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ScS’s “strong” financial health to cushion against market uncertainty

Published: 11:05 01 Oct 2019 BST

ScS Group plc - ScS’s “strong” financial health to cushion against market uncertainty
The retailer is ready for a "challenging" financial year

Shares in ScS Group plc (LON:SCS) fell out of bed this morning as the sofa seller revealed a sharp fall in like-for-like sales.

The past two months recorded a 7.6% plunge, a sharp fall considering the financial year closed on 27 July with a 4.2% increase driven by online and core in-store furniture offerings.

READ: ScS warns of second-half profit hit from rising cost of providing interest-free credit

The home furnishing retailer said the poor comparative performance was due to record temperatures over the August bank holiday weekend as well as recent political turmoil, which it warned may continue to affect consumer sentiment, cause increased costs due to exchange rate fluctuations and border delays affecting lead times.

Chief executive David Knight said the company is in a good position to face the “challenging” year ahead thanks to “strong” financial health and a debt-free balance sheet that allows the company to “invest internally and consider external opportunities as they arise.”

Acquisitions and exits

The company, which tried to acquire retailer Sofa.com before it was snapped up by Sports Direct International Plc (LON:SPD) in February, said it continues to consider similar investments.

A new store opened in September in Kirkcaldy, Scotland, while ScS identified a few key sites to set up shop should the right space and location be secured.

ScS ended its House of Fraser concession in January, exiting 27 locations, after the department store went into administration in August 2018.

Profits flat

Underlying earnings (EBITDA) for the full year were pretty flat at £19.7mln compared to £19.1mln a year ago, with exceptional costs involving the due diligence conducted for the acquisition of Sofa.com.

Revenue of £317.4mln was up 1.5%, driven by increased sales volumes in the year and partly offset by a lower opening order book, due to the warm weather and a hangover from last year’s football World Cup plus the closure of two stores which didn’t meet the return targets.

The board proposed a final dividend of 11.20p, which would give a full-year dividend of 16.70p, making an increase of 3.1% year-on-year.

Shares were down 6.56% to 221.46p in mid-morning trades.

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