Silentnight dents hopes of upturn: Recovery in furniture 'not yet evident'

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The Independent Online
SILENTNIGHT Holdings, Britain's biggest bed maker, yesterday poured cold water on any hopes that the furniture market was recovering.

'Improvement on last year's excellent second-half performance will depend largely upon a recovery in the UK furniture market which is not yet evident,' said Bill Davies, chairman, in a reference to the prospects for the August to January second-half trading period.

Elimination of losses in the US bed making business and inclusion of the German subsidiary for the full six months - as against two months in the corresponding period of 1992 - lifted pre-tax profits by 27 per cent to pounds 5.2m for the six months ending 31 July. This compared with pounds 4.1m a year earlier. Earnings per share rose from 5.98p to 7.41p.

Analysts were surprised by an interest charge of pounds 66,000 despite Silentnight's net cash of about pounds 5m. Barry McKenzie, finance director, said this was due to borrowings in Germany, where interest rates are relatively high. The loan had been raised to match the value of German assets and eliminate currency risk.

The shares fell 1p to 377p as analysts trimmed full-year profit forecasts to a range of about pounds 12m to pounds 12.5m.

The interim dividend was increased for the first time in five years from 2.25p to 2.75p. Mr McKenzie stressed that it was company policy always to pay the same interim dividend, but he felt this one-off rise was necessary because the interim had dwindled in relation to the full-year dividend as profits had grown.

Total sales rose by 13 per cent to pounds 79.6m after pounds 70.5m in 1992. This was mainly thanks to 1992's German acquisition, but cabinet sales in the UK and Ireland rose by 21 per cent to pounds 20m.

Silentnight has been investing heavily in its cabinet business - which covers bedroom, dining and living room furniture - and makes furniture that retails at about 20 per cent less than the competition's. Its furniture is covered with 'paper foil' rather than the more usual veneer.