WH Smith raises fresh debt to manage ‘pessimistic’ Covid-19 scenario
WH Smith has unveiled a range of financial measures as it seeks to shore up its business as the coronavirus pandemic wipes out 90% of its revenues.
The retailer, which is taking a pessimistic outlook in terms of the duration of the virus and the impact it will have on its business, said it had agreed a package of new bank financing arrangements including a new £120m facility from BNP Paribas, HSBC and Santander and a waiver of its banking covenants at August 2020 and February 2021. The package is dependent on WH Smith raising fresh cash through the issue of new shares presenting some 13.7% of it share capital, however.
WH Smith’s chairman, chief executive and chief financial officer, plus other members of its senior management team, have committed to investing £535,000 in the equity placing.
WH Smith has unveiled a range of financial measures as it seeks to shore up its business as the coronavirus pandemic wipes out 90% of its revenues.
The retailer, which is taking a pessimistic outlook in terms of the duration of the virus and the impact it will have on its business, said it had agreed a package of new bank financing arrangements including a new £120m facility from BNP Paribas, HSBC and Santander and a waiver of its banking covenants at August 2020 and February 2021. The package is dependent on WH Smith raising fresh cash through the issue of new shares presenting some 13.7% of it share capital, however.
WH Smith’s chairman, chief executive and chief financial officer, plus other members of its senior management team, have committed to investing £535,000 in the equity placing.
The push for fresh capital comes as the business reports a 25% drop-off in revenues for March 2020, leading the firm to predict that full-year revenues will be down by 90% to £114m. Operating profits are expected to decline to £39m.
WH Smith said it was working on a “pessimistic scenario” for the business that assumes that 95% of its store estate remains closed with gradual re-openings. For the second half of its financial year (April to August), that scenario assumes revenues down by between 80% and 85% and operating profits down by 45%.
Alongside fresh financing and the equity raise, WH Smith said it would also cut operating costs by 60% – or £200m – and reduce its capital expenditure by £29m. Operating costs will be reduced through the furloughing of staff, reducing rent or moving to turnover-based rental models, the suspension of business rates, and reductions in corporate overheads, among other measures.
Chief executive Carl Cowling said: “We are a resilient business and with the new financing arrangements, together with our continued focus on managing cost, we are in a strong position to navigate through this time of uncertainty and are well positioned to benefit from the normalisation and growth of our key markets.”
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