Forum Archive Index - February 2003

["DR" <hamish@webmail.visp.co.nz>]

What's new?

Example Matalan, a fast growing UK warehouse type operator (mainly clothing) dropped 17% on the day after announcing the following:

 

H1 profits 49.4m (35.0m) - dividend 2.4p (1.75p). Chairman said: "Results: In the six months to 25th August 2001 the Matalan Group increased sales by 50.3% from £256.3m to £385.2m and operating profit by 44.0% from £33.9m to £48.8m. Net interest receivable was £0.6m (2001: £1.1m), which is lower than last year due to the funding of the acquisition of Lee Cooper. Profit before tax increased by 41.1% from £35.0m to £49.4m. Included within the profit before tax is a write off of fixed assets due to the development programme of extending and re-siting stores, totalling £4.1m (2000: £2.6m). These figures include turnover of £8.9m and operating profit of £1.4m (before goodwill amortisation charge of £0.2m) in respect of the Lee Cooper Group. This reflects the peak selling period for the new Autumn/Winter season and is not representative of a full year.

 

Lesson: Even when your profit increases, if the market thinks you should have done more, you get the cane.

Remember that companies like WHS have a lofty PE from which to topple. Hence it is not only the profit drop that has to be compensated but also the establishment of anew lowered PE for the new expectations.

 

Afterthought: Matalan is still expanding but its current price of 215p is rather lower than its high of 805p just two years ago.