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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