Retailer ScS Group PLC (LON:SCS) has warned that second-half profits will take a knock from the rising cost of providing interest-free credit on its sofas and carpets.
The £90mln company said recent rises in LIBOR – the rate at which banks lend to one another – meant it is now more costly to provide interest-free finance which, in turn, will “negatively impact” second-half margins.
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“Consequently, the group expects that margins in the second half of the year will be similar to those achieved in the first half of the prior year,” according to a line in Tuesday’s interim results statement.
Still, ScS shares edged 0.7% higher to 223p in early deals as the continuation of a pick-up in trading offset any margin worries.
Group revenue rose 1.1% to £151.4mln (H1 18: £149.9mln) in the six months ended 26 January, while profits increased by 1.5% to £71.5mln (H1 18: £70.4mln).
First-half revenues, profits rise
That is no mean feat given the state of the home improvement industry in the UK, with the cash-strapped public generally putting off any big-ticket purchases. Just ask Carpetright PLC (LON:CPR).
Fewer people are moving houses, typically a time when they spend big on things like new carpets, sofas and tables.
Like-for-likes – which strip out the impact of new and closed stores – rose 1.5% in the period, and they are now up 2.9% for the year-to-date.
That is what bosses had expected though, given that last year’s Beast from the East means the comparatives aren’t too difficult.
Short-term trading to ‘remain challenging’
“The group continues to deliver profitable growth whilst increasing its resilience. The board is pleased with the group's year to date trading, which is in line with its expectations,” said chief executive David Knight.
“The retail market continues to suffer in the midst of the uncertain economic and political environment.
“We, therefore, expect the trading environment to continue to remain challenging in the short to medium term, although the board is confident that the group is well positioned to maximise opportunities as they arise.”