The flooring retailer reported a statutory loss before tax of £11.7mln for the six months to October 27, compared to a loss of £600,000 the same period a year ago. Revenue fell 15.7% to £191.1mln from £226.6mln last year, reflecting weaker consumer demand.
Like-for-like sales in the UK dropped 19% to £149.6mln while like-for-like sales in the rest of Europe dipped 1.2% to £41.5mln. However, shares gained 4.2% to 17.05p in morning trading as the group said it was on track to deliver £19mln in annualised cash savings after closing 65 underperforming UK stores and reducing its overhead costs.
READ: Carpetright shutters over 60 stores but performance trend improves as restructuring takes effect
The store closures were part of a company voluntary arrangement– an insolvency progress that allows a struggling business to close stores and negotiate lower rents on remaining stores – agreed with creditors and landlords in April.
In June the company secured £60mln in an emergency equity raise of support its CVA and restructuring costs.
The proceeds of the fundraising, combined with tight costs control and £58.8mln headroom in bank facilities, allowed the company to reduce its net debt to £12.4mln at the end of the first half from £53mln as of April 28.
"This is a transitional year for Carpetright as we work through our restructuring plan,” said chief executive Wilf Walsh.
“We remain on schedule and are confident that this activity is already starting to yield benefits. This is the first stage in returning the group to sustainable long-term profitability."
As part of the turnaround strategy, Carpetright plans to invest in digital technology to improve its online and in-store customer experience. The project is expected to go live in Spring 2019.
The company has halted plans to refurbish stores in order to evaluate its UK estate. It intends to restart refurbishments in the second half.
“As far as management and business performance goes, Carpetright looks well on track to hit our full-year forecasts,” Peel Hunt said, repeating a ‘buy’ rating on the stock.
“However, we take a cautious view on the macro environment on Brexit uncertainty into Q4 and cut UK sales forecasts by circa 2.5%, which translates to circa £3.5mln cut to full-year EBITDA forecasts.”
In morning trading, shares were changing hands at 18p each.