THE INVESTMENT COLUMN : Can Carpetright keep growing?

Sir Phil Harris, the Magic Carpet man, is clearly enjoying himself. Just two years after the flotation of Carpetright, his carpet warehouse company, the business has snatched 12 per cent of the UK carpet market, amassed pounds 20m in the bank and is flogging more shag pile than you can shake a stick at.

Yesterday's figures continued the trend. Pre-tax profits increased 40 per cent to pounds 19.7m in the year to April on sales up 28 per cent to pounds 141m. A progressive dividend policy continues with a 50 per cent rise in the payout to 10.5p.

The problem is that unless Carpetright expands abroad or diversifies at home, the headlong growth will slow. The company would then be in danger of becoming little more than a cash generator that could afford a share buy-back every couple of years. Sir Phil is still hanging fire on a share repurchase.

Meanwhile, the expansion continues apace. Carpetright opened 43 stores in the year, bringing the total to 189. A further 30 will open this year.

Much is expected of Premier Carpets, a new, slightly more upmarket format that started trading last year from concessions in MFI and Sainsbury's Homebase. Premier outlets keep no stock but guarantee the delivery of carpets within five days. Up to 20 Premier concessions will open this year in do-it-yourself sheds and department stores and the expansion programme should take Carpetight's market share up to 25 per cent by the end of the decade.

Trading remains robust, with like-for-like sales up 4 per cent over the year. However, there is pressure on margins from rising raw material prices.

NatWest Securities forecasts profits of pounds 25m next year. That puts the shares - up 9p to 279p yesterday - on a forward rating of 13.6. High enough.