Online value retailer-to-education supplies company Findel (FDL) firms 2.3% to 225p after a record-breaking Black Friday for its biggest business Express Gifts.
The retailer, whose biggest shareholder is Mike Ashley’s Sports Direct (SPD), continues to expand its customer base and revenues. There is also welcome progress from the Education arm's UK customer base ‘for the first time in many years’ as the proposition increasingly shifts towards value and moves online.
STIFEL’S ESTIMATE SMASHED
Results for the half ended 28 September show adjusted pre-tax profit up 2.3% to £11.6m, some way ahead of Stifel’s £8.6m estimate, as well as a £9.1m drop in Findel’s core net debt to £80.9m. Profit progress at Express Gifts is the key reason for the ‘beat’.
Trading as ‘Studio’ and with a flexible credit option that enables the cash-strapped demographic to spread out the cost of clothing, footwear and toys, Express Gifts’ customer base has grown from 1.8m at the end of the last financial year to 1.9m active customers. Straight-talking chief executive (CEO) Phil Maudsley is confident of growing the customer base to more than two million during the next one to two years.
ONLINE LEAP FORWARD
Over in Education, a supplier of resources to UK and overseas schools, Maudsley’s turnaround plan is evidently working, with the use of value, improved service levels and digital tools reversing several years of market share erosion.
In fact, the UK customer base grew by 5% in the 12 months to 30 September 2018 with online ordering levels leaping from 26% at September 2017 to 52% at September 2018.
'More and more new customers are now recognising our incredible value, while our existing customer base are shopping more frequently and across an increased range of products. In Education too, we continue to make operational progress as the turnaround of that business performs to plan.’
THE ANALYSTS’ TAKE
Stifel insists Findel’s strong start to the Christmas selling season bodes well for the rest of the financial year and sees the share as an attractive way for investors to access the online and/or discount retail channel: ‘We believe management expects growth to remain buoyant in the current year (and beyond), as recent Express customer additions mature and Education initiatives pay off.'
In a note entitled ‘Hitting the spot as a digital first value retailer’, rival brokerage N+1 Singer writes: ‘Interims show Findel continuing to perform strongly, especially when measured against the tough retail backdrop. Of particular note is 12% product sales growth at Express Gifts over the last 10 weeks.
This, alongside better than expected Financial Services growth, a stable debtor book, and positive key performance indicators (KPI) at Education, puts the group well on track to deliver full year expectations and further reduce net bank debt.'
