MFI dismantles businesses to make life more comfortable

FURNITURE retailer MFI today announced it is scaling back its operations as it continued to suffer at the hands of cautious consumers.

The company revealed it is quitting three businesses expected to make a combined loss of 10 million this year as part of a strategic review, which is also examining the future of its UK retail chain.

Details of the shake-up came in a trading statement from MFI, which indicated sales at its retail outlets were still falling - but at only half the speed of when it last updated the market in October.

Orders in the eight weeks to November 26 at its UK retail arm were 15 per cent lower than last year, compared with a 31 per cent drop over the previous three weeks.

The firm also revealed a 19 per cent slump in UK retail orders in the first half of the year, although its Howden joinery business saw sales up eight per cent over the same period.

MFI said it was on track to meet market expectations for its annual results, but its Howden Joinery business was likely to deliver operating profits towards the lower end of the current consensus in the City.

New chief executive Matthew Ingle said: "Howden Joinery has performed well in a more demanding market. In UK retail we are undertaking a fundamental review and, in the short term, are managing the business for margin, cost control and cash.

"We have also taken actions to simplify the group and improve profitability by exiting a number of non-core activities."

As part of a strategic review started by Mr Ingle, MFI said it was exiting its Howden Millworks business in the US, its joint retail venture in Taiwan and its Ethan Allen joint venture in the UK. The exit will lead to a one-off charge of 16m in the current year.

MFI said its profitable Howden Joinery traded well through its peak period but conditions were becoming increasingly tough.

The trade arm, which sells kitchens to small builders, has been propping up the group while the retail chain saw sales slump in a stagnant housing market.

Investors had feared Howden might be struggling too after rival Travis Perkins issued a recent profit warning.

By the year end, 22 depots will have been opened taking the total to 342, MFI said. "Depot openings are less than the 40 originally planned, reflecting the emphasis on profit contribution in current market conditions," said Mr Ingle.

The company said its UK retail division continued to experience tough market conditions. "The focus in the business is on margin, cost control and cash and this will continue through the winter sale," explained Mr Ingle.

Year-on-year sales in the UK retail arm in the second half are down 12 per cent on a same store basis with sales for the year to date down five per cent.

The facts

History: Noel Lister and Donald Searle founded MFI as Mullard Furniture Industries. Both men had been buying and selling government surplus stock after the Second World War and often met at auctions.

They joined forces, using the maiden name of Mr Searle's wife for the company name, specialising in flat-pack furniture selling by mail order.

Flotation: In 1971, under the chairmanship of Arthur Southon, who had previously been Mr Lister's accountant, MFI Warehouses was listed on the Stock Exchange.

Growth: In 1982, MFI acquired the Hygena brand name, which had been recognised in the UK as a kitchen brand since the 1930s.

The acquisition of Schreiber Furniture in November 1988 enabled MFI to appeal to an older, more upmarket customer.

At the start of the new millennium, new routes to market included high street stores in major conurbations, and Hygena kitchen concessions in Currys stores.