Kleeneze washes its hands of DMG.
Kleeneze washed its hands of its troublesome display marketing business DMG yesterday, for a fraction of what it paid for it less than three years ago.Loss-making DMG, recently renamed The Wonderful Book Company, was sold to Premier Direct for just pounds 4.1 million, one eighth of the pounds 31.5 million the door-to-door cleaning goods retailer paid for the business at the end of 2000.
The company said DMG's disposal cleared the way for the company to concentrate on profitable Kleeneze and Christmas hamper group Farepak.
Kleeneze reported a loss of pounds 36 million in the year to April, some pounds 33.4 million of which was a write-down relating to the DMG sales.
DMG, which sells gifts and books in offices, also lost pounds 10.8 million from trading and has lost a further pounds 2.5 million in the first three months of the current year.
The remaining Kleeneze businesses made profits of pounds 8.2 million, a 16 per cent rise, and increased sales by six per cent to pounds 164 million.
New chief executive William Rollason admitted it was 'disappointing' to sell DMG for just pounds 4.1 million but there was little potential upside from restructuring.
He said: 'Following a detailed strategic review in which we considered the three options of retention, disposal and closure, we concluded that any potential upside from reducing the operating losses at DMG was not sufficient. The costs and risks of closure were too great.
'This disposal clears the decks and will enable us to exploit much more quickly the excellent opportunities for Kleeneze UK and Farepak.'
The Kleeneze catalogue business saw turnover grow 5.5 per cent to pounds 86.3 million and operating profits rise by a fifth to pounds 6.6 million with a particularly strong performance from its newer health and beauty lines.
Farepak saw turnover increase seven per cent to pounds 77 million pushing up operating profits to pounds 1.9 million from pounds 1.6 million a year ago.
The current year has started well, said Mr Rollason, with sales up at Kleeneze and the company looking for more bolt-on acquisitions for Farepak.
The growth has also prompted the group to relocated from its site in Hanham, Bristol, which it has occupied since 1928, to another purpose-built distribution centre in the city.
Rival Premier Direct said of its acquisition: 'This acquisition will significantly expand the group and establish it as the leading 'shopping-at-work' provider with over 500 distributors covering the UK and Republic of Ireland.'
Kleeneze passed on a dividend but still the shares soared over 20 per cent at 107 1 /2p. Premier Direct closed up 20p at 210p.
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| Title Annotation: | Business |
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| Publication: | The Birmingham Post (England) |
| Date: | Jul 26, 2003 |
| Words: | 448 |
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