Home shopping-to-education supplies business Findel (FDL) falls 5.5p to 222p, as flat interim profits and a sales slowdown at direct mail order arm Express Gifts give investors the jitters. Findel also warns investment costs will curtail profit growth next year too, though the share price decline is cushioned by ongoing takeover speculation.

Click here to read Findel's half-time results, revealing static pre-tax profit of £3.4 million from continuing businesses, with sales broadly flat at £191.4 million (2014: £192.2 million). Crimping the performance was a disappointing turn from Express Gifts, the core credit-based home shopping operation turned around dramatically over the past four years.

Express Gifts experienced an 'unexpected slowing in demand' from its autumn catalogues in the half, mainly seen from new and dormant customers, though sales to existing customers were stronger and executive chairman David Sugden is 'confident that the recent slowdown in new customer recruitment will be reversed in future campaigns.'

Running the business until a full-time CEO is found, Sugden assures Findel will deliver an increase in full-year profit before tax, though the need to invest in Express Gifts' new customer recruitment 'will subdue profit growth in FY17'.

Web - FDL - NOV 15

Findel, which reports a further fall in net bank debt to £95.6 million (2014: £115.9 million), says its austerity-stricken education division is beginning to stabilise. Talks regarding the sale of loss-making specialist sports retail arm Kitbag, treated as a discontinued operations in these numbers, are ongoing.


According to Findel: 'As announced on 29 September 2015 we have received an approach to purchase Kitbag and terms for that transaction have been agreed subject to contract.' However, 'the buyer is taking longer than expected to finalise their funding for the transaction and until this is completed there can be no certainty that a transaction will be agreed.'

Cantor Fitzgerald Europe insists Findel is undervalued, 'worth up to 350p per share on a sum-of-the-parts basis', and well-supported by fundamentals such as Express Gifts' impressive earnings record. Reiterating its 'buy' rating and 335p price target, the broker reminds clients recent share price strength reflects the announcement that Mike Ashley's Sports Direct International (SPD) has acquired an 18% stake, as well as the Kitbag approach.

'Stake-building by a shareholder, which is likely to be an activist, and the disposal of one of the company's three divisions is likely to lead to the break-up of the group,' writes retail scribe Freddie George.

Issue Date: 25 Nov 2015