Wickes' spending puts dividends in doubt

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The Independent Online
WICKES, the home improvements retailer, plans to spend pounds 20m this year rolling out its Builders Mate store format and other capital projects, throwing doubt on its ability to resume paying dividends.

The group announced a swing to pre-tax profits of pounds 6.6m in 1992 from a loss of pounds 6.7m the previous year. However, there was no dividend because of the need to reduce debts and to finance new store openings.

Wickes plans to open 30 more stores this year, including 14 Builders Mate sheds - its challenge to traditional builders' merchants. The seven pilot stores opened so far were achieving three times the sales per employee of their rivals, according to Henry Sweetbaum, Wickes' chairman and chief executive.

The roll-out will lift capital spending from pounds 14.5m last year to about pounds 20m this year.

There was no final dividend but Mr Sweetbaum said it remained 'a priority' to resume dividend payments. Wickes last made a payout for the second half of 1990. The shares fell 4p to 93p yesterday.

The profits recovery was boosted by the first full-year interest benefit from the pounds 42m rights issue in April 1991 and three weeks of the pounds 9.7m share placing in December. Earnings recovered from a loss per share of 2.1p to a positive 1.9p.

Group debt was reduced by pounds 36m to pounds 73.2m, mainly due to the conversion of pounds 19.1m of convertible loan stock to equity. Gearing remains at an uncomfortable 94 per cent.

Operating profits more than doubled to pounds 20.8m and the interest bill was cut from pounds 16.8m to pounds 13m. Property profits of pounds 786,000 and reorganisation costs of pounds 2m were taken above the line.

The biggest problem remains the Malden Timber and Hunter Timber businesses. However, their losses after interest were reduced from pounds 25.5m to pounds 17m.

The loss-making Parker Kislingbury hardwood distribution business has still not been sold. Wickes recorded a pounds 3.1m provision to withdraw from this and other businesses. The deficit was offset by a pounds 5.1m profit on the loan stock conversion, giving a net extraordinary gain of pounds 2m.

Mr Sweetbaum said a second version of the accounts incorporating accounting standard FRS3 - which in effect abolishes extraordinary items - would be included in the annual report.

The core Wickes retail chain lifted operating profits from pounds 18m to pounds 24m. UK stores made pounds 19m, Continental stores about pounds 4m.

Mr Sweetbaum said the board had not discussed splitting the dual role of chairman and chief executive: the company already abided by the Cadbury recommendations on corporate governance by having a strong line-up of non-executive directors and the additional role of chief operating officer.