Peel Hunt downgrades Headlam to 'hold'

Analysts at Peel Hunt downgraded floor coverings distributor Headlam to 'hold' from its previous 'buy' rating on Friday, citing a cautious view on the firm's outlook.

Peel Hunt expects Headlam's current trading year figures to be "broadly in line with expectations". However, the broker believes 2019 appears to be "more challenging" with a slowing economy and the chaos of Brexit affecting sentiment.

Peel Hunt analyst Charles Hall reduced his forecasts by 9% to reflect "the heightened risk of a tougher market", noting that its commercial wing, in particular, was under pressure.

"We are now assuming that LFL volumes in 2019 are -2% vs flat previously. The shares have held up reasonably well in the recent sell-off and are now trading on c11x our 2019E," said Peel Hunt.

Peel Hunt also expects Headlam to maintain dividends in the current environment, which it noted would result in its cover reducing from 1.7x to 1.6x.

In addition to the downgrade, Peel Hunt also dropped its target price on Headlam to 460p from its previous 640p.