MIDAS SHARE TIPS: Carpet king Likewise doubled its sales in a year

Tony Brewer was barely out of short trousers when he started work in the carpet business. A callow teenager fresh from school, he learnt his trade from the bottom up and by 1992 had risen through the ranks sufficiently to help found a new business, Headlam.

Appointed chief executive eight years later, Brewer spent 16 years at the helm, during which time the company became the largest flooring business in Europe and the shares rose more than 230 per cent.

Now, Brewer is trying to do something similar at Likewise, a business he set up in 2018 and listed on the stock market in 2021. The company floated at 25p a share and that year, delivered £60 million of sales, with profits of £1.6 million.

Results for 2022 will be unveiled on Tuesday but Brewer has already told investors that sales more than doubled to £124 million last year, while profits of £2.5 million are forecast alongside a 0.2p dividend. Brewer is expected to sound a confident note for 2023 as well. Yet Likewise shares are just 24p, with market-watchers spooked by the impact of economic pressures on both company costs and consumer spending.

This reaction seems overdone. Brewer has a stated goal of increasing sales to £200 million in the next few years by creating a robust and efficient business and taking market share from other operators. Progress has been encouraging but the pace should accelerate in the next few years as recent investments bear fruit.

Every year, retailers spend around £2 billion stocking their stores with carpet, tiles and other floor coverings.

They buy these goods from distributors, most of which are small, local firms. Brewer built Headlam into something different, a market leader that could offer retailers lower prices, swifter deliveries and more compelling window displays than most rivals. Along the way, Brewer developed relationships with manufacturers across Europe and retailers across the UK and beyond.

That network still holds good at Likewise, backed by 19 loyal managers who joined Brewer from his former place of work, bringing a string of contacts with them. Together, they intend to make Likewise a top player in flooring distribution, selling their wares to thousands of independent shops from Scotland to the West Country.

Doing so effectively can be a complex task, requiring strategically-located warehouses and well-thought-out logistics. Brewer and his team have spent the past few years ensuring that they can deliver the goods, establishing operations in centres across the country, including Leeds, Birmingham and Newbury so stores can receive carpets swiftly, wherever they are.

There has been heavy investment in sales too, not just flogging goods to store-owners but also helping them to purchase the right products for their neighbourhood and display them attractively. 

Grey carpet is the most popular choice among homeowners but consumers are also attracted to tiles of every hue, as well as laminates, made to look like natural wood.

Some observers worry that spending will fall as families struggle to make ends meet. Evidence suggests however, that millions of people are still keen to buy well priced flooring, whether to furnish a new home or spruce up an old one. Brewer is also focused on grabbing a greater share of the market so Likewise should continue to grow, even if nationwide sales decline.

The company sells to commercial customers too, such as offices, schools and hospitals, where pricing and reliability are all-important.

Midas verdict: Likewise shares have suffered from wider concerns about consumer spending but, at 24p, those fears have been oversold. Brewer has spent more than 45 years in the flooring market, he has a record of success and is determined to make Likewise a leading operator in the market. As a 12 per cent shareholder, he is financially motivated too. Buy and hold.

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