Findel Share News (FDL)

Findel enjoyed good growth in the year to 27 March, especially in its Express Gifts home shopping business and reduced losses from its Kitbag online sports shop, but warned profits would still be below market forecasts due to lower education spending in the UK.Having completed the sale of Kleeneze on 24 March, the company said it had enjoyed a "year of significant progress" with annual sales 2.7% ahead of the prior year.However, while full year profit before tax and exceptional items is expected to be "substantially ahead" of the prior year, meeting target operating profit margin of 7%, it will be slightly below the £27.1m-£28.5m range of market expectations, mostly due to a particularly weak final quarter in the Findel International education supplies business.Management said the new financial year to March 2016 should see the same rate of growth in operating profit, the continuing challenges for the education arm are likely to result in a flat profit performance at best, with the impact of the strengthening dollar on import prices is likely to provide a headwind to Express Gifts.The education arm's tough last year saw sales down around 6.5% as sales in the final quarter decelerated to 9.2%.While the impact of these reductions on profits was partly mitigated through cost savings, Findel noted recent analysis from the Institute of Fiscal Studies that indicated that both Conservative and Labour parties plan to implement real-term reductions in spending per pupil in the next parliament.Action is being taken, with the management team strengthened and investment in marketing ahead of the new catalogue launch later this month."Whilst the board retains confidence in the long term future of this business, market conditions mean that achieving the board's aspirations for the business will likely take longer and be harder than previously anticipated," the company said.On the upside, Express Gifts went from strength to strength in the last year, with a 220-basis-point improvement in bad debt performance an important factor for the quality of group earnings.Total sales at the home shopping unit were up 4.8%, with product sales ahead by 6.6% after accelerating to 7.9% in the final quarter, but gross margin declined slightly largely due to changes in product mix.With tighter control over margins and stock levels, Kitbag saw a strong recovery in sales and losses as management near the end of a strategic review that may result in a possible disposal.