Carpetright expects up to £9m loss as UK sales take double-digit hit
Carpetright has seen losses rise dramatically in the past few weeks amid plunging UK sales as shareholders agreed its need for secure immediate funding of £15 and backed its VCA.
On 1 March and on 12 April the chain said it expected a ‘small underlying pre-tax loss’, which corporate stockbrocker Peel Hunt estimated at £4.3m. Some 23 days later Carpetright said that loss would be between £7m and £9m.
As recently as the start of the year it had been expected to make a profit of around £13m.
Since 12 April ‘trading conditions have remained difficult, as expected, in both our UK and Rest of Europe (RoE) businesses. In the UK, continued weakness in consumer confidence, coupled with some inevitable disruption to trade arising from the publicity associated with the group's ongoing restructuring activities, resulted in like-for-like sales falling by 10.5% in the final quarter of our financial year.
‘This performance, combined with that of the previous nine months, will result in full year like-for-like sales being down by 3.6%,’ the chain said.
Carpetright only considers about half of its stores to be ‘core’ to its future. ‘However, the refurbished stores continue to outperform the uninvested estate, thereby giving us confidence to continue with the store modernisation strategy following the forthcoming equity capital fundraising.’ As long as it can secure a further £15m of short-term funding, it will ask shareholders to invest £60m in the chain.
‘Like-for-like sales in RoE fell by 8.3% in the final quarter against a similar trading background to that experienced in the UK, with the full year figure being an increase of 1.1%. As a result of the above, the group anticipates reporting an underlying pre-tax loss for the year ending 28 April 2018 in the region of £7m to £9m.’
Shareholders supported the CVA and a change to the articles of association that would have limited its ability to borrow more money.
Wilf Walsh, Carpetright ceo repeated that approval would see ‘tough but necessary actions needed to restore profitability and the proposed equity financing to recapitalise the business and enable Carpetright to address the competitive threat from a position of strength.’
Shareholders are expected to resolve the financing on 13 May, with the chain expecting the funds in early June.
Shareholders have been told that news on the further borrowing, an essential vital part of the restructuring without which management have warned the chain faces administration or liquidation, would be provided ‘soon’. This is expected within days.
As well as the underlying losses, Carpetright will have to pay 29.99% shareholder Meditor its arrangement fee for the £12.5m loan from March and a host of advisors fees. The loan is to be repaid in August.
The group again stressed that it was a going concern and the CVA restructuring did not mean it was in administration.