1st Dec 2005 07:02
MFI Furniture Group PLC01 December 2005 MFI Furniture Group Plc Pre-Close Trading Statement 1 December 2005 MFI today announces its scheduled pre-close update including information oncurrent trading. > Howden Joinery has traded well through its peak Autumn period with total sales for the second half to date up 8 per cent on the same period last year and 4 per cent on a same store basis. The trading environment has, however, become increasingly demanding and is expected to remain so. > UK Retail continues to experience tough market conditions. Orders in the last eight weeks to 26 November 2005 show a year on year decrease of 15 per cent, compared to the 31 per cent decrease for the three weeks prior to 2 October 2005 reported in our last trading update. The Group is on track to meet market expectations for the financial year,although within the overall result, Howden Joinery is likely to deliver anoperating profit towards the lower end of current market estimates. A wide-ranging and fundamental review of the Group's performance and strategy,including UK Retail, is being undertaken by Matthew Ingle, whose appointment asGroup Chief Executive was announced on 3 October 2005. The review is ongoing andan announcement will be made when conclusions are reached. In the short-term UKRetail is being managed for margin, cost control and cash, with the immediatefocus on the important Winter Sale, which commences on Boxing Day. As part of this strategy review, the Board is exiting certain of the Group'sactivities comprising: > Howden Millworks in the USA; > the retail joint venture in Taiwan; and > the Ethan Allen joint venture in the UK. These activities are expected to report a combined loss of circa £10 million inthe current year. There will be an exceptional charge to the profit and lossaccount of approximately £16 million in the current year. Trading and outlook The Group's order performance for the year to date, as compared with last year,is summarised below: Second half to date(1) Year to date(2) Total Same store Total Same store------------ -------- -------- -------- --------Howden Joinery(3) 8% 4% 11% 7%UK Retail(3) (19)% (18)% (9)% (10)%France Retail(3) 6% 4% 10% 7%Group (5)% (7)% 0% (2)%------------ -------- -------- -------- -------- (1) 24 weeks to 26 November 2005(2) 48 weeks to 26 November 2005(3) For Howden Joinery, orders equate to sales. UK Retail and France Retail orders are recorded as sales when the order is despatched to the customer Howden Joinery Orders (which equate to sales) for the year to date at Howden Joinery show an 11per cent year on year increase (same store 7 per cent). Howden Joinery traded well through its peak period in October with sales for thesecond half to date up 8 per cent (4 per cent on a same store basis). Thetrading environment has become increasingly demanding and is expected to remainso. By the year end, 22 depots will have been opened taking the total to 342. Depotopenings are less than the 40 originally planned, reflecting the emphasis onprofit contribution in current market conditions. The Board expects 2006 depotopenings to be at a similar level to this year. UK Retail UK Retail continues to experience tough market conditions. The focus in thebusiness is on margin, cost control and cash and this will continue through theWinter Sale. Following recent management action, UK Retail gross margin hasshown an improvement. Orders for the second half to date show a decrease of 19 per cent compared withthe same period last year. This reflects a year on year decrease in orders of 15per cent reported for the first 13 weeks of the second half (to 7 September2005), a year on year decrease reported for the next three weeks of the secondhalf (to 2 October 2005) of 31 per cent, and a 15 percent year on year decreasefor the subsequent eight weeks (to 26 November 2005). For comparison, year on year sales in UK Retail in the second half are down 12per cent on both a total and same store basis and sales for the year to date aredown 4 per cent (5 per cent on a same store basis). The decrease in sales forthe year to date is lower than the decrease in orders. This reflects theunwinding of the high opening order book this year and an improvement indelivery during 2005 following the supply chain problems in the second half oflast year. France Retail Hygena Cuisines continues to record a strong performance with orders for theyear to date up 10 per cent and same store orders in local currency up 7 percent on the same period last year. Non-core activities As part of the strategy review, the Board is exiting a number of the Group'sactivities. In the United States Howden Millworks is to be closed. Whilst recent salesperformance has improved, the results from the 20 pilot depots do not justify asignificant roll out programme at this time. In order to achieve an efficientrealisation of inventory the business will continue to trade until March 2006.All operations in the United States will cease by June 2006. Agreement has been reached to divest the Group's interest in its retail JointVenture in Taiwan to the local partner. The business will continue to besupplied with product by the Group. It is expected that the divestment will becompleted by January 2006. In the United Kingdom, we have reached agreement with our Joint Venture partnerEthan Allen Inc. to close the two Ethan Allen stores in the UK. The closure plananticipates that operations will cease by the end of March 2006. Financing Constructive discussions with the Group's lenders continue and these areexpected to conclude before the announcement of the Group's preliminary resultsfor the current year. Net debt is currently around £63 million. Matthew Ingle, Chief Executive Officer, said today: "Howden Joinery has performed well in a more demanding market. In UK Retail weare undertaking a fundamental review and, in the short term, are managing thebusiness for margin, cost control and cash. We have also taken actions tosimplify the Group and improve profitability by exiting a number of non-coreactivities." Enquiries MFIMatthew Ingle 020 7404 5959 (today only)Mark Robson 020 7404 5959 (today only) BrunswickSusan Gilchrist 020 7404 5959Fiona Laffan 020 7404 5959Anna Jones 020 7404 5959 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Howden Joinery