Battered Carpetright saw its shares bounce, despite axing its half-year dividend and reporting an 86 per cent drop in underlying pre-tax profit, as management pointed to an anticipated improvement in second-half trading, which means that it will hit full-year forecasts.
Of course, those expectations have been pared back significantly after no less than five successive profit warnings in the past 12 months. They've come as a result of a challenging consumer environment that knocked another 2.4 per cent off underlying sales in the period, but also as a consequence of falling gross margins - down 430 basis points in the half due to high levels of promotional activity and, most significantly, a higher proportion of less profitable bed sales in the mix.
While management expects another 200 basis point decline in the second half, they argue that this will be offset by a new value bed range that will steal share from rivals, a new laminate floor offering, a store closure and refit programme, and ongoing cost savings. Costs were reduced by £4.8m in the period, and continue to be reviewed.
Peel Hunt expects full-year pre-tax profits of £11.9m, and EPS of 12.8p (£16.9m and 17.9p in 2011).
CARPETRIGHT (CPR) | ||||
---|---|---|---|---|
ORD PRICE: | 437p | MARKET VALUE: | £294m | |
TOUCH: | 436-441p | 12-MONTH HIGH: | 847p | LOW: 375p |
DIVIDEND YIELD: | nil | PE RATIO: | na | |
NET ASSET VALUE: | 99p* | NET DEBT: | 83% |
Half-year to 29 Oct | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
---|---|---|---|---|
2010 | 248 | 9.8 | 10.4 | 8.0 |
2011 | 238 | -0.8 | -0.9 | nil |
% change | -4 | - | - | -100 |
*Includes intangible assets of £64.2m or 95p a share |