Alba announces shake-up as profits tumble

Electronics firm Alba today announced a major management shake-up after a sharp drop in annual profits.

The company behind Goodmans music systems and Dirt Devil vacuum cleaners said it had to “significantly” change its business to ensure it had a profitable future.

It came as Alba reported a slump in pre-tax profits from £21.6m (€31.7m) to £2.4m (€3.5m) in the year to March 31 as total sales fell 6% from £763.5m (€1.1bn) to £714.2m (€1bn).

Despite rising demand for MP3 music players and Liquid Crystal Display (LCD) televisions, the group said it had been forced to change the way it operated after margins came under pressure from rising component costs and problems with availability.

However, the company added that trading since the end of the financial year had been in line with expectations.

The restructuring will see group chief executive Daniel Harris made directly responsible for Alba’s consumer electronics arm while David Allen, managing director of its Breville products business, has been appointed chief executive of the firm’s leisure division.

Chairman John Harris said: “We recognise that our markets are changing and have begun the process of implementing the necessary strategic programmes to revive consumer electronics profitability.

“This will take time, but by acting now, we will deliver the platform through which Alba can realise its considerable potential.”

Alba said the consumer electronics market place was changing rapidly with component suppliers unable to keep up with soaring demand for products such as Flat Screen High Definition Ready televisions and MP3 music players.

It added that due to the shortage of capacity, suppliers were able to exert significant control over pricing for the first time “in many years”.

The firm said consumer behaviour had polarised and products must either be seen as delivering an innovative “wow” factor or offer exceptional value, with demand between these two positions waning.

It claimed that customers were also moving away from the high street and opting to shop for electronics goods at supermarkets, on the internet, or via TV shopping channels.

In the UK, the company said its Alba, Bush and Goodmans arms experienced difficult trading conditions while its Grundig consumer electronics joint venture posted losses of £2.4m (€3.5m) due to the slow pace of restructuring, despite sales rising to £135.6m (€199m).

Alba said Grundig UK, launched at the beginning of January, had seen encouraging results and had the potential to make a significant contribution to the business.

Shares in Alba, which also counts Nicky Clarke hair care products, Bush radios and Anthony Worrall-Thompson kitchenware among its portfolio of brands, rose 2p to 242p despite results coming in slightly lower than expectations.

Investec Securities analyst John Nuttall said: “The last 12 months have clearly been very challenging, particularly in the consumer electronics space where rapidly evolving end marketplaces took their toll on the business.

“Consumer electronics markets have become increasingly polarised and as a consequence Alba's traditional focus which has been on a broad range of products is no longer the most appropriate business model to maximise profitability.

“In response, management have been actively evolving the business over the past six months.”