Arnotts, now partly owned by the State, has revealed one of the largest losses ever posted by an Irish retailer, but said more recent trading had helped earnings to recover.
In accounts to be filed shortly with the companies office, Arnotts Holdings Ltd reveals an after-tax loss of €295m, after it took writedowns on the Northern Quarter project promoted by its former chairman Richard Nesbitt. It said the actual store was now trading at far better levels.
The group -- owned by Anglo Irish Bank and Ulster Bank -- has bank loans of €282m to service, but both banks have allowed the retailer to defer some of the interest as it tries to trade its way out of trouble. Anglo and Ulster took over the store in August in a debt-for-equity deal.
The results cover the period ending January 2010. A fresh €10m of working capital has been extended by both banks, but remains undrawn so far. The operating loss was €15.2m and directors' pay came to €392,000.
The company said there was "no benefit'' in either Anglo or Ulster Bank taking action over the debt at this time and all parties were instead concentrating on letting the retailer return value over the "medium term''. The company breached its banking covenants last year and the banks were entitled to call in all their loans immediately but chose a different course.
The results were hugely distorted by the exceptional charge related to the Northern Quarter development and yesterday chairman Mark J Schwartz said the results were historical and didn't reflect the upturn in the business subsequently.
He said the business had not just bottomed out since then, but was undergoing an improvement, with no reduction in employee numbers planned.
Asked why the previous management team, associated with Mr Nesbitt, got it so wrong in building up the Northern Quarter scheme, Mr Schwartz declined to be drawn.
"It didn't work out the way they planned,'' he said.
He said the Northern Quarter, which consists of 1.4 million sq ft of space, was not a drain on the company and was bringing in rental income. Asked would the scheme eventually go ahead as planned earlier by Mr Nesbitt and his colleagues, Mr Schwartz said "some variation of it might happen''.
Asked how Anglo might get value back from converting its debt into shares in the store, Mr Schwartz said rebuilding retail businesses was not a "short-term endeavour''. He said it was premature for talk about exits at this stage.
The store, led on a day-to-day basis by chief executive Nigel Blow, formerly of Brown Thomas, was trading well and would be cash-flow positive in its next financial year, said Mr Schwartz. There would be some exceptional charges for redundancy costs in the next results, added Mr Blow.
"This should be viewed as our clean-up year,'' said Mr Schwartz, who was unveiling sales of €120m, down from €160m. The store is changing its product line, altering the shop layout and expanding its online offering to boost profits.