DSG International, owner of Currys and PC World, today announced it is scrapping its dividend after plunging into the red during the first six months of the year and warned that trading remained "tough and volatile".

The company blamed weak trading across the UK, Ireland, Spain, Central Europe and Italy for a £29.8 million pre-tax loss for the six months to October 18, compared to a £52.5 million profit last year.

As a consequence, DSG said it will not pay a dividend in the current financial year to "preserve liquidity" and to deliver on its "Renewal and Transformation" plan.

The company has already cut £75 million worth of costs from the business and aims to reduce capital expenditure by between £30 million and £160 million in this financial year.

The company, which has £149.5 million worth of debt, said today it is compliant with its financial covenants at the first half point, and had £300 million in undrawn bank facilities.

This week, DSG became one of the retailers to pass on the 2.5 per cent cut in VAT, announced in the Pre-Budget Report, to its customers.

Sales over the first six months of the year rose 3 per cent to £3.4 billion however on a like-for-like basis, which strips out trade from new stores opened during the period, revenue fell by 7 per cent.

In the UK, demand for computing was heavily impacted, with sales down 11 per cent while electrical trade fell by 7 per cent. In Southern Europe, sales declined by 8 per cent while the Nordic region reported a 6 per cent fall in revenues.

However, ecommerce continued to thrive for DSG, with trade up 9 per cent over the first six months of the year.

DSG said today: "The trading environment remains tough and volatile. The group is prepared for a recessionary environment and is consequently focused on cash generation."

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