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Carpetright looks threadbare after divi cut

TIP UPDATE: Carpetright's profits have tumbled and its final dividend has been pulled.
June 28, 2011

Carpetright's travails have been well flagged by a series of profits warnings, but the board's decision not to pay a final dividend still came as a shock to the market.

IC TIP: Sell at 679p

The group reported a 40 per cent fall in underlying profits before tax to £16.9m, while underlying EPS fell 43 per cent to 18p. With profitability so sensitive to falling sales, the group has been trying to rein in costs. Store numbers in the UK and Ireland fell by 27 to 559 during the year. With a further 94 leases coming up for renewal over the next five years, management believes there will be opportunities to close more stores without compromising the group's ability to serve its customers. Some openings are also being considered, but overall further net closures are expected.

Carpetright continued to push higher-margin bed sales and these now account for 5.1 per cent of turnover compared with 3.4 per cent last year. The group is also looking to boost the level of business it generates from its website by setting up a call centre to help it convert online interest.

Broker Seymour Pierce has cut its forecast for pre-tax profit for the coming year by 13 per cent to £16.5m, giving EPS of 17.7p (£16.9 and 18p in 2011). An 8p full-year dividend is forecast.

Carpetright (CPR)
ORD PRICE:679pMARKET VALUE:£456m
TOUCH:678.5p-679p12-MONTH HIGH:847pLOW: 610p
DIVIDEND YIELD:1.2%PE RATIO:100
NET ASSET VALUE:*100pNET DEBT:98%

Year to 30 AprTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
200747667.068.250
200852259.563.252
200948316.717.68
201051722.323.516.0
20114876.66.88.0
% change----

Ex-div:na

Payment:na

*Includes intangible assets of £66m, or 98p a share

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