Carpetright delivered a pre-tax profit surge to £5.2m in the first half of its financial year against £800,000 in the same period last year but sales fell 1.6% to £189.1m.
Following this update, we are not making any changes to our ‘top of the range’ full-year pre-tax profit of £10m. Sales are now going in the right direction. The company has achieved three quarters of positive like-for-like growth following two years of declines. Earnings should thus start to recover but only at a pedestrian rate and not, in our view, back to the record operating profit levels of over £60m seen in FY04. Housing activity and the mortgage approvals market, the main drivers, are recovering from trough levels but are still expected to be relatively subdued over the next three years.
Freddie George, Seymour Pierce
The retailer has looked to offset the impact of discounting and promotional activity through tighter cost control and store disposals, which has had a positive impact on the bottom line.Coupled with investment in customer service and an enhanced online proposition, it remains well placed to gain market share as consumer interest picks up.Elsewhere, positive strides have also been made in relation to product. For example, Carpetright has increased focus on modern flooring, most notably laminates. The ongoing development of its Sleepright beds offer also continues to gain greater resonance with cautious UK consumers, though weakening like-for-like growth in this category through 2012 is indicative of a fragile market.
George Scott, Conlumino
There are few surprises in the historics, other than an exceptional charge of £12.4m and that no interim dividend is to paid. We had pencilled in 1.6p and 4.0p for the full-year. The exceptionals relate to onerous lease provisions for 11 store closures as well as an increase in the provision for some store closures last year due to the deterioration in the out-of-town property market. As expected, Darren Shapland, chief executive for seven months now, is not planning any significant change to the strategy, but will be looking to accelerate certain elements around the shape of the store portfolio, which has 85 lease renewals in next five years, refurbishments, product ranges, the multichannel offering and service proposition.
Sanjay Vidyarthi, Espirito Santo
Net debt has fallen 70% to £16.3m and is on track to meet our full-year forecast of £9m. No dividend has been declared, with management keen to lift profitability to more “acceptable” levels and move towards a net cash position before recommencing dividend payouts. Management intends to roll out a smaller-scale refresh for newer stores, with a European refurbishment also being trialled. The UK bed offer has been fully revamped ahead of peak trading and the Boxing Day sales.
John Stevenson, Peel Hunt