Isosceles write-down wipes out profits

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The Independent Online
A PROVISION of pounds 144.8m against the cost of its US sporting chain wiped out the profits of Isosceles, the struggling food retailer that operates the Gateway supermarket chain.

The write-off reduces the cost of Herman's Sporting Goods, which Isosceles has been trying to sell since it bought out the Gateway group in 1989, to about pounds 50m. The provision was part of a pounds 161m extraordinary item, described as investments held for disposal, in the results for the year to 25 April.

The results for Wellworth, the Irish supermarket chain also on the market, were, however, included in profits. Ernest Sharp, chairman, said the different treatment was because the group had always intended to sell Herman. 'That was not the case with Wellworth. We always knew we might want to sell it, but we did not announce it nor did we intend it from day one.'

Isosceles' pre-tax profits rose from pounds 3.6m to pounds 18m, helped by an pounds 11.6m reduction in interest charges to pounds 177.7m following the refinancing last January. Bob Nellist, finance director, said that the previous year's figures had also benefited from a pounds 5.5m contribution from stores that had been sold to Kwik Save and a pounds 7m gain on foreign exchange. Operating profits on a like-for-like basis rose pounds 3.2m to pounds 169.3m.

The group also announced that it had agreed a refinancing with its bankers that extends the group's senior debt to July 1995 and relaxes its covenants. Interest on the pounds 288m of mezzanine finance will continue to be rolled up, until it has reached pounds 48m - expected in February - after which it will be paid as it falls due.

Mr Sharp said the lenders had agreed to new facilities when the mezzanine interest becomes payable, and the net outflow of cash was likely to be under pounds 15m.

Alistair Mitchell-Innes, chief executive, said the group was moving towards flotation in 1995 and would concentrate on accelerating the conversion of Gateway stores to Somerfield or Food Giant - the discount warehouses. He said the group was 'very pleased' with their progress.