MFI gloomy on prospects after interim profits fall

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The Independent Online
MFI, the furniture maker, yesterday delivered a gloomy verdict on current trading conditions when Derek Hunt, the chairman, warned of 'disappointing' demand for more expensive items, such as kitchens and bedroom furniture, since the start of the Boxing Day sales.

Revealing lower-than-expected interim profits, Mr Hunt said sales had been broadly in line with the previous year until the events of last September, when sterling was forced out of the exchange rate mechanism.

Black Wednesday had resulted in a sharp fall in consumer confidence and, as yet, there was no sign of economic recovery.

Pre-tax profits for the 28 weeks to 7 November, the first since the group re-floated on the stock market in July, were calculated on a pro forma basis showing the results as if the flotation had occurred just before the period under review. On that basis they were 33 per cent lower than last year at pounds 12.7m, with turnover down 5.6 per cent at pounds 303.6m.

The poor results led most analysts to downgrade their pre-tax profit expectations for the full year to around pounds 45m.

Excluding salary costs, MFI succeeded in cutting overheads by 7.4 per cent in the period under review. But higher payroll costs cut the improvement to just over 1 per cent.

The shares lost 7p to 128p. The interim dividend is 1.25p a share.

Watson & Philips, the Dundee-based wholesale food distributor, is buying the Circle K chain of shops for pounds 21m. Subject to shareholders' approval, W&P will pay 4.4 million shares and pounds 7.65m cash and take on Circle K's pounds 3.3m worth of net debt. Circle K owns about 150 stores, mainly in central and southern England. Another 60 stores are operated by licensees and franchisees. W&P's shares closed up 31p at 333p.