Kesa reported a sharp rise in profits in line with expectations as it benefited from strong sales of flat screen TVs and white goods such as fridges and washing machines.

The electricals retailer, which owns the Comet brand in the UK and Darty in France, expected sales in the coming year to be boosted by demand for new technology gadgets.

But Jean-Noel Labroue, chief executive, said he expected growth to slow during 2007. “We expect the same sales trends to continue, but not at the same rate as last year.” Comparisons with last year will be tough as trade was boosted last summer when customers bought new televisions in advance of the World Cup.

Kesa’s margin has been affected by a larger proportion of sales of flat screen TVs, laptops, MP3 players and digital products, which have lower margin than traditional white goods. Mr Labroue said: “This strong negative margin mix is something I have never seen. I don’t anticipate that we will have a negative margin mix for ever.”

Mr Labroue added that he would offset the negative mix effect by focusing on costs and productivity gains.

The retailer said it would see a short-term impact on earnings growth and cashflow as a result of its investment programme. This includes the opening of more mezzanine floors at its UK electricals chain Comet, new services at Darty in France and the development of new businesses in Italy, Switzerland and Turkey.

The launch of the Darty Box – internet, TV and telephone – attracted 28,000 subscribers at the end of January. Start-up losses were €9m and are expected to be €24m in total.

Pre-tax profits for the year ended January 31 rose by 15.4 per cent to £165.4m on revenues that increased by 9.8 per cent to £4.5bn, or 7.8 per cent on a like-for-like basis.

Operating profit rose 11 per cent to £177.8m. Earnings per share rose 16.3 per cent to 20.7p.

Jonathan Pritchard of Oriel Securities described the update on current trade as “vague and not inspiring” in an early note. He estimated pre-tax profit forecasts for 2008 of £175m, which would place the shares on a pe multiple of 16, adding: “It’s hard to call that cheap. Was the retail sector not in a bid frenzy at the moment, we would have turned seller today.”

Kesa, which during the past year has been linked with persistent speculation about private equity interest, in January put in a better Christmas trading performance than its rival DSG, whose Currys chain competes with Comet in the UK.

The board is recommending a final dividend of 10.05p a share, bringing the total dividend for the year to 13.3p a share, up 9.9 per cent.

Shares were flat at 350p by lunch time in London.

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