Greetings Direct only made its US debut this year, when its Australian operations were also extended. It was hoped the stateside expansion would deliver big economies of scale, but they have not materialised, undermining the entire business.
Flying Brands said: “This, combined with the continuing deterioration of the bad debts and returns metrics in the UK and Australia, means that Greetings Direct will make losses in 2008 with little probability of profits in 2009.”
The US business has been closed with immediate effect. There will be a managed closure of the UK and Australian ventures over the next 12 months.
Flying Brands will write off£11.5 million of goodwill and has made a provision of£1.7 million for future losses and closure costs. There will be a hit to this year’s profits of about£1.5 million.
Landsbanki analyst Paul Deacon said: “We assume no more dividends in the near term and believe this sad equity story could be coming to a head.”