Findel’s cash crisis

Between 2004 and 2008, revenue at multibrand merchant Findel
climbed 53.2 percent, from £421.1 million to £645.1
million. Yet its pretax profit fell 12.4 percent during the same
period, from £38.8 million to £34.0 million. What’s
more, following a two-year spending spree-during which Findel
acquired the Letterbox, Kleeneze, and Cotswold Company
businesses, among others-it had to write off almost £25
million in impairment charges when it closed the Findel Direct
division in February 2009 as part of a restructuring.

So now Findel is focused less on growing sales and more on
raising cash. Which is why it is looking to sell its
brand and is mulling an equity issue.

An online retailer of sports gear, Kitbag is reportedly one of
the most profitable of Findel’s cash-with-order home shopping
brands. That the company is hoping to divest it could indicate
that Findel’s cash crunch is fairly serious, although the company
wouldn’t comment.

It did disclose in May, however, that annual sales from
continuing operations at both its home shopping division and its
education division were down 4 percent for the year ended 3rd
April. Still performing well is Findel’s third division, the
healthcare group, which continued to enjoy “double-digit
sales growth”.

Findel also warned that its annual results would be at the lower
end of expectations and that reporting would be delayed while it
focused on cash generation, renegotiation of its credit terms,
and a debt reduction programme. This includes the consideration
of a rights issue and the potential disposal of certain
“noncore assets”-believed to be the noncredit-based
home shopping business. Findel sold its Letterbox toys catalogue
earlier this year to the parent company of Hawkin’s Bazaar and
shut down its unsuccessful Cotswold Company home furnishings

According to a source who wished to remain anonymous, Findel’s
brokers Numis and Singer were not made aware of the possibility
of a rights issue until the announcement went on general release.
This suggests that Findel may be working with brokers nominated
by its lenders, who are keen to monitor the company to ensure
capital is raised quickly. Neither the brokers nor Findel would
comment on the speculation.


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