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Carpetright looking plusher

Could perennial under-performer Carpetright be turning a corner?
December 16, 2014

Things are looking less strained for Carpetright (CPR). The beleaguered retailer has a new chief executive in Wilf Walsh and a fresh strategy, both of which appear to be improving its fortunes. In the UK, like-for-like sales returned to growth in the first half, rising 7 per cent, as lower prices attracted more customers and bed sales took off. Costs as a percentage of sales also fell, reflecting the operational gearing of the business. That boosted underlying operating profit by a third to £7.3m.

IC TIP: Hold at 351p

In Continental Europe, like-for-like sales fell 3 per cent, but this marks a big improvement on last year's 9 per cent decline. Moreover, the decline softened over the period, from 3.6 per cent in the first quarter to 0.5 per cent in the second. Improved sourcing, lower costs and less advertising also boosted the underlying profit margin by 140 basis points, nudging the division back into the black. Across the group, underlying pre-tax profit more than doubled to £6.7m, and Carpetright ended the reporting period with a net cash position.

Mr Walsh said a well researched and well executed strategy would reshape Carpetright, but warned that "the changes will take time to take full effect". He said the business remained "absolutely focused" on maintaining the recent improvements in performance, and that a strategic plan would be fully implemented next year. This plan includes revitalising the brand, more effective promotional activity, a broader choice of floor covers, better customer service and investments in multi-channel retailing. The group will also continue to rationalise the store estate and renegotiate leases.

House broker Peel Hunt has upgraded its full-year profit guidance by 15 per cent to £11m, giving EPS of 13p (2013-14: £4.6m and 5p).

CARPETRIGHT (CPR)
ORD PRICE:351pMARKET VALUE:£238m
TOUCH:350-352p12-MONTH HIGH:631pLOW: 298p
DIVIDEND YIELD:NilPE RATIO:NA
NET ASSET VALUE:95p*NET CASH:£3.2m

Half-year to 25 OctTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20132221.92.8nil
20142286.77.6nil
% change+3+253+171-

Ex-div: na

Payment: na

*Includes intangible assets of £57.7m or 85p a share