Coleshill-based Headlam has posted an increase in first-half pre-tax profit.

The European floor-covering distributor notched £20.6 million, compared with £19.5 million a year ago, on revenues of £259.1 million, up from £245.7 million.

Chief executive Tony Brewer said: "During 2007, the group has enjoyed a progressively improving sales trend and we are well positioned entering the traditionally busy autumn selling period.

"The management teams of our individual businesses in the UK and Continental Europe are clearly focused on their product, sales and operations and we look forward to achieving our objectives for the year."

He said the group had not seen any effect from recent UK interest rate rises and was "not overly concerned" that they would.

"We have seen progressive improvement in both residential and commercial, and we are very much aligned to the refurbishment market."

Basic earnings per share increased by 6.4 per cent from 15.6p to 16.6p.

The board also issued a dividend of 5.35p per share, an increase of 10.3 per cent on last year's interim dividend of 4.85p per share. This will be paid January 2.

The firm said three recently acquired businesses - 3D Flooring Supplies, Florprotec and Plantation Rug Company - had boosted activities. Each, along with Concept (Midlands) acquired in October last year, were performing ahead of expectations.

It added: "The group continues to evaluate acquisitions in both the UK and Continental Europe. We would anticipate making further acquisitions which enhance our market position and contribute to an increase in profitability."

The company's businesses in France, Switzerland and the Netherlands had produced a significantly improved performance from 2006 into 2007.

It stated: "The management teams of these businesses have capitalised on improving marketing conditions and each business contributed to a combined increase in sales of 7.2 per cent. This has resulted in operating margins improving from 2.7 per cent to 3.6 per cent."

A new 105,000 sq ft purpose built facility has opened in Leeds and construction has started of a similar unit in Bridgend which will be operational in the spring of 2008. "The group continues to assess other opportunities to re-house existing businesses, increasing capacity in conjunction with the latest material handling capability, to allow them to continue to develop and exploit market opportunities."

In reaction, KBC Peel Hunt said EPS growth was forecast to be about 10 per cent this year but added this may be improved with rising sales trends into the key autumn period and continued share buyback activity.

KBC added Headlam's cashflows remained strong - the shares provided a reasonable safe haven, albeit an unexciting one.