Retail chain and HP retail partner Smiths City has come out of a trading halt and is initiating discussions with potential strategic investors to support the business.
Smiths City, which sells mainly furniture and appliances but also a range of home and SME technology gear through a network of 32 stores nationwide, went into a trading halt late on Friday citing the impact of the Covid-19 pandemic on its business.
Even before the government imposed the Covid-19 Level 4 Alert, Smiths City warned on 18 March that it had seen a reduction in sales and the number of customers passing through its stores and that these trends were directly attributable to the pandemic.
The government’s subsequent imposition of the Covid-19 Alert Level 4 has since required Smiths City to close its stores, including its online outlet.
These conditions and the new Covid-19 restrictions represented a "material and significant challenge to the business", it told investors today.
"As we noted in our 18 March 2020 market announcement, Smiths City is undertaking a comprehensive review of its operations," it said.
The company had stood down almost all its 465 employees for at least the term of the Level 4 Alert on 80 per cent of their salary or wage entitlements, in line with the terms of the Government’s support package.
Directors and the chief executive and other senior executives had also agreed a 20 per cent reduction in their remuneration.
A skeleton staff remained working on business continuity.
"The company has initiated a number of measures to manage expenses and cashflow in line with sales performance including negotiations with landlords, reductions in new inventory and operating expenses and cancelled or deferred capital expenditure.
Following discussions last Friday, Smiths City’s banker, ASB, agreed to delay by four weeks, the repayment of $1.5 million of the company’s $65 million senior secured facility due for payment on 31 March.
"While Smiths City believes it has enough capital to cover its debts as they fall due, the company recognises the current capital structure is not sustainable given the outlook and the company must secure more funding," it said today.
Smiths City is also working with PwC to develop a strategy for addressing its capital structure.
“ASB’s extension of the facility demonstrated its willingness to support Smiths City through this extraordinary period and give Smiths City the space to engage in discussions with potential investors," chief executive Roy Campbell said.
“Our focus continues to be on the health and wellbeing of our team and customers, including doing all that we can to prevent the spread of Covid-19, and ensuring business continuity.
"I am grateful for the resilience and continuing loyalty our team and our broader community of partners have shown as we navigate this period of uncertainty.
“Smiths City is committed to keeping the market informed and will provide more information as it becomes available.”
Other tech brands offered include Apple, Samsung, Epson and Canon.
For the half years ended 31 October 2019, Smiths City reported revenue fell to $95.1 million from $114.2 million due to the closure of two stores and slower trading than the prior year.