Exceptional items behind IWP's €34m loss

Cosmetics and toiletries group IWP had exceptional items totalling €27.7 million in the year to the end of March 2006, its last year as a publicly-listed company, according to accounts just published.

It made a pre-tax loss of €34 million for the year. When exceptional items and other factors such as amortisation were removed, the loss was €5.6 million.

The group, which now belongs to funds that are advised and managed by Strategic Value Partners in Britain, delisted on March 31st, 2006.

The exceptional items included refinancing costs of €9.7 million, currency swap cancellation costs of €7.25 million and loan note cancellation costs of €3.65 million. Also included was provision for obsolete stocks of €3.44 million and impairment of goodwill of €3.26 million.

The obsolete stocks involved "old and slow-moving stock" from the group's Vivalis business. Vivalis is a British manufacturer and distributor of colour cosmetics, toiletries and fragrances.

The group underwent a major financial restructuring in 2006 that saw €55 million in debt converted into equity. British corporate advisory and restructuring firm Kroll Talbot Hughes was paid €2,117,000 during the year. Kroll was paid a £75,000 (€122,000) per month retainer fee "and any reasonable expenses" for IWP's chief executive, Alex Sorokin, a partner in Kroll. Fees of €1 million were payable in relation to the conclusion of the restructuring transaction.

The reduction of the level of debt for the group has lowered the interest burden to manageable levels, allowing for investment in core activities, according to the accounts.

Turnover in 2006 was €181.4 million, down from €184 million the previous year. Operating profit was up 17 per cent to €5.4 million. This growth was broadly driven by a series of operating cost-reduction measures, the accounts noted.

The chairman, Nicholas Butt, in his statement accompanying the accounts, said the financial restructuring was required to secure the continuation of the business. The group was "too highly leveraged and a number of key businesses were being starved of investment".

"The board is developing a business plan with a view to concentrating on core areas where value can be achieved. European personal care markets are difficult at present, particularly in the UK."

Difficult market conditions in the British gift business led to the decision to close the Burlington Gifts business. The group's business in the Netherlands had a "steady if unspectacular year", while its Polish retail business showed positive trading trends. The wholesale business in Poland was discontinued.

Last August the group's head office moved from Dublin to Skelmersdale in Lancashire. The accounts show that turnover was €72.9 million in Britain and €108.5 million in mainland Europe.

Turnover at Jeyes Holdings, in which IWP has a 35 per cent stake, remained static at €89.8 million. IWP's share of associate losses was €7.3 million.

IWP employed an average of 1,618 people during the year, 1,141 of these in mainland Europe. Total payrolls costs for employees were €31 million.

Drumcove Property, a company associated with the former chairman and non-executive director of IWP, Joe Moran, was paid €240,000 during the year as part of the termination of a lease.

In September 2003, Mr Moran and the IWP board rejected an offer for the company at 44 cent per share. The shareholders were eventually paid 3.5 cent when the company was taken private.