Amstrad loses 25m pounds on Spanish closure
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Your support makes all the difference.AMSTRAD, the consumer electronics group run by Alan Sugar, yesterday closed its Spanish subsidiary at a cost of pounds 25m as a first step towards reorganising its European operations.
The company, which is struggling in a fierce high street price war, had already scaled down the Spanish business over the past 12 months. The move will result in a pounds 25m exceptional charge against profits in the year to 30 June under new accounting rules, but City analysts are unclear whether it will push the group into a full-year loss. Market estimates range between pounds 7m pre-tax profits and a pounds 7m loss.
Earlier this year Amstrad made a surprise return to the black with an interim pre-tax profit of pounds 5.6m against a pounds 12m loss.
The Spanish closure is regarded in the consumer electronics industry as the first significant step in a sweeping restructuring of Amstrad's European operations. The company set up a network of subsidiaries, usually costly to operate, in most of its key markets including France, Germany, Italy and Greece during the 1980s boom.
But a fierce price war in personal computers and weak demand have led to a sharp reversal of its performance, forcing it to retrench. 'This is just one step in Amstrad's restructuring and it will probably take similar action elsewhere,' one leading analyst predicted.
The Spanish subsidiary was set up after the acquisition of its local distributor for pounds 20m. At the time Spain was Amstrad's fastest-growing market, with annual sales of about pounds 100m, but has since declined sharply, incurring a pounds 7m loss last year.
'We have had a bad experience in the Spanish market. We set up the subsidiary when the market was peaking,' Tony Dean, Amstrad's finance director, admitted. The company will in future supply Spanish customers through an independent distributor.
Amstrad shares eased back 0.5p to close at 32p.
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