Published on 28 - January - 2011
Focus seeks new rent agreementFocus has "fallen short" of its predictions for 2010 after conditions proved more difficult than expected, and is now asking landlords to extend the terms of its CVA beyond March, when it is due to expire.
Chairman Bill Grimsey confirmed to DIY Week that he has been talking to landlords to negotiate an extension of the monthly repayments deal the business entered into under the terms of its company voluntary agreement (CVA) in August 2009.
He said: "When we put this deal in place it was July 2009, and we based it on what the outlook was at the time, and by looking at the market going forward. Most predictions saw 2010 as being a better year than it turned out to be. In our market it's been a very tough year and this year hasn't started out any better with the increase in VAT and the core consumer confidence ratings. The austerity cuts from the Government and the uncertainty about the future have created conditions that are much more difficult."
He added: "We're falling short of our predictions and so the pressure on cash is greater than we expected. We're asking for more support and we're getting a good response because we have good relationships with our landlords. It's pretty straightforward stuff."
Focus operates from 178 stores and deals with more than 100 landlords. Mr Grimsey confirmed he started talks at the beginning of January and that the "vast majority have already signed up", extending the monthly rentals agreement for another year or, in some cases, to the end of the lease.
He said this "shows foresight and wanting to work with us as a retailer to combat the current economic conditions."
The CVA, approved in August 2009, saw 38 Focus outlets close and allowed for the remaining stores to switch to monthly rent payments to ease the company's cash flow, helping the retailer to avoid entering into a pre-pack administration.
Focus has since launched a strategy of downsizing stores; a new format in Congleton saw the store cut in half and the rest of the space taken over by a M&S Simply Food.
Focus's owner, private equity group Cerberus, recently employed advisory investment bank Lazards to conduct a review of the business.
While Mr Grimsey would not be drawn on future plans or investment in the business, he confirmed that the retailer is still talking to landlords about downsizing, as well as looking at plans with other retailers who may wish to take up some of the relinquished space - "all of that is progressing", he said.
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