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LONDON (Thomson Financial) - DSG International Plc, the troubled European electricals retailer, confirmed Thursday an expected 30 percent slump in full-year underlying profit and reiterated its 'very cautious' view on the outlook for consumer spending.
'The economic backdrop continues to be difficult and the group remains very cautious about consumer confidence in many of the markets in which it operates,' it said.
'In this environment the group's clear priorities are focused on reducing costs further and managing cash flow while continuing to improve customer focus.'
DSG, which trades as Currys and PC World in the UK, Elkjop in the Nordic region and UniEuro in Italy, did not issue a current trading statement and is not planning to update on first quarter trading until Sept 3, the day of its annual shareholders' meeting.
However, chief executive John Browett told reporters: 'We spoke to the market six weeks ago (on May 15). Nothing has changed ... We see the market to be very tough and it's going to be a challenging year.'
DSG's rival Kesa Electricals Plc, which owns Comet in the UK and Darty in France, reported results Tuesday and gave a grim assessment of medium-term trading prospects, particularly in the UK, where it predicted negative like-for-like sales for the rest of the year.
For the 53 weeks to May 3, DSG made an underlying pretax profit of 205.3 million pounds -- in line with the company's previous guidance of 200 million pounds to 210 million pounds but down from 295.1 million pounds in the previous year.
Total sales increased 8 percent to 8.55 billion pounds, while sales on a like-for-like basis, which strips out the impact of new space, grew 1 percent.
The group confirmed restructuring and business impairment charges of 389.2 million pounds, largely driven by the struggling Italian operation, where up to 43 store closures are being considered, threatening 800 jobs.
After taking account of these charges, DSG made a pretax loss of 192.8 million pounds versus a pretax profit of 114.1 million pounds last time.
Loss per share was 14.5 pence versus earnings per share of 1.8 pence.
DSG had previously flagged a halving of its dividend payout. The final dividend was cut to 3.43 pence, making 5.45 pence for the year.
The group said that as of May 3, it had 779 million pounds of available funding headroom.
'We're very well financed, we've got a very strong balance sheet and we wanted to make that clear,' finance director Kevin O'Byrne told reporters.
Six weeks ago Browett, who joned DSG last December, issued a strategic review, promising to 'transform the DNA' of the retailer with a focus on improving stores and customer service and developing its multi-channel offer.
The CEO claimed Thursday the group's investors have 'applauded' the turnaround plan, in sharp contrast to analysts and the media who were largely underwhelmed.
'Investors have been very supportive. They recognise that this plan will add significant value to shareholders and so they have applauded what we are doing,' he said.
'They actually see it as a very radical change in traction and a big transformation programme.'
Shares in DSG, changing hands for 168 pence this time last year, closed on May 15, the day Browett announced his strategic review, at 64 pence. They have since fallen by a further 30 percent.
At 10.02 a.m. they were unchanged at 45 pence, valuing the business at 798 million pounds.
Browett plans to reduce costs by 50 million pounds in the 2008/09 year, with 'material savings' to be identified in subsequent years. The cost savings will be reinvested to improve the customer offer.
His 'renewal and transformation' programme is targeting a 3 percent to 4 percent return on sales in the medium term. Incremental capital expenditure of about 110 million pounds is planned over the next three years.
The CEO has insisted that his plans for DSG have not been impacted by U.S. giant Best Buy Co Inc's entry into the UK through a joint venture with Carphone Warehouse Group Plc.
Prior to Thursday's statement, analysts were forecasting year to end-April 2009 underlying pretax profit to fall to 130 million pounds to 135 million pounds. O'Byrne said he did not expect forecasts to change.
Nick Bubb, analyst at Pali International, is forecasting a current year pretax profit of 135 million pounds and does not think the following year will be much better.
He reiterated his 'sell' stance and cut his price target from 44 pence to 40 pence.
'DSG may not be doomed, but trading conditions are worsening and it has less than 12 months to get its act together in terms of customer service and range authority, before mighty Best Buy launches their UK assault,' he said.
'Internal confidence at DSG is surprisingly high, but if Best Buy doesn't get them ... the UK recession will.' james.davey@thomsonreuters.com jdd/jdd/wj COPYRIGHT Copyright Thomson Financial News Limited 2008. All rights reserved. The copying, republication or redistribution of Thomson Financial News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Financial News.