Today’s update from floor coverings distributor Headlam (LSE: HEAD) is in line with expectations and shows the company continuing to make encouraging progress. Sales in the first half of the current year rose by 4.8% versus the same period of last year. This was driven by strong performance in the UK where like-for-like (LFL) revenues in the period increased by 3.4%, despite a somewhat uncertain outlook.
In Continental Europe, Headlam benefitted from a positive currency translation. This meant that combined revenues rose by 8.9% and while this is a positive, weak sterling also produces a negative for the company. That’s because it causes the cost to Headlam of residential floor coverings to increase by an average of 6%. They’re imported from Belgium and the Netherlands and it means that Headlam will increase its selling prices by a similar amount over the next month.
Looking ahead, Headlam is forecast to increase its bottom line by 5% next year and with it trading on a price-to-earnings (P/E) ratio of 12.9, it seems to be fairly priced. Its yield of 4.8% from a dividend that’s covered over 1.5 times by profit remains its big draw, meaning it holds appeal for income-seeking investors.
Also reporting today was NewRiver Retail (LSE: NRR), with the real estate investment trust (REIT) recording a strong start to the year. Its first quarter was busy with it improving its occupancy to 97% following 90 leasing events having been completed during the quarter. Furthermore, lease length and footfall were also improved, with NewRiver having made good progress on its Co-operative convenience store development programme.
The strong start to the year has allowed NewRiver to increase dividends by 11% to 5p per share. This puts the company on a yield of 6.8%, which is clearly among the higher yielding stocks on the UK index. As such, it has appeal for income-seeking investors at a time when interest rate cuts are being mooted.
However, with dividends being covered just 1.06 times by profit and the outlook for the UK commercial property market being uncertain to say the least, it may be prudent to await further news flow before buying a slice of NewRiver Retail.
Meanwhile, Science Group (LSE: SAG) also reported today. The science and technology consulting company’s first-half performance was in line with management expectations, with revenue rising by 25.5% to £17.7m and adjusted operating profit being marginally higher at £2.5m. Encouragingly, Science Group’s operating cash flow remained strong, rising to £5.3m from £3.3m in the same period of the previous year, thanks in part to a VAT rebate of £1.5m in relation to a property purchase in 2015.
Looking ahead, Science Group is expected to increase its earnings by 29% this year and by a further 16% next year. This puts it on a price-to-earnings growth (PEG) ratio of just 0.8, which indicates that now could be a good time to buy it.
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Peter Stephens owns shares of Headlam Group. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.