Kleeneze axes 70 jobs and warns of increasing losses at DMG

Kleeneze, the door-to-door and catalogue seller of household goods, yesterday warned its DMG division would record a £3m loss for the full year and said it was axing 70 jobs at the beleaguered books and gifts unit.

William Rollason, the company's recently appointed chief executive, said: "Trading at DMG is extremely disappointing and we are taking strong action to reduce its cost base."

Kleeneze first revealed problems at its DMG division back in December alongside its interim results.

DMG uses self-employed agents to sell books and gifts to people at their workplaces, and represents about 20 per cent of Kleeneze's group turnover. It posted a £1.5m profit in 2001.

At the time of the interim results, Kleeneze said DMG had recorded a £1m operating loss and warned that falling sales, high staff turnover and fixed overheads at the division meant that the group's key end-of-year performance would be "materially short of expectations".

Attempts to introduce sales techniques used in the Kleeneze business had not "shown positive results", the company said, while the decline turnover had had a disproportionate effect on operating profits because DMG's warehouse and distribution facilities were designed to operate with higher volumes.

Despite improving profits at its core Kleeneze catalogue division and its mail order hampers business Farepak, the company was forced to pass its interim dividend and book a £23.4m goodwill write-down on DMG, which it had acquired in 2000 for £31.5m.

George Pollock, who oversaw the acquisition of DMG, was replaced as chief executive last month by Mr Rollason, a former investment banker who had been finance director at the transport group National Express. He said at the time of his appointment that his first priority would be to tackle the problems at DMG.

Mr Rollason tried to reassure investors yesterday that trading at the other divisions, Kleeneze Europe and Farepak, had performed well over Christmas and that the operating profits for these businesses for the year to the end of April were expected to be in line with market expectations.

But shares in Kleeneze fell 10 per cent yesterday to end at 60p, close to 10-year lows. The shares were trading at 155p less than a year ago.

Kleeneze yesterday said the job cuts would save more than £1m a year. The staff cuts represents about 10 per cent of the group's entire workforce.

Analysts are forecasting a £5.1m full-year pre-tax profit for the group.