DSGi plans £310m rights issue
Requires funds to continue "transformation"
DSGi is looking to raise £310m through a rights issue to underwrite its continuing overhaul and offset a drying up of credit insurance.
The placing was revealed as the firm, which owns PC World, confirmed a slide in revenues and forecast a loss for the year ending May 2 once charges for businesses it is closing are included.
The electronics retailer, which has been undergoing a painful "transformation" over the last year, said the cash raising would give it "the financial resources and flexibility" to continue to invest in its transformation, and a strengthened capital base to "provide it with financial headroom".
Lastly, it will give the sprawling retailer "a stronger financial base to provide comfort to the group's trade suppliers and their credit insurers with regard to the group's working capital position."
DSGi said that in the 26 weeks to April 18, total group revenues were down 3 per cent in sterling, with UK computing business down 14 per cent, while UK and Ireland electricals were down 10 per cent. In local currencies, total group revenue was down 10 per cent. However, the firm said it had increased gross margin by 1.1 per cent compared to the previous year.
The firm forecast underlying profit of at least £42m for the year ending May 2, with pre-tax profit of £30m from underlying profit minus losses from businesses to be closed. But it said the group would see pre-tax losses from business to be closed and "net non-underlying charges before tax of £195m to £215m."
The firm said that "structural changes in the trade supplier credit environment" had limited the firm's ability to repeat historical deferrals of payments. At the same time, it had had to make "one-off early settlement payments to trade suppliers of approximately £40m to £80m to assist them in managing their risk."
Today's statement added that "in management's view, the reduction in credit insurance capacity, at least in part, represents a structural rather than temporary change."
CEO John Browett said the "renewal and transformation plan is delivering and we remain extremely encouraged by the results."
He added, "The refinancing also leaves us well placed to provide reassurance to our trade suppliers and their credit insurers with regard to the group's capital position." ®