More than 1,000 jobs to go as MFI restructures

Troubled furniture group MFI has revealed a full-year loss and warned that more than 1,000 jobs will be axed as part of its restructuring by new chief executive Matthew Ingle.

The group has already identified 11 stores for closure, as well as relocations and downsizing of other units. MFI's manufacturing capacity will also be slashed.

MFI's Sofa Workshop business is also up for sale and there are plans to close three out of its eight regional home delivery centres.

UK manufacturing capacity will be cut by 40 per cent with a view to increased product sourcing from overseas to 75 per cent from 50 per cent at present. This alone will lead to 1,100 job losses.

For the year to December 24 the group reported a loss before tax of£0.6 million, almost£4 million better than analysts' forecasts, although the figure excludes£107 million of exceptional charges. The results were a sharp reversal of last year's profit of£54.5 million.

At Howden UK, pre-exceptional operating profit edged up 1 per cent to£103.6 million. However, the pre-exceptional losses of MFI's UK Retail business widened to£85.1 million from£31.3 million last time.

The group's pre-tax loss after exceptionals was£110.8 million, compared with a pretax profit of£20.6 million last time, achieved on total sales up 2.5 per cent to£1.55 billion.

Between Boxing Day and February 22, UK Retail like-for-likes were down 14 per cent at£85 million. However, gross margins were up 500 basis points and, as a result, gross profit margins were down just under 5 per cent.

The Howden UK business fared better, with sales on a same-depot basis up over 6 per cent to£103.6 million.

MFI chief executive Matthew Ingle plans to refocus the UK Retail business around kitchens and bedrooms, as well as accelerate Howdens depot openings.

There will be a store-by-store property review, improvements to customer service and supply chain restructuring.

By the end of this year, MFI plans to reduce the number of bedroom ranges from 53 to 31 and kitchen ranges from 63 to 38.

Numis analyst Steve Davies said: 'Phase two of the turnaround is to rebuild the core retail business. The cash cost of this will be£34 million and the changes are expected to deliver annual benefits of£11 million this year and£23 million from 2007 onwards.'