20 July 2010 – results

Annual results from this home shopping and educational supplies group were grim to say the least.  Although sales from continuing operations were only down 4% to £547m, the group made a statutory loss before tax of £76.1m.  Adjusted pre-tax profits which exclude exceptional items fell to £13.8m (2009: £29.2m).  These results are almost irrelevant as they were expected to be awful.  Of more concern is the level of net debt. which at £309.6m (2009 £376.1m) is higher than the board would like.  Cash generation has been lower than expected and going forward debt reduction is a major priority.  Trading remains challenging and the board has instigated a review of all the group’s operations.  The appointment of a new finance director completes a total overhaul of senior management and having previous experience in the sector as finance director of N Brown should be an advantage.  For investors, shares in Findel seem to be a classic binary bet – either they end up worthless because the debt mountain cannot be managed successfully or the group slowly recovers, in which case the shares could multiply in value.  After today’s share price fall, down over 30%, the potential upside means that we would continue to HOLD.