MBL racks up £21m loss after Morrisons hit

ENTERTAINMENT distributor MBL plunged into the red to the tune of £21.2m today after the disastrous loss of a contract with retailer Morrisons.

The listed Lancashire-based group, said the loss of the contract had generated  £22.7m worth of exceptional items which included goodwill impairment of £17m, exiting a lease on a property and redundancy costs.

Operating profits before exceptionals fell from £9.9m to £1.5m in the year to the end of March. Turnover in the same period was flat at £195.3m.

Chairman Peter Cowgill said MBL had encountered an “immensely challenging period both during the financial year ended 31 March 2011 and subsequent to the announcement of the termination of the contract relating to the group’s major customer in April 2011.”  

The Morrisons contract was worth 80% of group revenue to MBL- and had originally been due to end next month.

The Leyland-based firm said the early cessation of the contract had caused a number of serious operational difficulties, including the withdrawl of its banking facility and the loss of credit insurance.

“The announcement that MBL had lost the contract led to the immediate withdrawal of the group’s bank facility and the withdrawal of credit insurance covering MBL, which resulted in the loss of credit limits from major suppliers.

“Due to this severe restriction in credit the remaining six month period became impossible for MBL to service and, as a consequence, on 4 April 2011 it was mutually agreed to terminate the contracts prematurely.

“The difficult circumstances that have had to be managed following the termination have been a serious setback to the future plans of the group.” 

Cowgill told TheBusinessDesk.com: “It’s clearly been a very difficult time for the business with the loss of Morrisons and we have basically had to retrench.

“There are one or two options emerging though which could play to our trading strengths.”

On such opportunity is bee.com a direct-to-consumer website selling games, CDs DVDs, books and Blu-rays. Two trial high street stores have been opened under this brand.

Cowgill said: “It’s early days yet, and we have one of the stores in the Arndale in Manchester and it’s not doing too badly – building up week by week. There are obviously opportunities with space being available on the high street – but it’s early days.”