Electricals group DSG is writing off up to £200m to cover the cost of its loss-making operations in Italy and France, and the sale of its UK business mobile company.
DSG, which was previously called Dixons, admitted this morning that restructuring and impairment costs have taken between £180m and £200m out of its profits for the last year, to April 30.
In a full-year trading statement, DSG admitted that like-for-like sales at UniEuro, its Italian operation, were down 8%. It said the business had suffered “significant operational issues” as a new management team had attempted to bring its operational structure in line with the rest of the company, and also blamed price-cutting by Italian rivals.
“Following the disappointing performance, we expect to reduce the carrying value by between £110m and £130m,” said the company.
It is also taking a £40m hit on the closure of its PC City chain in France, and a £30m write-off on the sale of Genesis Communications, which sells mobile phone services to businesses.
In March, DSG revealed that workers at Pixmania, its French e-commerce operations, had embezzled millions of pounds through a sophisticated fraud. This is thought to have cost the group £10m, wiping out profits at its new businesses division. It said today that this had now been resolved, and should not affect profits in future years.
Despite these problems, chief executive John Clare said that underlying profits would still be in line with market expectations, and predicted significant profit growth in the UK and Ireland. It will release its final results for the year in June.
The Currys and PC World chains both grew their like-for-like sales by 4%. Laptops and flat-screen televisions were particularly popular.
DSG predicted that high-definition DVD, new games consoles and broadband communication products would all help drive profits in the current year.
Richard Ratner, analyst at Seymour Pierce, said that the update should come as a relief to investors. He kept his estimated profit for the year at £267m, lowered his forecast for the coming year from £331m to £322m because of the Italian problems, but kept an outperform rating on the company.
DSG shares were down 4.5p at 171.5p in early trading
Graeme Wearden
Wednesday May 16, 2007
Guardian Unlimited