The UK and European markets remain grim according to Amstrad Plc’s chairman Alan Sugar, as his company posted higher than expected full year pre-tax losses of UKP18.6m for the year to June 30, on turnover down 22.6% at UKP238.9m. Some analysts had predicted a pre-tax loss of around UKP4.0m, down from UKP20.5m. However they had […]
The UK and European markets remain grim according to Amstrad Plc’s chairman Alan Sugar, as his company posted higher than expected full year pre-tax losses of UKP18.6m for the year to June 30, on turnover down 22.6% at UKP238.9m. Some analysts had predicted a pre-tax loss of around UKP4.0m, down from UKP20.5m. However they had not banked on a UKP6.9m stock write-down and a UKP4.0m rationalisation cost for Europe. Amstrad was forced to write down the value of some inventories as market conditions mean it can’t sell its goods for their book value. The company had made a similar write-down last time of UKP4.8m but with no European exceptional charge. Amstrad’s share price reflected these surpise hits dropping 3.5p to 23.5 pence on the news, but bouncing back after consideration to 25.5 pence by mid-afternoon. Analysts are cautiously optimistic about Amstrad’s future, believing that it has now plumbed the depths and were reassured by the maintained final dividend of 0.3 pence, total for the year 0.5 pence. Net cash fell UKP29.4m to UKP137.7m, UKP30m for the initial payment for Dancall, while the inventory value rose UKP16.8m to UKP77.3m. It proposes a one-for-five consolidation on November 30, and hopes it will smooth out the effects of share movements that cause disproportionately large changes in the value of the shares. Sugar has promised to continue this rationalisation of European operations if necessary, until overheads and expenses reflect the market’s potential. Margins are under constant pressure, and Amstrad will weed out those activities in the tightest product categories. Its strategy of dividing the group up into autonomous business units is continuing under David Rogers, recently appointed as chief executive (CI No 2,426). The strategy seeks to guarantee that if one unit fails, the rest of the group will not be dragged under. The traditional electronics businesses of Amstrad will be retained in a new unit to be called Amstrad Consumer Electronics, which Sugar said would carry on the high street side of the business, involving comestic changes to products, and a separate unit dealing with research and development. The units covered by the ‘ACE’ umbrella contributed over half of the turnover and all its losses. Sugar, pointing to the potential of the mobile phone, computer and ink jet businesses, is confident that Amstrad will turn the corner during the current financial year aided by the acquisitions Dancall Radio A/S, the mobile phone company, and Viglen Ltd, the computer manufacturer that sold mainly direct. At the moment the only booming consumer electronics sector is mobile phones, but until March 1995 Dancall is testing and proving a new digital chassis. The acquisition of Viglen has made Amstrad reconsider its own distribution method and will move to selling direct by way of Viglen.