Silentnight hit by rising costs

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The Independent Online
Rising raw material prices and continuing stiff competition were blamed by Silentnight, the bedmaker, for an 11 per cent fall in pre-tax profits to £11.1m last year.

Silentnight said the weak pound had increased the cost of importing wood and other raw materials but these could not be passed on to customers.

Profits from bed sales in the UK had fallen from £8.7m last year to £5.4m. The fall was offset by an improvement from the cabinet making business, which saw profits rise from £2.3m to £3.2m.

The results include an exceptional charge of £1.1m, mainly to pay for the closure of one of the company's Yorkshire factories.

There was also a bigger contribution, worth over £1m, from Silentnight's activities in Germany, the United States and Kenya.

Turnover was up 6 per cent to £177m, mainly on the back of increased sales from the cabinets business, which accounted for £48.4m of turnover compared with £41.8m last year. Turnover from beds dropped off to £100m, down from £101.8m last year.

Bill Simpson, chief executive, said: "We have been hurt by the raw material price increases. Sterling has been one cause. We are expecting raw material prices to rise by 9 per cent in the current year, and that assumes sterling stays where it is."

The improvement in the cabinets business was due to better design, and the sector's growth was expected to continue. However, Mr Simpson was pessimistic about prospects for the bed business.

City analysts said the results were at the lower end of expectations. One analyst commented: "It's going to be a very tough year ahead. Overall the group is not going to make much of an advance." Earnings per share are 15.55p, down 12 per cent. The dividend is unchanged at 8p.