QXL narrows Q2 loss as Poland saga continues

London-based online auction group QXL has more than halved its second-quarter loss and said that recent trading has been better than expected.

The company posted a reduced turnover of £906,000 for the three months to 30 September, compared with £1.1m last year. This reduction was mainly attributed to the "fraudulent" loss of QXL Poland, which the company continues to dispute in court.

Operating costs also fell, from £6.7m to £3.8m, which helped the company report an operating loss of £1.16m, a big improvement on last year's £2.7m.

The troubled company recently amended its strategy in a bid to survive and this appears to be paying off, though cash reserves have now fallen below £1m and QXL is on the lookout for new financing.

The company is now focusing all resources on territories where it has a strong market presence, and is generating cash by withdrawing from others where it "does not believe it can become competitive in the longer term".

QXL recently banked £200,000 after signing a 'cooperation agreement' with Marktplaats, a Dutch company that will manage QXL's units in Germany and Spain. QXL is to provide "marketing services" to Marktplaats, which will presumably have a major stake in the auction group's two continental subsidiaries.

QXL CEO, Mark Zaleski, said trading since mid-August has been "stronger than anticipated" but warned that the company's "financial viability is dependent on achieving our expected growth in revenue over the coming quarters".

Without this growth, or a new cash injection, the company would be odds-on to hit the wall by summer 2004, but Zaleski is confident that this can happen but said it is "critical" that recent trading improvements continue.

Zaleski added that while progress in its battle to reclaim ownership of QXL Poland had been slow over the summer, a breakthrough was made in late-October, when an administrator was appointed to ensure that assets are not sold, pending a final decision from the Polish courts.