TIDMSTU

RNS Number : 4379Q

Studio Retail Group PLC

19 June 2020

19 June 2020

Studio Retail Group plc ("SRG" or "the Group")

Update on the sale of Findel Education and Trading Update

Sale of Findel Education

SRG notes this morning's announcement from the Competition and Markets Authority ("CMA") that it intends to refer the proposed sale of Findel Education to YPO to a Phase 2 review.

As previously stated, we believe that this transaction will greatly benefit the customers of both parties, better position the combined business to more effectively compete in the increasingly dynamic and competitive educational resources market, and encourage further digital innovation. We will look closely at the concerns identified in the CMA decision and consider how best to move forward.

Trading Update

Over the last eleven weeks, the health and safety of our colleagues has been our clear priority. Their hard work and committed approach during this period has been outstanding and ensured that our customers' lives have remained that little bit easier during lockdown.

Studio

Further to the announcement on 23 April 2020, Studio has continued to trade strongly and well-ahead of the prior year, with product sales over the first eleven weeks of the new financial year up 55% against the comparative period. This has been driven by particularly strong demand for ranges such as toys, games, electricals, fitness and garden.

During this period, we have been encouraged by the increased numbers of new customers, alongside good levels of repeat shopping from our established base. As a result, we have seen an increase in the number of active customers, measured on a rolling 12-month basis, to 2.0 million. We have reduced the level of marketing spend, whilst focusing the majority of our marketing activity since lockdown on digital and TV channels, which has proved effective, with traffic to the Studio website and new app being well ahead of prior year.

Throughout the period, we have adopted a proactive approach to inventory management, matching intake decisions to customer demand and materially reducing our in-season stock holdings ahead of the resumption of UK high-street shopping this week, particularly for clothing and garden furniture. This has been achieved with a relatively limited impact upon margin rates and a negligible impact on the March 2020 stock provision.

Meanwhile, customer repayments have remained strong with requests for forbearance caused by COVID-19 representing less than 4% of the total receivables balances, although we anticipate that this, and the level of customer arrears may worsen later in the year if unemployment levels increase materially. We have recently agreed in principle minor, short-term variations to the securitisation agreement to help mitigate these COVID-19-related impacts.

Findel Education

Demand for educational resources remains much lower than we would normally expect to see at this time of year due to school closures. However, the gradual process to reopen schools across the UK has led to this position improving in recent weeks, with sales in June being around half the level from 2019. It remains too early to assess how and when the traditional trading peak in this market will occur in 2020 and the extent to which schools will defer certain types of purchasing until 2021. In view of the CMA's decision to refer the sale to a Phase 2 review, we will keep the level of overheads in the business under close review in the coming months.

Liquidity

The Group's core net debt at 12 June 2020 stood at GBP30.0m, down from GBP52.3m at the end of March and significantly lower than we would expect at this point in the year. This is due to the continued strong trading at Studio noted above and our continued cautious approach to discretionary expenditure and stock intake. At present, with committed headroom of c.GBP55m, the Group has sufficient liquidity for its near-term requirements without requiring recourse to government funding schemes. We have strong relationships with our lending banks, and we continue to plan for a medium-term refinancing.

Results for the year to 27 March 2020

We now anticipate publishing the Group's annual results for FY20 in the second half of August 2020, with the Group's AGM likely to be held at the end of September 2020.

We noted in our statement of 23 April 2020 that there were inherent challenges in assessing the forward-looking bad debt provision required by IFRS 9 in light of COVID-19 and the material deterioration in the UK's economic forecasts. We will continue to review this area closely before finalising the provision (along with the associated impact on liquidity) ahead of publishing our full year results.

FY21 Guidance

As noted in our statement on 23 April 2020, the Group is not giving any guidance for FY21 at this stage given uncertainty around the impact COVID-19 on the Group, and the uncertainty surrounding when the sale of Findel Education will complete.

Phil Maudsley, CEO of SRG, commented:

"Studio's multi-year transformation to become a digital value retailer means we have been well-placed to adapt to the current environment.

"The Group's response to the lockdown has been exceptional, not only with our strong trading performance and relevance to customers' needs, but also via our internal agility in responding to the operational challenges presented by COVID-19. I am so proud of all our colleagues.

"I have been particularly pleased by the number of new customers we have welcomed to Studio in recent weeks. Customers who have never shopped with us before have been impressed by the choice, value, and service we have to offer. Whilst we will face increased competition from the high street over the coming months, we are confident that the strength of our offer will continue to resonate amongst value-conscious shoppers.

"The overall market does remain volatile, and we are cautious about the risks to customer incomes for the remainder of the year. However, we have positioned ourselves strongly to manage these risks, and longer-term, we are well-positioned to respond to any permanent shifts in online consumer behavior."

Enquiries

   Studio Retail Group plc                                     0161 303 3465 

Phil Maudsley, Group CEO

Stuart Caldwell, Group CFO

   Tulchan Communications                                 020 7353 4200 

Will Smith

Notes to Editors

Studio Retail Group currently contains market leading businesses in the UK digital retailing and education supplies markets. It is primarily a retailer and distributor, handling and supplying specialist products manufactured by third parties.

The Group's activities are currently focused in two main operating segments:

-- Studio - a leading UK digital value retailer, primarily trading via the Studi o brand; and

-- Findel Education - the second largest listed independent supplier of resources and equipment (excluding information technology and publishing) to schools in the UK and overseas. We announced the sale of this business to YPO in December 2019 for GBP50m, subject to approval from the Competition & Markets Authority (see above).

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END

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June 19, 2020 02:05 ET (06:05 GMT)

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