Pentos assurance fails to calm City nerves

A trading statement from Pentos, the troubled Rymans and Dillons retailer, failed to calm City nerves about the group's future yesterday. The statement follows the closure of the Athena chain of poster and card shops on Tuesday after the receiver had failed to find a buyer.

Pentos said that Dillons, the high street bookselling chain, saw sales in the last quarter increase by 5.4 per cent on last year, with a spurt of 8.6 per cent in December and a record Christmas week. The performance at Rymans, the stationery group, was similar, although sales over the second half were just 1 per cent ahead. Strenuous efforts by the management at the Athena stores resulted in a sales increase of 2.5 per cent in the final quarter, although this proved to no avail as Pentos pushed the chain into administration immediately after Christmas.

Pentos's chief executive, Bill McGrath, said the shops had begun to respond to management initiatives and that progress was being made in a difficult environment.

Analysts were less cheerful, feeling the figures were insufficient to form the basis of a recovery. The shares finished 1p lower yesterday at 10.5p.

Of Pentos's remaining business, Dillons looks the more healthy. Stocks have been reduced and margins have improved, the company says. The new Dillons Direct and Hatchards mail order catalogues, which were launched at the end of June, have performed well.

Rymans remains the principal problem. Although the January sales have begun well and a new mail order catalogue was launched in the new year, the stores still lost £4m in the first half. Analysts expect a further loss of £1m-£2m in the second half. Pentos says it would love to sell the chain but not at a firesale price. It is looking for around £15m for it, but this looks optimistic. One City analyst said: "We've always been concerned about Rymans. No one ever made any money out if it even when times were good."