TIDMSTU
RNS Number : 8054V
Studio Retail Group PLC
19 April 2021
19 April 2021
Studio Retail Group PLC
("SRG" or "the Group" or "the Company")
Sale of Findel Education Limited
Conclusion of strategic review and formal sale process
Record trading performance in FY21
Pro-forma core net cash position
On 8 December 2020, the Board of Directors of SRG (the "Board")
announced that it had initiated a comprehensive review of all
strategic options available to it in order to maximise value for
all its shareholders (the "Strategic Review"). Having reviewed a
number of options as part of the Strategic Review, including the
disposal of a division and seeking offers for the Company pursuant
to a formal sale process in accordance with the City Code on
Takeovers and Mergers (the "Code") (the "Formal Sale Process"), the
Company now concludes the Strategic Review with the sale of Findel
Education Limited for a gross consideration of GBP30.0 million.
In addition, the Group provides an update on its record trading
performance in the year to 26 March 2021 with adjusted PBT from
continuing operations expected to be in the region of GBP48-50m, up
75% - 83% on GBP27.3m in FY20.
Overview of Strategic Review
During the course of the Strategic Review, the Company and its
financial advisors contacted a significant number of parties to
participate in the Formal Sale Process. Despite engaging
extensively with many of these parties, discussions did not
progress beyond receiving qualified, indicative and non-binding
expressions of interest for the Company.
The Board received multiple offers to acquire the Group's
educational resources business with the Company announcing
separately today the sale of Findel Education to West Moorland 221
Limited, a newly formed company owned by investment funds managed
by Endless LLP, for a gross consideration of GBP30 million on a
debt free, cash free basis.
The exceptional trading performance this year of the Group's
main business, Studio, proves the success of the online value
retail and integrated financial services offer which has been
enhanced over the last few years through the digital transformation
and data analytics programme. The Board is confident in the
Company's prospects and believes that greater value will be created
for shareholders by now focusing the Group's resources on the
pure-play Studio business, building on its strong momentum along
with an improved financial position.
Studio will continue to build towards its medium-term goal of
achieving revenue of GBP1 billion, through the following three
levers for growth:
-- Attract more of our core customers who appreciate the
affordability of Studio's VALUE proposition through building brand
awareness and through enhanced use of data analytics for customer
targeting and credit decisioning;
-- Extend the product range CHOICE for customers alongside a
personalised financial service proposition, and digital CRM
programmes to build spend per customer; and
-- Broaden the appeal of Studio to a wider customer base who are
still seeking great value and flexible PAYMENT OPTIONS
These levers of growth are underpinned by the ongoing digital
transformation and data analytics programme, alongside an even
stronger focus on how Studio serves and treats its customers, as
well as ensuring the business is sustainable and responsible for
all stakeholders.
We plan to hold a capital markets day shortly after the
publication of the Group's FY21 results, currently expected to be
towards the end of June, to set out more details about the growth
strategy that will drive the medium term goal of achieving revenue
of GBP1 billion.
End of Formal Sale Process
Having concluded its Strategic Review, the Board therefore
announces that the Company is no longer conducting a Formal Sales
Process. As such, the Company has ceased to be in an "offer period"
as defined in the Code. The disclosure requirements pursuant to
Rule 8 of the Code are no longer applicable.
Trading update
Trading in the traditionally quieter final quarter was
exceptionally strong. Product sales in Q4(1) were 88% ahead of
prior year, with gross margin rates from product sales in this
period 650bps higher than the equivalent period last year. This
performance in Q4 contributed to product sales growth of 43% for
the full year, with gross margin rates up 290bps year-on-year; a
record breaking performance. Over the period, Government support
was either repaid or not claimed and had no impact on
profitability.
The business has seen a step-change in its active customer base
this year. The total customer base of 2.5m is up 36%, with over
1.5m active credit account customers, up 15%. The proportion of
sales coming from the Studio App, downloaded by over a million
customers, has increased to over 25% during Q4. Notwithstanding the
economic environment and the growth in new credit customers, the
arrears profile of the credit receivables book has improved
compared to the same point last year, with collections running well
ahead of prior year.
Based on the unaudited draft results, the adjusted profit before
tax from continuing operations for FY21 is expected to be in the
region of GBP48-50m, up 75% - 83% on GBP27.3m in FY20. Guidance for
FY22 will be given alongside the year-end results currently
expected to be towards the end of June .
Eligible Receivables (2) at the year-end were GBP315m,
approximately 20% up against prior year. In light of this growth, a
further increase in the securitisation facility from GBP225m to
GBP250m was agreed on 7 April. Drawings at the year-end were
GBP225m (March 2020: GBP197.6m).
Core net debt (3) ended the year at approximately GBP27.6m
(March 2020: GBP51.8m) implying that the committed headroom is
GBP42.4m. As at 16 April 2021, following receipt of the net
proceeds from the sale of Education and drawings under the
increased securitisation facility, the Group has moved to a core
net cash position (i.e. cash exceeded drawings on the Group's
revolving credit facility).
The legacy defined benefit pension scheme has benefitted from
favourable market conditions over the last year. Following the
receipt of regular contributions from the Group of GBP5m in FY21,
plus the GBP9m special contribution that will be made following the
sale of Findel Education, the scheme is now in a strong surplus
against its funding targets. The Group will look to work with the
scheme's trustees to remove any liabilities arising from the
Group's defined benefit pension scheme.
This step change in the Group's financial position as a result
of the recent trading performance and sale of Findel Education will
now allow Studio to evaluate a range of options to continue to grow
the business and enhance shareholder value. We look forward to
providing more detail at the upcoming full year results and capital
markets day.
Paul Kendrick, Group CEO, commented:
"Studio has seen strong trading during the financial year ending
26 March 2021 whilst successfully managing the operational
challenges of the pandemic, which, along with the sale of Findel
Education, creates a step-change in our financial position. We
start the new financial year from a position of focus and strength,
with the growth in our customer base demonstrating the success of
our leading online value retail and integrated financial services
offer."
"I am hugely proud of all my Studio colleagues who have worked
tirelessly throughout the year in order to deliver this trading
performance. We will continue to support our colleagues to ensure
their safety and wellbeing through these challenging times"
Notes:
(1) 13-week period ended 26 March 2021
(2) Eligible Receivables means the proportion of the trade
receivables of Studio which are eligible to be funded in part from
the securitisation facility. This is essentially customer accounts
which are either up to date or one payment in arrears.
(3) Core net debt means drawings under the Group's revolving
credit facility net of cash held by the Group.
This announcement contains inside information for the purposes
of Article 7 of the Market Abuse Regulation (EU) 596/2014. For the
purposes of MAR and Article 2 of Commission Implementing Regulation
(EU) 2016/1055, this announcement is being made on behalf of the
Group by Stuart Caldwell, Group CFO .
Enquiries
Studio Retail Group plc +44 161 303 3465
Paul Kendrick, Group CEO
Stuart Caldwell, Group CFO
Stifel Nicolaus Europe Limited (sole financial adviser) +44 20 7710 7600
Matthew Blawat
Ashish Burman
Francis North
Tulchan Communications +44 20 753 4200
Sunni Chauhan
Stifel is authorised and regulated in the United Kingdom by the
FCA and is acting exclusively for the Group and no one else in
connection with the matters referred to in this announcement and
will not be responsible to anyone other than the Group for
providing the protections afforded to the customers of Stifel or
for providing advice in relation to the matters described in this
announcement.
Forward-Looking Statements
This document contains statements which are, or may be deemed to
be, "forward-looking statements" which are prospective in nature.
All statements other than statements of historical fact are
forward-looking statements. They are based on current expectations
and projections about future events, and are therefore subject to
risks and uncertainties which could cause actual results to differ
materially from the future results expressed or implied by the
forward-looking statements. Often, but not always, forward-looking
statements can be identified by the use of a date in the future or
forward-looking words such as "plans", "expects", "is expected",
"is subject to", "budget", "scheduled", "estimates", "forecasts",
"intends", "anticipates", "believes", "targets", "aims", "projects"
or words or terms of similar substance or the negative of those
terms, as well as variations of such words and phrases or
statements that certain actions, events or results "may", "could",
"should", "would", "might" or "will" be taken, occur or be
achieved. Such statements are qualified in their entirety by the
inherent risks and uncertainties surrounding future expectations or
events that are beyond the Group's control.
Forward-looking statements include statements regarding the
intentions, beliefs or current expectations of the Company
concerning, without limitation, future revenues, economic
performance, financial condition, and future prospects.
Such forward-looking statements involve known and unknown risks
and uncertainties that could significantly affect expected results
and are based on certain key assumptions. Many factors may cause
the actual results, performance or achievements of the Studio
Retail Group to be materially different from any future results,
performance or achievements expressed or implied by the
forward-looking statements.
Neither SRG nor any of its Directors, officers or advisers
provides any representation, assurance or guarantee that the
occurrence of the events expressed or implied in any
forward-looking statements in this document will actually occur.
You are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date of this
document.
Other than in accordance with its legal or regulatory
obligations (including under the Listing Rules and the Disclosure
Guidance and Transparency Rules), SRG is not under any obligation
and SRG expressly disclaims any intention or obligation to update
or revise any forward-looking statements, whether as a result of
new information, future events or otherwise.
No Offer or Solicitation
This announcement is not intended to, and does not, constitute
or form part of any offer, invitation or the solicitation of an
offer to purchase, otherwise acquire, subscribe for, sell or
otherwise dispose of, any securities, or the solicitation of any
vote or approval in any jurisdiction, pursuant to this announcement
or otherwise.
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END
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April 19, 2021 02:00 ET (06:00 GMT)
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