26/10/2006
Higher costs and an unfriendly high street have razed interim profits at Blacks Leisure, the outdoor leisure retailer, yet management is maintaining its 3.3p dividend as a sign of its faith in the business.
For the six months to August, fierce competition at its Millets stores and large cost increases dragged pre-tax profits back from £6.9m to a mere £75,000, in line with revised expectations. A considerable £7.6m of costs came from website development as well as the opening of new stores and improvements to the distribution line. The board blamed the World Cup and the hot weather for a slight constriction in sales to £141.3m.
In the second half of the year to date, trading has remained unfriendly, meaning the group will find it hard to hit consensus pre-tax profit forecasts of around £14.6m.
A degree of optimism may be extracted from news that performance at the Blacks-branded stores was ‘resilient’ and ‘satisfactory’ at the Freespirit and O'Neill surf brands and that October experienced a slight pick-up as the wet weather returned. The new website should make up for some of the offline losses, and deals with the Mambo surfing brand and Evans cycles.
There are rumours of a bid from entrepreneur Mike Ashley, the owner of pile-'em-high-sell-'em-cheap retailers Lillywhites and Sport Soccer, who has also been building a stake in fully listed JJB Sports. Independent broker Numis, which makes a market in the shares, opines that the offer for Blacks would have to be at least 500p ‘to stand a decent chance of getting through’.
The shares are in no way cheap, but if you put any stock by these rumours hold on, otherwise the business is best avoided as it looks likely to continue facing tough competition and a desiccated high street.
| Market cap: | £185.37m |
| PE Forecast: | 19.2 |
| Share price: | 444.25p |
| LSE | £18.23m |
42.75p
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-1.25p
|
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| Other company articles: |
| 09/02/2007 |
| 05/01/2007 |
| 26/10/2006 |
| 07/02/2006 |
| 28/10/2004 |
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