Undercoverwear expects slim FY12 profit

Undercoverwear (ASX:UCW) is expecting a slight profit in FY12, as a result of measures taken in response to the conditions that led to a $16.1 million loss in FY11.

In the apparel manufacturer and seller's annual report, executive director Richard Lowry said the measures - including a 25% reduction in head-office staff and plans to outsource 95% of production offshore - should lead to a small profit.

The company has also managed to stabilize the decline in consultants that had been to blame for a 28% decrease in sales for FY11 to $17 million, Lowry said.

Looking ahead, Undercoverwear plans to develop a digital sales model, and has taken steps to this end with the establishment of a clearance website to help sell off inventories of some discontinued products.

CEO Stuart Richardson said last year's loss, which stacks up against an FY10 loss of $5.8 million, was “disappointing and below expectations.”

But he said that the company is continuing to review all areas of the business “to ensure best practice and a strict attention to costs.”

The FY11 figure includes a $14.6 million write off of all remaining goodwill. Pre-impairment, the loss would have been $1.5 million, compared to a $531,000 profit in FY10.

UCW shares stayed flat on Thursday at $0.035.