1st Oct 2014 08:21
LONDON (Alliance News) - UK home shopping and education business Findel PLC said it expects to report a positive first-half pretax profit for the first time in six years, but said sales in the first half remained broadly flat.
In a post-close trading update, the company said its profit expectations exclude exceptional items.
"The first half of the year has seen a substantial improvement in operating profit and margin. Sales in the period were broadly flat, reflecting a mixed sales performance across our businesses. We continue to make significant progress in reducing overall debt and core net debt," the company said in a statement.
The group said it continues be driven by its largest division, Express Gifts.
"Overall, though mindful of the important Christmas trading period ahead and the specific market challenges currently in front of our Education business, we maintain our expectations for overall group performance and margin targets," the company said in a statement.
Findel said its direct mail-order unit, Express Gifts, saw sales grow 6% in the 26 weeks to September 26, driven by growth from its existing customers and a 4% increase in customer numbers.
"The business has again achieved a significant increase in profits and operating margin, which is a critical driver of the group's overall performance. The business is well placed ahead of the important Christmas trading period," it said.
However Findel warned of weakness in its network marketing unit Kleeneze, as well as its second biggest unit, its Education Supplies business.
The company said its Education Supplies division posted in a 5% fall in first-half sales, hit by new curriculum and changes to budgets and funding processes for schools.
"A range of corrective actions have already been taken and more will be taken in the second half to mitigate the profit impact this year should the anticipated market recovery be further delayed or fail to materialise," the company said.
Findel said its smallest business, Kleeneze, continues to underperform, with sales down 24% in the first-half.
"Whilst service levels have recovered and distributor numbers have stabilised, sales per distributor are yet to improve. A number of new options are being trialled and evaluated to improve performance, it said.
The company said its Kitbag sports retail business, which has been struggling as of late, saw sales improve in the first-half by 7% and also reduced its losses.
"The remaining activities in the operational turnaround plan are progressing well," the company said.
Findel's turnaround plans for the Kitbag business include contract renegotiations and operational changes. It said that given the substantial improvement in the underlying operations and contract base for Kitbag, it now seems an appropriate time to commence a full strategic review of the business.
"The board has concluded it is now appropriate to commence a full strategic review of the options for the future development of Kitbag, including consideration of further investment or potential divestment," the company said.
The company said it will release its interim results on November 26.
Findel shares fell 1.7% Wednesday morning, trading at 238.00 pence.
By Rowena Harris-Doughty; [email protected]; @rharrisdoughty
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