Westcoast parent profits dive 74%

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Westcoast parent profits dive 74%

Paul Kunert

Profits at Westcoast and XMA parent Kelido Ltd tumbled 74% in 2008 as a result of hefty interest repayments, weak market conditions and a steep rise in costs.

Group operating profits of £6.34m for the year ended 31 December 2008 were wiped out by a £6.51m interest charge, resulting in an operating loss of £126k, but tax gains of £220k gave the company a profit of £94k (compared to £435k in 2007).

The year was one of group consolidation as the firm sought to cut costs by integrating systems, processes and staff into Kelido's Distribution businesses under the Westcoast brand, said Duncan Forsyth, Group managing director.

"This resulted in a significant amount of one-off, non repeating costs of such consolidation," he told MicroScope, "[and] lower reported profit than previous years."

Sales climbed to £801m from £675m in 2007 including £28m from the acquisition of Clarity Distribution in Ireland.

Operating expenses rose 60.7% to £37.3m including a 64% rise in salaries to £24.8m as the group's head count swelled from 588 to an 896 average for the year.

The acquisitions may have added to the overheads but reseller XMA, bought in November 2007, had a positive impact on gross margins which went up to 5.44% from 4.29%.

A year-on-year rise in net cash from £31k to £11m was used to cut net debt from £77.6m on 1 January 2008 - up from £48.8m in 2007 - to £62.1m by 31 December.

Favorable currency translations and a movement in borrowings also cut the debt.

Around 150 positions across the group were made redundant during the year with roles cut from the warehousing, and sales and marketing functions. As a result, the firm said it is in better shape this calendar year.

"The generation of over £11m in cash, as well as preparing the group in advance for the difficult trading conditions experienced by the whole economy 12 months ago, has allowed the business to focus on growth this year," said Forsyth.

As revealed in June, Kelido's reseller business XMA cut around 10% of its staff, some 30 positions, to counter the market slowdown.

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