DSG International profits plunge 30% in high street spending slump

Published on Thursday 26 June 2008 21:42

CURRYS and PC World-owner DSG International unveiled a 30 per cent plunge in annual profits yesterday, as City analysts said new chief executive John Browett faced a tough task turning the business round.

Browett, hired late last year from from Tesco, said he remained "very cautious" about consumer confidence.

His comments came on the back of DSG posting underlying pre-tax profits of 205.3 million for the 53 weeks to 3 May, down from 295 million for the previous year.

Including restructuring and business impairment charges of 389.2m, DSG made a loss before tax of 192.8m. As flagged, the dividend is slashed to 5.45p from 8.87p last time.

Things also look set to worsen, with Pali International retail analyst Nick Bubb forecasting a fall in pre-tax profits to 135m for the group in the current year.

Freddie George, retail analyst with broker Seymour Pierce, said: "(Browett] was full of energy when he presented his turnaround plan at a strategy meeting six weeks ago.

"Today he looked a lot more tired, as if he thinks it is a greater challenge than he thought.

"There are no quick fixes for DSG. Currys and PC World trade next door to each other in a hell of a lot of instances, and they cannibalise each other. It certainly remains an uphill challenge for the group in the UK."

Other analysts said the downturn in the Scandinavian markets in the second trading half was particularly disappointing. "That was seen as DSG's jewel in the crown, so took people aback," one said.

The market had been prepared for the profits plunge following two profits warnings from the company this year. Browett revealed that the group's UK computing division bore the brunt of consumer caution, with same-floorspace sales down 5 per cent.

UK computing division profits nearly halved to 63.2m after having to launch a raft of laptop promotions to shift stocks.

Overall like-for-like sales edged up 1 per cent, helped by a 27 per cent lift in internet sales _ now accounting for 12 per cent or 1 billion of group sales.

Currys and high street chain Currys.digital did better, with like-for-like sales up 3 per cent, helped by good sales of flat-panel TVs and digital products.

DSG said the division saw a strong start to the year, but that the second half deteriorated as the consumer environment worsened and increased promotional activity hit margins.

The group operates more than 700 stores in the UK – more than 80 per cent of which are Currys and Currys.digital – as well as more than 500 across Europe. DSG is closing 43 stores in the country under Browett's turnaround plan as part of 50m of cost-cuts.

The company's share price has dived 25 per cent since last month's turnaround announcement amid fears that an extended economic slowdown has hit the electrical goods sector. Yesterday, the shares closed down a further 2.5p at 42.5p.