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Self-help boost for Carpetright

RESULTS: Self-help measures have driven a big improvement at Carpetright's UK operations - but the European business remains troubled
December 10, 2013

Self-help initiatives at floor coverings retailer Carpetright (CPR) helped to improve trading in the UK business during the first half. But progress here was offset by difficult conditions in Holland, so the group's underlying pre-tax profit slumped by a third to £3m.

IC TIP: Sell at 540p

UK revenue reached £185m, although comparable sales fell by 0.8 per cent. However, the UK gross margin improved by 140 basis points, thanks to improved sourcing and fewer lower-margin wholesale sales. The cost base also fell and Carpetright scrapped two onerous leases, leaving the underlying operating profit here 5.8 per cent higher at £5.5m. But comparable sales in Europe fell 8.6 per cent in local currency terms, driven by poor trading in Holland, while costs were flat - resulting in an underlying European operating loss of £1.4m.

Meahwile, UK store refurbishments delivered a 5 per cent sales uplift and a new website has led to a 22 per cent increase in appointment leads and sample requests. The successful beds business, where sales jumped 14.2 per cent in the second quarter, is also being replicated in Holland - along with UK-style self-help measures.

Broker Peel Hunt expects pre-tax profit of £9.1m for the full-year, giving EPS of 10.1p (From £9.7m/9.6p in 2013).

CARPETRIGHT (CPR)
ORD PRICE:540pMARKET VALUE:£365m
TOUCH:535-540p12-MONTH HIGH:703pLOW: 510p
DIVIDEND YIELD:nilPE RATIO:216
NET ASSET VALUE:100p*NET DEBT:21%

Half-year to 26 OctTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
2012227-7.90-9.50nil
20132221.902.80nil
% change-2---

*Includes intangible assets of £60.2m or 89p a share

Ex-div: -

Payment: -