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It’s a game of good news / bad news for Carpetright (LSE:CPR) shareholders this morning. But investors have responded positively today, pushing the share price up 13.0 pence (2.15% ) to 618.50 upon release of the company’s full-year results ending 27 April.
Reading the report, one senses that Neil Page, Finance Director, and Darren Shapland, CEO, struggled to find some good news to offset the bad. How investors interpret the results will determine how well the carpet and flooring retailer’s share price will fare. Judging by their immediate response this morning, they understand that retail has become the sector of last resort for university graduates with a business degree. In fact, failure for a college grad to secure a position elsewhere, may leave them consigned to the far corner of purgatory called “Retail” where the door to hell is always open. These are the former students with the strongest backs, who have too much integrity to become a banker or a politician.
I’d better get back to the story.
The best news is that CPR’s UK revenues increased by 2.2% on a like-for-like basis. The next best news is that underlying operating profit increased by 42.5% to £11.4 million. The core retail (excluding wholesale and contractor) business improved 3.9%. Sales in refurbished UK stores (186 total; 154 during the fiscal year) were up 10%. It’s pretty much downhill from there, with the exception of an £8.9 million reduction in debt that brought the total debt reduction since 2009 down by more than 89%.
- Rest of Europe (ROE) sales dropped 10.4%
- Total revenue dropped by 2.9% to £457.6 million
- A £5.1 million pre-tax loss
- A 9.8 pence loss per share
- No dividend payouts
While it is fairly easy to see by reading the report, which was published with an amendment, pretty much all of the good news is a direct result of what the company calls “self help measures;” in other words internal restructuring and cost cutting along with external image enhancement, the retail outlet refurbishments being the prime example. Specifically, Shapland said, “The improvement in the Group’s performance this year has been driven, in large part, by the success of our programme of self-help measures, a number of which were accelerated on conclusion of the review completed immediately following my appointment as Chief Executive in May 2012. The results from this package of initiatives have been very encouraging and further potential exists in the ongoing roll-out over the next two financial years.”
My take on Carpetright is that, although the entire retail sector is suffering the woes of the continuing economic crunch, Shapland and his team have developed an excellent plan for returning the business to profitability and a solid foundation for future growth. Long term investors apparently agree. The sheer fact that UK sales are on the increase again is a near miracle in and of itself. There are not a lot of UK retail businesses that can point to the same result.
The thing that impresses me about Carpetright is that neither the board nor the investors are acting like victims of the economy, even though they are. They have recognized that they are also victims of good-times management that was not adequately prepared for crisis. They are not crying about it. They are doing something about it, even if it means applying their corporate EPICs stock symbol, CPR. The results are satisfactory to the point that they indicate that there will, indeed, be more good news to come.
For past ADVFN articles about Carpetright, see “Carpetright’s Property Portfolio Disposal Boosts Annual Profit” and “Carpetright Shares Decline Following Interim Management Statement.” Those articles were published on 26 June 2012 and 31 January 2012, respectively.
