Amstrad warns of extra 25m pounds losses

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The Independent Online
AMSTRAD, the consumer electronics group headed by Alan Sugar, yesterday warned that its full-year loss to 30 June will be about pounds 25m worse than market estimates.

The move has led to a sharp downgrading of City forecasts and some brokers are now expecting a pounds 60m full-year deficit against taxable profits of pounds 20m last year.

Though prompted by fierce cost-cutting in the personal computer market, the warning caused little surprise. Amstrad shares lost 1p to 29p yesterday, valuing it at about pounds 165m.

The company said that the worse than expected result stemmed from plummeting prices of personal computers and weak demand.

In addition, Amstrad is also likely to incur much higher restructuring costs aimed at reducing its operating overheads.

'Everybody is committing hara- kiri', a spokesman for the company said, referring to a desperate high street price war for hardware.

In consequence, it has been selling some of its products at a loss to build up its cash balances, which have increased from pounds 60m in 1991 to pounds 100m as at 30 June, amounting to two-thirds of its market value.

Analysts said the price war had made it hard for the company to dispose of older stocks. The write- down in the value of unsold computers and extensive cost-cutting measures had added to its losses.

The company's worst-hit products are its desk-top range of personal computers, which has been affected by low demand, thanks to the recession.

But the company says that it is committed to introducing new hardware, including a new, high- powered computer to be produced by Intel, the world's leading microprocessor chip maker. The new line is aimed at the business market, which Amstrad has yet to penetrate successfully.

Despite the recession, however, the company's satellite television receivers business is continuing to grow strongly. A total of about 950,000 sets have been sold in the past 12 months.

Amstrad is hoping that the satellite business, together with a successful launch of new products in consumer electronics, will return it to a break-even position in the current year.

However, City brokers remain sceptical. Nomura Research said: 'Amstrad has little competitive advantage in a market in which computers have been a commodity. In due course it may again find new products to make it successful but the next 18 months will remain difficult.'

As a result, the company is forecasting a pounds 10m loss for the year to 30 June 1993.