Carpetright is today announcing a proposal to address its legacy property issues and reduce the size of its UK property estate and rental cost base by the implementation of a company voluntary arrangement (CVA).
The directors of the company have finalised the terms of a CVA which is intended to restore the viability of the Group's business model (the CVA Proposal). The CVA proposal will enable the Group to undertake a fundamental restructuring of its property portfolio that the board believes must be carried out as part of implementing the Group's revised business plan.
A comprehensive review of the company's property portfolio has identified 205 sites in the UK that are underperforming and/or on unfavourable lease terms, or, in certain cases, not expected to have significant strategic value to the company going forward. Of these, 92 sites have been identified for closure in the short term under the CVA Proposal, with the balance of 113 sites being subject to a reduction in rental costs and revised lease terms.
In addition, Carpetright currently expects to raise net proceeds of approximately £60 million through an equity capital raising (expected to be by way of a placing and open offer). These proceeds will be used to fund the Group's on-going strategy, reduce indebtedness and cover the costs associated with the CVA.
Since the Company last updated the market on March 1 2018, trading conditions have remained difficult. However, in-line with the announcement, the Group still expects to report a small underlying pre-tax loss for the year ending April 28 2018 (FY18). The company now expects to provide the market with a scheduled trading update for FY18 on or shortly after April 30 2018, being the day on which the shareholder meeting is due to take place.
Commenting on the CVA proposal, Carpetright CEO, Wilf Walsh said: "These tough but necessary actions will enable us to address the burden of a legacy UK property estate consisting of too many poorly located stores on unsustainable rents and are essential if we are to restore our profitability and deliver a successful turnaround. Carpetright has engaged fully with the British Property Federation on the detail of the CVA Proposal and we thank them for their constructive approach.
"Completion of the CVA and equity financing will enable us to establish an appropriately-sized estate of modernised stores, on economic rents, complemented with a compelling online offer, enabling Carpetright to address the competitive threat from a position of strength.
“We will remain in close contact with all colleagues to keep them fully informed as we move through this process."