Amstrad Plc turned in a healthy set of year-end figures yesterday, despite a drop in turnover and a pre-tax loss. But most attention was focused on the chairman’s statement in which Alan Sugar formally announced the search for a new chief executive and a diversification of his company. The pre-tax loss of UKP20.5m hides an operating profit plus interest of UKP16.3m, where last year it made an operating loss of UKP70.7m. Since the company does not break out the separate figures it is impossible to pin down exactly what lies behind the abrupt turnabout, however some analysts suggest that it is due to the more focused approach to the personal computer market. Losses this year are due to hefty restructuring costs of UKP33.5m, and the write-down of surplus properties of UKP3.3m. Restructuring, in this case, essentially means the closure of Amstrad’s Spanish subsidiary and the figures include a UKP25m write-off of the goodwill that came with the original acquisition. Turnover was boosted by UKP12.2m from the 66.2% holding in Betacom Plc and yet sales from continuing business fell 16.1% to UKP296.3m, mainly, says Sugar due to reduced activities in professional and home computers. This has been a conscious decision to reduce our interest in this market where many of the players seem to have little regard for margin. By contrast the chairman’s statement says that major (though unquantified) advances in turnover came from facsimile and telecommunication products, with a healthy contribution from the company’s re-entry into the audio market. When Alan Sugar attempted to buy back his company at the end of last year he talked in general terms of the restructuring and re-positioning that he foresaw; now he is talking in specific terms: Amstrad’s existing markets are mature, and Sugar is looking for ways to break out – Margins are very slim and we have to recognise that our current products have nothing unique to offer. Sugar’s answer? To diversify and set up new divisions. All of Amstrad’s existing products are going into the new consumer electronics division, which will be headed by Malcolm Miller, who sports the new title of managing director. Meanwhile a newly constituted board will focus its attention on adding new businesses. This is something of a change of tack from last year when Sugar committed to building the business through organic growth, but he says: It is clear at this stage that the only way for Amstrad to progress is to build a group of companies active in the electronics industry that is not dependent on any one product category. We do not underestimate the challenge of being able to control such an organisation and it is here that the decision to strengthen the top executive management will be the key. So it is that the board is looking for a chief executive and other senior executive management. Sugar says that he will delegate his existing day-to-day role and concentrate on product direction, innovation and appraisal of acquisitions. The new chief will also be responsible for seeking out new acquisitions and monitoring their progress. With UKP167.3m in the bank, up from parsimony, is not going to limit Amstrad’s ambitions and the recent acquisition of Dancall Radio for UKP6.4m (CI No 2,253) is not going to be its last. Now renamed Dancall Telecom A/S the business operating as a wholly owned, but autonomous subsidiary.
Particularly irksome
It is quite clear that the future of the GSM and PCN telephone market is going to be enormous said Sugar, but he added that Amstrad’s existing core business would be its bread and butter for the next year or two. He seems to be particularly irked at Amstrad’s inability to capitalise on early entry into the consumer market We were able to make quite good profits on a short term basis when breaking into these new areas, but the loyalty from the retailers diminishes when our competition catches up. As a result Sugar says he is looking at how to stabilise the business to compete in the me-too environment. In an uncharacteristically veiled comment he said that the gro
up may look at ways to turn its hardware sales into a source of continuing income; it seems partnerships in the services market beckon and the old days of pile ’em high sell ’em cheap have gone for good.
