Adjusted PBT broadly in line

Findel 24 March 2016 Flash note

Findel

Adjusted PBT broadly in line

Pre-close statement

Consumer

24 March 2016

Price

185.25p

Market cap

£159m

Net core bank debt (£m) at 25 March 2016

87

Shares in issue

85.9m

Free float

100%

Code

FDL

Primary exchange

LSE

Secondary exchange

N/A

Share price performance

Business description

Findel comprises two businesses: the home shopping business, Express Gifts, and education supplies business Findel Education.

Analysts

David Stoddart

+44 (0)20 3077 5700

Paul Hickman

+44 (0)20 3681 2501

Findel is a research client of Edison Investment Research Limited

The pre-close statement notes that Findel expects to report FY16 profit before tax and exceptional items broadly in line our expectations. Core net debt will also be in line with our estimates. We therefore leave our estimates unchanged. The signs on sales growth at Express and the restructuring in Education are encouraging and underpin our unchanged SOTP target of £3.

Year end

Revenue
(£m)

PBT*
(£m)

EPS*
(p)

DPS
(p)

P/E
(x)

Yield
(%)

03/14

402.2

24.8

23.7

0.0

7.8

N/A

03/15

406.9

27.7

25.8

0.0

7.2

N/A

03/16e

406.1

25.0

24.2

0.0

7.7

N/A

03/17e

423.8

27.9

26.5

0.0

7.0

N/A

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles.

Having addressed a series of factors relating to stock, credit management and marketing, which restrained sales through Q316, Express has boosted sales growth. Product sales growth in the final nine weeks increased to 8.5%, compared to 2.2% for the year as a whole. Currency headwinds and a competitive market continue to constrict margins. Management expects Express Gifts to report FY16 operating profit approximately £2m lower than FY15’s £33.5m.

Sales in Education declined by 7.8%. However, the business stabilised its market share in its key UK Schools brands. The sales decline slowed to 7.6% in the final nine weeks of FY16 and trends in customer numbers improved. Encouragingly, the project to integrate the Education business’s two warehouses into one site has started well with one brand already successfully transferred from Enfield to Nottingham. Management remains confident that the programme will complete this year and produce cash and net profit benefits of £2-3m p.a. from FY18 onwards.

Within exceptional items, the provision for redress on financial services products has increased to £10m. Express having examined all of its financial products, we would be surprised to see further costs in this area. There will be an onerous lease provision for Education’s Enfield site of c £5-6m in addition to previously announced costs relating to the group’s refinancing, restructuring charges and Kitbag’s sale.

Disclaimer

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Wellington +64 (0)48 948 555

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New Zealand

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Wellington +64 (0)48 948 555

Level 15, 171 Featherston St

Wellington 6011

New Zealand

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