Write-offs plunge Ashley into red: Spanish sale hammers window blinds maker

Huge exceptional write-offs will plunge Ashley Group, the troubled window blinds company, into loss when it announces 1993 results.

The group plans to make a full provision against the pounds 20m deferred consideration it says it is owed from the sale of its Spanish supermarkets group in 1992.

The group warned it was in breach of banking covenants. Although it still had the support of principal lenders, it would need to seek more equity finance. Ashley had net debt of pounds 18.5m at the year-end.

There will be no dividend and the payment of preference dividends has been deferred.

The group has appointed NM Rothschild as its merchant bank and Allied Provincial Securities as stockbroker, replacing Hoare Govett.

The news follows a review by Hamish Grossart, who replaced James White as chairman last month. Mr Grossart said the group would make operating profits of pounds 3.1m in 1993, against pounds 3.3m the previous year. Trading in the group's continuing operations had improved. 'In particular, turnover for January and February is over 10 per cent ahead of the corresponding period last year.'

Mr White, a former chairman of Bunzl and a non-executive director of Lucas Industries, acquired Ashley as a shell company in 1988 and built it into a blinds, timber and retailing group.

But institutional shareholders were unhappy with the large losses sustained after the group's disastrous move into Spanish retailing.

Ashley returned to profit in the first half of last year, making pounds 1.6m before tax, after selling Digsa, the Spanish retailer, for pounds 53m.

The group has been forced into legal action to recover pounds 20m of the payment that was deferred. The new chairman has decided to make a provision, although the legal action is still being pursued. Ashley is also the defendant in two other Spanish suits.

Mr Grossart said: 'Where legal action is concerned, one can never be sure of the outcome - what we've tried to do is make prudent provision.'

He added the group would focus on its window blinds business distribution business. The London office has been closed and the management of the group is centred at the offices of the principal subsidiary, Eclipse Blinds, at Inchinnan, Glasgow.

There will be a further pounds 1.1m provision to cover items relating to disposals not previously accounted for.