“Significant progress made in core UK flooring business – first half performance impacted by short term UK beds clearance and losses in Rest of Europe. Current trade encouraging but taking a more cautious view of second half prospects”
Financial highlights Group
- Group revenue increased 2.6% to £228.1m (H1 FY17: £222.3m) (note 1)
- Underlying profit before tax of £2.1m (H1 FY17: £5.1m)(note 2)
- Net debt of £22.8m (H1 FY17: net cash £0.4m) reflecting the continued investment in the store refurbishment programme. (note 3)
- Statutory profit before tax £0.3m (H1 FY17: £4.1m).
- Underlying pre-tax profits for the second half of the year expected towards the bottom end of the current range of market expectations. (note 5) UK
- Like-for-like sales in the first half of the year increased by 0.7% (H1 FY17: decline of 2.9%), with solid growth of 1.9% in our core flooring categories offset in part by reduced bed sales, which were impacted by clearance of discontinued lines as we changed the entire range. (note 7)
- Underlying operating profit of £3.6m (H1 FY17: £4.9m) reflecting impact of beds clearance and higher store payroll costs. Rest of Europe
- Like-for-like sales growth of 6.5% (H1 FY17: decline of 1.5%).
- Underlying operating loss of £0.4m (H1 FY17: profit of £1.1m)
- Gross profit margin down 730bps reflecting impact of first time inclusion of low margin service income (520bps) and deeper discounting promotions (210bps), which is now being addressed. Current Trading
- Encouraging start to the second half: o Like-for-like sales in the UK up 1.4% in the six weeks to 9 December 2017 with robust growth of 2.7% in our core flooring categories. o Rest of Europe has also made a positive start with like-for-like sales up 9.2% in local currency over the same six week period. Page 2 of 31 Strategic progress
- Continued investment in store refurbishment programme with 52% of the UK estate trading under the new brand identity by period end.
- Hard flooring category in the UK achieving double digit sales growth as it benefits from increased customer awareness.
- Focus on improving customer service delivering stronger satisfaction metrics – ‘Trustpilot’ score increased to 8.9.
- Effective response to increased competition – 52 stores have now traded against a new direct local competitor for more than 12 months, delivering like-for-like growth of 5.0% on average during the half.
- Continued progress made in reducing the number of underperforming stores – ten closures to reduce the UK estate to 418 stores. Commenting on the results, Wilf Walsh, Chief Executive, said: “The first half has undoubtedly been challenging. Consumer confidence remains fragile and we continue to manage the impact of intensified competition.
We have made pleasing progress in our core flooring business in the UK – like-for-like sales are up, more than half the UK store estate has now been refurbished and our customer service metrics have been improved significantly.
However, as previously flagged, our first half profits reflect the impact of the clearance of discontinued lines in our beds business and also unsuccessful deeper discounting promotions in the Netherlands and Belgium, which are now being addressed.
Looking ahead we will be focused on maintaining sales momentum in UK flooring, capitalising on the much-stronger new range to turn around our beds performance and improving overall trading in the Netherlands and Belgium.
While trading over the first six weeks of the new period has been encouraging, with an acceleration in like-for-like sales growth in both the UK and Rest of Europe, in light of the consumer outlook we are taking a more cautious view of the second half and now expect underlying profit before tax for the full year will be towards the bottom end of the current range of market expectations.
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