Dutch electrical parts distributor Hagemeyer has reported its third straight annual loss after chalking up a £29.4 million shortfall on sales of £3.8 billion.

The company, which employs around 200 people at its United Kingdom headquarters in Edgbaston, Birmingham, had been expected to report a net profit of £6.1 million, according to poll of analysts.

The distributor of products ranging from hard hats to spark plugs said it expected to see a positive net result in 2006.

Chief executive Rudi de Becker said: "Hagemeyer has taken a major step towards profitability. The successful completion of Hagemeyer's turnaround is in sight.

"In 2005 we realised considerable progress in all key performance areas. All major operating companies contributed, but the largest contribution came from our UK operation where substantial progress was made towards a positive operating result expected for 2006."

Operations in Britain account for one-fifth of sales and include the Newey & Eyre brand, employing 2,000 in the UK, in 176 branches.

The company began a sales campaign in Britain at the end of 2005 modelled on a marketing push in Germany which has produced strong growth.

Hagemeyer has fought to recover from a net loss of more than £200 million in 2003, caused by the botched introduction of a software system and a centralised logistics model at its British business, once its most profitable division.

The company's loss narrowed to £111.5 million in 2004.

But Hagemeyer beat its own guidance for a full-year operating profit of at least £48 million, excluding exceptional charges, reporting a figure of £59.8 million compared to £8.15 million in 2004 amid signs the recovery of the UK operations was accelerating.

Second-half sales of £2 billion beat analysts' f o r e c a s t s o f £1.9 billion,while the core PPS division reported full-year sales of £3.53 billion

compared to £3.388 billion in 2004, with organic sales growth accelerating to 5.4 per cent from 3.2 per cent.

At the UK operations, where a major marketing and sales campaign took place during November and December, Hagemeyer said organic growth showed "a first encouraging sign", rising 1.1 per cent in the fourth quarter, which increased to 5.1 per cent in January of this year.

Hagemeyer said it is "confident that the combination of resumed sales growth, further gross margin improvement and further cost reductions will bring us a positive operating result in the UK in 2006".

The company also repeated its outlook for a net profit in 2006. Revenue growth in its US business accelerated to 10.3 per cent in the second half from 4.8 per cent in the first.

"This high growth rate was the result of a strong US market in construction and installation as well as in industry, the winning of some new supply contracts with large customers and the expansion of our organ-isation," Hagemeyer said.