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Ordinarily results like these would have been well-received. But Findel's disclosure last month that bad debts would have an unexpected and material impact pulled the rug out from underneath the group. The shares plunged and have lost nearly half their value since.
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So far, it seems that the problem affected the debt collection rates in March only and chairman Keith Chapman says that "we are not seeing a continuing deterioration". Overall, the performance during the year was robust, marked by continued growth in all divisions and the completion of all the restructuring and integration projects - the latter achieved at an exceptional cost of £15.9m. Home shopping was boosted by Kitbag, which launched three more Premier League football club sites, and moved into cricket, rugby, motor sport and tennis.
The education business launched a new customer relationship marketing and warehouse management system, which will allow Findel to capitalise on it strong position in this area. Healthcare was also well-ahead, with operating profit up 66 per cent in the period.
Numis Securities expects pre-tax profit of £63m for 2009, and EPS of 53p.
IC Tables:
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FINDEL (FDL) |
||||
|---|---|---|---|---|
| ORD PRICE: | 272p | MARKET VALUE: | £231m | |
| TOUCH: | 272-273p | 12-MONTH HIGH: | 796p | LOW: 253p |
| DIVIDEND YIELD: | 8.2% | PE RATIO: | 10 | |
| NET ASSET VALUE: | 153p* | NET DEBT: | 297% | |
| Year to 31 Mar | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2004 | 421 | 38.8 | 33.4 | 14.5 |
| 2005 | 474 | 41.5 | 35.4 | 16.4 |
| 2006 | 528 | 35.1 | 35.6 | 18.0 |
| 2007* | 546 | 16.4 | 18.1 | 19.8 |
| 2008 | 634 | 34.9 | 28.4 | 22.2 |
| % change | +16 | +107 | +57 | +12 |
Ex-div: 4 Jun Payment: 8 Jul *Includes intangible assets of £143.2m, or 168p per share |
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Trading isn't bad and a forward PE ratio of just 5 is certainly cheap. But the bad debt issue reveals how vulnerable Findel is to tougher consumer conditions and, in the current climate, investor sentiment could well go against the group. Fairly priced.
Last IC view: Fairly priced, 274p, 17 April 2008
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