Homebase has today announced the next phase of its restructuring plan, the company is to launch a Company Voluntary Arrangement (CVA) and is seeking approval from creditors on a proposed plan to reduce its cost base in the UK and the Republic of Ireland.
Homebase’s sales performance and profitability declined significantly under the previous ownership over the last two years. In addition, the company has faced an extremely challenging retail trading environment reflecting weak consumer confidence and reduced consumer spending. These factors have had a significant adverse impact on Homebase’s trading position.
After a comprehensive review, Homebase has concluded that its current store portfolio mix is no longer viable. Rental costs associated with stores are unsustainable and many stores are loss making.
The CVA enables Homebase to make essential changes to its store portfolio, reducing its cost base and providing a stable platform on which to continue its turnaround.
Under the terms of the CVA proposal, all creditors receive a better outcome than any other likely alternative.
It is anticipated that 42 stores will close during late 2018 and early 2019.
The proposed changes to the store portfolio will mean redundancies from those stores earmarked for closure. The process is expected to lead to a reduction of up to 1,500 roles, although every effort will be made to redeploy team members within the business where possible.
All stores in the UK and the Republic of Ireland will remain open for business as usual and this process will have no impact on customer purchases, outstanding orders or any product or service guarantees.
The creditors will vote on the CVA on 31 August 2018.
CEO of Homebase, Damian McGloughlin said: “Launching a CVA has been a difficult decision and one that we have not taken lightly. Homebase has been one of the most recognisable retail brands for almost 40 years, but the reality is we need to continue to take decisive action to address the underperformance of the business and deal with the burden of our cost base, as well as to protect thousands of jobs. The CVA is therefore an essential measure for the business to take and will enable us to refocus our operations and rebuild our offer for the years ahead.”
Assistant director of Real Estate Policy, British Property Federation (BPF), Stephanie Pollitt said: “These situations are never easy as property owners need to take into consideration the impact on their investors, including those protecting their in
vestors’ pensioners’ savings, as they vote on the CVA proposal. Homebase and Alvarez & Marsal have, however, demonstrated best practice, engaging with the BPF in the process and therefore ensuring property owners’ interests have been properly taken into account. Ultimately, it will be for individual property owners to decide how they will vote on the CVA, but the proposal has sought to find a solution that provides a sustainable future for Homebase.”