Floors 2 Go is facing the worst market conditions it has seen in its six year history, the company's chief executive admitted yesterday.
As the Birmingham-based flooring retailer revealed a 30 per cent slump in 2005 underlying pretax profit, Simon Farnsworth said low consumer spending and a slowing housing market had hit hard.
"It would be fair to say these are the toughest market conditions we've faced since the company was founded," he said, after the firm issued its third profit warning since floating in 2004.
"We are also sceptical about 2006 and are not willing to make any predictions either way," he added.
The group, which now trades from 137 stores made a profit before tax, goodwill amortisation and exceptional items of #5.1 million in the year to December 31. This was down from a pro-forma #7.3 million in 2004. Turnover fell 5.2 per cent to #74.7 million.
Sales on a like-for-like basis, which strips out the impact of new space, fell 18 per cent, but gross margin improved to 49.8 per cent versus a pro-forma 48 per cent and operating cash flow was #6.7 million.
For the year to March 10, total sales decreased 9.7 per cent and were down 15.8 per cent like-for-like.
However, Mr Farnsworth said the business was being managed tightly and maintained it had achieved "a reasonable performance from a cash and profit perspective".
It was diversifying in attempt to mitigate poor retail trading conditions. "Our business was purely retail at the start of 2005," Mr Farnsworth said. "We are now trying to become the one-stop shop.
"We provide insurance and warranty services and have extended our accessories range - which makes up 26 per cent of our total sales."
The company has also moved into commercial flooring, winning a #50,000 contract to deliver flooring to the new Ramada Encore hotel in Walsall.
Mr Farnsworth said the company was now starting trials for a fitting service. It will take place in the West Midlands and is intended to be rolled out nationally later in the year.
"We remain confident that measures to control costs, cautiously expand store numbers and improve the product range and the business' infrastructure leave us well placed," he said.
The retailer plans to open 15 new stores in 2006. After investing #500,000 in a new 130,000 sq ft distribution centre in Oldbury, Floors 2 Go believes there is scope to trade from up to 350 outlets.
A final dividend of 0.75 pence was proposed, making a maintained 1.0 pence for the year.
Prior to the statement analysts were forecasting a 2006 underlying pretax profit of about #5.7 million.