Headlam in another rights issue

HEADLAM GROUP, the fast-growing carpet and fabrics distribution group, is promising at least six months of consolidation after launching its second rights issue in less than four months, writes Heather Connon.

The group is raising pounds 5.5m through a two-for-13 rights issue at 127p a share to buy Claremont, a wholesaler of fabrics for domestic and contract furnishings. In April it launched a pounds 5.1m rights issue at 92p for acquisitions and investment.

Headlam has bought 10 companies, at a cost of about pounds 17m, since a new management team headed by Graham Waldron took over in 1991.

Ian Kirkham, chief executive, said the fabrics business would now have pounds 40m of turnover, balancing the pounds 70m of sales in its flooring division. 'We should get a very decent bottom line out of that, but we have got to work.'

Claremont made pounds 816,000 profit on pounds 10.7m sales in the year to April, putting the deal at about 10 times earnings on a full tax charge. Headlam is paying pounds 5.3m, including 208,661 shares. The rights issue will fund the remainder and provide about pounds 500,000 working capital.

Headlam is confident that Claremont will make a positive contribution to earnings this year. Its shares closed down 3p at 150p.