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Studio Retail Group draws down £285m credit facility

Online retail business Studio Retail Group, formerly called Findel, has accessed various credit facilities in a bid to protect the business amid the coronavirus. 

The company withdrew a revolving credit facility of £85m and a securitisation facility supporting Studio’s credit receivables of up to £200m on 27 March. A securitization facility is the process of transforming non-trading assets into tradeable securities, for example auto loans, commercial mortgages and debt obligations. 

This has resulted in net debt of around £53m, or cash on its balance sheet of £32m.

A company trading update said: ”This headroom is around £5m better than we would otherwise have expected to see due to a particularly cautious approach to cash outflows in the week following the lockdown announcement, which has since been reversed. Drawings under the securitisation facility stood at £198m at the end of March. At present, whilst Studio continues to trade, the group has sufficient liquidity for its near-term requirements without requiring recourse to government funding schemes.”

The company added: ”Given the external environment, we are taking a prudent and dynamic approach towards stock intake for the summer period, particularly on clothing, in order to de-risk the business in anticipation of a highly competitive marketplace once the lockdown for high-street retailers is eased. We thank our suppliers for their cooperation and support. 

“The business saw a good cash collections performance from its credit portfolio during the important period between Christmas and Easter, although we anticipate that customers’ incomes will come under sustained pressure in the coming months due to the coronavirus. In line with guidance from the Financial Conduct Authority (FCA), we will offer appropriate forbearance to those customers that require relief.”

In anticipation of the lockdown in mid-March, the business took swift steps to conserve cash, including deferring a number of projects involving external consultants and cancelling discretionary expenditure until conditions become clearer. Internal resource has instead been diverted in the near-term into successfully adapting key systems to enable as many non-warehouse colleagues as possible to work effectively from home. A small number of colleagues whose roles cannot be performed from home and who are either vulnerable themselves, or who are caring for those who are, have been furloughed under the Coronavirus Job Retention Scheme although remain on full pay.

Meanwhile, the group normally publishes its full-year results in early June, but it said it is not possible to confirm a date for this announcement. However, revenue for the full-year in Studio was around 3% ahead of the prior year (2019), and up around 5% in the second half of the year.

The group reported a 12% rise in adjusted profit before tax to £13m in the 26 weeks to 27 September. Group profit before tax from continuing operations dropped by 83% to £2.6m, after recognition of additional provision PPI claims announced in September, estimated at £7.9m. 

Phil Maudsley, CEO of Studio Retail Group, commented: “I would like to thank each of our colleagues for their hard work and committed approach during this unprecedented period. I am grateful for their continued support and I hope that our service has helped to make our customers’ lives that little bit easier during this lockdown period.”

 

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