Studio Retail has strong H1, puts itself up for sale

By

Sandra Halliday

Published
Dec 8, 2020

Studio Retail Group saw a record trading performance in its first half (the six months to the end of September) as online retail strength drove group revenue 17.2% higher to £268 million.

But the big news was that the company has put itself up for sale. That has come after it revealed Frasers Group, which has a 37% stake in the business, sent it a letter in October saying it thinks the group is “misunderstood by the market and as a consequence, significantly undervalued”. It added that “although this may be fixable over the long term, the group should conduct a strategic review”.

Studio said that with its upcoming CEO succession, the cancellation of the sale of Findel Education to YPO after the competition authorities scotched the deal, and following discussions with its second-largest shareholder Schroders, it agrees with this view. So “the board has now determined that it is an appropriate point to undertake a comprehensive review of the strategic options open to it in order to maximise value for shareholders”.

Between them, Frasers and Schroders have a combined shareholding of 56%.

Now to those first-half results. As mentioned, revenue was up in double-digits. Adjusted pre-tax profit rose 52% to £17.7 million and reported pre-tax profit was up 199% to £15 million.

Its core Studio Retail operation saw its active customer base rising 15% to 2.1 million by the end of September, including 1.4 million with an active credit account. And in Q3, those numbers have risen to 2.3 million and 1.5 million. 

And it added that 20% of sales now come through its Studio App that launched in October last year, with more than 850,000 downloads in total.

In H1, product revenue rose 38% to £169.5 million with margin rates flat, leading to gross profit from product increasing by £16.7 million.

Studio is currently in the middle of a multi-year transformation into a digital-first retailer. And while moving to a focus on retail might not seem like great timing, the company said the marketplace has been significantly less promotional than in November 2019 “due to the second lockdown in England, which has led to a materially stronger profit performance to date in Q3 than last year”. In fact, product revenue in Q3 to the end of November was 32% ahead of the prior year, with gross profit margins from product sales up 450bps.

CEO Phil Maudsley said the results “are testament to the strengths of our digitally-focused value business and the ability of our colleagues and customers to adapt rapidly to change. Our strategy to grow the Studio customer base and increase our customers' spend with us, supported by our flexible credit offer has delivered a record trading performance which underpins our confidence in the group's medium-term growth prospects”.