No rest for Silentnight as profits dip

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SILENTNIGHT HOLDINGS, Britain's biggest bed-maker, yesterday blamed poor demand for cabinet furniture for a flat profits performance and said the closure of its Barnsley factory had resulted in one-off costs.

Trading losses and pounds 2.9m of closure costs pushed Silentnight's full-year profits down slightly to pounds 16.3m against pounds 16.5m last year. Sales at Silentnight's cabinet division fell by 16 per cent as consumers cut back on discretionary purchases.

The main problem was at the Meredew business, acquired from Spring Ram two years ago. It specialises in pre-assembled bedroom and dining-room furniture with prices up to pounds 900 and consumers were reluctant to commit themselves to such big purchases towards the end of last year as the threat of recession loomed. Meredew barely broke even in the year and has now been merged with the group's other cabinet brands where demand has proved more stable.

The poor performance overshadowed solid growth in the bed division which includes top brands like Sealy and Layezee where like-for-like sales grew by 4 per cent. Including the Rest Assured brand acquired last year, bed sales grew by 10 per cent.

Silentnight's problem is that it already has 20 per cent of the UK bed market with limited scope for expansion. To tap further markets for growth, it is selling its bed division in the US where high prices are limiting acquisition opportunities. The proceeds will be used to make furniture acquisitions in the UK.

This presents a problem for investors as the outlook for the shares depends heavily on what management chooses to buy. This aside the shares look good value. House broker BT Alex.Brown's current year profit forecast is pounds 19.5m. With the shares up 3p to 206.5p, the stock trades on a forward multiple of 10 and yields 6 per cent. Worth a look.

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