Revamped Findel upbeat on outlook
May 2007
The
group, which underwent heavy reorganisation and
engaged in intense acquisition and disposal activity
over the year, saw full year pretax profits rise
10% to £56m on sales up 11% to £587m.
Earnings
per share increased 4% to 50.17p and there is
a final dividend of 15.6p, taking the full year
payout to 19.8p, up 10% on last time.
The
numbers above, however, exclude operating losses
of £6m on discontinued businesses. Some
of the others hits in a very long list of one-offs
that totalled £36.6m over the year include
£16.5m on disposal of its outlet stores;
£7.5m for warehouse reorganisation and
contract exiting in Home Shopping; and £4.3m
for further reorganisation in Educational Supplies.
Over
the year the group made very good progress with
its strategic aim of moving into the cash with
order market. A year ago, the Home Shopping
business, for instance, operated only a credit
model. A flurry of acquisitions, including Kleeneze,
Kitbag.com and The Cotswold Company, however,
has added a cash with order business with annualised
sales of over £150m.
Home
Shopping sales from ongoing businesses increased
29% to £338m over the year, with operating
profit increased 29% to £48.4m. The division
benefited from further strong growth in internet
sales, which now makes up 30% of all sales in
the core credit business. The group expects
internet sales will make up more than 50% of
all sales in the current year.
Home
Shopping's customer base is now over 1.5m with
retention rates at a record 70%. Bad debt remains
in line with budgeted levels at less than 8%
of sales. Findel believes the division is now
well positioned with both a credit and cash
with order offer.
Current
trading is certainly encouraging, with divisional
like for likes in the credit business over the
first 6 weeks of the new year up 7% and product
sales 13% ahead. Overall divisional sales, including
acquisitions are 64% ahead of last year.
Educational
Supplies, meanwhile, saw ongoing sales ease
3.2% to £168.2m and operating profits
fall 6% to £22.7m on difficult marker
conditions caused by a number of factors including
the introduction new multi year budgets for
schools' delays in providing this year's funding;
and schools not spending to their budgets -
they have once again built up net surpluses
to £1.6bn.
The
division, however, saw an upturn in demand in
the final quarter of the year being reported
which has spilled over into the new year, with
sales for the first six weeks of up 6% on last
time. The group reckons the business is very
well placed for a return to growth this year.
Group
sales overall over the first six week were 32%
ahead of last time and while that includes contributions
from acquisitions, management's confidence about
the heavily revamped group's prospects going
forward is palpable. Encouragingly, integration
of the clutch of acquisitions is on track and
'significant benefits' can be expected from
the exercise.
Investors
will be given the opportunity to assess Findel's
long-term prospects in more detail when the
group publishes the outcome of a strategic review.
The review is due to be concluded by the end
of the summer.
Today's
statement generally pleased Seymour Pierce analyst
Richard Ratner. Despite some misgivings about
the accounting for one-offs, he reiterates 'outperform'
for the stock. He believes the strategic review
should lead to a demerger of the group.
Ahead
of seeing the company, Ratner is retaining his
2008 forecasts, with pretax profits seen coming
in at £63.3m, giving earnings per share
of 54.4p.
The
strong results, very confident tone of the statement,
and upbeat noises on outlook led to Findel Plc
shares rushing ahead 7% or 47p to 709p this
morning. Based on Seymour's estimates, that
implies an undemanding forward PER of 13. The
prospective yield is a decent 3%.
|