MFI slumps on new profit alert

INVESTORS in troubled furniture group MFI were running for cover today after the group issued a disastrous profits warning.

Blaming problems with its new supply chain system, MFI said it expected its UK retail arm to post a 'substantial loss' for the current year after prolonged teething difficulties had left it unable to deliver orders.

Shares in the group dived on the news and they were down at 102p, some 20% adrift, in early trading.

Analysts described the news as a shock. The warning comes just weeks after MFI reported a 45% slump in pre-tax profits to £32.1m in the first half. Several retail analysts said that the latest bad news left the company looking distinctly vulnerable to a bid.

Broker Numis Securities slashed its short-term price target for the group to just 100p a share from 180p.

MFI insisted that it was working to resolve the difficulties it was experiencing with its supply chain systems. But it admitted that teething problems had lasted much longer than expected.

Costs had mounted because of the expense of compensating customers. Orders were also below expectations at the end of the company‘s August Bank Holiday promotion. Orders for the second half of the year to date were 5% down on last year, while year-to-date sales were 6% lower.

Profits for the second half are likely to be materially below the £32.1m reported a few weeks ago – that was itself down from £59.3m in the same period in the previous year.