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Dick Smith put into receivership 2 years after being taken public by Anchorage Capital

Tuesday 5th January 2016

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Dick Smith Holdings, the consumer electronics chain with 393 stores in Australia and New Zealand, has been put into receivership two years after being taken public by buyout firm Anchorage Capital Partners.

The stock last traded at 35.5 Australian cents on the ASX, having tumbled 84 percent from the A$2.20-a-share Anchorage set for its initial public offering two years ago. It bought Dick Smith from Woolworths in 2012, in a deal reportedly valued at about A$115 million, before selling down in 2013 in an IPO that valued the company at A$520.3 million. Anchorage sold its remaining 20 percent in September 2014 for about A$2.22 a share. 

The appointment of Jim Sarantinos, Ryan Eagle and James Stewart of Ferrier Hodgson as external administrators comes after Dick Smith shares were halted on the ASX yesterday pending an announcement on its funding position and debt financing covenants. That followed a A$60 million impairment against inventory, flagged on Nov. 30 with the possibility of more charges, which meant the retailer couldn't affirm its profit guidance.

The retailer brought in external consultants after disappointing trading in October and November, and was underway with "significant marketing activity" to stimulate sales ahead of Christmas, the company said in November. At the time, managing director Nick Abboud said Dick Smith would maintain "flexibility on gross margin to reduce inventory and improve our debt position," a signal that more discounting is likely.

It cut prices in the run-up to Christmas to clear inventory, having struggled to compete against more profitable rivals such as JB Hi-Fi and Harvey Norman.

Dick Smith lifted sales by 7.5 percent to A$1.3 billion in 2015, although gross margin shrank to 24.8 percent from 25.1 percent, while profit fell about 10 percent, including one-time items, to A$37.9 million.

 

BusinessDesk.co.nz



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