Kleeneze offloads office toy division after £44m loss

Kleeneze, the door-to-door seller of household goods, has sold its disastrous DMG division for £4.1m - a fraction of the £31.5m it paid for the business less than three years ago.

DMG, whose travelling salesmen offer a range of books, cuddly toys and other gifts to office workers, is being bought by Premier Direct for a mixture of cash, deferred payments and shares.

The decision to sell DMG was taken by William Rollason, the former National Express finance director who was appointed chief executive of Kleeneze in January.

He said that Kleeneze's skills lay in direct-to-consumer sales whereas DMG relies on office receptionists to generate orders for the gifts on offer.

DMG lost £44.2m in the year to April, including a goodwill write-off of £33.4m. It had been profitable when acquired in November 2000.

Mr Rollason said: "Even if we had turned it around, the amount of profit we could have made from it would not have warranted the investment needed."

Barry Moat, chief executive of AIM-listed Premier Direct, another direct selling group, said: "At a stroke, this deal significantly expands our distributor network and positions us as the market leading 'shopping at work' provider."

This is Mr Rollason's first corporate action since joining Kleeneze. The former corporate financier was ousted from his post at National Express after a bust-up with his boss, Phil White. Mr White had argued he wanted a finance director who concentrated on day-to-day financial issues rather than pursued deals.

Kleeneze shares jumped 21 per cent to 107.5p. Share options worth twice Mr Rollason's salary kick in if the stock is over £2 by 2006.

The group's remaining businesses grew strongly in the 12 months to April. However, DMG's plunge deep into the red left the group as a whole with a pre-tax loss of £36.0m, compared with profits of £6.3m the year before.