Homeworks pays off in MFI sales; The Investment Column

It all seems to be going right for MFI Furniture. Its shoddy image seems to have been well and truly buried as far as consumers are concerned and the City seems to be happy too. Since the shares' most recent trough in March last year, they have outperformed the rest of the stock market by a third.

That performance seems fully justified by both the state of the company and the economic background. Despite the noise from the building societies and others, MFI claims not to have seen much benefit from a rising housing market, suggesting that the level of house moves is pretty static. So to have raised pre-tax profits 62 per cent to pounds 32.7m on like-for-like sales in the UK 13.5 per cent ahead in the six months to November is impressive. With the most important season of the year still ahead - MFI makes about 30 per cent of its sales in the 10 week period from Boxing Day - it is a sign of management's confidence that it is raising the half-way dividend by 13 per cent.

It is not all management's doing. As the largest integrated furniture maker and seller in the country, MFI is very dependent on high volumes matching its fixed cost base. The recent downward trend in gross margins has clearly been reversed, helped by lower raw material costs and the strong pound.

But the group is continuing to grab share in a market which probably grew no more than 6 per cent in the latest six months. The two- to three- year capital investment programme to revamp the stores and upgrade the manufacturing operations saw spending stepped up from pounds 20.1m to pounds 32.7m in the period and the effects are starting to kick in.

MFI estimates that it is gaining double-digit percentage sales increases at stores converted to the new Homeworks format, which offers an airier feel and a wider range of products. Seventy-eight out of a chain 184-strong are now operating in the new livery, and there is scope for 80 more to be switched over in the next two or so years.

Meanwhile, this programme is continuing to release surplus space which is being let out to other retailers like Dixons and Carpetright and could be generating annualised rental income of pounds 4m by the year-end.

MFI's fledgling operations are also at last showing promise. Eight years after its establishment, the French Hygena chain, now 98-strong, broke into profits of pounds 1m last year. Despite the bleak economic environment there, that should be bettered this year, with underlying sales up 11 per cent in the first half. It is not clear why MFI moved into trade sales, given the travails of Wickes and other operators, but the start-up Howden Joinery business seems to be doing well and the plan is to double the current 24 depots, with profits expected in two to three years.

But the real bull story at MFI is the hope that consumers are starting to spend again. All will be revealed in a March trading statement, but profits of pounds 90m this year would put the shares, down 2p at 191p, on a forward p/e ratio of 19. Hold.

Start your day with The Independent, sign up for daily news emails
Arts and Entertainment
Brendan O'Carroll as Agnes Brown in the 2014 Mrs Brown's Boys Christmas special
tvCould Mrs Brown's Boys have taken lead for second year?
Arts and Entertainment
Jack O'Connell stars as Louis Zamperini in Angelina Jolie's Unbroken
film review... even if Jack O'Connell is excellent
News
news
News
peopleIt seems you can't silence Katie Hopkins, even on Christmas Day...
PROMOTED VIDEO
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Arts and Entertainment
Wolf (Nathan McMullen), Ian (Dan Starky), The Doctor (Peter Capaldi), Clara (Jenna Coleman), Santa Claus (Nick Frost) in the Doctor Who Christmas Special (BBC/Photographer: David Venni)
tvOur review of the Doctor Who Christmas Special
News
i100
Arts and Entertainment
tvChristmas special reviewed
Arts and Entertainment
Jenna Coleman as Clara Oswald in the Doctor Who Christmas special
tvForget the rumours that Clara Oswald would be quitting the Tardis
Arts and Entertainment
tv
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Selby Jennings: Oil Operations

Highly Competitive: Selby Jennings: Our client, a leading European Oil trading...

The Jenrick Group: Night Shift Operations Manager

£43500 per annum + pension + holidays: The Jenrick Group: Night Shift Operatio...

SThree: Trainee Recruitment Consultant - LONDON

£20000 - £25000 per annum + OTE £40,000 + Car + Pension: SThree: SThree are a ...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £35K: SThree: We consistently strive to be the...

Day In a Page

A Christmas without hope: Fears grow in Gaza that the conflict with Israel will soon reignite

Christmas without hope

Gaza fears grow that conflict with Israel will soon reignite
After 150 years, you can finally visit the grisliest museum in the country

The 'Black Museum'

After 150 years, you can finally visit Britain's grisliest museum
No ho-ho-hos with Nick Frost's badass Santa

No ho-ho-hos with Nick Frost's badass Santa

Doctor Who Christmas Special TV review
Chilly Christmas: Swimmers take festive dip for charity

Chilly Christmas

Swimmers dive into freezing British waters for charity
Veterans' hostel 'overwhelmed by kindness' for festive dinner

Homeless Veterans appeal

In 2010, Sgt Gary Jamieson stepped on an IED in Afghanistan and lost his legs and an arm. He reveals what, and who, helped him to make a remarkable recovery
Isis in Iraq: Yazidi girls killing themselves to escape rape and imprisonment by militants

'Jilan killed herself in the bathroom. She cut her wrists and hanged herself'

Yazidi girls killing themselves to escape rape and imprisonment
Ed Balls interview: 'If I think about the deficit when I'm playing the piano, it all goes wrong'

Ed Balls interview

'If I think about the deficit when I'm playing the piano, it all goes wrong'
He's behind you, dude!

US stars in UK panto

From David Hasselhoff to Jerry Hall
Grace Dent's Christmas Quiz: What are you – a festive curmudgeon or top of the tree?

Grace Dent's Christmas Quiz

What are you – a festive curmudgeon or top of the tree?
Nasa planning to build cloud cities in airships above Venus

Nasa planning to build cloud cities in airships above Venus

Planet’s surface is inhospitable to humans but 30 miles above it is almost perfect
Surrounded by high-rise flats is a little house filled with Lebanon’s history - clocks, rifles, frogmen’s uniforms and colonial helmets

Clocks, rifles, swords, frogmen’s uniforms

Surrounded by high-rise flats is a little house filled with Lebanon’s history
Return to Gaza: Four months on, the wounds left by Israel's bombardment have not yet healed

Four months after the bombardment, Gaza’s wounds are yet to heal

Kim Sengupta is reunited with a man whose plight mirrors the suffering of the Palestinian people
Gastric surgery: Is it really the answer to the UK's obesity epidemic?

Is gastric surgery really the answer to the UK's obesity epidemic?

Critics argue that it’s crazy to operate on healthy people just to stop them eating
Homeless Veterans appeal: Christmas charity auction Part 2 - now LIVE

Homeless Veterans appeal: Christmas charity auction

Bid on original art, or trips of a lifetime to Africa or the 'Corrie' set, and help Homeless Veterans
Pantomime rings the changes to welcome autistic theatre-goers

Autism-friendly theatre

Pantomime leads the pack in quest to welcome all