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
ebooks
ebooksAn introduction to the ground rules of British democracy
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

Recruitment Genius: Sales Assistant / Buyer

£15000 - £17000 per annum: Recruitment Genius: This company offers a range of ...

Recruitment Genius: Customer Service Advisor

£15000 - £16000 per annum: Recruitment Genius: Customer Service Advisors are r...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45K: SThree: SThree were established in 1986....

Recruitment Genius: Compliance Manager

£40000 - £60000 per annum: Recruitment Genius: A Compliance Manager is require...

Day In a Page

Greece debt crisis: What happened to democracy when it’s a case of 'Vote Yes or else'?

'The economic collapse has happened. What is at risk now is democracy...'

If it doesn’t work in Europe, how is it supposed to work in India or the Middle East, asks Robert Fisk
The science of swearing: What lies behind the use of four-letter words?

The science of swearing

What lies behind the use of four-letter words?
The Real Stories of Migrant Britain: Clive fled from Zimbabwe - now it won't have him back

The Real Stories of Migrant Britain

Clive fled from Zimbabwe - now it won’t have him back
Africa on the menu: Three foodie friends want to popularise dishes from the continent

Africa on the menu

Three foodie friends want to popularise dishes from the hot new continent
Donna Karan is stepping down after 30 years - so who will fill the DKNY creator's boots?

Who will fill Donna Karan's boots?

The designer is stepping down as Chief Designer of DKNY after 30 years. Alexander Fury looks back at the career of 'America's Chanel'
10 best statement lightbulbs

10 best statement lightbulbs

Dare to bare with some out-of-the-ordinary illumination
Wimbledon 2015: Heather Watson - 'I had Serena's poster on my wall – now I'm playing her'

Heather Watson: 'I had Serena's poster on my wall – now I'm playing her'

Briton pumped up for dream meeting with world No 1
Wimbledon 2015: Nick Bollettieri - It's time for big John Isner to produce the goods to go with his thumping serve

Nick Bollettieri's Wimbledon Files

It's time for big John Isner to produce the goods to go with his thumping serve
Dustin Brown: Who is the tennis player who knocked Rafael Nadal out of Wimbeldon 2015?

Dustin Brown

Who is the German player that knocked Nadal out of Wimbeldon 2015?
Ashes 2015: Damien Martyn - 'England are fired up again, just like in 2005...'

Damien Martyn: 'England are fired up again, just like in 2005...'

Australian veteran of that Ashes series, believes the hosts' may become unstoppable if they win the first Test
Tour de France 2015: Twins Simon and Adam Yates have a mountain to climb during Tour of duty

Twins have a mountain to climb during Tour of duty

Yates brothers will target the steepest sections in bid to win a stage in France
John Palmer: 'Goldfinger' of British crime was murdered, say police

Murder of the Brink’s-MAT mastermind

'Goldfinger' of British crime's life ended in a blaze of bullets, say police
Forget little green men - aliens will look like humans, says Cambridge University evolution expert

Forget little green men

Leading evolutionary biologist says aliens will look like humans
The Real Stories of Migrant Britain: An Algerian scientist adjusts to life working in a kebab shop

The Real Stories of Migrant Britain

An Algerian scientist struggles to adjust to her new life working in a Scottish kebab shop
Bodyworlds museum: Dr Gunther von Hagens has battled legal threats, Parkinson's disease, and the threat of bankruptcy

Dying dream of Doctor Death

Dr Gunther von Hagens has battled legal threats, Parkinson's disease, and the threat of bankruptcy