Carpets and floor coverings purveyor United Carpets (UCG:AIM) has delivered better-than-expected finals with taxable profits up 23% to £1.49 million, comfortably ahead of the £1.45 million anticipated by broker Cantor Fitzgerald Europe.
Reassuringly, like-for-like sales since the March year-end have 'continued to be positive' and United Carpets has yet to see any discernible impact from the Brexit vote.
'In the board's view, demand from our target customers has improved during the 12 months under review, benefiting from a modest increase in consumer confidence,' comments chairman Peter Cowgill in today's preliminary results statement.
Continues Cowgill: 'Whilst uncertainty over the outcome of the EU referendum had a negative effect on wider consumer confidence more recently, we believe that market conditions continued to be broadly positive. It will take some time to assess the real impact of the decision to leave the EU, however, the housing market in our core areas appears to have been generally moving forwards a little which may bring some additional benefits to our traditional growth drivers of renovations and home improvements.'
Shares in Rotherham-headquartered United Carpets, the UK's second largest chain of specialist retail carpet and floor covering stores, weave 2.27% higher to 11.25p on the earnings beat, which is pleasing given the positive stance Shares outlined on the stock here in February.
CEO Paul Eyre reports sales up 6% to £21.4 million with like-for-like sales 5.8% ahead. Within the mix, flooring like-for-likes grew 4.3% while like-for-like beds sales leapt 27.2%, admittedly from a low base. Over the past two years, United Carpets has improved the quality of its store portfolio and is now well placed to expand its store network.
Yet one of the key planks of the investment case is United Carpets' relatively strong balance sheet, the company closing the year with £1.6 million in net funds and increasing the final dividend to 0.265p (2015: 0.25p). This supports scope for significant free cash flow and further special dividends, building on the 1p paid in June 2015, in the years ahead.
'The group continues to be virtually debt free, cash generative and is growing organically at a sustainable rate,' comments Eyre, adding 'the board therefore believes the group to be well positioned to continue this progress supported by a store network that is in good shape.'
'Following this update, we are for the time being retaining our FY17 pre-tax profit forecasts of £1.55 million (EPS: 1.52p),' writes Cantor Fitzgerald Europe analyst Freddie George, who believes forecast risk is to the upside.
'Results over the medium term are, we believe, set to benefit from recent initiatives including a strategy to improve the quality of the store portfolio through relocations. They should also benefit from the development of up to three stores each year, the conversion of up to three corporate to franchise stores each year, the extension of the interest free credit offer to all stores and a further strengthening of the bed ranges.'