The retail sector has been badly hit for obvious reasons due to the Covid-19, however opportunities also present themselves to pick up good value stocks, and for me Scs (LON:SCS) is one that falls into that category, hence adding to the ISA along with another couple of retailers including Card Factory which I will also share my thoughts on time permitting over the next few days.
I have been looking for retailers which are well run and historically well performing which I believe will see the Covid-19 crisis though and who have a commitment to reinstating the dividend payment as soon as we get to the other side.
ScS moved quickly as the Covid-19 situation progressed and have utilised the Government schemes available to protect the financial situation. Including the £12m inflow from a revolving credit facility, as at 23 March 2020, SCS held £74.8m in cash.
The company noted on the 6th of April on holding back the interim divided:
“Our focus in recent years on building a business with increasing resilience is reflected in the strength of our balance sheet and the level of flexibility in our cost base. We cannot predict the impact of COVID-19 but we believe the Group is as well positioned as it can be.”
“Despite the strength of our balance sheet, the Board feels that it is appropriate to suspend payment of the interim dividend, which was due to be paid on 7 May 2020. At a time when the UK Government is supporting ScS, it seems inappropriate to use the cash for anything other than protecting the financial strength and resilience of the business.”
ScS, or to give it its full title the ‘Sofa and Carpet Specialist’ is one of the UK’s leading furniture and flooring retailers and have over 100 years of furniture and retailing experience. The operate from a 100 stores and via the website and the current share price is currently sat on the 52wk low of 128p and that being 51% down on its year high of 258p. On the current market cap of £48m, this compares favourable with a net cash position of £63m stated at the end of March. The company is trading at less than 5 times net profit (if you believe they will get back to pre Covid-19 performance) this compares favourably to the market leader
