Recovery helps Fine Art dispel grim picture

Fine Art Developments, a catalogue retailer and Europe's biggest greetings card producer, had only pleasant surprises yesterday, in contrast to December, when disappointing results at the interim stage led to a bloody nose from the market.

The shares clawed back a further 3p of the 44p lost then, leaving them at 389p as the company revealed it was raising the final dividend by 7 per cent to 11.8p, taking the total from 14.3p to 15.3p.

The largesse came despite a mere 2 per cent increase in pre-tax profits to pounds 38.7m for the year to March and a warning from the chairman, Keith Chapman, that there was still no sign of the feel-good factor among customers.

"We are assuming there will be no marked improvement in consumer confidence in the short term; this is governing the way we are managing the business," he said.

One of the hardest hit by recession has been Fine Art's Webb subsidiary, a leader in the provision of catalogues for charities like the RSPB, NSPCC and Save the Children Fund.

Support for charities has been falling for the past two or three years, and the business returned a small loss last year. Mr Chapman said it would return to profit this year, but it could take another two to three to recover fully.

Meanwhile, the two businesses supplying wholesalers have suffered, with small tobacconists and newsagents under the cosh of Sunday trading.

Increases in other businesses more than offset the shortfall. Overall, the mail order division saw operating profits rise 5 per cent to pounds 24.9m, while cards rose 2 per cent to pounds 20.2m.

Mr Chapman is pinning his hopes on new initiatives such as the switch to customers paying interest on credit purchases at the Express Gifts mail order business.

The move has helped push gearing to 66 per cent, but Tony Shiret at the company's brokers, Barclays de Zoete Wedd, still believes Fine Art can make pounds 42m profits this year.