DSG profits plunge with no recovery until 2010
Friday 26 June 2009
DSG International, which owns Currys and PC World, posted losses for the second consecutive yesterday and warned its market wouldn't recover until after next summer. Total losses at the electricals group hit £140.4m before tax for the 12 months to May 2, as it continued to suffer from the slump in consumer spending.
It was also hit by one-off charges of £190m related to its restructuring drive and problems at failing businesses. Yesterday's results did mark an improvement on the previous year when losses had spiralled to £184.1m.
Stripping out these write-offs, DSG's profits slumped 80 per cent from £225.6m to £50.5m, although analysts had feared the figure could sink as low as £30m. Chief executive John Browett said: "The difficult economic backdrop across Europe and subsequent impact on consumer spending, particularly on discretionary products, has been well publicised. The group expects these conditions to continue throughout the coming year in many of its markets."
The management has launched a plan to overhaul the ailing group. This included changing the format of 82 stores and slashing costs by £95m. The new stores have boosted profits between 11 per cent and 65 per cent, it said yesterday. KBC Peel Hunt analyst John Stevenson said the transformation plan was "progressing well".
The group has identified a further £200m of costs to be taken out the business over the next four years. It is also looking to reduce working capital by £80m to £130m. At the end of April, DSG raised £311m through a rights issue and placing. It sought the cash to help tackle its £478m debt pile and accelerate the overhaul.
This follows losses reported on Wednesday by rival Kesa Electricals, which owns Comet. The group fell to a full-year loss of £81.8m, compared with a profit of £128.8m the previous year.
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