Pentos hits 'low point' with pounds 36m interim loss

FIRST-HALF losses at Pentos, the ailing retail group, tripled to pounds 36m as it revealed an unexpected pounds 10.5m exceptional charge for creditors, redundancies and write-downs of stock, writes Gail Counsell.

The charges follow pounds 56m of write- offs announced in March when the group, which owns the Dillons, Athena and Rymans retailing chains, raised pounds 45m from shareholders.

But Bill McGrath, the chief executive who replaced the founder, Terry Maher, after he was ousted last year, said the results should mark the 'low point' in the group's fortunes.

Mr McGrath said Pentos had only begun to implement its rationalisation strategy fully once the rights issue proceeds were received on 18 May. As a result the interim results showed no benefit from the rights, but the company was on track to return to profits within two years, he said.

The bookseller Dillons accounted for pounds 5.7m of the pounds 36m losses. Most of that was a higher-than-expected figure for creditors, the result of 'tighter in-store disciplines and financial controls', which produced an exceptional cost of pounds 4.1m.

Dillons has also rationalised its stock, boosting sales and market share with stock levels a third lower, although Pentos stresses it has no intention of reducing the range of books it carries.

Mr McGrath believes that abolition of the net book agreement, under which publishers set minimum resale prices, is likely after Christmas and will benefit Dillons.

The group reported progress in disposing of peripheral businesses and rationalising the store portfolio. It has sold 20 Athena stores, with another 18 scheduled for disposal.

Pentos has dismissed talk of another rights issue, pointing out that it is now operating well within borrowing limits. A spokesman said borrowings had peaked about six weeks ago at pounds 64m and had since been on a downward trend.

However, even if Pentos breaks even in the second half it is still likely to report a full-year loss of about pounds 25m. The shares, which at one point dropped to 9p, ended down 0.5p at 14p.

View from City Road, page 29

(Photograph omitted)

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