Carpetright denies investors dividend

Soft-furnishings retailer Carpetright has not declared a dividend, despite pre-tax profits for the year to 27 April soaring 142.5%.

Total group sales fell by 2.9%. By region, there was a 15.5% sales decline in the rest of Europe (Netherlands, Belgium and the Republic of Ireland), which also saw like-for-like sales fall by 11%. UK sales were flat, with like-for-like sales improving by 2.2%.

A reduction in promotional activity and the impact of better bed and laminate ranges helped UK gross margins improve by 260 basis points, better than guidance of between 225 and 250 basis points.

Operating profits in the UK improved by 290%. Going the other way, the rest of Europe saw operating profits fall by 90%, with the main driver operational gearing. Pre-tax profits improved from £4 million to £9.7 million, although this was before exceptional charges of £14.8 million.

Debt fell by £8.9 million to £10.2 million.

"The success of our self-help activities in improving group performance during the period was particularly encouraging, demonstrating that a focus on factors within our control can yield good results," stated chief executive Darren Shapland.

"While we expect trading conditions to remain challenging, we are confident that the combination of these self-help initiatives will underpin the positive momentum of the group."

No dividend

"It is disappointing that there is no final dividend," stated Philip Dorgan, analyst at Panmure Gordon. "Indeed, the table on the front page of the press release says that the dividend per share was 'TBC', so clearly this was a well-thought-through decision."

Analyst view

Dorgan added: "Carpetright shares are tightly held, hardly traded and many investors are taking a long-term view that its markets will recover and that, in the meantime, management will manage cash and costs well."

However, he rated the stock a 'sell' explaining: "The shares trade [on a 2013 price/earnings (P/E) ratio of] 58 times and [a prospective 2014 P/E ratio of] 31 times, but, more importantly, they trade at 11 times peak earnings.

"This looks over-optimistic to us and this is why we remain sellers."