Amstrad Plc is definitely suffering as it plungeddeep into loss for the year ending June 30. Pre-tax losses amounted to a hefty UKP70.9m against profits of UKP20.2m last time, while turnover dropped32.5% to UKP356.6m. As a result, no final dividend is to be paid. No secret has been made of the fact that the directors […]
Amstrad Plc is definitely suffering as it plungeddeep into loss for the year ending June 30. Pre-tax losses amounted to a hefty UKP70.9m against profits of UKP20.2m last time, while turnover dropped32.5% to UKP356.6m. As a result, no final dividend is to be paid. No secret has been made of the fact that the directors consider it essential to concentrate on and maintain liquidity, especially in light of the further deterioration in trading conditions in the second half of the year, combined with the heavy losses incurred, which are attributed to two main factors – an operating loss after interest of some UKP39.1m, and UKP31.9m costs related to restructuring and inventory provisions. Trading losses were blamed on personal computers, where Amstrad was forced to dispose of inventories to remain competitive in a sector involved in a ruthless price war. Because specs of personal computers change swiftly with the advance of technology, giving them very limited shelf-life, Amstrad said that rapid action was necessary not only to achieve cash liquidity, but also to ensure that its inventory didn’t consist of out-dated merchandise. The loss was deepened further by the group’s exit from the home computer market. Although its Sinclair products were formerly very popular with children, no longer being fashionable, they underwent a massive decline in realisable value. So, this range went by the board too. Also out was Amstrad’s old model of facsimile machine, replaced by new higher-specification units, which were sold for the first time into Germany. On a slightly more positive note, sales of satellite dishes were satisfactory in both the UK and Germany. However, margins did decline compared with previous years, Amstrad said, because of increased competition and a certain maturation of the market. Revenues from audio were minimal, but the affects of the decision to re-enter this market will show up in the current year. Chairman Alan Sugar is intent on focussing his attention on maintaining liquidity and reducing inventories still more. His aim is to try and insulate the group from outside influences as much as possible, while being largely self-sufficient as regards funding of on-going business. Although cash balances currently stand at UKP113.8m, he does expect these to be reduced during the first half to finance inventory levels deemed necessary to support sales requirements. Sugar reaffirmed his commitment to take the company private at 30p a share.