Recession deflates Kwik-Fit by 42%

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SHARES in Kwik-Fit Holdings slumped 13p to 96p after the car tyres and exhausts fitter brought forward its interim results to report a worse-than-expected fall in profits.

The taxable outcome is down 42 per cent to pounds 9.7m for the six months to 31 August, well below the City's expectations of pounds 11m.

There was also a pounds 1.7m profit on property disposals that was not anticipated by analysts.

Tom Farmer, the chairman and chief executive, said the results were brought forward to remove uncertainty 'so that shareholders and the market are informed as quickly as possible'.

Yesterday's figures prompted City analysts to take the knife to their full-year forecasts for the second time in three months. Rob Golding, an analyst with Warburg Securities, has slashed his estimate from pounds 23m to pounds 15m before tax. In July, the company's shares crashed by a third after two brokers prompted a series of downgradings.

Kwik-Fit's profits decline stems from a sharply lower demand for new tyres due to the recession. Group turnover fell by 8 per cent overall but like-for-like sales - which exclude the impact of seven new fitting centres - were down 12 per down.

Both car fleet owners and private motorists have been delaying spending on car parts despite new legislation on tyre tread depths. Many motorists have also been buying reconditioned tyres rather than forking out for new ones.

Car exhaust sales, however, were maintained at the previous year's level, partly because spending on replacements is harder to delay.

Interest costs eased back from pounds 1.6m to pounds 1.4m. Net borrowings at the first half amounted to pounds 6m, representing 6 per cent of net assets, and are likely to be eliminated by the year end.

The company said that 'controlled expansion' would continue. A total pounds 9m capital expenditure was incurred in the first half and 30 new sites are under development by Kwik-Fit.

Earnings per share slipped 46 per cent to 3.82p but the interim dividend is held at 1.35p.

'It is difficult to make any forecast with respect to future trading,' Mr Farmer said. 'However, the group, with its leading market position, will benefit from any uplift in sales as motorists reach the point where they cannot defer their car maintenance requirements any longer.'