[SharePad] Screening For My Next Long-Term Winner: Headlam

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19 July 2020
By Maynard Paton

Let me start by thanking you for showing interest in an article with Headlam in the title.

Rest assured, not everyone will want to read about this rather dull business that has suffered badly during the pandemic.

But for us contrarians, now may be the time to consider such stocks — unloved names that the market rebound has left far behind.

Headlam seems to possess the industry position, balance-sheet strength and management experience to survive this downturn and recover thereafter. A full share-price recovery could even offer a potential 100% gain.

Read my full Headlam article for SharePad.

Maynard Paton

5 thoughts on “[SharePad] Screening For My Next Long-Term Winner: Headlam”

  1. Maynard

    Thanks for posting this. Their ex-CEO, Tony Brewer, left in 2016 following a disagreement over strategy with the Board. He appears to have wanted to continue doing bolt-on acquisitions, whereas the Board had something more ‘strategic’ in mind, as noted in some of their presentations since Steve WIlson took over. Domus may have been the result of that. In the meantime, Tony Brewer has set up a competing platform, Likewise, to do a buy and build.

    Notwithstanding previous writedowns on Domus and today’s further writedown, Headlam continues to say that it is looking for acquisitions in adjacent market segments a la Domus. It is troubling that the Board of Headlam has not openly addressed whether this strategy is the right one, because shareholders are left wondering, firstly, how cash will be allocated, and secondly, whether Headlam is taking its eye off the ball. Have you seen anything from them on this? The really good distribution businesses (or any business, for that matter), for example those spun out of Bergman and Beving, focus relentlessly on return on capital either from scale or service and their acquisition strategy is geared towards strengthening their existing position.

    Best regards

    Reply
    • Hi Jerry,

      Thanks for the comment. You seem to know the sector and company much better than me! I had not picked up the management change had correlated with the acquisition strategy change. Slightly alarming the ex-CEO has set up a rival business. Likewise is in fact listed on the Channel Islands exchange: https://www.likewiseplc.com/financial-reports. I have not really read too much into Headlam’s strategy for now because Covid-19 had become a more pressing issue and I was focusing more on the prospect of recovery. You would hope the Domus result would steer the business back to bolt-ons, but you can never be sure.

      Maynard

      Reply
    • V interesting Jerry. Was also unaware of strategy change, meanwhile Likewise have readily been making smaller acquisition, in line with stated strategy. It is not apparent how one goes about buying shares listed on TISE. Thank you for link Maynard.

      Reply
  2. I did a bit of a read up, acquisitions since Domus have been much smaller and carpet based, as it had been previously. 2019-Edel Telenzo Carpets Ltd (£1.3m) , Supertex Furnishing Limited (£2.1m) 2018 5 acquisitions total of £9.1m. Suggests that acquisition emphasis has been on the smaller side of things.

    Reply
    • Thanks Michael. The subsequent acquisitions do seem more reassuring.

      Good question on TISE. Tried with Youinvest to get a quote for Likewise. Recognised the name but could not deal online. Message suggested the shares could be dealt over the phone.

      Maynard

      Reply

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