Amstrad Plc has reported pre-tax profits for the year to June 30 down 43% at UKP44m on turnover that was down 8% at UKP577m. Chairman Alan Sugar says the results are as forecast (CI No 1,366) – the company has been concentrating on cash generation and inventory reduction even at the expense of profits: the company doesn’t want to become one of the over-borrowed casualties of the recession. Sugar now feels that these ambitions have been achieved, while still remaining profitable, and that Amstrad is ready to face a bright new financial year. Peak inventory levels reached UKP335m in the year, and bank borrowing peaked at UKP114m but the balance sheet at the year end is much healthier, with inventory levels down to UKP188m and a positive net cash figure of UKP24m. Sugar says that sales of professional and entertainment computers in the last quarter of the financial year were disappointing, and that the well rumoured future introduction of Amstrad’s new products in both these sectors, as well as the shortages of good quality hard disk drives – which Sugar claims restricted sales of Amstrad’s top range 80386-based computer were some of the reasons for the year’s sales being down.
Foresightedness
In the recent past Amstrad’s computer business has been dominant, but Sugar feels it is important to remain in both the leisure and personal computer sectors. In the leisure sector, Amstrad is boasting the foresightedness of its move into satellite receivers – the company has seen considerable growth in this product (it accounted for 19% of turnover this time, compared with 6% last year) and is claiming a dominant market position in the UK, Germany and Holland. The reshaping of Amstrad’s Spanish company has resulted in reduced volume but a return to profitable trading. The US operation has been scaled down to avoid holding risk inventory unique to that market, resulting in lower sales volumes. Amstrad has closed its Hong Kong factory and trading company and has decided to cease trading in countries where the company doesn’t have a directly-owned subsidiary, because it says this has resulted in disorderly marketing in the past. Instead Amstrad is studying these areas – Scandinavia, Greece, Portugal, Turkey and Eastern Bloc countries – with a view to forming its own subsidiary companies or entering into more formal agency agreements or joint ventures. Amstrad is looking to expand its overseas markets but is swinging away from the Far East to UK manufacture and European Community sourcing. Besides restructuring its balance sheet, Amstrad has developed a batch of new products this year – which Sugar says are the company’s bloodline. These new products included the Laptop range of computers, new satellite receivers and dishes – designed for both the UK and overseas markets, a new range of entertainment computers plus a games console, an automatic video camera with zoom and playback functions, and a range of video recorders headed by the flagship Double Decker twin-deck video cassette recorder. In addition, Amstrad introduced three new facsimile machines – the company’s new area of sales. Sugar says that whilst the current economic climate cannot be ignored, with its new ranges of products and a healthy balance sheet, Amstrad is well poised to go forward into the current financial year.
