TIDMELTA
RNS Number : 4472U
Electra Private Equity PLC
29 July 2020
Electra Private Equity PLC
Response to Covid-19, Approval of Hotter Shoes CVA, and Update
on Portfolio Businesses
29 July 2020
Electra Private Equity PLC ("Electra" or the "Company") is
pleased to provide an update on the Company's response to Covid-19,
to report on the outcome of the restructuring of Hotter Shoes via a
company voluntary arrangement ("CVA") announced on 19 June 2020,
and to provide an update on its portfolio businesses.
Response to Covid-19
The Covid-19 pandemic has had significant impact on the global
economy, particularly on the retail and hospitality sectors, in
which our two larger businesses operate.
During this period our portfolio companies have and continue to
receive significant support from the UK Government. This support,
comprising rates relief, furlough support, the hospitality industry
VAT rate reduction and the 'Dine out to help out' scheme, has
contributed significantly to the ability of our management teams to
respond effectively to the crisis, to the preservation of over
4,000 UK jobs, and the continuation of the resultant tax revenue
streams.
Our focus in recent weeks has been on ensuring that each of our
portfolio businesses emerges from the situation as strong and
resilient as possible, leaving us well positioned to recover and
grow shareholder value.
Approval of Hotter Shoes CVA
Electra confirms that the CVA proposal launched on 9(th) July
for its portfolio company, Hotter Shoes, has been approved by 99.5%
in value of those creditors who voted, with a majority vote in
favour of the proposals from each category of creditor.
In accordance with the statutory provisions there now commences
a 28-day period in which creditors may challenge the CVA outcome. A
further announcement regarding the outcome is expected in late
August.
Commenting on the approval of the CVA proposal, Ian Watson,
Chief Executive of Hotter Shoes, said:
"I would like to thank my colleagues for their support and
understanding through this process. Following the impact of
Covid-19 the CVA was a regrettable but necessary step to avoid the
likelihood of Hotter going into administration causing a much
larger number of job losses, and was critical to ensure a viable
future for the business. Now, we can focus on accelerating the
implementation of our strategy to develop the respected and
valuable Hotter brand with a greater emphasis on its online
offering, which should establish a successful long-term future for
the business."
Update on Portfolio Businesses
The Company provides an update on each of its larger portfolio
businesses as follows:
-- TGI Fridays
TGI Fridays ("Fridays") now has 71 of its 85 stores fully open
with a further 9 being reopened within the next week. The remaining
stores will reopen as location specific circumstances develop (e.g.
at event driven destinations such as the London O2). Throughout the
phased reopening to date the level of trading activity has exceeded
our expectations. Whilst the future trading environment remains
highly uncertain with many competitors yet to re-open, the year on
year sales performance and weekly sales progression that we have
seen since reopening, combined with the excess capacity that has
come out of the market and the early reaction to the new
initiatives being implemented by Fridays, give us grounds for
optimism.
Fridays' CEO, Robert Cook and his team are implementing a
development strategy in response to a detailed review of customers'
aspirations which has an increased focus on consistent quality,
provenance, simplification and point of relevance. The 'click and
collect' channel successfully launched in May marked the first of a
series of brand and channel developments that will be launched in
the coming months.
Fridays has acquired two new sites (Cobham and Lincoln) at
attractive prices that will open in the fourth quarter and
continues to explore other opportunities for measured
expansion.
-- Hotter Shoes
Hotter Shoes is expected to emerge from the CVA process with its
targeted sales channel structure in place and its fixed cost base
significantly reduced. This, combined with the delivery of a number
of strategic initiatives, including an enhanced web platform
launched in June, and the anticipated benefits of enhanced product
development and design activity reflected in the upcoming
autumn/winter product, leaves the business well placed to face the
uncertainties of the current market.
The Covid-19 crisis has accelerated Hotter's strategy of
digitisation, which will refocus the business on its online and
direct-to-consumer channels. This strategy will also see a return
to the company's core area of success, which is a focus on comfort
and fit, supported by industry-leading, bespoke technology.
UK e-commerce sales growth of 11% YTD with 35% coming from new
customers gives confidence that as an e-commerce focussed business
Hotter has the opportunity for a positive future with profitable
growth and value creation.
On a pro-forma basis, using actual results for the year to
January 2020, and therefore excluding any retail revenue retained
through channel shift, following the significant structural changes
being implemented before the end of August, Hotter's total revenue
would be reduced from GBP85.6m to GBP59.8m, with 80% of sales being
direct to consumer compared with 55% in the prior year. Non
marketing overheads would be reduced by approximately GBP15.4m,
resulting in a 30% increase in EBITDA margin prior to the
significant marketing efficiencies enabled by the transformed sales
channel structure.
-- Sentinel Performance Solutions
The management changes and cost reductions implemented at
Sentinel since Electra acquired control in July 2019 have left the
business well positioned to come through the period of Covid-19
disruption. Sentinel has performed well and whilst revenue has
recovered significantly ahead of expectations to close to prior
year levels, this remains at a seasonally low level. The business
development plans initiated in the last year and preparations for
the coming winter season are on plan.
Commenting on the performance of the Company and its underlying
portfolio businesses Neil Johnson, Chairman of Electra Private
Equity PLC, said:
" The past five months of Covid-19 related lockdown and
restrictions have been extremely challenging for the management
teams and employees in each of our portfolio businesses. In common
with other retail and hospitality brands we have had to adapt to
survive, and this has necessitated sometimes significant structural
change and regrettable job losses, particularly at Hotter. We thank
all of our portfolio businesses' employees for their understanding
and dedication throughout the crisis, and we wish all those leaving
us well. The actions taken will ensure positive futures for the
businesses going forward.
The impact of recent events and continuing restrictions make it
hard to forecast future trading with clarity. However, we believe
that our portfolio businesses are now stronger and better placed to
face this uncertain environment with relative confidence. We
therefore continue to target successful delivery of the Electra
corporate strategy by the end of 2021. "
-ENDS-
For further information please visit www.electraequity.com or
contact:
Gavin Manson
Chief Financial and Operating Officer
Electra Private Equity PLC
17 Old Park Lane
London W1K 1QT
Tel: 44 (20) 3874 8300
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END
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