Carpetright FY profits drop but results please

In the 52 weeks to 29 April, underlying pre-tax profit fell to £14.4m from £18.3m the year before, which the company said was in line with market expectations, while statutory pre-tax profit slumped to £900,000 from £12.8m.

Group revenue edged up to £457.6m from £456.8m, while year-end net debt stood at £9.8m, up significantly from £1.1m in 2016 due to the accelerated store refurbishment programme.

In the UK, LFL sales in the second half rose 1.8%, partially mitigating the 2.8% drop in the first half to give a full-year decline of 0.5% versus 2.8% growth in 2016. Meanwhile, underlying operating profit fell to £10.7m from £17.8m, partly reflecting the pound's depreciation in the aftermath of the Brexit vote.

In Rest of Europe, LFL sales growth came in at 2.5%, marking a slowdown from the previous year's 4.8%, but underlying operating profit rose to £5.7m from £2.5m.

Chief executive Wilf Walsh said: "I am pleased to report on a year of significant strategic progress, as we implemented a wide-ranging programme of investment and operational change, to refresh and update the Carpetright brand. Our strategy is on track and the positive response we have received from these initiatives has encouraged us to press ahead with plans to complete the refurbishment of the UK store estate by the end of 2018 and to extend the programme in the Rest of Europe.

"We have made an encouraging start to the new financial year, underpinned by the improving performance of our refurbished UK estate. While a challenging consumer environment and competitive landscape remain headwinds, we are confident the additional potential in our self-help initiatives will support an increase in market share."

Shore Capital noted that headline underlying pre-tax profit of £14.4m was ahead of consensus expectations of £14.1m and its expectations of £14m. Revenue was also above Shore's estimate of £457m.

Neil Wilson, senior market analyst at ETX Capital, said: "Overall a decent enough second half has slightly offset a weak first half - LFL sales rose 1.8%, partially making up for the 2.8% decline in the first half. The question is whether this progress will be maintained.

"Investors are seeing this as a glass half full - shares leapt more than11% on the open. But doubts remain with the stock down a fifth since April. Carpetright has suffered a serious decline since last June as investors shy away from companies whose chief exposure is to UK consumers. Any turnaround has to be viewed in the context of a very tough market that might get tougher yet as inflation climbs and wages fail to keep pace.”

At 0827 BST, the shares were up 11% to 200p.