ScS and Pilkington's Tiles blame heat for profit alerts

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The Independent Online

The hot summer that kept people out of their homes and out of the shops claimed two more victims yesterday as the furniture maker ScS Upholstery and the ceramics maker Pilkington's Tiles issued profits warnings. ScS shares slid 12.5p to 248.5p, while Pilkington's battered share price was off 0.13p to 3.37p.

ScS still hopes to beat last year's pre-tax profits of £9.75m for the financial year to September but David Knight, the chief executive, sought to dampen expectations by stressing that like-for-like sales were down 2 per cent.

Mr Knight claimed that "once the weather returned to normal in early September, trading saw an immediate turn". Sales in the first two weeks of the current financial year were 2.5 per cent ahead on a comparable basis.

Rhys Williams, an analyst at Seymour Pierce, said: "We do not believe that the fall-off in sales is solely related to the warm weather. We have been bearish about the large ticket household goods retailers for a while since in our opinion the market is definitely slowing and we believe that next year could be a very sluggish year for sales."

Mr Williams cut his profit estimates from £11.35m to £10.2m for the year just ended and from £12.8m to £11.5m for the current year. That gives earnings per share of 21.6p and 24.5p respectively.

Since its last trading statement in August, ScS has opened four new stores and has been improving its supply chain with three new distribution centres.

Mr Williams said: "Despite our downgrades we still believe that ScS is a well run and tightly controlled company."

Pilkington's Tiles claimed a significant increase in sales in each one of the continuing operations in the first half to September but admitted that progress had been slower than expected.

A cut in the pre-tax loss from £765,000 to £599,000 was at the bottom end of expectations and the chairman, Tony Palmer, concluded: "While the improvement in trading will continue, the profit outturn for the full year is likely to fall below original expectations."

Although sales in continuing businesses were 20 per cent ahead at £15.4m, Mr Palmer said profitability was "constrained by the costs of the improvement programme" begun eight months ago.

The value of Pilkington's Tiles depends as much on the value of land it owns in Poole, Dorset, as on the business itself. Mr Palmer said the land had been revalued upwards by about 50 per cent but the actual price Pilkington's Tiles might raise is in a wide range from £7m to £14.3m, depending on what use it might be put to.