OFT ruling hits DM half-year results hard

HEREFORDSHIRE direct marketing and home gaming company DM has posted a 38% drop in turnover and a 86% fall in pre-tax profit for the first half of 2011.

The plc said the figures were due to action on the group by the Office of Fair Trading after it investigated a group of DM’s companies which promoted scratch cards.

The case resulted DM making undertakings about changes to the design and content of the cards which took effect on March 17.

In its interim results for the six months ended June 30, 2011, DM said today its turnover was down 38% year-on-year to £8.4m from £13.45m.

Group EBITDA was down 82% to £580,000 from £3.18m and pre-tax profit was down 86% from £2.98m to £410,000.

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It has however moved into the black on its balance sheet with a with net cash surplus of £280,000 from H1 2010 net debt of £2.54m.

Earnings per share were down 77% to 0.3p from 1.32p last year.

Although the OFT proceedings did not result in a fine, the court ordered the group’s companies to pay 85% of the OFT’s cost from the proceedings which are yet to be finalised.

Since the court ruling, DM’s game card and promotional activities had been at a very low level, it said today, as new compliant promotional formats were designed and tested.

This area of the company is expected to run at an operational loss as new products are designed and it tested, DM says.

The OFT court ruling has since been appealed and referred to the European Court of Justice.

Chairman Adrian Williams said: “2011 has, for many reasons, been one of the most challenging periods in the group’s history, but the group continues to be well managed and its resilience in these difficult times means that it is still well placed to benefit when market conditions start to improve.”