.4
—
2.4
Accumulated depreciation
Balance at 1 January 2023
27.2
—
—
—
Depreciation charge for the year
1.9
0.1
—
0.1
Impairment
—
—
1.1
1.1
Disposals
—
—
(1.1)
(1.1)
Balance at 31 December 2023
29.1
0.1
—
0.1
Balance at 1 January 2024
29.1
0.1
—
0.1
Depreciation charge for the year
1.6
0.2
—
0.2
Disposals/transfer to assets held for sale
(11.3)
(0.1)
—
(0.1)
Balance at 31 December 2024
19.4
0.2
—
0.2
Net book value
At 1 January 2023
89.6
0.8
1.8
2.6
At 31 December 2023
87.7
2.9
0.3
3.2
At 31 December 2024
46.1
2.2
—
2.2
The Company holds investment properties which are predominantly freehold distribution centres, occupied by its UK
subsidiary companies for trading purposes. The Company obtains a valuation triennially, by an external valuer. Investment
properties were valued by an independent professional valuer on 18 January 2023. This valuation of the investment properties,
not including those under construction at the same date and updated for subsequent disposals was £83.6 million (2023:
£138.5 million), however the Company has chosen to hold them at cost. External valuers were also used to provide a valuation
of the Group’s main sites in France and the Netherlands, for the first time in 2023, which amounted to £10.3 million.
The club of banks has a legal charge over a number of properties that are included in investment properties, whose market
value is broadly equivalent to the size of the Group’s committed bank facility.
Headlam Group PLC Annual Report & Accounts 2024
175
Financial Statements
11 Intangible assets
Group
Goodwill
£M
Order
book
£M
Customer
relationships
£M
Brand
names
£M
Non-
compete
£M
Supply
agreements
£M
Software
development
£M
Total
£M
Cost
Balance at
1 January 2023
37.9
6.5
7.4
7.6
0.1
0.2
3.3
63.0
Additions
3.6
—
0.5
1.7
—
—
0.8
6.6
Disposals
—
—
—
—
—
—
(3.6)
(3.6)
Balance at
31 December 2023
41.5
6.5
7.9
9.3
0.1
0.2
0.5
66.0
Balance at
1 January 2024
41.5
6.5
7.9
9.3
0.1
0.2
0.5
66.0
Additions
—
—
—
—
—
—
0.1
0.1
Balance at
31 December 2024
41.5
6.5
7.9
9.3
0.1
0.2
0.6
66.1
Accumulated
impairment and
amortisation
Balance at
1 January 2023
30.3
6.5
4.4
3.5
0.1
0.1
0.3
45.2
Amortisation charge
for the year
—
—
0.7
0.7
—
—
—
1.4
Impairment charge
—
—
—
—
—
—
3.6
3.6
Disposals
—
—
—
—
—
—
(3.6)
(3.6)
Balance at
31 December 2023
30.3
6.5
5.1
4.2
0.1
0.1
0.3
46.6
Balance at
1 January 2024
30.3
6.5
5.1
4.2
0.1
0.1
0.3
46.6
Amortisation charge
for the year
—
—
0.6
0.7
—
—
0.1
1.4
Impairment charge
0.4
—
—
0.1
—
—
—
0.5
Balance at
31 December 2024
30.7
6.5
5.7
5.0
0.1
0.1
0.4
48.5
Net book value
At 31 December 2023
11.2
—
2.8
5.1
—
0.1
0.2
19.4
At 31 December 2024
10.8
—
2.2
4.3
—
0.1
0.2
17.6
The impairment charge of £0.5 million during the year relates to the Dersimo cash-generating unit. The impairment charge is
reported in non-underlying administrative expenses in the Consolidated Income Statement.
The remaining useful economic lives of intangible assets is as follows: customer relationships is 8 years and brand names is
8 years.
Amortisation charged during the year of £1.4 million (2023: £1.4 million) is presented within administration expenses in the
Consolidated Income Statement.
Cumulative impairment losses recognised in relation to goodwill is £30.7 million (2023: £30.3 million).
176
NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
Company
Software
development
£M
Cost
Balance at 1 January 2023
3.0
Additions
0.7
Disposals
(3.6)
Balance at 31 December 2023
0.1
Balance at 1 January 2024 and 31 December 2024
0.1
Accumulated impairment and amortisation
Balance at 1 January 2023 and 31 December 2023
—
Balance at 1 January 2024 and 31 December 2024
—
Net book value
Net book value at 31 December 2023
0.1
Net book value at 31 December 2024
0.1
Software development is internally generated.
Impairment tests for cash-generating units (‘CGU’) containing goodwill
Goodwill is attributed to the operations identified below for the purpose of testing impairment. These businesses are the
lowest level at which goodwill is monitored and represent operating segments and CGUs. In the prior year, each distribution
centre within these businesses was classified as a CGU. With the development of the business strategy, performance is now
monitored and assessed at a higher level. Prior year figures below have been updated to align with the newly defined CGUs as
outlined above.
The aggregate carrying amounts of goodwill allocated to each CGU are as follows:
Reported segment
2024
£M
2023
£M
UK Distribution
UK
7.6
7.6
Melrose
UK
3.2
3.2
Other
Continental Europe
—
0.4
10.8
11.2
Impairment of intangibles, property, plant and equipment and right of use assets
Each year, or whenever events or a change in the economic environment or performance indicates a risk of impairment, the
Group reviews the value of goodwill and other assets allocated to its CGU.
An impairment test is a comparison of the carrying value of the assets of an operation or CGU to their recoverable amount.
The recoverable amount represents the higher of the CGU’s fair value less costs of disposal and value in use. Where the
recoverable amount is less than the carrying value, an impairment results. For Melrose, Domus and Dersimo CGUs, the
recoverable amount has been determined based on value in use and for UK Distribution and LMS CGUs, the recoverable
amount has been determined based on fair value less costs of disposal.
An impairment of £1.8 million has been recognised as a result of impairment testing in the current year with £0.7 million
recognised against property, plant and equipment, £0.6 million recognised against right of use assets, £0.4 million recognised
against goodwill and £0.1 million recognised against other intangible assets. This is included within non-underlying
administrative expenses in the Consolidated Income Statement.
Headlam Group PLC Annual Report & Accounts 2024
177
Financial Statements
11 Intangible assets continued
Key assumptions – value in use
Cash flows were projected based on actual operating results, the approved 2025 business plan and management’s
assessment of planned performance in the period to 2029. For the purpose of impairment testing, where there was goodwill
allocated to CGUs, the cash flows were assumed to grow into perpetuity at a rate of 2.0% beyond 2029. For CGUs with no
associated goodwill, revenue and central costs were assumed to grow at a rate of 2.0% for each year after 2029 up to the end
of the deemed useful life of the assets being assessed for impairment.
The main assumptions within the operating cash flows used for 2025 include the achievement of future sales volumes and
prices for all key product lines, control of purchase prices, achievement of budgeted operating costs and no significant
adverse foreign exchange rate movements. These assumptions have been reviewed in light of the current economic
environment. The assumptions for sales growth are as follows, with gross margin held flat across all years:
CGU
Sales growth assumptions
Year 1
Year 2
Year 3
Year 4
Year 5
Melrose
11.7%
4.7%
5.0%
6.1%
6.4%
Domus
13.6%
14.3%
12.0%
7.0%
5.0%
Dersimo
38.5%
7.2%
2.5%
2.5%
2.5%
The Directors have estimated the discount rate by reference to an industry average weighted average cost of capital. This
has been adjusted to include an appropriate risk factor to reflect current economic circumstances and the risk profile of the
CGUs. As the CGUs in the UK have similar characteristics and risk profiles, a single discount rate has been applied: a pre-tax
weighted average cost of capital of 13.1% (2023: 13.3%). The CGUs in Continental Europe operate under a different regulatory
environment which is reflected in the risk factor used to determine the discount rates. In the Netherlands, the pre-tax
weighted average cost of capital is 12.8% (2023: 12.0%).
Climate-related risks have been considered in relation to the impairment testing, assuming that a transition scenario is most
likely, including Extended Producer Responsibility (EPR) for bulky waste and reduced demand for current product offering.
As noted in the TCFD disclosure, the Group could mitigate the EPR risk in the long term by rolling out the take back scheme,
currently being trialled. Similarly, any risk from a reduced demand for the Group’s current product offering could be mitigated
by the Group quickly adapting its offering to reflect consumer preferences. As such, neither risk is included in the base models
but sensitivity analysis has been performed.
There is a high degree of uncertainty in the cost estimates for a zero emission HGV fleet. It has been assumed, for this impairment
modelling, that the cost of operating a zero emission HGV fleet is broadly comparable to that of operating a diesel fleet. This
assumption is consistent with the TCFD disclosure and is on the basis that there is a very large global market for HGVs, which
provides commercial incentive for companies to develop a viable, cost-effective zero emission solution for HGVs.
Key assumptions – fair value less costs of disposal
The most significant component of the fair value less costs of disposal figures for the CGUs relate to the freehold and long
leasehold properties. The fair values have been calculated with reference to the independent valuation of the properties that
was performed on 18 January 2023. The valuation is considered to be level 3 in the fair value hierarchy due to unobservable
inputs used in the valuation. After considering movements in the macro-economic environment relating to commercial
properties and the recent disposals of property in the year, the fair values have been uplifted based on the evidence of the
profit achieved over the fair values on these sales.
Sensitivity analysis
The Group has applied sensitivities to assess whether any reasonable possible changes in these key assumptions could cause
a further impairment to goodwill and subsequently intangible assets, property, plant and equipment and right-of-use assets
that would be material to these Consolidated Financial Statements.
The Directors performed sensitivity analysis on the estimated recoverable amounts focusing on a reasonably possible change
in key assumptions:
Key assumptions - value in use:
•
sales growth decrease of 5% in the first year and 2% in the following four years;
•
gross margin decrease of 1% in the first five years;
•
pre-tax discount rate, used to convert the cash flow forecasts to present values, increase of 1%;
•
a shift away from non-sustainable to more sustainable flooring at a rate of 0.5% of mix per year, settling in the medium
term, with an associated gross profit reduction; and
•
introduction of EPR from 2027 with some of the cost mitigated by the take back scheme with none of the residual costs
passed on to customers in the short or medium term.
Key assumptions - fair value less costs of disposal:
•
decreases in fair values of the property of 5%
178
NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
The following table details those CGUs that are materially sensitive to the sensitivities mentioned above and the impairment
value that would be required if this sensitivity was to occur independently and then combined:
Sensitivity
CGU
Goodwill
£M
Intangibles
£M
Property,
plant and
equipment
£M
Right of
use assets
£M
Total
impairment
£M
Sales growth
Melrose
3.3
0.4
0.1
0.5
4.3
Sales growth
Dersimo
–
0.5
0.2
1.1
1.8
Gross margin
Dersimo
–
0.4
0.1
0.9
1.4
Discount rate
Dersimo
–
0.3
0.1
0.6
1.0
Shift to more sustainable flooring
Dersimo
–
0.3
0.1
0.6
1.0
Combined sensitivities
Melrose
3.3
0.9
0.3
1.1
5.6
Combined sensitivities
Domus
–
0.5
0.1
0.4
1.0
Combined sensitivities
Dersimo
–
0.7
0.2
1.5
2.4
12 Investments in subsidiary undertakings
Company
Summary information on investments in subsidiary undertakings is as follows:
£M
Cost
Balance at 1 January 2023
117.7
Share options granted to employees of subsidiary undertakings
0.6
Balance at 31 December 2023
118.3
Balance at 1 January 2024
118.3
Share options granted to employees of subsidiary undertakings
0.7
Balance at 31 December 2024
119.0
Impairment
Balance at 1 January 2023 and 31 December 2023
(16.6)
Balance at 1 January 2024 and 31 December 2024
(16.6)
Carrying value
At 1 January 2023
101.1
At 31 December 2023
101.7
At 31 December 2024
102.4
A full list of the Group’s subsidiaries is listed on page 203.
The Company determines annually whether there are any indications that its investment in its subsidiaries may be impaired.
The Company then assesses whether there is an impairment in this investment by comparing the carrying value of the
investment with the recoverable amount of the relevant subsidiaries.. Where the recoverable amount is less than the carrying
value, an impairment results.
Estimations are required of the value in use of the subsidiaries in which the investments are held. No impairment has been
recognised as a result of impairment testing in the current year.
The key assumptions used in the value in use calculations for the first five years can be seen in the below table, with gross
margin held flat across all years. The cash flows were assumed to grow into perpetuity at a rate of 2.0% beyond 2029.
Year 1
Year 2
Year 3
Year 4
Year 5
Revenue growth
6.4%
10.5%
8.6%
8.7%
8.3%
Headlam Group PLC Annual Report & Accounts 2024
179
Financial Statements
12 Investments in subsidiary undertakings continued
The Directors have estimated the discount rate by reference to an industry average weighted average cost of capital. This has
been adjusted to include an appropriate risk factor to reflect current economic circumstances. A pre-tax weighted average
cost of capital of 13.1% has been applied to the value in use calculation.
Sensitivity analysis
The Company has applied sensitivities to assess whether any reasonable possible changes in these key assumptions could cause a
further impairment to investments in subsidiary undertakings that would be material to these Consolidated Financial Statements.
The Directors performed sensitivity analysis on the estimated recoverable amounts focusing on a reasonably possible change
in key assumptions:
Key assumptions - value in use:
•
sales growth decrease of 5% in the first year and 2% in the following four years;
•
gross margin decrease of 1% in the first five years;
•
pre-tax discount rate, used to convert the cash flow forecasts to present values, increase of 1%;
•
a shift away from non-sustainable to more sustainable flooring at a rate of 0.5% of mix per year, settling in the
medium term, with an associated gross profit reduction; and
•
introduction of EPR from 2027 with some of the cost mitigated by the take back scheme with none of the residual costs
passed on to customers in the short or medium term.
Investments in subsidiary undertakings are materially sensitive to the sales growth sensitivity and would require an impairment
of £56.9 million should this sensitivity occur independently as above. Should all value in use sensitivities occur simultaneously as
above, an impairment of £83.3 million would be required.
13 Deferred tax assets and liabilities
Group
Recognised deferred tax assets and liabilities
Deferred tax assets and liabilities are attributable to the following:
Assets
Liabilities
Net
2024
£M
2023
£M
2024
£M
2023
£M
2024
£M
2023
£M
Property, plant and equipment
—
—
(7.8)
(11.9)
(7.8)
(11.9)
Intangible assets
—
—
(2.0)
(2.4)
(2.0)
(2.4)
Leases
23.7
7.5
(24.4)
(7.9)
(0.7)
(0.4)
Employee benefits
0.5
1.0
—
—
0.5
1.0
Tax losses
13.6
1.1
—
—
13.6
1.1
Other items
0.3
0.3
—
—
0.3
0.3
Tax assets/(liabilities)
38.1
9.9
(34.2)
(22.2)
3.9
(12.3)
Set-off of tax
(34.2)
(9.0)
34.2
9.0
—
—
3.9
0.9
—
(13.2)
3.9
(12.3)
A deferred tax asset has been recognised in respect of certain tax losses in the year. The Group has assessed future trading
forecasts and has concluded that the deferred tax assets will be recoverable. The losses can be carried forward indefinitely
and have no expiry date.
Movement in deferred tax assets during the year
1 January
2024
£M
Acquisition
of subsidiary
£M
Recognised
in income
£M
Recognised
in equity
£M
31 December
2024
£M
Property, plant and equipment
(11.9)
—
4.1
—
(7.8)
Intangible assets
(2.4)
—
0.4
—
(2.0)
Leases
(0.4)
—
(0.3)
—
(0.7)
Employee benefits
1.0
—
(0.6)
0.1
0.5
Tax losses
1.1
—
12.5
—
13.6
Other items
0.3
—
—
—
0.3
(12.3)
—
16.1
0.1
3.9
180
NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
Movement in deferred tax liabilities during the prior year
1 January
2023
£M
Acquisition
of subsidiary
£M
Recognised
in income
£M
Recognised
in equity
£M
31 December
2023
£M
Property, plant and equipment
(11.3)
(0.1)
(0.5)
—
(11.9)
Intangible assets
(2.1)
(0.5)
0.2
—
(2.4)
Leases
(0.4)
—
—
—
(0.4)
Employee benefits
1.5
—
(0.5)
—
1.0
Tax losses
—
—
0.2
—
0.2
Other items
0.2
0.1
—
—
0.3
(12.1)
(0.5)
(0.6)
—
(13.2)
Movement in deferred tax assets during the prior year
1 January
2023
£M
Acquisition
of subsidiary
£M
Recognised
in income
£M
Recognised
in equity
£M
31 December
2023
£M
Tax losses
—
—
0.9
—
0.9
—
—
0.9
—
0.9
Company
Recognised deferred tax assets and liabilities
Deferred tax assets and liabilities are attributable to the following:
Assets
Liabilities
Net
2024
£M
2023
£M
2024
£M
2023
£M
2024
£M
2023
£M
Property, plant and equipment
—
—
(4.4)
(8.5)
(4.4)
(8.5)
Employee benefits
0.5
0.8
—
—
0.5
0.8
Tax assets/(liabilities)
0.5
0.8
(4.4)
(8.5)
(3.9)
(7.7)
Set-off of tax
(0.5)
(0.8)
0.5
0.8
—
—
—
—
(3.9)
(7.7)
(3.9)
(7.7)
Movement in deferred tax during the year
1 January
2024
£M
Recognised
in income
£M
Recognised
in equity
£M
31 December
2024
£M
Property, plant and equipment
(8.5)
4.1
—
(4.4)
Employee benefits
0.8
(0.4)
0.1
0.5
(7.7)
3.7
0.1
(3.9)
Movement in deferred tax during the prior year
1 January
2023
£M
Recognised
in income
£M
Recognised
in equity
£M
31 December
2023
£M
Property, plant and equipment
(9.2)
0.7
—
(8.5)
Employee benefits
1.2
(0.5)
0.1
0.8
(8.0)
0.2
0.1
(7.7)
Unrecognised deferred tax assets and liabilities – Group and Company
At 31 December 2024, the Group and Company has unused capital losses of £nil (2023: £4.0 million) available for offset against
future chargeable gains. In addition, the Group has an unrecognised deferred tax asset in respect of tax losses in France of
£1.5 million (2023: £0.3 million). The Directors have considered the probability that the deferred tax asset will be recoverable
within the foreseeable future and concluded that no deferred tax asset should be recognised at 31 December 2024.
Headlam Group PLC Annual Report & Accounts 2024
181
Financial Statements
14 Inventories
Goods for resale
Group
Company
2024
£M
2023
£M
2024
£M
2023
£M
Balance as at 31 December
102.8
131.5
—
—
During the period, inventories of £426.1 million (2023: £448.7 million) were recognised as an expense and included in cost of
sales in the Consolidated Income Statement. Included within this expense is a £18.5 million charge (2023: £8.0 million charge)
for write-downs of inventory to net realisable value.
15 Trade and other receivables
Current
Group
Company
2024
£M
2023
£M
2024
£M
2023
£M
Trade receivables
75.7
79.7
—
—
Prepayments and accrued income
9.9
10.1
1.3
1.0
Other receivables
25.4
27.3
1.8
1.4
Amounts due from subsidiary undertakings
—
—
11.0
11.2
111.0
117.1
14.1
13.6
Non-Current
Group
Company
2024
£M
2023
£M
2024
£M
2023
£M
Amounts due from subsidiary undertakings
—
—
14.6
11.8
—
—
14.6
11.8
Amounts due from subsidiary undertakings are unsecured, interest bearing and are repayable on demand.
£2.9 million (2023: £1.5 million reduction) was recognised as an increase in the impairment loss allowance in the Consolidated
Income Statement in respect of trade receivables.
The receivables written off during the year as uncollectible are attributable to the reportable segments as follows:
Group
Company
2024
£M
2023
£M
2024
£M
2023
£M
UK
0.1
0.6
—
—
Continental Europe
0.4
0.2
—
—
0.5
0.8
—
—
Further details on the impairment of trade receivables is provided in note 25.
182
NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
16 Cash and cash equivalents
Group
Company
2024
£M
2023
£M
2024
£M
2023
£M
Cash
12.0
21.1
82.3
63.2
Cash and cash equivalents per Statement of Financial Position
12.0
21.1
82.3
63.2
Cash and cash equivalents of £12.0 million (2023: £21.1 million) is shown net of overdrawn bank accounts of £345.2 million (2023:
£186.0 million) that have a right of set-off, and an intention to settle net, under the UK overdraft facilities. Gross cash without
the set-off agreement is £357.2 million (2023: £207.1 million).
Reconciliation to cash flow statement
Group
Company
2024
£M
2023
£M
2024
£M
2023
£M
Cash and cash equivalents per Statement of Financial Position
12.0
21.1
82.3
63.2
Bank overdraft
(1.1)
(0.7)
—
—
Cash and cash equivalents per Cash Flow Statement
10.9
20.4
82.3
63.2
17 Assets classified as held for sale
Group
Company
2024
£M
2023
£M
2024
£M
2023
£M
Non-current assets held for sale
4.8
—
4.8
—
As part of the acceleration of strategy announced in September 2024, certain UK non-core property is expected to be sold in
2025. The non-current assets held for sale are presented within total reportable segments assets of the UK.
18 Other interest-bearing loans and borrowings
This note provides information about the contractual terms of the Group’s and Company’s interest-bearing loans and
borrowings.
At 31 December 2024, the Group had a committed sterling revolving credit facility agreement with Barclays Bank PLC, The
Bank of Ireland and Credit Industriel Et Commercial (London Branch) for £81.5 million which will expire in October 2027. In
January 2025, following receipt of proceeds in December 2024 from the property disposals, the Group has reduced this credit
facility agreement to £61.0 million. The Group had short term uncommitted facilities of £15.0 million in the UK and €4.7 million
facility in Continental Europe. In January 2025, The £15.0 million uncommitted facility in the UK was reduced to £7.5 million and
the €4.7 million facility in Continental Europe was reduced to €2.7 million following a review of facility requirements after the
property disposal proceeds. These are renewable on an annual basis. The total banking facilities available to the Group at
31 December 2024 were £100.4 million (2023: £100.6 million).
Facilities
31 December
2024
£M
31 December
2023
£M
Sterling RCF
81.5
81.5
Sterling uncommitted facilities UK
15.0
15.0
Euro uncommitted facilities Continental Europe
3.9
4.1
100.4
100.6
For more information about the Group’s and Company’s exposure to interest rate and foreign currency risk, see note 25.
Headlam Group PLC Annual Report & Accounts 2024
183
Financial Statements
18 Other interest-bearing loans and borrowings continued
Group
Company
2024
£M
2023
£M
2024
£M
2023
£M
Current liabilities
Bank overdraft
1.1
0.7
—
—
Interest-bearing loan
—
50.0
—
50.0
1.1
50.7
—
50.0
The Group has undrawn borrowing facilities at 31 December 2024, which amounted to £99.3 million (2023: £49.9 million). The
facility conditions for drawdown had been met during the period. The facility is secured against four of the Group’s properties
with a combined market valuation of £59.2 million. In the prior year, the facility was not secured against properties. There is a
cross guarantee in place between the Company and its UK, French and Dutch subsidiaries. Covenant calculations have been
prepared for the year ending 31 December 2024 and there were no breaches.
The undrawn borrowing facilities are as follows:
Interest rate
%
2024
£M
Interest rate
%
2023
£M
UK
7.0
96.5
5.9
46.5
Netherlands
6.0
0.9
7.2
1.4
France
4.2
1.9
5.0
2.0
99.3
49.9
The undrawn borrowing facilities consisted of £81.5 million committed and £17.8 million uncommitted facilities (2023:
£31.5 million committed and £18.4 million uncommitted).
All the borrowing facilities above bear interest at floating rates.
Changes in net (debt)/cash
At
1 January
2024
£M
Acquisitions
£M
Non-cash
items
£M
Cash flows
£M
Foreign
exchange
movements
£M
At
1 December
2024
£M
Cash at bank and in hand
21.1
—
—
(9.0)
(0.1)
12.0
Bank overdraft
(0.7)
—
—
(0.4)
—
(1.1)
Debt due within one year
(50.0)
—
—
50.0
—
—
Lease liabilities
(43.4)
—
(33.4)
15.4
0.2
(61.2)
Liabilities from financing activities
(94.1)
—
(33.4)
65.0
0.2
(62.3)
Net (debt)/cash
(29.6)
—
—
40.6
(0.1)
10.9
Net debt including lease liabilities
(73.0)
—
(33.4)
56.0
0.1
(50.3)
184
NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
At 1 January
2023
£M
Acquisitions
£M
Non-cash
items
£M
Cash flows
£M
Foreign
exchange
movements
£M
At
31 December
2023
£M
Cash at bank and in hand
2.1
0.5
—
18.6
(0.1)
21.1
Bank overdraft
—
—
—
(0.7)
—
(0.7)
Debt due after one year
(0.3)
—
—
(49.7)
—
(50.0)
Lease liabilities
(37.7)
(2.7)
(18.2)
15.1
0.1
(43.4)
Liabilities from financing activities
(38.0)
(2.7)
(18.2)
(35.3)
0.1
(94.1)
Net cash/(debt)
1.8
0.5
—
(31.8)
(0.1)
(29.6)
Net debt including lease liabilities
(35.9)
(2.2)
(18.2)
(16.7)
—
(73.0)
Non-cash items relate to lease additions, modifications and interest.
19 Leases
The Group leases various properties, commercial vehicles and cars. Rental contracts are typically made for fixed periods of 5
to 10 years on properties and 3 to 7 years on commercial vehicles and cars, but might have extension options. Lease terms are
negotiated on an individual basis and contain a wide range of different terms and conditions. The lease agreements do not
impose any covenants, but leased assets cannot be used as security for borrowing purposes.
Information about leases for which the Group is a lessee is presented below.
Right-of-use assets
Group
Company
Properties
£M
Non-
property
£M
Total
£M
Properties
£M
Net book value at 1 January 2023
11.9
24.8
36.7
0.7
Acquisitions
2.6
0.1
2.7
—
Additions
6.8
7.6
14.4
0.2
Contract modifications/terminations
2.0
(0.2)
1.8
—
Depreciation
(4.1)
(9.4)
(13.5)
(0.1)
Impairment
(0.4)
—
(0.4)
—
Effect of movements in foreign exchange
(0.1)
—
(0.1)
—
Net book value at 31 December 2023
18.7
22.9
41.6
0.8
Net book value at 1 January 2024
18.7
22.9
41.6
0.8
Additions
23.7
4.8
28.5
2.5
Contract modifications/terminations
0.6
(0.9)
(0.3)
—
Depreciation
(4.8)
(9.1)
(13.9)
(0.1)
Impairment
(0.3)
(0.3)
(0.6)
—
Effect of movements in foreign exchange
(0.1)
(0.1)
(0.2)
—
Net book value at 31 December 2024
37.8
17.3
55.1
3.2
The right-of-use assets are shown as non-current assets in the balance sheet. The non-property right-of-use assets relate
mainly to commercial and motor vehicles.
Headlam Group PLC Annual Report & Accounts 2024
185
Financial Statements
19 Leases continued
Lease liabilities
Group
Company
2024
£M
2023
£M
2024
£M
2023
£M
Current
13.8
11.9
1.8
0.1
Non-current
47.4
31.5
4.6
0.8
61.2
43.4
6.4
0.9
Amounts recognised in the Consolidated Income Statement
Group
2024
£M
2023
£M
Interest on lease liabilities
2.5
2.1
Expenses relating to leases of low-value assets
0.1
0.1
The total cash outflow for leases during the year ended 31 December 2024 was £15.5 million (2023: £15.2 million) for the Group
and £0.1 million (2023: £0.1 million) for the Company.
Extension and termination options
Extension and termination options are included in a number of property and equipment leases across the Group. These terms
are used to maximise operational flexibility in terms of managing contracts. The majority of extension and termination options
held, are exercisable only by the Group and not by the respective lessor.
Sale and Leaseback Transactions
During the period the Group entered into a sale and leaseback transaction for a package of two properties. The proceeds
were used to reduce the Group’s net debt. The portfolio of two properties were sold for combined proceeds of £29.2 million
and completed on 19 December 2024. The leases are at market rates and the aggregate annual lease cost of the properties is
£2.1 million. The total gain recognised due to the sale and leaseback transactions is £13.7 million and is included within profit on
disposal of property plant and equipment in non underlying items. The leases commenced on the transaction date and are for
a term of three years.
20 Trade and other payables
Current
Group
Company
2024
£M
2023
£M
2024
£M
2023
£M
Trade payables
95.4
93.3
3.2
0.6
Taxation and social security
26.0
14.7
13.4
3.2
Non-trade payables and accrued expenses
17.8
21.1
1.4
1.8
Amounts due to subsidiary undertakings
—
—
31.2
35.8
139.2
129.1
49.2
41.4
Amounts due to subsidiary undertakings are unsecured, interest free and are repayable on demand.
The Group’s exposure to currency and liquidity risk related to trade and other payables is disclosed in note 25.
186
NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
21 Provisions
Property
2024
£M
2023
£M
Balance at 1 January
2.6
1.7
Acquired through business combination
—
0.8
Utilisation of provisions
(0.2)
—
Charged to the income statement:
Additional provisions
0.7
0.1
Balance at 31 December
3.1
2.6
The property provisions relate to property dilapidations. Dilapidation provisions are expected to be utilised between 1 and 111
years as the individual lease term comes to an end.
22 Employee benefits
During the year, the Group operated a UK defined benefit plan and defined contribution plans in the UK, France and the
Netherlands.
UK defined benefit plan
The Headlam Group PLC Staff Retirement Benefits Scheme (the ‘plan’) is the defined benefit plan operated by the Company
which provides pensions in retirement and death benefits to members. The majority of members are entitled to receive
pensions from age 65, equal to either 1/50 or 1/60 of final salary for each year of service that the employee provided,
depending on which section of the plan the member is part of. The plan is closed to new members and from 31 March 2020
was closed to future accrual of benefits.
The plan is a registered scheme under UK legislation and is contracted out of the State Second Pension. The plan is legally
separated from the Company and assets are held independently of the Company’s finances. The plan is subject to the
scheme funding requirements outlined in UK legislation.
The Company has a right to a refund of any surplus in the plan if the plan winds up, after payment of expenses, members
benefits and any enhancements to the members’ benefits as the Trustee sees fit. In addition, if the assets of the plan exceed
the estimate by the actuary of the cost of buying out the benefits of all beneficiaries with an insurance company, including
the associated expenses, and the plan is not being wound up, then the Company may request a payment of the excess funds
though does not have an unconditional right to a refund. There have been no payments made to the Company out of the
plan’s assets over the year.
The plan was established from 11 February 1983 under trust and is governed by the plan’s Trust Deed and Rules dated
26 March 2015. The Trustee of the plan comprises one sole corporate trustee. The Trustee of the plan is required by law to act
in the best interests of the plan participants. The Trustee is responsible for the operation and the governance of the plan,
including making decisions regarding the plan’s funding and investment strategy in conjunction with the Company.
There have been no curtailments or settlements made to the plan over 2024. On 31 March 2020, the plan closed to future
accrual which would typically be treated as a curtailment event. Historically the future salary increase assumption used
to calculate the Scheme’s IAS 19 liabilities has been set equal to the assumption for expected future RPI inflation (the rate
of increase applied to pensions in deferment) and therefore there was no impact on the reported liabilities in respect of
this event.
The plan’s current investment strategy is to hold 100% annuity policies, following a buy-in transaction in March 2024.
The last scheme funding valuation of the plan was as at 31 March 2023 and revealed a fully funded position.
The main annual rate assumptions used by the actuary were, increase of pensions in payment 3.24%, discount rate before
retirement 3.68%, discount rate after retirement 3.68% and inflation 3.24%. Assets were taken at their audited market value at
the valuation date.
The schedule of contributions was agreed between the Company and Trustee in June 2024. No regular contributions are
required to be paid by the Company into the scheme.
The liabilities of the plan are based on the current value of expected benefit payment cash flows to members of the plan over
the next 65 years or more. The average duration of the liabilities is approximately 11 years.
Headlam Group PLC Annual Report & Accounts 2024
187
Financial Statements
NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
22 Employee benefits continued
Defined benefit obligation
In the UK there is no contractual agreement or stated Group policy for allocating the net defined benefit liability between the
participating subsidiaries and as such the full deficit is recognised by the Company, which is the sponsoring employer.
Group
Company
2024
£M
2023
£M
2024
£M
2023
£M
Present value of funded defined benefit obligations
(62.2)
(69.2)
(62.2)
(69.2)
Fair value of plan assets
60.7
73.6
60.7
73.6
(Deficit)/surplus in funded scheme
(1.5)
4.4
(1.5)
4.4
Adjustment in respect of asset ceiling and minimum funding
requirement
—
(6.7)
—
(6.7)
(1.5)
(2.3)
(1.5)
(2.3)
Other long-term employee benefits
(0.6)
(0.6)
—
—
Total employee benefits
(2.1)
(2.9)
(1.5)
(2.3)
Analysed as:
Current liabilities
—
(1.1)
—
(1.1)
Non-current liabilities
(2.1)
(1.8)
(1.5)
(1.2)
Total employee benefits
(2.1)
(2.9)
(1.5)
(2.3)
Movements in present value of defined benefit obligation
Group
Company
2024
£M
2023
£M
2024
£M
2023
£M
At 1 January
69.2
72.0
69.2
72.0
Interest cost
3.0
3.4
3.0
3.4
Net remeasurement (gains)/losses – financial
(7.8)
0.7
(7.8)
0.7
Net remeasurement gains – demographic
(0.1)
(1.4)
(0.1)
(1.4)
Net remeasurement gains – experience
(0.4)
(2.4)
(0.4)
(2.4)
Deferred buy-in premium
2.1
—
2.1
—
Benefits paid
(3.8)
(3.1)
(3.8)
(3.1)
At 31 December
62.2
69.2
62.2
69.2
Movements in fair value of plan assets
Group
Company
2024
£M
2023
£M
2024
£M
2023
£M
At 1 January
73.6
74.1
73.6
74.1
Interest income on plan assets
3.2
3.5
3.2
3.5
Return on assets, excluding interest income
(13.7)
(2.2)
(13.7)
(2.2)
Contributions by employer:
Past service deficit contributions
1.7
1.3
1.7
1.3
Benefits paid
(3.8)
(3.1)
(3.8)
(3.1)
Administration expenses
(0.3)
—
(0.3)
—
At 31 December
60.7
73.6
60.7
73.6
188
The fair value of the plan assets were as follows:
Group
Company
2024
£M
2023
£M
2024
£M
2023
£M
Equities*
1.3
3.4
1.3
3.4
Government debt*
—
61.7
—
61.7
Corporate bonds*
—
6.2
—
6.2
Liability and currency hedging
—
0.7
—
0.7
Cash and other
0.2
0.7
0.2
0.7
Insured annuities
59.2
0.9
59.2
0.9
60.7
73.6
60.7
73.6
* These assets are held within pooled investment vehicles that are unquoted. The fair value of the underlying assets within these funds have a quoted market price in an
active market.
Movements in the effect of the asset ceiling
Group
Company
2024
£M
2023
£M
2024
£M
2023
£M
At 1 January
6.7
5.3
6.7
5.3
Interest cost on the asset ceiling
0.3
0.2
0.3
0.2
Changes in the effect of the asset ceiling excluding interest cost
(7.0)
1.2
(7.0)
1.2
At 31 December
—
6.7
—
6.7
Expense recognised in the Consolidated Income Statement relating to defined benefit obligation
Group
2024
£M
2023
£M
Net interest expense on the net defined benefit liability (note 6)
0.1
0.1
Administration expenses
0.3
—
Total
0.4
0.1
Net interest is charged to net finance costs, administration expenses are charged to administrative expenses.
Remeasurement of the net defined benefit liability in the Statement of Comprehensive Income
Group
2024
£M
2023
£M
Return on assets, excluding interest income
13.7
2.2
Net remeasurement – financial
(7.8)
0.7
Net remeasurement – demographic
(0.1)
(1.4)
Net remeasurement – experience
(0.4)
(2.4)
Deferred buy-in-premium
2.1
—
Adjustment in respect of asset ceiling and minimum funding requirement
(7.0)
1.2
0.5
0.3
Headlam Group PLC Annual Report & Accounts 2024
189
Financial Statements
22 Employee benefits continued
Principal actuarial assumptions
2024
%
2023
%
Discount rate (net of management fees)
5.5
4.5
Revaluation of deferred benefits in excess of GMPs
3.3
3.2
Inflation-linked pension increases
3.3
3.2
Price inflation (RPI)
3.3
3.2
Commutation of pension at retirement
85% of members assumed to
take maximum tax-free cash
using the Scheme’s current
commutation terms
85% of members assumed to
take maximum tax-free cash
using the Scheme’s current
commutation terms
Mortality table assumptions:
UK pre-retirement
AC00 (Ultimate) table
AC00 (Ultimate) table
UK post-retirement – future pensioners
98%(M)/107%(F) of the S3PA
tables with future improvements
from 2013 in line with the CMI
2023 projections model with
the initial addition to mortality
improvements parameter of
0.5% and a long term rate of
improvement of 1.5% per annum,
2020/2021 weighting parameters
of 0% and 2022/2023 weighting
parameters of 15%.
98%(M)/107%(F) of the S3PA
tables with future improvements
from 2013 in line with the CMI
2022 projections model with
the initial addition to mortality
improvements parameter of
0.5% and a long term rate of
improvement of 1.5% per annum,
2020/2021 weighting parameters
of 0% and a 2022 weighting
parameter of 25%.
UK post-retirement – current pensioners
98%(M)/107%(F) of the S3PA
tables with future improvements
from 2013 in line with the CMI
2023 projections model with
the initial addition to mortality
improvements parameter of
0.5% and a long term rate of
improvement of 1.5% per annum,
2020/2021 weighting parameters
of 0% and 2022/2023 weighting
parameter of 15%.
98%(M)/107%(F) of the S3PA
tables with future improvements
from 2013 in line with the CMI
2022 projections model with
the initial addition to mortality
improvements parameter of
0.5% and a long term rate of
improvement of 1.5% per annum,
2020/2021 weighting parameters
of 0% and a 2022 weighting
parameter of 25%.
The mortality assumption implies the expected future lifetime from age 65 is as follows:
Group
2024
Years
2023
Years
Non-pensioner male
23.8
23.8
Pensioner male
22.2
22.2
Non-pensioner female
25.8
25.7
Pensioner female
24.1
24.0
Company
The principal actuarial assumptions for the Company are the same as those disclosed for the UK above.
190
NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
Sensitivity analysis
The table below shows the impact on the defined benefit obligation of changing each of the most significant assumptions in
isolation.
Effect in £M
Change in assumption
Impact on scheme
liabilities
2024
Impact on scheme
liabilities
2023
Increase
Decrease
Increase
Decrease
Discount rate
1.0% movement
(6.0)
7.2
(7.7)
9.4
Rate of inflation (RPI)*
0.25% movement
1.1
(1.1)
1.7
(1.6)
Assumed life expectancy
One-year movement
1.8
(1.7)
2.3
(2.4)
* With corresponding changes to the salary and pension increase assumptions.
The figures in the table as at 31 December 2024 have been calculated using the same valuation method that was used
to calculate the defined benefit obligation at the same date. The figures in the table as at 31 December 2023 have been
calculated by applying the same percentage increase or decrease as at 31 December 2024.
Extrapolation of the sensitivity analysis beyond the ranges shown may not be appropriate.
The plan exposes the Group to risk of life expectancy changes which can affect the value of the liabilities.
The Group operated an employment indemnity scheme in connection with a foreign subsidiary undertaking to provide for
lump sum cash payments due to employees retiring on their normal retirement date. The present value of the retirement
indemnity obligation at 31 December 2024 is £0.6 million (2023: £0.6 million). This is reported as other long-term employee
benefits within the employee benefits disclosure.
Total Group pension costs
Included within the total staff costs as disclosed in note 4 are costs relating to the Group’s defined contribution plans.
The pension cost for the year represents contributions payable by the Group to the plans and amounted to £4.9 million
(2023: £4.4 million). Contributions amounting to £nil (2023: £0.5 million) in respect of the December 2024 payroll were paid in
January 2025.
23 Share-based payments
Group and Company
Executive Directors and executive management currently participate in executive share option schemes. The Group operates
the Headlam Group Performance Share Plan 2017 and Deferred Bonus Plan 2017. Further details of these schemes and plans
are given in the Directors’ Remuneration Report on pages 114 to 137.
The Group operates the Headlam Management Incentive Plan which was approved by shareholders at the 2023 Annual
General Meeting. The plan enables the grant of market value options to senior managers below the Executive Team. The
options are intended to focus and incentivise senior managers for multi-year strategy delivery. Options granted will vest three
years after the date of grant and remain exercisable up until the tenth anniversary of their grant date.
Additionally, the Group operates a savings-related share option scheme (‘Sharesave scheme’) which is open to employees
subject to eligibility criteria determined by the Directors prior to each option grant. The most recent grant was on
16 October 2024 when employees with over one month’s service were invited to participate.
The Group also operates an Employee Long Service Award Scheme to recognise the long service of employees across the
Group. Employees are awarded ordinary shares for no cash consideration after certain milestones of service. There were
two share grants during the year, 5,400 shares were granted on 9 April 2024 with a fair value of 175.0p and 3,800 shares were
granted on 6 September 2024 with a fair value of 153.0p. The fair value of the services received in return for the shares issued is
measured at the closing share price on the grant date.
Headlam Group PLC Annual Report & Accounts 2024
191
Financial Statements
23 Share-based payments continued
The terms and conditions of the grants are as follows, whereby all options are settled by physical delivery of shares:
Grant date/employees entitled
Number of instruments
Vesting conditions
Contractual
life of options
2024
2023
Headlam Group Performance Share
Plan 2017 granted to key management
5 July 20171
767
767
Exercisable
06/07/17 – 06/07/27
Five-year Sharesave scheme granted
to other employees 1 May 2018
–
16,344
Continuous service
01/07/18 – 01/01/24
Three-year Sharesave scheme granted
to other employees 5 October 2020
792
716,212
Continuous service
01/11/20 – 30/04/24
Headlam Group Performance Share
Plan 2017 granted to key management
9 April 20211
–
165,434
Awards will vest between 25%
and 100% for performance
between ‘threshold’ performance
and ‘maximum’ performance
10/04/21 – 09/04/31
Three-year Sharesave scheme granted
to other employees 6 October 2021
42,165
73,530
Continuous service
01/11/21 – 30/04/25
Headlam Group Performance Share
Plan 2017 granted to key management
8 April 20221
167,114
167,114
Awards will vest between 25%
and 100% for performance
between ‘threshold’ performance
and ‘maximum’ performance
09/04/22 – 08/04/32
Three-year Sharesave scheme granted
to other employees 16 September 2022
134,830
294,392
Continuous service
01/11/22 – 30/04/26
Headlam Group Performance Share
Plan 2017 granted to key management
7 October 2022
36,976
36,976
Awards will vest between 25%
and 100% for performance
between ‘threshold’ performance
and ‘maximum’ performance
08/10/22 – 07/10/32
Deferred Bonus Plan granted to
Executive Directors 13 April 20231
22,563
22,563
Continuous service
14/04/23 – 13/04/33
Headlam Group Performance Share
Plan 2017 granted to key management
29 June 20231
627,142
627,142
Awards will vest between 25%
and 100% for performance
between ‘threshold’ performance
and ‘maximum’ performance
30/06/23 – 29/06/33
Management Incentive Plan granted
to senior management 29 June 2023
407,345
633,961
Continuous service
30/06/23 – 29/06/33
Three-year Sharesave scheme granted
to other employees 6 October 2023
411,980
1,169,301
Continuous service
01/11/23 — 01/05/27
Headlam Group Performance Share
Plan 2017 granted to key management
18 March 20241
935,334
–
Awards will vest between 25%
and 100% for performance
between ‘threshold’ performance
and ‘maximum’ performance
19/03/24 - 18/03/34
Deferred Bonus Plan granted to
Executive Directors 18 March 20241
94,191
–
Continuous service
19/03/24 – 18/03/34
Management Incentive Plan granted
to senior management 18 April 2024
854,309
–
Continuous service
19/04/24 – 18/04/34
Three-year Sharesave scheme granted
to other employees 16 October 2024
1,174,783
–
Continuous service
01/11/24 – 01/05/28
Management Incentive Plan
granted to senior management
28 October 2024
2,031,254
–
Continuous service
29/10/24 – 28/10/34
Total share options
6,941,545
3,923,736
1
Further details are provided on pages 114 to 137 of the Directors’ Remuneration Report.
192
NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
The number and weighted average exercise prices of share options are as follows:
Weighted
average
exercise
price
(pence)
2024
Number of
options
2024
Weighted
average
exercise
price
(pence)
2023
Number of
options
2023
Outstanding at the beginning of the year
163.0
3,923,736
172.9
2,597,531
Exercised during the year
–
–
227.0
(6,673)
Granted during the year
110.3
5,426,098
145.6
2,649,701
Lapsed during the year
230.2
(703,366)
255.9
(20,199)
Forfeited during the year
165.7
(878,664)
45.5
(727,225)
Cancelled during the year
193.2
(826,259)
272.8
(569,399)
Outstanding at the end of the year
111.1
6,941,545
163.0
3,923,736
Exercisable at the end of the year
389.8
43,724
229.6
733,323
The weighted average share price at the date of exercise for options exercised during the year was £nil (2023: 250.0p).
The options outstanding at the year-end have an exercise price in the range of 0.0p to 400.0p and a weighted average
remaining contractual life of 7.6 years (2023: 5.1 years).
The fair value of services received in return for share options granted are measured by reference to the fair value of share
options granted. In order to estimate the fair value of the services received the Group uses an appropriate option pricing
model, either the Black–Scholes or the Monte Carlo option pricing model.
It is expected that the options will be exercised as soon as they reach maturity.
The expected volatility is based on historic volatility calculated over the weighted average remaining life of the share options.
Details of share options granted during 2024 are shown below:
2024
Performance
Share Plan
2017
Deferred
Bonus Plan
2017
Management
Incentive Plan
2023
Sharesave
scheme
Management
Incentive Plan
2023
Number of options
granted
935,334
94,191
1,108,697
1,199,809
2,088,067
Grant date
18 March 2024
18 March 2024
18 April 2024
16 October 2024 28 October 2024
Fair value at
measurement date:
No performance
conditions (p)
—
156.98
28.38
25.27
24.00
Performance
conditions (p)
EPS 70%, ESG
10% & TSR 20%
134.80
–
–
–
–
Share price at grant
date (p)
177.0
177.0
174.5
127.0
133.0
Exercise price (p)
—
—
174.40
114.74
128.20
Expected volatility
30%
32%
32%
33%
33%
Option life
Three years
Two years
Three years
Three years
Three years
Dividend yield
6.0%
6.0%
6.0%
6.0%
6.0%
Risk-free rate of
interest
4.20%
4.20%
4.50%
3.74%
4.00%
Headlam Group PLC Annual Report & Accounts 2024
193
Financial Statements
23 Share-based payments continued
The total expenses recognised for the year arising from share-based payments are as follows:
Group
Company
Subsidiaries
2024
£M
2023
£M
2024
£M
2023
£M
2024
£M
2023
£M
Options issued
1.0
0.2
0.3
—
0.7
0.2
Shares issued
—
0.4
—
—
—
0.4
Total expense recognised
1.0
0.6
0.3
—
0.7
0.6
24 Capital and reserves
Share capital
Ordinary shares
2024
2023
Number of shares
Authorised
In issue at 1 January and 31 December
107,840,000
107,840,000
Fully paid
In issue at 1 January and 31 December
85,639,209
85,639,209
2024
£M
2023
£M
Allotted, called up and fully paid
Ordinary shares of 5p each
4.3
4.3
Shares classified in shareholders’ funds
4.3
4.3
At 31 December 2024, the Company held 5,393,392 shares (2023: 5,449,419) 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.
Dividends are not payable on these shares and they are excluded from the calculation of earnings per share. The shares held
in treasury and trust represented 6.3% (2023: 6.4%) of the issued share capital as at 31 December 2024 with a nominal value of
£0.3 million (2023: £0.3 million).
Ordinary shares
The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per
share at meetings of the Company.
Dividends
2024
£M
2023
£M
Final dividend for 2022 of 11.2p paid 2 June 2023
—
9.0
Interim dividend for 2023 of 4.0p paid 28 November 2023
—
3.2
Final dividend for 2023 of 6.0p paid 7 June 2024
4.8
—
4.8
12.2
The total value of dividends proposed or declared but not recognised at 31 December 2024 is £nil (2023: £4.8 million).
194
NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
Reserves
Other reserves
Other reserves as disclosed on the Statement of Financial Position comprise the capital redemption reserve, translation
reserve, treasury reserve and special reserve.
Capital redemption reserve
The capital redemption reserve represents the nominal value of shares repurchased and cancelled during 2007.
Translation reserve
The translation reserve comprises all foreign exchange differences arising from the translation of the financial statements of
foreign subsidiaries.
Treasury reserve
The treasury reserve comprises the cost of the Company’s shares held by the Group.
Special reserve
The special reserve (merger reserve) arose on the issuance of shares in connection with acquisitions made by the Company.
At 31 December 2024, this reserve was £1.5 million and there were no changes to this special reserve during the current or
previous year.
25 Financial instruments
The main financial risks arising in the normal course of the Group’s business are credit risk, liquidity risk, and market risks arising
from interest rate risk and foreign currency risk. This note presents information about the Group’s exposure to each of the
above risks, the Group’s objectives, policies and processes for measuring and managing risks and the Group’s management of
capital. Further quantitative disclosures are included throughout these financial statements.
Credit risk and credit quality
Credit risk arises from cash and cash equivalents, contractual cash flows of debt investments carried at amortised cost, at fair
value through other comprehensive income and at fair value through profit or loss, favourable derivative financial instruments
and deposits with banks and financial institutions, as well as credit exposures to wholesale and retail customers, including
outstanding receivables.
For Headlam Group PLC credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial
instrument fails to meet its contractual obligations and arises principally from the Group’s trade receivables.
The maximum exposure to credit risk is represented by the carrying amount of each financial asset and, as at the Statement
of Financial Position date, in the Directors’ opinion, there were no significant concentrations of credit risk likely to cause
financial loss to the Group.
The Group has a credit policy in place and the exposure to credit risk is monitored on an ongoing basis. Credit evaluations
are performed on all new customers requiring credit and these are frequently reviewed by management to limit exposure.
Businesses must obtain central approval from Executive Directors or senior executive management for credit limits in excess of
£10,000. The Group does not require collateral in respect of financial assets.
The credit control procedures described above, coupled with the diversified nature of the Group’s trade receivables, lead the
Directors to believe that there is limited credit risk exposure and that the credit quality of these assets is robust.
Other receivables comprise amounts due to the Group which historically have been received within three months of the year-
end. The Directors have considered the inherent risk profile of other receivables at the year-end and are of the view that this
historical experience will prevail for the foreseeable future and accordingly consider the credit quality of these assets to be
robust.
Cash and cash equivalents represent deposits with reputable financial institutions in the UK and Continental Europe and
hence, the Directors consider the credit quality of cash and cash equivalents to be robust.
Headlam Group PLC Annual Report & Accounts 2024
195
Financial Statements
25 Financial instruments continued
Impairment of financial assets
The Group has trade receivables for sales of inventory as financial assets that are subject to the expected credit loss model.
While cash and cash equivalents are also subject to the impairment requirements of IFRS 9, the identified impairment loss was
immaterial.
The carrying amount of financial assets at the Statement of Financial Position date was:
Group
Company
2024
£M
2023
£M
2024
£M
2023
£M
Trade and other receivables (note 15)
101.1
107.0
27.4
24.4
Cash and cash equivalents (note 16)
12.0
21.1
82.3
63.2
113.1
128.1
109.7
87.6
The fair values of the above financial assets at both 31 December 2024 and 2023, are deemed to approximate to carrying
value due to the short-term maturity of the instruments.
All other receivables and derivative financial assets are not past due (2023: not past due).
The Company had trade receivables of £nil (2023: £nil).
The Group applies the IFRS 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss
allowance for all trade receivables.
The expected loss rates are based on the payment profiles of sales over a period of 36 months before 31 December 2024 or
31 December 2023 respectively and the corresponding historical credit losses experienced within this period. The historical loss
rates are adjusted to reflect current and forward-looking information on macroeconomic factors, including gross domestic
product growth, affecting the ability of the customers to settle the receivables.
To measure the expected credit losses, trade receivables have been grouped based on shared credit risk characteristics and
ageing based on invoice date. The loss allowance provision as at 31 December 2024 is determined as follows;
Ageing based on invoice date
Current
< 30 days
30–60 days
60–90 days
Over
90 days
Total
31 December 2024
Expected loss rate
0.3%
0.3%
1.2%
56.7%
Gross carrying amount – trade receivables
(£millions)
34.3
26.1
13.7
4.6
78.7
Loss allowance (£millions)
0.1
0.1
0.2
2.6
3.0
This provision excludes a specific trade receivable which has been provided for in full and as at 31 December 2024 totalled:
£1.3 million (2023: £Nil).
Ageing based on invoice date
Current
< 30 days
30–60 days
60–90 days
Over
90 days
Total
31 December 2023
Expected loss rate
0.2%
0.2%
0.9%
39.9%
Gross carrying amount – trade receivables
(£millions)
43.8
25.9
7.6
4.3
81.6
Loss allowance (£millions)
0.1
—
0.1
1.7
1.9
196
NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
The maximum exposure to credit risk for trade receivables at the Statement of Financial Position date by geographic region was:
Group
Company
2024
£M
2023
£M
2024
£M
2023
£M
UK
69.0
71.2
—
—
Continental Europe
6.7
8.5
—
—
75.7
79.7
—
—
During the year the Group’s impairment charge as a percentage of revenue amounted to 0.5% (2023: reversal 0.2%).
The loss allowances for trade receivables as at 31 December reconcile to the opening loss allowances as follows:
Group trade receivables
Company trade
receivables
2024
£M
2023
£M
2024
£M
2023
£M
Opening loss allowance at 1 January
1.9
4.2
—
—
Increase / (decrease) in loan loss allowance recognised in profit or
loss during the year
2.9
(1.5)
—
—
Receivables written off during the year as uncollectible
(0.5)
(0.8)
—
—
Closing loss allowance at 31 December
4.3
1.9
—
—
Trade receivables are written off where there is no reasonable expectation of recovery. It is the Group’s policy wherever
possible to engage the debtor in a repayment plan to reduce the exposure to credit losses.
Impairment losses on trade receivables are presented as net impairment losses within operating profit. Subsequent recoveries
of amounts previously written off are credited against the same line item.
The Company assesses the expected credit loss associated with amounts due from subsidiary undertakings on a forward-
looking basis, relying upon cash flow forecasts of the subsidiary to determine expected recoverability. The Company has
loss allowances against amounts due from subsidiary undertakings of £10.0 million (2023: £11.3 million). The decrease in the
loss allowance in the year is driven by the decrease in the effective interest rate implicit in the amounts due from subsidiary
undertakings alongside an increase in forecasted cash flows of the borrowing subsidiary.
Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s approach to
managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, with
sufficient headroom to cope with abnormal market conditions. Details of the total facilities that the Group has access to are
given in note 18.
The following are the contractual maturities of financial liabilities:
31 December 2024
Group
Carrying
amount
£M
Contractual
cash flows
£M
1 year or less
£M
1–2 years
£M
2–5 years
£M
5 years
or more
£M
Non-derivative financial liabilities
Overdraft
1.1
(1.1)
(1.1)
—
—
—
Trade and other payables
113.2
(113.2)
(113.2)
—
—
—
Lease liabilities
61.2
(76.8)
(16.3)
(15.3)
(24.4)
(20.8)
175.5
(191.1)
(130.6)
(15.3)
(24.4)
(20.8)
Headlam Group PLC Annual Report & Accounts 2024
197
Financial Statements
25 Financial instruments continued
31 December 2023
Group
Carrying
amount
£M
Contractual
cash flows
£M
1 year or less
£M
1–2 years
£M
2–5 years
£M
5 years
or more
£M
Non-derivative financial liabilities
Overdraft
0.7
(0.7)
(0.7)
—
—
—
Unsecured bank loans
50.0
(50.0)
(50.0)
—
—
—
Trade and other payables
114.4
(114.4)
(114.4)
—
—
—
Lease liabilities
43.4
(50.9)
(13.7)
(11.4)
(17.3)
(8.5)
208.5
(216.0)
(178.8)
(11.4)
(17.3)
(8.5)
31 December 2024
Company
Carrying
amount
£M
Contractual
cash flows
£M
1 year or less
£M
1–2 years
£M
2–5 years
£M
5 years
or more
£M
Non-derivative financial liabilities
Trade and other payables
35.8
(35.8)
(35.8)
—
—
—
Lease liabilities
6.4
(8.2)
(2.2)
(2.2)
(2.2)
(1.6)
42.2
(44.0)
(38.0)
(2.2)
(2.2)
(1.6)
31 December 2023
Company
Carrying
amount
£M
Contractual
cash flows
£M
1 year or less
£M
1–2 years
£M
2–5 years
£M
5 years
or more
£M
Non-derivative financial liabilities
Unsecured bank loans
50.0
(50.0)
(50.0)
—
—
—
Trade and other payables
38.2
(38.2)
(38.2)
—
—
—
Lease liabilities
0.9
(2.0)
(0.1)
(0.1)
(0.1)
(1.7)
89.1
(90.2)
(88.3)
(0.1)
(0.1)
(1.7)
The value of the Group’s and Company’s financial liabilities as detailed above at 31 December 2024 and 2023 were not
materially different to the carrying value. Fair values were calculated using market rates, where available. Where market values
are not available, fair values have been estimated by discounting expected future cash flows using prevailing interest rate
curves. Amounts denominated in foreign currencies are valued at the exchange rate prevailing at the Statement of Financial
Position date.
All financial assets and liabilities for the Group and Company are recognised at amortised cost.
All derivative financial instruments not in a hedge relationship are measured at fair value through the profit or loss. The Group
and Company does not have derivatives in the current or prior year.
Interest rate risk
The Company and Group are exposed to interest rate fluctuations on their borrowings and cash deposits. Borrowings are
principally held in sterling at floating rates. Deposits are in sterling, euros and US dollars and are at floating rates.
Floating rate borrowings are linked to the Sterling Overnight Index Average. The Group adopts a policy of reviewing its floating
rate exposure to ensure that if interest rates rise the effect on the Group’s income statement is manageable.
198
NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
At the reporting date the interest rate profile of the Group’s interest-bearing financial instruments was:
Group carrying amount
Company carrying
amount
2024
£M
2023
£M
2024
£M
2023
£M
Variable rate instruments
Financial assets
12.0
21.1
82.3
63.2
Financial liabilities
(1.1)
(50.7)
—
(50.0)
10.9
(29.6)
82.3
13.2
Sensitivity analysis
A change of 100 basis points in the interest rates at the reporting date would have increased/(decreased) equity and profit
or loss by the amounts shown below. This analysis assumes that all other variables, in particular foreign currency rates, remain
constant. The analysis is performed on the same basis for 2023.
Group
Company
Profit or loss
Equity
Profit or loss
Equity
100bp
increase
£M
100bp
decrease
£M
100bp
increase
£M
100bp
decrease
£M
100bp
increase
£M
100bp
decrease
£M
100bp
increase
£M
100bp
decrease
£M
31 December 2024
Variable rate instruments
0.1
(0.1)
—
—
0.8
(0.8)
—
—
31 December 2023
Variable rate instruments
(0.3)
0.3
—
—
0.6
(0.6)
—
—
Foreign currency risk
The Group and Company are exposed to movements in currency exchange rates arising from transaction currency cash flows
and the translation of the results and net assets of overseas subsidiaries. The currencies giving rise to this risk are primarily the
euro, and US dollar.
The Group and Company use forward exchange contracts to hedge their foreign currency transactional risk. A future foreign
currency contract would be entered into where there was a known requirement for the currency due to planned imports
that are not invoiced in the functional currency of the acquiring company. These forward exchange contracts would have
a maturity of less than one year after the Statement of Financial Position date. The Group also enters into foreign currency
contracts at spot rate where the amounts are not frequent or material.
The exposure to foreign currency risk was as follows:
2024
Group
Company
Euro
amount
£M
Other
amount
£M
Total
£M
Euro
amount
£M
Other
amount
£M
Total
£M
Trade and other receivables
0.6
—
0.6
—
—
—
Cash and cash equivalents
0.4
0.5
0.9
0.1
—
0.1
Trade and other payables
—
(0.3)
(0.3)
—
—
—
1.0
0.2
1.2
0.1
—
0.1
Headlam Group PLC Annual Report & Accounts 2024
199
Financial Statements
25 Financial instruments continued
2023
Group
Company
Euro
amount
£M
Other
amount
£M
Total
£M
Euro
amount
£M
Other
amount
£M
Total
£M
Trade and other receivables
0.1
0.2
0.3
—
—
—
Cash and cash equivalents
0.6
0.4
1.0
0.1
—
0.1
Trade and other payables
(1.0)
(0.3)
(1.3)
—
—
—
(0.3)
0.3
—
0.1
—
0.1
Sensitivity analysis
A 10% weakening of sterling against the following currencies at 31 December would have increased/(decreased) profit or loss
by the amounts shown below; there is no equity effect. This analysis assumes that all other variables, in particular interest rates,
remain constant. The analysis is performed on the same basis for 2023.
Group
Company
2024
£M
2023
£M
2024
£M
2023
£M
Euro
0.1
—
—
—
Other
—
—
—
—
A 10% strengthening of sterling against the above currencies at 31 December would have had the equal but opposite effect
on the above currencies to the amounts shown above, on the basis that all other variables remain constant.
200
NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
Fair values hierarchy
The financial instruments carried at fair value are categorised according to their valuation method. The different levels have
been defined below:
•
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
•
Level 2: inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly, as
prices or indirectly, derived from prices.
•
Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
Fair values
The carrying amounts shown in the Statement of Financial Position for financial instruments are a reasonable approximation
of fair value.
Trade receivables, trade payables and cash and cash equivalents
Fair values are assumed to approximate to cost due to the short-term maturity of the instrument.
Borrowings, other financial assets and other financial liabilities
Where available, market values have been used to determine fair values. Where market values are not available, fair values
have been estimated by discounting expected future cash flows using prevailing interest rate curves. Amounts denominated in
foreign currencies are valued at the exchange rate prevailing at the Statement of Financial Position date.
Capital management
The Group views its finance capital resources as primarily comprising share capital, bank loans and operating cash flow.
The Board’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to
sustain future development of the business. The Board closely monitors its shareholder base, dividend yield and earnings per
share. In the medium-term the Group aims to maintain a dividend cover of 2.0 times.
The Board encourages employees of the Group to hold the Company’s ordinary shares. The Group operates a number of
employee share option schemes.
Certain subsidiaries of the Company are required to maintain issued share capital at levels to support capital adequacy
requirements prevailing in the legislative environment in which they operate.
In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends made payable to
shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.
At 31 December 2024, the Group had a committed sterling revolving credit facility agreement with Barclays Bank PLC, The
Bank of Ireland and Credit Industriel Et Commercial (London Branch) for £81.5 million. The Group had short term uncommitted
facilities of £15.0 million in the UK and €4.7 million facility in Continental Europe. In January 2025, following a review of facility
requirements after the receipt of proceeds in December 2024 from property disposals, the Group reduced this revolving
credit facility agreement to £61.0 million. The £15.0 million uncommitted facility in the UK was reduced to £7.5 million and
the €4.7 million facility in Continental Europe was reduced to €2.7 million. These are renewable on an annual basis. The total
banking facilities available to the Group at 31 December 2024 were £100.4 million (2023: £100.6 million).
No changes were made to the objectives, policies or processes during the years ended 31 December 2024 and
31 December 2023.
Covenants
The Group is subject to financial covenants in relation to its £81.5 million revolving credit facility agreement which are
tested and reported every half year and year end. In June 2024, and amended in January 2025, the Group agreed a new
covenant package with its banks. The previous covenants of leverage and interest cover no longer apply for the 30 June 2024,
31 December 2024, 30 June 2025 and 31 December 2025 tests. Instead, a monthly minimum liquidity test and a quarterly
minimum EBITDA test apply.
Liquidity is the total amount of cash and available committed facilities and the minimum EBITDA is calculated using EBITDA,
adjusted to exclude the impact of IFRS 16 and share-based payments.
The Group met both the covenants during the year and there is headroom in both of the covenants at 31 December 2024. The
Group is forecast to meet the covenants in the going concern period as detailed on pages 68 to 69.
Headlam Group PLC Annual Report & Accounts 2024
201
Financial Statements
26 Capital commitments
Group
As at 31 December 2024, the Group entered into commitments to purchase property, plant and equipment for £nil million
(2023: £0.9 million).
Company
At 31 December 2024, the Company had commitments to purchase property, plant and equipment for £nil million (2023:
£0.5 million).
27 Related parties
Group and Company
Identity of related parties
The Group has a related party relationship with its subsidiaries and with its Directors and executive officers.
Transactions with key management personnel
The Group annually re-evaluates its interpretation of key management personnel and considers that this relates to the
Executive and Non-Executive Directors of the Group as identified on pages 78 and 79.
As at 31 December 2024, Directors of the Company and their immediate relatives controlled 0.2% of the total voting rights of
the Company (2023: 0.1%).
Non-Executive Directors receive a fee for their services to the Board.
Other than as disclosed in the Remuneration Report, there were no other transactions with key management personnel in
either the current or preceding year. The cost charged to administrative expenses relating to share plans of key personnel
amounted to £nil (2023: £nil).
Company only
In addition to the transactions with key personnel, the Company has the following transactions:
Transactions with other Group companies
Balance at
31 December
2024
£M
Balance at
31 December
2023
£M
Amounts due from subsidiaries
25.6
23.0
Amounts due to subsidiaries
(31.2)
(35.8)
Transactions with Group companies typically comprise management, rent and interest charges during the period.
Related party transactions reported in the income statement
For year
ended
31 December
2024
£M
For year
ended
31 December
2023
£M
Rental income
10.2
11.0
Recharge of operating expenses
2.6
2.4
Interest income
11.0
7.1
202
NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
28 Group subsidiaries
Company
Holding
Type
Place of incorporation
HFD Limited
Direct
Trading
UK*
MCD Group Limited
Direct
Trading
UK*
CECO (Flooring) Limited
Indirect
Trading
UK*****
Domus Tiles Limited
Indirect
Trading
UK*
Headlam BV
Indirect
Trading
The Netherlands**
Dersimo BV
Indirect
Trading
The Netherlands****
LMS SA
Indirect
Trading
France***
Melrose Interiors Limited
Indirect
Trading
UK*
Modern Style Rugs Limited
Indirect
Trading
UK*
Birch Close Trading Limited
Indirect
Holding Company
UK*
Headlam (European) Limited
Direct
Holding Company
UK*
Betu Holdings Limited
Indirect
Holding Company
UK*****
Headlam Holdings BV
Direct
Holding Company
The Netherlands**
Headlam SAS
Indirect
Holding Company
France***
Domus Group of Companies Limited
Direct
Holding Company
UK*
Tileco (2012) Bidco Limited (dissolved
28 February 2025)
Indirect
Holding Company
UK*******
Tileco Group (2007) Limited (dissolved
28 February 2025)
Indirect
Holding Company
UK*******
Tileco Group Limited (dissolved 28 February 2025)
Indirect
Holding Company
UK*******
Yourfloors Limited
Direct
Dormant
UK*
Crossforge Limited
Indirect
Dormant
UK*
Headlam Group Employee Trust Company Limited
Direct
Dormant
UK*
Headlam Group Pension Trustees Limited
Direct
Dormant
UK*
Headlam Ireland Limited
Indirect
Dormant
Ireland******
Tileco Limited (dissolved 28 February 2025 )
Indirect
Dormant
UK*******
Surface Tiles Limited (dissolved 28 February 2025)
Indirect
Dormant
UK*******
Gorsey Twenty One Limited
Indirect
Dormant
UK*
Gorsey Twenty Two Limited (in liquidation)
Indirect
Dormant
UK*******
Gorsey Twenty Three Limited (in liquidation)
Indirect
Dormant
UK*******
The ordinary share capital of all of these subsidiaries are wholly owned. The principal activities of the trading companies are
wholly aligned to the sales, marketing, supply and distribution of floorcoverings and certain other ancillary products.
*
Registered address for UK subsidiaries: Gorsey Lane, Coleshill, Birmingham, B46 1JU, UK.
**
Registered address for these Dutch subsidiaries: Bettinkhorst 4, 7207 BP Zutphen, the Netherlands.
***
Registered address for French subsidiaries: 9-11 Rue de la Litte, 92390, Villeneuve-la-Garenne, France.
****
Registered address for this Dutch subsidiary: Noordzee 12, 3144 DB, Maassluis, the Netherlands.
*****
Registered address for these UK subsidiaries: Unit 5 Carryduff Business Park, Comber Road, Carryduff, Belfast, County Down, BT8 8AN, UK.
****** Registered address for Irish subsidiary: 3rd Floor Kilmore House, Park Lane, Spencer Dock, Dublin 1, Ireland.
******* Registered address for these UK subsidiaries: 8th Floor Temple Point 1, Temple Row, Birmingham, B2 5LG, UK.
Headlam Group PLC Annual Report & Accounts 2024
203
Financial Statements
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 insurance proceeds
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
204
ALTERNATIVE PERFORMANCE MEASURES (‘APMs’)
Glossary of Alternative
Performance Measures
Closest equivalent
statutory measure
Definition and purpose
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 provided for use by investors, who used this
metric before the adoption of IFRS16 and continue to
do so
Like for Like Revenue Growth
None
Calculated as year-on-year revenue growth, expressed
as a percentage and 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
Headlam Group PLC Annual Report & Accounts 2024
205
Financial Statements
Total
Results
£M
Amortisation
of acquired
intangibles
and other
acquisition-
related costs
£M
Impairment
of property,
plant and
equipment,
intangible
assets and
right of use
assets
£M
Cloud-based
ERP system
development
costs
£M
Impairment
of
Inventories
and
receivables
£M
Profit on
sale of
property,
plant and
equipment
£M
Business re-
structuring
and change-
related costs
£M
Adjusted
Results
(under-
lying)
£M
Revenue
593.1
–
–
–
–
–
–
593.1
Cost of sales
(426.1)
–
–
–
1.6
–
9.0
(415.5)
Gross profit
167.0
–
–
–
1.6
–
9.0
177.6
Distribution costs
(140.8)
–
–
–
–
–
4.4
(136.4)
Administrative expenses
(78.9)
1.3
1.8
2.6
–
–
6.3
(66.9)
Net impairment (losses)/
gains on trade receivables
(2.9)
–
–
–
1.3
–
–
(1.6)
Other operating income
21.1
–
–
–
–
(21.1)
–
–
Operating (loss)/profit
(34.5)
1.3
1.8
2.6
2.9
(21.1)
19.7
(27.3)
Finance income
0.1
–
–
–
–
–
–
0.1
Finance expenses
(7.1)
–
–
–
–
–
–
(7.1)
Net finance costs
(7.0)
–
–
–
–
–
–
(7.0)
(Loss)/profit before tax
(41.5)
1.3
1.8
2.6
2.9
(21.1)
19.7
(34.3)
Taxation
16.5
(0.4)
(0.3)
(0.6)
(0.7)
(3.5)
(4.8)
6.2
(Loss)/profit for the year
attributable to the equity
shareholders
(25.0)
0.9
1.5
2.0
2.2
(24.6)
14.9
(28.1)
(Loss)/earnings
per share
Basic
(31.2)p
1.1p
1.9p
2.5p
2.7p
(30.6)p
18.6p
35.0p
Diluted
(31.2)p
1.1p
1.9p
2.5p
2.7p
(30.6)p
18.6p
35.0p
206
ADJUSTED RESULTS RECONCILIATION
YEAR ENDED 31 DECEMBER 2024
Total
Results
£M
Amortisation
of acquired
intangibles
and other
acquisition-
related costs
£M
Impairment
of property,
plant and
equipment,
intangible
assets and
right of use
assets
£M
Insurance
proceeds
(following
a fire)
£M
Loss on
disposal of
items under
construction
£M
Profit on sale
of property,
plant and
equipment
£M
Business re-
structuring
and change-
related costs
£M
Adjusted
Results
(under-
lying)
£M
Revenue
656.5
–
–
–
–
–
–
656.5
Cost of sales
(448.7)
–
–
–
–
–
–
(448.7)
Gross profit
207.8
–
–
–
–
–
–
207.8
Distribution costs
(132.8)
–
–
–
–
–
–
(132.8)
Administrative expenses
(73.3)
2.3
5.9
–
1.2
(2.3)
5.4
(60.8)
Net impairment (losses)/
gains on trade receivables
1.5
–
–
–
–
–
–
1.5
Other operating income
9.0
–
–
(8.6)
–
–
–
0.4
Operating profit/(loss)
12.2
2.3
5.9
(8.6)
1.2
(2.3)
5.4
16.1
Finance income
0.3
–
–
–
–
–
–
0.3
Finance expenses
(5.4)
–
–
–
–
–
–
(5.4)
Net finance costs
(5.1)
–
–
–
–
–
–
(5.1)
Profit/(loss) before tax
7.1
2.3
5.9
(8.6)
1.2
(2.3)
5.4
11.0
Taxation
0.6
(0.5)
(1.5)
0.3
–
0.1
(1.2)
(2.2)
Profit/(loss) for the
year attributable to the
equity shareholders
7.7
1.8
4.4
(8.3)
1.2
(2.2)
4.2
8.8
Earnings/(loss)
per share
Basic
9.6p
2.2p
5.5p
(10.3)p
1.5p
(2.7)p
5.2p
11.0p
Diluted
9.6p
2.2p
5.5p
(10.4)p
1.5p
(2.7)p
5.2p
10.9p
Headlam Group PLC Annual Report & Accounts 2024
207
Financial Statements
ADJUSTED RESULTS RECONCILIATION
YEAR ENDED 31 DECEMBER 2023
2024
£M
2023
£M
2022
£M
2021
£M
2020
£M
Trading results (Continuing operations)
Revenue
593.1
656.5
663.6
667.2
609.2
Underlying gross profit
177.6
207.8
219.5
220.5
188.9
Overheads
(204.9)
(191.7)
(180.3)
(183.2)
(171.0)
Underlying (loss)/profit before net financing costs
(27.3)
16.1
39.2
37.3
17.9
Net financing costs
(7.0)
(5.1)
(2.1)
(1.5)
(2.0)
Underlying (loss)/profit on ordinary activities
before tax
(34.3)
11.0
37.1
35.8
15.9
Taxation
6.2
(2.2)
(7.4)
(9.2)
(3.9)
Underlying (loss)/profit on ordinary activities after
taxation – continued operations
(28.1)
8.8
29.7
26.6
12.0
Underlying profit on ordinary activities after taxation
– Discontinued operations
–
–
–
0.1
–
(Loss)/profit before tax
(41.5)
7.1
41.8
27.6
(17.1)
Shareholder value
(Loss)/earnings per share for profit from continuing
operations
(31.2)p
9.6p
40.1p
23.5p
(24.2)p
Underlying (loss)/earnings per share for profit from
continuing operations
(35.0)p
11.0p
35.5p
31.5p
14.3p
Earnings per share for profit from discontinued
operations
–
–
–
5.3p
–
Paid interim and final dividend per share
6.0p
15.2p
14.8p
5.8p
7.55p
Paid special dividend per share
–
–
17.7p
–
–
Proposed special dividend per share
–
–
–
17.7p
–
Proposed dividend per share
–
6.0p
11.2p
8.6p
—
Declared dividend per share
–
–
–
–
2.00p
208
FINANCIAL RECORD
2024
£M
2023
£M
2022
£M
2021
£M
2020
£M
Net assets
Non-current assets
Property, plant and equipment
86.9
127.6
119.9
113.3
122.9
Right of use assets
55.1
41.6
36.7
35.0
42.1
Intangible assets
17.6
19.4
17.8
18.1
21.1
Deferred tax assets
3.9
0.9
–
–
–
163.5
189.5
174.4
166.4
186.1
Current assets
Inventories
102.8
131.5
139.8
130.9
118.5
Trade and other receivables
111.0
117.1
119.1
114.0
101.6
Income tax receivable
3.6
3.1
–
–
–
Cash and cash equivalents
12.0
21.1
2.1
61.2
60.8
229.4
272.8
261.0
306.1
280.9
Non-current assets classified as held for sale
4.8
–
–
–
0.4
234.2
272.8
261.0
306.1
281.3
Total assets
397.7
462.3
435.4
472.5
467.4
Current liabilities
Bank overdraft
(1.1)
(0.7)
–
–
–
Other interest-bearing loans and borrowings
–
(50.0)
(0.3)
(0.6)
(2.0)
Lease liabilities
(13.8)
(11.9)
(11.4)
(10.5)
(12.5)
Trade and other payables
(139.2)
(129.1)
(153.2)
(178.0)
(178.4)
Employee benefits
–
(1.1)
(1.0)
(1.0)
–
Income tax payable
–
–
(1.9)
(1.0)
(0.2)
(154.1)
(192.8)
(167.8)
(191.1)
(193.1)
Non-current liabilities
Other interest-bearing loans and borrowings
–
–
–
(6.9)
(7.2)
Lease liabilities
(47.4)
(31.5)
(26.3)
(25.5)
(30.8)
Provisions
(3.1)
(2.6)
(1.7)
(2.7)
(2.1)
Deferred tax liabilities
–
(13.2)
(12.1)
(10.3)
(8.7)
Employee benefits
(2.1)
(1.8)
(2.7)
(3.9)
(5.5)
(52.6)
(49.1)
(42.8)
(49.3)
(54.3)
Total liabilities
(206.7)
(241.9)
(210.6)
(240.4)
(247.4)
Net assets
191.0
220.4
224.8
232.1
220.0
The results for 2020 within the financial record have not been re-presented to reflect the discontinued activity that occurred
in 2021, they remain the historical results reported for the Group.
Headlam Group PLC Annual Report & Accounts 2024
209
Financial Statements
ADVISERS
Auditors
PricewaterhouseCoopers LLP
Donington Court
Pegasus Business Park
Castle Donington
DE74 2UZ
Taxation advisers
Deloitte LLP
Four Brindleyplace
Birmingham
B1 2HZ
Solicitors
Pinsent Masons LLP
55 Colmore Row
Birmingham
B3 2FG
Principal bankers
Barclays Bank PLC
PO Box 3333
One Snowhill
Snow Hill
Queensway
Birmingham
B3 2WN
Bank of Ireland
26 Cross Street
Manchester
M2 7AF
Crédit Industriel et Commercial
CIC London Branch
Finsbury Circus House
15 Finsbury Circus
London
EC2M 7EB
Stockbroker
Peel Hunt LLP
100 Liverpool Street
London
EC2M 2AT
Panmure Liberum
Level 12 Ropemaker Place
25 Ropemaker Street
London
EC2Y 9LY
Registrar
MUFG Corporate Markets
Central Square
29 Wellington Street
Leeds
LS1 4DL
210
ADDITIONAL INFORMATION
The production of this report supports the work of the
Woodland Trust, the UK’s leading woodland conservation
charity. Each tree planted will grow into a vital carbon store,
helping to reduce environmental impact as well as creating
natural havens for wildlife and people.
HEADLAM GROUP PLC
Gorsey Lane
Coleshill
Birmingham
B46 1JU
UK
T: 01675 433 000
E: headlamgroup@headlam.com
S N: B46 1JU
www.headlam.com
Company number: 00460129