Studio profits slump amid PPI claims

Online retailer Studio has recorded a ‘flat’ revenue of £228.1m in its half-year results ended 27 September. 

Whilst adjusted profit before tax rose by 12% to £13m, profit from continuing operations plunged by 83% to £2.6m. 

PPI claims of £7.9m impacted its profits from continuing operations, which were reported at £15.5m the year prior. 

Studio Retail Group, formerly known as Findel, also claimed a post-period agreement to sell its Education unit was in the works, to be sold to Wakefield City Council for a cash consideration of £50m. 

Whilst approval of the sale must still be sought from stakeholders, its sale would represent 10.3x its adjusted EBITDA for the financial year. 

As the Education unit is now considered a discontinued operation by the retailer, its sale impacted the pre-adjusted profit figures alongside the PPI claims. 

The retailer said the disposal “demonstrates our ongoing focus on investing behind the Studio business”, and upon its completion, will “reduce core net debt and significantly strengthen the position of the legacy pension scheme”.

Meanwhile, online product sales were up by 12.8%. Black Friday also brought record levels of online sessions in a single day, as 781k sessions were reported. 

Its core net debt was also reduced by £10.2m, and now lies at £70.8m at the end of its half-year period.

Phil Maudsley, CEO of Studio,said: “This has been another period of strategic progress as we strengthen our position as a digital-first value retailer.

“We are pleased to have reported a strong increase in adjusted profit before tax in the first half, followed in Q3 by a record sales performance from Studio during our peak seasonal trading period.

“We know that Studio’s customers look for value all year round, so we do not need to chase promotional trends to maintain our market position. In support of this approach, we look forward to further initiatives coming on stream next year to enhance our digital-led value offer.

He added: “We will look to refund the remaining customers’ PPI claims during the second half of the year. 

“Education has delivered on the foundations laid last year and its leadership team should be congratulated on their hard work.  We are delighted to have agreed the terms of a sale with YPO and we look forward to this completing in 2020.

“The retail marketplace is undoubtedly challenging, but Studio’s unique position as a digital-first, value-focused retailer with an integrated credit option gives us great confidence for the future.”