ScS Upholstery, which sells fabric and leather upholstered furniture, shed almost 20% of its value after warning on profits for both the first half-year and the new ten-month financial period to July.

In a turbulent update, chief executive David Knight warned trading since the year-end had proven more challenging than expected, with like-for-like sales for the first 18 weeks of the year coming in 8% lower, despite total sales orders being 12% higher and the key week of the winter sale starting well.

Alongside tricky trading, deliveries in the run-up to Christmas were hit by ‘logistics management issues’, mainly in southern distribution centres. To prevent a recurrence, ScS will extend delivery times during the March peak period and strengthen controls at these locations. In addition, new centres in Wales and the Home Counties will open ahead of plan to support the South.

Despite the disappointing news, Knight insisted the business model remains ‘extremely sound with continued strong cash flow generation’ and the store-opening programme remains on track, with three opened to date this year and a further six planned before July.

Scs has proved a robust performer for some time, with pre-tax profits of £17.2m wrought from improved sales of £196m (£158m) for the year to September. The total dividend was lifted from 16.5p to 19p. Despite the group’s good track record, the shares now look rather risky fare. Avoid.

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